Rumsfeld Decides To Study Refurbishment

The Pentagon has delayed for six months a decision on whether to go ahead with the scandal-ridden Boeing 767 deal.

Boeing already had Congressional approval on a deal to sell and lease 100 refueling tankers -- based on the 767 airframe -- to the Air Force for about $23.5 billion. But the deal was put on hold after Pentagon officials learned that former USAF chief negotiator Darleen Druyun accepted a job as Boeing vice president before the deal was consummated. She later pleaded guilty to criminal charges. Boeing fired both her and the man who hired her, Chief Financial Officer Michael Sears. Shortly after that, CEO Phil Condit abruptly resigned.

Here's what the military said in a statement to ANN:

Secretary of Defense Donald Rumsfeld has deferred a decision on the tanker recapitalization program until additional studies now underway can be completed later this year. The decision was based in part on recommendations made by the Defense Science Board's Aerial Refueling Task Force.

The data evaluated by the task force led them to conclude that the corrosion problem on KC-135s can be managed and the operating and maintenance cost growth on the tanker fleet may not be as large as earlier estimates.

The Task Force also concluded that the Mobility Capability Study being conducted by the Director of Program Analysis and Evaluation (PA&E) would provide more clarity on the question of tanker recapitalization. In addition, the Task Force found that future potential decisions regarding the matter would benefit from the completion of the Air Forces's ongoing Analysis of Alternatives, a comprehensive look at other aerial refueling options.

Based on DSB Task Force Study conclusions, the Secretary of Defense has directed that both studies -- the Air Force Analysis of Alternatives and the PA&E Mobility Capability Requirements -- be completed by November 2004.

Congress Reacts

The decision came after weekly trips by Boeing CEO Harry Stonecipher to Capitol Hill, where he talked "with anyone who'll listen" about his company's efforts to clear up ethical questions. But it appeared Boeing's congressional allies were ready to sit this one out after the Pentagon's decision not to decide.

Rumsfeld "has made the appropriate decision to return to square one and take a new look at the tanker issue from the ground up," said Sen. John W. Warner (R-VA), chairman of the Senate Armed Services Committee, in a prepared statement.

Arizona Republican Senator John McCain, a former Navy pilot and harsh critic of the deal said Rumsfeld's decision sounded a death knell for Boeing's 767 tanker sale as it was originally approved by Congress.

"So, the secretary's decision appears fatal to at least the lease component of the proposal," he told the Post.

But Boeing appears to be sticking to its guns. Spokesman Doug Kinnett told the Washington Post, "We firmly believe that the 767 tanker is the only solution that fulfills all" of the Air Force's requirements.

But in the wake of the tanker scandal and news that the requirements for the deal were rewritten by Boeing to make them fit the 767, Boeing may indeed face stiff competition from Airbus. The European consortium has reportedly already won two tanker deals overseas and is spending about $80 million to meet the USAF specifications.

Boeing has said, if the deal falls through, it will take a $300 million charge-off.

FMI: www.af.mil, www.boeing.com