Boeing, Lockheed Lose Protest Over New Bomber

The Government Accountability Office (GAO) on Tuesday rejected a protest filed by Boeing Co. (NYSE: BA) and Lockheed Martin Corp. (NYSE: LMT) challenging the award of a contract to build a new U.S. Air Force Long Range Strike-Bomber (LRSB). The contract, valued at around $80 billion over the life of the plane, was awarded in late October to a team lead by Northrop Grumman Corp. (NYSE: NOC).

The protest was filed a week after the decision was announced, with Boeing and Lockheed charging that the selection was “fundamentally flawed.”

The cost evaluation performed by the government did not properly reward the contractors’ proposals to break the upward-spiraling historical cost curves of defense acquisitions, or properly evaluate the relative or comparative risk of the competitors’ ability to perform, as required by the solicitation.

The GAO said on Tuesday that it found no basis to uphold the protest. The agency concluded “that the technical evaluation, and the evaluation of costs, was reasonable, consistent with the terms of the solicitation, and in accordance with procurement laws and regulations.”
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In a brief response Boeing and Lockheed said:

We continue to believe that our offering represents the best solution for the Air Force and the Nation, and that the government’s selection process was fundamentally and irreparably flawed.

We will carefully review the GAO’s decision and decide upon our next steps with regard to the protest in the coming days.

Given the significance of the LRS-B program, it could not be more critical that the government procure the most capable bomber to serve the warfighter, at the greatest value to the American taxpayer.

We reviewed the arguments for and against the contract award in December. Last week the Air Force lowered the development budget from $12.6 billion to $9.1 billion based on a budget update from Northrop.

Boeing’s stock traded higher by more than 3% in the mid-afternoon on Tuesday at $112.10 in a 52-week range of $102.10 to $158.83. The share price boost is like due to another Boeing announcement that it is taking 787 production from 10 to 12 per month this summer.