The report by the Defense Department's Inspector General's office, made public at a US Senate Armed Services Committee hearing, found that several top Pentagon officials failed to properly award and oversee the contract, in one of the worst military contracting scandals ever.

The deal was scrapped last year amid an outcry over the inflated price tag and questionable ties among the chief players.

The auditors found the price charged for the leasing program was higher than justified, that standard acquisition channels were circumvented, and that the planes were not even really needed, at least not in the short run.

Had it gone through, the program would have been the most expensive government lease program ever.

Acting Deputy Secretary of Defense Gordon England testified that the report underscored the need for "corrective action and better check and balances" in the contact awarding process.

The report found that Air Force officials felt compelled in part by the 9/11 terror attacks to replenish their aging tanker aircraft fleet, but said that senior officials at the Air Force and in the office of the Secretary of Defense skirted rules meant to assure "objective acquisition information."

An August 2002 e-mail by a senior official in the Defense Department's comptroller's office estimated that the lease price was inflated by as much as 50 percent.

"We all know that this is a bailout for Boeing," he wrote.

The scandal resulted in congressional, Pentagon and Justice Department investigations and sent two top Boeing executives -- including a former Air Force officer -- to prison, after a Boeing executive helped negotiate the hiring of the Air Force official while she was still handling Boeing matters at the Pentagon.

The Chicago-based aerospace giant and its European nemesis, Airbus, are embroiled in a mano-a-mano battle to be selected for a new plan, which would entail the purchase of modified airliners as aerial refueling tankers.

Representative Duncan Hunter, chairman of the House Armed Services Committee, quietly attached an amendment to the Defense Department budget bill last month that would effectively eliminate Airbus from a future tanker bidding competition, leaving Boeing as the only available option for the contract, which could be worth billions of dollars.

Tuesday's Pentagon report provided the most detailed accounting to date of the scandal, but lawmakers on the Armed Services Committee were sharply critical over information that had been black out from several sections of the document.

Pentagon Inspector General Joseph Schmitz told lawmakers he edited out portions of the report and accompanying documents in accordance with White House rules, but Democratic Senator Carl Levin decried the edits.

"You are required to issue a thorough and independent report. It appears to me that you have done neither," Levin told Schmitz.

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