GAO report on tanker deal and why it was denied to EADS

[SUBMAN1]

United States Government Accountability Office
Washington, DC 20548
Office of the Comptroller General
of the United States
PRESS RELEASE
For Immediate Release
Contact: Michael R. Golden,
GAO Office of the General Counsel
202-512-4788

GAO SUSTAINS BOEING BID PROTEST

Agency Recommends Air Force Reopen the Bid Process

Washington, DC – (June 18, 2008) – The Government Accountability Office (GAO)
today sustained the Boeing Company’s protest of the Department of the Air Force’s
award of a contract to Northrop Grumman Systems Corporation for KC-X aerial
refueling tankers. Boeing challenged the Air Force’s technical and cost evaluations,
conduct of discussions, and source selection decision.

“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. We therefore sustained
Boeing’s protest,” said Michael R. Golden, the GAO’s managing associate general
counsel for procurement law. “We also denied a number of Boeing’s challenges to
the award to Northrop Grumman, because we found that the record did not provide
us with a basis to conclude that the agency had violated the legal requirements with
respect to those challenges.”

The GAO recommended that the Air Force reopen discussions with the offerors,
obtain revised proposals, re-evaluate the revised proposals, and make a new source
selection decision, consistent with the GAO’s decision. The agency also made a
number of other recommendations including that, if the Air Force believed that the
solicitation, as reasonably interpreted, does not adequately state its needs, the Air
Force should amend the solicitation prior to conducting further discussions with the
offerors; that if Boeing’s proposal is ultimately selected for award, the Air Force
should terminate the contract awarded to Northrop Grumman; and that the Air Force
reimburse Boeing the costs of filing and pursuing the protest, including reasonable
attorneys’ fees. By statute, the Air Force is given 60 days to inform the GAO of the
Air Force’s actions in response to GAO’s recommendations.

The GAO decision should not be read to reflect a view as to the merits of the firms’
respective aircraft. Judgments about which offeror will most successfully meet
governmental needs are largely reserved for the procuring agencies, subject only to
such statutory and regulatory requirements as full and open competition and fairness

to potential offerors. The GAO bid protest process examines whether procuring
agencies have complied with those requirements.
Specifically, GAO sustained the protest for the following reasons:

1. The Air Force, in making the award decision, did not assess the relative merits of
the proposals in accordance with the evaluation criteria identified in the solicitation,
which provided for a relative order of importance for the various technical
requirements. The agency also did not take into account the fact that Boeing offered
to satisfy more non-mandatory technical “requirements” than Northrop Grumman,
even though the solicitation expressly requested offerors to satisfy as many of these
technical “requirements” as possible.

2. The Air Force’s use as a key discriminator that Northrop Grumman proposed to
exceed a key performance parameter objective relating to aerial refueling to a greater
degree than Boeing violated the solicitation’s evaluation provision that “no
consideration will be provided for exceeding [key performance parameter]
objectives.”

3. The protest record did not demonstrate the reasonableness of the Air Force’s
determination that Northrop Grumman’s proposed aerial refueling tanker could
refuel all current Air Force fixed-wing tanker-compatible receiver aircraft in
accordance with current Air Force procedures, as required by the solicitation.

4. The Air Force conducted misleading and unequal discussions with Boeing, by
informing Boeing that it had fully satisfied a key performance parameter objective
relating to operational utility, but later determined that Boeing had only partially met
this objective, without advising Boeing of this change in the agency’s assessment and
while continuing to conduct discussions with Northrop Grumman relating to its
satisfaction of the same key performance parameter objective.

5. The Air Force unreasonably determined that Northrop Grumman’s refusal to
agree to a specific solicitation requirement that it plan and support the agency to
achieve initial organic depot-level maintenance within two years after delivery of the
first full-rate production aircraft was an “administrative oversight,” and improperly
made award, despite this clear exception to a material solicitation requirement.

6. The Air Force’s evaluation of military construction costs in calculating the
offerors’ most probable life cycle costs for their proposed aircraft was unreasonable,
where the agency during the protest conceded that it made a number of errors in
evaluation that, when corrected, result in Boeing displacing Northrop Grumman as
the offeror with the lowest most probable life cycle cost; where the evaluation did not
account for the offerors’ specific proposals; and where the calculation of military
construction costs based on a notional (hypothetical) plan was not reasonably
supported.

7. The Air Force improperly increased Boeing’s estimated non-recurring engineering
costs in calculating that firm’s most probable life cycle costs to account for risk
associated with Boeing’s failure to satisfactorily explain the basis for how it priced
this cost element, where the agency had not found that the proposed costs for that
element were unrealistically low. In addition, the Air Force’s use of a simulation
model to determine Boeing’s probable non-recurring engineering costs was
unreasonable, because the Air Force used as data inputs in the model the percentage
of cost growth associated with weapons systems at an overall program level and
there was no indication that these inputs would be a reliable predictor of anticipated
growth in Boeing’s non-recurring engineering costs.

The 69-page decision was issued under a protective order, because it contains
proprietary and source selection sensitive information. The GAO has directed
counsel for the parties to promptly identify information that cannot be publicly
released so that GAO can expeditiously prepare and release, as soon as possible, a
public version of the decision.

Although the Air Force intends to ultimately procure up to 179 KC-X aircraft, the
solicitation (No. FA8625-07-R-6470) provided for an initial contract for system
development and demonstration of the KC-X aircraft and procurement of up to 80
aircraft. The solicitation provided that award of the contract would be on a “best
value” basis, and stated a detailed evaluation scheme that identified technical and
cost factors and their relative weights. With respect to the cost factor, the
solicitation provided that the Air Force would calculate a “most probable life cycle
cost” estimate for each offeror, including military construction costs. In addition, the
solicitation provided a detailed system requirements document that identified
minimum requirements (called key performance parameter thresholds) that offerors
must satisfy to receive award. The solicitation also identified desired features and
performance characteristics of the aircraft (which the solicitation identified as
“requirements,” or in certain cases, as objectives) that offerors were encouraged, but
were not required, to provide.

The agency received proposals and conducted numerous rounds of negotiations with
Boeing and Northrop Grumman. The Air Force selected Northrop Grumman’s
proposal for award on February 29, 2008, and Boeing filed its protest with the GAO
on March 11, supplementing it numerous times thereafter. In accordance with GAO’s
Bid Protest Regulations, GAO obtained a report from the agency and comments on
that report from Boeing and Northrop Grumman. The documentary record produced
by the Air Force in this protest is voluminous and complex. The GAO also conducted
a hearing, at which testimony was received from a number of Air Force witnesses to
complete and explain the record. Following the hearing, GAO received further
comments from the parties, addressing the hearing testimony as well as other aspects
of the record.

Information about GAO’s bid protest process can be found at
http://www.gao.gov/legal/aboutbid.html.
###

[Platapus]

Wow seems like a pretty legit protest.

I hope the government can fix this fairly and quickly

[SUBMAN1]

Originally Posted by Platapus

Wow seems like a pretty legit protest.

I hope the government can fix this fairly and quickly

It is pretty legit - Specifically #4! What a crock of crap!

-S

[Platapus]

I am more concerned with number 1

"The Air Force ...did not assess ...the proposals in accordance with the evaluation criteria identified in the solicitation,"

When I was a govie this was a big no-no. The government will use the evaluation criteria, the whole evaluation criteria, and nothing but the evaluation criteria.

Someone in the AF farkled up

[PeriscopeDepth]

http://www.marketwatch.com/news/stor...%7D&dist=msr_1

As I said in the other thread, the USAF couldn't manage a large program to save its life.

F-22, F-35, and now this tanker fiasco. Defense companies just aren't held accountable, and truth be told probably run the show more than any of the services do.

PD