Pentagon Delays Boeing Tanker Plans

The Pentagon will delay plans to acquire 100 air refueling tankers from Boeing Co. (BA) in light of a scandal at the aerospace giant that has led to the dismissal of two executives and the resignation of Chairman and CEO Phil Condit (search).

Deputy Defense Secretary Paul Wolfowitz (search) said the Pentagon's internal auditor will examine whether the conduct of the two executives had any negative impact on the contract to lease 20 tankers and buy another 80.

The Air Force initially proposed leasing all 100 tankers in an attempt to quickly update its aging fleet. Sen. John McCain (search), R-Ariz., and other lawmakers had criticized the proposal as wasteful and lawmakers worked out the compromise to lease only 20 planes and buy the rest. The change was expected to save billions from the original plan, estimated around $21 billion.

In a letter Monday to leaders of the House and Senate Armed Services committees, Wolfowitz described the delay as "a pause." He said the Pentagon "remains committed to the recapitalization of our aerial tanker fleet and is appreciative of the compromise that will allow this arrangement to move forward."

"Nonetheless, I believe that it is prudent to reassess this matter before proceeding," he said.

Boeing spokeswoman Deborah Bosick declined comment on the decision.

Boeing announced Nov. 24 it had fired its chief financial officer, Mike Sears (search), and a vice president, Darleen Druyun (search), a former Air Force official. A Boeing investigation found that Sears approached Druyun about joining the company while Druyun was overseeing Boeing contracts for the Air Force.

Boeing said Sears and Druyun were fired for violating company policies on hiring and they tried to cover up the misconduct.

Condit resigned unexpectedly Monday, saying "the controversies and distractions of the past year were obscuring the great accomplishments and performance of this company."

On the day that Sears and Druyun were fired, President Bush signed a $401.3 billion defense bill that authorized the plan to lease and buy the tankers. But pressure quickly mounted to reconsider the plan. Defense Secretary Donald H. Rumsfeld said the next day that he had asked senior Pentagon officials to examine whether it should be delayed.

On Friday, McCain and Sen. Peter Fitzgerald, R-Ill., sent a letter to Rumsfeld saying it would be irresponsible for the Defense Department to proceed with the contract without reassessing it.

John Ullyot, a spokesman for Senate Armed Services Committee Chairman John Warner, R-Va., said the decision to suspend the tanker plans was "a prudent step."