Boeing Not Going Down Without a Fight, Files Grievance Over Lost Contract

By Jason Simpkins
Associate Editor

The Boeing Co. (BA) has filed a formal protest with the Government Accountability Office hoping to overturn a $35 billion contract awarded to its rivals by the U.S. Air Force, which Boeing is accusing of modifying its specifications to accommodate a larger plane.

"This competition was seriously flawed and resulted in the selection of the wrong airplane," Mark McGraw, head of Boeing's tanker program, said in a statement. "We were deliberate in this process and we think we were not treated fairly."

Boeing executives said Tuesday, that they were misled into believing the Air Force wanted a medium-size tanker and the larger plane, co-constructed by Northrop Grunman Corp. (NOC) and Airbus S.A.S., benefited from changes to the evaluation criteria. 

This is just the first step in what will likely devolve into a protracted legal battle. The contract win by Northrop and Airbus, a subsidiary of European Aeronautic Defense & Space Co., also rouses pro-American labor sentiments – particularly from unions and lawmakers in states where Boeing has big payrolls.

Sen. Patty Murray (D-Wash.) has already scolded Air Force officials for their decision, saying that after telling Boeing it wanted to buy a "pickup truck," the Air Force bought a "semi-truck" from Airbus.

Most analysts agree the Air Force changed its criteria for the tanker, but the question lingers as to whether it did so fairly.

"It appears, over time, Northrop Grunman was able to change the Air Force's mind about what it wanted," Loren Thompson, a military analyst at the Lexington Institute, told the International Herald Tribune.

Thompson said that early in the competition the Air Force was only interested in a tanker, but it warmed up to the idea of a more versatile plane that could transport cargo and personnel as well. The plane that won the bid is based on the Airbus A-330 passenger jet, which is substantially larger than the Boeing 767, the basis for that company's losing proposal.

In its defense, the Air Force said it "followed a carefully structured process, designed to provide transparency, maintain integrity and promote fair competition."

The contract in question could be in effect for decades to come and grow to $100 billion in value, making it worth fighting over.

News and Related Story Links:

• Los Angeles Times:
  Boeing files protest over tanker choice

• IHT.com:
  Boeing formally protests changes in contract it lost to Airbus

• Money Morning:
  Boeing in the Hunt for $30 Billion Jet Fighter Deal With India