Boeing Units Suspended; MCI Faces Debarment In a rare slap at two of the government’s largest contractors. three Boeing Co. units and MCI WorldCom have been declared ineligible for federal contracts as a result of separate ethics investigations. Boeing The Air Force suspended Boeing’s Launch Systems, Launch Services, and Delta Program business units because the company used proprietary data from rival Lockheed Martin in bidding successfully on the Evolved Expendable Launch Vehicle contract. Boeing was also stripped of seven of its 19 scheduled Delta rocket launches; those launches were given to Lockheed Martin. Air Force Undersecretary Peter Teets said Boeing stands to lose about $1 billion in revenue. The suspension is indefinite; however, Teets said it might be lifted in time for the next round of competition for launches, set to begin late this year, if Boeing makes satisfactory changes in its ethics programs. “If Boeing were to not take corrective actions, if Boeing were to not respond strongly to this matter, then we would take into consideration the potential for debarment,” he said at a July 24 Pentagon briefing. But he added that it is in the government’s interest for Boeing to remain in the space business, so there will be two strong competitors. The Justice Department is conducting a criminal investigation of Boeing’s activities. Two former employees have been indicted in Los Angeles in the case. The Air Force investigation found that one of those former employees had worked for Lockheed Martin, and brought proprietary documents with him when he joined Boeing. “I have never heard of a case of this scale,” Teets said. “First, the extent of Lockheed Martin proprietary material in Boeing possession at the time of (launch) source selection was extraordinary – approximately 25,000 pages. Second, the quality of information was sufficient to provide great insight into Lockheed Martin’s proprietary cost and pricing. Third, Boeing was not forthcoming with the Air Force about the amount of Lockheed Martin data in its possession, and it took a period of approximately four years for them to provide us with all of it.” Boeing CEO Philip Condit apologized for the employees’ actions. The company has appointed former senator Warren Rudman (R-NH) to lead a review of its policies on ethics and the handling of competitive information. In a recent study, the Project on Government Oversight, a watchdog group, found that Boeing had committed 50 acts of misconduct and paid nearly $379 million in fines and penalties from 1990 to 2003. MCI WorldCom The General Services Administration suspended MCI WorldCom from bidding on new federal contracts and proposed debarment of the scandal-ridden telecommunications company. In announcing the action July 31, GSA said it had “determined that MCI WorldCom lacks the necessary internal controls and business ethics.” The federal government is MCI’s largest customer, spending $700 million to $1 billion a year. The company was suspended immediately from competing for new work and has 30 days to appeal the proposed debarment. Its biggest federal contract comes up for renewal in January. MCI is under federal bankruptcy protection after admitting to accounting irregularities amounting to $11 billion. GSA said its decision was not related to the latest charges against MCI, that it cheated competitors by rerouting long-distance calls to avoid paying access fees to link to local telephone networks. Federal prosecutors are investigating. The company told a federal bankruptcy court in New York that the charges are “groundless.” It said competitors, especially AT&T, are trying “to generate negative publicity and derail the Company’s reorganization efforts.” In a letter to GSA, Verizon General Counsel William Barr noted the fraud allegations and wrote that the “United States is now on notice that it is effectively serving as a ‘fence’ for stolen property,” the Wall Street Journal reported. Competitors had protested when the government awarded new contracts to MCI to build telecom networks in Afghanistan and Iraq even after its accounting scandal had come to light.