GAO upholds protest of lucrative Air Force contract

The Government Accountability Office has slammed the brakes on a $1.2 billion Air Force contract awarded in 2007 to Boeing for the upkeep of its fleet of midair refueling tankers.

In a decision issued last week and released publicly Thursday, GAO said it was upholding one aspect of a protest filed by Pemco Aeroplex Inc. of Birmingham, Ala., now operating as Alabama Aircraft Industries Inc., for depot maintenance of the KC-135 aircraft.

Pemco's protest, filed Sept. 19, 2007, charged that "the Air Force's evaluation was flawed in various aspects, including the evaluation of offerors' past performance, mission capability, and cost/price," according to GAO's ruling.

GAO upheld the latter protest allegation "because the record does not reflect any Air Force analysis as to the realism of certain changes Boeing introduced in its final proposals, or the potential risk associated with those changes; the solicitation required such analysis."

Meanwhile, the congressional watchdog denied Pemco's protest allegations concerning past performance and mission capability and declined to rule on allegations of conflict of interest involving a now deceased senior Air Force procurement official.

GAO recommended that the Air Force "perform and document the required realism and risk analysis."

Ron Aramini, president and CEO of Alabama Aircraft Industries, said, "This decision will introduce an element of fairness into the process and a proper evaluation will establish that AAII is the low cost, low risk, best value provider of KC-135 [Programmed Depot Maintenance] services. We continue to believe the other issues we raised in the protest have merit and could be sustained in civil litigation."

Meanwhile, a spokesman for Chicago-based Boeing Co. said the company remains confident that once a new analysis is performed, it "will again be determined to have offered the best value to the Air Force."

The Air Force has said it would evaluate GAO's decision.

Boeing was awarded a 10-year contract -- a five-year base term with five additional one-year options -- in September 2007 to continue providing programmed depot maintenance on the KC-135 Stratotanker fleet, which includes more than 200 aircraft at facilities in Texas, Oklahoma and Missouri. Boeing has held the PDM contract since 1998.

Boeing also is bidding against Northrop Grumman for a $40 billion contract to supply the Air Force with new aerial refueling tankers to replace its aging fleet of KC-135s. A contract decision is expected as early as the end of the month.

GAO's ruling did not address Pemco's allegations that the Air Force's second-highest ranking procurement official was biased in the selection of Boeing. Charles Riechers was responsible for the contract decision as the "source selection authority for this procurement," GAO said.

Riechers, the former principal deputy assistant secretary for acquisitions, was found dead in his Virginia home in October 2007. Police have called the death an apparent suicide.

Riechers became embroiled in controversy after a front-page Washington Post story alleged that he was placed in a private consulting position for an Air Force contractor while awaiting his Pentagon appointment.

The Post reported that while Riechers spent two months earning nearly $27,000 as a senior technical adviser to Commonwealth Research Institute, a nonprofit defense contractor in Johnstown, Pa., he had done no work for the firm but instead was working for Sue Payton, the assistant Air Force secretary for acquisition.

Pemco amended its original protest submission in October, alleging the conflict of interest because Commonwealth Research Institute's parent company, Concurrent Technologies Corp, has done work for Boeing in the past. GAO said it has been advised by the Air Force that local police and federal investigative units are conducting an ongoing probe into "the root cause" of Riecher's death.

"It is our understanding that this investigation will encompass matters that may have a bearing on Pemco's allegations of bias," GAO said. "In light of the ongoing investigation, and consistent with this office's past practice, our decision does not express any opinion regarding Pemco's bias allegations."

GAO's complete decision in the Pemco case will not be released due to a protective order. A redacted version for public release is expected soon.