Boeing scandal puts pressure on Hoon over £13bn flight-refuelling battle

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The Independent Online

Geoff Hoon, the Defence Secretary, is under pressure to put off a decision on the £13bn Private Finance Initiative for flight refuelling because of a scandal that has engulfed a similar contract in the US.

Boeing, the US group leading one of the two shortlisted consortia bidding for the PFI, last week fired its chief financial officer and another senior executive over alleged irregularities in a successful $27bn (£16bn) bid for a US flight-refuelling deal.

Although Boeing's UK consortium, which includes BAE Systems, British Airways and Serco, denies that there is any connection between the two deals, the US scandal is casting a pall over the UK bid battle.

EADS, the European aero- space group, is the rival bidder in both deals and, as part of the battle for the UK contract, Boeing signed a memorandum of understanding that guaranteed up to £2bn of work on the US deal for BAE Systems. This is now under threat after Donald Rumsfeld, the US Secretary of State for Defence, said he would review the US deal.

If the contract was revoked, this could cost hundreds of jobs at BAE, mostly in the UK.

There is pressure on Mr Hoon to postpone any decision on the flight-refuelling PFI until it becomes clear what action the US will take against Boeing.

It is alleged that Mike Sears, Boeing's chief financial officer, received information about EADS' bid from Darleen Druyun, a chief procurement official at the US Air Force who was later hired by Boeing. Both Mr Sears and Ms Druyun were sacked last Monday.

"Any decision now will be tainted by the Boeing scandal, even if EADS won," said a source who is close to the bidding.

Keith Archer-Jones, who is leading the Boeing consortium, said his group would not allow the decision to be deferred. "The two programmes are entirely separate and stand alone," he said.