US GAO begins hearing on Northrop/EADS tanker deal

By Andrea Shalal-Esa

WASHINGTON, May 5 (Reuters) - The U.S. Government Accountability Office (GAO) on Monday kicked off a hearing on Boeing Co's (BA.N: Quote, Profile, Research) protest of a $35 billion U.S. Air Force refueling aircraft contract won by Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and its European subcontractor EADS (EAD.PA: Quote, Profile, Research).

A GAO spokesman confirmed the start of the hearing, but gave no details. The congressional agency, which reviews contract disputes, is due to rule on the case by June 19.

The hearing includes lawyers from Boeing, Northrop, and the Air Force, with three GAO officials hearing the various arguments, according to three sources familiar with the case, who said it could last all week.

"This hearing will go on for days and days," said one of the sources, who asked not to be named. "Each side will put on what they think is the support for their key arguments."

Boeing, which was widely expected to win the competition for the new aerial refueling tankers, protested the Air Force decision vigorously in legal filings with the GAO and in newspaper advertisements. It argues the Air Force was inconsistent in the way it assessed the bids.

A Boeing spokesman declined comment on the GAO hearing. Northrop and the Air Force had no immediate comment.

The Air Force's acquisition chief, Sue Payton, is not expected to testify at the hearing, but other officials who headed assessments of specific aspects of the bids will be called, said two of the sources, who asked not to be named.

Loren Thompson, defense analyst with the private Lexington Institute, said the Air Force believed the GAO would find only minor problems with its handling of the competition, but no major issues that could lead it to sustain Boeing's protest.