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Heavy Lifting for Boeing: Sweetheart Deal Helps Defense Contractor and Hurts Taxpayers

March 19, 2001 


The Air Force is promoting a highly speculative sweetheart deal that would put billions of taxpayer dollars at risk and provide little or no benefit to the federal government. The arrangement, called a "public-private partnership" by the Air Force, amounts to a plan to bribe private companies to purchase a commercial version of the $232 million C-17 military airlifter from Boeing, according to the Project On Government Oversight which obtained documents outlining the plan.

Under the proposal, a private air freight company would be able to purchase the "commercial" BC-17X at a price that is up to $50 million less than what the government pays and receive guaranteed government hauling contracts from the Air Force. The Air Force has also offered to "buy back" the planes in the event that a purchaser declares bankruptcy.

The BC-17X plan is based on a one-year study that was conducted by a panel of Pentagon employees along with a few Boeing representatives. Their plan amounts to goodies all around in order to entice previously disinterested buyers into purchasing the BC-17X.

But even at its reduced "commercial" price, the plane still costs millions more than its heavy lift competitor plane, the Antonov 124, and is unable to land on short runways when they are wet, a problem that can seriously limit the locations where the plane is used. There is widespread skepticism among private carriers whether the BC-17X can operate in a competitive civilian environment, the Air Force's study admitted. In fact, some industry experts candidly say there is little or no interest among private freight haulers.

"There is no demonstrated market," said longtime aviation consultant Edwin C. (Ned) Laird, founder of Air Cargo Management Group and publisher of Cargo Facts. "It's like the taxpayer is being asked to buy this aircraft."

Why is the Air Force promoting the plan? The Air Force says in its report that in order to meet the cost savings requirements set by Congress, that the production line needs to remain open and producing 15 planes per year. Congress has authorized 120 C-17s but says that before the Air Force can purchase 60 more that the price of the plane must be reduced by 25%. In 1990, former Secretary of Defense Dick Cheney reduced the program from 210 to 120 C-17s after the collapse of the Soviet Union reduced airlift needs. The Air Force has been unable to demonstrate an airlift need to justify keeping the line open and the GAO says that 100 is all that is needed.

The arrangement may also allow the Air Force to succeed in acquiring a "commercial" designation for the C-17. A current proposal to make the plane commercial has raised the eyebrows of the Inspector General, members of Congress and the Pentagon's former head of testing. Commercial designations were conceived under the law to apply to items that are available "off the store shelf" such as office equipment or tools - not to an entire military aircraft. By designating an entire aircraft developed by the Pentagon "commercial," the Air Force would allow Boeing to avoid complying with federal laws that prevent accounting shenanigans and schemes that ripoff the taxpayers.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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