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Thompson Files: Air-tanker logjam

Boeing defense projects face threat of budget axe
Washington (AFP) April 7 - US aerospace giant Boeing would be hit harder than other defense contractors if the Pentagon's proposed cuts to major weapons programs are approved, analysts said Tuesday. Boeing's stock fell 2.65 percent to 37.15 dollars in trading a day after Defense Secretary Robert Gates presented a "reform budget" that calls for deep cuts in some big projects led by the company. Gates' recommendations call for ending production of F-22 fighter jets, scaling back the Army's Future Combat Systems (FCS) program of hi-tech vehicles and robots, canceling plans for more C-17 transport planes and cutting elements of the missile defense program. All of those proposed cuts would deal a blow to Boeing's defense division, which generates about 32 billion in sales. Gates also recommended cancelling contracts that Boeing had hoped to secure, including plans for a new CSAR-X search and rescue helicopter, a long-range Air Force bomber and a series of communications satellites. "Boeing could face difficult times," the investment firm Collins Stewart wrote in an analysis. "FCS (Future Combat Systems), C-17 (transport planes) and missile defense are key programs for the company and all face cuts," it said. Apart from Boeing, the outlook for other defense contractors was not as bleak as anticipated and in some cases largely positive as budget recommendations removed uncertainty, analysts said. The defense secretary's budget offered more funding for certain weapons programs, including unmanned drones, Lockheed Martin's F-35 fighter jet and its close-to-shore naval ships. "For Lockheed Martin, the news was good. In our opinion, the key to the company's revenue and earnings growth is the F-35, and the F-35 received strong support," the according to Collins. Boeing "appears to be most at risk on the downside, with several programs under pressure," Fitch ratings agency wrote. The planned cutbacks in defense contracts came on top of bad news for Boeing's commercial operations, which has seen a drop in orders for new planes amid a global economic crisis. The Pentagon's recommendations still need to be formally endorsed by the White House and then approved by Congress, where some lawmakers have already blasted the suggested cuts in weapons projects.
by Loren B. Thompson
Arlington VA (UPI), April 7, 2009
Ever since Sen. John McCain, R-Ariz., the 2008 Republican presidential nominee, threw a monkey wrench into efforts to lease new aerial refueling tankers five years ago, the U.S. Air Force has been struggling to implement an alternate strategy.

The Air Force has spent a lot of time and money on the process but still hasn't managed to buy a single new tanker. Now the 453 Eisenhower-era Boeing KC-135 tankers that make up most of the aerial refueling fleet are approaching 50 years of age. Since nobody has ever operated jets for this long, there's no way of knowing for sure when they will start falling out of the sky because of metal fatigue or corrosion. But with the replacement process likely to take decades, it's a safe bet that will eventually happen.

The U.S. Air Force provides aerial refueling to all of the military services of the United States and to the nation's allies too, so if its tanker fleet is grounded by age-related problems, the nation's entire military posture could be crippled.

Flying to places like Afghanistan and Guam in the central Pacific Ocean often requires multiple refuelings, and right now the U.S. Air Force is accomplishing that mission with the kind of planes that airlines retired a generation ago. So you would think there would be some sense of urgency about finally getting the acquisition process right and moving out on buying new tankers.

Well, no such luck. Despite Obama administration rhetoric about openness in U.S. federal contracting, the Pentagon's new and improved tanker-selection process has all the transparency of the FBI's witness protection program.

The performance requirements for the future tankers were blessed by the U.S. Department of Defense's Joint Requirements Oversight Council with almost no input from industry, and now the acquisition strategy is being crafted in much the same way. If you were planning to spend $100 billion over the next 30 years on a new aircraft fleet, wouldn't you want to check with the only two qualified suppliers to determine whether your terms and specifications were reasonable?

We have been here before. Last year the U.S. Air Force kept contractors in the dark for several months before releasing the findings of its initial tanker competition, which proved to be so poorly executed that the whole process was overturned by the Government Accountability Office.

That doesn't necessarily mean the wrong tanker was selected, but there were so many problems with the way the process was carried out that the service had to start over. Many of those problems could have been avoided if the industry teams had been kept informed on how the selection process was unfolding. Instead, the U.S. Air Force couldn't explain its approach convincingly even after the winner was announced.

The current buildup to a re-competition is being carried out with even greater secrecy. This time around, the U.S. Air Force doesn't bear all the blame because U.S. Defense Secretary Robert Gates has reserved final oversight of key tanker decisions for his office. That means it will be his fault if the process unravels a second time, especially given the administration's righteous indignation about past acquisition errors.

What is missing from the Obama administration's high-minded rhetoric is any acknowledgment of the role that government incompetence played in bringing about those errors. When it comes to buying weapons, this really is the worst form of government except for all the others, to paraphrase Winston Churchill.

But perhaps a more fitting quote for the present tanker process would be George Santayana's observation about how people who fail to learn from the past are doomed to repeat it.

(Loren B. Thompson is chief operating officer of the Lexington Institute, an Arlington, Va.-based think tank that supports democracy and the free market.)

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Gates urges 'reform,' cuts in US weapons programs
Washington (AFP) April 6, 2009
Defense Secretary Robert Gates on Monday outlined plans to "profoundly reform" US military spending, urging a scaling back of major weapons programs while boosting funds for counter-insurgency warfare.







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