The Real Reason for Boeing's Protest


What's the real reason Boeing filed a GAO protest over the tanker award to Northrop Grumman? After all, the GAO rarely overturns such awards and the Air Force appears to have acted about as transparently as anyone could hope for.

Of course, it's extremely difficult to get a good grip on just how strong -- or weak -- Boeing's case might be since most of the information that would really make that clear is considered extremely sensitive proprietary data.

It looks as if Boeing has two main goals. The first and most easily understood is that Boeing wants to get paid back for the costs it incurred preparing its bid. The second goal is to give the company the 100 days to trumpet its various claims, spread money around Capitol Hill and advertise, advertise, advertise.

I spoke about all this with a lobbyist and a defense finance expert, both of whom have to remain very anonymous. Both have a tight grasp on defense acquisition battles and their dynamics. We concluded that Boeing doesn't really care about the GAO protest, though the finance expert said Boeing may have a stronger case than first appears obvious. They both agreed that the company's main object was to carve out a window to give it time to hammer lawmakers, their staff and the public about just fabulous their plane really is and to create so much white noise that Northrop Grumman/EADS is forced to either share the deal or, best of all, get Congress to award the contract to Boeing.

The lobbyist said he had used a similar strategy on a smaller program several years before and it worked like a charm.

The finance person said there are two financial reasons Boeing filed the protest. First, it stands a decent chance of getting back the cost of preparing its bid, which he estimated at around $20 million. But the biggest reason for Boeing's actions may have little to do with its defense business, although $32 billion is not chump change even for one of the big three defense contractors. And the enormously cyclical nature of the civil aviation business may pose enormous long-term risks for the Chicago-based company.

So Boeing would like to guarantee revenue from its reliable government customer. Should the 787 Dreamliner face longer delays than it has already wracked up, our finance expert said the company faces penalties that reach as high as $20 billion.

[PHOTO: Boeing Co.]

-- Colin Clark

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