Wynne: Blinded by Tanker Rage?

Just when we start to think former Air Force Secretary Michael Wynne might have something important to say he comes up spouting gibberish.

Take his latest interview with Air Force Magazine's Daily Report. In it he once again shows how, at the highest levels of the service, there is an alternate tanker reality.

Wynne thinks the service should be meaner to losers of procurement competitions:

Excessively kind language, he said, leads the losers to think they only lost by a hair. In the KC-X tanker competition, “We should have been harsher on the loser,” Wynne said during an interview July 28. However, the service refrained from frank comments. Instead of writing a " 'We don’t want you memo' " to Boeing after it lost to Northrop Grumman, the service crafted a " 'We like you, but you didn’t win' memo," Wynne said. “I just don’t think the write-up was harsh enough.” Boeing was apparently emboldened by the perceived narrow miss to launch its protest, which has put the coveted tanker contract back up for grabs.

From where we stand Boeing was emboldened because they could tell Air Force procurement personnel did not follow the RFP, were duplicitous in their discussions during the competition, and some even sold their integrity to spin public opinion against a Boeing protest. Also, the GAO decision revealed the competition was close; so we wonder how harsh Wynne could have made his comments.

They say hindsight is 20/20, but in Wynne's case it seems to be blind to reality.

[Note: After 30 July the article link will be broken. You must visit the Daily Report archives and pull up the July 30th edition to retrieve it.]

HASC Tanker Briefing Round Up

Yesterday the Air and Land Subcommittee of the HASC met with GAO officials and a last minute DoD procurement stand-in for the Sue Payton.

From the reports we received, it is clear that the majority of members came away from the brief more convinced then ever that the Air Force has continually misled Congress about the tanker selection process.

By their remarks, even those Members who support the KC-30 seemed to have concluded that GAO did a thorough job in rendering its decision and that the reasons for rebidding the contract are compelling and overwhelming.

When questioned if the GAO believed that the was malice directed against Boeing, the reply was that they did not believe so. But, they did mentioned that there was pattern of incompetence that clearly resulted in favoring the KC-30.

Chairman Abercrombie, who reportedly was none to happy with what he heard yesterday, has scheduled another Air and Land Forces Subcommittee hearing on the tanker contract for July 10th. This time around Ms. Payton and DoD acquisition chief John Young are expect to be in attendance.

GAO Decision Analysis

These is a great deal of commentary on today's released redacted version of the GAO Tanker Decision. We have some observations of our own but first we want to point out some analysis by others:

Dr. Loren Thompson of the Lexington Institute released a new brief on the GAO decision titled Tanker Fiasco: Five Steps to Fix the Problem. In it he makes it clear he is for rebidding the contract sooner rather than later. He also believes that changing the bid criteria will only delay the process and that there is a "simple problem to fix -- not by developing new capability metrics, but by finding competent evaluators to apply the existing ones." Sounds like a call for some personnel changes in Air Force procurement.

We have also received a rather comprehensive set of GAO KC-X Decision Talking Points from our members the Hill. The strongest points are that in addition to the number of errors made by the Air Force, the KC-30 may not have even been eligible for the contract because: 1) the KC-30 proposal did not meet the minimum required task to establish a depot maintenance capability within two year after the delivery of the first full-rate production aircraft. 2) The KC-30 proposal failed to prove that it could refuel all currently compatible planes using current Air Force procedures.

Also, while not really an analysis Senator Jeff Sessions did released a statement that highlights extremely well many of the points KC-30 supporters have been making since the GAO decision: 1) The GAO’s concerns were strictly related to the Air Force’s selection process, not the merits of the KC-30 2) The Air Force is the agency to best determine which tanker it wants 3) The tankers are need now rather than later 4) Further comments will be made after Air Force’s response to the GAO decision is known.

On point #4 above, the experts at TruthyPR believe that waiting for the Air Force answer is the worst thing they can be doing. Instead he offers that the KC-30 team:

...should have followed [the GAO decision] up with a response that they welcomed a rebid, but since it would result in the same outcome, and because the tankers are desperately needed by our men and women in harm's way, there's no reason to delay.

The goal is to promulgate the message that a new process is going to generate the same outcome. And if you don't start saying it, nobody else will believe it.

Well count us as not believing it, even if they do start saying it more forcefully.

GAO Decision is Released

Breaking Tanker News: Here is the full redacted GAO tanker decision. We will comment later after we have time to read it.

Also, the Air and Land Forces Subcommittee of the HASC will receive a brief from the GAO on their tanker decision tomorrow. According to the HASC memo we received, only Congressional Members and committee staff will be allowed to attend, but we will inform our readers if any new releasable issues are discussed.

Of note though is that Ms. Sue Payton, the Assistant Secretary of the Air Force for Acquisition and tanker source selection official, had planned to attend but the Secretary of Defense has directed she postpone her brief to the subcommittee until the Department's review of the GAO decision is complete.

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.

What to Expect from the GAO on June 19th

A number of our readers have e-mailed us asking what to expect on June 19. While we do not know the GAO's decision, we do have a good idea of how the decision will be announced and how much information will be initially available.

The first thing to understand is that unlike when DoD announces a major contract decision, the GAO does not hold press conferences for their bid protest decisions. Instead, the GAO will normally issue a simple press release stating their determination. Here is a recent example.

The full scope and details behind the bid protest decision will not normally be immediately released, since it contains proprietary and source selection sensitive information. These details will only be avalible to the counsels for the protester and intervenor admitted under the GAO protective order issued for the protest and to the Air Force.

So while the decision will immediately apparent, the reasoning behind it will not.

The GAO normally releases a public version of the bid protest decision a number of weeks later after receiving suggested redactions from the parties involved. The public version of the tanker contract bid protest decision will look similar to this recent case.

Due to the magnitude of the tanker decision we fully expect both companies will receive an advanced notice of the decision about an hour prior to the GAO's press release. Both companies respective PR departments already have several press release ready to go to fit a number of decision results. But, don't expect any concession speeches; the tanker contract war will probably only heat up.

Also, during this advance notice time we expect each company will call its Hill supporters to break the good, bad, or mixed result news. We will see which of us can keep a secret for an hour...

Note: Please remember that June 19th is only the deadline for the ruling, it is not a set date to issue the decision. In fact, the GAO has probably already completed their determination and we fully expect their decision at any time in the next 48 hours.

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.

More Agency Report Comments

Yesterday, we finally obtained a full copy of the Public Redacted Version of Boeing's Comments on the Agency Report which we have now posted in two parts. Part 1 pages 1-92 and Part 2 pages 93-191 (Note: Each are big 6 MB files but they are in streaming text format so viewing should not should not take too long.)

Also yesterday, the KC-30 team made available their Agency Report Comments. As is their recurring theme, the KC-30 submission came in much bigger and heavier; totaling 370 pages of comments. (Note: This is a huge 13.2 MB PDF file).

Here is how Boeing summarizes their comments:

The Air Force rests its submission that Boeing's protest should be denied on the claim that Boeing merely disagrees with its subjective professional judgment. On issue after issue after issue, the Air Force dismisses the concerns Boeing has raised by intoning the mantra that its position reflects "the evaluators' professional and subjective judgment." It is certainly true that GAO will defer to the reasoned exercise of the agency's professional judgment. But when the claimed exercise of professional judgment is contrary to the plain terms of the Request for Proposals (RFP), when it is exercised disparately, when it is patently unreasonable, the Air Force's judgment is not entitled to deference. And when, on issue after issue after issue central to the source selection decision, the Air Force's disregard for the plain terms of the RFP, its disparate treatment of the offerors, and its patently unreasonable judgments consistently redound to the benefit of one offeror and to the detriment of the other, the protest must be sustained.

Here is how the KC-30 team concludes their comments:

Boeing has made many different claims in its multiple protest filings. The vast majority share a common unstated premise - echoed in its PR campaign - that the Air Force was prejudiced against Boeing and intent on treating it unfairly. An examination of the facts surrounding Boeing's grounds of protest demonstrate just the opposite. The Air Force conducted a comprehensive evaluation which treated both offerors fairly. If anything, it went out of its way to give Boeing the benefit of the doubt. On a few minor points the Air Force has made corrections after considering the Boeing protest arguments. Perfection, while an admirable goal, is rarely achieved in human affairs, and particularly not in something as complex as the evaluation which the Air Force performed here. But those small corrections are inconsequential and in no way alter the conclusion that the SSA reasonably determined that Northrop Grumman submitted the more advantageous proposal. Certainly, nothing in the record supports the exaggerated claim of deliberate manipulation and bias throughout the Air Force on which Boeing's protest depends.

After reading portions of both sets of comments, we can say that good arguments are made on each side. It seems almost impossible for an outsider to say beyond the life cycle cost errors we mentioned previously what the GAO's will decide.

Are the admitted errors minor and inconsequential as both the Air Force and the KC-30 team claim? It difficult to tell without seeing the Agency Report and the full comments. Also, much of the protest rests on the technical merits of each proposed aircraft; not our strong suit.

A key point will be if the GAO believes the metrics in many of the disputed areas were set by rigorous analysis or instead by a what Boeing claims is "flawed analysis" and "unreasonable judgement".

In Boeing's favor was a GAO Report released on 6 March 2007, after the final KC-X RFP, entitled Defense Acquisitions: Air Force Decision to Include a Passenger and Cargo Capability in Its Replacement Refueling Aircraft Was Made without Required Analyses. As the title makes plainly clear the GAO at that time did not believe that the DoD had established in any concrete way that it had done the proper analysis:

Mandatory Air Force implementing guidance governing the capabilities-based planning analyses discussed above states that capabilities-based planning employs an analysis process that identifies, assesses, and prioritizes needed military capabilities. These four analyses did not identify a passenger and cargo capability gap, did not establish that such a capability would represent a redundancy, and did not assess the risk of not acquiring such a capability. Without sound analyses, the Air Force may be at risk of spending several billion dollars unnecessarily for a capability that may not be needed to meet a gap or shortfall.

Military Decision Makers Approved the Capability with Neither an Identified Need nor Risk Assessment

DoD strenuously disagreed with the GAO's assessment then, but the question remains: Did the Air Force prove that their grading criteria had merit, and if so did they set that criteria prior to the RFP, and did they carry out the grading rules the criteria set evenly?

In Boeing's comments they clearly state their position on this:

The source selection decision repeatedly violated the terms of the Solicitation in material respects. These legal errors permit GAO to sustain the protest without a hearing, but they do not begin to capture the full measure of the Air Force's flawed analysis.

Here in DC, Tanker War Blog is not alone in thinking the Air Force made mistakes, but until the GAO decision is released, no one can know for sure the magnitude of those errors.

Air Force Admits to GAO that the KC-30 Costs More

Now that the GAO has wrapped up its tanker contract hearings and is currently determining its decision, some redacted documents are now being released. One document that has been released in part are Boeing's comments on the Agency Report (USAF's response to the Boeing's protest).

At Tanker War Blog we were not able to obtain the full version of the comments, which we are told total over 400 pages, but one of our members on the Hill did get a very interesting section on Most Probably Life Cycle Cost(MPLLCC) calculations. These comments are heavily redacted, but from them it seems that the Air Force in its Agency Report has apparently now conceded that the KC-30's MPLCC is higher than Boeing's. This of course is the exact opposite of what the Air Force had briefed Boeing and publicly stated as a reason for selecting the KC-30. Page 103 of the comments has the following:

III. THE AGENCY REPORT CONFIRMS THAT THE AIR FORCE'S COST/PRICE EVALUATION WAS IMPROPER AND UNREASONABLE.

With respect to the Cost/Price evaluation, as an initial matter, the Air Force now concedes that Boeing's most probable life cycle cost (MPLCC) is lower than NG/EADS'. See MOL, AR Tab 001 at 201-02. This renders even more troubling the SSA's initial public assertions that NGIEADS "offered great advantage to the Government in cost price." See Protest, AR Tab 003(a) at 94. The Air Force's concession, however, addresses only a miniscule fraction of the errors in the Cost/Price evaluation confirmed in the Agency Report.

On page 107 it seems that a small part of this error was even caused by someone in Air Force procurement not properly using an Excel spreadsheet:

In particular, in its Third Supplemental Protest, Boeing demonstrated that the Air Force underestimated [redacted]costs by $ [redacted] as a result of an erroneous spreadsheet cell reference.

Now, the Air Force likely responded in the hearings that the error in their calculations was minor and irrelevant to the overall outcome. But, we expect this error will have considerable impact on the GAO in terms of their assessment of the thoroughness and credibility of the evaluation.

As more of the documents are released we will attempt to post them. Given that the Boeing documents are by their nature one-sided, we will generally refrain from commenting except when new information is brought to light, or we see items where the Air Force seems to concede it made errors.

GAO Ruling Preeptive Action?

In an extremely short Reuters news release, the Under Secretary of Defense for Acquisition, Technology and Logistics, John Young, is reported to have said today that the tanker contract should not:

be undone over a possible small judgment call with minimal impact on the $35billion decision...

This is a strange statement, as it seems to almost be an admission by Mr. Young that the GAO will find at least some fault in the tanker contract selection.

This might have just been a slip of the tongue from the normally tight-lipped head of DoD procurement, or it just might be a planned move to label any errors found by the GAO as being minor and having "minimal impact".

Either way, we should find out in less than 15 days what the GAO rules.

Aviation Expert Supports Protest and Congressional Tanker Hearings

Highly respected aviation expert Scott Hamilton, founder of Leeham Companies, LLC calls for Congressional Hearings and a vigorous protest by Boeing.

In his recent report on the tanker issue Mr. Hamilton writes:

Boeing should pursue the protest of the award by the US Air Force of the KC-45A tanker to Northrop Grumman as aggressively as possible. Furthermore, Congressional hearings should also be pursued aggressively.

This is a complete about face of our previous positions. Here’s why: Once Boeing filed the protest, a move we did not support, and Boeing explained its reasoning, it’s clear that there is a real disconnect between what the public has been hearing from the Air Force, Northrop, aerospace analyst Loren Thompson, whose close ties to the Air Force and his information published became the focus of some criticism, and what Boeing understands from its debrief. [Note: see our previous post on this issue.]

Northrop, the Air Force and Thompson said the win by Northrop for its KC-30 wasn’t even close. Boeing says not only was the win not close, Boeing’s KC-767 actually outscored the KC-30 in several areas. Furthermore, Boeing claims the process was changed, sometimes without the Air Force telling it, during the evaluation. These changes, Boeing said, were designed to keep Northrop’s KC-30 in the competition. With the huge disconnect and the Boeing assertions, there is only one way to resolve the issue and to provide affirmation, modification or rejection of the process and decision, and that’s to aggressively pursue the protest.

Anything less will leave a cloud of doubt hanging over the Air Force’s decision and continue to subject the award to Congressional, labor and public criticisms. Even if the Government Accountability Office, with which Boeing filed the protest, affirms the award, it’s unlikely to completely quell the criticism because of the political ramifications that have enveloped this process from the start of the competition.

Mr. Hamilton's support for Boeing's protest and Congressional inquiry into the matter are welcomed by those of us here at Tanker War Blog.

Boeing Protests

Thanks to our friends at the Center for Security Policy we now have a copy of the publicly releasable version of the Boeing protest.

Contrary to public option, Boeing contends that the competition was very close and the EADS won only because the Air Force misapplied the selection criteria and disregarded sections of the Request for Proposal.

Congress now has a decision to make will they try to nullify/not fund the contract now or wait for the GAO to hopefully rule in favor of Boeing.

It should be noted that a freeze was automatically made on the contract award under federal regulations due to the protest. But, those same rules gave the Air Force leeway to resume work in certain circumstances prior to the GAO ruling. The fact the Air Force is not fighting the freeze probably means they don't want to antagonize Congress again so soon. (Don't make them mad when next year's budget is currently being discussed.)

Our guess is given what Boeing says in their protest, Congress will make threats but will not move on the issue until the GAO rules on the dispute which could be in 3 months. (GAO has 100 days, June 19th, to make a ruling.)