EOW May 2007

In a rare decision that could overturn its selection to provide the US Air Force with the next generation of search-and- rescue helicopters, the Government Accountability Office on 26 th February recommended reopening the competition. If Boeing’s bid ‘no longer represents the best value to the government,’ the GAO will recommend termination of the contract. Lockheed Martin (Bethesda, Maryland) and Sikorsky Aircraft (Stratford, Connecticut) were surprised as well as displeased to lose out to Chicago-based Boeing for the $15 billion contract, awarded in November 2006. Both companies had submitted models that are newer, lighter, and more flexible than Boeing’s 54,000-pound update on its Vietnam-era Chinook. They promptly lodged protests with the GAO, the auditing arm of Congress. Less than 30% of such protests are taken up by the GAO but it lent an ear to the Lockheed and Sikorsky complaints. Finding in favour of the two companies, the GAO said that in its selection of Boeing the Air Force had violated its own cost-analysis rules. The agency moreover held that Lockheed and Sikorsky should be reimbursed for their legal expenses in lodging the complaint. This episode is uglier than the decorous Airbus-UPS rupture. Lockheed even accused the Air Force of using two sets of books in an effort to steer the contract Boeing’s way.

Greg Caires, a Lockheed spokesman, said in a statement last November, “The competitors received different instruction during the competition.” If Boeing does lose the helicopter contract, it will revive memories of a conflict-of-interest scandal that ended last year in prison terms for top Boeing and Air Force officials. At the centre of that unsavoury case, which cost Boeing billions in Pentagon contracts and more than $600 million in fines, was a former Air Force official who was found to have shepherded billions of dollars in contracts toward Boeing. Some of these, too, are now being bid again. While the GAO recommendation in the current case is non- binding, it would be unusual for the Air Force to ignore its findings. The GAO criticised only the financial analysis used to award Boeing the contract. It did not comment on the relative merits of the various helicopters evaluated. Notes on telecom . . . Escalating its effort to bring its case under American jurisdiction, Vivendi , the French conglomerate, said on 2 nd March that it had new ammunition in its long-running dispute with Deutsche Telekom over control of a Polish ❈

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EuroWire – May 2007