November 5, 2015 / 12:51 AM / 2 years ago

Boeing nears decision on protest of U.S. bomber award to Northrop

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The Boeing logo is seen at their headquarters in Chicago, April 24, 2013.Jim Young

WASHINGTON (Reuters) - Boeing Co (BA.N) may decide as soon as Thursday whether to protest the U.S. Air Force's selection of Northrop Grumman Corp (NOC.N) to develop and build a next-generation long-range strike bomber amid signs that a challenge could be an uphill battle, according to sources familiar with the issue.

Boeing spokesman Todd Blecher said the company had not yet decided whether to challenge the contract award, which could be worth $80 billion to the winning bidder over the next decades. "We continue to evaluate our options," he said.

Boeing, which had teamed with Lockheed Martin Corp (LMT.N), has agonized over the decision since receiving a briefing from the U.S. Air Force on Friday, according to sources familiar with the issue, who said company executives were stunned by the loss.

The stakes were high, but neither Boeing nor Lockheed were willing to proceed with a protest if their case looked weak, for fear of annoying the Pentagon and the Air Force, according to two sources familiar with the issue.

A protest would also delay work on the new warplane that U.S. Air Force officials say they need to start replacing the current aging fleets of B-1 and B-52 bombers, the sources said.

The Air Force last week selected Northrop to develop and build the new bomber.

Boeing and Lockheed immediately said they wanted answers on how the competition was scored with regard to price and risk.

Under federal law, companies have 10 days after an agency debrief to file with the U.S. Government Accountability Office, an arm of Congress that rules on federal contract protests. In order to trigger a stop-work order, protests must be filed within five days of a required briefing, according to the GAO.

The GAO then has 100 days to evaluate the case.

Loren Thompson, a defense consultant with close ties to Boeing and Lockheed, said challenging the bomber award could be difficult given that the program was highly classified. The decision would ultimately hinge on how the Air Force evaluated the price and risk of the competing bids, he said. The fact that the deliberations had stretched out for days indicated it was not an obvious - or easy - decision.

He said Boeing could also mount a political battle against the contract award, but faced some hurdles. "It's a secret program, it's a high priority for the Air Force, and Northrop wants to build the bomber in California, a very powerful state," he said.

Sources familiar with the issue said both companies had concerns about the use of historical bomber data to determine the pricing of the new plane since it did not give credit for innovations and new advanced manufacturing techniques implemented since the B-2 bomber two decades ago.

Relying on historical data also affected projected life cycle costs for the planes, the sources said.

Air Force officials have said only that Northrop's bomber represented the "best value for the nation" and would cost $511 million per plane, on average, in 2010 dollars, well below the program's cost cap of $550 million per plane.

Reporting by Andrea Shalal; Editing by Leslie Adler

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