KC-X - Boeing Protest

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. 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. These changes, according to Boeing, not only unfairly skewed the results against Boeing; they "penalized the warfighter and the taxpayer by selecting an airplane that did not satisfy the Air Force's own bid requirements."

Bryan Whitman, deputy assistant secretary for public affairs, said the challenges like the one filed by the Boeing Company are built into the acquisition process to ensure it complies with federal regulations. GAO had 100 days to review the contract award and determine whether the Defense Department followed appropriate processes and procedures, with a decision expected prior to 19 June 2008.

According to Boeing, "the selection process for the KC-X was flawed by countless irregularities. In the evaluation, selection criteria were misapplied, the RFP was disregarded and the requirements of the Federal Acquisition Regulation were not adhered to-resulting in the selection of a much larger, more vulnerable, less capable and ultimately more costly offering. It's a decision that doesn't add up; not for the warfighter or the taxpayer."

"Our analysis of the data presented by the Air Force shows that this competition was seriously flawed and resulted in the selection of the wrong airplane for the warfighter," said Mark McGraw, vice president and program manager, Boeing Tanker Programs. "We have fundamental concerns with the Air Force's evaluation, and we are exercising our right under the process for a GAO review of the decision to ensure that the process by which America's next refueling tanker is selected is fair and results in the best choice for the U.S. warfighters and taxpayers."

"Boeing offered an aircraft that provided the best value and performance for the stated mission at the lowest risk and lowest life cycle cost," said McGraw. "We did bring our A-game to this competition. Regrettably, irregularities in the process resulted in an inconsistent and prejudicial application of procurement practices and the selection of a higher-risk, higher-cost airplane that's less suitable for the mission as defined by the Air Force's own Request For Proposal. We are only asking that the rules of fair competition be followed."

Following an analysis of data presented at an 07 March 2008 debriefing on the decision, Boeing concluded that what began as an effort by the Air Force to run a fair, open and transparent competition evolved into a process replete with irregularities. These irregularities placed Boeing at a competitive disadvantage throughout this competition and even penalized Boeing for offering a commercial-derivative airplane with lower costs and risks and greater protection for troops.

"It is clear that the original mission for these tankers -- that is, a medium-sized tanker where cargo and passenger transport was a secondary consideration -- became lost in the process, and the Air Force ended up with an oversized tanker," McGraw said. "As the requirements were changed to accommodate the bigger, less capable Airbus plane, evaluators arbitrarily discounted the significant strengths of the KC-767, compromising on operational capabilities, including the ability to refuel a more versatile array of aircraft such as the V-22 and even the survivability of the tanker during the most dangerous missions it will encounter."

Boeing charged that the contract award and subsequent reports ignored the fact that Boeing and the Northrop/EADS team were assigned identical ratings across all five evaluation factors: 1) Mission Capability, 2) Risk, 3) Past Performance, 4) Cost/Price and 5) Integrated Fleet Aerial Refueling Assessment. Boeing argued that an objective review of the data as measured against the Request for Proposal would show that Boeing had the better offering in terms of Most Probable Life Cycle Costs, lower risk and better capability. Boeing asked the GAO to examine several factors in the competition that it believed were fundamentally flawed.

The source selection decision rests on what Boeing described as patently unreasonable and unsupported judgments that reflect disparate treatment of the offerors. Tellingly, Boeing's protests on this score were chiefly based, not on its own technical judgments, which it is trying to "substitute" for those made by the Air Force, but on the documented professional judgments of the Air Force's own evaluators - judgments that were either ignored or unreasonably dismissed in the ultimate source selection decision. [Examples include].the Air Force's treatment of.NG/EADS' failure to comply [with] the KPP threshold requirement that cargo "fit seamlessly" into the Defense Transportation System.NG/EADS' itinerant, multi-lingual production plan.and.the acknowledged weakness in NG/EADS' untested boom.

Boeing identified multiple individual "Major Discriminators" that the Air Force awarded to NG/EADS for non-KPP/KSA requirements that turned the tide of the evaluation, but do not appear to be grounded in rational analysis of actual benefit. Similarly, Boeing had satisfied substantially more non-KPP/KSA requirements than NG/EADS, which the SSAC recognized as "Discriminators Offering Less Benefit," but ignored thereafter. There is virtually no documentation or explanation of why the SSAC focused on the Major Discriminators that it did, or why it ignored the other discriminators.

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.

Other Issues

Jobs Job creation was not a part of the evaluation criteria, in accordance with federal law. The Northrop Grumman KC-45A tanker program does not transfer any jobs from the United States to France or any other foreign country. Assembly and militarization of the Northrop Grumman KC-45A tanker will take place in Mobile, Ala., resulting in the creation of 1,500 jobs in the United States. The Northrop Grumman KC-45A U.S. supplier base includes 230 companies in 49 states. Northrop Grumman claims that its KC-45A tanker will support more than 25,000 direct and indirect jobs in the United States -- a conservative estimate based upon the U.S. Department of Commerce aerospace industry jobs projection formula. Using more recent data from suppliers and applying the Labor Department's formula for projecting aerospace jobs at the state and regional level, Northrop Grumman claims that the KC-45A will employ approximately 48,000 direct and indirect jobs nationwide.

Repayable Loans / WTO Dispute Issue The U.S. Department of Defense ruled that the disputes involving Boeing and Airbus currently being adjudicated by the World Trade Organization were not relevant to the U.S. Air Force's KC-X Tanker competition.

Industrial Base Northrop Grumman contends that the Northrop Grumman KC-45A tanker program will create a new aerospace manufacturing corridor in the southeastern United States, and helps return competitiveness to the U.S. aerospace industry.

Foreign Content Northrop Grumman notes that all modern jetliners are built from a global supplier base, and the two entrants in the KC-45A competition are no exception. Boeing's proposed tanker includes parts manufactured in Japan, United Kingdom, Canada and Italy. Northrop Grumman tanker includes parts built in the United Kingdom, Germany, Spain and France -- countries exempt under the Buy America Law. The Northrop Grumman KC-45A will include approximately 60 percent U.S. content. There are numerous examples of transatlantic cooperation on vital U.S. military programs. Foreign suppliers currently play essential roles in the F-35 Joint Strike Fighter, the VH-71 Presidential Helicopter and the C-27J Joint Cargo Aircraft program. No sensitive military technology will be exported to Europe. For the KC-45A program, a commercial A330 jetliner will be assembled by American workers in EADS's facility in Mobile. The aircraft will then undergo military conversion in an adjacent Northrop Grumman facility. All of the KC-45A's critical military technology will be added by an American company, Northrop Grumman, in America, in Mobile, Ala.