GAO Sides With Boeing in Dispute of Air Force Tanker Deal

The Government Accountability Office is siding with Boeing Co. in a dispute with a European-based plane manufacturer, recommending that the Air Force re-open the bidding process that initially handed the multibillion dollar mid-air refueling plane project to the foreign competitor.

The Pentagon awarded the contract in February to a partnership between European Aeronautic Defence and Space Co. and U.S.-based Northrup Grumman Corp. EADS is the European parent company to Airbus, and lawmakers cried foul that jobs would be lost to overseas workers. Boeing filed the protest with GAO in March.

In its ruling Wednesday, GAO cited "significant errors" on the Air Force's behalf in its consideration of the two competing bids, including the Air Force not following its own rules, conducting "misleading and unequal discussions with Boeing," and otherwise tilting the table toward the EADS-Northrup proposal.

"Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman. We therefore sustained Boeing’s protest,” said GAO procurement law specialist Michael Golden, according to a release.

Golden noted that it did not find in Boeing's favor on all counts, "because we found that the record did not provide us with a basis to conclude that the agency had violated the legal requirements with respect to those challenges.”

GAO, however, said their decision was not a reflection on which aircraft was better.

GAO recommended reopening the contract process and possibly amending the request for proposal. The deal, worth approximately $35 billion, is for up to 179 refueling planes, although including estimates for continued maintenance and possible construction, the total life-cycle costs are expected to be significantly higher.

GAO did not publicly release its report on the decision, which it said was 69 pages.

"The Air Force is aware of the review, its findings and recommendations, and we will be putting out a statement later this afternoon," Air Force spokesman Gary Strasburg said.

Issuing a statement for Northrup Grumman, spokesman Randey Belote said: "We respect the GAO's work in analyzing the Air Force's tanker acquisition process. We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform. We will review the GAO findings before commenting further."

Several members of Congress said they felt vindicated by the GAO report.

Sen. Patty Murray, D-Wash., has been critical of the deal, feeling Boeing was not given a fair shake. On Wednesday, she said GAO's finding "confirmed what I have been saying for months: The Air Force's tanker decision was fundamentally flawed," according to a statement released by her office.

"I am not surprised that the GAO identified significant errors in the selection process. The Air Force bought a tanker that doesn't meet their needs and has been waging a PR campaign ever since," Murray said.

She added that she believed Air Force officials now bear the burden of explaining their decision to grant EADS the contract.

"We need answers before handing billions of American defense dollars to a subsidized, foreign company focused on dismantling the American aerospace industry," she said.

Fellow Washington Democrat, Rep. Adam Smith, called the GAO's decision "an unequivocal vindication of our position regarding the bidding process for the Air Forces refueling tanker contract. The process was not fair and did not provide equal consideration for both companies products based on the Air Forces solicitation."

"In addition to ensuring that American workers get a fair shot at the contract, I hope this decision will also cause our government to reevaluate the wisdom of awarding major contracts to companies that have benefited from illegal government subsidies," Smith said.

"I strongly urge the Air Force to take immediate action to correct the deficiencies associated with this procurement," Sen. Sam Brownback, R-Kansas, adding: "This contract should be overturned and awarded to Boeing."

Rep. Duncan Hunter, R-Calif., the top Republican on the House Armed Services Committee agreed, and said national security would be strengthened by the decision.

"Today’s decision is a victory for American workers and taxpayers. It’s a big win also for the defense industrial base that is so vital to our national security," Hunter said. "This decision is a step toward ensuring that local communities throughout America will not lose thousands of jobs over the period of the contract to competitors in Europe."

The GAO decision also comes on the heels of a recent report that the Air Force chose the contract option that was projected to be more expensive in the long run.

The tanker deal has a long history of controversy. It first was derailed several years ago, when Sen. John McCain, the presumptive GOP presidential nominee, took Defense Department officials to task over conflict of interest problems in its initial choice of Boeing. That situation led to the re-bidding of the contract, which resulted in the EADS-Northrup decision.

The Air Force also is undergoing a major shake-up at its top echelons. Less than two weeks ago, Defense Secretary Robert Gates sacked the top two Air Force officials — the secretary and the chief of staff — and has nominated their replacements. Gates was irritated over the results of a report spurred by the mishandling of the Air Force's nuclear arsenal.

FOX News' Trish Turner and Chad Pergram contributed to this report.