By Jason Bates

The Air Force failed to follow federal regulations in awarding a contract to The Boeing Co. [BA] to develop a sensor for a next-generation government weather satellite, according to an audit released by the Department of Defense (DOD) Inspector General.

Boeing received a contract in June 2001 to develop the Conical Scanning Microwave Imager/Sounder for the National Polar Orbiting Operational Environmental Satellite System (NPOESS), beating Ball Aerospace & Technologies [BLL] for the $317 million award.

Northrop Grumman Corp. [NOC] is the lead contractor on the overall NPOESS program, while Boeing, Raytheon Co. [RTN] and other major firms contribute to NPOESS, a weather monitoring asset.

The program has encountered blistering criticism.

For example, another inspector general report flailed NPOESS for cost overruns.

Before the House Science Committee recently, Johnnie Frazier, the Commerce Department inspector general, noted that even though the NPOESS program is more than $3 billion over initial life-cycle cost estimates and 17 months behind schedule, the contractor has received $123 million in incentive payments.

The Commerce Department inspector general likewise assailed the imager/sounder portion of the NPOESS program, linking it to a favoritism scandal.

“The Air Force Source Selection Authority for the contract award lacked impartiality with respect to the contract winner, Boeing Satellite Systems and manipulated complex proposal evaluation ratings to benefit Boeing Satellite System’s contract proposal and hinder Ball Aerospace and Technologies Corporation’s contract proposal,” the audit said.

“In addition, source selection personnel did not adequately document the evaluation of the offerors’ proposals and used undefined and inconsistently applied evaluation ratings in the source selection reporting process.”

This audit was performed at the request of the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, which requested audits of several contracts awarded by Darleen Druyun, the Air Force’s former top procurement official, who steered contracts to Boeing in exchange for a lucrative job managing their missile programs.

An investigation found Druyun inflated costs in a deal to lease tanker aircraft to favor Boeing and she ended up serving several months in federal prison after admitting she did it in return for jobs for herself and her daughter.

Sen. John McCain (R-Ariz.) helped to unearth the Druyun scandal, which derailed a $23.5 billion plan to lease/purchase 100 Boeing KC-767 tanker aircraft.

Boeing, however, has stated that it helped to unearth the conflict of interest; fired Druyun and CFO Mike Sears who gave her the $250,000 yearly job; was unaware that Druyun thought the price was inflated; and cooperated fully with authorities.

“We recommend that the Air Force establish a source selection oversight process, require support for source selection findings, and update past performance evaluation guidance,” the Commerce Department IG audit said.

In June, the Air Force terminated the sensor program as part of a restructuring of the NPOESS program.

Lawmakers have complained this means NPOESS, at least in the near term, will lack some planned capabilities.