Boeing must compete again for Air Force work worth $3.3 billion to upgrade avionics on C-130 transports because of a conflict of interest...

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Boeing must compete again for Air Force work worth $3.3 billion to upgrade avionics on C-130 transports because of a conflict of interest in the original contract.

Michael Dominguez, acting secretary of the Air Force, announced his decision in an April 26 letter to U.S. Comptroller General David Walker, two months after a government agency concluded that the 2001 contract was tainted by service-acquisition chief Darleen Druyun.

The original award was worth $4.1 billion and Boeing will keep the ongoing development portion worth about $1 billion. The production phase — producing and installing the electronics-upgrade kits — will be rebid, Dominguez wrote.

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The C-130 is one of the world’s most widely used aircraft, with about 1,400 in service, including 490 in the Air Force, a potentially huge international market.

Lockheed Martin, L-3 Communications Holdings and BAE Systems protested the award in October after Druyun told federal prosecutors she improperly influenced Boeing contracts. The Government Accountability Office (GAO) upheld the protest in a February report.

The GAO, Congress’ auditor, concluded “the evidence showed Druyun’s biased influence throughout the source-selection process” in favor of Boeing. “The record is replete with documentation regarding her influence,” GAO wrote.

Dominguez said the Air Force would reimburse the protesting companies for the cost of filing their complaints to GAO, “including reasonable attorneys fees.”

Druyun, 57, was sentenced to nine months in prison Oct. 1 for discussing a job at Boeing while negotiating a refueling-tanker contract, a conflict-of-interest violation. She also admitted awarding the C-130 work to Boeing out of gratitude to the company for employing her daughter and future son-in-law.

Pentagon officials said Feb. 14 that Druyun, who went to work for Boeing in January 2003, may have improperly influenced eight contracts.

“We fully support the Air Force in its requirement to field a vastly more capable and modernized C-130 fleet,” Boeing spokesman Doug Kennett said. “We continue to focus on the successful execution of this important program, building on the extensive development work we have completed to date and the strong performance ratings we have received from the Air Force. The system will enter flight test early next year, on schedule.”

BAE spokesman John Measell said the Air Force decision “will help to restore public confidence in the integrity of the procurement process,” and the company “will work with the Air Force to implement the GAO’s recommendations.”

Lockheed Martin spokesman Jeff Adams said the company is “evaluating the proposed Air Force action.”