Boeing must compete again for contract

WASHINGTON — The Boeing Co. must compete again for Air Force work worth more than $3 billion to upgrade C-130 cargo planes because of a conflict of interest in the original deal, the Air Force said.

In a letter this week, Michael Dominguez, acting secretary of the Air Force, said a 2001 contract awarded to Boeing was tainted by Darleen Druyun, a former senior Air Force official who has admitted giving special treatment to the Chicago-based jet maker.

Druyun, who later took a job at Boeing, is now serving nine months in prison for violating federal conflict-of-interest laws.

The Air Force decision follows a Feb. 24 report by the Government Accountability Office upholding a protest by three rival bidders, who had complained that the C-130 contract award was tainted by Druyun’s involvement.

The companies — Lockheed Martin Corp., BAE Systems North America and L-3 Communications Corp. — are among those expected to compete for new production and installation contracts when they are reopened in 2009 or 2010.

The original award was worth $4.1 billion, and Boeing will keep an ongoing development portion worth about $1 billion, Air Force officials said. The contracts to be rebid involve production and installation of upgraded electronic instrumentation on the C-130 transport planes.

In an April 26 letter to Comptroller General David Walker, Dominguez said the Air Force has accepted all of the recommendations in the GAO’s report, including reimbursing the three companies for the cost of the protest and attorneys’ fees.

Boeing shares rose 80 cents to close at $59.52 in Friday trading on the New York Stock Exchange.