Leeham News and Analysis
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Leeham News and Analysis
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Tanker recompete, decision by January
Ahead of the afternoon (EDT) press conference by the Department of Defense, Tanker War Blog is reporting that it appears DOD is going to have “an expedited” recompete.
Live Internet streaming coverage of the DOD press conference at 1pm EDT will be available on this Mobile TV station.
The Mobile Press Register has this blog item.
Breaking News, 845 AM PDT: We’re told that there will be a quick evaluation of the GAO concerns and that an award will be made by January.
Additional, 855 AM PDT: John Young at DOD replaces USAF’s Sue Payton as the Source Selection Authority.
Update, 1000 AM PDT: The press conference is about to begin. As we wait, here are a couple of take-aways from what we know at this time:
- The quick turn-around keeps the contract under the Bush Administration, rather than a potential Democratic Barack Obama White House or one under John McCain, a Boeing nemesis.
- By narrowly recompeting the contract based on the GAO findings–instead of a full, start-from-scratch recompete–Boeing is limited to sticking with the KC-767 rather than offering a tanker based on the 777.
Robert Gates, Secretary of Defense, says that DOD will review all eight of the GAO protest items. John Young, as we reported earlier, becomes the new Source Selection Authority. A new advisory committee will be appointed to oversee the new process, and completion of the process will be by year-end.
The new Air Force chief noted that there is a need to rebuild confidence in the procurement process. He noted that the USAF successfully defended itself in more than 100 protest items, and therefore he does not conclude that the underlying procurement process is fatally flawed. However, with eight protest items being sustained, it is essential for the USAF to maintain confidence in the process.
Sue Payton and her team have been directed to be sure the USAF understands the GAO’s actions to position the Air Force for future competitions.
The rebid will not take into account the “industrial base” (jobs) or the WTO subsidy dispute between Airbus, Boeing, the US and the European Union.
Gates notes that this is the third time “we’ve gone at this.” He expressed confidence in the acquisitions team.
The press conference now takes a side trip to today’s Iranian missile test.
Back to the tanker:
Undersecretary John Young, who now will oversee the recompete, said the objective is to expedite the review. There will be a new draft Request for Proposals limited to the GAO points, and Boeing and Northrop will have the opportunity to submit requests for changes before a final RFP is issued.
Northrop’s contract is withdrawn for now, Young says.
Young says the oversight team that monitored the source selection was added during the process and did find things that were addressed during the competition, inferring that some issues arose before the oversight team was in place.
Young generally favors fly-offs, but in this case is not requiring it.
Young added that the December timeframe is a goal–meaning that, given the history of this procurement–the schedule may slip into next year. “We would seek to change the minimum number of requirements” in the new RFP, with the GAO findings and taxpayer costs paramount. Contractors may bring up other issues that could affect timing.
Young, significantly, clarified that Boeing may elect to offer a tanker based on the 777.
Government procurement mechanisms and laws don’t allow DOD to consider the WTO dispute.
Young hopes to issue to issue the draft RFP in late July or early August and make selection by end of year. Working against having two prototypes in a fly-off in this case isn’t required because these are derivatives of commercial airliners, and the best use of taxpayers’ money is to proceed along the route of an RFP in this case. Also, doing a fly-off would require reducing the budget and acquisition from 12-18 tankers a year to as few as six.
Looking long-term, Young says that he wants competition for the KC-Y follow-on program with “aggressive pricing.” He also said that in this rebid on the KC-X, perhaps Northrop and Boeing will sharpen their pricing even further.
Bottom Line:
We think it unlikely Boeing will offer only the 777, but it would be interesting to offer a mix of the KC-767 and KC-777. At the same time, since the USAF previously was clear that it wants to have only one airplane type for the KC-X competition, we believe that in the end Boeing will stick with the KC-767. That’s where all the money has been invested and all the effort and analysis made. Furthermore, Boeing has spent years saying the KC-767 is “right sized,” fits on the tarmac, is better for runway weights and so on. To change now would undermine everything that it has said up to this point.
It’s worth remembering that the USAF wants a “medium” tanker. According to the Rand Corp. Analysis of Alternatives, the KC-767 and KC-30 are medium tankers; the 777 is a “large” tanker.
But the rebid doesn’t mean that Boeing has any particular advantage. This is going to be a tough competition and, unfortunately, we expect more of the public and political campaigns (which we largely considered unseemly) to resurface. It would be nice if both sides would reign it in and just work with the USAF quietly.
Update, 300 PM PDT: Boeing had this to say about the DOD action:
“We welcome the decision by Defense Secretary Robert Gates not to proceed with the contract award to Northrop Grumman/EADS and to reopen the KC-X tanker competition. 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.
“We look forward to working with the new acquisition team as it reopens the competition, but we will also take time to understand the updated solicitation to determine the right path forward for the company.
“It’s encouraging that the Defense Department intends to take steps to ensure a fair and open competition that, among other things, fully accounts for life-cycle costs, such as fuel, to provide the most capable tanker at the best value for the American taxpayer.”
Northrop was more subdued:
“Northrop Grumman Corporation applauds Defense Secretary Gates and Under Secretary Young for recognizing that the acquisition of replacement refueling tankers for the Air Force should be put on a path toward quick closure. We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals.
The United States Air Force has already picked the best tanker, and we are confident that it will do so again. Our men and women in uniform deserve nothing less.
The Northrop Grumman KC-45 tanker is needed now and is ready now.”
As John Young [not to be confused with the ninth man to walk upon the surface of the moon 🙂 ]said: Bidders will be free to completely change their proposals. Boeing could offer the (much more expensive) 777, but they’re probably more than aware of the fact that a KC-777 based on the 777-200F is in an all different category than the KC-30 and the A330-200. It’s got a MTOW about 50 percent greater, but it’s wing area is only about 20 percent bigger than the A330-200. If Boeing wants to equal the field performance of the KC-30 with a 777-200F type of aircraft, they would need to put a 747 sized wing on the triple seven. Forget it!
The GAO denied the nonsense put forth by Boeing that the KC-30 at MTOW doesn’t have significantly more capability in getting fuel airborne from a 7000 ft dry, hard-surface runway at sea level using standard Federal Aviation Regulations. On page 38 of the USAF redacted copy of its filing in the GAO protest, it’s stated how the SSET assessed the ability of both the KC-767 and the KC-30 to takeoff and land on a 7000ft runway against the criteria st forth in the SRD. This means that Boeing will be forced to, once again, offer the KC-767AT, and cannot offer the 777-200F since it exceeds the field length requirements by more than 50 percent with a takeoff run at MTOW (ISA+15 MSL).
What will NG/EADS do? They could offer an improved KC-30 at no additional cost to USAF, and at few extra expense for NG/EADS. How would this go about? First, Airbus would make a deal with GE and finally accept the GEnX engine for the A350-800 and A350-900, and NOT the A350-1000, in return for GE agreeing to put the smaller diameter GEnx-2B67 747-8I/F engine on the A330-200F (albeit with a slight thrust bump). GE would pay for most of the expenses required for the installation on the A330-200F as well as aircraft/engine certification in 2011/2012. NG/EADS will then offer this “new”, but low risk platform to the USAF, while Boeing is stuck with the KC-767 and its legacy engine, the PW4062.
It’s interesting to note that GE seems to be more than eager to put the GEnX on the A330:
Farnborough 2006: GEnx offered for future A330s (LINK)
——
Quote:
General Electric is floating the idea of offering the GEnx to power future derivatives of the A330, including the -200F freighter and tanker variants.
GE was well into the design of the GEnx-72A1 variant for the similarly sized A350-800/900 when the programme was revised in favour of the larger, wider A350 XWB. GEnx programme manager Tom Brisken says: “If they want to use it in the A330 for the freighter or tanker it’s a great engine. It is still available to them.” GE says the study is “very preliminary”. Brisken adds: “There’s no intent for Airbus to do that, but it does offer significant advantages, and if 13% fuel burn means anything to the customers, I’m sure there could be interest.”
——
In point #6 in the GAO statement of their sustainment of Boeing’s protest: ” 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.”
Hmm, times they are a-changin’. The price of gas has risen “astronomically”, and a 13 percent decrease in fuel burn will probably result in NG/EADS being back with a vengeance, and once again displacing Boeing as the offeror with the lowest life cycle cost!
Boeing’s response to Secretary Gates’ announcement conveys a concern that many have voiced (myself included!) over the fact that the Northrop Grumman/EADS proposal was essentially non-conforming and, to paraphrase the words of the GAO, should not have constituted the basis for an award. If Boeing plays the game and submits a revised proposal (why should they when their original proposal was conforming) do they waive their right to take this issue to Federal Claims Court?
I suspect that there is an ulterior motive here, which is to get this tanker issue out of the forthcoming presidential (and congressional) campaign(s).
Frankly, I cannot see this Congress, or the next, rolling over to the selection of a “French” tanker. This announcement by Gates will not put this to rest and I suspect that the final say will rest with the next Administration. It has gone way past considerations of MTOW and pallets and will ultimately be a political decision. Unfortunate because Gates could have used the GAO decision to declare NG’s bid “non-conforming” and get the KC-767 on the fast track. Granted, a few senators an congress persons from his own party would have been a tad upset, but if the needs of the Warfighter were paramount, and given the fact that either tanker can do the job, then he would have opted for the path of least resistance. The fact that he elected to drag this thing out suggests that the KC-30 will be selected again and more protests will be assured.
And there is the WTO ruling expected in the fall. What would happen if the WTO rules in favor of the U.S.? Almost certainly, Congress would have the “moral high ground” to get this included into the decision calculus.
OV-099, interesting analysis and rundown on some possible variations of a A330 theme. Thanks! I had prepared a post on relative sizes of the aircraft earlier but never published it due to the ‘size’ issue taking a back seat to all the subsequent rapid fire complaints pouring forth from Boeing. I may dust it off with a reference to your comment.
Aurora, I don’t think we saw the same press conference. In fact, after reading the transcript again I’m almost certain of it. To help clarify some disconnects, could you please elaborate on some of your statements? I am particularly interested in your “Northrop Grumman/EADS proposal was essentially non-conforming” statement. It is based upon……..???
SMSgt Mac, please refer to page 54 of the redacted GAO report. Note the finding by the GAO, “Whether or not Northrop Grumman’s proposed schedule accommodates providing these product-support services within the 2-year timeframe misses the point, however. By explicitly refusing to contractually commit to the 2-year timeframe for providing these services in the SOW as it was repeatedly requested to do, we think that Northrop Grumman has taken exception to this solicitation requirement. See C-Cubed Corp., B-272525, Oct. 21, 1996, 96-2 CPD ¶ 150 at 3. It is a fundamental principle in a negotiated procurement that a proposal that fails to conform to a material solicitation requirement is technically unacceptable and cannot form the basis for award.”
Note the last sentence in particular. I infer from your screen name that you have access to advice from government acquisition types. Run it by them. Based on my knowledge of contracting regulations (admittedly limited), this tells me that the entire proposal has been tainted by a failure to respond to a material solicitation. Ergo, it is “non conforming”. It isn’t just me; read Boeing’s press release after Secretary Gates announced his intention to pursue a “re-bid”.
IMO, the safest course of action for USAF would be to re-score the two proposals based on the GAO findings. Obviously, with one proposal “non-conforming”, that would leave the KC-767 on the table. That DOD doesn’t want to do this speaks volumes, and all but guarantees that this controversy will live well beyond this Administration.
Ah! I suspected as much.
I found the redacted AF post-hearing brief just as informative as the ‘GAO findings’ in this area and they do not concur with the GAO. Your assertion relies on the GAO finding to be in a superior, overriding position to the AF’s NOT finding it to be non-conformance–which it is not. The AF had the legal (politically risky) option to proceed in spite of the GAO findings.
This turns out to be the one area out of eight that I think the AF could have done better on and not just a GAO splitting-hairs moment. It comes down to the AF wanting a specific commitment date and NG not giving it, but instead asserting it would support any date the AF came up with in the end. I chalk it up to poor requirements writing more than non-compliance.
One area of contention with ANY substance, out of a shotgun blast of over 100 complaints filed by a loser who got beat soundly, on a contract with hundreds of requirements, that really needs to be awarded.
Let’s talk reality. NG will NOT let that little oversight go in the resubmittal. Looking at what both parties can do with their bid, I agree that Boeing will do everything they can to get the whole thing done over (In the perceived interest of ‘fairness’ only no doubt) and will do so as long as it takes or the shareholders get tired. they will do this because their offering is STILL the materially inferior one.
I AM a former designated acquisition official, which is why I, as also a now-former admirer of Boeing, am aghast at what they are doing– which is nothing less than a complete perversion of the acquisition system. To me this isn’t about the contract or even the military side of their business (I’ve posted this somewhere else & can’t remember where). I see it as about keeping themselves as the only domestic large-airframe manufacturer in the US. they went to a lot of trouble to gobble up McDonnel Douglas and their anti-competition tendencies have not abated. My friends at LockMart call them “The Borg”. Seems appropriate.
At the EADS Media Day, John Young, the COO of EADS North America (but no relation to John Young, the Defense Department guy who is now in charge of the recompete and source selection) told the press that Northrop has and did commit to a specific date. He didn’t really explain how the GAO came to a different conclusion (which, in reading the GAO report, certainly seemed unambiguous). But EADS’ Young said they and Northrop will indeed clear that up in the recompete.
Young also said that within EADS, he’s referred to as Young while DOD’s Young is “The Honorable” John Young to distinguish the two. Levity hasn’t been entirely lost in this whole tanker saga.
SMSgt MAC: “I found the redacted AF post-hearing brief just as informative as the ‘GAO findings’ in this area and they do not concur with the GAO. Your assertion relies on the GAO finding to be in a superior, overriding position to the AF’s NOT finding it to be non-conformance–which it is not. The AF had the legal (politically risky) option to proceed in spite of the GAO findings.”
A disagreement of that sort begs arbitration. Claims court?
Arbitration. Only with a unreasonably litigious party involved – Which is the real reason why DoD chose the path it did I suppose. LOL
~Sigh~I have ultimate respect and devotion to Right and Justice, which unfortunately is the source of my general low regard for the Law.
SMSgt Mac, as a tanker operator, I take issue with your acquisition views of the very weapons system I operate. Take a look at the RAND Study for the KC-135 replacement (while you are at it, read Gen Handy’s recent comments – Retired AMC commander – a tanker operator himself). I think fault can be found not only in the USAF’s evaluation of the RFP responses, but in the RFP itself. It seemed to bend over backwards to have an opponent for Boeing, and may have even put its finger on the scale to tip it away from Boeing.
How else can you explain the selection of an aircraft to replace KC-135 that is larger than its bigger brother the KC-10. Yet the A-330 is a far less capable tanker than the KC-10 by some 100,000 pounds. Yes, the A-330 is larger than the KC-10, but at each maximum takeoff weight the KC-10 can off-load over 100,000 pounds more! We are trying to replace the KC-135 right? The KC-10 is supposed to be replaced by KC-Z right? The A-330 can carry more pallets than a KC-10, but we’re supposed to be buying a tanker, right? The RAND study warns against putting too much stock into non-refueling mission capability for the KC-135 replacement. But I guess the USAF acquisition folks don’t bother reading the studies commissioned by the USAF. Maybe if the USAF put some operators on the acquisition team you would have picked the best replacement for the KC-135 rather than the anti-Boeing pick.
When you need to maintain 20 concurrent AR tracks over the AOR, you need 20 tankers, you can’t do it with 15 larger tankers. The recievers either run out of gas because the trip to the tanker is further from where they need to operate, or they spend less time supporting the troops on the ground because they have a longer drive to the tanker. Bigger does not mean better, especially when you can’t park as many on your ramp, and when you have to pay a lot more to enlarge your ramps and hangers at home, pay more to maintain all that extra metal, and pay for the higher fuel burn to fly that larger plane carrying more fuel. The economics just don’t fall in the larger planes favor. It’s not just my opinion, it’s one of the findings of the RAND study on the options to replace the KC-135. One which General Handy agrees with.
If the DoD doesn’t get this right, and I mean pick the Boeing 767, I hope Congress exercises the power of the purse and gets it right.
Tankerpilot. Sorry to not to have gotten back to this thread back when it was ‘happening’. I do have several coounterpoints for you but I hate it when people come back behind me ages after a thread is played out and make some ‘brave’ point to an empty room. So I won’t do it here. If you are still tuning in to the thread let me know and I’ll be happy to post them.