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 through various procurement programs since March 2002.  On September 10, 2008, Pentagon procurement officials threw in the towel and kicked the decision down to the new administration.  The annual cost of maintaining the current fleet of tankers has tripled in the past decade, reaching $2.2 billion in 2003, with annual maintenance costs ballooning to an estimated $5.1 billion by the time the old tankers are phased out.

After Congress blocked attempts in Congress to give the Boeing Company a $23 billion tanker leasing deal in 2004, Boeing and  Northrop Grumman competed for the contract under a new competitive bidding process.  After a year of review, the DoD awarded the contract to Northrop Grumman 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, a GAO inquiry recommended that the DoD restart the entire bidding process.  The following day, 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 the year.

Instead, the Pentagon made another 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 capabilities with regard to the tanker.

In announcing the decision on September 11, 2008, Sec. Gates said “The process has 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 DOD Undersecretary for Acquisition John Young was quoted in a September 18 Washington Post article stated that under the proposal offered by Northrop Grumman, development costs for the first 68 tanker aircraft would have cost $12.5 billion, compared to $15.4 billion under the Boeing proposal.

Young added 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 reasonable expected” to pay.

Meanwhile, the Air Force continues to fly the same aircraft, designed in the nineteen-fifties, and taxpayers are left to marvel at the acute dysfunction of the entire Defense Department procurement process.  By the time the decision is made, it will have been more than seven years since the process began and tens of millions of taxpayer dollars will have been wasted to pay government officials to ruminate over the minutiae of this single procurement…for the third time.

- Sam Leverenz