Here is a running update of the Pentagon briefing to reporters, 4pm EDT, 24 Sept.
William Lynn Deputy Sec Def:
- USAF will be source-selection team but overseen by DOD. There will be independent review panels as well, including from other services.
- This is not a re-run of the prior process. GAO found substantial flaws in previous process and we’ve taken pains to be explicit about criteria, scoring system and decision tree.
- This is a Best Value competition, not a price shoot-out. Price is extremely important but not only point. We will look at price, life cycle and war-fighting requirements.
- This is a step forward toward acquisition reform.
- This is not a cost-plus contract, and includes not-to-exceed prices. Will constraint prices considerably and move toward avoiding cost overruns.
- We’ve played this right down the middle.
AF Secretary Michael Donnelly:
- The KC-X represents one-third of the eventual procurement.
- Aerial refueling underwrites the global reach of the Air Force.
- Requirements set by Air Mobility Command (AMC): number of booms and drogues in the air. Offload capability. To succeed going forward we need some additional capabilities going forward: communications, navigation systems, defensive systems. We expect the KC-X to be far more capable than the KC-135.
- Requirements: Capabilities requirements is the same as in 2006. No changes made to this very high level. Systems Requirement defines systems level requirements. AMC led this work.
- 800 requirements in 2006 competition reduced to 373 mandatory requirements plus 93 additional value parameters.
Ashton Carter, chief DOD procurement officer:
- In the worst case scenario over 40 years, the offerer who can deliver what is needed with the fewest airplanes will have an advantage. (Editor’s Note: this would favor a larger airplane over a smaller airplane, a key point in the 2006 competition advanced by Northrop.)
- The cost of adjusting taxiways, ramps, runways and hangars will be taken into consideration for each aircraft. Wartime and peacetime factors will be considered. Life cycles costs will be a factor. If the all-in pricing/costs submitted are greater than 1%, the lower cost will win, “end of story.” If within 1%, the extra values will be considered as long as the extra value remains within the 1%. (Editor’s note: This is a very important item with all sorts of implications for Boeing and Northrop.)
- Offerers and Congress have 60 days from 25 September to submit comments. Final RFP follows by 60 days. Proposals to be submitted 60 days after that. Evaluation takes up to 120 days. Contract awarded next summer.
- DOD “cannot” consider WTO Interim Report ruling because it’s still a pending case.
- Why not include KC-Y because this process has taken so long? Donnelly: we want to evaluate the new airplanes and changing conditions in next 15 years before going to KC-Y.
- There is no credit for exceeding mandatory requirements. (Editor’s note: this would seem to be a defeat for Northrop, since this was an issue in the 2006 competition.) Extra features cannot in aggregate exceed 1% of the base cost.
- Cargo and passenger capabilities appears both in mandatory and extra requirement-see the DRFP tomorrow for details. Some previously “extra” features are now mandatory and vice versa.
- What is the greatest risk of a protest? Lynn: we hope there is no protest. We’ve tried to make things so concrete and transparent there will be no basis for a protest, but we don’t control that.
- Lynn: WTO is an interim ruling and there is another pending. You need both rulings and finality in the rulings before you can evaluate it. This will take several years. Until you get it, all you can do is have a hold harmless clause.
- Offerers will have access to war plan scenarios to consider submissions. Offerers can disagree with war plans, but Carter said it’s unlikely that the Pentagon will change war plans based on offerer comments.
- The independent panels overseeing the process cannot overrule; these are inputs. They are to make sure everything is being done correctly.
- Donnelly said DOD has made the point to Boeing and Northrop it does not want a corporate food fight. The point was also made to Members of Congress. (Editor’s note: fat chance on the latter.)
- This will be a single source purchase. This is our plan, says Lynn.
- Risk factors: this is still in the DRFP. These are normal aspects of a proposal, Carter says.
Breaking news: Here is our synopsis from DOD to Congress this morning.
The Draft RFP will be available 25 September. Here is the tanker briefing document presented to Congress.
Our quick takes:
- Boeing and its supporters want a Low Price, Technically Acceptable evaluation. Northrop and its supporters wanted a Best Value evaluation. The USAF said this will be a Best Value competition, provided the competing price comes within 1% of each other. No clear winner on the “wants” on this one.
- The USAF is clear: price alone won’t be the only determining factor. Life-cycle costs and “MILCON” requirements (runways, taxiways, ramps, hangars) will be considered. This almost certainly will work against a KC-777, which weighs roughly 50% more than the KC-30 even if dimensionally there isn’t much difference. In the Round 2 competition, it’s obvious by the Northrop win that the USAF was comfortable with the extra size and weight of the KC-30 vs. the KC-767, so we are going to go out on a limb and assume there will be no disadvantage to Northrop on this criteria this time.
- Fuel burn will be considered and cost evaluated accordingly. This favors the KC-767, the smaller airplane to the KC-30, especially if Boeing puts winglets on the airplane–further reducing fuel burn by roughly 4%. This works against the 777 compared with the KC-30.
- Delivery of the first production KC-X is 2015, five years from the presumed contract award next year. This could be a challenge for a KC-777, which is nothing but a “paper” airplane at this point.
- Northrop threatened to protest or even sue over its allegations that the USAF improperly provided Boeing with its cost information during the GAO protest process. The USAF rejected Northrop’s complaint as being properly handled in the first place and irrelevant to this new process in the second place. Northrop is the loser on this point.
- The Air Force rejected calls by Boeing’s supporters to consider the interim WTO report finding Airbus illegally benefited from subsidies. The USAF noted, as we did, that the WTO report can be appealed and the EU complaint against Boeing has yet to be delivered, and it too can be appealed. The USAF included a hold-harmless clause in the DRFP, as it did in the Round 2 RFP, protecting it from any penalties that might be imposed on either side. Boeing and its supporters are the clear loser on this one.
So it essentially comes down to the cost to keep the tankers in the air and offload fuel.
Seems wise of the DoD: May the cheapest man win!
In the end this situation calls for a decision arrived at with the utmost courage.
Split the procurement.
The big question in my mind is “can the 767 meet the mandatory requirements?”. Presuming it burns less fuel (must check engine vintage and note Boeing was penalyzed last time for perceived risk of tweaking their airframe, and that the wing is not heavily loaded like 707-320C), it should win easily because there is little credit for optional performance and then only if adjusted prices are within 1%. Note too that “MILCON” requirements for hanger and airfield expansion may work against larger airframes.
That’s assuming price is the same as the KC-30 or lower – does USAF have credibility criteria? (They have penalties for falling short of what they promised. In general risk another good reason for split purchase, which the RFP allows USAF to do, but the low production rate seems to work against that as well as against Boeing offering both airframes. USAF quote two development costs as a reason why split would be more costly, but I wonder about ongoing competition lowering all-in costs including by ensuring excellent product support – I’m confused by the exclusion of depot maintenance costs in the briefing Q&A, surely USAF will consider design impact on that such as corrosion protection, and parts costs.)
I’m amused by the line in one web page transcript of a briefing . Spelled with an extra w – too many of those about?
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