Tanker protest analysis

Tanker protest analysis

For what it's worth, here's my take on the tanker protest situation. This article will appear in next week's Flight International magazine.
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The US Government Accountability Office (GAO) ruling that\ncategorically rejects the US Air Force's two-year process to award the KC-X\ncontract sets up a repeat scenario with a changed political backdrop and vastly\ndifferent views about the product positions of the two competing teams.

The GAO's findings are not binding, but the full weight of\nthe investigative agency's seven-point rebuttal (see below) is expected to\ncompel USAF officials to start over again.

That means the landmark US military contract victory for\nthe transatlantic consortium of Northrop Grumman, EADS North America and\nAirbus, which offered the A330-200-based KC-30B, is likely to be voided. The\nUSAF has 60 days to respond to the GAO's decision.

Boeing, meanwhile, can expect a welcome reprieve from both\nthe certainty of losing its 50-year monopoly on the USAF's strategic tanker\nfleet, and of allowing its biggest competitor to gain a prized manufacturing\nfoothold on US\nsoil.

At the same time, a repeat of the tanker competition\npresents Boeing's executives with some difficult decisions. Boeing had\nconsidered the KC-767 the \"right-sized\" aircraft to meet the USAF's\nrequirements and a sure-thing for the contract award, but the selection team\nand the USAF's leadership clearly disagreed.

General Arthur Lichte, commander of Air Mobility Command,\nhas used sweeping terms to describe why the USAF selection team decided to pick\nthe KC-30B.

\"From my perspective, I can sum [the KC-30B's advantages] up\nin one word: more,\" said Lichte, speaking to reporters at the Pentagon on 29\nFebruary. \"More passengers, more cargo, more fuel to offload, more patients\nthat we can carry, more availability, more flexibility and more dependability.\"

That perception could place Boeing in an awkward competitive\nposition entering the second round, said Richard Aboulafia, the Teal Group's\nvice president of analysis.

\"The weakest aspect of Boeing's counterattack is their\nproduct position,\" Aboulafia said. \"If the Air Force really does prefer\nsomething in the A330-size class, the 767 looks a bit too small, and the 777\ntoo large. [Boeing's] best hope is to play up their strong tanker experience\nand the 767's lower costs and footprint.\"

Northrop's team could submit a second proposal with the\nconfidence of clearly knowing the customer's preference for an aircraft larger\nthan the 767-200ERX.

However, Northrop's seemingly favourable position has been\ndamaged by Boeing's protest. GAO's investigation detected multiple errors in\nthe USAF's sums. The new results reverse Northrop's position as the lowest-cost\nbidder, although by a tight margin. The GAO report also revealed that\nNorthrop's bid failed to provide for two years of required maintenance support.

\"We continue to believe that\nNorthrop Grumman offered the most modern and capable tanker for our men and\nwomen in uniform,\" says Northrop in a statement.

More importantly, perhaps, the\nNorthrop team's offer also faces the fall-out from a protectionist political\nbacklash ignited by the USAF's contract award, and enflamed further by the\nGAO's findings.

\"I've been saying that this\nprocess was flawed, we shouldn't hand away billions of dollars and thousands of\njobs, and that Boeing should build these tankers,\" Senator Patty Murray, a\nWashington Democrat, said on the Senate floor on 19 June.

\"The GAO decision backs up each\nof my concerns,\" Murray\nadded.

If the Democratic party sweeps\npresidential and congressional elections in November, Boeing can expect strong\npolitical support for keeping the tanker contract away from Airbus, Aboulafia\nsaid.

 

Finally, the USAF must answer the\nGAO's ruling amidst an unprecedented leadership crisis that removes two key\ndefenders of the contract award for the KC-30B. \nTwo weeks ago, Secretary of the Air Force Michael Wynne and Chief of\nStaff General T. Michael Moseley were forced to resign as a result of nuclear\nsecurity lapses.

 

SIDEBAR

The Government Accountability Office identified seven\ncategories of flaws in the US Air Force's selection process that awarded the\nKC-X contract to the Northrop Grumman/EADS North America KC-30B.

Here are the categories:

1. Wrong metrics:\nthe USAF ignored its own evaluation criteria and neglected to account for\nBoeing's lead on satisfying an undisclosed list of \"non-mandatory requirements\"

2. Extra credit:\nthe USAF gave Northrop bonus points for exceeding the fuel offload threshold,\nviolating its own rule

3. No aircraft left\nbehind: the USAF failed to prove that it could correctly assess the\nKC-30B's ability to refuel all fixed-wing aircraft

4. Double-speak: the\nUSAF told Boeing it had fully satisfied a requirement. The USAF later changed\nits opinion, but did not inform Boeing

5. Not just an oversight:\nNorthrop's refusal to provide two years of maintenance support was\n\"unreasonably\" judged by the USAF to be an administrative oversight

6. Math mistakes: correcting\nmistakes in the USAF's cost estimates shows that Boeing submitted the lowest\nestimated lifecycle cost, not Northrop

7.  Improper increases: the USAF did not\nthink Boeing's estimates for non-recurring engineering costs were too low, but\ndecided to raise them anyway because Boeing failed to explain them. The USAF\nalso couldn't prove that its own model for predicting costs was accurate.

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