Bloomberg News

Boeing’s Upgrades for C-130s Said to Be Canceled by Pentagon

January 24, 2012

(Updates with Boeing comment in sixth paragraph.)

Jan. 11 (Bloomberg) -- The Pentagon has canceled a 10-year- old program to upgrade older C-130 Hercules transports with modern cockpit electronics, according to two government officials.

The move saves almost $4 billion, including $2.22 billion planned from 2013 to 2016, according to an Air Force program document. The Air Force recommended the program termination and Pentagon planners accepted, said one of the officials familiar with the decision, who spoke on condition of anonymity because it hasn’t been announced.

While Boeing Co. is performing the initial upgrades, the Air Force had planned a competition for most of the work after the program was entangled in a procurement scandal in the mid-2000s. The Pentagon rejected a previous move by the Air Force to kill the program in 2009.

The C-130 has the highest profile among the few programs the Pentagon intends to cancel in its plan for 2013 to 2017, the officials said. The proposed budget will contain more truncations or delays, such as moving the purchase of 100 to 150 Lockheed Martin Corp. F-35 jets beyond 2017, the last year of the coming five-year spending plan.

Defense Secretary Leon Panetta is scheduled January 26 to announce some of the budget details, according to a third defense official. The Budget Control Act directed the Pentagon to cut $261 billion through 2017 from its planned budget, including $46.8 billion in 2013.

“Boeing has not been notified” of any cancellation decision, Jennifer Hogan, a company spokeswoman, said in an e- mail. “We continue to meet our C-130 customer commitments and continue to perform on the low-rate initial production contract.”

Tainted Win

The initial $4.1 billion C-130 Avionics Modernization Program contract was awarded to Boeing in 2001. Lockheed Martin Corp. challenged the win after Darleen Druyun, the Air Force’s former No. 2 acquisition official, told federal prosecutors she improperly favored Boeing in the selection. L-3 Communications Holdings Inc. and BAE Systems Plc also protested the award after Druyun’s admission.

The Government Accountability Office recommended in 2005 that the service rebid a portion of the contract. The Air Force agreed in April 2005 to do so.

Druyun was sentenced to nine months in prison October 2004 for discussing a job at Boeing while negotiating a refueling- tanker contract, a conflict-of-interest violation. She also admitted to awarding the C-130 work to Boeing out of gratitude for the company employing her daughter and future son-in-law.

First 26 Aircraft

Boeing, based in Chicago, was allowed to update the first 26 of the 221 C-130s through 2015. It has received $177.2 million so far for upgrades of six aircraft, engineering and logistics support and spares and installations.

The first four fully upgraded aircraft have been delivered to Little Rock Air Force Base in Arkansas. An additional aircraft is to be delivered next month, according to Air Force spokeswoman Jennifer Cassidy.

The remaining 195 aircraft upgrade kits were to be subject to competition starting in June 2013 with a full-rate production contract awarded in July 2014.

The upgrades outfit the aircraft with a common glass cockpit, integrated digital communications and navigation capabilities that meet Federal Aviation Administration and European air-traffic management and navigation mandates, Cassidy said.

The price for each upgrade kit has increased 16.3 percent to $15.4 million from $13.2 million, the Pentagon said in June 2010.

Cassidy said the Air Force won’t discuss the program’s budget status pending release of the fiscal 2013 budget. The Air Force has spent $1.69 billion on program research, according to a service program document.

The upgrade work is performed in Oklahoma City, Oklahoma. The work is being performed by Boeing’s Global Services & Support division under the company’s Defense, Space and Security unit.

--Editors: Larry Liebert, Bob Drummond

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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