US watchdog faults Air Force on Boeing contract

By Jim Wolf

WASHINGTON (Reuters) - The U.S. Government Accountability Office on Thursday faulted the Air Force again for its handling of a contract with Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), upholding in part a Pemco Aviation Group Inc PAGI.O protest.

At issue is a potential $1.2 billion contract for depot maintenance of KC-135 mid-air refueling aircraft awarded to Boeing on September 10.

The GAO decision was the latest setback to an Air Force deal with Boeing, scarred by a corruption scandal that landed two company officials in prison in 2005.

Pemco's protest claimed the Air Force's evaluation was flawed in several ways, including its tally of the rivals' past performance, mission capability and cost and price data.

"Our decision sustains the protest challenging the cost/price evaluation because the record does not reflect any Air Force analysis as to the realism of certain changes Boeing introduced in its final proposals," said the GAO, Congress's non-partisan audit and investigative arm.

Nor did the record show any Air Force analysis of the potential risk associated with the changes made by Boeing although the solicitation required such analysis, the GAO said in a statement.

The GAO recommended the Air Force perform and document the analysis."

In a one-sentence response, Lt. Col. Jennifer Cassidy, an Air Force spokeswoman, said the service would evaluate the GAO ruling, which is a recommendation, not an order.