Ethics Newsline®

But head of company that won the bidding says it’s unfair to change the rules

WASHINGTON
The ethics debate over Boeing, which lost a mammoth government contract, continued on several fronts last week.

Boeing was passed over for a deal worth about $35 billion when the U.S. Air Force awarded a contract for tankers, airplanes used to refuel other airplanes in flight, to a partnership between U.S.-based Northrop Grumman and Paris-based EADS.

Many in the industry speculate that Boeing’s past ethics problems, including the revelation that an Air Force procurement executive arranged a purchase in return for an offer of a job after she left government, made the Pentagon wary of the firm. The Air Force says Boeing lost the new contract because Northrop Grumman and EADS simply offered a better proposal.

The government’s decision to award part of a defense contract overseas predictably did not sit well with lawmakers in states with Boeing factories, reports the Voice of America. Boeing, with help from several congressmen, has protested the decision and the Government Accountability Office expects to issue a report by June 19.

In response, Northrop Grumman’s CEO last week complained of unfair treatment, saying that if Congress steps in and changes the rules, many companies will not want to get involved in government bidding, according to a report from BusinessWeek.

“How do you get companies to bid when you discover at the end of the day that Lucy pulls away the football?” Ronald Sugar said. “It would discourage companies from making significant investments to compete and then the Defense Department wouldn’t get full competition. The stakes here are bigger than just one contract.”

In an interview with CNBC, Sugar said that the tanker planes are going to have more than 60 percent U.S. content and that his company and EADS plan to build four new factories in the United States.

The controversy has worked its way into the U.S. presidential race as critics of presumptive Republican nominee John McCain charged that his ties to EADS will cost U.S. jobs, according to ABC News. McCain had prodded the Pentagon into opening the bidding process to EADS, and critics are questioning whether three former EADS lobbyists who are now on his campaign staff had anything to do with that.

McCain countered that his interest in opening the bidding process would benefit the taxpayer, arguing that his role in the 2004 congressional probe of the Boeing procurement scandal saved taxpayers billions, according to ABC.

Sources: Voice of America, Mar. 13 — BusinessWeek, Mar. 13 — ABC, Mar. 13 — CNBC, Mar. 13.

For more information, see: Related Newsline story, Mar. 10 — Related Newsline Commentary, Mar. 3 — Related Newsline story, Mar. 3 — Related Newsline story, Aug. 7, 2006 — Related Newsline story, July 31, 2006.