RAF FAIRFORD, England (Reuters) – The U.S. Air Force said it had reached a deal with Boeing (NYSE:) for the supply of E-7 Wedgetail airborne warning and control aircraft and played down concerns that the company's internal crisis would hurt its ability to supply the Pentagon.
The tentative agreement covers rapid prototype production as the Air Force phases out the E-3 Sentry airborne warning and control aircraft, or AWACS, and comes after reports of disagreements over the price of the 737-based Wedgetail jets.
“We've reached an agreement with (Boeing) … We've got a reasonable price that we can afford,” Air Force Secretary Frank Kendall told reporters at the Royal International Air Tattoo military airshow in western England.
The formal contract will be finalized in August, he added.
It is the first major contract announcement since Boeing agreed earlier this month to plead guilty to one count of criminal fraud conspiracy to resolve a U.S. Justice Department investigation into fatal 737 MAX crashes more than five years ago.
Experts have said the plea, which is opposed by the families of the crash victims, potentially threatens the company's ability to win contracts from agencies such as the Defense Department and NASA, although it could seek exemptions.
Asked how the plea deal had affected the Pentagon's ability to negotiate with Boeing, Kendall said: “The short answer is it hasn't; we continue to do business with Boeing.”
Under U.S. rules, the Pentagon has to assess whether any supplier it does business with is a responsible company.
“We will be working in a coordinated manner … to understand what implications the plea agreement might have, but I don't anticipate at this point that it will … cause a significant disruption to our contracting,” Andrew Hunter, assistant secretary of the Air Force for acquisition, technology and logistics, told reporters.
Boeing is the Pentagon's second-largest contractor and is said to compete with Lockheed Martin (NYSE:) in a strategically important competition to replace the F-22 fighter.
The latest deal stems from the Air Force's efforts to replace the Cold War-era E-3s, whose distinctive rotating radar dome allows crews to track targets and direct aircraft in a battle.
The transition between the two planes has been delayed amid price negotiations, raising some concerns in Congress about capability gaps.
“We are very pleased to have an affordable foundation for the rapid prototyping program, which is the basis for the future production program,” Hunter said.
Boeing welcomed the deal, which is a boost to its defense business after a series of cost overruns and delays.
“We are focused on executing well and meeting the needs of our customers,” a spokesman said.
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