Air Force Faulted Over Handling Of Tanker Deal

Audit Sustains Boeing's Protest of $40 Billion Award

Federal auditors said yesterday that the Air Force bungled its decision to award a multibillion-dollar contract for new refueling tankers to a team that includes the European company Airbus, touching off calls for a congressional probe and putting yet another twist in the years-long, scandal-plagued effort to replace the aging tanker fleet.

The Feb. 29 award of the $40 billion contract had spurred a fierce and unusual public relations battle between the loser Boeing, which claimed it was treated unfairly, and winner Northrop Grumman and its partner, European Aeronautic Defence and Space, parent of Airbus.

It also triggered fears that thousands of well-paying jobs in the United States would evaporate. Critics said the Air Force was being shortsighted by awarding key defense contracts to a European company, possibly hobbling the industrial might of Boeing, the nation's top airplane maker.

Yesterday's finding by the Government Accountability Office is the latest in a series of public relations debacles for the Air Force. It comes just two weeks after Air Force Secretary Michael W. Wynne and Chief of Staff Gen. T. Michael Moseley were asked to resign because of "a chain of failures" in their leadership.

Critics of the award, some of whom represent states where Boeing employs thousands of people, questioned whether those resignations were linked to problems with the tanker contract. Sen. Maria Cantwell (D-Wash.) is among several lawmakers who said they would ask Congress to review the Air Force's decision.

"Congress needs to investigate," Cantwell said. "How is it that the process was so flawed? These mistakes are so glaring."

Sen. Pat Roberts (R-Kan.), whose state is also home to major Boeing operations, called the GAO decision "a major win for Kansas and America's industrial base." Roberts said he and Rep. Todd Tiahrt (R-Kan.) would introduce legislation mandating that the Air Force hold another competition.

The Air Force has 60 days to respond to the GAO findings. The service can agree or ask the GAO to reconsider. It said in a statement that it would review the decision to determine its next step.

"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," said Sue C. Payton, assistant secretary of acquisition for the Air Force. "The Air Force will select the best value tanker for our nation's defense while being good stewards of the taxpayer dollar."

The months-long GAO review found that the Air Force failed repeatedly to follow procedures designed to ensure a fair and open competition and good value for taxpayers. The GAO urged the Air Force to renew discussions with both teams and obtain revised proposals, and to effectively stage a new competition.

"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," said Michael R. Golden, the GAO's managing associate general counsel.

Boeing filed its protest with the agency March 11 after it lost the deal to build 179 refueling aircraft, which are essentially gas stations in the sky. The Chicago-based company is the largest U.S. aircraft manufacturer, with 44,000 jobs in the United States and operations in 40 states. It began building the Air Force's fleet of KC-135 tankers nearly 50 years ago.