KC-X Tanker Re-Compete
On 10 September 2008 the Department of Defense notified the Congress and the two competing contractors, Boeing and Northrop Grumman, that it was terminating the current competition for a U.S. Air Force airborne tanker replacement. Secretary Gates, in consultation with senior Defense and Air Force officials, had determined that the solicitation and award cannot be accomplished by January. Secretary Gates stated, “Over the past seven years the process has become enormously complex and emotional – in no small part because of mistakes and missteps along the way by the Department of Defense. It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment. The resulting “cooling off” period will allow the next Administration to review objectively the military requirements and craft a new acquisition strategy for the KC-X.” The Department will recommend to the Congress the disposition of the pending FY09 funding for the tanker program and plans to continue funding the KC-X program in the FY10 to FY15 budget presently under review. Some have speculated that President Obama would favor organized labor and a Boeing tanker, and that President McCain wouldn't want to be seen dumping Boeing a second time.
U.S. Senators Sam Brownback and Pat Roberts (R-KS) today applauded the decision by the Department of Defense to terminate the flawed U.S. Air Force tanker competition in order to start over with a fair, objective process. Brownback said, "I applaud the Department of Defense's decision to terminate the existing process and for giving itself the time to clarify the capabilities it needs in a new tanker. By restarting this competition next year, DoD can restore confidence that the ultimate winner of this competition will be providing the best platform for our warfighters and the best value for our taxpayers."
On 29 February 2008 Secretary of the Air Force Michael W. Wynne and Vice Chief of Staff of the Air Force Gen. Duncan J. McNabb announced the selection of a team of Northrup Grumman, EADS and Airbus as the winner of the KC-X competition for development and procurement of up to 179 tanker aircraft for approximately $35 billion. The initial contract for the newly named KC-45 is for the system design and development of four test aircraft for $1.5 billion. This contract also includes five production options targeted for 64 aircraft at $10.6 billion.
On March 11, 2008 Boeing filed a formal protest regarding the selection by the U.S. Air Force of the Northrop Grumman/European Aeronautic Defence and Space Company KC-30 over the Boeing KC-767 for its KC-X medium-sized tanker program. The Boeing protest alleged more than 100 violations of proper contracting practices. Boeing concluded from the debriefings following the selection was that the KC-X acquisition process was flawed. Boieng contended that fundamental but often unstated changes were made to the bid requirements and evaluation criteria.
The Government Accountability Office (GAO), the investigative arm of Congress, sustained eight of Boeing’s protest issues on 18 June 2008. GAO's review of the record led the agency to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman. The Air Force, in making the award decision, did not assess the relative merits of the proposals in accordance with the evaluation criteria identified in the solicitation, which provided for a relative order of importance for the various technical requirements. The Air Force conducted misleading and unequal discussions with Boeing, by informing Boeing that it had fully satisfied a key performance parameter objective relating to operational utility, but later determined that Boeing had only partially met this objective, without advising Boeing of this change in the agency’s assessment and while continuing to conduct discussions with Northrop Grumman relating to its satisfaction of the same key performance parameter objective. The Government Accountability Office recommended the Air Force reopen the bidding process for the service’s aerial refueling aircraft contract.
On 09 July 2008 the Defense Department reopened the bidding process for the multibillion-dollar midair refueling tanker contract. Defense Secretary Robert M. Gates said “Industry, Congress and the American people all must have confidence in the integrity of this acquisition process,” Gates said at a Pentagon news conference. “I believe the revised process will result in the best tanker for the Air Force at the best price for the American taxpayer.” Replacing the Air Force as the “source selection authority” is John J. Young Jr., undersecretary of defense for acquisition, technology and logistics. He is tasked with appointing an advisory committee to oversee the selection of a bidder.
The Boeing Co. received a major boost August 1, 2008 from a House subcommittee, which moved to impose tight restrictions on the Pentagon as it seeks new bids on a $35 billion contract for Air Force aerial refueling tankers." The defense spending bill approved by the subcommittee essentially would require the Pentagon to abide by the provisions of the earlier bid proposal. The bill would: require the Pentagon to seek a medium-sized tanker like the one Boeing offered, and prohibit extra credit for a larger tanker like the one offered by Northrop Grumman and the European Aeronautic Defense and Space Co. The bill also would require that a new tanker be capable of refueling all of the planes currently flown by the Air Force, a requirement the Northrop-EADS tanker was unable to meet but was dismissed by the Air Force in the earlier competition, and require the Pentagon to consider the cost of operating the new tankers over a 40-year life cycle, rather than a 25-year life cycle. That could favor the Boeing plane. The language was inserted in the defense spending bill by the subcommittee’s chairman, Rep. John Murtha, D-Penn., after nonstop lobbying by the No. 2 Democrat on the subcommittee, Washington Rep. Norm Dicks, the veteran from Belfair. Rep. Todd Tiahrt, R-Kan., is also a member of the subcommittee.
On 08 August 2008 the revised Request For Proposal (RFP) was issued by the Defense Department. This launched a $40 billion procurement with final proposals due in 45 days and a source selection decision by the end of the year. In the original selection process, the Air Force took nearly 10 months –and botched the job -- to do what it now plans to do in three.
Rep. Norm Dicks said the new RFP included substantive changes that appear to favor a tanker larger than any real-world scenarios would require and that appear to diminish the substantially greater life-cycle costs of buying a bigger aircraft. The Airbus A-330 is 53 percent larger than the Boeing 767. In this revised RFP, the Defense Department now apparently intends to award greater credit for having the ability to carry more than the “threshold requirement” contained in the previous solicitation – which was already three times the amount routinely off-loaded by KC-135 aircraft today.
On 11 August 2008 Aviation Week reported that Boeing was "strongly considering" dropping out of the tanker competition. Boeing complained that the 45-day response period is too short a time frame to bid a larger aircraft. Boeing contended that new specifications for the tanker are biased toward the Airbus tanker. Boeing would need more time to put together a proposal for a tanker based on its larger 777. The Pentagon said it would measure government ownership costs over 40 years instead of 25, which analysts say should favor the smaller Boeing 767-based tanker.
In a bi-partisan letter sent in mid-August, lawmakers asked Defense Secretary Robert Gates to allow more time for the revised RFP to be understood by the bidders. On 22 August 2008 Republican Sens. Pat Robert and Sam Brownback of Kansas said Boeing Co. needed four extra months to respond to the new request for a larger aircraft. They warned of “fierce bipartisan resistance” in Congress if the new process seems unfair. U.S. Senator Sam Brownback commented on conversations he, along with U.S. Senator Pat Roberts (R-KS) and U.S. Representative Todd Tiahrt (R-Goddard), had with Pentagon officials about the KC-X tanker replacement schedule. "I am concerned that the Department of Defense's 'bigger-is-better' mentality poses substantial costs to tax payers without clearly defined benefits to the warfighter," said Brownback. "Nevertheless, if DoD proceeds with a request for proposal that favors a large tanker, it must provide adequate time for competitors to offer bids."
