Boeing tanker deal put on hold

LES BLUMENTHAL; The News Tribune

Dec. 3, 2003

WASHINGTON - Just a day after Boeing's chief executive resigned, the Pentagon announced Tuesday it's putting a hold on the $23 billion Air Force deal to lease and buy 100 of the company's 767s for use as aerial tankers.

Deputy defense secretary Paul Wolfowitz, in a letter to various committee chairmen on Capitol Hill, said he had ordered a "pause in the execution of the contracts to lease and purchase tanker aircraft."

Wolfowitz also said he had asked the Pentagon's inspector general to provide an independent assessment of allegations that a Boeing official might have improperly offered a job to the Air Force's procurement official who oversaw the negotiations for the tanker contract.

Last week, Boeing fired Michael Sears, its chief financial officer, and Darleen Druyun, who took a job with the company after leaving the Pentagon. On Monday, Phil Condit, Boeing's chief executive and chairman, resigned.

"The department remains committed to the recapitalization of our aerial tanker fleet," Wolfowitz wrote. "Nonetheless, I believe it is prudent to reassess this matter before proceeding."

The Air Force had hoped to sign the contract to lease 20 Boeing 767s and buy an additional 80 as early as next week. Through intense congressional negotiations, the price had been pared by several billion dollars to about $17 billion, with an additional $6 billion for maintenance costs.

The latest twist comes more than two years after a tanker deal was first proposed and against a backdrop of mounting congressional criticism. Sen. John Warner (R-Va.), chairman of the Senate Armed Services Committee, plans to hold hearings in January.

Sen. John McCain (R-Ariz.), the leading congressional critic of the tanker deal, said he was "pleased" with Wolfowitz's decision to suspend the signing of any contracts, adding he hoped the inspector general's review would be a "thorough independent investigation of the facts wherever the evidence takes you and however long it takes."

One of the top congressional proponents of the deal, U.S. Rep. Norm Dicks (D-Belfair), said it was "time to clear the air" of the allegations of impropriety. But Dicks said the tanker proposal was still a good deal for the Air Force, with Boeing agreeing to cap profits at no more than 15 percent, offering rebates if it sells 767s to anyone else cheaper and picking up all the research and development costs.

Dicks also said the final contract was reached seven months after Druyun left the Pentagon.

"It's hard for me to believe they will find anything wrong," Dicks said. "If they do, we can renegotiate."

Dicks also said he was "disappointed" with Boeing's apparent ethical lapses.

"They just imploded," he said. "Their credibility as a company is on the line."

U.S. Sen. Maria Cantwell (D-Edmonds) said Wolfowitz's decision to put the tanker deal on hold while the inspector general investigates "may be just what is needed to give taxpayers the confidence in the process needed for this agreement to move forward. I want a contract, but I want it done right."

Washington's other senator, Patty Murray (D-Shoreline), said she hoped any new reviews would be done quickly.

"This tanker deal had already faced unprecedented scrutiny from Congress, government agencies, the Pentagon, and outside interest groups," Murray said. "I'm confident that another round of scrutiny will prove that this is still a good deal."

Les Blumenthal: 1-202-383-0008
lblumenthal@mcclatchydc.com

• Everett assembly line might not survive long inquiry into tanker deal. D1

(Published 12:01AM, December 3rd, 2003)