WASHINGTON -- The Air Force negotiated a contract to lease refueling aircraft from Boeing Co. that could cost hundreds of millions to several billions of dollars more than it should, and followed a procurement strategy that demonstrated poor stewardship of Defense Department funds, according to a long-awaited report by the department's inspector general.
The $23.5 billion program -- the costliest lease in U.S. history -- is currently suspended, pending a series of Defense Department reviews and the outcome of a criminal investigation in Virginia into potential wrongdoing. But the report, which was presented Wednesday to members of the U.S. Senate, indicates the deal is unlikely to proceed on anything like the original contract terms.
It states that senior Air Force officials failed to comply with military contracting laws, wrongly exempted Boeing from disclosing vital price information, accepted insufficient or inaccurate Boeing data during its negotiations, and wrongly waived any right to audit the program once it gets started.
It also states that the Air Force -- despite past pledges -- cannot "ensure to the warfighter" that the tankers will meet the military's operational requirements. Specifically, the planes "may not be ... effective, suitable, and survivable" in battle.
The tanker lease had aroused controversy inside and outside the Bush administration for the past two years. The Pentagon's leadership agreed to back the project last year despite objections from a few members of Congress and initially the Office of Management and Budget, after President Bush personally asked his aides to work out a deal, according to a senior administration official and internal Boeing communications unearthed in a congressional investigation.
Bush's chief of staff Andrew H. Card Jr. became directly involved in the contract negotiations following an aggressive lobbying campaign by Boeing, a major donor to Bush's inauguration and to key members of the House and Senate armed services committees. House Speaker Dennis Hastert, R-Ill., and Rep. Norman Dicks, D-Wash., whose districts are in states with Boeing facilities, are major advocates of the leasing deal.
A grand jury in Virginia is nearing the end of its investigation into potentially illegal actions by Darleen Druyun, a top Air Force official involved in the contract talks, according to officials who spoke on condition they not be named. Druyun was hired by Boeing while the contract talks were underway, and then fired after an internal review found improprieties in her hiring.
Boeing also fired its chief financial officer over what it depicted as an attempted coverup of the hiring procedures. The Pentagon subsequently decided to suspend the contract pending completion of the inspector general's report and separate studies by the Defense Science Board and National Defense University of the plane's price and capabilities.
Boeing spokesman Douglas Kennett said he could not comment in detail until the report is officially released. But he said the tanker meets all Air Force requirements and is better than any competition. Air Force spokeswoman Alvina Mitchell said "we are heartened by the fact that the IG's number one observation was that there was no compelling reason not to proceed. Before we proceed, we will ensure that it is a good deal for the U.S. taxpayer, that it has been thoroughly reviewed by DOD (the Department of Defense) with oversight by Congress."
Air Force Assistant Secretary Marvin Sambur, who oversaw the contract negotiations, is recorded in the report as dissenting from most of its conclusions.
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