Internal emails expose Boeing-Air Force contract discussions

Wednesday, November 24, 2004

Aging KC135 tankers, shown here refueling an F16, were to be replaced by Boeing's 767 tanker.

Emails exchanged among United States Air Force officials regarding a USD$23 billion dollar deal with aircraft manufacturer Boeing have been entered into the public record. Senator John McCain (R-AZ) entered them into the Congressional Record during a speech last week against the now-cancelled deal to lease 100 mid-air tanker aircraft from Boeing.

Congressional lawmakers rejected the proposal in October, although industry experts say the deal had been killed by the Pentagon because of reports stating that the deal had favored Boeing. Senator McCain has been the deal's most vocal critic.

The original negotiations with Boeing were over a no-bid contract. Such contracts are often justified by the speed they offer, eliminating a preliminary bid and selection round that may last months. However, no-bid contracts are only open to the company selected by the procuring agency. This leaves no-bid contracts open to accusations of conflicts of interest among the procurement personnel. Such accusations have previously been leveled against Vice President Dick Cheney for a no-bid contract to Halliburton, and are now being made against senior Air Force officials for choosing Boeing to replace its tanker fleet.

In the released emails, Air Force officials responsible for the awarding of contracts appear biased against Boeing's main competitor, Airbus and its CEO Ralph Crosby.

Airbus is owned by European Aeronautic Defense & Space Company (EADS). Airbus manufacturers a number of passenger and military aircraft and has gained market share in passenger aircraft over Boeing in recent years. The following is a sequential email exchange regarding Airbus as recorded in the Congressional Record:

Special Asst. to the Secretary and Director of Air Force Communications Bill Bodie: "We don't have to turn the other cheek, you know. I'm ready to tell the truth about Airbus's boom, footprint, and financial shortcoming. But maybe we should sleep on it."
Secretary of the Air Force James Roche: "No, Sir, save it and blow him away. He admits that they were not technically qualified! And, we keep their record of bribes as our trump card! Jim."
Civilian Deputy Undersecretary of the Air Force for Acquisition Darleen Druyun: "I read with disgust the article on Airbus tankers from the new EADS CEO of North America. What BS . . . should not have been surprised at the slime . . . his day of reckoning will come hopefully."
Secretary of the Air Force James Roche: "Oy. I agree. I had hoped you would have stayed and tortured him slowly over the next few years until EADS got rid of him! Jim."

An email from Burkhardt & Associates to James Roche advises the Secretary to release fiscal numbers favorable to Boeing, apparently regardless of the facts: "I'd distribute a one page memo saying the per plane cost of the lease will not be greater than x and have x be less than the last lease Boeing did for some commercial entity--or that x is y dollars less than the cost of a new tanker," it said. An additional email by Roche provides a stark contrast to his criticism of Airbus, as he talks to Assistant Secretary of the Air Force for Acquisition Marvin Sambur about Boeing, saying, "I love Ya, Big Guy. Give it to the Blue Eyed Arabs of the North (the expression we used for Boeing)." quotes a "Senate aide" as saying: "The House language [of the spending bill] ignores an analysis of alternatives called for in last year's authorizing language and by Pentagon Acquisition Director Michael Wynne and the DSB. It precludes such an analysis and predetermines the outcome in favor of the Boeing 767 before the study is even initiated." The activist organization the Project on Government Oversight has called it "a textbook case of favoritism to a single defense contractor."

Assistant Secretary of the Air Force for Acquisition Marvin Sambur defended the Air Force's exclusive consideration of Boeing, saying, "This was not a competitive bid process. The Air Force was ordered by Congress to work with Boeing on the new tanker program."

Boeing had previously hired Civilian Deputy Undersecretary of the Air Force for Acquisition Darleen Druyun. This caused a controversy over conflict of interest and led to felony charges against Boeing Chief Financial Officer Michael Sears for illegally hiring her. Former military personnel are often hired by defense contractors to lobby for contracts.

Days after Sen. McCain's remarks, the Air Force said the tanker replacement contract would be revived as an open bid. Deputy Defense Secretary Wolfowitz published an open-article in the Congressional Record, saying: "After we have selected an appropriate alternative, we intend to require competition."