Boeing: The Rival’s Files Behind the Launch Contracts

Boeing agreed to pay $565 million in a civil settlement announced on June 30, 2006 to resolve procurement-integrity allegations involving launch contracts and its hiring of an Air Force official. The launch contracts at issue were worth billions of dollars. The government alleged that Boeing used a rival’s confidential information to gain an advantage in competitions for government work. If you know the bid files, cost claims or recruiting discussions inside a contractor, this case shows why the story can begin well before an invoice reaches the government.

The Justice Department’s announcement connected the company’s handling of competitor information to Air Force and NASA launch services. It also described the government’s investigation of Boeing’s relationship with the Air Force’s top career procurement officer.

The Air Force Wanted Competition Between Two Launch Providers

The Air Force designed its Evolved Expendable Launch Vehicle program around two sources of launch services. It wanted competition to reduce costs and the risk of failure while meeting the government’s satellite needs. Boeing and Lockheed Martin became those sources.

The Air Force wanted competing suppliers whose prices would help it choose where to place work. According to the Justice Department, Boeing’s low pricing led the Air Force to award it 19 of the original 28 launch-services contracts in October 1998.

The government alleged that, before those awards, Boeing obtained more than 22,000 pages of Lockheed Martin documents. Some contained confidential, competition-sensitive or proprietary information about Lockheed’s launch program. The government alleged that Boeing used some of that information to unfairly assist its own bid.

After discovering the information problem, the Air Force sought to rebalance the contracts at substantial expense. We see the absurdity in that sequence: a program built to save money through competition incurred additional costs trying to repair the competition itself. Taxpayers were paying for the consequences of a process designed to protect them.

NASA’s Launch Missions Went to a Single Supplier

The government alleged that Boeing’s information advantage also helped it secure a package of NASA missions without competition. NASA already had launch-services contracts with Boeing and Lockheed Martin that required the contractors to compete for individual missions.

According to the Justice Department, Boeing possessed additional Lockheed documents obtained through channels different from those involved in the Air Force program. The government alleged that Boeing’s possession and use of proprietary information, together with the advantage it had gained in the Air Force competition, enabled it to persuade NASA to award 19 missions on a sole-source basis. The package became known as the 19 Pack.

Then came the cost claims. The United States alleged that the absence of competition, combined with Boeing’s false claims for certain costs, caused NASA to pay much more than it should have for the package. The allegation connected the award decision to the amount the government paid.

For someone familiar with launch procurement, that is a concrete chain: the information available to the bidder, the decision to award missions without competing them, and the costs charged afterward. A pricing employee may understand the cost claim. Someone involved in the proposal may understand the advantage that preceded it. We work with insiders to connect those views of the same contract.

Hiring the Official Who Influenced Boeing’s Contracts

The hiring investigation concerned Boeing’s relationship with an Air Force official who exercised influence over billions of dollars in contract awards, modifications and settlements. The Justice Department described her as the service’s top career procurement officer before her retirement in 2002.

In 2000, according to the department’s account, Boeing hired the official’s daughter and future son-in-law at her request. In 2002, Boeing’s then-chief financial officer recruited the official for an executive position with the company following her retirement. During that period, she was responsible for dozens of Boeing contracts, including a proposed procurement of aerial refueling tankers.

The timing is the point. This part of the settlement reaches a different set of internal records from the launch bids. A person familiar with recruiting may know who requested a hire and when the discussions occurred. A contracting employee may know which awards or modifications were being decided at the same time.

What the Civil Settlement Covered

Boeing’s civil settlement with the Justice Department’s Civil Division resolved the procurement-official matter, the Air Force launch program and certain NASA launch-services contracts.

The Justice Department’s Civil Division led the civil investigation and negotiations, assisted by U.S. Attorneys’ Offices and investigators from the Defense Criminal Investigative Service, the Air Force and NASA’s Office of Inspector General.

The Records Behind the Government’s Bargain

An insider may hold the evidence behind government payment in the bid material used to win the work, the costs submitted afterward or the recruiting discussions alongside a contract decision.

Other procurement cases show why the information behind the contract matters. In the Northrop Grumman satellite-parts case, the government alleged that satellite transistors were unqualified or untested. That allegation concerned what the government received. Boeing’s launch allegations concerned how the government chose its supplier and what it paid. Product qualification, pricing information and competition can each connect a contractor’s internal decisions to public money.

We build the case around those connections with what the contractor represented to the government in view.

Why Defense Procurement Matters to Whistleblower Cases

Defense-contract fraud helped drive Congress’s decision to strengthen the False Claims Act in 1986. The Congressional Research Service’s 2009 report, Qui Tam: The False Claims Act and Related Federal Statutes, recounts the congressional concern: in 1985, 45 of the 100 largest defense contractors were under investigation for multiple fraud offenses, including nine of the ten largest.

The report explains that the amendments strengthened private whistleblower cases in response to extensive fraud against the government. That history gives the procurement insider’s knowledge its proper place. The government can hold a contract and still need someone who understands how the business produced the bid, cost submission or assurance behind it. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Contract Was Won

If you know how a competitor’s files reached a bid team, why costs changed or how a hiring discussion overlapped a contract decision, we want to hear it. Speak to one of our Whistleblower Experts about how the contract was won. We bring in government-contract fraud whistleblower lawyers who understand bid and pricing disputes, and stay at your side to build your strongest government-contract whistleblower case.