With the Pentagon’s announcement this week that a major push has begun to wring costs out of the defense budget, will this macro approach trickle down to one of the largest defense procurements in decades–the KC-X tanker recapitalization?
Remember when Defense awarded Northrop Grumman the KC-X contract in 2008? A key, if not the key, to winning was, “More, more, more.”
Now Ashton Carter, the top procurer in DOD, says “more has been costing more.”
Given one advantage Boeing has over EADS in the current KC-X competition–life cycle and MilCon costs–will “more, more, more” cost EADS the contract?
Here is Carter’s six page memo, obtained by DOD Buzz.
Boeing’s KC-767 has lower life cycle costs due to a lower fuel burn than the larger KC-45 offered by EADS. The spread is in dispute. Boeing claims a 24% better fuel burn, before taking into account the addition of winglets (which in commercial service lowers consumption about about 4%). Airbus claims the spread is only 6% before the winglets. Either way, over the 50 years life expectancy, this is real money.
Boeing also claims the KC-767 will require less new infrastructure and ground support equipment to accommodate and support the smaller, lighter KC-767.
EADS says its larger KC-45 is more mission-capable because it carries more fuel, more troops and more cargo–the “more, more, more” cited by the USAF in 2008 in awarding the contract to then-prime contractor Northrop.
But “more, more, more” is only worthwhile if it is used. Otherwise this only added to the operating cost of the airplane, to no benefit to the USAF.
With DOD’s emphasis now on cost-cutting, will this work against EADS and in favor of Boeing?
Meantime, Alabama is revising its incentive package to attract EADS and the KC-45 tanker to Mobile, according to this article.