Obscure tanker protest may muddy waters

An obscure protest of the USAF tanker award to Northrop Grumman by a two-person company might muddy the waters in the protest by Boeing if allegations contained in the protest prove to have substance. This protest focuses principally on whether the Air Force improperly told Boeing that the service wanted a tanker the size of the KC-767, leading Boeing to decline to provide critical information the small company wanting to offer a “multi-function transport” based on the Boeing 747-8F.

The firm, NA KOA Aviation LLC (pronounced na-ko-a) is registered in Hawaii but operates out of the San Francisco area. On the one hand, information filed by the firm in its protest seems to support the notion that Air Force officials told Boeing unofficially that they wanted a smaller tanker than the Northrop KC-30 or the even larger Boeing 777. On the other hand, NA KOA alleges that this caused Boeing to effectively shut out NA KOA’s proposal to use the 748 in its own tanker proposal through “insider” information obtained by Boeing.

NA KOA has asked the Government Accountability Office to support a split buy between a medium- and a large tanker as a negotiated compromise, or to recommend a recompetition of the entire KC-X program.

NA KOA’s principals are Elizabeth P. Curtis and Paul D. Asmus. Each has around 30 years of experience in aviation. Asmus has filed comments with the US Federal Aviation Administration on safety matters and he once ran for Congress in Washington State in the district that includes Boeing’s Everett factory.

He also has a long history, dating to 1993, of proposing use of commercial airplane derivatives by the Air Force for air mobility solutions involving the Boeing 747-400.

What has unfolded is a story that may have the potential to be significant in the GAO’s assessment of Boeing’s protest. A decision by the GAO is to be issued by June 19.

The crux of NA KOA’s protest, according to Asmus, is who in the Air Force told Boeing what and when about what size airplane the Air Force wanted for the KC-X.

“Was this illicit information?” Asmus asked in an interview with Leeham.net. Did this information lead Boeing to improperly cut NA KOA out of competing for the KC-X contract by refusing to consider investing in the 748?

When the Air Force announced its decision to award the contract to Northrop and the KC-30, the aerospace industry was stunned: Boeing, its employees, even Northrop and its employees, as well as analysts and us pontificators.

“When the Service picked the KC-30 because of ‘more’ fuel and cargo carrying capabilities, we felt both vindicated and cheated,” Asmus says. “Many of the arguments that NG/EADS has made supporting the KC-30 could apply to our platform as well.”

The question of what Boeing was told has been one of Boeing’s complaints in its protest over the tanker award by the USAF to Northrop. Boeing, and some of its Congressional supporters (notably US Rep. Norm Dicks, D-WA) claim Boeing (and Congress) were misled by the Air Force into offering only the KC-767 instead of a proposed KC-777 or in combination with the larger airplane. When the USAF awarded the contract to Northrop, the USAF said one of the key reasons, if not the key reason, was that the KC-30 offered “more”–more fuel, troop and cargo capabilities than the KC-767.

It’s what the Air Force is alleged to have said or not said to Boeing during the competition that is at the heart of the NA KOA protest. When Boeing declined to provide any information to NA KOA about the 748, NA KOA filed a protest with the Air Force’s KC-X contract office. The USAF’s response to this protest is a key element of NA KOA’s subsequent protest to the GAO.

The GAO protest was filed on March 11; it was dismissed on March 14. NA KOA quickly filed for reconsideration of the dismissal and this request remains active—presumably to be decided by June 19, the deadline for the GAO to rule on Boeing’s protest, although the Docket page suggests a decision may be rendered as late as July 23.

“We have requested that the GAO facilitate a negotiated settlement under the Alternative Dispute Resolution process (4 CFR Part 21.10(e)). We believe a split-buy with the ‘medium’ size NG/EADS platform and a ‘large’ Boeing built platform would be a fair solution. If this was not acceptable to all parties, then the program should be re-competed,” Asmus tells Leeham.net.

According to documents reviewed by Leeham.net, NA KOA responded to the Air Force’s Request for Information (RFI) in June 2006. NA KOA was one of a reported 18 companies to submit information to the Air Force. The Air Force never acknowledged who submitted information, or even how many, citing proprietary regulations, leaving it to the firms to make any announcement. Boeing and Northrop Grumman were very public about their submissions. The private concern Omega Air also said publicly it submitted a proposal offering used DC-10s converted to tankers. Omega uses converted Boeing 707s to provide some refueling services to the US Navy.

We were aware of another submittal, which has never been made public. But NA KOA didn’t become known publicly until recently, and then only obscurely—although the filing notice was there for all to see. We saw it upon reviewing the docket page of the Government Accountability Office (http://www.gao.gov/decision/docket/, Docket 311344), which shows a filing from NA KOA.

Here’s the timeline of NA KOA’s KC-X effort.

In a September 4, 2006, letter to Boeing Commercial Aircraft (BCA), NA KOA’s Asmus inquired about using the 748 as a platform for a KC-X proposal NA KOA was pursuing.

“We focused on the 747-8 as a hybrid mix of the 747-8i Intercontinental upper deck and the 747-8F Freighter main deck,” Asmus says. “The Multi-Function Transport Aircraft (MTA), as we coined it, offered the extended upper deck for passenger seating (like the C-5) and the main deck available for cargo. We also added in the belly fuel tanks from the 747-400ER for increased fuel carrying capability for the air-tanker role. We have offered other unique proprietary enhancements which we cannot share. With all these features added in, we believe our MTA platform would checkmate the 777 or anything EADS offered. We suggested to Boeing (and the USAF) they could transfer the air-tanker capabilities developed for the KC-767 over to the MTA to minimize time, cost and risk. We have always felt this platform is what the USAF needed.”

NA KOA asked Boeing to consider significant changes to the 748 configuration, the timing of such changes and associated aircraft pricing. In an e-mailed response from Boeing’s Thomas Lindberg (since retired from Boeing) dated September 22, Lindberg expressed “appreciation” for NA KOA’s interest but said Boeing was not “prepared” to undertake the investments that would be required on NA KOA’s requests.

“What you outlined in your letter would require a major financial and engineering commitment by Boeing at a time when we are unable to do so,” Lindberg wrote. “Furthermore, our understanding is that the USAF tanker requirements contained in the SRD [Systems Requirement Document] may not be clear as to size, but that indications from the Service are toward a medium sized platform: 767 or 777 if it were a Boeing airplane. With that in mind, it would be high risk to invest in a 747-based proposal.”

Boeing in this context considered the 777 to be a “medium” sized airplane. This is important in Boeing’s subsequent public relations campaign following its loss to Northrop—but the facts of the government analysis suggest that the 777 is a “large” airplane, as will be examined later.

Unaddressed in all this, of course, is why Boeing would want to cooperate in the first place with a company proposing a competitive product. One can reasonably argue that it would be silly for Boeing to create competition when it already had a formidable competitor in the Northrop/EADS team.

Asmus, who has dealt with Boeing previously on 747 pricing, says NA KOA asked if Boeing wanted to partner with them and for pricing and timing data on “green” 747s.

Lindberg notes that the Air Force plans to recapitalize the tanker fleet in stages, with the second block unlikely to occur before 2024.

“Earlier this year [2006] the USAF suggested their plan is to acquire a medium-sized KC-135-type aircraft first and to follow that with either a second block of medium tankers or possibly a larger (KC-10 type) aircraft…[E]ven then it is not know what size ‘large tanker’ USAF would specify.”

With that, Lindberg thanked Asmus and sent him on his way.

NA KOA pursued the matter with Boeing’s legal counsel, questioning the propriety of what NA KOA said appeared to be improper communication between the Air Force and Boeing over the size of what the service desired in a KC-X. Boeing’s counsel replied that such statements could be found via a Google search.

NA KOA then filed its protest with the KC-X contracting office, asking who in the Air Force told Boeing that the Air Force was interested only in a medium tanker. The Air Force contracting office denied that Boeing was ever told any such thing, but in a wording that certainly raises some questions, as described below.

When the Air Force announced the award to Northrop, and cited “more” as a key reason, NA KOA subsequently filed a protest with the GAO on March 11, the same day Boeing filed its protest. The GAO dismissed NA KOA’s protest three days later—hastily, Asmus said. He claims the GAO may think so, too. As evidence of this, he points to the fact that the GAO did not dismiss NA KOA’s petition for reconsideration.

(The GAO’s docket page doesn’t not show NA KOA’s original protest, 311344-5, due to a technical error at the GAO, Asmus says; 311344-2 is also not shown, an unrelated filing.)

NA KOA says its petition for reconsideration, GAO Docket 311344-9, claims the “basis of our complaint concern[s] questionable actions in the KC-X program on the part of Boeing and the United States Air Force which in turn has had an adverse impact on NA KOA…and the program in general. These actions prevented our small company’s further participation in the KC-X program and deprived the warfighter with an alternative platform.”

NA KOA asserts that Lindberg’s September 2006 e-mail statement, “indications from the Service are toward a medium sized platform: 767 or 777 if it were a Boeing airplane. With that in mind, it would be high risk to invest in a 747-based proposal,” is at the “heart” of the dispute “because of what Boeing said to NA KOA.

“When we asked Boeing just how they got their ‘indications from the service,’ their legal counsel replied in an October 26, 2006, letter with this statement: ‘The information Mr. Lindberg provided…is all public information, as is confirmed by a quick Google search.’”

NA KOA says it could not locate any such data in a Google search, so it asked the Air Force, filing a letter of protest with the KC-X Contracting Office on November 6, 2006. The Air Force replied, “The Contracting Officer is unaware of any USAF official or any member of the KC-X program team, who has made any official comments on USAF preference for one tanker platform over another.” (Emphasis added.)

Being the wordsmith that we are, we note the USAF phrasing, “official comments.” What, if any, “unofficial” comments may have been conveyed to Boeing?

Asmus asks, “where did Boeing get these indications for the ‘medium’ sized tanker from?”

Following the February 29, 2008, contract award to Northrop, NA KOA notes that Boeing “angrily admitted they were discouraged by the Air Force from offering the larger 777. They accused the Air Force of misleading them.”

Asmus continues, “So we have a stalemate with the Air Force purportedly telling Boeing not to offer a large category platform such as the 747 and Boeing in turn using that information to deny NA KOA with the pricing and timing data on a substantial number of large Boeing aircraft. So who is responsible and liable to NA KOA and the warfighter for this disinformation?”

NA KOA has asked the GAO to recommend an Alternative Dispute Resolution (ADR), “which would be a negotiated settlement for all interested parties,” Asmus says.

NA KOA’s filings seeking reconsideration “deal with new information, such as the intentional leaking of information by someone in senior Air Force leadership to those outside the Air Force as evidenced by comments from a particular defense analyst.”

This defense analyst is Loren Thompson of the Lexington Institute, who has long had close ties to the Air Force. Thompson has become part of the story and controversy. He became the focus of scrutiny when, on the day of the contract award, he told a Seattle newspaper who the winner was about 30 minutes before the Air Force told anyone else, including the principals or Congress. Furthermore, before the Air Force divulged details about how Northrop won the contract and the scoring metrics involved, Thompson was telling newspapers that Northrop had won by a “wide margin” and provided details—details that Boeing later claimed were overblown and which became key talking points in Boeing’s public relations, advertising and political lobbying campaigns to overturn the award to Northrop. Even Thompson subsequently backed away from key elements of what the Air Force told him about the competition, and what he told the media.

That Thompson was the apparent recipient of leaks from the Air Force—and that the leaks favored the highly controversial Northrop win—enraged Boeing and its supporters, and led to a member of Congress drawing a bead on Thompson.

US Rep. Todd Tiarht (R-KS), a Boeing employee in is pre-Congressional days, wrote Air Force Secretary Michael Wynne demanding to know who talked to Thompson.

In the March 18 letter, Tiahrt requested that Wynne provide:

  • All documentation briefed or provided to Thompson regarding the KC-X decision;
  • A list of government officials who discussed the tanker decision with Thompson on Feb. 29, the date the award was announced;
  • Northrop’s official bid proposal;
  • Boeing’s official bid proposal;
  • Any appropriate data to the competition and award.

Thompson has followed the tanker program from its inception in 2001. During Boeing’s first effort to lease KC-767s to the Air Force, Thompson supported the controversial proposal, telling print and broadcast media that the Air Force was on the right track with the lease and that the KC-767 was the right airplane. As the program was being unveiled (but well before it became a scandal) in the summer of 2002, William Brody, a top Air Force official, wrote James Roche, then the Secretary of the Air Force, in an e-mail, “We’ve got Loren doing the Lord’s work again. ‘3rd Party’ support at its best.” This followed an appearance by Thompson on the cable network CNBC and an e-mail from Thompson to Mac Carey, another Air Force official, in which Thompson listed 10 talking points he made in favor the 767 lease deal.

Just how important is what Boeing was told by the Air Force and when? NA KOA believes this is critical and has the potential to unravel the award to Northrop because of the alleged improprieties of any such action.

After months of complaining to everyone who would listen (and to many of those who wouldn’t, apparently), Boeing softened its approach to this. In a May 22 press release, Boeing claimed the Air Force only “seemed” to favor a medium sized tanker:

“The Air Force Request for Proposals seemed to call for a medium-sized tanker designed to meet the unique needs of today’s expeditionary Air Force.” (Emphasis added.)

Well, did it? And did this preclude Boeing from offering a KC-777?

In the Rand Corp. Analysis of Alternatives (AOA) conducted specifically for the eventual KC-X competition, Rand concluded “after about two years of extensive analysis that the USAF should procure a derivative of a medium (300-550K lbs) to large (550-1,000K lbs) commercial airliner,” notes a person close to the procurement process. Boeing’s KC-767 and Northrop’s KC-30 fall into the medium category; the KC-30, although about a third larger than the KC-767, nonetheless classifies as a medium airliner at 512,000 lbs. The KC-777 would have been based on the 777-200LRF, which has a maximum take-off weight of 766,000 lbs, according to Boeing’s website—and wouldn’t have classified as a medium tanker. For all the complaints about the KC-30 being a “large” tanker, in fact it isn’t by the Rand definition—it’s merely “larger” than the KC-767. Also, news articles of the era, such as those that can be found published by Flight International via www.flightglobal.com, placed the KC-30 and KC-767 in the same “medium” category and the 777 in the same “large” description as the Airbus A340.

The RFP didn’t specify weight categories but sought proposals for medium- to large tankers. Given the Rand AOA, the definitions of the airplane categories seem obvious, as do which airplanes fall into which categories.

The evidence, therefore, seems conclusive that all the rhetoric about the KC-30 being a “large” tanker is simply hyperbole without foundation; it’s simply “larger” than the KC-767.

But it is also true that some news articles of the era quote Air Force officials as saying the KC-767 is lighter and “better suited than the KC-30 to replace the KC-135 because of its lower fuel burn and runway loading and smaller parking footprint.” (Flight International, February 7, 2006.) This article continues, “Having already invested around $1 billion in the KC-767, Boeing is counting on the USAF putting the medium aircraft requirement first.”

It’s been suggested by Boeing critics that Boeing simply didn’t want to dump the KC-767 and the $1 billion invested in it in favor of an entirely new KC-777 and therefore made the choice to offer the KC-767. From a financial point of view, this would not be illogical if this theory is true, all technical reasons aside.

Even so, according to Flight International (October 3, 2006)—a very short time after Boeing told NA KOA that it didn’t want to invest in a “large” tanker—Boeing unveiled a proposed KC-777 in response to the USAF RFP. This news article cites a timeline for a test aircraft to fly in 2009 and initial production aircraft to be delivered in 2011-12.

The 777-200LRF rolled out of Boeing’s factory in May. First flight is due soon and first delivery is due later this year. But a full KC-777 development likely would have meant the first test airplane would not have been delivered to the Air Force in 2009; observers believe the initial production KC-777 could not have been delivered before 2014, largely due to the full production lines of the commercial 777 that are sold out until 2012 or 2013. Any KC-777 production would have to be integrated into the commercial line and—given the number of orders for the 777 even back in late 2006 when the KC-777 concept was revealed—would have had to displace commercial customers, a prospect considered highly unlikely.

Also, according to a person close to the competition, the Air Force’s RFP called for the KC-X’s engines to be able to fit into the Lockheed C-130 for transport—presumably for spares or repairs. The engines of the 777 are too big to fit, according to this person—which would have disqualified the KC-777. Additionally, since the KC-777 is significantly larger than the KC-30 in all respects, the runway loading, parking footprint and the whole host of other issues Boeing asserted as arguing against the KC-30 would have applied even more so against the larger KC-777.

But what of Boeing’s contention in its reply to NA KOA that there were public statements by the Air Force, as “verified” by Google searches, that the Air Force wanted a “medium” tanker? NA KOA says it could not find any.

Flight International reported the conflict within the Air Force over medium- and large tankers. In a March 14, 2006, item, Flight wrote that “USAF officials testifying to Congress have differed on which way to go, with [the]…Air Mobility Command favoring a mix of medium- and large tankers for flexibility.” The deputy for Air Force Acquisition “says the first 100 aircraft should ‘all look the same’ and be medium tankers on cost grounds.” [Emphasis added.]

The same article once again classified the KC-767 and KC-30 as medium tankers and the KC-777 and A340 as large tankers.

Another Flight article (January 2, 2007) quotes Lt. Gen. Donald Huffman of the Air Force’s acquisition office, saying, “first and foremost the KC-X is the next generation on aerial refueling.”

The Flight International articles lend at least some credence to the assertion by Boeing that there were public indications that the Air Force wanted a “medium” airplane. But there was also a very public debate among generals of the Air Force, who differed on the potential mission requirements that, at best, represented conflicting desires about exactly what airplane would best serve the Air Force.

Furthermore, Asmus responds that for Boeing to rely on news articles to make a multi-billion dollar decision about which airplane to offer to the Air Force—without private assurances from Air Force officials—is absurd on its face, and he wants to know who in the Air Force told Boeing it did not want a “large” airplane.

Asmus also points to a June 2008 article just published by Air Force Magazine, which contains this paragraph:

If Boeing was listening to senior serving generals, its notions about size were probably reinforced. Privately, top USAF officers frequently said they were looking for an ability to put many tankers on forward runways at once, since strike packages involve many airplanes, and each tanker can only refuel one other boom-receptacle airplane at a time. (Both the KC-30 and KC-767 can simultaneously refuel two other aircraft if the receiving airplanes are equipped with probe-and-drogue type refueling gear). However, those generals were quick to point out that they had no say in the acquisition process, and the outcome of the competition bore that out.

He believes this is further proof that Boeing was receiving information from the Air Force that was outside the procurement process, and demonstrates why a negotiated resolution to the protests is in order, or alternatively a complete rerun of the competition.

“With a split-buy of our MTA (747-8F) and the NG/EADS platform (A330), the Warfighter and American aerospace workers would come out OK,” says Asmus. “Due to poor sales, Boeing has excess capacity on the 747-8 production line, so unlike the 777, providing production slots should not be a problem. Besides being an air-tanker, the MTA also makes a good C-5 replacement which the USAF and Congress are currently struggling with. Oversized cargo can be handled with the C-17s.”

Asmus says several Members of Congress, including key Boeing partisans, are aware of NA KOA’s situation but have said nothing during their public pronouncements on Boeing’s behalf.

At this point, the question is restated, Just how important is it over who said what to whom and when?

For NA KOA, the question appears to be critical. But is it critical to Boeing’s protest of the award and the over-arching question about how fair the entire KC-X process was?

Boeing has softened its rhetoric on this issue and in fact some in the company believe this is the weakest argument it has; the technical and process issues are where officials believe they have the best chance of prevailing.

We may find out on June 19 if the GAO thinks this issue has any merit—for Boeing or for NA KOA.

By Scott Hamilton, June 2, 2008

7 Comments on “Obscure tanker protest may muddy waters

  1. I’ve been looking for more information about NA KOA on the internet and I dont know whether they are a credible enough operation to have had their bid qualified in the first place.

    The Air Force would have made this RFP almost protest-proof if it had not made some of its requirements vague in their RFP. The size argument that Boeing is making public will have made no sense if the USAF had specifically stated size qualifications for the tanker. No specific size qualifications were made except that the KC-X would replace KC-135E’s.

  2. Maybe because I am European, I fail to see the merit of NA KOA’s protest.
    They have undertaken on their own decision a study on a B747-8 based tanker/cargo.
    They have asked for Boeing’s assistance as they were unable to put up a bid themselves, let alone build such a plane.
    Boeing has politely declined on grounds of no time, no money, wrong size.
    And now, based on irrelevant gossips, they want to be awarded compensations!!!!
    Strange world.

  3. Isn’t that how the world works now a days anyway? You don’t get things your way, you try to seek compensation or sue someone. Or do like Boeing does, cry to congress for reassurance. besides, a B747-8 based tanker/cargo would be even larger right? Not to mention way more expensive to fly and following many of Boeing’s current argument against the KC-45A, I do not see how this is going to work except for it being an even bigger mess.

  4. I think

    1) the KC45A is a mid size aircraft

    2) Boeing might have been selectively listening

    3) Boeing had no real alternative to offerring the KC767. The 777 is way bigger and heavier and doesn’t meet basic runway requirements met by KC767 and KC30.

  5. We received this note from Loren Thompson today (6/4):

    Please note that I have not “backed away” from my previous issue briefs on the tanker competition. Those briefs reflected the views of government officials, and I have no reason to believe said officials have changed their views.

  6. Fascinating. More grist for the mill!
    I like the NA KOA concept, but it was clear from Boeing’s response to it that they really were trying to do this without significant up-front investment. Considering that the AF was looking for something that was commercial-based and trying to avoid paying for as much development as possible, this was good business sense on Boeing’s part. No doubt NG would not have been able to offer the EADS A330 airframe if other nations had not already got the tanker variant going on their currency first. From the AF’s (redacted) post-hearing legal brief to the GAO and in publically available documents concerning the competition, I see no evidence that Boeing was mislead by anyone, or that any specific ‘size’ was preferred at all. This really does come down to WHO allegedly told Boeing a smaller tanker was preferrable doesn’t it? And it ONLY rises to the level of ‘misleading’ if that particular WHO was in a position of ‘size’ responsibility on the acquisition team.
    The NA KOA protests highlights one important question though: if the 747-8 required too much engineering and development, and the B777 is too large “as is”, so to shrink it will require too much engineering and development. What could Boeing offer as an alternative to the already-recognized “too small” B767?

    I sincerely hope that Boeing’s character assassination of the AF over the last few months has lit a fire under the AF’s keester and they proceed apace with buying the KC-45 in spite of the GAO ‘punt’–as is their legal right.
    I would love to see the inevitable hearings on C-SPAN because Congress-critters tend to beclown themselves in the presence of technical experts in command of the facts.

  7. It still stuns me that the KC30 is regarded as a perfectly fine size, and yet the 777 is just too large despite a minimal change in footprint compared to the KC30.

    One must note that the “right size” KC30 takes up MORE ramp space than a B52.

    In some regards the failure to see any action on the use of converted used DC-10’s instead of aquiring new KC30 is more troubling than just Boeing losing. The KC10 hauls MORE fuel on a smaller footprint. Not knowing the terms of the deal, it might have been uneconomical when viewed over the entire lifespan of the program, but it makes me wonder. Afterall if the USAF wanted MORE fuel and cargo like NG claims, wouldn’t more KC10’s be better? Cheap up front, higher fuel loads, and they slot in nice with the existing USAF inventory.

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