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Letter from Douglas Holtz-Eakin, Director Congressional Budget office to Don Nickles with attachment: Assessment of the Air Force's Plan to Acquire 100 Boeing Tanker Aircraft 1 (August 2003)

handle is hein.congrec/cbo9856 and id is 1 raw text is: August 26, 2003 Honorable Don Nickles Chairman Committee on the Budget United States Senate Washington, DC 20510 Dear Mr. Chairman: As you requested in your letter of July 14, 2003, the Congressional Budget Office (CBO) has reviewed the Air Force's report on its plan to lease 100 Boeing KC-767A aerial refueling aircraft. In that report, submitted to the Congress on July 11, 2003, the Air Force concluded that its plan to acquire the aircraft using a leasing arrangement would cost about $150 million more (expressed in net-present-value terms) than an outright purchase. According to the report, the proposed leasing arrangement meets all requirements of the Department of Defense Appropriations Act, 2002, including criteria for an operating lease specified in the Office of Management and Budget's (OMB's) Circular A-11, Preparation, Submission, and Execution of the Budget and leasing is the preferred approach because of the advantage it affords for quickly delivering needed tankers to our warfighters without requiring significant up-front funding. After analyzing the Air Force's report and receiving additional information about the proposed lease from the Air Force and Boeing, CBO has concluded that the proposed transaction would essentially be a purchase of the tankers by the federal government but at a cost greater than would be incurred under the normal appropriation and procurement process. The special-purpose entity that has been established to buy the aircraft would, in fact, be substantially controlled by and act on behalf of the federal government, and its transactions should be reflected in the federal budget. Even if, however, one views the arrangement as a lease, CBO's analysis indicates that the proposal does not meet the conditions for an operating lease described in the Congressional Scorekeeping Guidelines and in OMB Circular A-I1 and thus does not comply with the terms of section 8159 of the Department of Defense Appropriations Act, 2002.

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