June 12 (Bloomberg) -- Northrop Grumman Corp. and Boeing Co. both said the U.S. Air Force discovered errors in its calculation of the operating costs of the competing aircraft in the $35 billion refueling tanker contest that Northrop won in February.

Northrop said in a statement today the ``minor errors should have no impact'' in the pending ruling on Boeing's protest of that award. Boeing in a separate statement said its case is ``bolstered by new revelations'' and that the Air Force now concedes that Boeing's most probable life cycle cost is lower than Northrop's. The Air Force had no immediate comment.

The U.S. Government Accountability Office, a congressional watchdog agency, must make its recommendation on Boeing's protest to the Pentagon by June 19. History doesn't favor Boeing, which has been the service's sole supplier of the planes for half a century, because the GAO sustains only about one in every four protests. For Boeing, with as many as 44,000 jobs in the balance including suppliers, the new ammunition was welcome.

``Now that we see that the data wasn't correct and the costs were less, we're looking forward to getting some answers,'' Bill Barksdale, a spokesman for Chicago-based Boeing, said in an interview. The company is the second-largest U.S. defense contractor, trailing Lockheed Martin Corp., and one position ahead of Northrop.

Boeing has declined 13 percent since the day before the tanker decision, compared with an 11 percent drop in Northrop. Boeing rose 81 cents to $74.12 at 4 p.m. in New York Stock Exchange trading, while Los Angeles-based Northrop gained 7 cents to $71.53.

Cost Errors

Northrop said there were a total of five errors made which resulted in a ``slight adjustment of the operating costs.'' The initial estimate for life cycle costs was $108.01 billion for Northrop compared with $108.044 billion, or a $34 million difference. Neither Boeing nor Northrop provided the adjusted costs after accounting for the Air Force errors.

``Perfection, while an admirable goal, is rarely achieved in human affairs and particularly not in something as complex'' as the tanker contest, Northrop spokesman Randy Belote said in an e-mailed statement. ``Despite any minor inaccuracies in the process, the tanker providing the most capability at the best overall value is still the Northrop Grumman KC-45.''

The errors were reported earlier today by Reuters.

Air Force spokeswoman Karen Platt didn't immediately have any comment. Michael Golden, the GAO's managing associate general counsel for procurement law, didn't immediately return a call.

Aging Tankers

The Air Force needs a new aircraft to replace the Boeing KC-135 tankers flown since 1956. Replacement has already been on hold for four years, after the collapse of a planned tanker order from Boeing in 2004 amid ethical violations that sent the Air Force official who handled negotiations to prison for nine months.

The errors discovered in the current contest may not add much Boeing's case at the end of the day, said Peter Arment, a Greenwich, Connecticut-based analyst with American Technology Research said.

``I'm sure you can try to poke holes in a lot of the contracts that get awarded, but is it enough to get it overturned?'' Arment said. ``Unless there was a significant enough difference between what the Air Force told Northrop versus what they told Boeing, it's going to be hard for the GAO to overturn it. There has to be a major red flag.''

Disclosure of the errors is one more sign that the acrimony in this protest has risen to levels rarely seen in government contracting, said Paul Nisbet, analyst at JSA Research Inc. in Newport, Rhode Island.

``It's really gotten quite nasty, I've never seen anything like it,'' Nisbet said. ``I don't think you are going to see any change in how this comes out from what the Air Force decided in the first place, but it may ultimately take a year or two.''

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net; Susanna Ray in Chicago at sray7@bloomberg.net.

Last Updated: June 12, 2008 17:22 EDT