The U.S. Air Force could be violating the law in an attempt to reduce the cost of future C-17 Globemaster transport aircraft under a new “public-private partnership” arrangement with aircraft manufacturer Boeing, according to a government watchdog group.

Analysts with the Project on Government Oversight said that under the proposal, a private air-freight company would be able to buy “commercial” versions of the C-17 — designated the BC-17X — “at a price that is up to $50 million less than what the government pays …”

Also, POGO analysts said, the deal would include “guaranteed government hauling contracts from the Air Force,” and the Air Force has “offered to ‘buy back’ the planes in the event that a purchaser declares bankruptcy.”

In exchange for those perks, commercial air haulers taking part in the program would be required to make the planes available to the Air Force during wartime or other times of national emergency.

The plan “amounts to goodies all around in order to entice previously disinterested buyers into purchasing the BC-17X,” said a POGO analytical report, released yesterday.

The report characterized the deal as a “highly speculative sweetheart deal that would put billions of taxpayer dollars at risk and provide little or no benefit to the federal government.”

“The plan calls for the Air Force to provide an unusual array of financial incentives to encourage private carriers to buy the transport plane … including guaranteed government transport business, a Pentagon promise to buy back C-17s from firms that go bankrupt, and even subsidies up front,” the New York Times reported Sunday.

The proposal was finalized in December 2000, but before it can take effect it must be reviewed by Secretary of Defense Donald Rumsfeld and approved by Congress.

The Times said Rumsfeld has yet to look at it.

Currently, he is conducting a closely guarded review of all Pentagon weapons-acquisition programs, with an eye toward recreating a 21st-century military force touted by President Bush during his campaign. That vision could include cutting a number of current high-dollar acquisition programs being sought by the Pentagon, including three new fighter aircraft and additional C-17 Globemasters.

“We see this [deal] as win, win, win for the Air Force, for Boeing and the air cargo industry,” George P. Sillia, a Boeing spokesman in Long Beach, Calif., told the Times.

POGO said Congress has only authorized funding for a total of 120 C-17s in an acquisition program scheduled to run through 2004. The planes cost $232 million each, according to Boeing and the Defense Department.

The Air Force initially requested funding for 210 planes, but that figure was scaled back by then-Defense Secretary Dick Cheney in 1990, after the end of the Cold War and the demise of the former Soviet Union.

However, Boeing — since 1999 — has been pushing the Pentagon to buy another 60 Globemasters. Congress has been somewhat receptive, but before they authorize more, lawmakers said the overall cost of the plane must first be reduced by 25 percent.

That condition, the watchdog group said, puts the government in a position of subsidizing the plane with taxpayer dollars if the Air Force is allowed to order more C-17s, and is “an apparent attempt to meet the letter, but not the spirit, of the Congressional mandate to reduce the cost of future C-17 military procurement.”

Some analysts say additional planes aren’t necessary.

POGO’s assessment report said that “the Air Force has been unable to demonstrate an airlift need to justify keeping the line open and the GAO [General Accounting Office] says that 100 [planes] are all that are needed …”

Air Force and Pentagon planners disagree, pointing out that the current fleet of C-141s, gigantic C-5s and C-130 aircraft have been worn after years of overuse in various overseas deployment roles during the eight years of the Clinton administration.

Even so, POGO says, the proposal emphasizes what is viewed as an alarming trend in government-business relationships that diminish the Pentagon’s oversight of the defense industry and provokes charges of favoritism.

“These cozy relationships have always existed,” POGO executive director Danielle Brian told the Times. “But this is more overt than in the past. And that’s a disaster for taxpayers.”

POGO’s analysis noted that the proposal has raised the eyebrows of the inspector general, some members of Congress, and the Pentagon’s former head of testing.

“The Air Force proposal is essentially attempting to bribe commercial air haulers to use an aircraft that is ill-suited for their overall needs, tantamount to requiring a NASCAR driver to race a sports utility vehicle lacking in cornering characteristics,” the report said.

The panel that recommended the program said of the 60 additional planes sought, the Air Force would buy 50 of them, with the remaining 10 going to private companies.

The Air Force would help those companies buy the planes by giving them grants and long-term government transport business.

And though the companies would be required to allow the Pentagon to use the civil models in a national emergency, analysts said the Air Force would be limited in how they could use them because the BC-17s would lack advanced avionics and software endemic on the military models.

The Times said the subsidies could amount to nearly $200 million annually. Air Force officials maintain that in reality, however, after subtracting those costs, taxpayers would save $1 billion over five years because the Air Force would be buying its 50 planes at a reduced cost.

POGO’s Brian sees it differently.

“When a person goes into a very expensive store and sees a $200 dress selling for 10 percent off, they may buy it and say they saved money. But if you didn’t need the dress in the first place, you haven’t saved anything,” she told the Times.

There are also design modifications that would have to be made to the plane to meet Federal Aviation Administration requirements and regulations that don’t apply to military aircraft.

Boeing says the plane was designed to carry large combat equipment and troops or humanitarian aid across international distances directly to small austere airfields anywhere in the world.

In 1998, eight C-17s completed the longest airdrop mission in history, flying more than 8,000 nautical miles from the United States to Central Asia, dropping troops and equipment after more than 19 hours in the air, a feat repeated in 2000.

Since the first squadron became operational in 1995, C-17s have logged 250,000 flight hours, Boeing said.

But quoting GAO sources, POGO’s analysis said, “almost from the start the C-17 has been plagued with cost, schedule, and technical performance problems. Since the early 1990s, the GAO has repeatedly raised serious questions about the aircraft’s ability to operate in the manner it was originally envisioned.”

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