Aug. 2, 2021, © Leeham News: A move by the Biden Administration may have unintended consequences in the KC-Y Bridge Tanker procurement by the US Air Force.
The Bridge Tanker is the Air Force’s second round to replace the aging Boeing KC-135 fleet. Between 140-160 airplanes will be purchased under KC-Y. The Air Force awarded a contract to Boeing in the previous KC-X procurement for 179 tankers based on the 767-200ER platform.
President Joe Biden announced last week that the US will adopt a rule under its Buy American policy that American content must be increased from 55% to 60% immediately and ultimately 75%.
If adopted, the rule appears to all but preclude an expected proposal by a partnership between Lockheed Martin and Airbus (LMA) to offer the KC-330 Multi-Role Tanker Transport (MRTT). This is based on the A330-200 platform.
Lockheed Martin did not respond to a request for comment.
President Biden made increasing the US government’s purchases of “buy American” a major goal of his administration.
“The Buy American statute says products bought with taxpayer dollars must ‘substantially all’ be made in the U.S. However, today, products could qualify if just 55%–just over half—of the value of their component parts was manufactured here. The NPRM proposes an immediate increase of the threshold to 60% and a phased increase to 75%,” the White House said in a statement. NPRM stands for Notice of Proposed Rule Making, a process required before certain policies may be adopted.
The US Office and Management and Budget (OMB) is the agency through which the NPRM will be issued. The NPRM proposes increasing the US content “immediately” from 55% to 60%, then to 65% by 2024. By 2029, the content required will jump to 75%.
The Federal News Network explains more here.
The Air Force already is in the early stages of the procurement process. A contract will be awarded in 2023, under the current timeline. First flight testing is targeted for 2027. Fully functioning tankers will be delivered in 2029, under the planning in place now.
Whether the LMA proposal will be able to qualify is a question. In the earlier KC-X competitions, Northrop Grumman, and Airbus (NGA) initially partnered to offer the KC-330 MRTT. NGA won, but the award was overturned on appeal. Airbus, via its parent EADS (as it was then called), competed alone in the re-competition when Northrop bowed out. Boeing won.
In both competitions, the American content was a technical and a political issue. Airbus had to comply with the 55% American content requirement. Selecting the GE Aviation CF-6 engine went a long way toward achieving this goal. Coupled with American-sourced avionics, landing gear, systems and components that are routinely part of the A330 design anyway, Airbus complied with the 55% threshold. Airbus also committed to assembling the MRTT in Mobile (AL), which at the time did not have any Airbus facility as it does today.
Will LMA be able to meet the 60% threshold that “immediately” takes effect? Or will certain Defense contracts be exempt? Or since the process already began, are the interested parties “vested?” LNA doesn’t have the information to fully understand the ramifications.
But we can conclude that more than likely, the standards—whether new or old—probably rule out an MRTT based on the A330-800 neo, which uses Rolls-Royce engines. The MRTT’s GE engines enabled Airbus and NGA to meet the 55% threshold.
What about using the GEnx engines on the A330neo? The airplane would have to be certified to swap engines from RR to GE, not an insurmountable issue but one that adds costs.
LNA believes LMA will offer the A330-200-based MRTT. The engine choices are the GE CF-6 used now for the MRTT or switching to the Pratt & Whitney PW 4000 used on the Boeing KC-46A. Offering the Air Force engine commonality may be attractive, but LNA believes in the end, LMA will stick with the GE engine.
But how does LMA meet the 60% “immediate” threshold, let alone future, higher ones?
Where will LMA suggest the MRTT be assembled? This is another good question.
Production of the A330 family already is limping along at just 2/mo. The production rate of the MRTT currently is just four per year. Certainly, an order for 140-160 KC-Y tankers could boost the rate. But with a small skyline with weak customers for the A330neo, how could two production lines be justified?
But if LMA does suggest assembling the KC-Y in the US, where? Airbus could build yet another final assembly line (FAL) in Mobile, next to the A320 and A220 FALs. But Lockheed Martin may have other ideas. LMA is headquartered in Georgia. The C-130 is assembled there. There are fighter FALs in South Carolina and Florida, Texas, and California. If Lockheed Martin has any excess capacity or surplus facilities, this will undoubtedly factor into the decision. So will politics. Locating the FAL in a key state may benefit Congressional support.
In a bit of déjà vu all over again, Airbus must figure out how to keep the A330 production going until the outcome of the KC-Y competition is known and if LMA wins, until production of the KC-Y begins.
There currently is a backlog of 13 MRTTs, produced at a rate of four per year. This takes the MRTT production to 2024, the year after the contract award is targeted. According to data reviewed by LNA, there are firm orders for the neo scheduled for delivery through 2032. But the customer quality includes weak airlines. Lessors represent a portion of the orders, for which lessees are not identified—not unusual at this stage. There are also several “Unidentified” customers, whose quality cannot be determined.
Boeing’s performance on the KC-46A program almost certainly will become an issue. The company already wrote off $5bn in cost overruns. The tanker was delivered years late, with Category 1 deficiencies, the most severe of shortcomings. But by 2023 when the KC-Y contract is supposed to be awarded, Boeing undoubtedly will argue that it fixed all the problems and—presumably—is delivering a fully operational, reliable tanker with a track record that can be defended.
Airbus will counter that introduction of its MRTT elsewhere was earlier, smoother, and more reliable. The greater range and tankage give the MRTT an advantage over the KC-46A, Airbus will argue. These attributes were unimportant in the final KC-X competition, which was based on a pass-fail evaluation of what was called the Technically Acceptable, Lowest Price (TALP) competition. Only if Airbus and Boeing were within 1% of the prices bid would the MRTT’s greater capabilities be considered. Boeing won with a 10% lower bid—but, of course, the $5bn in write-offs may have made the win a pyrrhic victory.
The competition, if LMA figures it can meet the new Buy American thresholds, is going to be fierce. It is also likely to be very ugly. Forget the Marquis of Queensbury Rules. This is almost certainly going to be a street brawl, just like the 10-year battle for the KC-X contract.