GAO Decision Could Lead to Airforce Tanker Contract Redo

Today the Government Accountability Office (GAO) released its decision regarding Air Force contracts for mid-air refuling tankers. The GAO found that the Air Force made serious errors in awarding the contract, a complaint Boeing has made since the February 29 announcement that the contract would go to Northgrup Grumman. According to Boeing, the Air Force changed its requirements during the bidding process, resulting in a more favorable proposal from Northrup Grumman and its partner European Aeuronautic Defence & Space (EADS), parent company of Airbus. Boeing contends that it would have offered a modified version of its 777 series instead of its 767 model to better compete with the modified A330 from Airbus, had it known from the start that the Air Force wanted the larger model.

I’m not sure if this is a good or bad decision. On the one hand, Boeing is a US company with a predominantly US-based workforce (the 787 Dreamliner is another story). On the other hand, this contract was the first major agreement of its type with a non-US defense supplier. It represented the cooperation and trust between the US and Europe, and also showed the world that the US markets are open to foreign competition. At a time when the US is regularly signing free trade agreements, we showed that we really believed what we were selling. Now, the picture is not so clear. To be fair, while Boeing would utilize its US workforce, Northrup is also a US company with a strong, homegrown workforce. Northrup has already said it would perform as much as 50% of the work in Alabama, though at least some work would be done overseas simply due to its partnership with EADS.

UPDATE: WSJ posted this expanded article on its site late in the afternoon.