During the debate, Sen. McCain said, "I saved the taxpayers $6.8 billion by fighting a contract that was negotiated between Boeing and DOD that was completely wrong. And we fixed it and we killed it and the people ended up in federal prison so I know how to do this because I've been involved these issues for many, many years."
He didn't fix a damned thing. He introduced politics into a screwed up procurement and made things worse in terms of overall cost, schedule and readiness for a mission-critical Air Force development and production program.
Sen. McCain is referring to the Air Force air refueling tanker replacement program.
The USAF flys KC-135s for aerial refueling missions. The KC-135 plane is based on the Boeing 707. The first KC-135 flew in 1954. The last plane was delivered in 1965. The average age of the KC-135 fleet is about 48 years. Maintenance costs, safety and mission readiness are all growing concerns. The Air Force badly needs a replacement tanker.
In 2002, Boeing, the Air Force and Congress devised an approach to ‘lease’ 100 new 767s for $15.5 billion over six years with a $4.1 billion option to buy. The overall cost of the lease would have been greater than the purchase, but Congress didn’t give the AF the authority to buy the planes. So Boeing and the Air Force got creative and came up with the lease concept. Boeing would have borne all development risk and Boeing would have paid all development costs. Boeing profits would have been capped at DOD standard levels. It was not a lousy deal for the taxpayers, Boeing or the Air Force.
Some watchdog groups and Sen. McCain objected to the deal and got it killed. Beyond the 'lease' creativity, Boeing got really creative and bribed an AF procurement official and got caught (
Darleen Druyun, Michael Sears)
So in early 2004, the lease deal was dead and McCain continues to take credit for saving taxpayers $6.8 billion. And the Air Force keeps flying KC-135s.
Congress funded the Air Force to redo the tanker program. They issued an Request for Proposal (RFP) for a new tanker. Boeing and a joint venture of Northrop Grumman and EADS (European Aeronautic Defence and Space Company) responded. EADS is the second largest aerospace and defense corporation in the world – behind Boeing and ahead of Lockheed Martin and Northrop Grumman. EADS receives government subsidies of up to one-third of its Airbus jet development costs. The Air Force intended to factor those subsidies into the competition to level the playing field. Seattle PI.com: Subsidy dispute could be factor in tanker competition
In 2006, Sen. McCain wrote to the Air Force urging them to drop the subsidy factor and posed a number of technical questions about the Air Force procurement process. A senior Pentagon official is quoted as saying, "He (McCain) was trying to jam us and bully us to make sure there was competition by giving EADS an advantage." Inside the Pentagon, they assumed McCain’s letters were written for his signature by EADS lobbyists.
McCain’s campaign staff has included five top advisers and fund raisers who were registered lobbyists for EADS including Tom Loeffler who resigned in May as his finance co-chairman and Susan Nelson, his Finance Director.
Last June, the McCain’s campaign told Newsweek that McCain’s letters to the Air Force were not written by EADS or Northrop and were motivated solely by McCain’s ‘longstanding interest in ... full and open competition." The campaign would not answer a follow-up question posed by Newsweek as to whether McCain had input from EADS lobbyists for the letters.
Newsweek: McCain’s Boeing Battle Boomerangs
In February of this year, the Air Force awarded the contract to the Northrop-EADS team. Northrop-EADS started work. Boeing challenged the award. The GAO reviewed the procurement and found ‘significant errors’ in the Air Force decision process. The contract with Northrop-EADS was terminated. The Pentagon announced they would re-compete the program and award it before the end of 2008. Boeing complained the Pentagon was moving too quickly for it to prepare a new proposal.
On September 11, 2008 Defense Secretary Gates announced the Pentagon was canceling the re-competition and punted the hard decision to the next administration. The Northrop-EADS team is entitled to termination costs plus profits and will prepare a termination proposal.
LA Times: Northrop entitled to termination fee over tanker deal, Pentagon says
Earlier this month, the acting Air Force Secretary said it could take up to four years to complete the new competition for a replacement refueling tanker. That isn't four years to provide new planes, that is four years to just award a new contract.
Air Force officials: Tanker deal could be years away
So to summarize, incompetent and corrupt Pentagon and Boeing officials screwed up the original tanker procurement process. Sen. McCain carried the water for Northrop-EADS to tilt the scales in their favor in the flawed re-procurement process. The GAO threw out the flawed recompetition award. And now that McCain is the Republican nominee, the Pentagon does not dare to award the politically sensitive contract in an election year.
Pentagon delays decision on new refueling tankers
During the debate, Sen. McCain took credit for this fiasco saying, "we fixed it and we killed it" and claims to have saved $6.8 billion. Sen. McCain didn’t fix anything. He interjected politics into a messed up process and made it worse.
Meanwhile, the most important issue is nearly forgotten. US Air Force and Air National Guard service men and women perform their mission-critical air refueling flights in KC-135 aircraft with airframes that are, on-average, 48 years old and there is no plan to replace those planes.