The U.S. Air Force failed to follow federal regulations in awarding a contract to Boeing Co. to develop a sensor for a next-generation government weather satellite, according to an audit released by the Defense Department Inspector General July 10.

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 for the $317 million award.

"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."

In February, the Under Secretary of Defense for Acquisition, Technology, and Logistics referred eight Air Force contracts to the Inspector General’s Office "due to concerns that the principal deputy assistant secretary of the Air Force, Acquisition and Management may have used undue influence to award these contracts to Boeing Corporation and four other contractors."

Darleen Druyun, who held the position as the Air Force’s top procurement official, pled guilty to steering 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 served several months in federal prison after admitting she did it in return for jobs for herself and her daughter.

"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 audit said.

The Air Force concurred with two of the three recommendations, according to the Inspector General, but did not address the need for a sufficient audit trail to support source selection actions. The service did not agree with the recommendation "to update past performance evaluation guidance to include methodology to address when there are significant disparities in past performance experience between offerors," the report said. "We agree that past performance evaluation should be based on contractor past performance as a whole. However, the past performance evaluation methodology needs to include the impact of past performance strengths and weaknesses in proper proportion to the population of past performance experiences reviewed."

The Inspector General has requested that the secretary of the Air Force, Acquisition and Management comment on the finding by Aug. 10.

In June, the Air Force terminated the sensor program as part of a restructuring of the troubled NPOESS program. NPOESS costs have soared since its inception, breaching cost overrun limits set in the Nunn-McCurdy Act. The program, which will combine weather satellite programs operated by the U.S. Departments of Commerce and Defense, is $7 billion over budget and launch of the first spacecraft is three years behind schedule.

The Department of Defense cut the number of satellites and sensors for the program, which is led by Northrop Grumman Corp. with input by Raytheon Co.

NPOESS will survive as a downsized platform, with cost increases offset somewhat by cost savings that involve scrapping some planned sensors that would have been included in the first couple of satellites in the constellation, and by using data from a European constellation of satellites.

Boeing expressed disappointment at the termination of the sensor development program and has said it plans to bid for the new Microwave Imager/Sounder, which will be integrated into the second Engineering and Manufacturing Development satellite. "Boeing will work to understand the new program requirements and ultimately hopes to develop and build the redefined CMIS sensor for NPOESS," the company said at the time of the cancellation announcement.