Department of Defense Delays Air Force Tanker Contract Decision...Again
October 17, 2008
by: Sam Leverenz

Government WasteWatch

The Department of Defense (DoD) has once again flip-flopped with regard to the awarding of a $40 billion Air Force aerial refueling tanker contract.

The Air Force has been attempting to replace its deteriorating mid-air refueling fleet since March 2002. On September 10, 2008, Pentagon procurement officials threw in the towel and kicked the decision over to the new administration. The cost of maintaining the aircraft has tripled in the past decade, reaching $2.4 billion in 2002, with total costs ballooning to an estimated $5.1 billion by the time the old tankers are phased out.

After Congress blocked attempts to give the Boeing Company a $23 billion leasing deal in 2004, Boeing and Northrop Grumman officially competed under a new competitive bidding process. After another year of review, the DoD awarded the contract to the EADS/Northrop Grumman consortium in February, 2008.

Boeing lodged an official protest with the Government Accountability Office (GAO), and politicians from the states which host the aerospace contractor cried foul as well. On June 18, GAO decided to restart the entire bidding process. Defense Secretary Robert Gates removed the procurement process from traditional Air Force jurisdiction, placing it in the office of the Undersecretary of Defense, and promised a final decision by the end of 2008.

But on September, 10, the Pentagon made an abrupt about-face. Top officials notified Congress that the decision over the new bid had been suspended indefinitely, guaranteeing the whole mess will land in the lap of the next administration. In addition, one of the main contenders, Boeing, has been hit with a machinist’s strike, inspiring concerns over that company’s production possibilities with regard to the tanker.

In announcing the decision, Secretary Gates admitted that the process had “become enormously complex and emotional—in no small part because of mistakes and missteps along the way by the Department of Defense.”

Further insight into what happened behind the scenes at the Pentagon came to light when John Young, the Pentagon’s Undersecretary for Acquisition, Technology and Logistics, was quoted in a September 18 Washington Post article stating that under the tanker proposal offered by Northrop Grumman and its partner EADS, development costs for the first 68 aircraft would have cost $12.5 billion, compared with $15.4 billion under the Boeing proposal. He went on to add that Boeing’s tanker “was smaller and should have been cheaper. A member of the American public might conclude that Boeing sought to charge more than the Defense Department reasonably expected to pay.”

Meanwhile, the Air Force continues to fly the same aircraft, designed in the nineteen fifties, at a cost of almost $3 billion per year and the taxpayers are left to marvel at the acute dysfunction of the entire Defense procurement process. By the time the decision is made, it will have been over seven years since the process began, millions of taxpayer dollars will have been wasted, and a wide array of government agencies and departments will have been lost while bureaucrats ruminated over the minutiae of this single procurement…twice. Yet, the Air Force, during a time of war, and the taxpayers, during a severe economic recession, will be no closer to upgrading and modernizing this critically important $40 billion dollar component of our war-fighting infrastructure.