Tanker DRFP may violate law: former procurement official

Inside Defense, a subscription-only publication, today reported that a former defense procurement official believes the current KC-X tanker Draft RFP may violate the law. Here is what Inside Defense sent out in the public domain:

Former Top Procurement Official Questions KC-X Compliance with New Acquisition Law

The Pentagon’s solicitation for the KC-X aerial refueling competition is inconsistent with the 2009 Weapon Systems Acquisition Reform Act and may violate the law, according to a former top federal procurement officer.

That critique, by Robert Burton, a former deputy administrator of the Office of Federal Procurement and Defense Department veteran, comes as a powerful lawmaker and a key architect of the recently enacted weapon systems acquisition reform law — Sen. John McCain (R-AZ) — is raising questions about whether the KC-X draft request for proposals, issued on Sept. 25, complies with the new act.

In an October 19 letter obtain by Inside Defense, Burton writes that the DRFP is “inconsistent” with the Weapons Systems Acquisition Reform Act of 2009 by failing to “provide for trade-offs between cost, schedule. and performance….” This is “clearly inconsistent with the intent of the law and Congress’ desire to maximize competition and minimize risk.”

Burton goes on to write the the USAF is “inviting significant risk” by conducting a 15-year fixed price competition. He calls it “highly unlikely” that the presumed offerers, Boeing and Northrop Grumman, will submit bids that will be within 1% of each other–a key parameter in the RFP–thereby awarding the contract to the smaller airplane “with minimal capabilities.” Although Burton doesn’t say so, this clearly suggests Boeing’s KC-767 will be the winner.

Burton cites Section 201 of the WSARA is applicable in which “trade-offs among cost, schedule and performance are considered as part of the requirements process.”

More on WTO

Meanwhile, the Lexington Institute’s Loren Thompson published this piece about “Why Boeing thinks subsidies matter,” prompting this rebuttal from a consultant to Northrop.

After Thompson published his piece supporting inclusion of the preliminary WTO ruling that Airbus improperly benefited from subsidies, we emailed Thompson asking why he continually ignores Article 23 of the WTO rules that prohibit self-help before the case is finalized (the issue addressed in the Northrop rebuttal). Thompson did not respond (not atypical, by the way).

We have maintained from the day the WTO Interim Report was issued that while Boeing and its supporters believe the finding that Airbus violated WTO rules should be considered by the USAF, Article 23 prevents this and to do so would violate WTO rules. That the final report rarely changes is academic (and the operative word here in any event is “rarely;” this doesn’t mean “never”). If Boeing and its supporters are sticklers for the rules on the one hand, they can’t ignore the rules on the other.

We’ve also maintained that if the USAF changes its collective mind and decided the Interim Report finding will be considered (Article 23 notwithstanding), we’ve said doing so in the absence of the pending WTO findings in the EU case against Boeing subsidies will generate a protest from Northrop should Boeing get the contract. Every observer, including some inside Boeing, believe the WTO will uphold some of the EU complaints against Boeing.

We may not have much longer to wait for the WTO Boeing Interim Report. We are getting indications that the report may be issued before the end of the year. (The operative words are “indications” and “may.”) If so, then watch the Airbus/EADS/Northrop crowd and their supporting politicians whinge on about including the Boeing findings in the Final RFP (Article 23 notwithstanding).

Defense Secretary Robert Gates had hoped this Round 3 would be free of corporate food fights and political interference. We thought at the time this veteran of Washington who is now serving his sixth President was being naive.

As we told KOMO Radio (Seattle) in a recent interview about the tanker competition, “We can’t wait for the damn thing to be over.”

9 Comments on “Tanker DRFP may violate law: former procurement official

  1. geeze- Since there is no claim AFIK against 767-xxx being involved in the WTO subsidy issue, and there is a claim regarding the A330-xxx subsidy issue, I fail to see just how any EADS/Airbus claim re WTO rulings has any significance or impact on the TANKER PROGRAM

    OTOH – Since the draft report by WTO does find EADS/Airbus in violation of EXCESSIVE subsidies above the GATT92 allowables, and they DO pertain to at least some versions of the A330 series, the claim of non-correction pending final adjucication is a red herring.

    determining the amount ‘ chargeable” to the A330-xxx tanker re the tanker contest is NOT a correction until or unless the ‘refund’ or duty involved is applied. Given a so called fixed price contract- the burden simply falls (IF and WHEN ) on the EADS/Airbus side. Otherwise there would be nothing preventing EADS from kicking in a few hundred million more TODAY to drop the price/bid and then claiming US cannot argue or dismiss until two or three decades from now.

    All this against the 767 which has yet to be claimed to benefit from like subsidies.

    • Actually, the EU did file complaints involving the 767, which for years was the beneficiary of an arcane tax break called Foreign Sales Corporations that The Boeing Co. took advantage of. The WTO in a prior case ruled these illegal and the US tried skirting the ruling by changing the legislation and the name, which the WTO also found to be illegal. This complex case is now before the WTO for the seventh (!) time.

      The EU complaint points to these illegal tax breaks as benefiting the 767.

      The EU also complains about the NASA/DOD funding to Boeing generally and, in the case of NASA, the 777 specifically. Thus from the EU perspective the 767 and the 777 are covered by the EU complaint to the WTO.

      • >>>The EU complaint points to these illegal tax breaks as benefiting the 767.

        Of course, Airbus has “never” benefited from these same tax breaks, has it?

        Cry us a river, please.

  2. “We can’t wait for the damn thing to be over.”

    Scott, this couldn’t be a more appropriate sentiment!

  3. You will still be writing about this “competition” in 2020 if the USAF doesn’t get its act together and request that this thing be sole sourced to Boeing. An “airbus solution” does NOT have the votes, especially in these days of 10.2% (actually 17%) unemployment.

    Politically, airbus is completely unworkable. I realize many posters here would rather eat ground glass than admit this, but it is the only workable solution. Further competitions are doomed to failure.

    I expect the Obama administration at some point just to come out and say, “were going with the Boeing product”.

    • Aurora: “You will still be writing about this “competition” in 2020….”

      You really know how to depress a guy…..

  4. Dont disagree – but being a pragmatic- common sense solution oriented towards keeping certain strategic capability in the U.S, along with jobs flies in the face of how our budget process and congressional non-mensa types operate – thus dooming that solution.

    1) AF/Congress/pentagon would have to somehow pay for some of the Airbus/EADS bidding activity to date, and come up with other ‘ concessions”

    2) Knowing for sure that BA would get the contract, the McDummy crowd in control would find more ways to milk the program without any risk.

    IMO- the realistic answer would be to ADD enough budget to cover Both airplanes, since the Airbus version more closely fits the KC10 tanker anyhow. In addition, there is simply no physical reason that BA could ramp up 767 tanker production faster than Airbus- getting more planes in use faster.

    But having both a pragmatic solution (Auroa) and a Realistic solution (mine ) will leave the current administration no choice but to continue the current fiasco.

    2) By the time the food fight is over, China will be in the running for a tanker contract, and they will have an even bigger club. Give us the tanker or we call in all your financial paper and foreclose on half your industry !

  5. ooops correction . . . “In addition, there is simply no physical reason that BA could ramp up 767 tanker production faster than Airbus- getting more planes in use faster.’

    S/B . . . BA could NOT ramp up . . .

  6. Burton is a D.C. lawyer who, based on his entry at his firm’s website, has represented Northrop Grumman in past litigation against the U.S. government. I don’t think we need take anything he says as objective analysis. I suppose it might be a signal the Northrop Grumman will sue the USAF if the RFP isn’t changed to its liking.

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