MD90 CREW HAD A GPWS TERRAIN WARNING AND WAS ADVISED THEY WERE TOO LOW BY THE ATCT LCL CTLR AT BIL.

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THE CAPT WAS HAND FLYING A VISUAL APCH TO RWY 28R AT BIL AFTER BRIEFING A VISUAL WITH ILS RWY 28R BACK-UP. HE BRIEFED THAT HE WOULD JOIN FINAL OUTSIDE LIGHTED TOWERS THAT ARE N OF THE APCH COURSE WHICH ARE AT APPROX 4200 FT MSL. DURING THE APCH; HE SAID THAT HE WOULD DSND TO 4000 FT MSL AND THEN INITIATED THE DSCNT TO TURN INSIDE OF THE TWRS. BIL TWR ASKED IF WE HAD THE TOWERS TO OUR R; TO WHICH I REPLIED AFFIRMATIVE AND WE WERE TURNING INSIDE OF THEM. THE CAPT APPARENTLY HAD MISTAKEN OUR POS AND SEEMED CONFUSED AS THE GPWS STATED TERRAIN AND THE RADAR ALTIMETER READ APPROX +/-1200 FT. I WAS UNAWARE OF HIS CONFUSION AS I WAS BUSY CONFIGURING THE ACFT AND PREPARING TO RUN THE CHKLIST. AT APPROX THE SAME TIME THAT I BECAME AWARE OF THE CAPT'S CONFUSION; THE TWR CTLR ADVISED US THAT THE ARPT ELEVATION WAS 3649 FT MSL. AN IMMEDIATE CLB WAS INITIATED TO APPROX 4600 FT MSL AND THE TWR ASKED US IF WE INTENDED TO OVERFLY THE ARPT AND ENTER THE R DOWNWIND. THE CAPT; WITH MY HELP; AGAIN FOUND THE ARPT AND ACCOMPLISHED THE OVERFLY AND PATTERN ENTRY AND WAS COACHED TO A SAFE LNDG.