Senators float plan to resolve Air Force tanker lease flap

Following an agitated Senate Armed Services Committee hearing Thursday, Chairman John Warner, R-Va., said he would urge the Pentagon to consider leasing up to 25 refueling aircraft in the near term while buying the remaining number of tankers later through traditional procurement practices.

The plan would be substituted for the Bush administration's controversial plan to lease 100 Boeing 767 commercial jets for use as aerial refueling tankers.

Senate aides told CongressDaily that Warner and Armed Services ranking member Carl Levin, D-Mich., had outlined the proposal in a letter to Defense Secretary Donald Rumsfeld that was being drafted Thursday evening. Congressional sources familiar with the effort expected the letter to call for a formal Pentagon assessment of Air Force tanker options and could call on the Air Force to refute assertions detailed in a two-year-old examination of corrosion problems that plague the existing tanker fleet of aging KC-135Es. The KC-135E study, according to Air Force Secretary James Roche, was based on faulty assumptions.

In addition, Warner and Levin could request a General Accounting Office audit of a recent study by the Institute for Defense Analyses that said the Air Force should pay a lower price in its 767 lease agreement than was negotiated in the $17 billion proposal.

Marvin Sambur, the Air Force acquisition chief, argues a smaller number of leased aircraft would mean losing Boeing's volume discount, making the per-aircraft cost higher.

"You also lose out on the schedule, because it will be delayed, which means inflation kicks in, and it's going to be more expensive," Sambur told CongressDaily Thursday. "And that means you have to maintain these other planes longer, so your [operations and maintenance] costs are higher, and you lose out on the additional capability for a longer period of time."

Warner and Levin began drafting the letter following an executive session of the committee that opened immediately after the four-hour public hearing.

A spokesman for Warner said the draft letter indicates the committee will wait for Rumsfeld's response before acting on the lease proposal. Warner's committee is the only one of four that has yet to act on the tanker lease proposal, though the House Armed Services Committee, along with the Senate and House defense appropriations subcommittees, already endorsed the plan.

Until now, the Bush administration's lease proposal appeared to be a done deal. But the tanker lease prospects dimmed after a slew of hearings called by senators this week shed new light on the details.

Previously, Senate Commerce Chairman John McCain, R-Ariz., also a senior member of the Armed Services Committee, was the only lawmaker to publicly criticize the controversial $17 billion lease.

But as the panel received testimony from Pentagon and White House officials Thursday, McCain sat back and watched as a majority of the members in attendance doubts about the plan.

Sen. Pat Roberts, R-Kan., was the lone champion of the administration's proposal. During the question-and-answer period, Roberts hauled out a corroded section of the belly from a KC-135 tanker and said that such problems could only be remedied through a special and costly maintenance effort.

"I don't want the warfighter fighting in this plane," he said.

But other members were more skeptical, and questioned whether the Air Force would do better to buy the planes outright. Roche, who testified at the hearing, said the Pentagon lacks the budget authority to procure the 767 directly and cited barriers to a traditional procurement inherent in the department's acquisition policy.

One way around this would be to structure a 767 purchase through a multi-year procurement that would offer lower funding requirements in the first two years, according to a recent study by the Congressional Research Service.

Sambur told CongressDaily that a multiyear program is a nice idea, but that the Air Force would need $12 billion over the next five years to do it.

"If they would give us the ability to do multiyear funding and the money, OK," he said. "But no one is going to give us that up front. It's unrealistic."

But the Aug. 29 CRS study suggests that a multi-year procurement with incremental funding would actually lower upfront costs for the first two years of the acquisition and would not change the aircraft delivery schedule. There would be a two-year crunch in fiscal 2006 and 2007 where the larger bills would come due, but this is shorter than the four-year crunch that would occur under a traditional procurement.

In fact, the multi-year would allow the Air Force to save some money by buying batches of tanker components up front, a tactic that could reduce slightly the total acquisition cost-estimated by the Congressional Budget Office to be $15.9 billion-that they would otherwise pay through a traditional procurement, according to the CRS analysis.

The downside is that it not only sets a precedent for using a multi-year procurement at the start of a major acquisition program, it also violates the full-funding policy governing defense acquisitions. But in passing legislation two years ago that authorized the Air Force to negotiate the Boeing tanker lease, lawmakers hinted at their willingness to consider highly novel and irregular acquisition methods.

Still, some members balked at the unconventional nature of the lease plan, noting that it inherently involves making a multi-year commitment to the 767 program, and expressed concern as to the precedent it could set.

"It's my view that if this proposal is adopted by other agencies, it would make our budget meaningless," Sen. Wayne Allard, R-Colo., said. "It creates hidden liabilities disguising our true deficit and debt numbers. I believe we must be very careful as we listen to our witnesses today, as there is more at stake than 100 tanker aircraft."