And the news is also another body blow for the Air Force, following the abrupt sacking earlier this month of its civilian and military chiefs.
The bid process, begun after a lengthy corruption probe ended the service's previous effort to replace its half-century-old fleet of aerial refueling tankers, was perhaps the most closely watched procurement the Air Force has ever undertaken. Officials have said repeatedly the new tanker was their No. 1 purchase priority and that it was up to a decade overdue.
So, despite the troubled history of large Air Force procurements, the auditors' finding that the process was riddled with "significant errors" left many observers open-mouthed.
"This was their No. 1 acquisition priority," Nick Schwellenbach of the Project on Government Oversight told United Press International. "It's astounding that they didn't get it right, given that they knew they would be under the microscope."
But he added that the Government Accountability Office, which reviewed the award, has "repeatedly sustained protests against Air Force contract awards."
"If this is the best the Air Force can do on its most critical contract award, the system remains dysfunctional," said Tom Schatz, president of Citizens Against Government Waste.
The GAO said Wednesday its review had found "a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman," according to Michael Golden, the GAO's managing associate general counsel for procurement law.
The GAO recommended the Air Force reopen discussions with both companies, "obtain revised proposals, re-evaluate the revised proposals," and make a new decision. Because some of the errors they found related to the service's use in making the decision of factors not properly included in their official solicitation, auditors added that "the Air Force should amend the solicitation prior to conducting further discussions."
By law, the Air Force now has 60 days to respond. Sue Payton, the service's assistant secretary for acquisition, said in a statement Wednesday that though "disappointed" by the auditors' findings, the service was reviewing it and "will do everything we can to rapidly move forward."
"As soon as possible, we will provide the Air Force's way ahead," she said.
The contract is for the development and production of up to 179 tanker aircraft, for approximately $35 billion, but it could swell to $100 billion with follow-up orders.
Although the Air Force, and Northrop Grumman, have the right to appeal the ruling, and Pentagon officials could even ignore the GAO's non-binding findings altogether, that does not seem likely.
"It is highly unlikely that the Air Force would override the ruling, given the huge political firestorm that would provoke," said Schwellenbach.
Both the GAO and the Air Force were keen to stress the audit had examined only the decision-making process, not the relative merits of the two airplanes, and Payton said the service believed it had made the right decision.
"We remain confident that the Northrop Grumman KC-45 is the aircraft best suited to meet the Air Force's critical mission requirements," said Payton.
Nonetheless, the GAO ruling was hailed by those in Congress who have vociferously opposed the award of the contract to a consortium that included U.S. defense contractor Northrop Grumman but was led by EADS, the European aerospace and defense contractor that makes the Airbus.
Schatz said it was important that Congress stay out of the process. "They have to let the process go forward without politicization," he told UPI.
Schatz said that given Air Force procurement officials "missed it by a mile" on such an important deal, "One wonders what might be occurring with other defense procurements."
He was not alone. In a statement Wednesday evening, Senate Armed Services Committee Chairman Carl Levin, D-Mich., said it was vital to find out what had gone wrong -- and deal with those responsible.
"The GAO's decision in the tanker protest reveals serious errors in the Air Force's handling of this critically important competition," he said. "We now need not only a new full, fair and open competition in compliance with the GAO recommendations, but also a thorough review of -- and accountability for -- the process that produced such a flawed result."