High-stakes tanker fight could end up decided in court

Boeing Co and Northrop Grumman Corp, locked in a three-month dispute over a $35 billion US Air Force refueling-tanker contract, may wind up in court before the fight is done.

Northrop and partner European Aeronautic, Defence & Space Co won the contract Feb 29 by beating Boeing, the Air Force's only supplier of the aircraft for half a century. Boeing protested the award to the US Government Accountability Office, a congressional watchdog agency that must make its recommendation to the Pentagon by June 19.

History doesn't favor Boeing, because the GAO sustains only about one in every four such protests. With decades of work and as many as 44,000 jobs in the balance for Boeing and suppliers, the Chicago-based company may risk the enmity of its largest customer and seek redress at the US Court of Federal Claims, said Richard Lieberman, a federal contracting attorney with McCarthy Sweeney & Harkaway in Washington.

"If Boeing loses at the GAO, I'll bet you will see this in the Court of Federal Claims," said Lieberman, author of Elements of Government Contracting. "If Boeing went up there and said the GAO got it wrong and asked for an injunction, I think the court would grant it."

The GAO decision will dictate Boeing's action, said Mark McGraw, vice-president of tanker programs. "Nothing is ruled out," he said when asked specifically if the company would consider taking its case to the Washington court.

Boeing shares have declined 14 percent since the decision, compared with a 11 percent drop in Northrop. Boeing declined 36 cents to $73.31 on Wednesday in New York Stock Exchange trading, while Northrop dropped 32 cents to $71.46.

Established by Congress in 1855 to adjudicate the Constitution's First Amendment guarantee of the right "to petition the Government for redress of grievances", the Court of Federal Claims has exclusive jurisdiction over various disputes against the US government in excess of $10,000. Cases handled by the court include the savings and loan crisis of the 1980s and the World War II internment of Japanese-Americans.

Boeing's complaint says the Air Force, in its desire to ensure competition for the contract, altered specifications in the contest that favored Northrop's larger aircraft. The Air Force has said that the contest was fair and that Northrop's plane better met its needs.

Randy Belote, spokesman for Los Angeles-based Northrop, said his company anticipates Boeing's protest will be denied by GAO, and the matter may end there.

"We hope to have this behind us and to be building these sorely needed tankers as soon as possible," Belote said. "We have full confidence in the Air Force acquisition process and look forward to the protest being denied."

The Air Force "politely declines comment," Lieutenant Colonel Tatiana Stead said in an interview.

The companies are also girding for a fight in Congress once the GAO rules. Representatives Norm Dicks, a Democrat from Washington, and Todd Tiahrt, Republican of Kansas, have vowed to help Boeing by cutting off funds for the tanker if the GAO rules against it. Their districts include large Boeing manufacturing sites that would benefit from the tanker work.

Agencies

(China Daily 06/13/2008 page16)