The Boeing tanker protest apparently is going well, as the General Accounting Office has rejected Northrop Grumman and Air Force motions to narrow the scope of the protest. Generally, the GAO sustains 25 percent of the protests, but Boeing’s chances are much better than the average protester’s due to its greater resources.

The critical element in the protest is the Air Force’s claim that Northrop had a comparable or lower bid than Boeing.

However, according to CNBC, Northrop has admitted that its bid included at least a 13 percent subsidy from the French government. This is a real no-no in government procurements since you could imagine the result if every contractor had their bid subsidized by their local municipality. It is difficult to conceive how Northrop had a lower price given (1) the lower cost of the 767, (2) the 12-15 percent G&A charge Northrop must place on its contract with EADS, and (3) the fact that EADS must be paid in Euros that exchange at $1.55 to the Euro. This makes me believe that Northrop, aided by the Air Force, used creative accounting to win the initial bid.

My experience in GAO protests indicates that once Boeing exposes these irregularities, it has a 70-80 percent chance of winning its protest. Remember the GAO sustained the Lockheed helicopter protest over Boeing based upon the fact that the specification was unclear. The creative accounting apparently used by Northrop is a more serious offense.

Daniel Schleher