Northrop, Boeing Find Errors in Air Force Tanker Award

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Northrop Grumman Corp. and Boeing Co. said separately Thursday that the Air Force has discovered errors in the calculations for operating costs in the $35 billion refueling tanker contest won by Northrop earlier this year.


Reuters reported that the Air Force conceded that Boeing Co.’s proposed KC-767 aerial refueling tanker would cost less over time than the winning plane offered by Northrop and its European partner, the European Aeronautic Defense and Space Co.


It’s unclear whether the errors are significant enough to make it likely that the huge contract could be taken away from the Los Angeles-based Northrop. Northrop said the errors were minor.


The errors, which were confirmed by Northrop, come as the Government Accountability Office prepares to rule on Boeing’s protest to the initial award by the June 19 deadline.


Boeing said in its document, dated April 25 and obtained by Reuters, that mistakes in calculating the life cycle costs of the airplanes raised questions about the thoroughness and credibility of the Air Force’s overall evaluation.


Northrop countered by saying the errors were “minor … [and] should have no impact” on the pending ruling being that the overall cost of the tanker was only one of the selection criteria in the award. Northrop continued that overall performance of the aircraft was the ultimate determining factor.


“Despite any minor inaccuracies in the process, the tanker providing the most capability at the best overall value is still the Northrop Grumman KC-45,” Northrop spokesman Randy Belote told Reuters.


“For all intents and purposes, the (life cycle) of both aircraft remain the same. The slight adjustment does not affect the outcome,” he added.


According to Northrop, the Air Force documents initially put Northrop’s life cycle cost at $108.01 billion versus Boeing’s $108.44 billion, a difference of $34 million or 3/100 of a percent. Officials did not say how much the difference would be if the errors were corrected.


Boeing has always contended that the Air Force misled it on the terms of the competition and skewed the results to favor Northrop, a claim Northrop has always said could not be true.


In a separate statement, Chicago-based Boeing said its case is “bolstered by new revelations” and, according to Boeing, the Air Force now concedes that Boeing’s most probable lifecycle cost is lower than Northrop’s.


The Air Force did not comment.


Separately, Northrop and partner DHS Systems received an Army contract for tents, trailers and computer-based command posts with total value of $240 million.


The contract, originally awarded in February, was protested by General Dynamics Corp., said Northrop, adding that the Government Accountability Office investigated and reaffirmed the Army’s selection of the Northrop group.


Shares in Northrop closed up 17 cents to $71.53 Thursday.

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