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GAO Sides With Boeing in Tanker Deal

POSTED: 05:07 PM ET, 06/18/2008 by Derek Kravitz

The Government Accountability Office's decision to side with Boeing over a $40 billion contract with rival Northrop Grumman to build new aerial refueling tankers for the Air Force represents an abrupt about-face in the government's dealings with the Chicago-based aerospace company.

The contract to supply the tankers had originally been awarded to Boeing, but was withdrawn in 2004 over a procurement scandal that resulted in Boeing and Air Force officers being sent to prison.

After Boeing snagged a $20 billion contract to lease tankers, the Air Force's former procurement chief, Darleen A. Druyun, admitted that she favored Boeing while negotiating for a job with the company.

Druyun and Boeing's former chief financial officer went to prison, and Boeing agreed with the Justice Department to pay $615 million -- the biggest penalty ever paid by a defense contractor -- to settle allegations of misconduct on the tanker deal and others.

Years later, in 2007, the Air Force's top procurement officer came under fire again

While he awaited appointment by the White House to the No. 2 job in Air Force procurement, a political position, Lt. Col. Charles Riechers went to work for Commonwealth Research Institute, a nonprofit defense contractor in Johnstown, Pa., for two months and was paid $26,800.

About two weeks after an Oct. 1 Post story about the arrangement ran, Riechers committed suicide.

The controversies allowed Northrop Grumman and Airbus's parent company, European Aeronautic Defence and Space (EADS), to reap the rewards when in March, the Pentagon passed over Boeing's proposal.

One defense consultant, Loren B. Thompson of the Arlington-based think tank, the Lexington Institute, called the decision to give Northrop Grumman the contract a "stunning upset," adding that "Boeing has been doing this for half a century, and it was simply assumed they knew what the Air Force wanted better than other companies."

And Sue C. Payton, assistant secretary of the Air Force for acquisition, said officials from the GAO and the Defense Department inspector general's office helped ensure the selection process was fair and open. "We've got it nailed," she said of the process.

But accountability investigators apparently felt differently, The Post's Dana Hedgpeth reports. While the full 69-page report has yet to be released (auditors are redacting a copy to remove trade secret information), government auditors cited "a number of significant errors" had been made in the evaluations of the heated competition.

Among the findings was that the Air Force failed to evaluate several key components of the bids, including accurate numbers of how much each bid would cost, and engaged in "misleading and unequal discussions with Boeing," by telling the Chicago-based company that it had fully satisfied a key performance objective when it reality it was only partially achieved.

Boeing, which built the Air Force's existing tankers, filed a protest with the agency on March 11 after it lost the deal.

By Derek Kravitz |  June 18, 2008; 5:07 PM ET
Previous: Psychology of Suffering Detainees Examined | Next: Bear Stearns Arrests

Comments

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I don't know how the AF could make
these kind of questionable,
perhaps even unethical decisions
to rig the whole contract process
towards NG/EADS, and not expect to get rake over the coals for it.

My theory is that Sue Payton had
it in for Boeing from the get go.

I would not be surprised at all
to find out that after she leaves
her AF post that she gets a job
with NG.

Posted by: Gadget | June 19, 2008 4:50 AM

Isn't it fair that the USAF was so nervous from the Druyun fallout that it was deadset that Boeing should have Airbus competition? USAF had to recognize that Boeing was the more experienced and market leader, so the contract requirements had to be loosened/broadened sufficiently to ensure Airbus could at least minimally compete. This loosening of the criteria backfired when the new criteria and weighting actually tilted the final tally in favor of the Airbus bid. Is USAF wrong to have loosened the criteria, or did too much political pressure cause it loosen the criteria so much that it appeared stilted? Given the importance of refuelers, why doesn't USAF pursue two models and hedge its risk in the event one of the models gets grounded for maintenance problems, as every model aircraft eventually experiences?

Posted by: Legally Correct | June 19, 2008 8:41 AM

Maybe USAF really does want two tankers, and the Airbus contract was a form of "game theory" since USAF knew Norm Dicks and others would guarantee a "gift" of Boeing tankers in addition to the Airbus tankers that USAF was willing to fund. In other words, USAF would pay $35B for Airbus tankers, and Congress would provide another $10-20B "extra" for Boeing tankers on the grounds of US jobs and fleet diversity.

Posted by: Inside Scoop | June 19, 2008 8:49 AM

In 1988 the Air Force banned Kapton wire insulation. Airbus uses Kapton wire insulation on their A330. Do the math.

Posted by: Edward Block | June 19, 2008 2:49 PM

It is equally probable the Boeing has sunk its tendrils into the GAO, as deeply as it has subverted congressional members. This is precisely what happens when one company becomes "the only game in town".

Posted by: Bruce Rouleau | June 19, 2008 5:23 PM

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