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GAO rejects part of Aerospace tanker protest

WASHINGTON/ATLANTA (Reuters) – Government auditors on Friday dismissed part of a protest by U.S. Aerospace Inc that alleged misconduct by the U.S. Air Force in a projected $50 billion tanker competition, but said it would rule on remaining issues by October 6.

The U.S. Government Accountability Office said it concluded there was "insufficient support" for U.S. Aerospace's claim that the Air Force may have acted in "bad faith" or intentionally delayed a messenger delivering the bid.

But the agency, which oversees federal contract protests, said it was still reviewing whether the bid was received on time -- or 5 minutes late as the Air Force has said.

The GAO still plans to rule by October 6, a spokesman said.

U.S. Aerospace said in early July it was partnering with Antonov, the state-owned Ukrainian plane builder, to compete against Boeing Co and Airbus parent EADS to build a new generation of aerial refueling planes for the U.S. military.

Michael Goldberg, a former U.S. attorney and one of six directors on the company's board, said he was heartened that the GAO was still reviewing the substance of the protest.

"All the company wants is a fair shake in the bidding process," Goldberg told Reuters in a telephone interview.

Ralph White, who heads GAO's bid protest unit, said the dismissed portion involved claims that "Air Force officials may have intentionally delayed the messenger delivering the proposal because of political issues with the company's Ukrainian supplier."

He said a final ruling was still expected by October 6, given the Air Force's request for an expedited handling of the case.

The Air Force referred questions about the ruling to the Pentagon, which said it would be inappropriate to comment until the overall issue had been decided by the GAO.

Goldberg said U.S. Aerospace planned to exhaust its administrative remedies in the case, but could take the case to federal court if the protest was not upheld.

He underscored the serious nature of the company, and said it planned to bid in other global weapons competitions, including a New Zealand helicopter competition and an upcoming U.S. Air Force competition for new training aircraft.

Goldberg said U.S. Aerospace was working with Antonov and a Chinese manufacturer to produce lower-cost aerospace products.

"We've not been trying to ballyhoo the stock; we're working the company. It's not for flash; it's for substance," he said.

U.S. Aerospace was in final stages of talking to people who would be hired as senior executives, including some well-known names in the military and aerospace community, he said.

On Friday, the company said it had appointed Michael Cabral, who has more than 30 years' experience in the aerospace industry, as president. Earlier this week, the company said it sold its machine-tool manufacturing business and that David Duquette resigned as chief executive.

U.S. Aerospace shares ended 1 cent or 14.3 percent higher at 8 cents in over-the-counter trading on Friday.

(Reporting by Andrea Shalal-Esa in Washington and Karen Jacobs in Atlanta; Editing by Robert MacMillan, Bernard Orr and Matthew Lewis)