Boeing Still in the Cross Hairs

By SALLY B. DONNELLY

The sudden ouster of Harry Stonecipher as CEO of Boeing for having an affair with an employee was just the latest blow to the aerospace giant, whose previous CEO, Phil Condit, resigned 18 months ago in an Air Force contracting scandal. But the nation's second biggest defense contractor may have more worries ahead. In the cross hairs this week is a $120 billion Army contract, managed by Boeing, that would enable computer-equipped soldiers on the ground to see and fight the enemy with satellites, unmanned vehicles and futuristic weapons. Senator John McCain of Arizona will hold hearings this week to determine whether the Pentagon was justified in setting the contract, known as Future Combat Systems, outside the normal procurement process. "The type of contracting leaves the government extremely vulnerable because there is no transparency or taxpayer protection," says Eric Miller, the senior defense analyst at the Project on Government Oversight, a Washington watchdog group. "It is ripe for abuse and often misused." A Pentagon representative said the program is being properly monitored.

McCain oversaw the investigation that helped derail the $23 billion Pentagon deal to lease Boeing tanker airplanes to the Air Force. Investigators found that the company's CFO had violated conflict-of-interest rules, and the scandal landed both him and a high-ranking Pentagon procurement official, who said she had steered other contracts to Boeing, in jail. McCain says he is not on a vendetta against Boeing but continues to have concerns about the Pentagon's procurement processes. "There are a lot of big-ticket items," says McCain. "It is going to be a very tough year." --By Sally B. Donnelly