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Critics howl, but Boeing deal for tankers still on

At a contentious Senate hearing, the Pentagon reveals it is investigating whether a former Air Force official helped Boeing. She later went to work there.

By PAUL DE LA GARZA, Times Staff Writer
© St. Petersburg Times
published September 4, 2003

WASHINGTON - Sen. John McCain acknowledged Wednesday that a controversial deal that would bring nearly three dozen new refueling tankers to MacDill Air Force Base in Tampa probably will be approved by Congress.

And the Arizona Republican doesn't like it.

"I think the fix is in," said McCain, a Vietnam war hero who flew Navy jets.

The $21-billion plan for the Air Force to lease rather than buy 100 refueling tankers from the Boeing Co. and station them at MacDill and two other bases is expected to clear its final congressional committee today.

But the landing is bumpy:

- The Pentagon has launched an investigation into whether a former defense official acted improperly in giving Boeing, her current employer, financial information about a competing bid on the tankers.

- The nonpartisan Congressional Budget Office says it would cost $5.7-billion less for the Air Force to buy the planes outright.

- McCain complained Wednesday that the Air Force advocated for the deal rather than negotiated it, and another senator suggested the leasing arrangement is "out of the Enron playbook."

"It's not a lease, it's just a complex legal construct to help you avoid the procurement laws that we have around here, and I'm very troubled by that," said Sen. Peter Fitzgerald, R-Ill.

Despite those complaints, McCain and other critics expect the leasing plan to be approved. The proposal has strong support from House Appropriations Chairman C.W. Bill Young, R-Largo, and other Tampa Bay area officials. They view the new tankers that would be stationed at MacDill as a way to help ensure the base's future.

But there is still plenty of intrigue behind the scenes.

The Pentagon's inspector general will investigate whether Darleen Druyun acted improperly in giving Boeing Co. financial information about a competing bid on the tankers.

Over the weekend, the Senate Commerce Committee chaired by McCain released documents detailing how the package between the Air Force and Boeing was put together.

The documents included an April 2002 exchange between two Boeing officials. The exchange said Druyun, then principal deputy assistant Air Force secretary for acquisition and management, had told Boeing that Airbus had submitted a bid that was $5-million to $17-million less per plane than the Boeing offer.

Nine months later, Druyun joined Boeing. She now is deputy general manager of the company's missile defense systems.

Boeing spokesman Doug Kennett said Druyun had no comment. Kennett said Boeing is confident it received no improper information.

At the Commerce Committee hearing Wednesday, McCain chastised Air Force Secretary James Roche for failing to look at alternatives to the leasing arrangement.

The deal is expected to be approved today with the blessing of the Senate Armed Services Committee, which has scheduled a hearing. Three other congressional committees with jurisdiction over the proposal already have approved it.

The documents released by the Commerce Committee illustrate the aggressive strategy by Boeing and the Pentagon in securing the tanker lease.

The documents show that the White House assured Boeing it was poised to replace the entire tanker fleet, not just 100 aircraft.

In the e-mails, Boeing sketched ways to sway public opinion by ghost-writing opinion pieces on behalf of retired generals and members of Congress.

During Wednesday's hearing, critics pointed to the e-mails to illustrate the cozy relationship between the Air Force and Boeing. "From the beginning," McCain said, "the Air Force appeared not so much to negotiate with Boeing as to advocate for it."

Sen. Ted Stevens, R-Alaska, who said the leasing deal was his idea, said the arrangement was needed because it would take 30 years to replace aging KC-135 tankers by purchasing them outright. The Senate Appropriations Committee chairman said the age and poor condition of the KC-135s put the Air Force's refueling capability at risk and endangers the planes' crews.

Steve Ellis of Taxpayers for Common Sense, echoed McCain's sentiments.

"I have to state that even we were shocked and disturbed by the recent revelations of the backroom deals that got this lease deal inked," he said. "This is really an economic bailout masquerading as a national need."

Keith Ashdown of Taxpayers for Common Sense pointed out that in addition to the lease of the tankers, the Air Force would pay Boeing an additional $5-billion to service the aircraft.

Under the plan, the Air Force says it would pay $17-billion to lease 100 Boeing 767s for six years, with the option of paying $4-billion to buy the jets at the end of the lease.

Supporters of the plan say buying the planes upfront would be difficult because of budget constraints. Leasing and then buying the planes is only slightly more expensive than buying them outright, according to the Air Force.

Last week, however, the nonpartisan Congressional Budget Office criticized the plan, saying it would cost $5.7-billion more than if the Air Force bought the planes outright. The CBO report echoed a study released in June by the Pentagon.

The General Accounting Office, the investigative arm of Congress, also has taken issue with the deal. The GAO insists the current fleet of KC-135 aerial tankers can be updated at a cost far lower than acquiring a new fleet, regardless of whether the planes are leased or bought.

The CBO estimates the lease-buy strategy would cost $21.5-billion, while buying the aircraft outright would cost $15.9-billion.

In its report, the budget office said that "rather than eliminating difficult budgetary decisions," the lease arrangement "merely postpones them."

The CBO report also pointed to Boeing's strong interest in this deal. Without the Air Force order, Boeing would most likely have to close its 767 production line by 2011 in the face of sagging commercial orders.

According to the e-mails released by the Commerce Committee, public opinion has weighed heavily on the Pentagon. Boeing, in fact, according to the Pentagon, agreed to cap its profit at 15 percent to avoid the perception that it is "ripping us off."

The Boeing documents suggest the Air Force was right to be paranoid; even the White House questioned its credibility, because, Boeing said, "Air Force numbers change in every meeting - and have for months."

- Information from the Associated Press was used in this report.

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