Thursday, June 12, 2008

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.

11 comments:

Anonymous said...

If I pick 3 numbers between 1 and 100, what are the odds you could guess one of the numbers on one try? The odds are the same the Air Force could make 5 random math errors in pricing the two proposals that would all just happen to benefit Northrup/EADS.

Anonymous said...

John Young and Sue Payton are a bunch of idiots. Has France or Germany ever give us a 35-100 billion military contracts? It's time we pull our troops out of Europe and let the Europeans defend their own countries. Let's see if they are so generous with their welfare systems when they have to spend more money to defend their own countries.

Anonymous said...

^ Well, what was/is the point of a bidding process in the first place if it all should go to Boeing everytime? Under that system, I can't wait to see the cost and crummy product produced next time the military needs something. Why should others bother to bid? And why should Boeing bother trying to be efficient?

Anonymous said...

Were you just born yesterday? Have you heard of launch aids? THe reason that there are no competion for Boeing in the US is that the Europeans subsidies basically drove all the competitors for Boeing in the US out of business.

Anonymous said...

ok so why doesent n.g. or lockeed build a new one from scatch instead of a forign platform? no one would have a problem with that. because they dont want to spend the money they just want to be the salseman and pocket a profit ...

Aurora said...

Anonymous #3. The problem with this particular solicitation is that the USAF and the McCain camp went out of their way to avoid consideration of the long term consequences with respect to the impact on the U.S. aviation industry and the fact that the net job losses will be massive. Further, they completely ignored the issues concerning foreign control of the parts of production of a strategic national asset used in world-wide power projection. In stort, the scope of the consideration was deliberately narrowed to allow the French a "fair" shot. (You are aware that the Russians own at least 5% of EADS and are angling for a board seat, aren't you?) Don't think for a second that the French, Germans, or Spanish would reciprocate and allow anything like this to impact their own aerospace industries. Look at the A400 and Galileo for concrete examples (and don't get caught up in the nonsense that the A400 is a "tactical" transport. It exists to provide a boost to their domestic industries. Galileo is a european alternative to "hegemonistic" American domination of space.)

It appears that the USAF also deliberately confined cost considerations to direct costs like fuel and maintenance. "Inconvenient" costs like infrastructure that didn't make the case for the KC-30 were "wished" away or ignored.

Whatever the GAO outcome, it is up to Congress to kill this deal. I'm sure that Senator McCain will be (rightly) pounded with this issue during the campaign, but Congressmen Murtha and Dicks seem to be wanting no part of this "French" tanker.

Anonymous said...

Regarding this statement in the Reuters report:

"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 or 3/100 of a percent."

Isn't the difference between the original $108.44B for Boeing minus the original $108.01B for NG/EADS a difference of $430M not $34M. That'd be 4/10 of a percent difference, not 3/100 of a percent.

ewaggin said...

Is the SSA (Source Selection Authority) a department or an individual?

Who is the SSA?

Tanker War Blog said...

Very good question.

The SSA is a person. The name of the person was redacted in the Air Force documents.

In the KC-30 comments, the pronouns in reference to the SSA are redacted, but in the Boeing comments she and her are used repeatedly in reference to the SSA.

This would lead the outside observer on to believe that Sue Payton was the SSA.

Sincerely,
Tanker War Blog

ewaggin said...

TWB -

Thanks for the info.

Indeed I had gotten the impression while following this saga that Payton was the SSA, but I couldn't find a definitive reference.

I'm surprised that the SSA's identity is (apparently) considered confidential. Is this standard practice?

Anonymous said...

Anon #4, it doesn't matter what the resons were before. Blame people and chop off their heads if you want. I'm sure they deserve it and i promise not to shed a tear. In the meantime, here we are with decisions to make with what we have going forward. And yeah, sure an American company can start making jets from practically nothing and compete with Boeing's bid. Ok. And I think I'll start a car company bigger and more efficient than Toyota.

The effects of this poltical situation will show up over time. I don't think you'll like the result.