Friday, July 11, 2008

HASC Tanker Hearing Analysis

The July 10, Air and Land Forces Subcommittee hearing on the source selection and path forward regarding the Air Force's KC-(X) program went on much longer than expected but yielded some new information and insight.

We have posted the GAO's testimony as well as the full hearing transcript on our documents site.

Also, you can listen to the hearing which is divided into two parts:
Part 1 Chairman's opening statement and the GAO testimony (23 min)
Part 2 GAO questions/Young testimony & questions (1 hr 48 min)

Observations on GAO testimony and questions:
1) GAO members found it unusual that none of the parties asked for a hearing. GAO instead called for one, but neither Sue Payton (the SSA) or LTG John Hudson (the chairman of the SSAC) testified at the protest hearing. Chairman Neil Abercrombie also found this very curious and said his subcommittee would follow up as to why these two important people were not selected by the Air Force to answer any questions.

2)Rep. Jeff Miller had the best grassy knoll theory of the day as he tried repeatedly tried to get the GAO reps to say union analysts had hand in the GAO decision. Mr. Miller attempted to call the impartiality of the GAO's decision into question by saying the GAO analysts were biased because their union, the International Federation of Professional and Technical Engineers was a vocal critic of the KC-30 contract.

Rep. Miller was assured the GAO's protest department is not unionized, and it is separate from the congressional reports department where the analysts work. Also, the GAO reps stated that only once was an analyst's advice even sought out during the protest decision. This single instance was only to clarify if a particular term in the report was used correctly.

Rep. Miller then followed up by accusing the GOA of creating an inflammatory decision report and argued that the KC-30 team's failure to address the Air Forces questions on depot-level maintenance should not have been labeled as a "refusal". The GAO reps said that the KC-30's own lawyers stated that the decision not to provide the information on the depot-level maintenance was "intentional".

3) The GAO reps stated, that while Air Force personnel did technically break procurement law, it was their opinion that this was not a case of intentional or malicious wrongdoing.

Nor did they see any indications of procurement personnel changing their minds on evaluations that might indicate outside influence.

4) The were several discussions on the Air Forces talking points, parroted by the KC-30 team, that only 8 out of over one hundred allegations were sustained. The GAO reps. did not know where the "over a hundred" allegations number came from and thought such a ratio was contrived or missed the point that the mistakes they did find were significant.

[Sec. Young later shed some light on this issue by saying the Air Force just counted up all the allegations in Boeing's eight protests. Mr. Young though did not offer much of an endorsement on the Air Force's math but did say that many of the allegations were overlapping.]

Observations on Young's Testimony and Questions:
1) Under Secretary of Defense of Acquisitions, Technology and Logistics, John Young was taken to task repeatedly for assuring Congress that the KC-(X) procurement selection was done correctly. HASC Chairman Ike Skelton (MO) said that despite these assurances, the train went off the track seven times and Mr. Young's oversight team failed to detect any of the issue the GAO sustained. Mr. Young said he had talked to his team, widely suspected to have been led by Shay Assad, about these shortcomings.

2) Rep. Nancy Boyda was asked that why only 25 year life cycle costs were used for evaluation when history shows that the tankers will probably be flown mush longer. Mr. Young replied that in fact since the requirements document stated that the life of the aircraft must be 40 years that the new RFP may call for determining 40 year life cycle costs.

3) Sec. Young stated that the current RFP would be amended as little as possible and that those amendments would primarily be to address the issues the GAO found. One of those changes could be to state that extra credit would be given to exceeding the KPP objective relating to aerial refueling.

Rep. Norm Dicks informed Sec. Young that Sec. of Defense Gates had already told Senator Levin that this extra credit provision would be in the new RFP. Sec. Young said he has not been told this Sec. Gates. (From this discussion, in is apparent that DoD has already made up its mind on this extra credit.)

4) Sec. Young said that the Sense of Congress was that cost needed to be made more important and that DoD would dutifully look into elevating this consideration. he also mentioned again that known cost such as those associated with SDD should be weighted more heavily than estimated life cycle costs.

5) Sec. Young laid out the new decision timeline as follows:

Late JulyNew RFP released
Mid August Final RFP released
Early October Proposal submission deadline
Late December Contract Decision

Sec. Young stated that the process will be event driven and that his own team has told him that the new RFP may not be able to be completed until early August. Chairman Abercrombie told Sec. Young that he should fire anyone who is not dedicated to meeting timeline.

6) Sec. Young said that in addition to being the SSA he may also still be the Milestone B decision authority. The KC-X program currently has Milestone B approval, but this may be revoked due to the GAO findings and the expedited recompete.


Anonymous said...

The real test of the Air Force and its acceptance of the GAO report will be the changes made to the RFP for the recompete. The GAO report is not only a criticism of how the Air Force conducted its award selection, it can also be used as a road map as to the changes needed to "wire" the new competition for one side or another. Having read the GAO report in detail, it seems obvious that had the source selection authority NOT awarded extra credit to the Airbus Aircraft submission, it would NOT have won. Based on the GAO report, Gates was totally justified in awarding the contract to Boeing since the A330 was non-responsive to all the requirements. That he did not indicates a desire to give NG/Airbus another chance. Best Value is in the end a subjective decision and with the Air Force talking about “extra credit” for exceeding capabilities, it will be possible to justify an award to the Air Bus; the argument would be that the A330’s “extra capacity” provides the “best value” despite quantitative factors to the contrary. At least for now, it seems that the Air Force is much more concerned about justifying its previous decision than anything else. Its also sounds like the rules are going to keep changing until the highly flawed decision the Air Force has made can get by a GAO audit of the selection process. Only time will tell if this initial impression is correct.

Aurora said...

After Secretary Gates' announcement that there would be a new "re-bid", Boeing issued a short press release that contained this statement:

"However, we remain concerned that a renewed Request for Proposals (RFP) may include changes that significantly alter the selection criteria as set forth in the original solicitation. As the Government Accountability Office reported in upholding our protest, we submitted the only proposal that fully met the mandatory criteria of the original RFP."

This can leave no doubt that they consider Northrop-Grumman/EADS' proposal "non-conforming". Where they go with this is anyone's guess at the moment. I suspect that they are waiting until the new "RFP" is on the street. Secretary Young noted in testimony yesterday that the new RFP would be "protest-able".

However, if I were king, this issue would be referred to Federal Claims court immediately. USAF and DOD are studiously avoiding addressing it in public. I can only conclude that it is so prejudicial to their preference for the european airbus that they just hope it will "go away".

It will take a judicial review of this flawed process to get the NG/EADS proposal tossed and the proposals "reevaluated" in line with the GAO guidance. Since there would be only one proposal left on the table, that would cinch it for the KC-767.

In my very humble opinion, this is the only way that the USAF will get a new tanker by the end of the next Administration, let alone a decision by this one. It is the path of least resistance and will serve our warfighters best. In fact, if the needs of the Warfighter (yes, that same Warfighter that everyone--including the euros!-- seem so concerned about) were really paramount, and considering that even Secretary Young admitted in yesterday's hearing that the loser will likely protest again, then that is the only path to bring this to closure soon.

That USAF and DOD don't want to go down this road tells me that they will stack the deck in favor of the big airbus.

Anonymous said...

3) The GAO reps stated, as they did in the last hearing, that they did not believe that while Air Force personnel did technically break procurement law, in the GAO's opinion this was not a case of intentional or malicious wrongdoing.

This gets the individuals out from under the threat of criminal culpability. It does NOT mean it was OK. With the GAO testifying before Congress that the Air Force procurement people broke the law, this case becomes a slam-dunk in a court case against the Air Force by Boeing.

They are going to wind up being paid for every dime of the costs it took to put their proposal together, the costs of the protest, their legal costs....

What is it with the Air Force Procurement office?

And the DOD procurement office is no better, if they believe that they will be allowed to get away with making a major change in the RFP (from MEDIUM to LARGE tanker) and get the court to accept THAT change as being in compliance with the timelines for preparing proposals mandated by law. If Boeing is feeling GENEROUS, they'll protest that to the courts and get it stopped quickly, before DOD wastes a huge amount more of the taxpayers money on another source selection that will ultimately be tossed out by the courts, because you KNOW Boeing will appeal this. The alternative is allowing their only real competitor for passenger planes to place a factory on US soil. Especially since, IT'S A GUARANTEED WIN IN THE COURT.

Look, I understand that the DOD wants these tankers yesterday...well, that's not the reality. This is the classic question about if you don't have time to do it right, where are you going to find the time to do it over?

I understand the Pentagon doesn't believe the law (and procurement law IS a law, not merely a suggestion) applies to them, but the court sees it differently.

If the DOD can really justify a LARGE tanker replacement, they can certainly have one, but it isn't going to come out of this competition, it'll have to come out of a new one. The JAG officers in charge of procurement and contract law need to pound that information into the heads of the USAF and DOD leadership. Otherwise they'll spend another decade spinning their wheels and wasting the taxpayers money.

Anonymous said...

How does the appointment of John Young fix anything? He has already let his true feelings show... This is still a joke.

> FROM APRIL 08...
> John Young, the Pentagon's top acquisition official, warned Congress
> on Friday not to interfere with the US Air Force's decision to buy new
> tankers from the EADS/Northrop Grumman team.
> Mr Young told reporters that threats by some Congress members -mostly
> from the states of Washington and Kansas where Boeing plants are
> located to cancel the contract funding would create "dangerous
> precedents". The official added that the selection by the Air Force
> was "valid" and should not be set aside "on a political basis". He
> reaffirmed that EADS and Northrop Grumman made the most advantageous
> proposal for "the taxpayer and war fighter" both in terms of cost and
> capability. Hence, Mr Young pointed out, any move by Congress to
> eliminate funds for the tankers would mean that "the choice will not
> be connected in any way to quality of the source selection. It will be
> connected to a set of political issues, which are largely what is
> being debated about the tanker". He also claimed that Boeing, who
> filed a complaint with the GAO, had no basis for protesting. The whole
> process was "a very-well run source selection, by the books and in
> accordance with the law". He concluded, "We had an excellent
> competition, two great proposals, and one proposal clearly delivered
> better value and better capability". Meanwhile, several Federal trade
> associations have called on Congress to reverse the Pentagon's
> decision. Seattle Post Intelligencer (18 & 19/04)

Anonymous said...

well golly geee- putting the same YOUNG fox in charge of the chicken coop will not reduce the loss of chickens-

Boeing seduced fido the first time regarding costs - and played the cost hide the pea the second time.

Even so- the only way out of the mess is IMHO -

A- award the initial block one contract to BA for the KC135 sized criteria they did meet.

B_ start the DC-10 Kc?? replacement game within a few months, allowing boeing say 12 to 18 months to prepare a 777 version to compete with the Airbutt version- and compete that on a slow rate procurement cycle to replace the aging DC-10 series tankers.

both sides then have a shot at 20 to 30 percent of the total tanker scenario for the next 30 to 40 years.

Anonymous said...

It's interesting to watch the social dynamics. Foy years, the DOD procurement people have violated procurement LAW, and bribed the loser not to take it to the courts with the next big contract. Ford Aerospace should have produced the Main Battle Tank, but to bail out Chrysler (through Chrysler Defense) the Army was told to select the M-1 Abrams, despite transmission problems that took decades to correct. For thier silence, Ford Aerospace got the DIVADS contract, even though their proposal was a disaster from the start. We spent billions on that fiasco, and it was never fielded. Same sort of thing with the USAF Next Generation Trainer (NGT) program. I knew someone on the source selection board. They were told on day one that it was going to go buy Fairchild-Republic's NGT

The New York Congressional Delegation was "owed" the contract for their support of Reagan's defense buildup.

But this time it's different. There are no big least, as big as this one, in the near future, and Boeing has gone to considerable lengths to become the only remaining US large passenger plane producing company, and they are not going to allow their rival to get established on their turf.

Boeing will fight this to the Supreme Court, if need be. They will not accept a change in the RFP to favor the larger aircraft if they are not allowed time to start over from the beginning with a 777 proposal.

If the DOD procurement people think they will, they are incredibly naive.

George Hanshaw said...

However, if I were king, this issue would be referred to Federal Claims court immediately. USAF and DOD are studiously avoiding addressing it in public.

And ultimately, this will be their undoing... as well as something that will cause a huge delay in the warfighters getting their needed tankers, and a huge cost to the taxpayer.

DOD procurement is governed by federal LAW, and the USAF procurement people trampled all over that law and the DOD people seem to think they can do so as well.

If DOD wants a large tanker, they have a formal needs process to establish that, and they can then put out a RFP for a large tanker. No one is going to force a medium tanker down their throats. What they CANNOT do is put out a RFP for a medium tanker and then decide at the source selection point that they really didn't mean what they said in their RFP...the information that was used to establish the proposals. Under federal procurement LAW, they will likely wind up paying for every dime of Boeings expenses to date for their reneging on the original RFP.

Similarly, they cannot now change the RFP and pretend that this is the same process. With a substantially changed RFP, the process must start at the beginning and be opened up to EVERYONE who wishes to bid on it on the same timeframe as any other new proposal.

Those things MUST be done not to please the GAO or even to please Congressional critics, they must be done because the LAW requires it.

The DOD may believe they can do this because they have, for decades, bought off the losing company by tossing them a bone on the next procurement project, but on this one Boeing isn't going to roll over. There aren't going to be any procurements in the near future anything like of this magnitude, in fact, the USAF doesn't currently have all the money in the FYDP they are going to need even for this program.

Half of Boeing's revenues come from its Commercial Airplane Division which is essentially the only remaining big passenger aircraft manufacturer in the US. No way in hell are they going to allow their only real international competitor to get a toehold on the US continent. Right now they have Airbus on the ropes. The A380 is having huge cost over-runs, is over two years late, and will NEVER recoup its development costs. The A350XWB exists only in CAD (and let's hope THIS time the various factoried used the same software), the equivalent of software "vaporware", the A400M is behind schedule and over budget, the executives are all being arrested for insider trading, and the Power 8 program is not even coming close to getting them skinnied down to be able to handle the hit they are taking to the cheaper dollar..and guess what, the dollar has gotten eeven cheaper since then.

Boeing has the opportunity to put the 'coup de grace', (no French pun intended) on Airbus, and they intend to do it.

If the DOD doesn't do everything TO THE LETTER of the procuremnt law, you can expect Boeing to fight this one to the Supreme Court.

And if the DOD were to do it to the letter of the law and either not modify the RFP significantly or opt for a new RFP and a complete redo of the whole process, look for Boeing to make sure that if they don't win it, they force Airbus to bid their proposal down to where they'll have to produce these aircraft at a loss, further bleeding EADS.

It isn't business as usual in DOD procurement with this one, it's going to be ugly and it's going to be brutal.

The DOD is playing out of their league.

george hanshaw said...

I have to agree with the comments about procurement law really being LAW, and the general ignorance of that law is truly frightening.

Back when he was SecDef, Cheney announced the cancellation of the A-12 Avenger program. The MANNER in which he announced it and the fact that he was not himself a procurement official (merely the SecDef) led to a court battle that took 16 years and almost cost the US a couple billions of dollars simply because of the way the cancellation was PHRASED.

Procurement law has been written, rewritten, and added to by the Congress for decades, and is as difficult to interpret and as poorly understood as the IRS tax code. And that's been largely winked at by contractors and procurement officials in the past. But I too think this one will be headed to the courts if Boeing doesn't believe they have been the victim of a 'bait and switch' on the RPF. If that happens, the court is going to try to enforce all that law, and this project will come to a screeching halt.

Anonymous said...

Am I missing something? Didn't the GAO conclude that NG/EADS was non responsive to a mandatory requirement? Wasn't that one of the eight issues?

Gates must recognize that fact, yet he allows a rebid instead of throwing out NG/EADS' proposal.

If Congress is truly interested in this award they should closely examine how a mandatory Air Force RFP requirement was given a pass in NG/EADS proposal.

george hanshaw said...

July 14 (Bloomberg) -- Boeing Co. said it may protest any changes to the U.S. Air Force's $35 billion aerial tanker tender, which would further delay an order that's being rerun after it was awarded to Northrop Grumman Corp. using Airbus SAS planes.

Boeing does not ``want to rule out anything'' in terms of how far it might take objections should there be unfavorable modifications to a request for proposals from the Air Force, the company's defense chief, Jim Albaugh, said in a briefing.

As noted above, Boeing is getting ready to play hardball on this. And legally, they are 100% justified under procurement law. The Air Force tried a "bait and switch," requesting one thing in the RFP and then changing that after the proposals were on the table in source selection. That is simply illegal.

It appears DOD may be trying to do yet another "bait and switch," pretending that they can materially change the RFP without going back to the beginning and giving Boeing time to work up a proposal for a larger aircraft, if that's now what is desired. That too is illegal.

All that is going to come out of this is a longer and longer delay for the warfighters and more and more egg on the face of DOD procurement people.

Hey guys, the law is the law. The fact that you might not LIKE the law, doesn't stop it from being the law. You've already made fools of yourselves and will be paying Boeings protest costs, and if they want to take you to court, you'll wind up paying for ALL the work they've done on this program, because you violated procurement law with the original bait and switch. They have now put you on notice that they are really going to enforce the law, not play the good sport in expectation that you'll throw them a bone later for not getting the court involved. That's sort of like hearing a rattlesnake rattle....only a fool ignores it.

Realistically, guys, you have these options:
1. Declare the N-G proposal in noncompliance and award the initial contract to Boeing.
2. Recompete with essentially the same RFP.
3. New competition with a new RPF, starting at the very beginning to allow Boeing a realistic chance of proposing a larger aircraft.

That's the law, boys. It doesn't much matter if you like it or not, until/unless Congress changes it, that's the law.

Right now you are wasting time and wasting money and making yourself look like fools. Why?

Anonymous said...

Realistically, guys, you have these options:
1. Declare the N-G proposal in noncompliance and award the initial contract to Boeing.

And NG will sue ... This option only favors Boeing for supporting the KC-135 fleet for decades during the law suits.

2. Recompete with essentially the same RFP.

GAO wants a clarification on certain fields. How much credit Air Force gives for certain areas is such a thing. For what would you give more credit number of plugs on cargo bay or amount of fuel offload.

3. New competition with a new RPF, starting at the very beginning to allow Boeing a realistic chance of proposing a larger aircraft.

If Boeing sees a realistic chance to compete with 777 Boeing could offer it under #2. Just replace values for 767 with 777. That can't be such a huge effort like a complete new proposal.

george hanshaw said...

And NG will sue ... This option only favors Boeing for supporting the KC-135 fleet for decades during the law suits.

Any idiot can sue. But can they win? The NG proposal was noncompliant with several of the contract requirements according to the GAO. It could be rejected out of hand, and the courts would support that.

GAO wants a clarification on certain fields. How much credit Air Force gives for certain areas is such a thing. For what would you give more credit number of plugs on cargo bay or amount of fuel offload. That's nonsense. Have you even read the GAO report? The original RPF said that there would be NO CREDIT above a certain level and Boeing based their sizing decision on that criteria. When you change it to a different criteria that makes a larger aircraft preferable, you create a brand new program.

If Boeing sees a realistic chance to compete with 777 Boeing could offer it under #2. Just replace values for 767 with 777. That can't be such a huge effort like a complete new proposal.

The ignorance of THAT statement pretty much disqualifies you from any credibility. Have you ever been a program manager for anything? Do you have a clue what the DOD requires in a proposal? Obviously not. When Airbus decided the A350 wasn't competitive and decided to make it the A350XWB what did that do to THEIR timetable for development? It makes a HUGE difference.

No, you can't have it both ways. If you don't go with substantially the same RFP, it's a new program.

Anonymous said...

As a USAF veteran tanker pilot, I’ve been following this with great interest. My hat’s off to the leaders of this site and all who contribute their perspectives. Let me offer mine.

I to was shocked by the selection of the NG/EADS bid. I’m equally shocked, but not surprised, that the GAO found that the USAF botched the evaluation and probably picked the wrong plane according to its original RFP requirements. As many of you have suggested, and I believe you are right on, the USAF went out of its way to have a competition. That may have lead to deviate from the original RFP objectives.

Am I the only one who noticed that the A-330 is larger than they KC-10? Isn’t this (KC-X) supposed to be a selection of a replacement for the KC-135? KC-Y is also supposed to be for KC-135 replacements, and KC-Z is to replace the KC-10. Am I also the only one that noticed that the A-330 tanker cannot touch the max off-load capability of the KC-10. The KC-10 exceeds the A-330 by about 100,000 pounds of fuel. So let me lay this out. The USAF selected the A-330, which is larger than the KC-10, yet a far less capable tanker than the KC-10 to replace the KC-135. The A-330 certainly will not fit on KC-135 ramps and hangers, it may not fit in most KC-10 hangers either. While the B-767 may not fit in some KC-135 hangers, I know it will fit in some, and certainly will fit in hangers build for 141’s, KC-10s, C-17’s, and C-5’s. The A-330 could only use hangers built for C-5’s. Seems to me right off the bat that the cost of fielding the A-330 as a tanker will be much more expensive than fielding the B-767 tanker.

Lastly, more often than not, I land my KC-135 with more gas than planned because the receiver didn’t need all the gas we were scheduled to off load. Very rarely do we need to launch more than one KC-135 because the job could not be done by one KC-135. Also, the USAF spent a bunch of money on a RAND study on the replacement options for the KC-135. They certainly did not suggest a plane larger than the B-767.

I have a very bad feeling that the DoD takeover of the process is not going to change the selection, and Boeing will be very justified in taking this to count. It will be regrettable, because they will take a lot of heat over that course of action.

What a mess. I have no doubt that Gen Lechte (or was it Handy) is correct…..the parents of the last KC-135 pilot have not yet been born. What a scary thought.