Pentagon to Scrutinize Boeing Deal

Boeing Co.’s $4-billion contract to upgrade C-130 Hercules transports will be reviewed after a former Air Force official admitted she improperly favored Boeing over Lockheed Martin Corp., the service said Monday.

The Air Force said in a statement that it had asked Joseph Schmitz, the Pentagon’s inspector general, to add the 2001 award to a list of others handled by former No. 2 Air Force acquisition official Darleen Druyun and being scrutinized for possible favoritism. They include a $23-billion contract to provide 100 aerial refueling tankers. Lawmakers last week rejected the awarding of the contract, and it may be reopened to competitive bidding.

Boeing probably won’t lose the C-130 work, but it could face penalties from the Air Force or legal challenges from Lockheed in the Federal Court of Claims or through the Government Accountability Office, said Richard Aboulafia, an aerospace defense analyst with Teal Group in Washington.

“Given the amount of work that has already gone into this project over the last three years, it’s difficult to imagine the project being directly taken from Boeing,” he said. “There might be some penalties or a lawsuit, but Boeing is likely to remain the prime contractor.”

Druyun was sentenced to nine months in prison Oct. 1 for secretly discussing a job for herself at Boeing while helping negotiate the tanker contract. She also admitted in a plea agreement to favoring Boeing over Lockheed and two other competitors for the C-130 contract out of a “perceived indebtedness” to Boeing for hiring her daughter and future son-in-law.

“We intend to ask the inspector general to investigate any contract where there was a potential for Ms. Druyun to adversely affect Air Force interests,” said Marvin Sambur, the Air Force’s assistant secretary for acquisition.

“Based upon Ms. Druyun’s admissions, we have now specifically asked the inspector general to include in their investigation her activities on the C-130 contract,” Sambur said. “Upon completion of each investigation we will take appropriate action.”

Lockheed declined to discuss what legal action, if any, it was considering on the contract.

Shares of Boeing rose 16 cents to $50.26 on the New York Stock Exchange.