has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

Office of the Secretary of Defense, Director, Programs Analysis and Evaluation (OSD/PA&E) commissioned this quick-look study to estimate the cost of a KC–767. The Air Force is not the release authority for this study, however I can relay your request to OSD. The Air Force negotiated with Boeing for over seven months-I believe that IDA was hampered by having only a few weeks for their quick analysis. IDA's initial results were that the cost of the KC-767 should be less than the Air Force negotiated price. Numerous meetings and data exchanges have occurred and will continue to occur among Air Force, Boeing, IDA and OSD representatives to better understand the weapon system and to clarify differences in costing methodology.

Question. What are your thoughts on the IDA's criticism of the lease proposal? Answer. To clarify the record, I was not present at the above-mentioned meeting that was reported in the media. As far as the costs you mentioned, the Air Force has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

OSD/PA&E commissioned this quick-look study to estimate the cost of a KC-767. The Air Force is not the release authority of this proprietary study, however I can relay your request to OSD. The Air Force negotiated with Boeing for over seven months I believe that IDA was hampered by having only a few weeks for their quick analysis. I believe that IDA did not fully understand and evaluate the cost, configuration, and complexities of the Air Force KC-767. Numerous meetings and data exchanges have occurred and will continue to occur among Air Force, Boeing, IDA and OSD representatives to better understand the weapon system and to clarify differences in costing methodology.

Question. What financial or other advantages are there to leasing now that may not be present if we purchased at a later date?

Answer. To clarify the record, I was not present at the above-mentioned meeting that was reported in the media. As far as the costs you mentioned, the Air Force has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

The key reasons to lease now are low interest rates, low inflation, the depressed aircraft industry, and a mature 767 production line. Leasing meets a projected need as KC-135s age and tankers require recapitalization. Leasing delivers more critical tanker capability to the warfighter in the same time period than the conventional program as funded in the Fiscal Year 2004 President's Budget. Leasing requires less money upfront and allows the Air Force to spread the operating cost over the life of the lease. Congress stipulated a multi-year lease that enabled the Air Force to negotiate firm fixed price development; production, training, and logistics support contracts that avoid the uncertainty of cost-plus contracts. Waiting to begin replacement will likely result in higher unit costs and a slower "ramp-up" of much needed new aircraft.

Question. Will the lease arrangement require research and development costs? Answer. To clarify the record, I was not present at the above-mentioned meeting that was reported in the media. As far as the costs you mentioned, the Air Force has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

The KC-767 negotiated lease proposal requires no separate Air Force research and development funding. Boeing's international launch and commercial pricing of the Global Tanker Transport Aircraft (GTTA) has resulted in costs being amortized among two foreign customers (total of four aircraft) and the U.S. Government (100 jets).

Question. If so, who will be responsible for paying for those costs, the government or the contractor?

Answer. To clarify the record, I was not present at the above-mentioned meeting that was reported in the media. As far as the costs you mentioned, the Air Force has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

Research and development costs are initially borne by the contractor, but are recovered in the fixed price of the KC-767 over the course of the lease.

Question. Are there any funds in the President's FY04 budget request to support the lease if it is approved?

Answer. To clarify the record, I was not present at the above-mentioned meeting that was reported in the media. As far as the costs you mentioned, the Air Force has not released cost information on the lease and cannot release cost information until the Secretary of Defense approves the lease.

If the Secretary of Defense approves the lease of the KC-767, the Air Force will prepare a report to the four defense committees seeking lease approval. If the KC767 lease is approved by the Secretary of Defense without changes, funding will be required in fiscal year 2004 for MILCON and other program startup costs. The Air Force has programmed $4.1 billion in the fiscal year 2004 President's Budget (fiscal year 2004-fiscal year 2009) for a traditional tanker procurement with funding beginning in fiscal year 2006.

KC-135 E-MODEL TANKER RETIREMENT

Question. Did the Air Force conduct a formal analysis to assess how the retirement of 68 E-model tankers would affect DOD's ability to meet wartime requirements?

Answer. Yes. It was determined that the capability lost with a reduction of 68 Emodel tankers (13 percent of the fleet) is equivalent to a 4-5 percent reduction in sortie generation averaged over a sustained 30-day conflict.

Question. Did the Air Force complete a comprehensive analysis of potential basing options to know whether they were choosing the most cost-effective alternative?

Answer. The tanker roadmap uses existing tanker bases in the Air Force. It is most cost-effective to use existing tanker bases and leverage the in-place support facilities and personnel. Active duty bases that transfer R-models to the reserve components will be the first to receive new replacement tankers, or in the case of McConnell AFB, their resultant force structure will increase with R-models. Reserve component basing and manpower remain unchanged, however the standard reserve component air refueling squadron is re-baselined to 8 R-model tankers by the time the first 100 new tankers are delivered to the active duty.

Question. What plans are there to replace those models with R-models for the Air Reserve Component?

Answer. Air Force active duty R-model tanker units will transfer 48 total aircraft to the reserve components during the period the E-models retire (fiscal year 200406). Of those 48, 16 flow to the Reserves and 32 to the Air National Guard.

Question. What is the tanker replacement (KC-767) beddown plan and how will it effect both the active duty and reserve component bases?

Answer. The active duty will continue to flow R-models to the Air National Guard, allowing them to retire their remaining 56 E-models. The Air Force plans to base the first 100 new tankers at active duty bases. Whether the Air Force leases tankers sooner or buys them later, this plan will not change. The resulting force structure will be a pure R-model reserve component and a mix of R-models and new tankers in the active duty.

Question. What is the fall-back position if leasing is not approved, and 68 air craft are cut from the inventory? Does the AF only plan on procuring a single new tanker in FY09 with all other buys outside of the FYDP?

Answer. The tanker retirements in the fiscal year 2004 President's Budget_are neither associated with, nor contingent upon the proposed lease. The savings from these retirements are used to pay for corrosion repairs on the remaining tanker fleet. Although under a traditional purchase the first new tanker will not be delivered until fiscal year 2009, the Air Force does have $4.1 billion programmed in the FYDP to recapitalize the tanker fleet. Funding begins in fiscal year 2006.

Question. Please detail the budget associated with procuring tankers, within the FYDP and beyond. Is this reduced number of tankers sustainable over the next 710 years if leasing does not occur?

Answer. The funding profile for tanker replacement in the Air Force program is indicated in the table below. Currently the Air Force has $4.1 billion programmed in the future years defense plan (FYDP) which will deliver 16 aircraft by fiscal year 2011 (aircraft purchased in fiscal year 2008 and fiscal year 2009 will be delivered in fiscal year 2010 and fiscal year 2011). Outside the FYDP the preferred production rate of 18 aircraft/year will require between $3.8 billion to 4.2 billion annually. The eventual number and type of tankers the Air Force might buy has not been determined.

Question: How many KC-135s are in depot maintenance now (and differentiate between the two models)? Quarterly average over three years?

A standard method to track aircraft in depot status is to observe it quarterly. This averages the data and takes into account the normal variations of aircraft flow.

This chart displays the quarterly average number of aircraft in depot maintenance for E models, R models and the total. Currently there are 87 KC-135 aircraft in depot maintenance consisting of 15 E models and 72 R models.

Question. How will crew ratios change with this decision? Please quantify personnel changes associated with this plan.

Answer. The crew ratio will increase with the decision to reduce KC-135 E-models. The Air Force retained 286 officer and enlisted positions as part of the 48 aircraft transfer to the Air Reserve Components (ARC), filling requirements in the active duty tanker program. This increased the active duty crew ratio from 1.36 to 1.75, while also largely maintaining the active duty flight hour program, flying more hours per jet. The ARC retained the manpower associated with the E-model reduction, allowing the Air National Guard to increase their crew ratio from 1.27 to 1.8, and Air Force Reserves from 1.27 to 1.5.

Question. Does this create a greater burden on the Guard to support missions, if the active force is reduced by 68 a/c? Please quantify the number of KC-135 sorties that the Air National generated annually over each of the last five years. Is this rate expected to increase significantly under this proposal?

Answer. The Air Force plans to reduce 68 primary aircraft authorization (PAA) KC-135Es between fiscal year 2004-06. As part of our recapitalization plan, 48 active duty R-models will transfer to the Air Reserve Component (ARC) allowing the ARC to retire their first 48 E-models. Additionally the Air National Guard (ÅNG) will standardize the size of their units at eight PAA, allowing the retirement of an additional 20 KC-135Es, and maintain all ARC unit flags. The savings will be reinvested into the KC-135 fleet for critical corrosion repairs, manpower is reinvested to increase crew ratio to 1.75 active duty, 1.8 ANG, and 1.5 Air Force Reserve Command. The active duty/ARC reduces the KC-135 PAA fleet by 13 percent, but retains peacetime flying hours to support crew training.

Yes, this creates a greater burden on the Air National Guard. These active force aircraft have generated significant sortie rates requirements that will continue to exist as they are absorbed by the ANG. The active duty to ARC mix changes from 45 percent/55 percent in fiscal year 2003 to 41 percent/59 percent respectively by fiscal year 2006. In peacetime the aircraft will log more hours per year, however, the crewmembers will fly/work the same amount. In a maximum effort wartime scenario the ARC will pick up an additional four percent of the workload.

Over the last five fiscal years, ANG KC-135 (E & R) sorties generated are: 19,859 (fiscal year 1998); 17,684 (fiscal year 1999); 16,316 (fiscal year 2000); 16,986 (fiscal year 2001), and 19,499 (fiscal year 2002). ANG sorties are expected to gradually increase under this proposal.

Question. What is the net impact on Fairchild? Grand Forks? Elsewhere?

Answer. Under the most current plan Fairchild AFB will transfer a total of 18 R-model tankers to the reserve components to backfill their E-model retirements. Grand Forks' contribution is 12 R-models, and McConnell's is 18.

Question. How many tankers are required for a two MTW scenario? What is the identified tanker requirement for a MTW involving Iraq?

Answer. Tanker Requirements Study 2005 (released 2001) was conducted by Air Mobility Command in partnership with the Office of the Secretary of Defense (OSD) Program Analysis and Evaluation division. The study was conducted to determine both aircraft and aircrew requirements to meet our nation's aerial refueling needs in the near term. The Tanker Requirements Study recommended fleet availability of 500-600 aircraft at a 1.66 to 1.92 crew ratio, depending upon the scenario.

We are confident that we can, and will, successfully execute all required missions. However, as simultaneous operations in other regions are added, tanker availability becomes more of a limiting factor, delaying deployment of forces, and extending the duration of the air war. In the future, the Air Force will continue to assess its tanker requirements and make appropriate decisions regarding force structure.

Question. Please detail the assumed savings from retiring these aircraft, including an explanation of assumed cost-avoidance. Are these savings being used entirely to recapitalize the remaining E-models?

Answer. Savings include depot costs, manpower, and engine overhauls. Cost avoidance includes expected increases to depot maintenance costs and corrosion repairs (including strut replacement). These retirements avoid needed replacement/ overhaul of the E-model struts on approximately half of the fleet ($177 million). The cost of program depot maintenance has quadrupled since 1990; cost avoidance for higher bills in the Future Year Defense Plan is approximately $530 million.