UP IN THE AIR
As the U.S. Department of Defense prepares to Rebid a Lucrative Contract to Supply America's next generation of Aerial Refueling Tankers, Will the Resulting Deal Provide the U.S. with an Aircraft that is the Home Grown or Grown at Home?
by Christian Sheehy, MLF Editor
The U.S. Department of Defense will conduct a new source selection on a $35 billion contract to replace the U.S. Air Force’s fleet of KC-135 Stratotanker aerial refueling aircraft over a three-phase KC-X, -Y, and –Z acquisition program valued at around $100 billion. The rebid is expected to be based on modified proposals submitted in response to the amended RFP with the expectation of reaching a single source selection in completing the Air Force’s KC-X acquisition program by late 2008 or early 2009. Defense Secretary Robert M. Gates has appointed John Young, the Under Secretary of Defense for Acquisitions, Technology & Logistics, as the new source selection authority and new source selection on the advisory committee.
“We will seek to address the GAO’s findings, groundings ourselves in the requirements document and the pursuit of best value for the taxpayer,” said Young. “The Defense Department will amend the tanker RFP and seek modified proposals from industry leaders. We intend to release an initial draft RFP in late July or early August 2008. I will have an independent team of advisors observing the process and advising me.”
The under secretary went on to say that the DoD has laid out an aggressive schedule to try and deliver the next-generation tanker to the Air Force in the stated time frame, but could not guarantee delivery by year’s end.
INITIAL BIDDING
In January 2007, the big question was whether there would be a competition for the KC-X proposal, which will cover 175 production aircraft and four test platforms. The cost for this first phase alone is likely to reach $35+ billion spread over about 20 years, but the USAF believes that adding new plane types to America’s 40-50 year old aerial tanker fleet is its No. 1 priority, lest unpredictable age or fatigue issues like its F-15A-D fleet is experiencing ground its aerial tankers— and with them, a substantial slice of U.S. total airpower. KC-Y and KC-Z contracts will follow in subsequent decades, in order to replace all 530 KC-135s (195 active; ANG 251; Reserve 84) that were delivered until 1965, as well as the USAF’s 59 larger KC-10s delivered from 1979-1987.
In the end, it was Team Boeing’s KC-767 Advanced (767-200 derivative) vs. Team Northrop Grumman KC-30B (Airbus A330- 200/200F derivative). Each aircraft system had its strengths, and each system also had risk factors as lobbying continued right down to the wire. Boeing claimed lower KC-767 operating costs, and received a union endorsement. EADS promised to open production of A330F civilian jets in the United States if it won. Most observers correctly pointed out that all this lobbying was important, as the financial stakes involved meant there was going to be a huge political fight no matter which side won.
That has proven to be the case. Intense marketing and legislative lobbying were only the opening shots, especially after the Air Force selected the KC-30B. The award was followed by a multiple point Boeing protest upheld by the Government Accountability Office, another setback in this much delayed program.
THE ORIGINAL DOCTRINE
On April 25, 2006, the Air Force issued a request for information for a tanker recapitalization program. The primary mission of the KC-X aircraft will be to provide worldwide, day/night, adverse weather aerial refueling on the same sortie to receiver-capable United States, allied and coalition military aircraft (including unoccupied aircraft). The KC-X will provide robust sustained aerial refueling capability to support global attack, air-bridge, deployment, sustainment, employment redeployment, homeland defense, theater support to joint, allied and coalition air forces, and specialized national defense missions. The inherent flexibility of the KC-X platform will accommodate a diversity of secondary missions in a manner that will not significantly impact the primary aerial refueling missions. These include airlift, communications gateway and aeromedical evacuation. The KC-X program acquisition strategy is focused on an existing commercial, Federal Aviation Administration or equivalent, certified transport aircraft modified to meet USAF requirements.
The KC-X competition opened in January 2007 with initial RFP specifications centered on an integrated, capabilities-based, bestvalue approach to both offerors’ proposed product. The RFP included specific factors for assessing the capability contribution of each offeror including cost and assessment of past performance as well as proposal risk.
OPEN COMPETITION VERSUS BUY AMERICAN
The Airbus A330 and Boeing 767 aircraft are both global products. Boeing has said roughly 85 percent of its tanker components would be American-made while the Airbus grabs about 60 percent—making the impact on jobs unclear.
Boeing said its bid would create or support 44,000 American jobs. The Airbus team’s figure was 25,000 jobs in 49 states. Both numbers are impossible to verify. Industry analysts point out that, employment claims aside, the manufacturers have a profit motive in building the planes with as few workers as possible.
KNOWN VERSUS PREDICTIVE COST
At a House Armed Services Committee hearing held regarding the GAO’s affirmation of the Boeing protest, Representative Nancy Boyda of Kansas asked Secretary Young if, after a half century of KC-135 service to the DoD, how the department plans to mitigate any bias in a new source selection and recompete. Young continued, “I reject the notion of bias. The truth is that KC-135s have on average 17,000 hours with a structural of 36,000 to 39,000 hours. We could continue with the KC-135 as it is a structurally robust aircraft. However, with today’s need to properly prioritize the predictive issue of life cycle costs with the known cost of development and purchasing, we need to address both in moving forward with the introduction of a new aircraft.” Young went on to say that in considering each cost category, DoD would consider using the Air Force RFP average life cycle time frame of 40 years as a basis for these determinations.
Young went on to say that the DoD, in grounding its RFP in the 808 original Air Force RFP requirements, would prioritize the requirements in its RFP and allow industry competitors to modify their proposals accordingly prior to submission. “In balancing the requirements with known and projected costs, we hope to make a source selection that will give the warfighter what they need at a price the taxpayer can afford.”
SIZE VERSUS CAPABILITY
In addressing the question of aircraft size, Representative Jim Saxton of New Jersey asked Young how the discussion of size and capability to complete the mission as required in the original Air Force RFP would be revisited by the DoD in the recompete. Young responded by noting that, though the minimum threshold fuel offload requirement of each competitor’s product was the current fuel offload requirement of KC-135R, the objective requirement is to exceed the KC-135 offload requirement. “While the objective is for more fuel offload capability, this is, and should be, bounded by cost,” said Young.
PRIORITIZATION OF REQUIREMENTS
Representative Ike Skelton of Missouri pointed out that in taking the reins of the recompete, DoD would need to maintain objectivity in addressing the GAO’s seven sustained objections. Young indicated that the DoD would build on the “substantial” record and help mitigate any further mistakes and issues by clearly indicating to the competitors which procurement requirements would be most important to the warfighter. Skelton clarified that with a new DoD-issued RFP, there might be the potential for bidder protest, which could slow the selection process. Young admitted that this may occur, but said that in the event of protest from one or more of the bidders, the DoD would move to amend the RFP in an expeditious manner.
FUTURE TANKER
The Air Force continues to have trouble getting out of its own way in efforts to revitalize the tanker fleet. With the new RFP expected, possibly by the end of July and hopefully before the end of August, Young seems committed to awarding a tanker contract before a president is sworn in, if not by the end of 2008.
Certainly an ambitious technical and timing schedule—one that leaves little room for error. “There is almost no way to complete the process by the end of the year,” said Richard Aboulafia, vice president at Teal Group, a defense information company. “Full recompetes typically take at least a year.” ♦