WASHINGTON — 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 roughly $20 billion contract to lease refueling tanker planes to the Air Force. The service branch’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 a job with Boeing while still 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 awards 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.”
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,” added Bill Barksdale, a Boeing spokesman on the tanker program.
The tanker contract will help the Air Force replace its fleet of KC-135 refueling planes that have been in service for almost 50 years. The tankers enable U.S. military planes to refuel in midair, 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 assembled in Everett. They would be modified in Kansas. 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.
The Air Force said it was trying to make the tanker competition a model for acquisitions by having more back and forth between the service and each bidding team, so they clearly understand what the Air Force is seeking and the degree to which their proposals meet the requirements.
Ken Miller, a former top Navy official hired by the secretary of the Air Force two years ago to improve the transparency of its acquisition process, said he’s had more than 100 meetings in the past year with congressional leaders to update them on the process. A winner was expected to be chosen in October, but the Air Force postponed the decision until early this year.
“We’ve had a lot of people interested in the tanker,” Miller said. “It’s been a perception issue to deal with. We’ve been much more cautious and deliberate in everything we do.”
Observers say the Air Force is trying to avoid any actions that would prompt protests. “They know their relationship with Boeing is hypersensitive,” said Phil Finnegan, a defense analyst at the Teal Group in Fairfax, Va. “The Air Force is going to do everything to make sure it doesn’t look like anything is tilted in the least toward Boeing.”
Boeing says it has made improvements to strengthen the ethics and integrity in its policies and procedures. It combined three divisions to create the Office of Internal Governance, which employs 600 people and helps ensure that all employees get ethics training and that deals are executed fairly.
For its part, the Air Force shifted its selection process away from one person with virtually absolute power, as Druyun had, to decisions made by the top acquisition official who gets input from advisers.
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