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Boeing Suspended from EELV; Then There Was None

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  • Kasten, Kathy
    US military gives $1 bln in Boeing work to Lockheed By Andrea Shalal-Esa WASHINGTON, July 24 (Reuters) - The U.S. Air Force on Thursday shifted rocket launch
    Message 1 of 1 , Jul 25, 2003
      US military gives $1 bln in Boeing work to Lockheed
      By Andrea Shalal-Esa

      WASHINGTON, July 24 (Reuters) - The U.S. Air Force
      on Thursday shifted rocket launch contracts worth
      about $1 billion from No. 2 U.S. defense contractor
      Boeing Co. to its rival Lockheed Martin Corp. for
      acquiring about 25,000 Lockheed documents during
      a heated 1998 contract competition.

      The Air Force stopped short of formally debarring
      Boeing from government contracts, but said three
      business units of Boeing Integrated Defense Systems
      and three of its former employees would be suspended
      indefinitely from future work until corrective action
      was taken.

      "Boeing has committed serious and substantial violations
      of federal law," Air Force Undersecretary Peter Teets
      told reporters. He said he had never seen a case involving
      procurement violations of such magnitude.

      "As a matter of policy, we do not tolerate breaches
      of procurement integrity, and we hold industry accountable
      for the actions of their employees," Teets told reporters.

      He said the Air Force inquiry found Boeing possessed
      an "extraordinary" 25,000 pages of Lockheed proprietary
      material at the time of the 1998 EELV contract award,
      in which Boeing won the lion's share of a deal worth
      nearly $2 billion.

      Boeing Chairman Phil Condit said in a statement, "We
      are extremely disappointed by the circumstances that
      prompted our customer's action, but we understand
      the U.S. Air Force's position that unethical behavior
      will not be tolerated."

      The documents gave Boeing "great insight" into top
      U.S. defense contractor Lockheed's costs and pricing,
      Teets said. Moreover, Boeing was "not forthcoming"
      with the Air Force about the amount of Lockheed data
      it held and took nearly four years to return them all.

      As a result of the findings, the Air Force decided
      to revoke seven contracts of 19 contracts awarded to
      Boeing under the Evolved Expendable Launch Vehicle
      (EELV) program in 1998.

      The Air Force also disqualified Boeing from a second
      set of three launches that would now go to Lockheed and
      said Boeing had lost its exclusive rights to carry out
      important West Coast launches of military satellites,
      Teets said.

      He said Lockheed Martin would now build its own
      launch facilities at Vandenberg Air Force Base in
      California to carry out the next three EELV contracts.

      That is a critical move, since polar orbiting
      military satellites that can spy on China and other
      areas of interest can only be launched from the West
      Coast, analysts said.

      Teets said Boeing could be reinstated as an approved
      contractor within 60 to 90 days, in time for the company
      to bid for 15 to 20 additional launches to be awarded
      late this year.

      "It is my sincere hope that the Boeing Company moves
      quickly to take meaningful corrective actions so that this
      suspension can be lifted and they may be allowed to compete
      in future launch competitions," he said.

      He said he spoke with Boeing's Condit on Wednesday,
      although the company was formally notified of the Air
      Force's specific actions only on Thursday.

      "I am anxious to see their strong response to this
      suspension, and it could involve some changing of
      personnel," he said, adding that the Air Force had
      not formally requested any specific personnel changes.

      Boeing said it would ask all 78,000 workers in the
      affected division to attend four hours of briefings on
      the case, which began in 1997 when Boeing hired a
      former Lockheed engineer, who brought thousands of
      documents with him to his new job.

      Boeing fired the man and his supervisor in 1999, and
      a third official involved has since left the company.

      A spokesman for Lockheed Martin, which has filed a
      civil lawsuit against Boeing in the case, said it was
      ready to take on the new work.

      "We can handle the additional launches. The increased
      volume will not pose any problems," Tom Jurkowsky said.

      Teets said the Air Force could seek a waiver from the
      suspension based on "compelling need" if it decided it
      urgently needed to use Boeing services to get a satellite
      into space.

      Teets said he worked at Lockheed until October or November
      1999, but was unaware of this case, which first came to
      light in June 1999.

      Additional reporting by Charles Aldinger, Will Dunham
      and Chelsea Emery)
      07/24/03 18:47 ET
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