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.

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.

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.

Inquiring Frenchmen Want to Know

We at Tanker War Blog have been following Secretary Gates' recent scoldings of the Air Force. (Some TWB thinks are unwarranted) While reviewing the transcript of Gates' remarks earlier this week at Maxwell-Gunter Air Force Base, we came across this interesting closing question from a French Air Force Office attending the Air War College:

Question: Good morning, sir. (Inaudible name) from Air War College, from France. Sir, you mentioned this morning in your speech how important interoperability and working in coalition was for the U.S. Air Force. About a couple of months ago, the U.S. government decided that the future tanker will be provided by a consortium led by Grumman and Airbus. Since then, Boeing decided to challenge this decision. I would like to know -- and it will delay the overall process for the Air Force to procure this kind of aircraft. I would like to know what you think about this challenge and how -- (audio break).

SEC. GATES: Well, Boeing is using the legitimate processes that have been established to protest the award of a contract. As I understand it, the General Accountability Office will -- is evaluating the decision process and Boeing's process and Boeing's protest, and they will issue a decision in terms of whether they believe the protest was warranted...

[Secretary Gates goes on to say he wants to move ahead with the purchase and he is concerned that things DoD can not by law consider are in the mix on Capitol Hill.]

So let's frame this properly: A French exchange officer gets the chance of a lifetime to ask the U.S. Secretary of Defense a question....and he wants to know if the Airbus tanker buy will be delayed? This is so cliche we are not sure anyone would believe us if not for the link to the DoD public affairs press release.

Also, this being an election year someone is sure to make the accusation that this was a planted question so DoD could repeat its tanker contract talking points.

So yes intrepid flier of the Armee de l'Air the purchase will be delayed. In fact, we hope that when Americans start to get as interested in this EADS/Airbus tanker contract as those in France, it will be cancelled.