Later this month, there is the crucial meeting she and new Air Force Chief of Staff Gen. David Goldfein will have at the Pentagon with acquisitions chief Frank Kendall on whether the Boeing KC-46 has reached "Milestone C" to allow the start of low-rate initial production.
"We believe that the aircraft has met all of the wickets that are required to meet Milestone C, but of course it remains to be seen," James said at a Pentagon news conference with Goldfein on Wednesday about the "State of the Air Force."
The Milestone C decision was in doubt when problems with the boom were detected in tests to refuel the C-17 Globemaster III aircraft. Boeing installed hydraulic pressure relief valves in the boom to correct the problem, the Air Force said.
"We have to go through the formal meeting" later this month on Milestone C, James said. "We have to present it to Mr. Kendall. He has to have the opportunity to ask questions. Others may have input. So we'll see how that goes, and then hopefully we will shortly thereafter get the decision."
James and Goldfein appeared to be more concerned about what would happen to the KC-46 program if Congress fails to pass the Fiscal 2017 defense appropriations bill. James said the whole KC-46 contract might have to be renegotiated.
She said that Congress might pass a continuing resolution to keep the existing budget in place if agreement can't be reached on a new appropriations bill, resulting in a projected loss of about $1.3 billion for the Air Force.
"We certainly hope that is not the case," James said, "but we are hearing that either a six-month CR or a one-year CR is a possibility," and that "would be a bad deal for the U.S. Air Force."
Under a continuing resolution, "KC-46 production would be capped at 12 aircraft," not the 15 as proposed in the FY 2017 budget, and the result would be to "delay operational fielding of this platform," James said.
A cap of 12 aircraft would affect the "Required Assets Available," or RAA, date under the contract, and possibly throw open the whole contract to renegotiation at much higher costs to the Air Force, James said.
"If certainly the quantity were to be delayed," James said, "that couldn't help but push back the RAA, and the other thing that concerns me -- would such an approach also reopen the contract?
"In other words, if we couldn't purchase the same number that contractually we're supposed to, would that reopen the contract? That's a serious question because, of course, we do have favorable terms and we do not want to reopen the contract, change requirements in any way."
The Boeing KC-46 Pegasus was developed from the Boeing 767 airliner. In February 2011, the tanker was selected by the Air Force to replace its KC-135 tankers.