US: Lockheed, BAE protest Boeing pacts

Publisher Name: 
Wall Street Journal

Firing the first legal salvos by defense contractors claiming to be
victims in a widening Pentagon procurement scandal, Lockheed Martin
Corp. and Britain's BAE Systems PLC filed protests asking the Air Force
to review tainted contracts won by rival Boeing Co.

The actions yesterday follow the admission by former high-ranking Air
Force acquisition official Darleen Druyun that she steered billions of
dollars of contracts to Boeing in return for Boeing's hiring members of
her family and giving her a $250,000-a-year job. The formal protests, a
break from the defense industry's general reluctance to make a public
outcry over major contract awards, are bound to increase pressure on
Air Force and Pentagon officials to delve into suspect contracts, some
of which already are under review. They also could prompt complaints
from other companies that lost out to Boeing.

In its protest, Lockheed asked the Air Force to review a $4 billion
contract to upgrade cockpit electronics on C-130 cargo planes, an award
to build the so-called small-diameter bomb -- a program that Boeing
says could generate $2.5 billion in sales -- and two classified
projects, which neither Lockheed nor the Air Force identified. The
Bethesda, Md., defense contractor said the scope of the review should
include contracts "that Ms. Druyun may have been involved in and which
Lockheed Martin was a competitor. We have asked the Air Force to look
at these contracts to ensure that they were properly awarded."

Tom Jurkowsky, a Lockheed spokesman, said the company asked the Air
Force for a specific remedy, but he declined to say whether Lockheed is
seeking the cancellation of tainted contracts won by Boeing, financial
compensation or a guarantee of future work. He singled out the June
2001 loss to Boeing of the contract to upgrade C-130 planes, which
Lockheed itself makes, as justification enough for the protest. "We
have to find a remedy for an injustice caused by Ms. Druyun through her
chicanery," he said.

BAE filed a protest over the C-130 contract, saying, "Ms. Druyun's
admitted bias and quid pro quo actions...clearly corrupted the
acquisition process, which we had assumed at the time was being managed
with fairness and integrity." It added that it will work with the Air
Force "to redress the injury to BAE Systems," though the company didn't
specify what action it wants.

When Ms. Druyun was sentenced to nine months' imprisonment earlier this
month for violating conflict-of-interest laws, the lead federal
prosecutor in the case said in court that her actions "did great harm
to the government." He added that the Air Force would have the burden
of the "many investigations that will result." In their court filing,
prosecutors said Ms. Druyun admitted in picking Boeing over three other
rivals to do the C-130 work that "she was influenced by her perceived
indebtedness to Boeing."

In response to the protests, Boeing said it "is not aware of having
received any special consideration in the award of the C-130 contract,
and believes the award was justified on its merits." The company
reiterated that it is cooperating fully with the government.

Air Force officials and prosecutors had looked into Ms. Druyun's
dealings with Jerry Daniels, a veteran, tough-talking executive who ran
Boeing's military-aircraft and missile operations from St. Louis until
mid-2002. From at least the fall of 2001 to the time he retired amid a
major executive shuffle, Mr. Daniels had extensive dealings over
contracts and other issues with Ms. Druyun, according to court filings,
internal Boeing e-mails and interviews with government officials
familiar with the matter.

Before yesterday's development, Justice Department and Pentagon
investigators had examined those contacts, which ranged from
negotiating proposed lease prices for aerial-refueling tankers to a
discussion about the performance of Ms. Druyun's daughter as a Boeing
employee, according to the e-mails and those officials.

Mr. Daniels, who was questioned for months by prosecutors and Pentagon
investigators, said, "I've done everything to cooperate with this
investigation, and I will continue to cooperate."

The relationship between Ms. Druyun and Mr. Daniels was so close that
from the beginning, they jointly developed a strategy to persuade
Congress to approve leasing modified Boeing 767 airliners as tankers,
according to internal Boeing e-mails. After both of them moved on to
other jobs, Boeing executives complained in an internal e-mail that the
company had less access to the Air Force. "In the past, we would have
had an audience with Darleen and Jerry" to work out the proposed tanker
deal, according to a December 2002 e-mail. "We are less nimble now,"
the e-mail concluded. Congress officially scrapped the tanker-lease
proposal last week.

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