Air Force lifts Boeing ban on satellite launches

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Boeing, the second-biggest U.S. defense contractor, was reinstated yesterday by the Air Force as a contractor for its space-rocket program.

Reinstatement allows the company to compete again with Lockheed Martin for government rocket contracts and will assure that the United States has two viable options for launching its military spy, weather and communications satellites into orbit.

Boeing is once again "a full partner on our national-security space team," Acting Air Force Secretary Peter Teets said at a press conference at the Pentagon outside Washington. The suspension was the longest by the military of any major defense contractor, Teets said.

Three Boeing units were suspended in July 2003 from receiving new launch contracts. The Air Force said the company improperly obtained documents from Lockheed that helped Boeing win a 1998 contract for a booster-rocket program called the Evolved Expendable Launch Vehicle, or EELV.

Terms of the reinstatement require Boeing to pay the Air Force $1.9 million for its cost of investigating the case and crafting the settlement, Teets said.

The suspension may be reinstated in the event Boeing is indicted or convicted in any current criminal or civil investigations, he said.

In addition, Boeing may not seek reimbursement for costs related to the suspension, including those connected with improvements to its ethics programs and its defense against a civil lawsuit Lockheed filed in connection with the document theft.

"We have worked hard over the past 20 months to restore the trust and confidence of our customer, and we are grateful that we have reached this point," company spokesman Dan Beck said in an e-mail statement. "The company is committed to maintaining the highest standards of ethical business conduct at every level of the organization."

Payment of the $1.9 million may not be the end of Boeing's financial liability, said Teets and Steve Shaw, the Air Force's top official for contractor debarment and suspensions.

The Justice Department is reviewing a "global settlement" with Boeing attorneys to settle a number of outstanding cases, including the rocket-document theft, he said.

The costs might include an extra $223 million the Air Force will be required to pay for at least eight Lockheed Martin rocket launches that were shifted in 2003 from Boeing as part of the service's penalty.

"The Department of Justice will include consideration for damages to the government in their investigation and their action against Boeing." Teets said.

"As far as the Air Force is concerned, our books have been righted."

Shaw said Boeing is discussing the matter with the Justice Department and that a resolution of those talks is likely to take at least several months.

"There may very well be other damages that the Air Force has suffered because of the underlying misconduct in the EELV matter and that is within the scope of what the Justice Department is doing," Shaw said. "The $1.9 million is not a 'settlement' of its liability on the EELV. It's only the Air Force cost of reviewing the matter."

Boeing shares rose 96 cents to $58.38 following Teets' statement to the Senate Armed Services Committee that the suspension would be lifted.

The Air Force in July 2003 suspended three Boeing Integrated Defense Systems units: Huntington, Calif.-based Boeing Launch Systems, Boeing Launch Services and the Delta rocket program office.

In addition to suspending Boeing, the Air Force stripped seven launches from Boeing's schedule and gave the work to Lockheed.

The work, won in a 1998 competition to develop a rocket for military satellites, was worth as much as $1 billion.

Source: Seattle Times

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