Military Aircraft:

Institute for Defense Analyses Purchase Price Estimate for the Air Force's Aerial Refueling Aircraft Leasing Proposal

GAO-04-164R: Published: Oct 14, 2003. Publicly Released: Oct 14, 2003.

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On September 4, 2003, GAO provided the Senate Committee on Armed Services our observations on the Air Force's proposed lease of 100 Boeing 767 aircraft modified for aerial refueling, to be known as the KC-767A. At the hearing, the Committee heard testimony from the Institute for Defense Analyses (IDA) concerning the results of a study it did on the estimated acquisition cost of each aircraft. IDA concluded that $120.7 million was a reasonable price for a KC-767A aerial refueling aircraft. At the time of the hearing, we had just obtained access to the IDA study and were not in position to comment on it. On September 5, 2003, the Committee's Chairman and Ranking Minority Member asked us to analyze the IDA study and provide our assessment. This letter responds to that request. Our objectives were to assess the reasonableness of IDA's approach to the issue of pricing the KC-767A aircraft and to provide any comments that we had on its methodology used to estimate the base prices and costs for each aircraft.

We believe the IDA has provided a reasonable and comprehensive estimate within the stated objective and assumptions given by the study authors. The objective of the IDA study was to establish a reasonable direct purchase price for 100 KC-767A aircraft. The IDA was not asked to and did not address or make any assumptions about provisions of the proposed lease, financing, suitability of leasing, or any other acquisition alternatives to the proposal. Further, the IDA did not attempt to reconcile its study results to coincide with the aircraft configuration currently being negotiated between the Air Force and Boeing.

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