<http://www.nytimes.com/2001/03/19/national/19MILI.html>
March 19, 2001
Air Force Proposes Plan to Help Boeing With Sale of Planes
By JAMES DAO
WASHINGTON, March 18 — In a twist to the Pentagon's growing efforts to bolster
the defense industry, the Air Force has devised an ambitious plan to help
Boeing, the world's biggest commercial jet producer, sell a version of its
latest jumbo military transport plane to private cargo companies.
The plan calls for the Air Force to provide an unusual array of financial
incentives to encourage private carriers to buy the transport plane, the C-17
Globemaster, including guaranteed government transport business, a Pentagon
promise to buy back C- 17's from firms that go bankrupt, and even subsidies up
front.
In exchange, the private haulers would be required to make their C- 17's
available to the Air Force for war and other emergencies.
The plan is subject to the approval of Secretary of Defense Donald H. Rumsfeld,
who has yet to review it, and Congress, where the C-17 program will be pitted
against other big- ticket programs facing cuts.
But for Boeing, the plan could help create a market in oversized commercial
cargo planes potentially worth billions of dollars, more than enough to keep its
C-17 line in Long Beach, Calif., humming into the next decade. Without new
orders, the 8,500-worker plant there is expected to close within five years. The
plan would begin with the sale of 10 of the planes to commercial cargo companies
at a total cost of $1.6 billion.
"We see this as win, win, win, for the Air Force, for Boeing and the air cargo
industry," said George P. Sillia, a Boeing spokesman in Long Beach.
But Pentagon watchdog groups say the proposal underscores an alarming trend
toward government- business partnerships that weaken Pentagon oversight of the
defense industry and raise questions of favoritism. The partnership may diminish
the Air Force's desire to hold a contractor to the strictest accountability,
these critics warn, and may result in the buying of weapons that are not
necessary.
"These cozy relationships have always existed," said Danielle Brian, executive
director of the Project on Government Oversight, a nonprofit watchdog group that
has studied the C-17 program. "But this is more overt than in the past. And
that's a disaster for taxpayers."
Industry experts say the C-17 proposal is groundbreaking in its foray by the
military into the private sector. Although the Pentagon has in the past
authorized contractors to sell commercial versions of military equipment, this
would be the first time in memory that it would help do the selling by offering
such broad financial incentives, the experts said.
And with many defense contractors asserting that they have been dangerously
weakened by shrinking military budgets, such forays could become more common,
the experts said.
"It's a sign of the times," said Richard Aboulafia, an expert in military
aircraft with the Teal Group, a consulting firm. "A fiscally weakened Department
of Defense, declining markets and an industrial base that has over-capacity are
potent recipes to encourage a more interventionist approach," Mr. Aboulafia
said. "There is no question we'll see more of this."
