U.S. Air Force to brief Boeing Friday on bomber contract loss: sources

Reuters News
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Posted: Oct 29, 2015 11:08 PM

By Andrea Shalal

WASHINGTON (Reuters) - The U.S. Air Force is due to brief Boeing Co on Friday about its decision to award Northrop Grumman Corp a huge contract to build a next-generation long-range strike bomber, according to two sources familiar with the matter.

Boeing, which had teamed up with Lockheed Martin Corp, told its staff in a memo on Tuesday that it would "rigorously deliberate" whether to protest the contract award, with a decision likely within two weeks.

Under federal law, companies have 10 days after an agency debrief to file with the U.S. Government Accountability Office, an arm of Congress that rules on federal contract protests. The GAO then has 100 days to evaluate the case.

Boeing will likely take several days to evaluate what it learned and consider whether to file a protest, the sources said.

Boeing declined to comment. Air Force officials could not immediately be reached for comment.

The Air Force on Tuesday selected Northrop, maker of the stealthy B-2 bomber, to develop and build the new bomber, a deal analysts value at up to $80 billion.

Boeing and Lockheed immediately said they wanted answers on how the competition was scored with regard to price and risk.

Air Force officials have declined to comment publicly about how the two bids compared. They said only that Northrop's bomber represented the "best value for the nation" and would cost $511 million per plane, on average, in 2010 dollars, well below the program's cost cap of $550 million per plane.

Boeing executives were in "total shock" about the contract loss, said one of the sources, given the combined strength and capabilities of the Pentagon's two largest suppliers.

Executives were concerned that the Air Force had not fully accounted for risks involved in setting up a new large airplane production line, as Northrop must do given that it is not currently producing large numbers of combat aircraft.

Northrop does build the center fuselage for Lockheed's F-35 fighter jet, the aft and center fuselage for Boeing's F/A-18E/F fighter jet, and the Global Hawk high-altitude drone.

Boeing and Lockheed were also concerned about whether a recent warning by Pentagon acquisition chief Frank Kendall about the undue influence of increasingly large defense contractors had factored into the decision, said one of the sources.

"When you make a statement like that, and then give a contract like to a smaller and less experienced company, it does raise suspicion. That will be closely looked at," said the source.

(Reporting by Andrea Shalal; Editing by Kenneth Maxwell)