Boeing Loses Tanker Contract

Boeing suffered a large financial hit after losing a $40 billion contract to build a new generation of Air Force tankers. A Government Executive story weighs some of the fallout.

While some analysts claimed the company's 2002 ethics scandal, which resulted in Air Force and Boeing officials serving prison time, was not a factor in the decision, others were not so sure. The Seattle Times quoted one worker:

Michael Cummins, 52, of Everett, blamed the ethics scandal that emerged during the earlier tanker competition for costing Boeing the bid this time as well.

"It boils down to past history," said Cummins, who works on interior mechanics for planes including the 767. "You can never take things back after they're done."

Analyst Loren Thompson told Reuters:

Boeing is still coping with the aftermath of the procurement scandal earlier in the decade. It had great difficulty communicating with its Air Force customer and understanding how its customer was thinking.

The decision provoked memories of the previous tanker competition. Darleen A. Druyun, the top Air Force procurement chief in 2002, admitted that she favored Boeing while negotiating for a job with the company. Both she and Boeing's former CFO went to prison, and Boeing paid $615 million to settle charges of misconduct. Air Force officials denied these events were a factor in the current decision. Sue C. Payton, assistant secretary of the Air Force for acquisition, said of the previous controversy, "That was a half-decade ago."

Whatever the reason for the newest Air Force decision, a perception that ethics violations can hurt the bottom line in a big way may be a good thing for the procurement community and the government in the long run.