Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Why e in ePlane shall stand for environment, not electric. Part 1. December 13, 2019
- Norwegian’s attempt to survive December 12, 2019
- With no end of MAX grounding in sight, Boeing may be forced to cut or suspend production soon December 11, 2019
- FAA: No MAX certification until 2020; analysis forecast 15 more crashes if MCAS not fixed December 11, 2019
- First reports from Boeing’s MAX briefings last week December 10, 2019
GAO Report issued
We haven’t read it, but here is it, all 67 pages in PDF form. b-311344__boeing__redacted_decision.
Update, 1215 PM PDT: We’ve completed a quick read of the GAO decision. In it, the GAO found–as previously reported–for Boeing on a number of key elements. The GAO also rejected Boeing’s protests on far more complaints than were sustained, but only a small number of these are discussed in the report. Some of these were key elements in Boeing’s public relations campaign. But that’s neither here nor there–the elements detailed by the GAO in sustaining the protest are enough.
The GAO report also makes it clear that in defending the decision, on occasion neither the Air Force nor Northrop Grumman provided information for the record that refuted Boeing’s complaints–thus leading the GAO to side with Boeing.
It is clear from our reading of the report that a rebid, correcting deficiencies outlined in the GAO report, is indeed warranted. The news report we posted earlier today suggesting that the Air Force may proceed with the award as issued without a rebid is an unwise course of action.
Among the key points in the GAO report is the conclusion that Boeing’s KC-767 did indeed score better than the KC-30 in the more important criteria identified in the USAF RFP, while the KC-30 outscored the KC-767 in criteria that was less important to the requirements of the aircraft. While the GAO sides with the Air Force that the KC-30 does offer “more” as the Air Force stated when announcing the award, the GAO concludes that the RFP doesn’t allow for the extra credit that was awarded for this extra capability–yet this was the key to the USAF’s decision announced on February 29.
The GAO also sides with Boeing about the “survivability” assertion that the KC-767 scored better. Furthermore, the GAO says the record calls into question the KC-30’s ability to maneuver safely in emergency break-away situations, largely because neither the Air Force nor Northrop provided adequate documentation or analysis for the record to enable the GAO to conclude otherwise.
A fair reading of the GAO decision leaves room for no other conclusion: the USAF process was fatally flawed. A recompete is necessary.
We will be re-reading the report in greater detail and may update our report here in the coming days.
Update, 230 PM PDT: Teal Group analyst Richard Aboulafia opines on the tanker mess in his monthly newsletter. Catch it here: Our long national nightmare.
USAF to GAO: Drop Dead
A reader just brought this report to our attention, which if true, is a real bombshell; it’s from DefenseTech.org.
Top OSD Officials Think Tanker Deal Can Go Ahead
Senior Pentagon and Air Force officials who have read the full 67-page report about the tanker bid by the Government Accountability Office think they can still grant a contract before the end of the Bush Administration. John Young, the Pentagon’s acquisition czar, has reportedly drafted a letter for the four congressional committees that oversee defense spending and policy informing them of the Pentagon’s decision to go ahead and award the contract to Northrop Grumman.
There have been reports that the GAO ruling on the tanker contract could add two years or more to the contract award, something that has greatly concerned Air Force leaders eager to start building new tankers after almost a decade of trying.
“Their finding is that the full document is quite different from the summary,” issued last Wednesday, said a source familiar with the issue. The source said Air Force leaders believe much of what was challenged is “procedural” and can be resolved without rebidding the deal.
The 69-page report is expected to become public today.
The GAO said in its summary that it found “a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman” and recommended that the bid be reopened. By law, the Air Force has 60 days to inform the GAO of how it will respond to the recommendations.
Any Air Force decision to press ahead with the contract award to Northrop Grumman is likely to spark outrage on Capitol Hill among supporters of Boeing, who include Rep. Norm Dicks (D-Wash.), the Nr. 2 member of the House Appropriations defense subcommittee, as well as Washington’s two senators and lawmakers from Kansas.
New, at 1035 AM PDT: The Hill has this article about the USAF and the tanker.
Full GAO report expected this week
The full, 69-page GAO report is expected to be issued this week, redacted of proprietary information. The report could be issued as early as today, we’re told. As soon as we get it, we’ll post it.
Meantime, fired Air Force Secretary Michael Wynne said the USAF “leaned over backwards” to be sure Northrop Grumman remained in the competition for the tanker. Here is the full story from Military.com.
The Wall Street Journal, a conservative newspaper now owned by right-winger Rupert Murdock, has this editorial on the tanker. It’s tone is far more moderate than one would think would come from The Journal on the issue.
Government Executive opines that the Air Force might follow a quaint rule: Do as you say. You may read this piece here.
The media in Alabama reports that it’s possible EADS, the parent of Airbus, might decide to proceed with a plan to move A330 freighter production to Mobile even if the USAF contract for the KC-30 is overturned in a rebid. Readers will recall that Airbus and EADS announced plans to assemble three or four A330-200Fs in Mobile, contingent upon the tanker award. Although the companies, and Northrop, profess confidence that the award will be sustained in a rebid, EADS and Airbus officials are considering what to do if it’s not.
We’re told there is a contingent in Airbus that thinks the company should go ahead and assemble the tankers in Mobile. This would help mitigate the dollar-Euro problem facing Airbus. But a new financial analysis is necessary for the capital costs and economics without the tanker before any decision can be made to proceed.
GAO decision–only the tip of the iceberg?
Newsweek has a piece about US Sen. John McCain and the KC-X tanker competition, quoting an unidentified Pentagon official about McCain’s involvement. This is the first article we’ve seen quoting a Pentagon official.
As readers know, we were in Washington, DC, when the GAO announced its decision upholding the Boeing protest of the award to Northrop Grumman. We’ve been told by a Boeing partisan of something that, if true, will create a procurement scandal if not quite equal to the illegal activities surrounding the first tanker award to Boeing in 2004 will at least rock the Air Force to its procurement core. This may or may not come out in the 69-page GAO report that is being sanitized for proprietary information before its release, perhaps as early as this week. If what we’re told is true and it’s not in the report, it should be, or certainly should become the subject of Congressional investigations of the thoroughness and aggressiveness undertaken by McCain following the Boeing tanker award in 2004.
If what we were told is true, not only was the process examined by the GAO flawed but it was outright subverted.
Meanwhile, fired Air Force Secretary Michael Wynne, on his last day in office, said a rebid is likely and suggested that a fly-off between Boeing and Northrop might be worthwhile. This Reuters story may be found here.
New, Monday, June 23, 1030 PDT: An interesting twist to the GAO decision. Readers will recall that we’ve previously mentioned that there was a “shadow group” looking over the shoulder of the Air Force the whole way during the evaluation process. It turns out that the GAO was a member of this shadow group. Now if one presumes that the role of the shadow group was to keep the USAF on track and not to simply look over the shoulder and not say anything or raise questions about whether there were irregularities, then one has to ask: just where was the GAO itself during this process? Perhaps the 69-page report will say.
New, Monday, June 23, 315 PM PDT: Loren Thompson has a fresh commentary on the tanker fiasco here.
New, Tuesday, June 24: Politico reports the Air Force is considering a KC-767/KC-30 flyoff. The Hill reports the Defense Department acquisition group may take over the rebid process from the Air Force in this report.
New, Tuesday, June 24, 945 AM PDT: Here’s an amusing piece from the United Arab Emirates about the tanker program. It’s amusing because it takes a shot at CNN’s Lou Dobbs, a once-fine financial reporter who has gone off the deep end on anything not US. The piece also has some interesting facts in it.
In the meantime, JD Crowe, the cartoonist with the biting wit for The Mobile Press-Register, inked this one today:
The Press-Register’s Washington reporter has this look at the current situation in the wake of the GAO protest.
What’s next on the tanker?
We’ve been asked by media across the country, What’s next for the tanker competition?
We stated our position long ago: if Boeing lost the protest, it should accept the GAO decision. On the other hand, if the Air Force lost, then the service and Northrop should accept it.
This means the deal, in our view, should be rebid as recommended by the GAO.
As for what should happen, we’ve been clear about that for a long time: double the production and appropriation and split the order between Boeing and Northrop. Then everyone can get on with their lives and be put out of collective misery over this interminable saga.
Details beginning to emerge in tanker ruling
All those interested in the GAO tanker decision are waiting for the 69-page decision to be sanitized of proprietary information, but one detail about life cycle cost emerged, according to this Bloomberg report: that Boeing wound up with a $91.8m life cycle advantage after the Air Force corrected a math error. This math error was one of seven “significant” errors identified by the GAO in its three page press release in recommending a recompete.
To put this in perspective, this is a difference of $2.3 million per year over the projected 40 year life cycle, out of a $35 billion program. This is a rounding error, and not one we’d call particularly significant. It’s also a far cry from the hyperbolic, hand-ringing $40 billion promoted by Boeing.
We hope the 69-page decision is a bit more definitive and substantive than this.
New, 100 PM EDT: The Mobile Press-Register’s JD Crowe is at it again with this cartoon following the GAO decision:
GAO sustains Boeing’s protest
In another stunning twist in the USAF tanker contract, the GAO sustained the Boeing protest over the award to Northrop Grumman. In a three page press release, the GAO sustained Boeing on key elements of the protest while rejecting other unidentified elements.
One of the complaints that Boeing had was that the Air Force didn’t communicate well on the competition. This is the crux of the NA KOA complaint we’ve written about as well.
We’re swamped with media calls and e-mails, so we’ll be digesting this a bit more when we have time. But this doesn’t look like the “close call” that either side expected; it looks like a clean victory for Boeing.
The Air Force doesn’t have to follow the GAO’s decision and recommendation to reopen the bidding, but politically we don’t see how it can’t.
If we’ve got this figured out, here’s the three page press release. press-release-final-boeing-decision-6-18-08
More, 245 PM EDT: We’re going to be very interested to read the 69-page redacted GAO decision when it becomes available. It has to be sanitized for proprietary information first.
One of the things that we find stunning about this decision is that given how the Air Force screwed up the first time around 2001-04, in which people went to jail and and lost their jobs, you would have thought the USAF would have avoided screwing up this time. The Air Force even created a “shadow” group to oversee the process, yet the GAO concluded the service screwed up anyway.
What happens now? The Air Force has 60 days to decide what it will do. As mentioned, it is not legally obligated to follow this decision. In fact, on a previous GAO protest a over tanker maintenance contract, the Air Force ignored the GAO upholding the loser’s protest over the award to Boeing.
An interesting element is that the new chief of the Air Force, who assumed this office after his predecessor was unceremoniously by DOD Secretary Robert Gates, is the former chief of the Air Mobility Command–in other words, a cargo guy. What, if any, bearing this will have going forward is a matter of speculation.
More, 430 PM, EDT: Although Boeing and its supporters are understandably overjoyed by the GAO decision, and assuming the USAF does undertake a recompete, this hardly means that Boeing will win the recompete. This is going to be another uphill battle for Boeing. Any assumptions on the part of Boeing-boosters that this knocks Northrop out of the game is simply wishful thinking.
One of the questions we were asked by the media is whether the award to Northrop was the Air Force’s way of simply stuffing it (our word) to Boeing as a result of the 2004 tanker scandal, or whether the Air Force simply a bunch of bumbling idiots (the broadcaster’s words).
My response: Well, this is the government, after all, and bumbling idiots are not incompatible with government. But in all seriousness, we really won’t get the full picture until the redacted GAO decision is issued for public consumption.
Waiting with bated breath
It didn’t take long for one of our readers to e-mail us that the headline for our Corporate Website update today (June 17) had a misspelling: Waiting with baited breath.
Well, be that as it may–we said it was a fish story and we may not really be all that far off–we take a final look at the USAF tanker protest in advance of the decision by the Government Accountability Office on Boeing’s protest. The deadline for issuing the decision is Thursday, June 19. The buzz here in Washington, DC, where we are, is that it might come down after the stock market closes tomorrow.
We also posted on our website four big PDF files of redacted documents filed by Boeing and Northrop Grumman with the GAO in April.
Whether the GAO decision comes out tomorrow or Thursday, we’ll be in DC.
Casey at the bat
We’re traveling and have limited access to reading things about the tanker, but we’ve seen the news about the USAF admitted a calculation error in the life cycle costs for the KC-30 vs the KC-767.
This reminds us of Casey Stengel, the iconic New York Yankees player and manager who later became the manager of the expansion team the New York Mets.
Although the Mets later went on to become world champs, the initial team was so bad that Stengel lamented, “Can’t anybody here play this game?”
via CaseyStengel.com
We can’t hlep but ask the same question of the Air Force. After all the scandal involving the first tanker award to Boeing in 2004, in which illegal activities canceled the award, sending the Boeing CFO at the time to jail as well as a former Air Force procurement official who went to work for Boeing; and causing the end of several careers of ranking Air Force civilians and military men; and after recognizing the scrutiny that would be on this competition; and after having a “shadow” group over-see the competition, you’d have thunk that the USAF might avoid such a basic mistake.
This certainly falls under the “Good grief” category.
via BBC
This one seems appropriate, too:
via fanboy.com
On the road
We’re on an extended travel schedule, so there won’t be much in the way of updates on this site.
In advance of the anticipated June 19 GAO decision on the tanker competition, we’ll have some documents to post to our Corporate Site June 17.