Hearing of the Senate Commerce, Science, and Transportation Committee: Lease of Boeing Tankers to the United States Air Force

HEADLINE: HEARING OF THE SENATE COMMERCE, SCIENCE AND TRANSPORTATION COMMITTEE
 
SUBJECT: LEASE OF BOEING TANKERS TO THE UNITED STATES AIR FORCE
 
CHAIRED BY: SENATOR JOHN MCCAIN (R-AZ)
 
LOCATION: 253 RUSSELL SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: PANEL ONE: JAMES G. ROCHE, SECRETARY, UNITED STATES AIR FORCE;
 
DOUGLAS HOLTZ-EAKIN, DIRECTOR, CONGRESSIONAL BUDGET OFFICE;
 
NEAL P. CURTIN, DIRECTOR, DEFENSE CAPABILITIES AND MANAGEMENT, UNITED STATES GENERAL ACCOUNTING OFFICE;
 
CHRISTOPHER BOLKCOM, SPECIALIST IN NATIONAL DEFENSE, CONGRESSIONAL RESEARCH SERVICE;
 
PANEL TWO: LT. GEN. JOHN B. SAMS, JR., (USAF RETIRED), PROGRAM MANAGER, USAF 767 TANKER PROGRAM, MILITARY AEROSPACE SUPPORT, THE BOEING COMPANY;
 
DR. J. RICHARDSON NELSON, ASSISTANT DIRECTOR, INSTITUTE FOR DEFENSE ANALYSIS, COST ANALYSIS AND RESEARCH DIVISION;
 
STEVEN ELLIS, EXECUTIVE DIRECTOR, TAXPAYERS FOR COMMON SENSE;
 
ERIC MILLER, SENIOR INVESTIGATOR, PROJECT ON GOVERNMENT OVERSIGHT
 

BODY:
SEN. FRANK LAUTENBERG (D-NJ): Thanks, Mr. Chairman. I'm sorry to extend this far to the program, but I -- thank you. I do have an interest and I'm curious about why three Senate committees are holding hearings this week on the leasing deal with Boeing. It's a huge leasing arrangement which is open-ended in terms of cost, although some estimate that it could be as large as $26 billion. And I want to set the record straight.

The Air Force needs this as a critical device for them to perform the valuable service they do, then I think that we ought not to be looking at some of the alternatives, which are to renovate and upgrade the present fleet, which can be done at considerably less cost. But I have three primary concerns about this leasing proposal. First, the expense. It's unclear whether they're fully necessary for the military, and I hope that we'll be able to discuss this. The airports, like all the other government entities, should be aware of the fact that we don't have enough money to do lots of things that we need to do for the military included, obviously. It shouldn't throw away any dollars on corporate appetites, especially when the government deficit is so enormous.

Second, I'm a strong advocate of open competitive bidding by private companies before they're awarded contracts or leases by the United States government. I'm concerned that because of Boeing -- and it's a terrific company, done a lot of good service, but the fact of the matter, we have a larger audience to be concerned about than Boeing's immediate needs, and that this lease would be given without an independent evaluation of whether it could best meet the Air Force's needs.

And earlier in this session I was able to pass a bipartisan amendment to the Department of Defense Authorization Bill that states that DOD has to comply with the competitive contracting laws with any contract awarded for reconstruction activities in Iraq. And, similarly, when one of our largest military suppliers is leasing aircraft to the United States Air Force, I want to know what other companies might have been, if any, for this deal, one of which, if not the largest commercial lease in U.S. history.

And thirdly, I've noticed that the administration has a strong will to privatize federal jobs. And first it's looking toward privatizing the federal air traffic controllers, and now Secretary Rumsfeld is changing the personnel system in the Department of Defense to allow for outside contractors to do typically federal work. Although I understand why in some cases the private sector is well suited for defense related jobs, I'm worried about this trend. What does it mean for the effectiveness of the safety and security functions of our government and its performance, as well as the future interests and the reward for loyalty by our federal employees. This leasing arrangement for 767s with Boeing will certainly set the precedent. And we ought to have a clear understanding of what significance this precedent has.

So I look forward to hearing from the witnesses about this arrangement and I reiterate the importance of transparency in all government contracts. And I don't know that anybody feels like we've seen all of the details here that we have to. And I took an earlier look at a GAO report and saw their estimate of what the difference might be in terms of an outright purchase, in terms of the savings that we might have. And what is the fondness for this lease arrangement when it looks like, by any stretch of the imagine, it's going to cost more to do than a -- more to deal with than a straight purchase. So, Mr. Chairman, I look forward to hearing from our witnesses.

BREAK IN TRANSCRIPT

SEN. LAUTENBERG: The red tape.

MR. ROCHE: If the process was changed then it's a different set of circumstances we would look at. We have no indication that that process could be changed, nor do we have an indication, Senator, that the monies, the budget authority would in fact be available. Had -- and I agree very much with the chairman, had earlier in the 90s this been thought of, and a systematic way to deal with this put in place, we wouldn't face the situation we face, of very old airplanes that are only getting older, with the prospect of taking a long time to replace them.

SEN. LAUTENBERG: Are they able to supply our needs for conflict now?

MR. ROCHE: So far they have, yes sir. This issue as raised by again, one of my colleagues here is, we couldn't predict the world in 2001 in July of what really happened within 24 months, it's, I find, the same situation.

I can't predict what the next 24 months will be like nor can I predict how these aircraft may behave because they are now so old we've never had aircraft like this. We've never had a fleet that age.

SEN. LAUTENBERG: You want to predict what it's going to look like three years from now and vary your procurement based on that?

MR. ROCHE: I think in many respects, Senator, that Secretary Rumsfeld is directing the services to think about what is the more likely type of war and one feature that comes across a lot is they're far away.

SEN. LAUTENBERG: Well, they are far away and I don't know that we can make changes fairly quickly about bringing them closer but -- (laughter) -- may be I don't know how --

MR. ROCHE: I don't think we'd want to, Senator. I meant far away in distance, not time.

SEN. LAUTENBERG: Yeah. Maybe what we ought to do is get a couple more aircraft carriers. I don't know what the cost of these things is but the fact is I think that the fact is that dismissing the inability to predict what the future might be shouldn't cause us to go ahead, throw out $6 billion -- $5.6 billion of the public's money and rush this through on a lease deal which frankly doesn't seem to make sense. If we need a change that we can save the taxpayer $5.6 billion over the next 14 years, less than 14 years, I'd say, hey, let's work on the changes. Would you endorse the purchase of this if the changes could be made to allow you to do the purchasing that way?

MR. ROCHE: Senator, if in fact all things could occur such that these planes could get there at the same rate they could with the lease by another means, I'd be delighted to take a look at that other means.

SEN. LAUTENBERG: Then, why do we fall for the easy way and spend $6 billion?

MR. ROCHE: It's not, sir. Granted there will be a debate in terms of assumptions but the value of doing that -- present value, if you have an assumption of the model, you purchase a model of lease and you bring it back at the same time, it's a way of reflecting that. My colleagues differ with what we have done, what the secretary of Defense has done and OMB and basically in what those assumptions of those models are. I can't say they're wrong. All I can say is that enough people who have reviewed ours and have made changes to it are now willing to go forward.