Boeing Suspended from EELV; Then There Was None
- 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
"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,
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
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