Thursday, July 10, 2008

DoD Tanker Recompete Brief Analysis

Now that the DoD KC-X tanker contract recompete press conference is over, it is time to review and analyze yesterday's events. (Note: The briefing transcript is on our documents site so you can do your own analysis. Or, you can view the brief on the right. )

What has changed in the Tanker War:
1) By deciding to recompete the contract, DoD has voided the KC-30 team's contract that was awarded after the first flawed competition. As John Young said," There is no contract award right now. And there won't be a contract award."

2) Sue Payton has been relieved as the Source Selection Authority (SSA) for the tanker contract and that task now falls to John Young. Sec. Gates was asked directly why is Ms. Payton staying on her job in Air Force acquisitions and if he had confidence in her. He answered that , "Yes I have confidence in the acquisitions team." Not a ringing endorsement but it probably means she will not be asked to resign.

3) In addition to a new SSA, a new Source Selection Advisory Committee (SSAC) will be appointed.

4) A new contract decision timeline has been established. Sec Gates believes that DoD can, "award a contract by December." But, Mr Young was more cautious stating that the timeline could slip and, "That is the best case to make the source selection decision by the end of the year."

What stays the same in the Tanker War:
1) The competition is not being completely reopend. The current RFP will be used as the starting point and amended as needed. Young stated, "We have a valid requirements document that has not been called into question."

2) There will be no new provisions for the WTO dispute or for industrial base implications.

Statements that give us cause for concern:
1) Acting Sec. of the Air Force Mike Donley's statement that "...the Air Force successfully defended itself against over a hundred protest allegation, some of which were overlapping. And based on this overall performance and my understanding of the transparent and collaborative way in which this process was conducted, I would not conclude that the underlying Air Force acquisition system is somehow fatally flawed."

Mr. Donley is taking false comfort in a GAO report that was scathing in its criticism of Air Force procurement. Also, how was it "transparent and collaborative" if the GAO said the Air Force "conducted misleading and unequal discussions with Boeing…."

2) Acting Sec. Donley's statement that, "GAO's conclusions show that even in a large, complex procurement with considerable staff resources and oversight, work accomplished by our contracting personnel, our warfighters and our engineers is not always adequately prepared to withstand the detailed audits and the legal challenges that we can now expect."

Gee, we though the GAO conclusions showed that, “[The Air Force’s] selection of Northrop Grumman’s proposal as reflecting the best value to the government was undermined by a number of prejudicial errors..." And, that the GAO found, "a number of significant errors in the Air Force’s evaluation under the key system requirements and product support subfactors of the mission capability evaluation factor and in its cost evaluation..."

But now, thanks to Mr. Donley we see that SSAC and SSA were not screwed up at all; they were only not adequately prepared to withstand such a mean legal challenge. We have a feeling a couple of Senators may have to talk some sense into him during his confirmation hearing.

3) Mr. Young's statement that "... we have some confidence in what the bidders propose for the cost to develop and build the aircraft. Many of our systems, from fighter aircraft to ships to weapons, are over their 15-, 20-, 25-year life used in ways we didn't anticipate. We still have to consider life cycle costs in developing a weapons system, because that is roughly a third of the Defense budget. But we don't want to overweigh -- you know, we want to balance the known cost to develop and build the tanker with the estimated life cycle cost, and we will do our very best in that to estimate that life cycle cost and include the realistic price of fuel, although it's very difficult to understand, you know, how fuel may vary from here going forward."

This only confirms our suspicions that, even though prohibited by the RFP to base selection decisions on costs other than most probable life cycle costs (MPLCC), DoD and the Air Force are heavily biased toward a tanker with low SDD costs. This favors the subsidised A330 based tanker with its lower SDD costs. Mr. Young's statement also seems like a cop out. He almost appears to be saying that determining MPLCC is just too hard; its not like its only been around in one form or another since the late 18th Century.

Tanker War Blog's Final Analysis:
As Rep. Norm Dicks has stated, the expedited rebid is, "...better than a split buy or other options, but the devil will be in the details." Right now not enough details are known on how the grading criteria or the RFP will be changed. Also, it seems as though no one in DoD other than Sec. Gates really understands the ramifications of the GAO findings other than it made Congress angry.

Will this expedited recompete be an honest attempt to get the right tanker for the mission, or simply a method to revalidate a decision and process DoD has not truly accepted as significantly flawed? It is too early to tell.


Bill L said...

I am wondering if the general public has access to the RFP #2 or will we be left in the dark as to what we are asking our taxdollars to be used on?

Anonymous said...

What about the finding by the GAO that NG's failure to respond to a material requirement should have never formed the basis of an award? No mention from DOD of that "inconvenient truth". From that one can conclude that their proposal was non-conforming and the KC-767 should have been declared the winner.

I suspect that there are two goals operating here. First and foremost, some folks in our Air Force have fallen in love with the big airbus contender, for reasons that I can't fathom and are willing to alter the procurement landscape to get it. Secondly, this "re-compete" conveniently removes a thorny issue for John McCain.

I suspect that the only way to get a fair hearing on the GAO's findings, and to get this gang in the Pentagon to pay attention, is for Boeing to elevate this to Federal Claims Court. At least we'll have a new administration by the time of any ruling!

Anonymous said...

by the way it sounds why even recompete, sounds like they will just make it easier for Scarebus to win.

John S said...

Bill I, the KC-X RFP was available on the website when it was released (but is not there now.) I'm pretty sure the revised RFP will be there as well.

The 8 concerns the GAO raised were:

1] [A]gency did not take into account the fact that one of the proposals offered to satisfy more “trade space” technical requirements than the other proposal..

2] [A]gency violated the solicitation’s evaluation provision that “no consideration will be provided for exceeding [key performance parameter] KPP objectives” when it recognized as a key discriminator the fact that the awardee proposed to exceed a KPP objective relating to aerial refueling to a greater degree than the protester.

3] [T]he record does not demonstrate the reasonableness of the agency’s determination that the awardee’s proposed aerial refueling tanker could refuel all current Air Force fixed‑wing tanker‑compatible receiver aircraft in accordance with current Air Force procedures.

4] [A]gency conducted misleading and unequal discussions with the protester, where the agency informed the protester that it had fully satisfied a KPP objective relating to operational utility, but later determined that the protester only partially met this objective.

5] [A]gency unreasonably determined that the awardee’s refusal to agree to the 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,”

6] [A]gency’s evaluation of military construction costs in calculating the offerors’ most probable life cycle costs for their proposed aircraft was unreasonable, where the evaluation did not account for the offerors’ specific proposals.

7] [A]gency improperly added costs to an element of cost (non-recurring engineering costs) in calculating the protester’s most probable life cycle costs to account for risk associated with the protester’s failure to satisfactorily explain the basis for how it priced this cost element.

8] [A]gency’s use of a “Monte Carlo” simulation model to determine the protester’s probable cost of non-recurring engineering associated with the system demonstration and development portion of the acquisition was unreasonable.

The way I see it, a rebid allows NG-EADS to fix 1, 3, 5, and 6, while Boeing gets to fix 4, 7, and 8. Point 2 is a straight forward Boeing win.

ewaggin said...

After talking with DOD officials, Dicks' view of the situation has changed significantly, according to an article in the Tacoma News Tribune:

Murray and U.S. Rep. Norm Dicks, D-Belfair, said they were concerned the Air Force continues to favor the larger Northrop-EADS tanker even though the service had originally sought a medium-sized tanker. Dicks said the smaller Boeing tankers would save $35 billion in fuel costs over the lifetime of the planes.

“This is another spin operation by the Pentagon and the Air Force,” said Dicks, who spent the afternoon on the phone with Defense Department officials. “I am very upset. This is another effort to tilt the competition to Northrop-EADS. We will fight this thing, and we will have to use a legislative remedy.”

My take on the Dicks quote is that he was looking for the DOD to acknowledge that the Airbus tanker was ineligible for a contract award (failed to meet points [3] and [5]; see previous post), and that the contract thus must be awarded to Boeing, which met all of the requirements (despite prejudicial and unfair treatment by the AF).

This would have been the right thing for the DOD and AF to do.

Since they have now decided not to do that, they have opened the door for Boeing to file suit with the US Court of Federal Claims.

Anonymous said...

Young stated, "We have a valid requirements document that has not been called into question."

If true, then they must go with the ORIGINAL RFP and the only MEDIUM tanker in the competition will win.