Lockheed, BAE Protest Boeing Pacts

The Wall Street Journal 10/13/04
author: Jonathan Karp
author: Andy Pasztor
(Copyright (c) 2004, Dow Jones & Company, Inc.)

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.