Beleaguered Boeing (NYSE:BA) backers got a rare bit of good news this week. (And every little bit helps, right?)
Over in the nation's capital, the U.S. Court of Appeals for the Federal Circuit has just overturned a lower court's ruling that stripped Boeing of its contract to service KC-135 refueling tankers.
As The Wall Street Journal described the story, Boeing won the contract to service the planes back in September 2007. Alabama Aircraft Industries -- don't laugh: They were big enough to go toe-to-toe with L-3 (NYSE:LLL), Alliant Techsystems (NYSE:ATK), and Orbital Sciences (NYSE:ORB) for a NASA contract last year -- proceeded to file suit, challenging the award's validity. And AAI was so convincing that the federal judge apparently agreed to rewrite the rules of the Air Force's request for proposals, resulting in an "impermissible substitution of the court's judgment for the [Air Force's]."
It's ... something ... all over again
Does all this sound eerily familiar? If so, it's not deja vu you're feeling -- you're thinking of the similar ruling last month, when the Air Force gave a different refueling contract (for KC-10 tankers) to Boeing rival Northrop Grumman (NYSE:NOC). As you may recall, Boeing broke new ground when it decided not to challenge that award. But this time, the situation is different.
For one thing, it wasn't Boeing that started this fight. Boeing won the KC-135 contract fair and square; it was AAI that raised a ruckus and rang up the lawyers. For another thing, Boeing filed its appeal of the lower court's verdict months before the Pentagon began pressing contractors to limit their award challenges to only extreme cases. This being the case, the precedent Boeing set when it agreed not to fight Northrop's KC-10 win has not been unsettled by this latest legal news.
At least, not yet
Or so a Fool can hope. As I argued last month, this rash of contrary contractors, calling in lawyers whenever a Pentagon contest doesn't go their way, poses a clear and present danger to U.S. troops in the field. Whatever the legal merits, these complaints threatened to prevent General Dynamics (NYSE:GD) and Navistar (NYSE:NAV) from building armored vehicles for the Army last year. They delayed delivery of vital refueling tankers to the Air Force by more than six years.
And not to sound like a war-profiteer here but ... yeah, the Pentagon's inability to get a final award out the door on so many contracts does hurt investors. It's hard for our companies to profit from a contract when they can't even begin work till the lawyers are done wrangling.
So forgive me for gloating a bit here but ... yes, I am glad to see AAI get its comeuppance in court.
Related Foolishness:
- How did we get to this state, where armed and body-armored contractors are held hostage by lawyers in briefs?
- And when did the tide begin to turn?
- Should we heed the Pentagon's plea for More Guns, Fewer Lawyers?
