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Boeing Competitors Protest

Lockheed, BAE Dispute Druyun's C-130 Choice

By Renae Merle
Washington Post Staff Writer
Wednesday, October 13, 2004; Page E03

Lockheed Martin Corp. and BAE Systems North America Inc. filed protests with the Air Force yesterday over a $4 billion contract to upgrade electronics on C-130 military transport planes awarded to Boeing Co. in 2001.

The companies had 10 days to dispute the contract after former Air Force procurement officer Darleen A. Druyun acknowledged in court documents that an "objective selection authority may not have selected Boeing." Druyun admitted she favored Boeing after the company gave jobs to her daughter and son-in-law.

The Pentagon's inspector general is reviewing contracts involving Darleen A. Druyun, who has acknowledged that she gave preferential treatment to Boeing. (Ken Cedeno -- Bloomberg News)

_____Stock Quotes_____
Lockheed Martin Corp (LMT)
BAE Systems North America Inc (BAE)
Raytheon Company (RTN)
_____Essential Background_____
Deal Would Bar Lease of Boeing 767s (The Washington Post, Oct 8, 2004)
EADS May Sue Over Pricing Data (The Washington Post, Oct 7, 2004)
Ex-Air Force Official Gets Prison Time (The Washington Post, Oct 2, 2004)
Report Examines Defense Hiring (The Washington Post, Jun 29, 2004)
Boeing Deal Skipped Protocol, Report Says (The Washington Post, May 19, 2004)
Ex-Pentagon Official Admits Job Deal (The Washington Post, Apr 21, 2004)
Boeing Lax on Hiring By Rules, Review Finds (The Washington Post, Mar 10, 2004)
SEC Probes Dismissal of 2 Boeing Executives (The Washington Post, Mar 6, 2004)
Federal Prosecutors Probing 2 Ex-Employees of Boeing (The Washington Post, Dec 13, 2003)
Boeing Fires 2 Top Officials In Hiring Probe (The Washington Post, Nov 25, 2003)
Air Force-Boeing Negotiator Criticized (The Washington Post, Oct 27, 2003)
New Questions Raised About Boeing Deal (The Washington Post, Oct 8, 2003)
U.S. Probes Actions Of Boeing Executive (The Washington Post, Sep 4, 2003)

Raytheon Co. also was in the competition but has since sold the unit that bid for the contract and did not file a protest. "When we have more information, we will determine if any action on our part is appropriate," a Raytheon spokesman said. The company could still file a protest with the Government Accountability Office or a claim with the Court of Federal Claims.

Druyun was sentenced to nine months in federal prison Oct. 1 after admitting she gave Boeing preferential treatment for years because she felt indebted to the firm. Druyun accepted a position as a Boeing vice president after retiring from the Air Force in 2003.

The C-130 work is among hundreds of contracts Druyun helped award that are now being reviewed by the Pentagon inspector general. "We will take appropriate action based upon the IG investigation and an evaluation of the protest," Air Force spokesman Doug Karas said.

Contract protests are typically considered long shots, but the unusual circumstances surrounding Druyun's admissions have made it more likely the Air Force will take some action, industry analysts said. Both companies will likely try to recoup the millions they spent bidding for the work, and the Air Force also could consider reallocating some of the contract or holding a new competition, they said.

"Ms. Druyun's admitted bias and quid-pro-quo actions as the source selection authority clearly corrupted the acquisition process, which we had assumed at the time was being managed with fairness and integrity," BAE said in a statement. Lockheed's loss of the 10-year C-130 contract was considered stunning within the defense industry, particularly since Lockheed had built the planes for decades.

"It is important for us to restore our corporate reputation after the contract loss . . . and it's important to find a remedy for an injustice that Darleen Druyun caused through her unlawful actions," Lockheed spokesman Tom Jurkowsky said.

Lockheed also asked the Air Force to review all of its competitions that Druyun helped decide, including a contract of more than $2 billion for a small-diameter bomb. The deal was awarded to Boeing in August 2003, months before Druyun retired and accepted a job at the company. The review also should include two classified programs, as well as other contracts, Lockheed said. "We are confident that the Air Force will act on these requests expeditiously to resolve them," Jurkowsky said.

Druyun was also involved in a 1990s competition for rocket launchers in which Boeing was awarded a majority of the work over Lockheed. That contract is now the subject of a federal investigation since Boeing acknowledged that several of its employees had proprietary Lockheed documents during the competition. Lockheed is also suing Boeing over that work.

The first of more than 400 C-130 upgrades is not expected to begin until January 2005, the Air Force said. Boeing, which has spent the past three years developing the technology, has already earned more than $300 million on the contract.

"Boeing is not aware of having received any special consideration in the award of the [C-130 contract], and believes the award was justified on its merits," Boeing spokesman Douglas J. Kennett said.

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