Boeing won sensor contract unjustly, says Defense audit

Boeing's 2001 contract to develop a sensor for U.S. weather satellites was "unfairly" awarded, according to a Defense Department audit.

Darleen Druyun, a top Air Force acquisition official, rigged the selection process and, in at least four instances, "manipulated complex proposal evaluation ratings to benefit Boeing and hinder" Ball Aerospace and Technologies, the only other candidate, Assistant Inspector General Paul Granetto wrote.

The $317 million contract was awarded July 30, 2001, nine months after Boeing, at Druyun's request, hired her daughter, according to the July 10 audit.

"In this environment," Druyun "could not be relied on to make an objective assessment," Granetto stated. She "lacked impartiality with respect to the contract winner" and "as a result, the Air Force unfairly awarded the contract to Boeing," Granetto wrote.

Druyun served nine months in prison last year for arranging a job for herself with Boeing while negotiating with the company in 2002 on a $23 billion program for aerial refueling tankers. She subsequently admitted in court that she gave Boeing favorable treatment and the satellite program is one of about 14 awards that the Pentagon and Air Force are reviewing.

The satellite sensor contract grew to $350 million before it was canceled last month because of weight problems, the Air Force said Friday.

Druyun's decision on the sensor contract was the second time in eight weeks that year she favored Chicago-based Boeing, the No. 2 U.S. defense contractor. In early June 2001 she awarded Boeing a contract over competitor Lockheed Martin worth up to $4 billion to upgrade older C-130 transports.

Druyun acknowledged during her October 2004 sentencing that she improperly favored Boeing in that contract. The contract has since grown 130 percent in cost.

Boeing spokesman John Dern said the company was aware that the satellite sensor contract was on the list of those being investigated, "but we continue to believe that it was awarded based on the merits."

Boeing shares fell $2.34 to $77.25 Friday. Shares have risen 20.5 percent in the last 12 months.

Ball Aerospace spokeswoman Roz Brown, asked if the company planned any legal action because of the audit findings, said the Boulder, Colo.-based company is "studying the report to determine an appropriate course of action."

"At the time of the contract award, we strongly believed that our proposal offered best-value and high-technical quality to the government," she said in an e-mailed statement.

Lt. Gen. Donald Hoffman, the Air Force's top uniformed acquisition official, said the service has implemented many of the recommendations of post-Druyun reviews to improve the awards process.

The service also set up procedures to ensure service attorneys have a greater role in reviewing the awards, Hoffman said.

The Air Force last month canceled the Boeing sensor program as part of a major reorganization of the National Polar-Orbiting Operational Environmental Satellite System.

The satellite program is a joint effort of the U.S. Defense Department, the National Aeronautics and Space Administration and the National Oceanic and Atmospheric Administration, which are sharing costs and which jointly signed off on the new plan.

The system's satellites are designed to fly around the Earth's poles.

The Boeing-developed sensor is one of six on the weather satellite to monitor the planet and provide data for long-range weather and climate forecasts. The Boeing sensor was to measure rain rate, wind speed and direction over the ocean, the amount of water in clouds, and soil moisture.

The Boeing sensor "was the least developed of any of the sensors, and experienced considerable weight and power growth which led to the decision to eliminate it and re-compete a smaller, less capable" model, Air Force spokeswoman Maj. Regina Winchester said.

The Air Force action was part of the reorganization stemming from the cost growth and "not the Inspector General audit," Winchester said.