- The Washington Times - Friday, October 8, 2004

The Boeing Co. would lose the $23 billion deal it won last year to lease and sell aircraft refueling tankers to the Air Force, while a plan to close some military bases would go forward, under a nearly $450 billion defense bill moving toward approval in the House.

The measure would kill the leasing aspect of the tanker deal, but would allow the Air Force to buy 100 Boeing 767 planes for use as tankers. However, that purchase could occur only after several studies are completed.

Industry analysts said last spring that the Pentagon had effectively killed the leasing deal because of mounting complaints that the pact had been tilted in Boeing’s favor.

Those concerns were exacerbated last week when a former top Pentagon procurement official was sentenced to nine months in prison for discussing a job with Boeing while overseeing the tanker deal. The official, Darleen Druyun, said she inflated the price of the tankers as a “parting gift” to Boeing before joining the company as an executive.

The bill as a whole authorizes $447 billion for defense programs for the fiscal 2005 budget year that began Oct. 1. The legislation was awaiting final votes by the House and Senate.

Regarding the tanker deal, it was not clear yesterday whether the Air Force would be required to hold a competition before buying the aircraft. The legislation would authorize spending $95 million for the tanker program in 2005.

Sen. John McCain, Arizona Republican, the leading critic of plans to lease or buy the tankers, said the bill “brings the Air Force’s plan back to square one,” with a “full and open competition in the traditional budget, procurement and authorization track.”

But tanker deal supporters said the bill merely banned leasing the planes. No language in the compromise bill requires the Air Force to open up the deal to other bidders, said Rep. Norm Dicks, Washington Democrat. European-based EADS, the parent company of Airbus, has said it is interested in the tanker deal if the contract were reopened to competition.

“McCain has misstated this,” Mr. Dicks said yesterday. “We’re not going to lease any planes. We’re going to buy 100, and we’re going to buy them from Boeing.”

The Air Force wants the planes to be built at Boeing’s Everett, Wash., plant and modified for military use in Wichita, Kan.

The tanker plan has been on hold since last spring, when Defense Secretary Donald H. Rumsfeld ordered a six-month delay to allow completion of two new studies. Those reports are expected by early December.

Defense analysts say they believe the studies will recommend that the Pentagon replace the aging tanker fleet. They also think Boeing is still in the best position to win the contract. The bulk of the Air Force’s refueling fleet consists of Boeing-built KC-135s. They average more than 44 years of age.

The bill includes a provision moving forward with base closings, rejecting House language that would have put that off until 2007. President Bush had threatened to veto the bill if the base closures were delayed.

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