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WASHINGTON -- Boeing Co. will forfeit $1 billion in Pentagon launch business and be suspended from upcoming launch competitions as punishment for cheating in a 1998 U.S. Air Force rocket procurement, a senior service official said. The Air Force imposed the penalties after concluding that Boeing used proprietary cost and technical data from arch-rival Lockheed Martin Corp. to win the bulk of the initial batch of launches awarded under the Evolved Expendable Launch Vehicle (EELV) program. At a Pentagon press conference July 24, Peter B. Teets, undersecretary of the Air Force, said Boeing will forfeit seven of its 19 EELV launch contracts to Lockheed Martin. In addition, three of four upcoming contracts to launch military payloads from Vandenberg Air Force Base, Calif., will be awarded to Lockheed Martin rather than Boeing as previously planned, he said. Lockheed Martin currently does not have a launch pad at Vandenberg for its Atlas 5 rocket, developed under the EELV program. Teets said the company will pay $200 million to construct the facility and will then lease it back to the Air Force. Air Force officials will decide during the coming weeks whether pressing national security needs dictate that the first of the upcoming Vandenberg launch contracts be awarded to Boeing, which does have a pad at that site for its EELV rocket, dubbed Delta 4. Both Boeing and Lockheed Martin have pads for their EELV rockets at the other main U.S. launch site at Cape Canaveral Air Force Station, Fla. So far there have been three successful launches of the Atlas 5 and two of the Delta 4 from the Cape.Finally, Boeing will be suspended until further notice from competing for Air Force launch contracts, Teets said. However, that suspension could be lifted in a matter of months if Boeing demonstrates it has taken measures to ensure that its rocket division abides by U.S. procurement rules in the future, he said. All told, Boeing will lose about $1 billion worth of Air Force launch business. Teets expressed hope that the Air Forces penalties would not drive Boeing out of the launch business. In a statement released shortly after Teets announcement, Boeing Chief Executive Phil Condit apologized for his companys actions: "We are extremely disappointed by the circumstances that prompted our customers action, but we understand the U.S. Air Forces position that unethical behavior will not be tolerated... We will continue to work with the Air Force to address the issues that caused this suspension." Teets said this marks the conclusion of the Air Forces investigation into the matter. However, the incident is still under investigation by the U.S. Department of Justice, and Boeing also faces a civil lawsuit filed by Lockheed Martin in connection with the incident.
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