Air Force tanker controversy prompts changes, probes

As part of its fiscal 2005 defense authorization bill, the Senate Armed Services Committee would require the Pentagon's inspector general to investigate aspects of the Pentagon's $23.5 billion plan to acquire 100 Boeing 767 refueling tankers.

Pentagon officials are mulling a decision about whether to proceed with the tanker lease plan, and sources said they could delay their decision until after this November's presidential election. That decision is expected to come in tandem with the release of a Defense Science Board study on the need to replace the existing KC-135 tanker fleet, and sources said that announcement could come later Friday.

In its bill, the committee calls for the Pentagon's IG to examine the role of two key advisory bodies to the Defense secretary's office. That request was prompted by revelations in December 2002 and January 2003 e-mails among Boeing executives that suggested three Defense Policy Board members, who also functioned as Boeing consultants, were lobbying senior Pentagon officials to support the tanker lease plan.

Those e-mails also indicated that senior Boeing personnel had met with Bill Schneider, chairman of the Defense Science Board, and that Schneider would push the tanker lease plan within top decision-making circles. The committee wants that review to determine whether the two boards are sufficiently insulated from advising the department on programs that could benefit contracts or organizations in which board members may have financial interests. The IG also would be directed to consider reducing the number of board members and instituting term limits.

The IG also would be asked to examine the need for more transparent procedures and oversight mechanisms, including public meetings. The probe also would tighten board requirements for filing financial and other disclosure statements, and make those document public. And it would consider prohibiting any exemptions or waivers for board members regarding matters that may directly or indirectly affect their defense industry employers and clients.

The IG recommendations to the committee would be due March 15, 2005.

Another provision triggered by the Boeing controversy would require all defense firms to give the Pentagon cost and pricing data on all contracts for non-commercial modifications to commercial items in excess of $500,000. A March audit of the Boeing deal by the Pentagon's IG found that less than one-third of the contract price was based on the value of the commercial aircraft, with the balance covering development costs, non-commercial modifications, logistics support, training and lease costs -- an acquisition approach that resulted in the Air Force agreeing to pay roughly $5 billion more than necessary.

On other issues, the bill directs GAO and the Congressional Research Service to study common aerial refueling systems on the Joint Strike Fighter family of aircraft. The Air Force version of the JSF is the only variant designed to use a boom mechanism for refueling, while Navy, Marine Corps and NATO coalition variants use a probe-and-drogue system. The studies were prompted by the committee's assertion that the Air Force manipulated Navy joint aerial refueling requirements to favor the Boeing aircraft. The committee also includes several provisions related to the Air Force's aging fleet of KC-135 tankers, including one that would prohibit the Air Force from retiring any KC-135s in fiscal 2005, when it had hoped to begin retiring 42 of the tankers.