Byline: Cynthia L. Webb
Boeing chief executive Phil Condit resigned Monday, saying in a statement that he was departing "as a way to put the distractions and controversies of the past year behind us, and to place the focus on our performance."
Condit's resignation comes "amid mounting skepticism from Congress and the Pentagon," The Washington Post reported Tuesday. First came a scandal in which internal documents from rival Lockheed Martin turned up in the hands of Boeing officials, documents that Lockheed said gave Boeing an unfair edge in the bidding for a lucrative rocket contract. Then the company had to deal with congressional skepticism over a Pentagon plan to lease airborne tankers from Boeing, skepticism that turned to outrage after it was learned that an Air Force contract officer who played a key role in the tanker deal was hired on at Boeing.
Even though Boeing took action to clean house after the contract matter was publicized, the Pentagon wasn't satisfied, announcing Tuesday that it will delay the tanker deal. According to The Chicago Tribune , "[t]he decision came from Deputy Secretary of Defense Paul Wolfowitz , who said the $20 billion-plus contract would not move forward until the Pentagon's inspector general had investigated alleged misconduct by Boeing's chief financial officer and a former Air Force procurement official. Any lengthy postponement would hurt Boeing's profitability and endanger its 767 production line, which has a shrinking backlog of orders Boeing declined to comment, referring calls to the Air Force. Air Force officials said they supported Wolfowitz's decision."
The New York Times said the about-face "could lead to the deal's being scrapped and to new bids from Boeing's competitors, [Pentagon] officials said. The contract, for Boeing to provide 100 refueling aircraft to the Air Force, was authorized in legislation signed by President Bush late last month. But the contract itself has not yet been signed, and the ouster last week of two Boeing executives over their conduct has intensified calls in Congress for the contract to be reopened."
The Seattle Times noted that "Wolfowitz's letter adds more uncertainty about the future of Boeing's controversial tanker deal, even as the company gets ready to start tanker production. ... Boeing spokeswoman Leslie Nichols said the company 'did have a plan to start this month,' though she couldn't confirm the date."
Meet the New Boss
Boeing's new chief executive, Harry C. Stonecipher , was the subject of a less-than-flattering profile in The Washington Post on Wednesday. The newspaper noted that Stonecipher is "a leader whose last company, McDonnell Douglas Corp. , suffered serious problems and whose harsh style could irritate Boeing's wounded morale, say long-term observers of the industry." Is history repeating itself? The Post said "at the time of the [McDonnell Douglas] acquisition, Boeing was focused on commercial business and respected worldwide for its management practices. McDonnell Douglas was mired in a lawsuit with the Pentagon over a canceled bomber program, had just lost a major fighter plane competition and was watching its commercial aircraft business fade into oblivion. Boeing now finds itself facing some of the same problems. Its sales of commercial aircraft will trail European rival Airbus SAS this year for the first time. Also this year, government contracting will account for more than half of Boeing's business for the first time -- but that is clouded by allegations of unethical behavior."
The Seattle Post-Intelligencer yesterday recounted that Stonecipher "was Condit's right-hand man from 1997, when the companies merged, until Stonecipher retired as Boeing vice chairman last year. But even in retirement, Stonecipher remained a powerful player behind the scenes at Boeing and as a board member. That power was underscored by his appointment Monday. What is not clear is just how long Stonecipher will remain Boeing's top executive. During Boeing's teleconference to announce Condit's resignation, Stonecipher said he would not be an interim executive -- he said he would remain for as long as the board wants him and as long as his health is good. Some industry analysts said they expect Stonecipher to head Boeing for at least three years."
The Wall Street Journal pondered Boeing's future leadership in a piece this week. "Among the names in play: the head of Boeing's commercial-airplane unit, the chief of 3M Corp. and a rising star at General Electric Co. Despite the succession musings, Mr. Stonecipher doesn't want to be perceived as a lame duck. The company is struggling to rebuild its reputation with the U.S. government after almost a year of negative developments on Pentagon contracts. 'I need to convince all of the constituencies that we really are a company with high integrity,' Mr. Stonecipher said, adding that 'there is no way for a temporary caretaker to do that.'" For the record, The Journal said in the same article that Boeing asked 3M CEO James McNerney Jr. if he was interested in the job, but sources told the paper that he declined the job "because he made a commitment to 3M's board that he would stay for several years."
Boeing's Loss = Other Contractors' Gain?
The Pentagon awarded an eight-year, $4.5 billion contract to a Northrop Grumman -led group to devise a rocket system to destroy enemy missiles. Massachusetts-based Raytheon could earn up to $2 billion under the contract, according to The Boston Globe , which added: "The Pentagon chose the companies over a team including Lockheed Martin Corp. and Boeing Co. , but the decision was based on technical merits and not related to a recent management shake-up and ethics issues dogging Boeing, Pentagon officials told Reuters. It represents Northrop Grumman's first big win following its $12.5 billion purchase of TRW Inc. 's defense assets last year."
The Los Angeles Times said the contract stemmed from a "high-profile competition that pitted the nation's top defense contractors against one another, the Northrop-Raytheon team upset Lockheed Martin Corp. and Boeing Co., both of which have long been the nation's leading contractors on developing missile defense systems. The contract to develop and test the so-called kinetic energy interceptor was initially valued at $4 billion over eight years, but analysts said its potential worth would be far greater once production began in 2010, making it one of the more significant programs in missile defense," the paper said. Loren Thompson , defense analyst for the Arlington, Va., think tank Lexington Institute , told the newspaper that the value of the contract could surpass $10 billion.
The Baltimore Sun noted that the system, pegged to be developed by 2012, "will become part of the Missile Defense Agency 's layered missile defense system." According to Washington Technology , Northrop Grumman head Ronald Sugar "said that the win validated the company's acquisition of TRW Inc. in December 2002. Six of the company's seven business sectors will play a role in the contract, he said."
Speed Up the Assembly Line!
Today's Washington Post reports that the Pentagon doesn't have enough sufficient stores to outfit every soldier in Iraq with advanced body armor. "This high-tech 'system' -- the Kevlar vest and 'small-arms protective inserts,' which the troops call SAPI plates -- is dramatically reducing the kind of torso injuries that have killed soldiers on the battlefield in wars past. Soldiers will not patrol without the armor -- if they can get it. But as of now, there is not enough to go around. Going into the war in Iraq, the Army decided to outfit only dismounted combat soldiers with the plated vests, which cost about $1,500 each. But when Iraqi insurgents began ambushing convoys and killing clerks as well as combat troops, controversy erupted."
According to the Post, lawmakers in Congress are clamoring for an investigation. Stay tuned. A separate Washington Post piece reports that manufacturers of body armor and armored humvees are enjoying a "mini-boom" as Pentagon demand remains high for their wares.
Data Sharing Hiccups
A new report says Uncle Sam has failed to make significant strides in improving how law enforcement agencies share data on terrorist and other threats in the two years since the Sept. 11 attacks. The report , released by a panel of experts convened by the Markle Foundation , concluded that "[t]oo many federal government agencies remain trapped in a Cold War mind-set of keeping information closely guarded ... rather than sharing it among organizations. The result: The complex but vital task of spotting potential terrorists before they strike is undermined because investigators cannot quickly reach across jurisdictional boundaries to examine such things as state driver's license records and financial transaction data," The Washington Post reported.
James Lewis , director of technology and policy for the Center for Strategic and International Studies and a member of the Markle national security task force, told washingtonpost.com : "The military has worked hard to figure out a way to pump intel to the platoon level, and we need to do the same thing on the national and local level. A lot of the solution lies in better use of technology to structure how you pass information so you can protect security while making sure the right people get the stuff they need."
InternetNews.com said the report "urges the government to effectively utilize the often valuable information that is held in private hands, but only within a system of rules and guidelines designed to protect civil liberties. According to the task force, the government must rely on information to detect, prevent, and effectively respond to attacks since it is not possible for the nation to 'harden' all potential targets against terrorist attack."
Diebold Backs Down on E-Voting Documents Suit
Chalk up a small victory for advocates of free speech on the 'Net. Voting technology firm Diebold "has agreed not to sue voting-rights advocates who published leaked documents about the alleged security breaches of electronic voting. A Diebold attorney promised in a conference call Monday with U.S. District Judge Jeremy Fogel and attorneys from the Electronic Frontier Foundation that it wouldn't sue dozens of students, computer scientists and Internet service providers who received cease-and-desist letters from August to October," The Associated Press reported on Monday. "Diebold didn't disclose specifics on why it had dropped its legal case, but the decision is a major reversal of the company's previous strategy. North Canton, Ohio-based Diebold, which controls more than 50,000 touch-screen voting machines nationwide, had threatened legal action against dozens of individuals who refused to remove links to its stolen data."
The EFF hailed the ruling. "We're pleased that Diebold has retreated and the public is now free to continue its interrupted conversation over the accuracy of electronic voting machines," EFF attorney Wendy Seltzer said in a statement . "We continue to seek a court order to protect posters, linkers, and the ISPs who host them." The EFF said Monday that the " ISP Online Policy Group (OPG) and two Swarthmore College students are seeking a court order to clarify that publishing or linking to the Diebold email archive does not violate copyright law and that ISPs should not face any penalty for hosting users who publish or link to the archive."
Wired explained more about Diebold's decision to forgo action: "Diebold spokesman David Bear said no one should interpret the move as a sign that the DMCA did not apply in this case. 'We've simply chosen not to pursue copyright infringement in this matter,' he said. More than 13,000 internal Diebold e-mails and documents were taken from a Diebold staff server last March and delivered to voting activist Bev Harris and her publisher, along with a Wired News reporter, in August. Harris has written a book based on a year's worth of research into companies that make e-voting machines. After Harris posted the memos on her website, Diebold sent cease-and-desist letters to her and her ISP. A Swarthmore student who subsequently published the memos also received a letter."
Meanwhile, New York Times columnist Paul Krugman chimed in on Diebold and the e-voting debate this week , chastising the company's CEO for maintaining close ties to the Republican Party. Krugman: "Georgia -- where Republicans scored spectacular upset victories in the 2002 midterm elections -- relies exclusively on Diebold machines. To be clear, though there were many anomalies in that 2002 vote, there is no evidence that the machines miscounted. But there is also no evidence that the machines counted correctly. You see, Diebold machines leave no paper trail. ... What we do know about Diebold does not inspire confidence. The details are technical, but they add up to a picture of a company that was, at the very least, extremely sloppy about security, and may have been trying to cover up product defects."
Rolling Out Fixes
Diebold Election Systems on Tuesday said it will heed recommendations contained in a report by Ohio's secretary of state on the company's e-voting technology. Excerpt: "Modifications to the Diebold touch screen software have already been completed, answering the few questioned areas identified in the analysis. These modifications have already been implemented within touch screen units in Maryland, and have operated exceptionally well. These software enhancements will be implemented in all touch screen units deployed throughout Ohio."
Ohio Secretary of State Kenneth Blackwell made some public remarks about problems with e-voting machines, according to a recent Toledo Blade article. Blackwell: "Fortunately, all of the documented risks can be and will be expeditiously corrected by each of our voting-machine makers. When the voters of Ohio begin casting ballots on electronic devices, they can do so with full knowledge that the integrity of their voting system has been maintained and that we have in place one of the nation's finest fraud-prevention systems." The Blade said fixes proposed by e-voting firms "may force them to seek federal and state recertification. Mr. Blackwell plans to ask the federal government to waive its November, 2004, deadline for updated machines to be in place in all 88 counties."
President Bush yesterday signed a bill that authorizes $3.7 billion for nanotechnology research over four years. Nanotechnology, the Wall Street Journal reminded readers, "deals with manipulating and designing materials at the scale of individual molecules or atoms." The new law "seeks to coordinate research being carried out by a number of federal agencies, including the Department of Energy and the National Aeronautics and Space Administration , creating a comprehensive road map for nanotechnology's development in the U.S., as well as a new agency to oversee federal investment. Although spending on nanotechnology has increased 83% since 2001, the bill, known as the 21st Century Nanotechnology Research and Development Act , provides few new funds. Instead, the bill's authorization reflects the investment levels in nanotechnology research already projected by 10 federal agencies," the Journal reported.
The One That Got Away
A joint effort by PeopleSoft and Accenture to land a $60 million contract with the Los Angeles County Board of Supervisors to automate and manage the county's accounting, payroll and other business services appears to have fallen through, according to The Los Angeles Times . The county pulled the plug on negotiations and said "the about-face was necessary because of continued budget concerns and PeopleSoft's uncertain future" -- a reference to Oracle 's hostile bid to acquire the business software firm.
The Times explained that the deal would have cost the county $8 million, plus between $52 million and $54 million in fees for Accenture to install the software. "But a county study found that implementing the entire software system would have cost as much as $100 million. Further complicating the deal, county officials said, were statements by Oracle that it would discontinue the product being offered to the county if its takeover bid succeeded. County Chief Administrative Officer David Janssen said Tuesday that a task force convened to evaluate and select any new software system decided that the risks of moving ahead were too great," the L.A. Times reported.
California IT officials are taking heat for giving SBC Communications and MCI a leg up on the competition. "The state's top information technology officials Wednesday defended their controversial proposal to extend a $300-million-a-year telecommunications contract as a well-intentioned effort to save Californians money during a time of fiscal crisis," The Los Angeles Times reported.
"But under sharp questioning at a Senate hearing, the officials acknowledged that they hadn't examined whether taxpayers might benefit more from the seeking of competitive bids for the contract jointly held by SBC and MCI. The Schwarzenegger administration is reviewing the matter and must decide whether to approve an extension before the contract expires in 2005," the L.A. Times added.
The San Jose Mercury News pointed out that "just as the now-canceled Oracle software contract did in 2002, the legislative inquiry raises questions about whether the state has the expertise to negotiate the best deal for taxpayers in complex technology-related contracts."
Prescription for Change
Britain's National Health Service plans to spend $17 billion on an information technology overhaul, an effort that "could serve as a model for other countries in the industrialized world," The Wall Street Journal reported yesterday, adding that the project envisions "wiring every hospital, clinic and doctor's office across England. Over the next two years, every citizen's health record will be securely stored on a central database and accessible to medical practitioners, via a broadband network, from anywhere in the country, according to the aggressive plan. Doctor appointments and referrals would be done online. Prescriptions would be electronically zapped to pharmacies."
E-mail government IT tips, comments and links to cindyDOTwebbATwashingtonpost.com
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