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Feds Probe Boeing Deal

The Pentagon is opening a formal investigation into allegations that a former Air Force official improperly gave Boeing Co. information about a competing bid on a widely criticized military contract to lease 100 refueling tanker planes that Boeing eventually won.

The move is the latest development in a growing dispute over the proposed lease deal.

Critics say it is a gift to the airplane maker. Supporters have dubbed the aircraft "freedom tankers" and said the leasing arrangement is necessary.

The department's inspector general told the Senate Armed Services Committee on Wednesday that after a preliminary inquiry, "sufficient credible information exists" to begin a formal investigation of the $21 billion lease deal.

Documents released this month reveal an April 2002 exchange between two Boeing officials about the deal. The exchange said Darleen Druyun, then the principal deputy assistant Air Force secretary for acquisition and management, had told Boeing that rival Airbus had submitted a bid $5 million to $17 million less per plane than Boeing's offer.

Nine months later, Druyun joined Boeing. She now is deputy general manager of the company's missile defense systems.

Boeing denied wrongdoing and offered to support the investigation.

"Boeing has said all along that we believe we received no proprietary information from any individual at any time on any subject throughout the entire tanker lease process. We have no reason to change that opinion," said a statement read by a Boeing spokeswoman. "If asked to support the investigation, we clearly will."

She said the company also will work with the Air Force, the Defense Department, the Bush administration and Congress "to find the best solution to this crucial military requirement."

Sen. John McCain, R-Ariz., leading critic of the leasing deal, welcomed the coming investigation.

"Up to now, it appears that the interests of taxpayers have been subordinated to those of Boeing," he said.

Nevertheless, the Pentagon leasing plan got a boost this week from President Bush and two major labor groups.

The president, in remarks Tuesday to the Seattle Post-Intelligencer and other regional newspapers, said he backs the deal, which has been pushed by the Air Force and lawmakers from states where Chicago-based Boeing has a major presence, such as Washington.

"I do support it," Mr. Bush said.

Mr. Bush made the comment in speaking about Boeing's economic troubles. The jet manufacturer has cut nearly 35,000 jobs in the past two years as sales of commercial aircraft plunged.

"Boeing is going through a difficult period," Mr. Bush said. "We're obviously working with Boeing on the construction of…airplanes, which should help the worker, help the economy."

Meanwhile, the AFL-CIO and International Association of Machinists and Aerospace Workers urged Congress to approve the leasing plan, which they said would support close to 30,000 jobs in dozens of states.

At a hearing this month, Air Force officials were sharply criticized for the unusual leasing arrangement, which the Congressional Budget Office says could cost as much as $5.7 billion more than a conventional purchase.

"The transaction would essentially be a purchase of the tankers by the federal government but at a cost greater than would be incurred under the normal appropriation and procurement process," the CBO found.

Opponents also question the urgency of replacing the tankers, noting that a 2001 Air Force study found the current fleet could last until 2040.

The Air Force acknowledges that leasing would cost more than an outright purchase but argues the extra expense is justified to get the tankers in the air sooner to replace a fleet with many planes more than 40 years old.

The deal is needed, says an Air Force report, because of the "advantage it affords for quickly delivering needed tankers to our warfighters without requiring significant up-front funding."

This is not the first time Boeing has been suspected of breaking bidding rules.

In July, the Air Force ruled that Boeing broke the law by stealing a competitor's trade secrets and, as a penalty, took away seven military satellite launches that were to use Boeing rockets.

The Air Force also indefinitely banned Boeing from bidding on future satellite-launching contracts. The shift of seven satellite launches from Boeing to rival Lockheed Martin Co. is worth about $1 billion, Air Force Undersecretary Peter Teets said Thursday.