Air Force asks government to reconsider Boeing ruling

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The U.S. Air Force has asked the U.S. Government Accountability Office to reconsider its decision faulting the Air Force for its handling of a $1.2 billion contract with Boeing Co for depot maintenance of KC-135 refueling aircraft, the GAO said on Wednesday.

"They are arguing that we made an error in our decision and are asking us to reverse it," said Michael Golden, spokesman for the GAO, the nonpartisan investigative arm of Congress, which also rules on contract protests.

It is due to rule on the request by April 16, but a decision could some earlier, he said.

Air Force spokeswoman Lt. Col. Jennifer Cassidy confirmed the request had been submitted, but gave no further details.

On December 27, the GAO upheld in part a protest by losing bidder Pemco Aviation Group Inc, which changed its name to Alabama Aircraft Industries Inc. on January 1.

That decision was the latest in a string of protest defeats for the Air Force, which had already been forced to redo a $15 billion helicopter competition also initially won by Boeing.

It is taking great pains to ensure that a projected $40 billion contract for new refueling tankers -- a fierce battle between Boeing and a team made up of Northrop Grumman Corp and Europe's EADS that is due to be decided later this year -- does not also result in a contract protest.

Pemco, based in Birmingham, Alabama, maintains and modifies aircraft for the U.S. government and other customers. It also develops and manufactures rocket vehicles and control systems.

In the past, Pemco was a subcontractor to Boeing on KC-135 maintenance. The two companies initially bid together to continue the work, but decided to pursue separate bids after the Air Force scaled back the scope of the maintenance contract.

Pemco claimed the Air Force's evaluation of the KC-135 deal was flawed in several ways, including its tally of the rivals' past performance, mission capability, and cost and price data. It also raised concerns about possible conflicts of interest, given the previous relationship between the two companies.

GAO denied the protest on all grounds except the cost and price issue. On that point, it said the Air Force had not documented any required analysis about the realism and potential risks of Boeing's final proposal revisions, and urged the Air Force to go back and do that work.

In a redacted version of the GAO decision released on Wednesday, GAO said the record contained no documentation of any Air Force analysis, "despite Boeing's own acknowledgment that its final proposal revisions created risk."

It said it found the absence of agency documentation "striking" since Boeing's revised proposals departed from its initial approach and "appear directly contrary" to the Air Force's own view about the KC-135 fleet.

Defense analyst Loren Thompson said Boeing understood the product better because it built the KC-135 airplanes and serviced them for a long time, while Pemco, as the nation's leading third-party maintenance company, probably had "a very favorable cost structure and pool of skills."

(Editing by Richard Chang)