Abstract:
In May 2003, Defense Secretary Donald Rumsfeld approved an agreement allowing the Air Force to lease 100 converted Boeing 767 aircraft as aerial refueling tankers. The deal's critics, most prominently Senator John McCain, argued that no, the aircraft were not needed; that the lease was a thinly disguised purchase designed to circumvent the budget process; and that the agreement was a government handout to the Boeing Company. As the deal neared Congressional approval, evidence surfaced of illegal conduct involving an Air Force acquisition executive and Boeing, casting uncertainty over the agreement's prospects. This case discusses the financial and accounting issues of leasing rather than purchasing the aircraft, the translation of commercial business practices to government, and the process and purpose of government budgeting. This case is best used in concert with "The Boeing Tanker Lease Deal (A)."
Learning Objective:
The case addresses the issues surrounding adapting common business practices to government; the implications on costs and accounting treatment of leasing versus purchasing; and the process and purpose of government budgeting. It also raises the issue of the proper role of government in promoting domestic businesses relative to other government interests.
