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Last Updated: Tuesday, 2 December, 2003, 23:41 GMT
Pentagon freezes Boeing contract
A Boeing 767 under construction
The tanker contract is worth $18bn
The US military has put on hold a controversial $18bn deal to buy Boeing tanker aircraft.

The Pentagon said the deal would be frozen pending an inquiry into alleged wrongdoing by one of its former officials.

Darleen Druyun is said to have discussed a possible job with Boeing prior to leaving government service.

Ms Druyun had played a key role in the Pentagon's decision to award the tanker contract to Boeing.

Last week Boeing fired its finance chief, Michael Sears, for allegedly violating company recruitment policy and seeking to hire the former procurement official.

Deputy Defence Secretary Paul Wolfowitz said this move prompted him to order the freeze.

'Independent assessment'

Ms Druyun went to work for Boeing in January this year, and was dismissed last month.

I am ordering a pause in the execution of the contracts to lease and purchase tanker aircraft
Paul Wolfowitz
Deputy defence secretary
In a letter to Senate officials, Mr Wolfowitz said he had asked for a "pause" in the process of putting through the deal.

"I am asking the Department of Defense inspector general to provide to me an independent assessment of those allegations and any negative impact that improper conduct by Mr Sears and Ms Druyun may have had on the negotiation of the contracts that the Air Force proposes to execute," he said.

He added the Pentagon would "consider" whether to proceed with the first phase of the contract once the investigation was complete.

But Senate Armed Services Committee Chairman John Warner, while welcoming the decision, warned the Pentagon to allow legislators to review the results of the investigation before approving any lease or purchase.

"Your recent actions clearly indicate that there are many outstanding questions that must be answered before proceeding with this programme," he said in a letter to Mr Wolfowitz.

Setback

BBC Pentagon correspondent Nick Childs says the tanker deal itself has been hugely controversial - originally the Pentagon wanted to lease all 100 planes, but opponents in Congress objected and the compromise has been to lease 20 and buy the remainder.

Michael Sears and Darleen Druyun
Sears and Druyun have both been sacked over their roles in the talks
But the Air Force says it desperately needs new tankers if the US military is to fulfil its global commitments.

The deal has also been scrutinised by the Pentagon following earlier allegations that Ms Druyun had given Boeing access to information concerning a rival bid from Airbus.

The new inquiry marks a setback for Boeing, which had hoped to draw a line under the affair by reshuffling its senior management.

On Monday, it followed up Mr Sears' dismissal by announcing the surprise resignation of its chief executive and chairman Phil Condit.

Earlier this year, the company was stripped of a $1bn air force contract after it emerged that it may have won them by illegally acquiring information from arch-rival Lockheed Martin.

The firm has become more dependent on military contracts amid a sharp downturn in demand for passenger jets from recession-weary airlines.




WATCH AND LISTEN
The BBC's Linden Kemkaran
"The aircraft deal had been causing controversy for months"



SEE ALSO:
Boeing chief quits unexpectedly
01 Dec 03  |  Business
Boeing fires its finance chief
24 Nov 03  |  Business
Boeing considers airline stake
23 May 03  |  Business
Boeing in contract probe
05 May 03  |  Business
Boeing boss warns of slowdown
07 Mar 03  |  Business
Airbus poised to overtake Boeing
14 Jan 03  |  Business


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