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Dan Catchpole |
Published: Thursday, July 14, 2011, 1:48 p.m.

McCain calls Boeing's tanker cost overruns 'unacceptable'

Sen. John McCain is demanding the Pentagon answer for allowing the Boeing Co. to overshoot its tanker budget by $1 billion.

McCain has sent a letter to Ashton Carter, Under Secretary of Defense for acquisitions, seeking an explanation for the cost overruns, which could cost taxpayers $600 million.

Earlier this year, the Air Force selected Boeing for a lucrative contract to replace 179 of its Eisenhower-era KC-135 tankers. Boeing beat out rival EADS for the deal. At the time, EADS officials suggested Boeing had offered the Air Force a low-ball bid.

The cost overruns are associated with the initial development lot of tankers. Boeing's cost target was $3.9 billion. But the Air Force agreed it would pay 60 percent of cost overruns up to the project cap of $4.9 billion, meaning the taxpayers pay up to $600 million and Boeing $400 million for the extra $1 billion of expenses. Anything above the $4.9 billion ceiling, Boeing pays for on its own.

McCain called Boeing's cost overruns “completely unacceptable.” He continued:

To me, that is gravely wrong and creates an incentive, particularly on very large programs, for contractors to low-ball a contract bid knowing that the taxpayer will subsidize atleast some of the overruns that will be needed to actually complete the work.

This isn't the first time McCain has called Boeing into question over the tanker contract. McCain is credited with overturning a tanker contract to Boeing shortly after 9/11. The Air Force had to bid the tanker contract again, giving it then to Airbus. That contract was later thrown out over Air Force errors.

After nearly a decade, the Air Force awarded the contract once again to Boeing, which offered its Everett-built 767-based tanker.

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