In what could be a second chance for airplane manufacturer Boeing Co. (BA) to win one of the most costly contracts in Pentagon's history, the Government Accountability Office or GAO Wednesday sustained the company's bid protest regarding a refueling tanker program.
The agency found in the company's favor on several issues related to its protest over the U.S. Air Force's award of a $35 billion contract on February 29 to Northrop Grumman Corp. (NOC) and Airbus maker European Aeronautic, Defence & Space Co. or EADS.
"Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman. We therefore sustained Boeing's protest," said Michael Golden, the GAO's managing associate general counsel for procurement law. The agency recommended that the Air Force rerun the process.
The statement added: "Air Force conducted misleading and unequal discussions with Boeing, by informing Boeing that it had fully satisfied a key performance parameter objective relating to operational utility, but later determined that Boeing had only partially met this objective, without advising Boeing of this change in the agency's assessment and while continuing to conduct discussions with Northrop Grumman relating to its satisfaction of the same key performance parameter objective."
The U.S. auditors said the Air Force did not assess the relative merits of the proposals in accordance with the evaluation criteria identified in the solicitation. It added that Air Force's evaluation of military construction costs in calculating the offerors' most probable life cycle costs for their proposed aircraft was unreasonable.
In late February, the Air Force selected Northrop Grumman and EADS to build 179 midair refuelers in the next 15 years to replace its KC-135 tankers. While Boeing offered a tanker based on its 767 aircraft, Northrop proposed to modify Airbus A330 jets into the KC-45 tanker. Subsequently, Boeing, which has been building tankers for the Air Force for over half a century, challenged the Air Force's technical and cost evaluations, conduct of discussions and source selection decision.
It was the first time that a major contract was awarded to an overseas contractor. The Air Force said Boeing's plane was smaller than the EADS-Northrop model.
The airborne tankers are in use since 1956. About four years ago, the Air Force had planned to lease and buy 100 767s from Boeing to be used as tankers. But that plan failed when Sen. John McCain, the Republican presidential nominee now, called it a taxpayer "ripoff."
McCain was at that time chairman of the Senate Commerce Committee and an Armed Services subcommittee. He headed an investigation that led to the contract award to Boeing being blocked in 2004. Later, the scandal resulted in a former Air Force official and a top Boeing executive being sent to prison, and Boeing's chief executive and several top Air Force officials resigned.
Though the GAO ruling is not binding, the Air Force will have to explain to Congress if it ignores the recommendation. The service has to respond within 60 days.
Commenting on the ruling, Mark McGraw, vice president, Tanker Programs of Boeing, said, "We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest. We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."
BA closed Wednesday's regular trading at $74.65, up $0.27 or 0.36%, on 11.53 million shares, compared to a 3-month average volume of 6.26 million shares. The stock, which has been trending in the range of $71.59-$107.83 for the past year, added 10 cents in the extended trade.
NOC closed the day's regular trade lower by $1.08 at $70.01. The stock dropped 48 cents in the post-close trade.
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April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.