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U.S. GAO rejects Boeing protest of Northrop’s bomber contract

WASHINGTON (Reuters) – The U.S. Government Accountability Office on Tuesday rejected a protest filed by Boeing Co and Lockheed Martin Corp against a multibillion-dollar bomber contract awarded to Northrop Grumman Corp by the U.S. Air Force in October.

The decision marked another setback for Boeing, which is facing job cuts in its commercial division and a reported federal investigation into whether it properly accounted for two jetliners, the 747 and 787.

Ralph White, GAO’s managing associate general counsel for procurement law, said the GAO found no basis to sustain or uphold the protest against the Northrop contract, which analysts value at over $80 billion.

The U.S. Air Force’s technical evaluation of the rival bids and their cost was “reasonable, consistent with the terms of the solicitation, and in accordance with procurement laws and regulations,” White said.

Boeing said it would carefully review the GAO’s decision and decide on next steps in the coming days. Boeing can still challenge the Northrop contract in federal court.

“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,” the company said in a statement.

Pentagon spokesman Peter Cook said the GAO ruling reflected the confidence the Defense Department had in its decision.

No comment was immediately available from Northrop or the Air Force.

Boeing had challenged the initial $21.4 billion contract awarded to Northrop, which includes engineering and design work, and options for production of the first 21 planes. It argued that the Air Force’s evaluation of the costs and technical aspects of Northrop’s bid was fundamentally flawed.

The Air Force has not released the full value of the contract which foresees production of a total of 100 new bombers, or the expected cost of the options for the first 21 planes. It has said the contract award will support an average cost per plane of $511 million in 2010 dollars.

GAO said the details of its decision and Boeing’s challenges were classified and covered by the terms of a protective order issued by GAO for the protest.

(Reporting by Andrea Shalal; Editing by Tom Brown)

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