Kill the Boeing Tanker Deal

Originally appeared in Defense Week, Oct. 6, 2003.

With all the news reports about the Air Force’s deal with Boeing to lease 767 airliners as air refueling “tankers,” one would think there is nothing more to say. There is; plenty.

The proposed deal is not just an atrocious idea; it’s a microcosm of all that is wrong in America’s national security apparatus.

Just how atrocious? Let me count the ways.

Not Needed

On Sept. 10, 2001, the Air Force felt no rush to replace its KC-135 air refueling fleet. Despite their calendar age of up to 43 years, they had plenty of life left. In terms of hours in the air —the way aircraft age should be measured—the oldest KC-135s had expended roughly 12,000 of their 30,000 hour design life: not even middle aged. The Air Force’s long term planning documents planned no replacements until 2013.

Sept. 11, 2001 changed all that. With 767 production already slack, cancellations poured into Boeing; the line was facing closure. By early October, Boeing, the Air Force and Sen. Ted Stevens, R-AK, were howling about the urgent military need to replace the tanker fleet with 767s. By Dec. 7, 2001, Stevens had rushed through a compliant Senate a deal for 100 767s as tankers.

Cost Questions

Boeing and Stevens decided just buying these aircraft was not profitable enough. They settled on a lease to use the aircraft for a few years and then to buy them outright for their remaining airframe life. Next time you want a new car, watch the salesman drool as you tell him you want to lease a model and later buy it outright.

The Congressional Budget Office reports that a lease will cost $5.6 billion more than a purchase. Even the President’s Office of Management and the Budget and the Defense Department’s Office of Program Analysis and Evaluation found similar cost differentials.

But Boeing, Stevens and the Air Force argued it was impossible to buy the aircraft. Budget rules required cash up front for a purchase, and a lease could be paid for “incrementally,” much like financing a house. Over the Air Force’s six-year budget planning cycle, a purchase would require $11 billion, a lease just $3.5 billion. (Of course, the lease spread its higher $22 billion total cost over almost 20 years, while the purchase front-end loaded its lower $16 billion total cost over 10.) The extra $7.5 billion needed up front to enable a purchase just wasn’t there; or so they say.

According to Sen. John McCain, R–Ariz., in fiscal year 2002, the year Congress approved the deal, it added to the defense budget $3.7 billion for state specific projects the Pentagon said it didn’t want: i.e., pork. In 2003, Congress upped pork to $8.1 billion; for 2004 the sausage bill is over $4 billion. That’s $16.8 billion in junk Congress tossed in—more than it would cost to buy the planes outright.

A reporter did a little snooping around Boeing’s political contributions. John Donnelly at Defense Week found that $22,000 was given to Stevens at a Boeing fund raiser in Seattle just a month before he pushed the deal through Congress. Further, many of those checks were written by executives for Boeing’s commercial production line that would lose heavily if the 767 went under.

In a mind boggling denial, Stevens explained that these contributions only came after he started to push the 767s; hence there was nothing wrong.

Others are under an even darker cloud. The Air Force’s top acquisition official, Marvin Sambur, was found in Boeing e-mails as ”desperately looking for the rationale for why the USAF should pursue the 767 Tanker NOW.”

Apparently, having found no justification from the many analysts working for him, Sambur pleaded with Boeing to please tell him why he was doing what he was doing.

Darlene Druyan, the Air Force’s principal deputy assistant secretary for acquisition and management, is reported to have fed Boeing cost information about a long-shot competitor from Europe’s Airbus: information that Airbus says was proprietary.

Today, Druyan has a new job, with Boeing. Stinks pretty bad, huh? It gets worse.

Robbing Peter

In wartime, such as now, the most critical account in the defense budget is called “Operations and Maintenance (O&M).” It pays for training, spare parts, weapons repairs, gasoline, food, and many other things needed to fight a war or occupy an unwilling country, like Iraq. Stevens and the Air Force want to use the O&M budget to pay for the lease, not the Air Force’s procurement budget. This constitutes a $22 billion raid on military readiness to pay for the whole thing.

The only people still saying the deal makes sense work for the Air Force or are on Boeing’s payroll, one way or another.

McCain has made several strong speeches opposing the tanker deal, but he has never really tried to kill it legislatively. In 2002, he offered an amendmentr that purported to do something but which, in fact, did nothing. Actually, Stevens, knowing the amendmentr was feckless, was happy to accept it.

It’s time for him, or someone else, to put this miserable idea where it belongs: in the trash can.