The Big Controversy

Americans need to understand the tremendous importance of the Air Force tanker contract to our national security and our economy. Of equal importance is the politics that went on behind the scenes. One of the key players, not only in this contract, but throughout the history of the Air Force’s need for a new refueling tanker, has been John McCain, primarily as a long-standing member of the Senate Armed Services Committee and his own personal military experience.

Here are some key points that underscore how critical this contract is to our future as a nation:

• The contract has an initial price tag of $35 billion dollars, and could be worth as much as $100 billion as more and more tankers are replaced over the next decade.
• The average age of our current tanker fleet is nearing 50 years old. Some Air Force officials have gone so far as to report incidences in which the skin of some aircraft were so deteriorated that a person could easily punch a hole using their fist. This has been an area of concern for the Air Force since 1991.
• The Air Force tanker is the most important aircraft in all the branches of our military. The following is a quote from an April 2007 report given to the Senate Armed Services Committee:

KC-X tankers will provide increased aircraft availability, more adaptable technology, and greater overall capability than the current inventory of KC-135E tankers they will replace. Enhancements to every aspect of aircraft operation will provide the Joint warfighter with more flexible employment options. It is imperative that we begin a program of smart, steady reinvestment in a new tanker – coupled with measured, timely retirements of the oldest, least capable tankers. Recapitalizing our tankers will ensure the viability of this vital national capability. Tankers make the Air Bridge possible and are essential to the success of joint and coalition military operations. Tankers are critical to the deployment and employment of joint combat power, and are crucial to rapid response to combat and humanitarian relief operations. - Lt Gen Carrol H. Chandler
- Source: April Report to the Senate Armed Services Committee 4/26/2007

• The number of American jobs generated by the North Carlina Facilty for partial assembly of the Airbus tanker - 2,000-4,000. The majority of work would be performed by Airbus plants in Europe.
• The number of American Jobs generated by additional hiring by Boeing and Spirit Aerosystems - 3,000-5,000… at just one location. Many more jobs will be generated among other Boeing plants and subcontractors. Additionally, the contract would impact all of the 120,000 employees of Boeing by providing fiscal income resulting in stability and job security through the life of the contract.

In early 2008, The long awaited Air Force Contract for the Armed Forced next generation KC-X refueling tanker was decided. The two bidders on the project were Boeing, a U.S. based company, and Northrop-Grummond, owned by Airbus, which in turn is owned by EADS (European Air Defense and Space administration). The contract was rewarded to Airbus, much to the surprise of Boeing, the U.S. congress, the media, and the nation in general.

Boeing soon filed an appeal with The Government Accounting Office (GAO), which oversees the legal ramifications and possible violations of government contract procedures, and within days found seven specific major problems with the method in which the Air Force awarded the contract.

What the GAO report didn’t include were the national security issues involved with having top-secret documents in the hands of foriegn governments. This is especially troublesome when coupled with the revelation (prior to the Iraq War) that France and Germany were secretly circumventing the Oil for Food program and that many high level officials were recieving money bribes directly from Saddam Hussein. Additionally, France and Germany have provided parts and engineering prowess in the development of nuclear programs in North Korea, pre-war Iraq, Iran, and Syria. These facts beg the question: Is it really a good idea from a national security standpoint to trust this type of information to countries that have aided and abetted our enemies, even to the point of ignoring U.N. mandates and sanctions?

Additionally, Airbus is currently under investigation for being subsidized by European Governments. The subsidies are the subject of a complaint that the United States filed with the World Trade Organization in 2004. European governments provided illegal subsidies to design and develop aircraft, including preferential loans, debt relief and research and development grants. The offshoot of these subsidies allowed Airbus to offer their planes at a cost which would not have been profitable for them otherwise, giving them an unfair advantage when bidding on new military and commercial contracts.

So, what does all this have to do with McCain? The facts, taken as a whole, are mind-boggling.

In 2004, Boeing offered the United States Government the opportunity to lease new tankers at a cost of 20 billion dollars…15 billion below the 35 billion of the new contract. Additionally, under the lease program, Boeing would have been responsible for repairs and maintenance, which would have saved the Armed Forces additional cost and effort.

Due to an investigation of this offer, a scandal was uncovered involving an offer for a high-paying job at Boeing to one of the top Air Force staff members involved in recommending this program. The two Boeing executives involved in the scandal were subsequently fired and are now serving time in jail, but the plan was abandoned without any real consideration as to whether or not it still had merit. McCain still expresses great pride in having a “central role” in defeating that proposal, which would have, by now, eased the burden caused by our badly aged tanker fleet (an issue which the Air Force is now calling “critical” as a defense to reopening the bidding process which the GAO report is encouraging them to do), as well as saving billions of dollars of taxpayer money over the current tanker contract.

The reality is that McCain had nothing to do with uncovering this scandal. The real hero was Ronald Garant, Director, Investment, Office of the Under Secretary of Defense, who brought the inflated costs by Boeing to the attention of government investigators. McCain’s involvement? He signed a letter asking for a full investigation after the lease deal was already rejected. (Report No. OIG-2004-171). <!– @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } –>

And during the course of the current bidding contract itself, in which the Air Force worked with both Boeing and Airbus/Northrop-Grumman, McCain, as a member of the Senate Armed Services Committee (which is charged with overseeing government defense contracts), wrote two advisory letters to Deputy Defense Secretary Gordon Englund in September 2006 in which he encouraged them to strike the consideration of Airbus’ Subsidy investigation by the WTO from contract consideration, and the impact it would have on the American economy AND American jobs:

“I am concerned that if the Air Force proceeds down its chosen path regarding the W.T.O. issue, the Air Force will risk eliminating competition before bids are submitted,” Mr. McCain wrote. “I respectfully suggest that Air Force remove any W.T.O. element from its procurement evaluation.”

President Bush also urged the same thing. It seems that neither one of them took the time to think of the full economic implications either.

If all this weren’t bad enough, it turns out that many of McCain’s former and current campaign staffers were lobbyists for… EADS, Airbus’ parent company, which McCain dismisses as mere coincidence. And we aren’t talking low-level positions either:

Mr. McCain’s campaign co-chairman, former Representative Thomas Loeffler, a Texas Republican, also runs a lobbying firm, the Loeffler Group, which earned $220,000 working for EADS in 2007. Mr. Loeffler was the McCain campaign national finance chairman when his firm was hired to lobby for EADS.

“Two other Loeffler executives who were registered to lobby for EADS are now top campaign advisers for Mr. McCain: Susan Nelson, the finance director, and William L. Ball III, the former Navy secretary. Ms. Nelson and Mr. Ball left the lobbying firm to join the campaign.

Another major money raiser for Mr. McCain, Wayne Berman, who was named vice chairman of the campaign last year, also worked for EADS through another lobbying firm, Ogilvy Government Relations, where he is a partner. Ogilvy earned $240,000 from EADS in 2007.

Also supporting Mr. McCain and lobbying on behalf of EADS was Kirk Blalock, a national chairman of Young Professionals for McCain and a former aide to President Bush. Mr. Blalock’s lobbying firm, Fierce, Isakowitz & Blalock, earned $320,000 from EADS in 2007, according to disclosure forms required by Congress.” Source: The New York Times

In response to scrutiny by Congress, McCain’s response was, “I had nothing to do with the contract except to insist in writing on several occasions as this process went forward that it be fair and open and transparent.”

If this response is predicated as a defense, does it not also show a deriliction of duty to continue to oversee the bidding process to its completion, which is the task of the very Senate Armed Services Committe of which he is a member? Would he not be the ideal candidate, considering his vast military experience?

What really calls McCain’s response into question is his own history, the very same fact that he holds forth as a shining moment of his political acumen: his central involvement in the Boeing Tanker lease deal of 2004. Would he not be as actively involved in such a similar deal now?

What wraps up the stench of this whole debacle is the GAO’s response to Boeing’s challenge to the rewardiing of the contract:

1. The Air Force, in making the award decision, did not assess the relative merits of the proposals in accordance with the evaluation criteria identified in the solicitation, which provided for a relative order of importance for the various technical requirements. The agency also did not take into account the fact that Boeing offered to satisfy more non-mandatory technical “requirements” than Northrop Grumman, even though the solicitation expressly requested offerors to satisfy as many of these technical “requirements” as possible.

2. The Air Force’s use as a key discriminator that Northrop Grumman proposed to exceed a key performance parameter objective relating to aerial refueling to a greater degree than Boeing violated the solicitation’s evaluation provision that “no consideration will be provided for exceeding [key performance parameter] objectives.”

3. The protest record did not demonstrate the reasonableness of the Air Force’s determination that Northrop Grumman’s proposed aerial refueling tanker could refuel all current Air Force fixed-wing tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation.

4. The Air Force conducted misleading and unequal discussions with Boeing, by informing Boeing that it had fully satisfied a key performance parameter objective relating to operational utility, but later determined that Boeing had only partially met this objective, without advising Boeing of this change in the agency’s assessment and while continuing to conduct discussions with Northrop Grumman relating to its satisfaction of the same key performance parameter objective.

5. The Air Force unreasonably determined that Northrop Grumman’s refusal to agree to a specific solicitation requirement that it plan and support the agency to achieve initial organic depot-level maintenance within 2 years after delivery of the first full-rate production aircraft was an “administrative oversight,” and improperly made award, despite this clear exception to a material solicitation requirement.

6. The Air Force’s evaluation of military construction costs in calculating the offerors’ most probable life cycle costs for their proposed aircraft was unreasonable, where the agency during the protest conceded that it made a number of errors in evaluation that, when corrected, result in Boeing displacing Northrop Grumman as the offeror with the lowest most probable life cycle cost; where the evaluation did not account for the offerors’ specific proposals; and where the calculation of military construction costs based on a notional (hypothetical) plan was not reasonably supported.

7. The Air Force improperly increased Boeing’s estimated non-recurring engineering costs in calculating that firm’s most probable life cycle costs to account for risk associated with Boeing’s failure to satisfactorily explain the basis for how it priced this cost element, where the agency had not found that the proposed costs for that element were unrealistically low. In addition, the Air Force’s use of a simulation model to determine Boeing’s probable non-recurring engineering costs was unreasonable, because the Air Force used as data inputs in the model the percentage of cost growth associated with weapons systems at an overall program level and there was no indication that these inputs would be a reliable predictor of anticipated growth in Boeing’s non-recurring engineering costs. Source: GAO Report

Pretty damning, but Point Number 4 is especially troubling. Who encouraged the Air Force to intentionally mislead Boeing, so that Boeing’s final proposal would fail?

Any Guesses? I have one…

The bottom line is this. As any Washington insider will tell you, there ARE NO COINCIDENCES. That John McCain was involved with this contract is on the record. If you believe his statements, then he has clearly demonstrated a lack of sensibility and oversight, which does not bode well for a President. If he was involved on a deeper level, which I personally believe given the facts, then the presentation of himself on the campaign trail as the best Guardian of National Security and Champion of the American Working Class rings a very sour note.

And now, we have the Pentagon canceling the initial contract in order to hand it off to the next administration… which, if the military testimony is to be believed, will leave us in an even more precarious position militarily, as we’re forced to continue to use outdated tankers. This does not make us safer, it undermines our national security, puts our pilots at risk, and presents our military with challenges they shouldn’t have to face.

And this all happened under McCain’s watch.