Under the $21 billion deal, the Air Force would lease 100 Boeing tankers to fuel aircraft while aloft. Budget watchdogs have said the agreement is needlessly expensive, breaks federal purchasing rules and constitutes a sweetheart deal for Boeing. But the Senate Armed Services committee — the last of four panels that must sign off on the deal — could approve financing for it within days.
The controversial aspect of the deal is that it is a lease. The Air Force can't afford to buy the planes, so it is paying to use planes that Boeing will make and own. But the Congressional Budget Office estimates the deal will end up costing taxpayers $5.7 billion more than if the Pentagon bought the planes outright.
White House chief of staff Andrew Card told the Air Force and the White House Office of Management and Budget to end their disagreement over the deal. After his intervention, The Washington Post reports, OMB quieted its objections. Quoting officials, the newspaper said Card acted at the president's direction.
According to The Post, Boeing made an unsolicited bid in February 2001 to sell the Air Force 36 tankers.
That same month, an Air Force study suggested the existing fleet of tankers might last until 2040, since they had been operated an average of 12.5 days a year. Air Force Secretary James G. Roche said the study was flawed.
After the Sept. 11 terrorist attacks, the Boeing deal was reshaped into a leasing arrangement. It was inserted into a defense spending bill after the bill had passed both houses of Congress.
The Air Force did not study alternatives or entertain any competing bids, The Post reported. It did not test its old tankers nor arrange to test the new ones.
Before the House and Senate Appropriations Committees approved the financing for the deal this year, neither held hearings on the deal.
According to the newspaper, the Air Force and Boeing worked closely together to push the deal through.
Boeing helped prepare briefing material for the Air Force to use when it lobbied on Capitol Hill. When the Air Force sent Boeing a list of requirements for the tankers, Boeing got the Air Force to scale its demands down to what the 767 could fulfill.
According to CBO, under the deal the Air Force and Boeing would create a special entity to sell bonds and buy the tankers with the proceeds. The Air Force will then lease the planes from the special entity for six years at a cost of $126 million per plane. At the end of six years, the Air Force can return the jets to the special entity or buy them for an estimated $35 million each. That means the Air Force will pay $161 million for a plane that it could buy for $131 million today, according to the CBO.
Last October, the CBO warned about the cost impact of the Boeing deal. The head of the White House Office of Management and Budget, Mitchell Daniels, wrote to Congress that the deal was "irresponsible." Sen. John McCain, R-Ariz., was fiercely critical.
The Post reports the Air Force called on Boeing to attack critics of the deal. One email discovered by The Post indicates Bill Bodie, an adviser to the Air Force secretary, encouraged Boeing to "have our friends on the Hill, think tanks, etc. get more visible/vocal" backing the deal.
Two Congressmen lobbied the White House on behalf of the deal: Speaker Dennis Hastert, who district includes Boeing's headquarters, and Rep. Norman Dicks, whose Washington state district encompasses Boeing production facilities.
Card, acting at what The Post reports officials said was Mr. Bush's direction, worked to get Boeing to scale its cost estimates down to a level the Air Force was comfortable with. He spoke to Boeing lobbyists on the phone and led several meetings on the deal.
"I think it's appropriate for him to work on an issue of great importance to fulfill a needed capability," White House spokesman Trent Duffy said, "and to make sure the taxpayers get the best deal for their money."
Boeing will make 15 percent profit — twice what it gets on private-sector deals — on the tanker deal, The Post reports, and get $5 billion to maintain the planes it leases to the Air Force.
The lease deal may become a model for other major Pentagon capital programs, The Post reports. At least one backer of the deal believes it will be expanded to cost the government $100 billion over time.