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The Pentagon Attempts to Quietly Push Two Sweetheart Deals for Boeing Through Congress

November 27, 2001 

 

Congress is being pressured to approve a pair of costly proposals that are hidden taxpayer bailouts of Boeing Company. One would allow the purchase of 60 Boeing C-17 cargo aircraft under a special "commercial" provision removing financial oversight; the other calls for the lease of 100 Boeing 767 tankers at a cost that is nearly $7 billion more than if the aircraft were purchased outright.

"These two handouts are being characterized as good business practices when in fact the U.S. taxpayers are paying more to get less," said Danielle Brian, Executive Director of the Project On Government Oversight (POGO).

The language that would have allowed the "commercial" C-17 multi-year contract proposal was left out of the Senate version of the National Defense Authorization Act for FY 2002. However, in an October 26, 2001 letter sent to Armed Services Committee Chairman Senator Carl Levin, Pentagon acquisitions chief E.C. "Pete" Aldridge urges that the language be reinserted to "provide sufficient flexibility" for the Department of Defense. POGO commended Senator Levin for his efforts to protect the taxpayer. The Defense bill has not yet been approved by Congress.

This C-17 commercial proposal would allow the Air Force to bypass important pricing oversight which is only intended to be lifted for items which are truly commercial and therefore regulated by market force. A $200 million outsize military cargo carrier with 173,300-pound capacity is simply not an item where the price tag is determined by free market forces.

Likewise, the plan to lease 100 converted Boeing 767 air refueling aircraft for a period of 10 years would rip off the taxpayers. The Office of Management and Budget estimates that the lease plan would cost $22 billion, while purchasing the aircraft outright would cost just over $15 billion.

The Washington Post reported recently that Boeing has dispatched its top executives to lobby Congress on the proposal as a way of creating a multibillion military market for the company's popular civilian aircraft including the 767.

The use of B-767 aircraft would also require an additional handout from taxpayers, as modifications to existing hangers would be necessary to house B-767s and would cost an estimated $ 600 million.

The B-767 lease proposal prompted a November 2, 2001 letter of opposition from OMB Director Mitchell E. Daniels. Daniels said it would circumvent rules that disallow lease agreements that have higher economic cost than traditional direct purchases.

"For the reasons stated above, I would oppose its inclusion in any legislation presented to the President," Daniels wrote in his letter to Budget Committee Chairman Senator Kent Conrad.


POGO's recent work on the C-17:
  • LEAKED: Air Force talking points requested by Defense Secretary Rumsfeld apparently in response to the March 19 front page New York Times story raised questions about A.F./Boeing deal to make the C-17 cargo aircraft "commercial." POGO's letter in response, March 23, 2001.
  • Air Force Proposes Plan to Help Boeing With Sale of Planes, New York Times, March 19, 2001.
  • POGO Report, Heavy Lifting for Boeing: Sweetheart Deal Helps Defense Contractor and Hurts Taxpayers. The Air Force is promoting a highly speculative sweetheart deal that would put billions of taxpayers dollars at risk and provide little or no benefit to the federal government. Press Release, March 19, 2001.
     

  • 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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