Under the Radar
The inside story of a Pentagon deal that will cost taxpayers billions
Late last year, Boeing Co. executives got a real nasty report: The White House's budget director had been overheard at a dinner complaining that the company wanted to charge the Air Force millions of dollars more for its 767s than it had billed Continental Airlines for the same basic plane. With just five days to go until Christmas, Boeing's lobbyists mobilized to explain the price gap to the company's allies on Capitol Hill. As one Boeing executive put it, in an E-mail: "We certainly want our friends"--the friends being House Speaker Dennis Hastert and Sen. Ted Stevens, the chairman of the Senate Appropriations Committee--"to be armed."
Any day now, the Air Force and Boeing plan to put the final touches on a controversial deal for air-refueling tankers based on the 767 that could be worth up to $40 billion to the giant aircraft maker. While the deal has attracted widespread attention--mostly for criticism that taxpayers are being overcharged--the behind-the-scenes details of Boeing's aggressive push haven't been known until now. Hundreds of internal Boeing documents and communications with Air Force officials--reviewed exclusively by U.S. News --provide a rare look at the contractor's relentless 18-month lobbying campaign to win over the Congress, the White House, and the Pentagon.
The documents show how Boeing pushed a plane that even some military officials doubted was right for the job. They reveal how the Air Force relied on Boeing to shape the basic performance requirements for the tanker and let the company devise the financial structure of an unusual lease arrangement. They indicate that, even now, no one can say precisely how many billions it will cost or how much Boeing will earn. The E-mails show that Boeing tried to remove an Air Force lawyer who raised basic questions about the deal. And finally, the documents make clear that Boeing's powerful connections won White House Chief of Staff Andrew Card's endorsement of a plan that, in the end, could double the number of planes to be leased.
According to one E-mail, a Boeing official described the deal as a chance to tap "a new deep-pockets customer." A Boeing spokesperson declined to comment on specific documents but said the company "is strongly committed to this program and believes it is in the best interest of the Air Force and the nation."
SETTING THE TABLE
The Air Force, in early 2001, was not even looking to buy refueling tankers, despite the fact that its fleet was some 40 years old. But after September 11, Boeing officials approached the service--and the Congress--with a plan to lease 100 air-refueling tankers, modified versions of its 767. The Air Force was interested but had to define the specifications for the new craft: how much fuel it could carry, its range, speed, and so on. In an unusual move, the Air Force offered Boeing an early look at the requirements for the tankers and allowed the company to suggest changes. Later, in July 2002, a Pentagon panel chastised the Air Force for tailoring its requirements to the Boeing 767 and concluded that the document "should not be written for a specific aircraft." Air Force acquisitions chief Marvin Sambur told U.S. News that the service was simply looking to save money by using an existing commercial design.
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