Wednesday, June 18, 2008

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.


Anonymous said...

we have justice for the taxpayers now ..

Anonymous said...

Well, Richard Aboulafia must be crying in his beer. Kudo's to the Boeing lawyers who filed the protest for outclassing their NG counterparts. All of Boeing protest documents were professional and to the point. The NG documents were full of longwinded prose that didn't say anything and were full of schoolyard taunts. I don't think NG effectively rebutted any of the Boeing claims. Glad to see the GAO agrees.

Anonymous said...

Northrop it's time to get over yourself your not so hi on the horse that people cannot se the truth...

ewaggin said...

It appears to me that the GAO decision is very bad news for the Airbus tanker.

It was already known (from the redacted comments released by both Boeing and NG/EADS) that the AF had admitted to mistakes in pricing, which when corrected, made Boeing's bid lower.

And that was based only on the mistakes the AF admitted making.

Now the GAO has determined that (among other things) the AF erred in not accepting Boeing's commercial pricing data. The AF instead substituted data that had the effect of significantly increasing the cost of Boeing's bid.

When that mistake is corrected, Boeing's bid will be that much less costly than the Airbus bid, and will make it much harder for the AF to defend their decision to award the contract to Airbus.

The GAO also determined that the AF improperly gave credit to Airbus for exceeding the requirements, when the RFP expressly said that no such credit would be given.

Since Boeing and Airbus both met or exceeded the reqiurements of the Key Performance Parameters (if a KPP isn't met, disqualification results), the AF was supposed to consider the positive discriminators of each offering.

The PDs are things like survivability, ability to refuel the V-22, ability to carry multiple fuel types, etc.

Boeing had 25 PDs (including the ones above), while Airbus had only 5 PDs (and none of the ones above).

Thus, it's not just that Boeing's bid was lower, but their offering was demonstrably better than Airbus's, based on the AF's own PDs.

ewaggin said...

Incidentally, the #3 point in the post is potentially a very big deal.

This is a KPP. If it is not met, the offering is to be disqualified.

In their protest, Boeing said that it appeared that the AF had eased the KPP to avoid disqualifying Airbus, as it appeared that the Airbus tanker could not refuel the C-130 when carrying a full fuel load.

If this turns out to be the case, then Airbus should have been disqualified, and Boeing should have been awarded the contract.

Anonymous said...

It's too bad they use the word "recommend" so much throughout that document.

With all the bad mouthing of the Air Force and whining Boeing has done since losing the contract, why should the Air Force take any of this into consideration?

None of those are at all very significant enough to force a re-bid.

I think you can toss #3 out the door as that has been proven otherwise since the decision was made.

Number 2? Give me a break. Grumman took a look at those objectives and said "Hmmm we can do better than that" and the Air Force said "wow, we kind of like that". So ok, now at the very least Boeing and Grumman will be ties on those objectives but the Air Force is still going to want the Grumman Tanker.

The others are out of my realm but I see no major points that scream "re-bid this contract!". The Air Force is hurting for these planes right now, I can't imagine they would want to delay this further and right now the ball is in their court.

And isn't this all ironic since this morning Boeinig was ready to close up shop in the tanker business?

Aurora said...

"Anonymous said...
It's too bad they use the word "recommend" so much throughout that document.
With all the bad mouthing of the Air Force and whining Boeing has done since losing the contract, why should the Air Force take any of this into consideration?"

They will take it seriously because the people that appropriate the money to buy these neat toys, i.e., the U.S. Congress will demand it. It's started already with Senator Carl Levin's comments. If you don't know who he is, google it.

Don't be surprised to see Senator John McCain join the clamor from Congress to re-do this botched deal. He just dodged a major bullet and his campaign must be absolutely delighted they won't be fingered in the fall for wanting to send aerospace jobs to France.

The language of the GAO determination was unusually scathing and points to serious flaws in this decision. Perhaps it's time for the DOD Inspector General to look into this? If the GAO, in a few weeks, came to these conclusions, what was going on in the Air Force acquisition branch to arrive at this incredibly stupid outcome? Senator Murray is correct; this thing just didn't pass the "smell test".

Anonymous said...

I recomend you read alot more and learn because there is alot more to this than what most people think,

Anonymous said...

Time to fire Sue Payton and John Wayne or whatever his name is. This goes to show that these people are incompetent and cannot run a fair and transparent selection process.

Anonymous said...

And how Exactly did Airbus get that 50% of the market ? Bribes, Subsidies, and like they have said before they will not be happy untill they have wasted our industrial base. Northrop has had there share of Botched jobs. we wont mention F-35 So before anyone Talks trash Lets look in our own backyard 2 tmes a protest for kc-135 maintn, Oh they cant get the maint done because Alabama air is protesting agin Pot calls the Kettle black

Anonymous said...

It was so transparent the G.A.O seen through all the Bull%^^%.

Anonymous said...

This is actually sad for Boeing, IMO. I know a lot of folks here figure it’s a "victory for America", or unions, or whatever flag waiving concept we can think up. And I know most can find plenty of blame on why Boeing has no equal American competition anymore. But the reality remains the same:

There is no point in a number of so called "foreign" companies (we'll just ignore Boeing's ongoing desire to ship off as many jobs as fast as they can so we can stay in our fantasy land) spending millions attempting to compete on a number of these non-sensitive projects going forward. The long-term real effect on beloved Boeing is going to be an even fatter, lazier, more inefficient company producing incompetent products on the level of Ford and GM in the 1980’s. There is no reason otherwise. It’s basic business evolution and it is assured. Boeing is the loser in all of this, just watch. Political crutches don’t last in the face of ineptitude.

We won’t be around on this site in 20 years to see it play out and post about who was right or wrong. But you can probably expect Airbus & Boeing to have further blurred the lines on what is foreign or domestic by then. Airbus will probably be assembling commercial jets in Mobile, AL (the real concern of Boeing in all of this) and continuing to eat into Boeing’s ever shrinking market share of the commercial sector. They will have the motivation to produce superior products, Boeing will not until the crutches fall away. And, much like Toyota and Honda plants in the U.S., the tide of public opinion will shift and blur as common people have a hard time determining what is foreign and what is domestic regarding the two companies. Especially in the face of differing product quality.
As far as a victory for taxpayers…well, maybe or maybe not this time. We shall really see when the next “process” excludes all so called “foreign” interests. The cost, corruption and inferior product of that fiasco will be the stuff of legend. And only the taxpayer and soldier will have to pay for it.

Anonymous said...

With all the bad mouthing of the Air Force and whining Boeing has done since losing the contract, why should the Air Force take any of this into consideration?

As a former USAF procurement official I can think of a number of reasons. These are just a few:
1. Complying with federal procurement LAW.
2. Avoiding paying damages to Boeing for failing to comply with procurement law.
3. Actually getting Congressional Appropriations to FUND this program which Congress has absolutely no obligation to do past the money used for source selection and evaluation.
4. Actually getting Congressional Authorization to spend the money on this program assuming it IS authorized, a second step in the process altogether.

I think you have to be living in a dream world if you think the Air Force is going to fight the GAO on this one. The Air Force just had their two senior guys FIRED for screwups...albeit most of those involved the nuclear surety program (accidentally flying an aircraft with live nukes, then accidentally shipping nuke detanators to Taiwan believing them to be F-16 brake linings). If you seriously think that the new kids on the block are going to say, Oh gee, we just screwed up a $20 billion procurement decision, but...oh well...and that Congress will let them get away with it, you must be on some pretty strong chemicals.

No, it IS too bad for the warfighters, because this will stretch out for at least another year or so the time they are going to be making-do with half-century old KC-135s, but the Air Force's BEST move right now is to redo the RFP to something they REALLY want (if indeed they don't want the original) and solicit for new proposals. If indeed they change the RFP, that will require the whole damn process to be done over...a delay of a couple of years. Under those conditions the Air Force will have little choice but to reimburse Boeing for what it cost them to bid under the original RFP. If they DON'T change the RFP it might well be quicker, but the 767 will certainly win, since the EADS aircraft is not the right size for the original RFP.

Procurement law simply doesn't allow the Air Force to change criteria once the RFP is published, even if they happen to see nifty things on one of the aircraft that they decide after the fact that they'd like to have. There is a whole requirements establishing process BEFORE the RFP where they need to make those decisions. Once the RFP is published, those requirements are locked in. Otherwise no one would bid on any government contracts. It's too expensive a process to mess with if the ultimate decision criteria bear no relationship to the criteria called for in the RFP.

Anonymous said...

The Air Force still has a decision to make, ignore the GAO or re-bid the contract.

And then Congress has two decisions to authorize the program...or not, and fund the program...or not.

And the plain fact of the matter is that the GAO report has killed any chance this contract has about getting through Congress.

If you had the least knowledge of procurement law you'd know that, and none of the arguments about wasted time or PR damage makes a damn bit of difference.

It is NOT up to the Air Force now. The Air Force's options are to promptly rebid this following the rules, or never get it through Congress. The new Air Force Chief of Staff knows that, and the new Air Force Secretary undoubtedly will too. The Air Force does not operate in isolation where they can ignore the rules with impunity.

This contract is's as simple as that. Any attempt to push it would simply mean the careers of those attempting to push it would die too.

Anonymous said...

NG botched F35! not hardly your info. it totally wrong home boy. NG designed three variations of the F35 Center Fuselage for three different aircraft in 18 months that has never been done before! snd on time, ahead of schedule, at weight and been building them for over a year. AAII and the protests for maintenance have nothing to do with Northrop! Yea I'm calling the kettle black sleezy B!

Anonymous said...

I really think you mean Sleazy N.G. for there tactfull way in the process for this tanker. Were not going to bid unless it favors us and then with the help of McCain and friends and then with all the retired A.F. officials on There ppayroll and airbus You Say Boeing Sleazy Pull Your head out of your u know what.

Anonymous said...

Uhh folks ?/ BA went overboard to try to hose Uncle on the initial lease deal. The reason for the lease deal at that time was to 1) keep the 767 line open, 2) to avoid the 3 to 4 year procurement cycle during which many many jobs and production capacity would dissappear. had BA not seduced fido and tried to seduce the taxpayers, it would have been a win win situation.

Airbuss * could * have competed with a smaller plane , etc but they chose not to. There may - repeat MAY have been some good logistical reasons for Airbutt using a smaller plane - or a larger plane - but that is NO LONGER THE ISSUE.

IMHO- ALL sides would be well served to simply clairify the specs- update the cost data- and split the contract via 60 40 or 70 30 to provide both planes for the initial block ONE buy- since Both have certain unique advantages depending on location and planeed versus actual use.

roynapoleon said...

If the USAF rewrites the RFP to better state what they want, and they still say they want a larger (ie ; longer ranged, more fuel capacity, more cargo capacity), I'm not sure Boe can compete. The 777 is WAY larger (4600sqft wing area,to A330's 3900. 767 is about 3000),and the airplane is certainly more expensive. There really are no similar sized commercial airliners to the A330. Boe would have to offer a smaller version of the 777 (a -100?), but that would drive the cost up.

Anonymous said...

The June 19th 12:14am comment completely nailed it on the head. Bravo good sir or madam.

I find it amazing that so many mindless souls, whether it be a politician, media person, or your average citizen, hide behind this "Buy American" campaign. Boeing doesn't subsidize work to foreign markets or use foreign markets and parts? What about the fact that the Northrop contract was/is going to create NEW jobs, some 1500 NEW jobs in a NEW AMERICAN market? As a previous poster stated, THIS was the real issue at hand for Boeing - COMPETITION. Is it really that surprising that the GAO ruling was so "strongly" worded when Boeing poured millions and millions of dollars into advertising and lobbying campaigns? Shocker right? You know what this is people? Protectionism. And it will do nothing but hurt the economy.

I, for one, am embarrassed by those who supposedly represent us in Congress. They get on this grand stage, start pounding their chest screaming VINDICATION, and why? Because they have political/monetary interests, not because it's the best thing for the military or the economy. Oh, but wait, you must buy American. When you begin to attempt to implement protectionism policies you will only further drag down the economy and hinder growth in what could potentially be upstart areas. Mobile is one of those areas. What a shame.

Hopefully, the Air Force is able to explain those items pointed out by the GAO and is not swayed by the POLITICS of the GAO decision. Furthermore, the Air Force should stand behind its original decision to create 1500 NEW jobs for the American economy and for American workers in Mobile, AL.