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Air Force may reinstate Boeing

By Seattle Times wire services

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Lt. Gen. Brian Arnold, commander of the Air Force Space and Missile Systems Center, has predicted a decision "very soon" to lift the sanctions, imposed last July after investigators found Boeing illegally obtained more than 25,000 documents from rival Lockheed Martin during a 1998 competition. The Air Force's suspension of Boeing last year left Lockheed Martin as the government's only launch contractor.

The Wall Street Journal, citing unidentified sources in a report yesterday, said senior officials from Boeing and the Air Force are putting the final touches on an agreement that would restore the company's full privileges as a military contractor.

Boeing will pay the Air Force's investigative costs and commit to regular updates to the Pentagon on compliance with new ethics policies it implemented after last year's scandal, the report said, citing industry and government officials.

However, the agreement would not resolve Justice Department criminal and civil investigations, which the Journal said could cost Boeing $250 million or more in fines and penalties.

Boeing spokesman Dan Beck confirmed the company's discussions with the Air Force on ending the sanctions but could not say when the agreement would be completed, or what its terms would be. He said Boeing had implemented many changes to prevent future ethics violations.

"We've worked closely with the Air Force ever since the suspension last year to provide them with everything they needed," Beck said.

Boeing took unspecified personnel actions in the wake of the scandal, in which employees are alleged to have illicitly acquired and hidden Lockheed Martin documents from the Air Force to gain a competitive edge in bidding for contracts. Boeing has consistently blamed since-dismissed employees for the wrongdoing.

The Air Force stripped Boeing of $1 billion in launch contracts and suspended three of the company's units from bidding on new rocket business.

Air Force officials initially said the punishment was likely to last only a few months, pending completion of related criminal and civil proceedings. But federal prosecutors have progressed more slowly than expected, according to the Journal.

Meanwhile, the Pentagon late yesterday forecast a 55.5 percent surge in the cost of launching spy satellites to $32.3 billion, mainly because of the collapse of the commercial rocket-launch market, which the companies had expected to help offset the cost of government rocket launches.
 
It said the resulting price increases would add $7.5 billion to program costs, with inflation adding an additional $3 billion, and changes needed to accommodate the growing weight of the spy satellites driving the price up by a billion more.

Information from Reuters and The Associated Press is included in this report.

Copyright © 2004 The Seattle Times Company