Boeing's Sweet Deal

Boeing may have lost out to Lockheed in its bid to build the Joint Strike Fighter, one of the most lucrative contracts in Pentagon history, but no one should mourn for the defense giant. The Pentagon needs a plump Boeing as much as Boeing needs Pentagon largesse. In this spirit, it's no surprise that Congress is poised to quietly hand Boeing a big consolation prize in the form of two unprecedented contracts that will give the company, which has recently fled Seattle for Chicago, a bailout that will total more than $10 billion.

One would allow the purchase of 60 Boeing C-17 cargo aircraft under a special "commercial" provision that shields the deal from any financial oversight, long the dream of both Pentagon acquisition hawks and defense contractors. The other contract calls for the Pentagon to lease at least 100 Boeing 767 tankers at a cost that is nearly $7 billion more than if the aircraft were purchased outright. These are the kinds of contracts that created front-page scandals during the 1980s. But these days the press, in full war mode, barely bats an eyelash over them.

This C-17 commercial proposal would allow the Air Force to bypass important pricing oversight that is only intended to be lifted for items which are truly commercial and therefore regulated by "forces of the free market." A $200 million outsized military cargo carrier with 173,300-pound capacity is scarcely an item where the price tag is determined by bracing forces of competition.

Originally, the Senate frowned upon this extraordinary deal and failed to include the provision in its Defense Authorization Act, despite a desperate lobbying effort from Boeing. Then the Pentagon sprang into action. In an October 26, 2001 letter sent to Armed Services Committee Chairman Senator Carl Levin, Pentagon acquisitions chief E.C. "Pete" Aldridge urged that the language be reinserted to "provide sufficient flexibility" for the Department of Defense. By the way, October 26 is the same day that the Pentagon announced its decision to award the $200 billion Joint Strike Fighter contract to Lockheed/Martin.

So far Senator Levin has refused to bow to the tag team efforts of the Pentagon and Boeing. But Levin is getting heat from all sides, including inside his own party, to capitulate. Senator Patty Murray, the Democrat from Washington state, is one of those carrying Boeing's water on the Hill, even though the company's headquarters abandoned her state earlier this year and Boeing has announced that it will lay off 90,000 employees. "We could lose our ability to build airplanes in this country if Boeing's production plants aren't kept rolling," Murray said.

Over on the House side, Boeing's interests are being zealously advanced by Rep. Norm Dicks, another Washington Democrat. "I've never seen Boeing as interested in anything as this deal," Dicks said.

The plan to lease 100 converted Boeing 767 air refueling aircraft for a period of 10 years has all the hallmarks of an even bigger boondoggle. The Office of Management and Budget estimates that the lease plan would cost $22 billion, while purchasing the aircraft outright would cost just over $15 billion.

But it doesn't stop there. In the perverse logic of defense contracts, the more complications the better. The B-767 plan also requires an additional handout from taxpayers, as modifications to existing hangars would be necessary to house B-767s and would cost an estimated $600 million.

Why in the world would Congress go along with such blatant pork barrel?

Leave it to Boeing's PR whizzes to come up with a unique sales pitch. Boeing airlifted its top executives to DC last week in a feverish lobbying blitz. There the men from Boeing told key congressional members that the deal was needed to get the ailing airline industry back on its feet by "creating a multibillion military market for the company's popular civilian aircraft including the 767."

"These two handouts are being characterized as good business practices when in fact the US taxpayers are paying more to get less," said Danielle Brian, Executive Director of the Project On Government Oversight, the defense watchdog group.