Aerospace giant Northrop Grumman Corp. said Wednesday that it was suspending the hiring of thousands of engineers in Southern California after a ruling by a federal auditing agency left its $35-billion Air Force contract to build aerial refueling tankers in limbo.
The Government Accountability Office ruled that the contract awarded to Century City-based Northrop was flawed and recommended that the Pentagon hold another competition for what is expected to be the biggest military purchase for at least a decade.
The ruling was a major victory for rival Boeing Co., which had challenged the contract award, arguing that the Air Force had unfairly favored Northrop's bid to build 179 tankers.
The decision is also expected to prolong the bitter rivalry between the nation's second- and third-biggest defense contractors and embolden "Buy America" proponents who have criticized the contract because many of the parts for Northrop's tanker would be made in Europe.
The ruling is the latest in a series of high-profile blows for the beleaguered Air Force, coming just weeks after the civilian and military heads of the service were forced to resign. The officials were pushed out by Defense Secretary Robert M. Gates after an investigation uncovered lax oversight of the Air Force's nuclear arsenal.
The Air Force said Wednesday that it would "determine the best course of action" after it had reviewed the GAO's decision.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," Sue C. Payton, assistant secretary of the Air Force for acquisition, said in a statement.
Though the recommendations of the GAO, an auditing arm of Congress, are not binding, the findings "were so sweeping that it is nearly inevitable that the Air Force will have to start over in competing the tanker program," said Loren Thompson, a defense policy analyst for the Lexington Institute.
"Protesting contract awards has become common, but it's rare for the GAO to be so definitive in rejecting an award, particularly when the service was saying that it was transparent and fair," he said.
The tanker contract will mean new jobs for Southern California no matter which group gets it. Northrop and Chicago-based Boeing are the largest private employers in Southern California, with a combined regional workforce of nearly 60,000.
