Boeing agrees to pay $4M to settle lawsuit alleging price inflation

The Boeing Co. has agreed to pay $4 million to settle a federal lawsuit accusing the company of inflating the production costs it charged the Air Force, the U.S. Attorney's Office announced today.

The lawsuit, filed in federal court in downtown Los Angeles, alleged that during 1998 contract negotiations, Boeing failed to disclose that it would out-source the manufacture of most of the components that were to be used for the Towed Decoy System. As a result, the Air Force paid $7.5 million more than it should have for the system, the lawsuit claimed.

The system deploys a decoy that is towed behind the bomber to protect it from guided missiles. Military pilots have dubbed the decoy "Little Buddy.''

Boeing did not admit any wrongdoing in agreeing to the settlement, according to the U.S. Attorney's Office. The $4 million settlement is expected to be paid within seven days.

In a statement, the company denied any wrongdoing.

"To avoid further disruption to its business and the expense of continued litigation, Boeing has agreed to settle a lawsuit over a 1998 contract for a B-1 Towed Decoy System for $4 million,'' according to the statement. "Boeing has denied the allegations. In paying the settlement, Boeing has not admitted liability, and in fact, Boeing believes the company acted appropriately in negotiating and performing the contract in question.

"For 25 years, Boeing employees have worked to keep the B-1 Lancer bomber fully capable and upgraded to support military missions around the world.''

The complaint claimed that during negotiations, Boeing promised to fabricate 50 parts of the system at its Palmdale Site 9 facility, but was instead planning to close the Palmdale site and use suppliers and
subcontractors to make the parts.

The suit alleged that had the Air Force known of the significant cost savings Boeing had achieved by using earlier contracts to purchase parts from suppliers and outsourcing manufacturing, it would have negotiated a substantially lower price for the Towed Decoy System.

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