France Set to Announce Purchase of EADS Tankers Without A Competition

Last week Aviation Week military editor Amy Butler, in a for subscribers only Aerospace Daily & Defense Report (Vol. 226,Issue 24), broke a bit of news of which no one seems to have grasped the significance. Specifically Ms. Butler reported that:

Plans for French President Nicolas Sarkozy to make a big announcement next month at the Farnborough Air Show related to his country's own refueling tanker program have apparently fizzled out after recent events in the United States, according to industry sources.

Sarkozy was set to announce that Paris was planning to buy A330-based tankers assembled at the yet-to-be built EADS North America manufacturing facility in Mobile, Ala. The country has a need for new refuelers, though a procurement strategy hasn't been released.

If this report is accurate, it means that France planned to buy EADS tankers without a competition. And, they hoped that because the tankers would be assembled in the US, everyone here would overlook the fact that this once again proves the hypocrisy of French defense firms.

These firms demand that they be allowed equal treatment for US defense contracts. Yet, behind the scenes, they seek to deny American companies the same rights in their country. Ed Morrisy on the Hot Air blog had a good post on this issue in March.

This is not the first time the France did not allow Boeing to compete in a defense contract. When the France asked for proposals for an air transport contract in 2004 they stipulated that the aircraft proposed must be of European conception. This effectively barred Boeing from participating.

It should be noted that the German's procured A310 tankers from EADS, also without a competition. Granted, the A310s retrofitted for this role were already in service with the German Air Force. But, given that the A310s were originally procured without a credible competition, and that the tanker retrofit contract opened the door for EADS to get into the tanker business, the German's procurement actions should be viewed with some suspicion.

It never ceases to amaze us here at Tanker War Blog how the KC-30 team was able to brand themselves as the defenders of the free-market; while at the same time, labeling all Boeing supporters rank protectionists. Though, we sense that this is about to change.

A case in point is an op-ed that ran in Sunday's Washington Post titled "5 Myths About the Death Of the American Factory". Myth 2 was especially interesting:

U.S. manufacturers can save themselves by investing in innovation.

Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up. Whatever you may think about the recent U.S. Air Force decision to buy tankers from Airbus rather than Boeing, one thing is clear: Through its subsidies, the E.U. has managed to build a highly competitive aircraft industry. South Korea has put more than $12 billion into its semiconductor industry to similar effect, severely harming the U.S. semiconductor manufacturing base.

At Tanker War Blog we continue to contend that the US government has a duty to balance the promotion of free trade with enforcement of free trade. Competition works great, if the all participants play by the rules of the free market, and if all countries agree to hold free and fair competitions.

If US defense companies are not allowed to compete at Away games in certain EU counties, then our government should ban those countries' competitors from Home games here in the US. Such action is not protectionism; it is enforcement of free market rules.

HASC Tanker Briefing Round Up

Yesterday the Air and Land Subcommittee of the HASC met with GAO officials and a last minute DoD procurement stand-in for the Sue Payton.

From the reports we received, it is clear that the majority of members came away from the brief more convinced then ever that the Air Force has continually misled Congress about the tanker selection process.

By their remarks, even those Members who support the KC-30 seemed to have concluded that GAO did a thorough job in rendering its decision and that the reasons for rebidding the contract are compelling and overwhelming.

When questioned if the GAO believed that the was malice directed against Boeing, the reply was that they did not believe so. But, they did mentioned that there was pattern of incompetence that clearly resulted in favoring the KC-30.

Chairman Abercrombie, who reportedly was none to happy with what he heard yesterday, has scheduled another Air and Land Forces Subcommittee hearing on the tanker contract for July 10th. This time around Ms. Payton and DoD acquisition chief John Young are expect to be in attendance.

Tanker Recompete Act

We have received a number of e-mails asking for more information on the KC-X Tanker Recompete Act. Below is a summary of the Act, and you may also view the full text of HR 6426 on our documents site.

The bill introduced by Representative Todd Tiahrt (KS) in the House and by U.S. Senators Pat Roberts (KS) and Sam Brownback (KS) in the Senate, seeks to prohibit the use of any funds by DoD on the KC-X Tanker unless the Department of Defense chooses to outright award the KC-X tanker to the bidder whose protest of the February 29, 2008, was upheld or DoD decides to recomplete the KC-X contract using the KC-135 criteria.

This legislation would ensure that the following areas be considered in a recompetition:

Independent Cost Estimate - Ensures that an independent cost estimate is completed. The cost estimate shall include an estimate of (1) all costs borne by the suppliers; (2) all costs borne by foreign governments; (3) all costs borne by domestic suppliers (if the proposal involves any domestic suppliers); and (4) all costs covered by cost accounting standards under the Federal Acquisition Regulation.

Requirement to offset Illegal Subsidization – When conducting the cost or price evaluation of any proposal submitted by a subsidized person, increase the cost or price of the proposal by the amount of illegal subsidization.

Ensuring Fair Competition - Ensures that any covered contractor, foreign or domestic, for the contract, as part of the cost criteria, is evaluated both on the cost borne by the supplier and any cost borne by a foreign government that is not borne by a government (local, State, or Federal) in the United States.

National Security Considerations - It is the responsibility of the DoD to take into consideration the national security impacts, the industrial base impacts, and the economic impact to the United States of awarding contracts for critical capabilities to foreign entities.

Industrial Base Considerations - It is the responsibility of the DoD to take into consideration the industrial base impacts and the economic impact to the United States of awarding contracts involving critical jobs to foreign entities.

Loss of Employee Tax Revenue - It is the responsibility of the DoD to take into consideration the impact of lost personal income tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

Loss of Corporate Tax Revenue - It is the responsibility of the DoD to take into consideration the impact of lost corporate tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

Regulatory Burden - It is the responsibility of the DoD to take into consideration the impact of all regulations waived or that are not applicable with respect to foreign entities. These regulations include cost accounting standards, Buy America provisions, specialty metal provisions, the Foreign Corrupt Practices Acts, and compliance with the International Traffic in Arms Regulation.

Foreign Corrupt Practices Act - Requires that any contractor or subcontractor described in paragraph (2) that is not already covered by the Foreign Corrupt Practices Act shall be required, as a condition of the contract, to comply with the requirements of such Act.

Report Requirement - The Secretary of Defense shall submit to the congressional defense committees a report on compliance by the DoD with the provisions of this Act during the acquisition process for the award of a contract for a replacement for the KC-135 tanker. The report shall be submitted no later than the date of award of such contract.

[Update: Michelle Dunlop at HeraldNet beat us to the punch and reported on 27 June that Sen. Jeff Sessions (AL) put a hold on the Senate bill. This effectively stops the bill until a supermajority of 60 Senators frees it for further debate. ]

Tanker News 27 June

The following tanker related items caught our eye:

Tanker Recompete Act Introduced:
U.S. Representative Todd Tiahrt (KS), U.S. Senators Pat Roberts (KS) and Sam Brownback (KS) introduced the KC-X Tanker Recompete Act in both the U.S. House of Representatives and the U.S. Senate. The legislation would prohibit use of any funds by the Department of Defense (DoD) on the KC-X Tanker unless the DoD chooses to outright award the KC-X tanker to Boeing or decides to fairly recompete the KC-X contract.

Chairman Waxman Announces Tanker Hearing:
The House Oversight Committee Announces Tanker Hearing for July 15 to examine the actions of the Air Force in awarding the contract to manufacture aerial refueling tanker aircraft. The Honorable Gene L. Dodaro, Acting Comptroller General of the United States (Head of the GAO) will testify.

Labor Unions Deliver Letters in Support of Boeing to Congress:
Twenty-three unions,labor federations and affiliated organizations have signed and delivered a letter to House and Senate lawmakers calling for Boeing to be immediately awarded the Air Force refueling tanker contract.

Citing the Government Accountability Office (GAO) report that said the KC-30 tanker lacked the ability to refuel all of the Air Force's aircraft and calling Boeing's KC-767 "the clear winner" in the competition to replace the Air Force's aging fleet of tankers, the labor groups urged Congress to award the contract to Boeing without delay.

AFP: Gates Says No decision yet on US air tanker purchase
Key passage:

"I haven't made any decisions yet," Gates said. "But I would say that I take the GAO report very seriously. They've clearly pointed out some areas where we were deficient.

"We've clearly had problems with the tanker contract. And this time around is not the first time, obviously. And so, I think I need to get a better feel for the GAO report and for the criticisms and the nature of the criticisms that they have made."

Congress is now out of session until 7 July, so Gates has some time to think it over before everyone gets back in town. After that, the pressure that has already building will become extreme. DoD has until mid-August to respond to the GAO decision, but no one expects them to try to run the clock down and punt to the next administration.

GAO Decision Analysis

These is a great deal of commentary on today's released redacted version of the GAO Tanker Decision. We have some observations of our own but first we want to point out some analysis by others:

Dr. Loren Thompson of the Lexington Institute released a new brief on the GAO decision titled Tanker Fiasco: Five Steps to Fix the Problem. In it he makes it clear he is for rebidding the contract sooner rather than later. He also believes that changing the bid criteria will only delay the process and that there is a "simple problem to fix -- not by developing new capability metrics, but by finding competent evaluators to apply the existing ones." Sounds like a call for some personnel changes in Air Force procurement.

We have also received a rather comprehensive set of GAO KC-X Decision Talking Points from our members the Hill. The strongest points are that in addition to the number of errors made by the Air Force, the KC-30 may not have even been eligible for the contract because: 1) the KC-30 proposal did not meet the minimum required task to establish a depot maintenance capability within two year after the delivery of the first full-rate production aircraft. 2) The KC-30 proposal failed to prove that it could refuel all currently compatible planes using current Air Force procedures.

Also, while not really an analysis Senator Jeff Sessions did released a statement that highlights extremely well many of the points KC-30 supporters have been making since the GAO decision: 1) The GAO’s concerns were strictly related to the Air Force’s selection process, not the merits of the KC-30 2) The Air Force is the agency to best determine which tanker it wants 3) The tankers are need now rather than later 4) Further comments will be made after Air Force’s response to the GAO decision is known.

On point #4 above, the experts at TruthyPR believe that waiting for the Air Force answer is the worst thing they can be doing. Instead he offers that the KC-30 team:

...should have followed [the GAO decision] up with a response that they welcomed a rebid, but since it would result in the same outcome, and because the tankers are desperately needed by our men and women in harm's way, there's no reason to delay.

The goal is to promulgate the message that a new process is going to generate the same outcome. And if you don't start saying it, nobody else will believe it.

Well count us as not believing it, even if they do start saying it more forcefully.

Tanker News 26 June

The following two tanker related articles caught our eye:

Forbes: Airbus Not Speaking Customer's Language
Key passage:

Airbus is also suffering from delays in its A400M military transport aircraft... Enders said he expects the maiden flight of the A400M military transport aircraft to take place "in September or October," rather than this summer as previously indicated...

According to a report by WirtschaftsWoche--a weekly German business paper--the delays of the military planes are due to cooperation problems between the Spanish and French factories.

"The French don't want to help the Spaniards to solve their problems in production," said an unnamed manager from Airbus, according to the paper.

If EADS can not get the French and Spanish working together smoothly how are they going to get their proposed US factory working with the French and Germans? Also, one wonders what this lack of coordination will mean for Airbus's new assembly facility in China.

AFP : US Defense Secretary Enters Tanker Controversy
Key passage:

While the Air Force has 60 days to respond to the GAO, Gates "wants to move as quickly as possible" on the issue, [Pentagon spokesman Geoff] Morrell said.

"This is something the secretary is going to be involved in."

Although some of us here believe the SecDef has already been involved in the tanker contract in a detrimental way, Tanker War Blog would welcome a swift and truly fair rebidding of the contract.

GAO Decision is Released

Breaking Tanker News: Here is the full redacted GAO tanker decision. We will comment later after we have time to read it.

Also, the Air and Land Forces Subcommittee of the HASC will receive a brief from the GAO on their tanker decision tomorrow. According to the HASC memo we received, only Congressional Members and committee staff will be allowed to attend, but we will inform our readers if any new releasable issues are discussed.

Of note though is that Ms. Sue Payton, the Assistant Secretary of the Air Force for Acquisition and tanker source selection official, had planned to attend but the Secretary of Defense has directed she postpone her brief to the subcommittee until the Department's review of the GAO decision is complete.

Most Shocking Tanker Item of the Day

TWB has been trying to ignore this item since we saw it yesterday and we hate to even spread it, but since it has picked up some attention we feel we should at least inform our readers. At DoD Buzz under the heading of rumor, it seems as though a new whisper campaign has been started that the Air Force will disregard the GAO recommendations:

John Young, the Pentagon’s acquisition czar, has reportedly drafted a letter for the four congressional committees that oversee defense spending and policy informing them of the Pentagon’s decision to go ahead and award the contract to Northrop Grumman.

First, we guess there is less than a 10% chance this is true. Second, if DoD is that foolish they must know they will never get funds from Congress to buy the KC-30 this way.

Also, if this is yet another KC-30 whisper campaign, this is the absolute cruelest thing we have yet seen in the tanker war. The only people who may believe this rumor are KC-30 supporters. And, if found to be spreading a rumor that only gives their supporters misinformation and false hope, the KC-30 team would have definitely breached the trust of its base.

Regardless of whether this rumor turns out to be true or not, we are really shocked at the implications either way.

In Defense of Air Force Procurement

Tanker War Blog has been hard on the Air Force procurement at times, but today we feel we must act as its pro-bono public defender.

Since the scathing decision by the GAO on 18 June, Air Force procurement personnel and their actions have been subjected to a number of vicious attacks in the Court of Public Opinion. Before the final verdict is rendered, we feel there are some facts that must be known.

As counsel we will prove beyond a reasonable doubt that Air Force procurement can not be held accountable for the mistakes in the KC-X contract as its state of mind did not allow it to make reasoned analysis. As such, the Air Force's actions on awarding the tanker contract to the KC-30 team were not based on willful malice or negligence, but due instead to diminished capacity and battered service syndrome.

Ladies and gentlemen of the jury, our client has suffered greatly these past four years and to illustrate this we introduce the following into evidence:

1) In 2004, Congress killed a $23.5-billion Air Force plan to lease and buy 100 modified Boeing 767s as tankers after Darleen Druyun, a former Air Force weapons buyer, admitted to inflating the deal before taking a $250,000-a-year job with Boeing. As a result, Druyun served a nine-month prison sentence for conflict-of-interest violations, and the Air Force reopened the competition.

All the contracts that Ms. Druyan was directly involved with since 1993 were reviewed. The Defense Contract Management Agency examined more than 8,000 pages of information in 407 contracts and identified those contracts that appear to have anomalies in them which warrant further review. As of a result of this review and subsequent protests the Air Force investigated the following programs: NPOESS-Conical Microwave Imager Sensor, C-5 Avionics Modernization Program, Financial Information Resource System(FIRST), C-22 Replacement Program (C-40), 60K Tunner Program Contractor Logistics, KC-135 Programmed Depot Maintenance, F-16 Mission Training Center, C-40 Lease and Purchase Program, Small Diameter Bomb, C-130 AMP.

It is our argument that the loss of credibility, the subsequent departure of the Sec of the Air Force James G. Roche, and the damaged congressional relationships that occurred as a result of this scandal caused our client to go into a downward spiral. The witch hunt that resulted forced some out merely for exchanging e-mail and opinions on the tanker lease. The scandal also caused a huge back load of work which as we will prove stressed and ,with the addition of a number of other factors, finally broke Air Force procurement.

2) In late 2005 our client became aware that it was destitute and could not successfully modernize its force with its current and projected budget. At that time our client sought a number of ways to alleviate this situation, but was eventually denied all its reasonable attempts to support itself.

Given that our client was under extreme financial stress, it is not unreasonable to say that it was susceptible to any fast talking European salesman who falsely promised to deliver lower life cycle costs.

3) February 24, 2006, The DoD Inspector General begins its investigation into the "Thunder Vision" contract. This investigation played heavily on the Air Force procurement and top uniformed officers for a number of reasons: First, those involved included Gen Mosley, Gen Lichte, and MajGen. Goldfein. (Only MajGen Goldfein was found to be culpable.) Second, the company protesting the award was from Arizona, and some in the Air Force feared that particular congressional members from that state may use the case as leverage. The Federal investigation was declined in May 2007 for insufficient evidence at that time, but could have been reopened if there was high level congressional interest.

4) December 1, 2006 a powerful senator writes to then nominated but unconfirmed SecDef Dr. Gates for a number of changes to the KC-X RFP including: Elimination of WTO language, elimination of Berry Amendment provision, and removal of extensions to ITAR regulations, and the inclusion of evaluation criteria that "measures the capabilities beyond thresholds" that would favor large aircraft platforms.

This is not the first congressional letter our client was subjected to, but all prior letters had been dismissed, and the previous SecDef had protected Air Force procurement from Congressional meddling. With the arrival of Sec Gates, my client lost a key ally and was now left to the devices of powerful "third party" lobbying and congressional interests.

5)October 15 2007 Darleen Druyun's replacement as the Air Force's principal deputy assistant secretary for acquisition, Charles D. Riechers, commits suicide and in a note addressed to the head of Air Force procurement repeatedly apologizes for causing a "doomsday scenario" and regrets that the Air Force procurement unit had come under fresh scrutiny.

Prior to Mr. Riechers being confirmed for his Pentagon post, the Air Force arranged a job for him at a defense contract but he did no work for the firm. The arrangement had been drawing heavy scrutiny from Congress.

Mr. Riechers reportedly worked on the KC-X procurement; his sudden and tragic death left our client in a diminished capacity from which it could not recover.

6) December 19, 2007 a member of Senator John McCain’s staff requested that the DoD IG investigate and advise him on whether the Air Force request for proposal for an aerial tanker replacement contained impediments to competition and whether the request for proposal included capability or operational requirements for aircraft refueling and cargo transport.

During this critical decision time for the KC-X tanker contract it weighed heavily on my client's mind as it seemed as though a preemptive IG investigation was being launched by KC-30 supporters. Under such conditions how could our client be expected to chose any other tanker but the KC-30?

7)Finally, we present exhibit A: TWB's inaugural post which pointed out, contrary to Air Force public statements during the tanker award announcement that, “We owe it to Boeing to give them the first debrief,” Air Force personnel briefed at least one outside defense expert and sought to brief members of congress while trying to delay debriefing Boeing for two weeks.

These actions were taken to seed the story that Boeing had lost decisively and to make public and congressional opinion go against a possible Boeing protest. This shameful tactic did work in the media and continued to generate numerous stories that Boeing lost decisively as see here, here, and here; until the GAO showed how poorly the contract was handled.

Ladies and gentlemen, we propose to you that our client knew that its duplicity and leaked misinformation would eventually be uncovered. In fact, these actions were not done out of malice but should be viewed instead as a cry for help.

So, as counsel to Air Force procurement we believe we have proven beyond a reasonable doubt that our client, was at the time of selction, in such a state of mind that it can not be held accountable for its actions. We humbly ask the jury in the Court of Public Opinion to please forgive our client, allow it to rebid the tanker contract, and choose the right tanker for the mission; the KC-767.

Further, we ask that our client's procurement budget be fully funded to meet its mission needs for the F-22, C-17, C-130J, FSF, and the KC-X.

Lastly, your honor we ask that you issue a restraining order against the KC-30 supporters whose constant harassment has so battered the service and left it in its current state of diminished capacity.

In closing, the defense rests in this case, but the Air Force's defense of our nation can never rest. As such, you must exonerate our client and protect it against those seeking to force the KC-30 on it.

Tanker War Blog, Esq.

Tanker News 24 June

The following tanker related articles caught our eye:

Forbes: EADS In Lead For Saudi/Iraq Fence
Key passage:

Last week's report by the General Accounting Office, which criticized the process by which the fuel-tanker contract was awarded to EADS and its partner Northrop Grumman, has thrown it into doubt and it's likely that the Air Force will have to ask the companies to resubmit their proposals.

If they do go back to the drawing board there is no chance whatsoever that EADS will get the entire contract: a more likely scenario is that they will get around 25.0% of it according to Doug McVitie of Arran Aerospace.

Mr. McVitie is a former Director of Sales Intelligence for Airbus so he has some G-2 on the situation, but it would be interesting to know how he came up with 25%. Most likely this is the percentage Airbus is willing to settle for and needs to be able to set up the assembly facility in Mobile.

Politico: Air Force considers Northrop, Boeing fly-off
Key passage:

The fly-off option, which departing Air Force Secretary Michael Wynne discussed with the Reuters news service at his retirement ceremony, and the split buy are costly prospects. The fly-off would require the two companies to build planes through the prototype stage, and under the split buy, the Defense Department would have to fund two production lines...

Supporters of Northrop are pushing for a speedy reconsideration by the Air Force — and trying to ensure that members of Congress don’t step in to steer the process toward Boeing.

The company is stressing that it hasn’t lost anything yet.

Split buy, fly-off, or rebid there is no easy way out of this tanker war. We are beginning to see the KC-30 team stress that the GAO decision does not mean that their tanker should not have won, only the way the Air Force went about it was flawed. This is rather convoluted logic, but without the full GOA decision it is hard to definitely refute at this time. Also, if one believes possession is 9/10 th's of the law, an argument could be made that until the Air Force completes the rebid, the KC-30 team still has the contract.

Human Events: How to Buy the Tanker
Key Passage:

The government is supposed to buy what it needs, not what it wants. And – in the case of combat systems, among which the tanker is certainly counted – the needs have to be defined by the warfighters. The government’s request for contractor proposals is supposed to define those needs in terms specific enough to enable the contractors to compete by offering the aircraft that best meets the precise need. But the Air Force -- bowing to political pressure -- crafted a specification so vague that two vastly different aircraft could arguably qualify under it.

Listing this article at the end is in keeping with the spirit of saving the best for last. Once again Mr. Babin offers great insight and expertise in dissecting the Air Force tanker contract decision

Waiting for the Full GAO Report

It seems as though another day or two will pass before the release of the public version of the GAO tanker Decision. We have been told by several sources that the Decision is either 67 or 69 pages long. (We suppose some are counting the cover or blank page or two.)

We have held off commenting extensively on the GAO statement regarding the bid protest decision until we get a chance to look at the report, even if major portions are reacted, but here are some areas we feel our readers should be aware of:

1) The GAO statement does not mention fuel usage differences and the Air Force's use of them in determining life cycle costs. This was a an issue Boeing's strenuously raised, so it will be interesting to see how the GAO ruled on that issue.

2) The GAO statement does not mention the Air Force's use as a discriminator of the KC-30 exceeding key performance parameter objects in medevac capacity, passenger carrying or cargo hauling. The GOA reason #2 only mentions aerial refueling.

3) The GAO statement seems to say that, contrary to the KC-30 team's many claims, the A330 tanker can not refuel the V-22. (See reason #3) If so, we would offer the numerous naysayers who hurled insults/false accusation against TWB for stating just this in March, to feel free to use the comments section to make your apology. If we turn out to be wrong on this, we will be sure to apologize to the KC-30 team.(Don't worry SMSGT MAC, we exempt you from having to admit any mistake ever.)

4) Lastly, in the GAO reason #7 for sustaining the protest, it mentions that the Air Force improperly increased Boeing's estimated non-recurring engineering costs. No mention was made of the recurring costs.

There are a number of other issues, such as the findings on the use/misuse of the IFARA and the CMARPS model, that we will be looking for but the above list is a good start.

Civil War at Airbus?

Business Week yesterday had an interesting article that indicates all is not well at Airbus. The article claims that tensions between the French and German operations at Airbus are running high, with workers in each country complaining they are suffering disproportionately as the company restructures.

News of the GAO decision to rebid the Air Force tanker contract has only made matters worse. The roots of the problem are many but Business Week lists the latest grievances:

French employees are grumbling that 2,000 Germans — brought to Airbus’s Toulouse, France, factory two years ago as “temporary” workers to fix problems on the troubled A380 aircraft program – are still there.

The French also say they are bearing the brunt of the so-called Power 8 restructuring plan to slash $7.5 billion in operating costs by 2010. As of March 31, Airbus’s German operations had achieved only 23% of their cost reduction target, while the French operations had achieved 39%.

The Germans, meanwhile, are unhappy because some work on aircraft cabins, until now done at a factory in Hamburg, has been shifted to Toulouse.

The article goes on to state that such in fighting has only deepened "the gloom at Airbus and its parent, the European Aeronautics Defence & Space Co".

Maybe we were too harsh in our commentary of the Air Force lawyers use of a quote from Lincoln. While not from the Cooper Union Address, the Lincoln quote, "A house divided against itself cannot stand," would be very appropriate.

Also, we hear some of the German workers have begun calling Thomas Enders, German CEO of Airbus, Uncle Tom instead of the more chummy Major Tom for his siding with the French. Whatever the cause, all is not well in Airbus's cabin.

Also, speaking of pent-up hostility, someone sent us a photo of a new Mobile billboard.(The company that put it up reportedly sells chicken fingers.) TAnchorman is on vacation right now, but we are sure he would have something to say to KC-30 supporters about keeping it classy if he were here.

TAnchorman Exclusive Report

On his blog, TAnchorman has an exclusive report on EADS's comments about the recent GAO ruling that the Air Force tanker contract decision had numerous errors.

He also has a first look at the Air Force's reaction to the GAO's findings and its recommendation that the contract be rebid.

Air Force's GAO Brief Channels Lincoln

Although the GAO decision now renders the Air Force's Agency Post Hearing Brief irrelevant, and mostly a work of fiction, we thought we would post below one of our member's initial reaction to it anyway.

He had completed his review of the brief just as the GAO decision broke, so we did not post it at that time. But, his observations on the last portion of the brief merit posting now. If for no other reason, it points out that Air Force lawyers don't seem to understand historical context or they must have a wicked sense of humor.

Overall, the brief is a tough read for all but the most dedicated procurement enthusiasts, but the summary on page 147 is most entertaining. It seems obviously written by someone with a flair for the dramatic and fondness for quotes made prior to the 1880's:

"The genius of the bid protest process resides in the very name of the Office deciding its end: government accountability.

Government accountability-that is, the duty of public officials to report their actions to the citizens, and the right of the citizens to take action against those officials whose conduct the citizens consider unsatisfactory-is an essential element, perhaps the essential element of democracy.

This is one example of the freedoms the Air Force does not denigrate or merely tolerate, but celebrates. We embrace and encourage, promote and protect it every single day, whether Active Duty, Reserve, Guard, civilian, or contractor. It is one of the very reasons we exist as an institution, and why individuals remain part of that institution.

The Air Force has reported accordingly. And in doing so we have upheld the Jeffersonian ideal of silencing the complaints of our citizens, whether just or unjust, solely by the force of reason.

The Thomas Jefferson quote referenced above this this: "I am... against all violations of the Constitution to silence by force and not by reason the complaints or criticisms, just or unjust, of our citizens against the conduct of their agents." (Thomas Jefferson to Elbridge Gerry, 1799. ME 10:78)

It is good to know the Air Force celebrates protests, and that it is against violations of the Constitution to silence its citizens. Also, given their above statement it would seem the Air Force would "embrace, encourage and promote" Boeing to file at the Court of Federal Claims which was established by Congress in 1855 to adjudicate the Constitution's First Amendment guarantee of the right "to petition the Government for redress of grievances."

An important fact to remember is that this quote is widely interpreted as Jefferson's reaffirming his political principles on free speech and freedom of the press in response to the Sedition Act crisis.

As one scholar wrote in an analysis of the act:

The act, which reads like an Orwellian proclamation from an omnipotent government, provided for the punishment of those who published or uttered false or scandalous statements and information about the government of the United States, Congress, or the president. Stirring up sedition could be punished by a fine of not more than $2,000 and imprisonment not exceeding two years. Though the truth could be used as a defense,no one using that defense was ever acquitted.

Trying to quote Jefferson's response to a government unjustly punishing those who dared to utter truthful but unpleasant words is not a wise choice to say the least.

We would respectfully suggest the Air Force should have use a Madison quote that addresses another hated act of this time, the Alien Friends Act. The acts obvious anti-French origins make it a perfect vehicle for the Air Force to stress the need to be friendly to French owned EADS.

Or, if they insist on a Jefferson quote, "To these I will add, that I was a sincere well-wisher to the success of the French revolution" can be found in the same letter to Mr.Gerry as their original choice. But, they should be warned that it ends with, "but I have not been insensible under the atrocious depredations they [the French] have committed on our commerce."

In closing the Air Force continues with the following:

As this case has shown, a bid protest may provide fodder for public discussion on various military, political, and economic subjects. It might provide a reminder of the brilliance of our governmental system. But, in the end, it is an avenue to a concrete resolution of the concerns of the citizens.

The time has at last come for GAO to resolve Boeing's protest. "Let us have faith that right makes might; and in that faith let us to the end, dare to do our duty." Based on the record, the answer is clear: deny Boeing's protest in its entirety.

This time the Air Force barristers really go overboard with their improperly truncated quote of Abraham Lincoln's 1860 Cooper Union Address.

The full closing paragraph of Lincoln's speech is this:

"Neither let us be slandered from our duty by false accusations against us, nor frightened from it by menaces of destruction to the Government nor of dungeons to ourselves. Let us have faith that right makes might; and in that faith let us to the end, dare to do our duty as we understand it."

So does the Air Force feel as though it has been slandered? Falsely Accused? Or frightened by the menaces of destruction to the Government?

Or, does the Air Force now understand its duty is to abide by the GAO ruling to rebid the contract; as the rightness of this decision makes mighty its non-binding status? Let's hope they do.

Also, will someone in the Air Force please remind us again how stopping the spread of slavery to new territories and new states entering the Union is in anyway connected to a GAO decision on a tanker contract?

Should we expect case citing or precedence from Plessy vs. Ferguson or Brown vs. Board of Eduction in future tanker briefs? If so, we at Tanker War Blog want to be firmly on record against "separate but equal" Air Force tanker requirements and what the GAO ruled today was "misleading and unequal discussions" about the tanker.

GAO Upholds Boeing's Protest

It's official, the GAO ruled that the Air Force made a "number of significant errors" in what, contrary to Air Force personnel leaks to the press, was a close competition. As a result, the GAO has sustained Boeing's protest of the tanker contract award decision.

The GAO found so many errors that it recommended that the contract be rebid, and not just reevaluated in certain requirement areas as many, including many of us here at TWB, had expected.

On our documents site we have posted the official GAO statement on the decision for you to view in full.

We will completely analyse the GAO statement later, but we will comment that the sheer number of things the Air Force did wrong, and the implication that they may have been duplicitous in at least one area (see #4 below), is quite extraordinary.

Defense Secretary Gates and the head of DoD Procurement, John Young have continuously gone on record in support of the tanker contract decision on the belief that the selection was done correctly. It is hard to imagine that we will not see more Air Force personnel be fired or quietly announce their retirement in as a result of the GAO's slap down of that service's procurement missteps.

The list of things the GAO found wrong with the selection of the KC-30 is long. Specifically, they state they sustained the protest for the following reasons:

1. 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 agency also did not take into account the fact that Boeing offered to satisfy more non-mandatory technical “requirements” than Northrop Grumman, even though the solicitation expressly requested offerors to satisfy as many of these technical “requirements” as possible.

2. The Air Force’s use as a key discriminator that Northrop Grumman proposed to exceed a key performance parameter objective relating to aerial refueling to a greater degree than Boeing violated the solicitation’s evaluation provision that “no consideration will be provided for exceeding [key performance parameter] objectives.”

3. The protest record did not demonstrate the reasonableness of the Air Force’s determination that Northrop Grumman’s proposed aerial refueling tanker could refuel all current Air Force fixed-wing tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation.

4. 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.

5. The Air Force unreasonably determined that Northrop Grumman’s refusal to agree to a specific solicitation requirement that it plan and support the agency to achieve initial organic depot-level maintenance within 2 years after delivery of the first full-rate production aircraft was an “administrative oversight,” and improperly made award, despite this clear exception to a material solicitation requirement.

6. The Air Force’s evaluation of military construction costs in calculating the offerors’ most probable life cycle costs for their proposed aircraft was unreasonable, where the agency during the protest conceded that it made a number of errors in evaluation that, when corrected, result in Boeing displacing Northrop Grumman as the offeror with the lowest most probable life cycle cost; where the evaluation did not account for the offerors’ specific proposals; and where the calculation of military construction costs based on a notional (hypothetical) plan was not reasonably supported.

7. The Air Force improperly increased Boeing’s estimated non-recurring engineering costs in calculating that firm’s most probable life cycle costs to account for risk associated with Boeing’s failure to satisfactorily explain the basis for how it priced this cost element, where the agency had not found that the proposed costs for that element were unrealistically low. In addition, the Air Force’s use of a simulation model to determine Boeing’s probable non-recurring engineering costs was unreasonable, because the Air Force used as data inputs in the model the percentage of cost growth associated with weapons systems at an overall program level and there was no indication that these inputs would be a reliable predictor of anticipated growth in Boeing’s non-recurring engineering costs.

The GAO then closes their statement by recommending the following:

We recommended that the Air Force reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision. We further recommended that, if the Air Force believed that the solicitation, as reasonably interpreted, does not adequately state its needs, the agency should amend the solicitation prior to conducting further discussions with the offerors. We also recommended that if Boeing’s proposal is ultimately selected for award, the Air Force should terminate the contract awarded to Northrop Grumman. We also recommended that the Air Force reimburse Boeing the costs of filing and pursuing the protest, including reasonable attorneys’ fees. By statute, the Air Force is given 60 days to inform our Office of the Air Force’s actions in response to our recommendations.

Normally the GAO takes a few weeks to release their full redacted decision report, but several offices on the Hill have been told that this process will be sped up significantly because of the sensitivity of the issue. As such, we expect see the full redacted GAO report out in less than a week.

Also, we have removed the Should Congress Stop the EADS Tanker Contract poll as the deadline to vote ended, and the GAO decision renders it moot.

For those 935 of you who voted no, you can feel vindicated as Congress will not have to stop the contract. For those 714 of you who voted yes, you can feel good that the tanker contract selection of the KC-30 team is for now effectively stopped.

More EADS Insider Trading Charges

Bloomberg today reports that the former number two official at EADS, Chief Operating Officer Jean-Paul Gut,was charged with insider trading for selling shares before the company disclosed problems on Airbus' A380 superjumbo airliner and A400M military cargo plane.

According to the Bloomberg article:

Gut, 46, was arraigned on a preliminary count of insider trading by investigating judges and released on bail of 400,000 euros ($619,000), said Isabelle Montagne, a spokeswoman for Paris prosecutors. Gut is the second former EADS executive charged in the case.

Well, we all know he can afford the bail money.

The article also states that:

The probe is one of two over the timing of disclosures that wiring problems would delay the 525-seat A380s introduction. As many as 17 current and former executives at EADS and its Airbus unit are under investigation in a related Autorite des Marches Financiers civil case....

The Paris prosecutors opened the inquiry in 2006, after EADS shareholders filed a lawsuit claiming insider trading and the French market watchdog began a probe into shares sold ahead of announcements that Lagardere and Daimler were each selling 7.5 percent stakes in EADS and about delays in the A380 program at EADS's Airbus SAS unit.

The New York Times has already reported that, the CEO of EADS North America Ralph Crosby, who was the main architect of the KC-30 Air Force tanker contract partnership, has been identified as one of the 17 officials under investigation.

In related news the Wall Street Journal reported that last Friday the EADS insider trading scandal was introduced in American courts:

Two U.S. law firms filed suits Friday in federal court in New York's Southern District, alleging insider trading in shares of EADS and that managers and shareholders misled investors. Both are requesting class-action status. The U.S. cases come on top of continuing investigations by French prosecutors and stock-market regulators into alleged insider trading at the company.

The Wall Street Journal article states that although EADS shares are not registered to trade in the U.S.

...attorneys in the two U.S. cases contend that the global aerospace giant conducts enough business in the U.S., and has enough U.S. investors, to merit filing complaints in the U.S.

One suit, filed by New York law firm Dreier LLP on behalf of an individual European shareholder, Danielle Bobin, alleges insider trading by Lagardère and Daimler. Both sold large blocks of EADS shares in April 2006, just weeks before EADS announced major delays in its flagship A380 project. The suit also targets two senior EADS managers who are U.S. citizens.

The other complaint was filed by San Diego law firm Coughlin Stoia Geller Rudman & Robbins LLP on behalf of an unnamed institutional investor and individual investors in the U.S. Its suit targets EADS and some top managers, alleging they misled investors about the state of the A380 program while selling EADS shares, the law firm said in a statement.

KC-30 Ground Game Revs Up

In a previous post we highlighted some of Boeing's grassroots mobilization or "ground game" activities in preparation for the GAO tanker contract decision.

The KC-30 team has also been actively organizing on the ground in addition to their efforts on the web at ComeBacktoMobile.com. (We readily admit that its a nice website and tip our hat to their efforts.)

Alabama station WALA Channel 10 interviewed Mobile County Commissioner Steve Nodine and several other local business leaders in its report on pre-GAO decision actions:

Mobile Chamber of Commerce President Win Hallett placed his opinion in the mix, as well. "Well we're always anxious until it's finalized, but we think this is an opportunity to re-win what we've already won. And, we are excited about that," he said.

Still, it might not be the end of what has been a long fight.

"We need political support obviously as we go down the road we have to make sure Congress doesn't toy around with and lifts the stop work order currently in place," said Nodine.

Tuesday, some of that help was demonstrated when a new political support network was announced. Local leaders in Mobile County have formed the Gulf Coast Aerospace Coalition in response to Boeing's challenges.

The network, founded by local leaders, includes 50 cities and counties in the Southern United States, stretching geographically from New Orleans, Louisiana, in the West to Tallahassee, Florida, in the East.

The Mobile Chamber of Commerce has been doing everything that it can to secure support for the city, as well. The organization has "been in touch with our allies all over who have something as stake in this project," said Hallett.

Contrary to most people's perception, political grassroots mobilization is expensive. But, if the GAO decision is not definitive either way, each side will spend as much as needed to get their supporters (voters) to demand action from elected officials. Given that this is an election year, the pressure will definitely be on Congressional offices to do something for their state's/district's economy.

Tanker War Blog E-mail Problems

Dear readers Tanker War Blog is experiencing an e-mail problem. We are unable to post your comments or view any e-mails you send us, so please be patient. Hopefully we will be able to get it fixed soon.

Where is the Tanker Maintenance Outrage?

A recurring comment we hear from KC-30 supporters, and in particular those from a certain state the KC-30 may eventually be assembled, is that Boeing lost and should, "Just get over it."

We at Tanker War Blog understand this frustration to a certain extent, but we really think that such outrage should be saved for a far more deserving and local company; Alabama Aircraft Aircraft Industries, Inc (AAII), formally known as Pemco Aviation.

Because, no matter how much one thinks Boeing's protest is holding up the delivery of new tankers, using that same logic, AAII's actions have been much worse.

As most readers to this blog know, the KC-X, now called the KC-45, will eventually replace the current Eisenhower era KC-135s. In 2007, Alabama Aircraft lost the Air Force maintenance contract for the KC-135 to Boeing. Alabama Aircraft then protested this decision and forced the Air Force to stop Boeing's work on the KC-135 maintenance covered by the contract.

Reuters reports that this stop work order was only lifted late last week:

"As a result of the GAO's decision, the suspension on your award of 10 Sep 2007 is hereby lifted," the Air Force told Boeing in a document obtained by Reuters.

Alabama Aircraft,...had won its first protest against the contract award in December, but filed a second protest in March after the Air Force again awarded the contract to Boeing.

So Boeing rightfully protests a replacement tanker contract, and KC-30 supporters have all but started to blame them for the deaths of tanker crews. But, Alabama Aircraft has been holding up KC-135 tanker maintenance since September 2007 and they are given a pass!

Not getting new tankers as fast as one may like is regrettable, but not being able to fix the old tankers you do have, and that desperately need repair, is worse; much, much worse.

Also, don't think for a second that Alabama Aircraft Industry, Inc. has given up. No, in fact according to Aero-News.net:

AAII President Ron Aramini issued a statement explaining, "While we are disappointed with the GAO's latest decision, we fully intend to continue to press our case until the Air Force has conducted a full and fair evaluation of proposals. We believe that a proper evaluation would result in the selection of AAII as the highest quality and lowest cost source for the maintenance of the Air Force's KC-135 fleet."

So two GAO rulings and two Air Force contract selections are not enough to satisfy those in the Alabama aerospace industry?

By that standard you would expect them to wait patiently and quietly while Boeing is allowed to go a couple more rounds with the GAO and Air Force. But, that of course assumes these Airbus/EADS supporters don't have a double standard, or are not just using aircrew safety as a PR pandering gimmick.

What to Expect from the GAO on June 19th

A number of our readers have e-mailed us asking what to expect on June 19. While we do not know the GAO's decision, we do have a good idea of how the decision will be announced and how much information will be initially available.

The first thing to understand is that unlike when DoD announces a major contract decision, the GAO does not hold press conferences for their bid protest decisions. Instead, the GAO will normally issue a simple press release stating their determination. Here is a recent example.

The full scope and details behind the bid protest decision will not normally be immediately released, since it contains proprietary and source selection sensitive information. These details will only be avalible to the counsels for the protester and intervenor admitted under the GAO protective order issued for the protest and to the Air Force.

So while the decision will immediately apparent, the reasoning behind it will not.

The GAO normally releases a public version of the bid protest decision a number of weeks later after receiving suggested redactions from the parties involved. The public version of the tanker contract bid protest decision will look similar to this recent case.

Due to the magnitude of the tanker decision we fully expect both companies will receive an advanced notice of the decision about an hour prior to the GAO's press release. Both companies respective PR departments already have several press release ready to go to fit a number of decision results. But, don't expect any concession speeches; the tanker contract war will probably only heat up.

Also, during this advance notice time we expect each company will call its Hill supporters to break the good, bad, or mixed result news. We will see which of us can keep a secret for an hour...

Note: Please remember that June 19th is only the deadline for the ruling, it is not a set date to issue the decision. In fact, the GAO has probably already completed their determination and we fully expect their decision at any time in the next 48 hours.

TAnchorman Announces Winning Tanker Name

We would like to direct our readers to TAnchorman's Blog as he has breaking news on the Name the Tanker Contest.

Thank you all for participating. It was a hard fought campaign, but the people have spoken and a winner has been declared.

Some in Pentagon Wary of EADS Ownership

While KC-30 tanker supporters would like you to overlook the foreign government ownership of EADS, Congress and DoD would be negligent to gloss over this fact. The important distiction is that EADS is not just a foreign company, it is a government owned and controlled foreign company. And, by doing business with the government owned EADS, the Pentagon is essentially reversing 60 years of procurement policy.

There are solid reasons the U.S. government no longer owns numerous arsenals, ship yards, and defense manufacturing facilities. Since the end of the New Deal, Congress has steadfastly been on the side of increased privatization. Throughout the American government and, indeed, throughout American society, there is a widely shared and ultimately decisive belief that placing primary reliance on the private sector to produce the nation's arms is good for reasons of political principle as well as practicality.

Foreign government owned and subsidies firms like EADS should not be treated as other truly private companies. The rise of these strange hybrids of government-owned enterprise should be viewed in fact as undermining the very foundation of the free market.

Luckily not everyone in DoD is blind to this fact. InsideDefense.com in an article entitled, "Pentagon Surveying use of Sovereign Wealth, Private Equity Funds" (subscription required) reported that, unlike those in Air Force procurement, some in DoD are starting to get worried about the potential impact of foreign government ownership on the U.S. defense sector.

Gary Powell the Assistant Deputy Under Secretary of Defense for Industrial Policy has commissioned a RAND study on how foreign governments use sovereign wealth and private equity funds and the potential impact on the U.S. defense sector. The report is due to be completed in January 2009.

In the InsideDefense.com article, Mr. Powell talks about foreign government ownership:

“So if the government of China wants to buy a U.S. defense contractor, what are the implications of that?” he questioned. “We’re a little worried about that because our concern is that we understand from a business perspective when one company wants to buy another company -- what the motivation is” but less is known about the intentions of a country.

Powell said DOD has heard stories about Russia harnessing its oil influence to put pressure on Ukraine. On that note, he wondered to what extent Russia would be willing “to use these sovereign wealth funds to buy into our firms and then do things for political purposes that may be counter to our best interests?”

Earlier this year, Russia warned of targeting missiles against former Soviet neighbor Ukraine if it joins NATO. The countries have also argued over natural gas over the last few years.

In a similar scenario, a Russian bank bought a roughly 5 percent stake in EADS, a French-German aerospace manufacturer, in 2006, he said.

“What if Russia uses that and they develop a voice in the management of the company? And they decide, ‘EADS, we want you to move your production facility from France to Russia. We want you to eliminate some of your non-Russian subcontractors and use Russian subcontractors,’” Powell said.

What Mr. Powell fails to mention is that in addition to Russia, Dubai, through the use of its sovereign wealth fund, also owns 3% of EADS.

Just as the U.S. must counter the rise of Illiberal Democracies, which undermine the very foundation of Democracy, so to must we confront and counter government-owned enterprises, like EADS, if we are to protect and maintain the independence and integrity of the private enterprise system.

KC-30 Naming Contest Finalists Announced

On his blog, TAnchorman has just released the official nose art for the KC-30 and he has announced the finalists in the name the KC-30 contest.

All visitors are asked to vote for their favorite name by noon on 16 June.

Tanker Approps Bill Amendment Readied

Aviation Week reports that Rep. Norm Dicks is working with House Defense Appropriations Chairman Jack Murtha to introduce an amendment to an appropriations bill preventing the award of the U.S. Air Force tanker replacement program to the KC-30 contractor team that includes EADS.

While the GAO deadline to rule on the tanker contract protest is on 19 June, the article reports that the amendment may be introduced regardless of the outcome:

But "no matter what happens with the GAO, if it doesn't stop this, Congress has a responsibility to review this," Dicks told Aviation Week after a House Aerospace Caucus luncheon June 12. "We're going to take whatever action we have to take."

At Tanker War Blog we believe it's go time in the HAC-D. So if you thought there was some rough play before...well you ain't seen nothing yet as both sides will now go to battle over funding for the tanker. When real money is at stake, the gloves come off.

Reuters Finally Reports on Tanker Math Error

Reuters, in what they liberally call an exclusive, reports what Tanker War Blog readers already knew two days ago; that the Air Force has conceded that their calculations on Life Cycle Cost were incorrect.

The article did report that Air Force documents initially put Northrop's life cycle cost at $108.01 billion versus $108.44 billion for the Boeing plane, a difference of $34 million. But, Reuters was not able to uncover the corrected amounts. (As an alert reader points out in the comments below, Reuters also seems to have a math problem: The above original cost number for Boeing should read $180.044 billion)

In the article Reuters also reports that:

During the protest review, the Air Force discovered five errors in the life cycle computation, which caused a slight adjustment in the operating costs of the two aircraft, Northrop said. But the initial results were "a dead heat" and remained essentially the same, even after the adjustments, it said.

If the KC-30 team and DoD thought that the initial cost/price results were a "dead heat" then why did they both stress that Boeing's proposal was more costly in statements to the press and in communications with Congress. As Boeing's Agency Report Comments state on page 108:

Indeed, even after the Air Force made its [math error] concession, the Pentagon's top acquisition official, Under Secretary of Defense for Acquisition, Technology and Logistics John Young, lectured Congress that the KC-767 would entail substantially greater cost: "If I am going to demand that certain companies or proposals must win regardless of what they cost, I am going to disadvantage the taxpayer and war fighter. I am going to deliver (a weapon with) less capability for more cost."

The Air Force admits to five errors but the GAO still has to rule on the many others they do not admit.

Also, CNBC's Jane Wells has a good TV story on the error.

More Agency Report Comments

Yesterday, we finally obtained a full copy of the Public Redacted Version of Boeing's Comments on the Agency Report which we have now posted in two parts. Part 1 pages 1-92 and Part 2 pages 93-191 (Note: Each are big 6 MB files but they are in streaming text format so viewing should not should not take too long.)

Also yesterday, the KC-30 team made available their Agency Report Comments. As is their recurring theme, the KC-30 submission came in much bigger and heavier; totaling 370 pages of comments. (Note: This is a huge 13.2 MB PDF file).

Here is how Boeing summarizes their comments:

The Air Force rests its submission that Boeing's protest should be denied on the claim that Boeing merely disagrees with its subjective professional judgment. On issue after issue after issue, the Air Force dismisses the concerns Boeing has raised by intoning the mantra that its position reflects "the evaluators' professional and subjective judgment." It is certainly true that GAO will defer to the reasoned exercise of the agency's professional judgment. But when the claimed exercise of professional judgment is contrary to the plain terms of the Request for Proposals (RFP), when it is exercised disparately, when it is patently unreasonable, the Air Force's judgment is not entitled to deference. And when, on issue after issue after issue central to the source selection decision, the Air Force's disregard for the plain terms of the RFP, its disparate treatment of the offerors, and its patently unreasonable judgments consistently redound to the benefit of one offeror and to the detriment of the other, the protest must be sustained.

Here is how the KC-30 team concludes their comments:

Boeing has made many different claims in its multiple protest filings. The vast majority share a common unstated premise - echoed in its PR campaign - that the Air Force was prejudiced against Boeing and intent on treating it unfairly. An examination of the facts surrounding Boeing's grounds of protest demonstrate just the opposite. The Air Force conducted a comprehensive evaluation which treated both offerors fairly. If anything, it went out of its way to give Boeing the benefit of the doubt. On a few minor points the Air Force has made corrections after considering the Boeing protest arguments. Perfection, while an admirable goal, is rarely achieved in human affairs, and particularly not in something as complex as the evaluation which the Air Force performed here. But those small corrections are inconsequential and in no way alter the conclusion that the SSA reasonably determined that Northrop Grumman submitted the more advantageous proposal. Certainly, nothing in the record supports the exaggerated claim of deliberate manipulation and bias throughout the Air Force on which Boeing's protest depends.

After reading portions of both sets of comments, we can say that good arguments are made on each side. It seems almost impossible for an outsider to say beyond the life cycle cost errors we mentioned previously what the GAO's will decide.

Are the admitted errors minor and inconsequential as both the Air Force and the KC-30 team claim? It difficult to tell without seeing the Agency Report and the full comments. Also, much of the protest rests on the technical merits of each proposed aircraft; not our strong suit.

A key point will be if the GAO believes the metrics in many of the disputed areas were set by rigorous analysis or instead by a what Boeing claims is "flawed analysis" and "unreasonable judgement".

In Boeing's favor was a GAO Report released on 6 March 2007, after the final KC-X RFP, entitled Defense Acquisitions: Air Force Decision to Include a Passenger and Cargo Capability in Its Replacement Refueling Aircraft Was Made without Required Analyses. As the title makes plainly clear the GAO at that time did not believe that the DoD had established in any concrete way that it had done the proper analysis:

Mandatory Air Force implementing guidance governing the capabilities-based planning analyses discussed above states that capabilities-based planning employs an analysis process that identifies, assesses, and prioritizes needed military capabilities. These four analyses did not identify a passenger and cargo capability gap, did not establish that such a capability would represent a redundancy, and did not assess the risk of not acquiring such a capability. Without sound analyses, the Air Force may be at risk of spending several billion dollars unnecessarily for a capability that may not be needed to meet a gap or shortfall.

Military Decision Makers Approved the Capability with Neither an Identified Need nor Risk Assessment

DoD strenuously disagreed with the GAO's assessment then, but the question remains: Did the Air Force prove that their grading criteria had merit, and if so did they set that criteria prior to the RFP, and did they carry out the grading rules the criteria set evenly?

In Boeing's comments they clearly state their position on this:

The source selection decision repeatedly violated the terms of the Solicitation in material respects. These legal errors permit GAO to sustain the protest without a hearing, but they do not begin to capture the full measure of the Air Force's flawed analysis.

Here in DC, Tanker War Blog is not alone in thinking the Air Force made mistakes, but until the GAO decision is released, no one can know for sure the magnitude of those errors.

Tanker War: Not Over by Christmas 2

Bloomberg is today reporting that depending on the GAO decision, Boeing could take the tanker contract to the Court of Federal Claims which was established by Congress in 1855 to adjudicate the Constitution's First Amendment guarantee of the right "to petition the Government for redress of grievances."

The Court of Federal Claims has exclusive jurisdiction over various disputes against the U.S. government in excess of $10,000 and unlike the GAO has no set timeline in which to rule.

A legal challenge after the GAO's finding is "within the realm of possibility," said Loren Thompson, an analyst at Lexington Institute, an Arlington, Virginia-based public policy group focused mainly on defense-industry issues.

"Boeing is absolutely convinced it has been wronged, and Northrop is absolutely convinced it had the best proposal," Thompson said. "That is a prescription for a process that just keeps going and going. Considering the stakes involved in awarding the next-generation tanker, I don't see Boeing giving up any time soon."

At Tanker War Blog we think it is a bit premature to talk about new court cases when we still do not have the GAO or WTO rulings. But either way, as we said before we think the Air Force tanker contract war will not be over by Christmas.

If the Tanker Doesn't Fit...

After a long ago requested but delayed briefing precipitated by Jed Babbin's article Too Big, Too Heavy a member of our team was given information on the possible construction cost related with purchasing the much larger KC-30.

During the brief she was provided Google Earth satellite imagery as visual evidence to show the many problems that will be associated with replacing the KC-135 with the much larger KC-30.

As you can see from the photos, unlike the KC-767, the KC-30 footprint does not allow space for taxiing, and precludes parking on many pads. In many places the KC-30 nose is consistently beyond the pad cement.

It should also be remembered that in addition to the size/spacing issue, there are many problems a heavier aircraft presents the classified Pavement Classification Number (PCN) or strength rating of the runway, taxiways or airport ramps. Some of these ramps and taxiways may not even be able to support a heavier tanker.

If dear departed Johnnie Cochran were around to argue the case before the GAO we think he would have said a little something like this, "If the tanker doesn't fit, you must the contract quit."

In the GAO case at least, he would be right.

Air Force Admits to GAO that the KC-30 Costs More

Now that the GAO has wrapped up its tanker contract hearings and is currently determining its decision, some redacted documents are now being released. One document that has been released in part are Boeing's comments on the Agency Report (USAF's response to the Boeing's protest).

At Tanker War Blog we were not able to obtain the full version of the comments, which we are told total over 400 pages, but one of our members on the Hill did get a very interesting section on Most Probably Life Cycle Cost(MPLLCC) calculations. These comments are heavily redacted, but from them it seems that the Air Force in its Agency Report has apparently now conceded that the KC-30's MPLCC is higher than Boeing's. This of course is the exact opposite of what the Air Force had briefed Boeing and publicly stated as a reason for selecting the KC-30. Page 103 of the comments has the following:

III. THE AGENCY REPORT CONFIRMS THAT THE AIR FORCE'S COST/PRICE EVALUATION WAS IMPROPER AND UNREASONABLE.

With respect to the Cost/Price evaluation, as an initial matter, the Air Force now concedes that Boeing's most probable life cycle cost (MPLCC) is lower than NG/EADS'. See MOL, AR Tab 001 at 201-02. This renders even more troubling the SSA's initial public assertions that NGIEADS "offered great advantage to the Government in cost price." See Protest, AR Tab 003(a) at 94. The Air Force's concession, however, addresses only a miniscule fraction of the errors in the Cost/Price evaluation confirmed in the Agency Report.

On page 107 it seems that a small part of this error was even caused by someone in Air Force procurement not properly using an Excel spreadsheet:

In particular, in its Third Supplemental Protest, Boeing demonstrated that the Air Force underestimated [redacted]costs by $ [redacted] as a result of an erroneous spreadsheet cell reference.

Now, the Air Force likely responded in the hearings that the error in their calculations was minor and irrelevant to the overall outcome. But, we expect this error will have considerable impact on the GAO in terms of their assessment of the thoroughness and credibility of the evaluation.

As more of the documents are released we will attempt to post them. Given that the Boeing documents are by their nature one-sided, we will generally refrain from commenting except when new information is brought to light, or we see items where the Air Force seems to concede it made errors.