Big Boeing Award, New Rules Won’t End DOD Conflicts of Interest

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After a decade of delays and embarrassing missteps, on February 24 the Air Force awarded one of the largest contracts in military history, a $35 billion deal to build nearly 200 giant airborne refueling tankers, to the Chicago-based Boeing Company. At one point, the Air Force had awarded the contract to a team composed of Northrop Grumman and EADS North America, a unit of European Aeronautic Defence & Space Co. In 2008, however, the Government Accountability Office upheld Boeing’s protest of the contract and the process began anew.

Part of the drama surrounding the contract occurred when Darleen Druyun, a senior Air Force procurement official, was alleged to have held employment discussions with Boeing while she was still employed at the Air Force and involved in the contract award. Druyun pleaded guilty to corruption and served prison time, as did the then CFO of Boeing. This blatant instance of impropriety spurred calls for reform of the conflict of interest rules for federal procurements. In addition, the recent consolidation within the defense industry, coupled with its explosive growth, often resulted in companies with a broad range of services and affiliates, with the distinct possibility that a conglomerate company could have input into Defense Department decisions that would help award a contract to an affiliate.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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