2005 - U.S. Air Force Rejects Lockheed Classified Contract Protests


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U.S. Air Force Rejects Lockheed Contract Protests

By Jim Wolf
Feb. 16, 2005

WASHINGTON (Reuters) - The U.S. Air Force said on Wednesday it denied two Lockheed Martin protests involving classified deals for which Boeing Co. was also a bidder.

Lockheed lodged the protests in October after Darleen Druyun, an ex-Air Force weapons buyer, confessed to improperly steering billions of dollars of deals to Boeing before going to work there as a $250,000-a-year vice president.

"After careful consideration, the Air Force denied both protests," said Air Force spokesman Douglas Karas, without elaborating.

The Air Force confirmed only that Boeing had been a bidder, not necessarily the winner of the contracts.

Lockheed, the Pentagon's No. 1 supplier, confirmed that neither protest was upheld but declined further comment, company spokesman Jeffery Adams said.

Boeing, the Pentagon's No. 2 supplier, could not comment, said spokesman Dan Beck, citing the classified nature of the work.

In fallout from Druyun, Lockheed has asked the U.S. government to revoke two other contracts valued at in excess of $6 billion.

The Government Accountability Office, Congress's investigative arm, is expected to rule on at least one of the remaining protests by Friday.

It involves an award to build the so-called small-diameter bomb, a contract won by Boeing in August 2003 that could be worth up to $2.5 billion.

The other is a $4 billion contract to upgrade cockpit electronics on C-130 Hercules cargo aircraft that Boeing won in June 2001. Lockheed was joined in that protest by L-3 Communications Holdings Inc. and BAE Systems Plc, which also competed for the deal.

In outlining these protests last October, Lockheed spokesman Thomas Jurkowsky said Lockheed had "all the confidence in the world" the Air Force would remedy contracting wrongs confessed to by Druyun.

Druyun resigned from the Air Force in November 2002 and went to work for Boeing two months later. Michael Sears, Boeing's former chief financial officer with whom she negotiated her job, is due to be sentenced on Friday.

Druyun is serving nine months in federal prison for conspiracy to break conflict-of-interest laws by negotiating her new job while overseeing Boeing's Air Force contracts.

Lockheed had been tipped to win the C-130 upgrade because it built the aircraft and had won similar competitions in the past, according to Loren Thompson, a defense analyst at the non-partisan Lexington Institute in Arlington, Virginia.

As a result of the loss, Lockheed has said its "reputation was tarnished in the eyes of potential investors, shareholders, domestic and international customers and employees."

Boeing has refuted Lockheed's claim that Druyun might have been involved in improperly denying it the small-diameter "smart" bomb deal

Boeing spokesman Douglas Kennett said last October that the award occurred 10 months after Druyun left her Air Force job, and that the award to Boeing was on merit.

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