Cost Was Deciding Factor in Air Force's B-21 Decision: GAO


The Air Force last year awarded Northrop Grumman Co. the B-21 Long Range Strike Bomber contract over Boeing for one reason: cost.

Boeing protested the contract award, initially worth $21.4 billion, in November. The Government Accountability Office denied the challenge in February.

The program is expected to top $55 billion.

In a redacted report released by the GAO on Tuesday, the investigative arm of Congress produced its final 52-page decision based on the Air Force's assessment that the award to Northrop was "reasonable and consistent" with the service's request for proposal.

"With respect to the cost price evaluation, we see no support for Boeing's argument that the Air Force failed to reasonably account for Northrop's technical risks in the cost realism analysis, and cannot conclude that the Air Force's realism evaluation of Boeing's proposal was flawed," investigators offered in their conclusion.

All technical and cost-price estimates were redacted or deleted throughout the report.

"Significant structural advantages in Northrop's proposal -- specifically, its labor rate advantage and decision to absorb significant company investment -- also strongly impacted the outcome of this essentially low-price, technically acceptable procurement, and Northrop's significantly lower proposed process for the [Low Rate Initial Production] phase created a near-insurmountable obstacle to Boeing's proposal achieving best-value or to Boeing's protest demonstrating prejudice in the cost realism evaluation," the report said.

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Boeing initially protested the award contract over inaccurate risk assessment for the program, the GAO revealed. The GAO said the claim had no bearing, as Northrop met the Air Force's bid proposal.

Boeing's protest, in tandem with partner Lockheed Martin Corp., prompted Northrop to suspend initial engineering work on the program in November 2015 until the decision in February reversed the temporary pause.

Earlier in the report, investigators also noted that, "throughout the discussion process, Boeing pursued an approach of revising and supplementing the substantiation of its original cost proposal without upwardly revising any of its proposed costs."

Northrop, on the other hand, adjusted its cost estimates, and was also willing to spend its own cash on risk-reduction activities and development.

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