A Mission to Rebuild Reputations
Upcoming Deals to Test Reforms at Air Force, Boeing
Thursday, January 17, 2008; Page D01
The pledges made by the military and one of its biggest contractors were unusually earnest. The Air Force and Boeing would be open about their relationships, overhaul their ethics reviews and tighten their internal controls. And they promised to give taxpayers the best deals possible.
It was the summer of 2006, and they were still feeling the effects of one of the biggest government procurement scandals of recent times.
Boeing had just agreed with the Justice Department to pay $615 million -- the biggest penalty paid by a defense contractor -- to settle allegations of misconduct, including assertions that its chief financial officer had conspired with a senior Air Force official to win work; and it had lost a contract worth about $20 billion to lease refueling tanker planes to the Air Force. The service's former top procurement official and Boeing's former chief financial officer went to prison. Confidence in the Air Force's procurement system was at a low. The promises were meant to signal a new beginning.
Now those promises -- and the public's perception of the Air Force's ability to spend its money prudently -- are being tested by new contracting and public relations challenges. The Air Force is about to award two key contracts worth a total of about $55 billion, and Boeing is in the running for both deals.
One is a $40 billion plan to build the refueling tankers, a second run at the deal that was canceled after former Air Force procurement chief Darleen Druyun admitted to negotiating for a job with Boeing while representing the Air Force. The other is a $15 billion contract for search-and-rescue helicopters. Boeing had won that contract, but it was suspended when two competitors protested.
The contracts are the two biggest for the Air Force since the Druyun scandal, and the service has identified them as its top acquisition priorities and crucial to maintaining its fleets. In both competitions, Boeing's bids have come under particular scrutiny, not only because the company's awards were earlier nullified, but because some of its competitors are again raising protests.
"Boeing and the Air Force are both certainly coming under the microscope," said James McAleese, an adviser to government contractors. "The American people, Congress and the Pentagon have high expectations now that they say they've cleaned up their act."
The Pressure's On
Boeing officials said they were anxious to win because so few big deals are up for grabs these days.
"The pressure is becoming more intense to win," said Chris Raymond, Boeing's vice president of business development for integrated defense systems.
"We want to win ethically. We want to win the right way," said Bill Barksdale, a Boeing spokesman for the tanker program.
The tanker contract will help the Air Force replace its fleet of KC-135 refueling planes, which have been in service for almost 50 years. The tankers enable U.S. military planes to refuel in the air, giving them vastly more range than if they had to land at refueling bases. The Air Force expects to award the contract in February.
Boeing has proposed building a new tanker from parts of its 767 commercial planes. Boeing is competing with a team of Northrop Grumman and European Aeronautic Defence and Space, parent company of Airbus, Boeing's rival in the commercial aviation market. Their proposed tanker is based on the Airbus A330 passenger jet.