The Boeing Company (NYSE: BA) isn’t happy about the U.S. Air Force’s recent decision to award European competitor Northrop Grumman
(NYSE: NOC) with a major military contract and it is throwing a very
public fit. The aerospace company called the competition for its air
tanker contract “seriously flawed” and even so far as to say that the
Air Force selected the “wrong airplane” for the warfighter. The move
highlights the increasing concerns surrounding military contracts and
could result in some widespread industry and governmental changes.
“This is an extraordinary step rarely taken by our company, and one
we take very seriously. Based upon what we have seen, we continue to
believe we submitted the most capable, lowest risk, lowest (cost) …
airplane,” said Jim McNerney, chairman, president and chief executive
officer of Chicago-based Boeing. Program manager Mark McGraw added,
“Our analysis of the data presented by the Air Force shows that this
competition was seriously flawed and resulted in the selection of the
wrong airplane for the warfighter.”
Boeing filed a formal protest with the U.S. Government
Accountability Office (GAO) regarding the airforce’s decision charging
that the Air Force changed the rules for choosing the tanker during the
course of the competition, which resulted in the Air Force choosing an
inferior plane. Coincidentally, without the contract, Boeing may be
forced to shut down its 767 line in Everett by 2012. So, while Boeing
has portrayed the government as at fault, it could have other motives.
Let’s not forget when former Boeing chief financial officer Michael
Sears received four months in prison for illegally negotiating a
$250,000-a-year job for an Air Force contracting officer while she held
sway over a potential multibillion-dollar contract sought by the
aircraft manufacturer. Then again, problems are hardly limited to
Boeing. Many major players in the defense industry have built strong
bonds with Air Force personnel in order to sway decision-making.
The apparent corruption in government military contracting has been
a much heated debate that is just starting to receive the attention
that it should from lawmakers. These regulators are now looking for
ways to better control the process and open it up to as many bidders as
possible to get the best price possible. Whether or not these decisions
will yield any real results remains to be seen, but this event
certainly adds gas to the fire!
Related Companies
Lockheed Martin Corporation (LMT)
Northrop Grumman Corporation (NOC)
Spirit AeroSystems Holdings, Inc. (SPR)
Textron Inc. (TXT)
Embraer-Empresa Brasileir de Aero (ERJ)
Kaman Corporation (KAMN)
Alliant Techsystems Inc. (ATK)
Alabama Aircraft Industries, Inc. (AAII)
Raytheon Company (RTN)
Spacehab, Incorporated (SPAB)