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GAO Backs Boeing’s Claims in Tanker Contract Dispute

June 18, 2008 at 6:25 PM EST
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Congressional investigators sided with Boeing Wednesday in a dispute over the awarding of a $35 billion Air Force tanker contract to competitor Northrup Grumman. A reporter discusses the decision.
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JUDY WOODRUFF: Now, the tanker decision. Three months ago, the Air Force chose Northrop Grumman and its European partners over competitor Boeing to build the next generation of aerial refueling tankers. The contract for 179 aircraft is worth $35 billion.

At the time, Boeing called the Air Force’s decision “flawed,” and they filed a protest. Well, today the Government Accountability Office, the investigative arm of Congress, agreed with Boeing, saying the Air Force made, quote, “significant errors that could have affected the outcome” of the competition, “did not assess the relative merits of the proposals,” and “conducted misleading and unequal discussions with Boeing.”

For more on the ruling, we turn to Los Angeles Times Pentagon correspondent Peter Spiegel.

Peter Spiegel, thank you very much for being with us.

First of all, how important are these new aerial tankers to the Air Force, to the country, for that matter?

PETER SPIEGEL, Los Angeles Times: It’s pretty critical. I mean, the Air Force has said now for almost a decade that it’s its top procurement priority.

I mean, if you go out to Afghanistan or Iraq and see the amount of material, troops, weaponry that has to be flown basically halfway around the world to get to the warzones, the key point where these planes can get to the region is the aerial refueling.

Most of these planes were built in the 1950s, so they’re basically already 50 years old. And as this slowly replacement comes online, a lot of them are still going to be in use for another 30, 40 years.

So we’re talking about planes that are in desperate need of repair and replacement that are still, even if they get the new planes tomorrow, are still going to be in the inventory for another couple of decades.

Air Force to reopen competition

Peter Spiegel
Los Angeles Times
I mean, the Air Force expected that if there was some decision against them, it might be a small, technical thing on costs or on performance. But if you read the decision that came down, the public bit of the decision, it is very sweeping.

JUDY WOODRUFF: And how unusual is it to have a Pentagon contract challenged by the GAO, the investigative arm of Congress?

PETER SPIEGEL: Well, unfortunately for the Air Force, it actually hasn't been that rare of late. I mean, what is surprising about this ruling is how damning and how sweeping it was.

I mean, the Air Force expected that if there was some decision against them, it might be a small, technical thing on costs or on performance. But if you read the decision that came down, the public bit of the decision, it is very sweeping.

It is really damning on the Air Force. It really accuses them of really bias against Boeing.

One of the things you mentioned in your opening there is that there were discussions going on with the Boeing company, where the Air Force basically told Boeing, "You have met one of these criteria," and then sort of went behind closed doors and decided that they hadn't met the criteria and never informed Boeing of this.

So it really raises some real serious questions about the way the Air Force is performing their procurement practices.

JUDY WOODRUFF: So they're saying essentially the entire selection process was flawed?

PETER SPIEGEL: Well, basically. I mean, they've asked the Air Force to reopen the complete -- the process and start anew. They basically say that they gave Northrop Grumman and Airbus, which is the one team, sort of credit for things they shouldn't have gotten credit for, and for Boeing, things that they should not have gotten credit for, they got extra credit for.

So it was pretty much a ruling that recommended -- now, the Air Force doesn't have to follow it, but it recommended that the Air Force start all over again.

The Air Force has said, and defense people I have talked to today said, they're pretty likely to follow the GAO ruling, and they're likely to move pretty quickly to reopen the competition.

But I must say, having covered a lot of these procurement challenges for about six, seven years now, this is pretty much the most sweeping one I have seen in recent history.

Unclear selection process

Peter Spiegel
Los Angeles Times
A lot of people I talked to today said, actually, a bigger plane on some of these airbases is a hindrance, because these bases are very small. A lot of them are in the Middle East, where you have to move planes around very delicately.

JUDY WOODRUFF: OK, just quickly, before we turn to what's going to happen next, one of the findings that the GAO had was they said the Air Force, in making this award, did not assess the relative merits of the proposals. Help us understand what that meant.

PETER SPIEGEL: Well, basically, there were about nine criteria which the Air Force was forced to judge them by. And they ranged from the actual just loading of fuel into an airplane to the amount of cargo they could carry, to the amount of passengers they can carry, all these different categories.

And once they met a certain threshold, both planes were supposed to be ruled as "adequate." And what they said is that Northrop's plane, the Airbus plane, which is a lot bigger -- because the big issue here is that the 767 is a lot smaller than the A330, which is the Airbus plan.

But they gave extra credit to the Airbus plane because it was bigger, and they weren't allowed to do that. Once the Boeing plane met the criteria, they weren't supposed to give the Airbus plane extra credit for being bigger.

And a lot of people I talked to today said, actually, a bigger plane on some of these airbases is a hindrance, because these bases are very small. A lot of them are in the Middle East, where you have to move planes around very delicately, and having a big plane out there is not necessarily a good thing to have.

JUDY WOODRUFF: Now, they also, as you said, the Air Force conducted misleading and unequal discussions with Boeing by informing Boeing of what they were doing. Go ahead.

PETER SPIEGEL: That seems to me the most damning thing in there. I mean, there is -- some of the disagreements are technical in nature. The things we discussed now, they may be judged certain things wrongly.

But by having a face-to-face meeting with Boeing executives and saying to them that they met the requirement and then deciding later that they didn't meet the requirement and didn't inform Boeing of this, at the same time they were having conversations about Northrop on the same -- that seems to be a really fundamental flawed way that they ran the competition.

JUDY WOODRUFF: So now you just said you've talked to the Air Force. They're saying they are going to take a look at this and open it. It's not a binding finding today, I should say.

PETER SPIEGEL: It's not binding. And by law, they're actually allowed 60 days to decide what to do about this.

Now, a couple of the Pentagon officials I talked to today, though, said they're going to try to probably move pretty quick on this. And they're most likely to re-compete pretty quickly.

The issue for the Air Force now is it takes about six months to a year to re-compete this whole thing. So if we add already the delay that's already been on this program, you know, there's basically been a lockdown for the last three months that this challenge has been going on, there was a competition way back right after September 11th where this -- that was already scrapped.

So we've been waiting almost a decade for this plane. They're going to have to wait now another 6 to 12 months. So the Air Force is really keen to get this started right over again, get new people involved, and really try to do this correctly this time, because these planes, as we said before, are 50 years old as they are.

They're really not performing up to the level that they need to be. There's failures going on. And so they feel they need to get these planes out to the pilots as fast as possible.

So they're looking to try to turn this around relatively quickly. And I think we're likely to see a decision within the next week or so to open up the competition again and start anew.

Disagreement within the Air Force

Peter Spiegel
Los Angeles Times
The Air Force more largely has had disputes with Secretary Gates over a number of issues ... there's a disagreement over whether the Air Force is really paying attention to the wars in Iraq and Afghanistan.

JUDY WOODRUFF: Peter Spiegel, is there a sense of what went wrong inside the Air Force? We know that, just in the last few weeks, Defense Secretary Gates has fired the Air Force secretary, the Air Force chief of staff. Any connection with all of this?

PETER SPIEGEL: There really isn't a connection, but the Air Force is a service right now that's in crisis. They really felt that they had crossed all their t's and dotted all their i's on this Air Force tanker issue.

I mean, they knew there was going to be criticism, there was going to be scrutiny, and they thought they had done it very transparently and openly. Clearly, they haven't.

The Air Force more largely has had disputes with Secretary Gates over a number of issues. They've had mishandling of some nuclear materials. More fundamentally, there's a disagreement over whether the Air Force is really paying attention to the wars in Iraq and Afghanistan.

There are people who are close to Secretary Gates who really believe the Air Force wants to go out, and fly their fancy fighter planes, and prepare for the next dogfight, when there's a war going on in Iraq and Afghanistan right now, where you need to have things like refueling tankers, cargo planes, spy planes, things that are a little less sexy than the traditional sort of white-scarf fighter pilots, but things that are really essential to fighting the current wars in Iraq and Afghanistan.

And a lot of the dispute that Secretary Gates was having with these recently ousted Air Force officials was over those very issues. So the issues they were ousted on were -- there was an investigation on the nuclear issue, but there's a much broader displeasure with the Air Force on the part of the secretary of defense right now.

JUDY WOODRUFF: All right. Well, we are going to leave it there, and we thank you very much for talking with us, Peter Spiegel of the L.A. Times.