GAO upholds Northrop Grumman bomber contract over protests

Federal auditors have rejected a protest by Boeing and Lockheed Martin and upheld an Air Force decision to award a lucrative new bomber contract to Northrop Grumman Corp.

The Government Accountability Office, a nonpartisan congressional agency that audits federal programs, said Tuesday that the Air Force’s review of bomber bids was reasonable and it did not see a reason to overturn the contract.

A Boeing Co. spokesman said the company will review the GAO decision before deciding on its next step. It could protest to the federal claims court in Washington. Lockheed Martin Corp. declined to comment.

The total cost of the contract is classified. The GAO says there are two parts — an engineering phase with an estimated value of $21.4 billion in 2010 dollars, and options to build the first 21 bombers. The Air Force hasn’t given a cost for producing the first 21 planes but has said that if 100 planes were built, the average cost per plane would be $511 million in 2010 dollars.

Using those figures and adjusting them for inflation, the total cost of the program could be nearly $80 billion if the Air Force buys 100 planes, as Pentagon officials discussed in October.

Northrop cheered the GAO’s decision to deny the protest by its rivals.

“This confirms that the U.S. Air Force conducted an extraordinarily thorough selection process and selected the most capable and affordable solution,” Northrop spokesman Randy Belote said. He called the plane vitally important to national security.

Not surprisingly, the Air Force was happy with the GAO decision too, saying that the selection process was disciplined and impartial. In October, Air Force Secretary Deborah Lee James said that selecting Northrop “represents the best value for our nation,” although financial terms of the competing bids were not disclosed.

The plane, called a long-range strike bomber, will replace an aging fleet that includes B-2 and B-52 bombers. Pentagon officials have said that it will be designed to penetrate advanced air-defence systems and strike any target around the world from the United States.

About two weeks after the Pentagon’s decision, Boeing and Lockheed — who were partners in the bid — protested to the GAO that the military made mistakes in judging the proposed costs of the bids and in its technical evaluation of Northrop’s proposal.

Boeing’s protest and details of the GAO’s decision to uphold Northrop’s win are classified. However, Ralph White, the GAO’s managing associate general counsel for procurement law, said in a statement that “the technical evaluation, and the evaluation of costs, was reasonable, consistent with the terms of the solicitation, and in accordance with procurement laws and regulations.”

Shares of Falls Church, Virginia-based Northrop rose $2.97 to close at $184.22; Chicago-based Boeing gained $3.97, or 3.7 per cent, to $112.60; and Lockheed Martin, which is based in Bethesda, Maryland, rose $2.92 to $209.