Summary

Rep. Howard L. Berman asked us, as a follow-on to our recent review of the early sensor tests for the exoatmospheric kill vehicle (EKV), to look into the circumstances surrounding Boeing Lead Systems Integrator's (LSI) selection of Raytheon's EKV device for further testing. Specifically, he asked us to (1) determine whether there was a misuse of Raytheon's proprietary information by the Boeing EKV team, as had been reported in the media, and whether these events affected the planned competition for an EKV contractor; (2) determine whether a request for proposals (RFP) was ever prepared, whether proposals were submitted, whether formal criteria were used to evaluate the two systems, and whether a formal technical comparison or analysis of the two systems was used to select between them; (3) describe the basis for the selection of Raytheon; (4) identify whether the decision was made by BMDO or Boeing LSI, and, if the decision was made by Boeing LSI, determine the extent to which BMDO was aware of the circumstances surrounding the decision; and (5) identify the amount of money the U.S. government spent to develop the two EKV systems that were to be competed against each other and, if one of the contractors was excluded from the competition, determine whether any effort was made to recoup the money paid to that contractor.

In late 1998--after 8 years of funding and administering parallel research an development contracts for an EKV for National Missile Defense and 2 months prior to the scheduled completion of the competition--BMDO abandoned its planned competition to select the most promising EKV for use in follow-on missile defense programs. This decision was made by Boeing LSI, with BMDO's concurrence. This decision was made shortly after Boeing disclosed to the government that employees of its EKV team had obtained and misused proprietary information developed by the other EKV competitor, Raytheon. Our review has not located any document memorializing the selection of Raytheon to build the EKV, and both BMDO and Boeing have advised us that no such document was created or exists. As a result, we have reviewed contemporaneous e-mails and correspondence exchanged between Boeing and BMDO discussing these events, and near-contemporaneous descriptions of the selection decision prepared by government officials involved in the subsequent discussions about whether the component of Boeing responsible for its EKV effort should be debarred from federal government contracting, and about the pursuit of a financial settlement. We have supplemented these contemporaneous materials with interviews of the decisionmakers. This review has led us to the following findings: (1) The planned competition was abandoned after BMDO, Boeing LSI, and Raytheon learned of the Boeing EKV team's misuse of Raytheon proprietary information, specifically a plan for testing Raytheon's EKV's software that was submitted by Raytheon to the Army and later discovered in the offices of the Boeing EKV team; (2) The final RFP was not issued, proposals were not submitted, no formal criteria were used to evaluate the two systems, and there was no formal technical comparison or analysis used by the decisionmaker to select the EKV; (3) Raytheon received the award (a) after Boeing LSI and BMDO were unable to mitigate, to Raytheon's satisfaction--which BMDO made a condition of moving forward--the possible competitive harm arising from the Boeing EKV team's misuse of Raytheon's proprietary information; (b) after Boeing LSI and BMDO concluded that failing to obtain Raytheon's concurrence might hamper BMDO's ability to complete the testing of National Missile Defense in time for a planned presidential deployment decision in June 2000; and (c) after Boeing LSI and BMDO concluded that any risk in selecting Raytheon without a technical comparison with Boeing's EKV could be mitigated by continuing to fund Boeing's EKV, at a lower amount as a "hot back-up;" (4) Both the decision to abandon the planned competition and the decision to award to Raytheon by default were made by Boeing LSI, with BMDO's concurrence; and (5) At the point when the competition was abandoned, the U.S. government had spent approximately $400 million each, or a total of $800 million, to develop and test the Raytheon and Boeing EKVs. Although several government officials recommended debarring a component of Boeing from federal government contracting, or pursuing a financial settlement from the company, all such recommendations were ultimately withdrawn.