[Congressional Record (Bound Edition), Volume 154 (2008), Part 3]
[Senate]
[Pages 4252-4254]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          KC-X TANKER DECISION

  Mr. WARNER. Mr. President, on February 29, 2008, the Secretary of the 
Air Force, Michael W. Wynne, announced that the Air Force had made a 
selection in the KC-X competition for development and procurement of up 
to 179 tanker aircraft, which are urgently needed to support our armed 
forces.
  This was a critical step forward in the recapitalization of an aging 
fleet of aircraft that are essential for force projection, 
intelligence, surveillance, and global strike capabilities. A modern 
tanker force is at the heart of our national security.
  I understand that it was a carefully constructed and transparent 
process that the Department of Defense and the Department of the Air 
Force structured and faithfully implemented to reach this decision. As 
Secretary Wynne said, the announcement ``is the culmination of years of 
tireless work and attention to detail by our acquisition professionals 
and source selection team, who have been committed to maintaining 
integrity, providing transparency and promoting a fair competition for 
this critical aircraft program.''
  The Boeing Company has filed a protest, as is their right under law, 
with the Government Accountability Office concerning the Air Force's 
award of this contract to Northrop Grumman. Further, as provided by 
law, the GAO will issue their decision within the next 100 days.
  I now would like to provide some context and historical background to 
the ongoing discussion by reviewing the oversight process employed by 
Senate oversight committees beginning with the original proposed tanker 
lease procurement.
  Nearly 6 years ago, a $30 billion authorization provision, placed in 
the fiscal year 2002 Defense appropriations bill, provided the Air 
Force the authority to lease, not purchase, up to 100 767s from Boeing, 
a sole source contract, for use as aerial refueling tankers.
  Authority to fund and execute this lease required approval of the 4 
congressional committees of jurisdiction over defense programs. Three 
approved; but, the fourth, the Senate Armed Services Committee, 
disapproved.
  Under Senate procedure, the chairman of the committees made the 
decision for their respective committees. As chairman of Armed Services 
at the time, I found fault with the proposed lease contract and after 
consultations with Members--in particular Senator McCain, who provided 
valuable oversight of the entire process--the committee declined to 
approve the proposal.
  Additionally, consultations with outside experts had corroborated 
that procedures and provisions related to the lease contract required 
further oversight by Congress.
  Following a full committee hearing on September 4, 2003, I directed 
the Department of Defense, by letter to investigate the Air Force's 
initial proposal and analyze alternatives that would meet the 
operational requirement.
  Furthermore, in letters to the General Accounting Office, the 
Congressional Budget Office, and the Office of Management and Budget, 
among others, I directed that these other agencies provide assessments 
of the proposal.
  These assessments, as well as further oversight conducted by both the 
Senate Armed Services and Commerce Committees, led Deputy Secretary of 
Defense Wolfowitz to order a ``pause'' in the execution of the proposed 
lease contract.
  On December 2, 2003, I sent a letter to the Deputy Secretary to 
concur with the decision requiring a ``pause'' in execution, and stated 
further:

       The Department of Defense Inspector General inquiry should 
     pursue the trail of evidence wherever it leads, in accordance 
     with standard IG procedures.


[[Page 4253]]


  By February 2004, Secretary of Defense Rumsfeld put a ``halt'' to the 
entire tanker lease process, pending the DOD inspector general report.
  During the following 3 years, the investigative process uncovered 
evidence revealing serious, criminal breaches in the very process that 
Americans trust to provide their service members with the equipment 
necessary to defend our great Nation. In fact, these efforts resulted 
in jail sentences for senior persons from the Air Force and Boeing, and 
a settlement of $600 million that was paid to the U.S. Treasury.
  The findings confirmed--the view of the Senate Armed Services 
Committee--that the Air Force's tanker lease proposal was faulty. 
Actions by the Congress allowed for the requisite time within which the 
executive branch could establish a free and fair competition. This 
ultimately resulted in a new proposed contract.
  On December 1, 2006, Senator McCain, then chairman of the Airland 
Subcommittee, wrote a letter to Robert Gates, then the President's 
nominee to be Secretary of Defense. In his letter, Senator McCain 
encouraged Secretary Gates to ensure a fair and open competition by 
issuing a second draft request for proposals in an effort to make 
certain that there was no ambiguity in the competition process. As 
chairman of the committee, I concurred with his initiative, given I 
have been a very strong proponent of competition.
  Since the announcement on February 29, 2008, by the Secretary of the 
Air Force with regard to the Department's acquisition decision, there 
has been, in my opinion, an injection of considerable misinformation in 
the public forum. Consequently, I believe I had an obligation to 
recite--and document--portions of the history relative to the debate.
  I am particularly concerned about allegations that the proposed 
contract would adversely affect job opportunities in America, given 
parts of the aircraft would be manufactured abroad.
  I draw on my experience as Under then as Secretary of the Navy, 1969-
74, when I solicited bids, for major procurements of fleets of new 
aircraft, from an American industrial base of many companies sized, 
financed, and experienced to compete.
  For many reasons that base, comprised of numerous large domestic 
companies, has consolidated and narrowed, but America remains the 
preeminent provider for the vast majority of our military procurements. 
Today, we also rely on our global partners for a wide diversity of 
technologies and support in joint military procurements. A prime 
example is the Joint Strike Fighter procurement.
  In closing, we must respect the right of Boeing to seek a review by 
the GAO as provided by law. It is my judgment that until the GAO acts 
and reports to Congress their findings; we should lower the emotional 
rhetoric, be accurate with the facts, and withhold judgment of the work 
done by a large dedicated group of uniformed and civilian acquisition 
specialists.
  I ask unanimous consent that several letters be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                      U.S. Senate,


                                  Committee on Armed Services,

                                Washington, DC, September 4, 2003.
     Hon. Donald H. Rumsfeld,
     Secretary of Defense, Washington, DC.
       Dear Mr. Secretary: As you know, the Senate Armed Services 
     Committee held a hearing today on the Department's proposed 
     lease of 100 KC-767A tanker aircraft. There was a large 
     attendance of members and an extensive exchange of questions 
     and views in this hearing that lasted over three hours.
       During the course of the hearing, Chairman Warner raised 
     the option of leasing a smaller number of tanker aircraft--up 
     to 25--to address the current, short-term need for additional 
     tankers, to be followed by a traditional procurement, not a 
     lease, of the remaining tankers, presumably under multi-year 
     authority. Secretary Roche said that such an option had not 
     been considered. We would like to draw your attention to 
     section 367 of the Senate version of National Defense 
     Authorization Act for Fiscal Year 2004, which requires the 
     preparation of an analysis of alternatives for the 
     Department's aerial refueling requirements. While this 
     language is not directly targeted at the KC-767A lease 
     proposal, it reflects the thinking of the Senate that other 
     alternatives should have been considered.
       We request that the Department analyze the option of 
     leasing up to 25 tanker aircraft, followed by a procurement 
     of the remaining aircraft. Such an analysis should include an 
     examination of the budgetary and cost implications of various 
     options for an incremental lease-buy, including an 
     accelerated exercise of the purchase option in the proposed 
     lease.
       Additionally, given the emphasis on an apparent corrosion 
     problem in the existing KC-135 tanker fleet, we would 
     appreciate your providing as with a thorough assessment of 
     the extent of those corrosion problems and the expected cost 
     of addressing those problems if tanker aircraft were 
     purchased according to the previous Air Force plan instead of 
     leased sooner as more recently proposed. Also, please provide 
     us with a justification of the Department's decision to pay 
     $10.3 million per aircraft more than the $120.7 million per 
     aircraft as determined by the Institute for Defense Analysis 
     to be a reasonable purchase price.
       The Committee will await your reply prior to meeting to 
     discuss the pending lease proposal.
       With kind regards,
           Sincerely,
     Carl Levin,
       Ranking Member.
     John Warner,
       Chairman.
                                  ____

                                                      U.S. Senate,


                                  Committee on Armed Services,

                               Washington, DC, September 25, 2003.
     Hon. David M. Walker,
     Comptroller General of the United States,
     Washington, DC.
       Dear Mr. Walker: As you know, the Senate Armed Services 
     Committee held a hearing on September 4, 2003, to review the 
     Department of Defense's (DOD) proposed lease of 100 KC-767 
     aerial refueling aircraft. Testimony by the General 
     Accounting Office (GAO), as well as GAO's work for the 
     Congress on this issue over the past year and a half, was 
     instrumental to the Committee during the hearing.
       Subsequent to the hearing, Senator Levin and I asked DOD to 
     analyze the option of leasing up to 25 aircraft, followed by 
     a procurement of the remaining aircraft. We also asked for 
     more detailed pricing information and an assessment of 
     corrosion problems including the cost of addressing those 
     problems for the existing KC-135 fleet of aircraft.
       The Department has responded to that letter, and identified 
     several alternative acquisition strategies, with associated 
     estimates of cost and savings. I ask that the GAO review the 
     Department's response, a copy of which is attached. Please 
     provide the Committee with your assessment of the validity of 
     DOD's assumptions and the accuracy of the cost and savings 
     estimates, and identify any other alternative acquisition 
     strategies the Committee should consider.
           Sincerely,
                                                      John Warner,
     Chairman.
                                  ____

                                                      U.S. Senate,


                                  Committee on Armed Services,

                               Washington, DC, September 25, 2003.
     Mr. Douglas Holtz-Eakin,
     Director, Congressional Budget Office, 402 Ford House Office 
         Building, Washington, DC.
       Dear Mr. Holtz-Eakin: As you know, the Senate Armed 
     Services Committee held a hearing on September 4, 2003, to 
     review the Department of Defense's (DOD) proposed lease of 
     100 KC-767 aerial refueling aircraft. Testimony by the 
     Congressional Budget Office (CBO), as well as CBO's work for 
     the Congress on this issue over the past year and a half, was 
     instrumental to the Committee during the hearing.
       Subsequent to the hearing, Senator Levin and I asked DOD to 
     analyze the option of leasing up to 25 aircraft, followed by 
     a procurement of the remaining aircraft. We also asked for 
     more detailed pricing information and an assessment of 
     corrosion problems including the cost of addressing those 
     problems for the existing KC-135 fleet of aircraft.
       The Department has responded to that letter, and identified 
     several alternative acquisition strategies, with associated 
     estimates of cost and savings. I ask that the CBO review the 
     Department's response, a copy of which is attached. Please 
     provide the Committee with your assessment of the validity of 
     DOD's assumptions and the accuracy of the cost and savings 
     estimates, and identify any other alternative acquisition 
     strategies the Committee should consider.
       I ask that the CBO provide the results of this assessment 
     as soon as possible.
           Sincerely,
                                                      John Warner,
     Chairman.
                                  ____

                                                      U.S. Senate,


                                   Commitee on Armed Services,

                                  Washington, DC, October 2, 2003.
     Hon. Joshua B. Bolten,
     Director, Office of Management and Budget, Washington, DC.
       Dear Director Bolten: On September 4, 2003, Deputy Director 
     Kaplan testified before the Senate Armed Services Committee 
     on the proposed Air Force lease of 100 KC-767 tanker 
     aircraft.
       After the hearing, we wrote a letter to the Secretary of 
     Defense (copy attached) in

[[Page 4254]]

     which we requested three things: (1) an analysis of the 
     option of leasing up to 25 tanker aircraft; followed by a 
     procurement of the remaining 75 aircraft; (2) a thorough 
     assessment of the extent of corrosion problems in the 
     existing KC-135 tanker fleet and the expected cost of 
     addressing those problems over the period before purchased 
     aircraft would become available; and (3) justification and 
     explanation of the Department's decision to pay $10.3 million 
     per aircraft more than the $120.7 million per aircraft 
     determined by the Institute for Defense Analysis to be a 
     reasonable purchase price. Deputy Secretary Wolfowitz has 
     responded to our letter, a copy of which is also attached.
       Given the importance of this tanker leasing issue, we would 
     appreciate receiving the benefits of your review of Secretary 
     Wolfowitz's response. Specifically, do you concur with the 
     assessments of the advantages and disadvantages of the 
     various funding options that are portrayed in the Deputy 
     Secretary's letter, and do you agree with the stated 
     rationale for paying the price per aircraft as negotiated by 
     the Air Force? We believe that the Committee needs to hear 
     your views on this subject before reaching a decision on the 
     lease. Accordingly, we ask that you provide this matter 
     prompt attention.
           Sincerely,
     Carl Levin,
       Ranking Member.
     John Warner,
       Chairman.
                                  ____

                                                      U.S. Senate,


                                  Committee on Armed Services,

                                 Washington, DC, December 2, 2003.
     Hon. Paul Wolfowitz,
     Deputy Secretary of Defense, Defense Pentagon, Washington, 
         DC.
       Dear Secretary Wolfowitz: I commend the Secretary of 
     Defense and yourself for the prompt actions you have taken 
     regarding the Air Force's tanker aircraft program, in light 
     of recent extraordinary personnel actions taken by the Boeing 
     Company. Your decision to require a ``pause'' in the 
     execution of any contracts to lease and purchase tanker 
     aircraft is a prudent management step.
       Further, I concur in your judgment to task the Department 
     of Defense Inspector General (DOD-IG) to conduct an 
     independent assessment. However, I believe that the DOD-IG 
     assessment should go further than the review described in 
     your letter of December 1, 2003. The DOD-IG inquiry should 
     pursue the trail of evidence wherever it leads, in accordance 
     with standard IG procedures. This inquiry should examine the 
     actions of all members of the Department of Defense and the 
     Department of the Air Force, both military and civilian, top 
     to bottom, who participated in structuring and negotiating 
     the proposed tanker lease contract which was submitted to the 
     Congress in July 2003.
       Your recent actions clearly indicate that there are many 
     outstanding questions that must be answered before proceeding 
     with this program. I expect that you will consult further 
     with the Congress as you receive the report of the DOD-IG and 
     that no actions will be taken with respect to the lease and 
     purchase of KC-767 tanker aircraft until the Congress has had 
     an opportunity to review the DOD-IG report. Ultimately, this 
     program, as restructured, must be executed in a manner that 
     is fully consistent with Section 135 of the National Defense 
     Authorization Act for Fiscal Year 2004 (Public Law 108-136).
       With kind regards, I am
                                                      John Warner,
     Chairman.
                                  ____

                                                      John McCain,


                                                  U.S. Senate,

                                 Washington, DC, December 1, 2006.
     Dr. Robert M. Gates,
     President, Texas A&M University, One Circle Drive, College 
         Station, TX.
     Re Tanker Replacement Program.
       Dear Dr. Gates: Subject to the confirmation of your 
     nomination, perhaps the most important new major defense 
     acquisition program for which you will be responsible, will 
     arise from the replacement of the KC-135 aerial refueling 
     tanker fleet. As you probably know, this program is currently 
     valued at about $200 billion.
       Given the regrettable history of the Air Force's prior 
     attempt to recapitalize the fleet, it is vital that this 
     program obtain the best possible joint aerial refueling 
     capability at the most reasonable price. In my view, this can 
     only be achieved by conducting a competition for replacement 
     aircraft fully, openly and transparently--using objective, 
     verifiable metrics. More to the point, if this very important 
     program is to reach production timely, I respectfully suggest 
     that the final Request for Proposals (RFP) must be 
     unambiguous and uncontroversial. Unfortunately, I am not sure 
     we are yet on that course.
       In recent correspondence to Deputy Secretary Gordon 
     England, I conveyed concern about the unprecedented inclusion 
     of an element related to litigation between the United States 
     and the European Union Trade Commission currently pending 
     before the World Trade Organization (WTO), in the draft 
     Request for Proposals (dRFP). I remain troubled that, without 
     clarity on how answers to this provision will be evaluated, 
     this element (and other similarly troubling provisions, 
     including an overly restrictive invocation of the Berry 
     Amendment and a questionable extension of ITAR regulations) 
     may risk eliminating competition before bids are submitted. I 
     understand that the Department will issue a final RFP on 
     December 15, 2006.
       Recent developments in the program underscore my concerns. 
     On Tuesday, November 28, 2006, the Air Force held an 
     Acquisition Strategy Panel (ASP) to review tanker 
     requirements and select an acquisition strategy for 
     replacement aircraft. I understand that the ASP selected a 
     strategy that did not include a ``capabilities-based 
     acquisition.'' As such, the approach that the ASP selected 
     appears to deviate from what I understand the Joint 
     Requirements Oversight Council (JROC) prescribed. I 
     understand that, in vetting the KC-X Operational Requirements 
     Document (ORD), the JROC called on the Air Force to consider 
     tanker aircraft options that maximize cargo and passenger 
     capacity. But, without a capabilities-based evaluation that 
     objectively and verifiably measures capability beyond 
     thresholds in either the primary mission area (aerial 
     refueling) or other inherently critical missions available 
     from large aircraft platforms (such as airlift), it is 
     difficult to see how the JROC's recommendation can be 
     implemented. As a result, competition may, once again, be 
     eliminated before bids are even submitted.
       Against this backdrop, I respectfully suggest that issuing 
     a second dRFP, which can address issues raised by all 
     prospective offerors in their responses to the first dRFP, 
     and conducting a capabilities-based evaluation, which can 
     help assure that the warfighter and the taxpayer obtain the 
     most capable platform at the best possible value, may be 
     useful.
       If you are confirmed, I respectfully ask for the following: 
     that you withhold releasing the final RFP until you have 
     provided me with an explanation of how you intend to assure 
     that the competition for tanker aircraft will be conducted 
     fully, openly and transparently--particularly in light of the 
     issues described above.
           Sincerely,
                                                      John McCain,
     Chairman, AirLand Subcommittee.

                          ____________________