Mattis Is Said to Warn He Won't Accept Any Flawed Boeing Tankers

(Bloomberg) -- U.S. Defense Secretary Jim Mattis has bluntly warned Pentagon weapons buyers that he won't let the Air Force accept new refueling tankers from Boeing Co. if they're flawed or don't meet all contract obligations, according to a person familiar with the issue.

The plain-spoken defense chief sent a note to staff last month that he's “unwilling (totally)” to accept deficient planes in the $44.5 billion KC-46 tanker program, said the person, who asked not to be identified discussing internal deliberations. Mattis also underscored in his note that Deputy Defense Secretary Patrick Shanahan, a former Boeing executive, is prohibited from involvement in the issue, according to the person.

While Mattis hasn't been deeply involved in weapons programs, he's the latest defense secretary to weigh in on the Air Force's tortuous, 16-year effort to replace the aging KC-135 tanker. Over the years, it's an effort that's been dogged by scandal, overturned contracts and congressional inquiries.

The most serious of three recent flaws with the tanker is multiple instances of its retractable boom scraping aircraft receiving gas during mid-air refueling, a problem first reported by Bloomberg News. The KC-46's schedule already has slipped because of earlier technical problems, including with its wiring. Delivery of the first 18 tankers, which was supposed to be completed by August of this year, is now expected by October 2018.

Pentagon Praise

Boeing has absorbed cost overruns exceeding the Air Force's $4.82 billion liability cap in the tanker's development phase, and the plane has drawn praise from Pentagon officials and the Government Accountability Office.

Responding to the note from Mattis, Undersecretary for Acquisition Ellen Lord praised Air Force management in an Oct. 4 memo.

“Throughout the execution of the contract, the Air Force has held, and will continue to hold, Boeing accountable to all KC-46 contractual requirements,” Lord wrote in the response. “If system performance is non-compliant and merits correction, the Air Force will hold Boeing accountable -- potentially via additional monetary penalties until corrected at their cost.”

Lord, the Defense Department's chief weapons buyer, wrote she believed two of three potential “Category 1” deficiencies “have a clear path forward” for a resolution soon.

One involved a concern that the aircraft's high-frequency radio might transmit during fueling when it shouldn't in order to protect the location of a plane its servicing. A second is that the tanker's refueling boom might remain extended after it dispensed gas.

Boeing spokesman Chick Ramey said in an email that both issues are near resolution.

‘Under Investigation'

The problem with the boom scraping planes was “still under investigation,” as the service planned to start testing last month, according to Lord.

While Ramey said in an email that “we are not going to comment on internal conversations with customers,” he said, “we continue to work with USAF officials to resolve” the boom-scraping issue.

Lord's spokesman, Navy Commander Patrick Evans, said in an email that “we do not comment on or discuss internal deliberations or requests for information between Secretary Mattis and his leadership.” The Pentagon's acquisition office “will continue to work with all the services on issues and resolutions they may identify in order to ensure we have the most lethal force possible,” Evans said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert, Michael B. Marois

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