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Own the Sky
Comments () | Published November 1, 2010
Crash and Burn
Boeing and Northrop submitted their bids in April 2007. More than 150 experts examined their proposals. The Air Force intended to buy 179 new planes as a first set to replace the KC-135 tankers.

The February 2008 news that EADS and Northrop Grumman had won stunned most of the aviation industry—the pair hadn’t been considered the clear favorites. According to an EADS spokesman, a roomful of executives fell silent for several seconds on hearing of their victory. Though hopeful, even they were surprised by the announcement. But as soon as employees started celebrating, they started worrying. The early reaction out of Boeing was telling: The company wasn’t going down without another, even bigger fight.

Under procurement rules, any company can protest the government’s contract decision. Much like a court appeal, it takes its case to the Government Accountability Office, where a team of lawyers judges whether the government followed its own rules. The more technical requirements a contract has—and the tanker bid had hundreds—the more opportunities there are to find fault with the government’s evaluation.

Boeing filed its protest 11 days after the award announcement, alleging numerous instances in which the Air Force had unfairly and inappropriately evaluated its bid. The company hadn’t acted lightly. According to a spokesman, it was the first time in eight years that Boeing had protested a contract loss. The Air Force thought Northrop beat Boeing on overall value, but both bidders had turned in plans that were essentially the same price and that met the service’s demands; whichever tanker the Air Force chose would do the job, just differently.

But the GAO condemned the Air Force evaluators, who auditors found had “conducted misleading and unequal discussions with Boeing.” Air Force officials told the company it had met one of the key tanker requirements, but later they changed their judgment and failed to alert Boeing. Yet officials continued having discussions with Northrop about the same requirement. The GAO also said the Air Force had broken the rules of the scoring process by giving Northrop extra credit for exceeding certain minimum requirements. That, of course, was the strategy on which Northrop had based its proposal: The Airbus plane was bigger, could carry more fuel, and could double as a cargo transporter.

After reading behind-the-scenes accounts of the judging, some analysts concluded that the Air Force had sided with Northrop and EADS to avoid the wrath of John McCain. The evaluators were seasoned procurement professionals. And yet the GAO found basic mistakes as well as what looked like outright favoritism. People in such powerful positions weren’t supposed to make rookie missteps. The Air Force’s decision looked politically motivated.

McCain had long been an advocate for full and even competition. But in March 2008, as he headed toward the Republican presidential nomination, news broke that top advisers to his campaign had lobbied for EADS, “taking sides,” as the Associated Press put it, “in a bidding fight that McCain has tried to referee for more than five years.”

Two advisers had stopped lobbying for the aircraft company when they joined McCain’s campaign a year earlier. But a third, former Texas congressman Tom Loeffler, lobbied for EADS while serving as McCain’s finance chairman, his top fundraiser. EADS hired Loeffler’s company to work on its behalf a few months after McCain sent the letter to Gates urging him to judge the acquisition on best value, the path that seemed to favor EADS. “They never lobbied [McCain] related to the issues,” a campaign spokeswoman said at the time, noting that the senator sent the letter before EADS hired Loeffler.

Such technical explanations put a dent in the armor of the taxpayer crusader. “The aesthetics are not good, especially since he is an advocate of reform and transparency,” Richard Aboulafia, an analyst with the Teal Group, who had closely followed the tanker saga, said at the time.

The GAO urged the Air Force to reevaluate the tanker proposals. But the 2008 presidential elections were only five months away. After an intense period of negotiations, in which it looked as though the Air Force might be able to re-award the contract, it was clear neither Boeing nor Northrop would be completely satisfied with the outcome. Defense Secretary Gates saw that the clock was winding down on the Bush administration. He decided the Air Force couldn’t settle the deal before the next President took office. “Over the past seven years, the process has become enormously complex and emotional,” Gates said in September. The Pentagon and the companies needed a “cooling-off period,” he said, so the next administration could figure out what to do.

Gates didn’t know that in a few months, Barack Obama—who hadn’t even been born when the first tankers were built—would ask him to stay at the Pentagon and that the tanker decision would remain Gates’s problem. The Secretary later joked that he had punted the ball only to find himself catching it.

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  • Conservativesniper

    A stunning example of one of my favorite oxymorons ,... government efficiency

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Posted at 12:00 AM/ET, 11/01/2010 RSS | Print | Permalink | Comments () | Washingtonian.com Articles