Aboulafia

vs.

McCain

From Aboulafia's blog last week:

"We know that McCain influenced the tanker selection process against Boeing with multiple letters to Deputy SecDef Gordon England and SecDef Robert Gates. We also know that McCain, for good and/or bad reasons, stopped the original Boeing tanker lease deal from going ahead. We know that people in McCain's office have also worked as EADS lobbyists. At least one lobbied for EADS while working for McCain. Finally, we have the GAO document, which accuses the Air Force of favoritism and bias, yet doesn't cite any rationale or motive for this bias. There's really just one.

So far, no one has been able to connect these four data points and prove that McCain and his lobbyist associates pushed the Air Force into actively favoring the Northrop/EADS plane. McCain's office has very skillfully maintained plausible deniability."

That's a very remarkable -- and politically explosive -- analysis. Aboulafia appears to be asking: 1) Did McCain steer the KC-X contract requirements to favor Northrop Grumman's bid, and 2) Were McCain's actions improperly influenced by EADS lobbyists?

"The Boeing Co., of Wichita, Kan., is being awarded a cost plus fixed fee contract for $14,983,252. This action will accomplish aircraft integration system engineering studies to support development of critical technologies required to enable airborne stand-off electronic attack. The technologies include low-band, high-power transmitting phased arrays, mid-band high-power transmitting phased arrays, and advanced exciters."

PROS

Well in a nutshell, take all the advantages in weight and fuel efficiency that the 787 has over the A330 and translate that over to the tanker version. The 787 would be larger but lighter than the A330. Boeing can utilized the advantage of better fuel burn and the lighter structure of the 787. The 787 would have a more advanced and modern cockpit compared to the A330. The 787 would beat the A330 on range, usable cargo carried (fuel and/or cargo), and weight. The KC-787 would certainly demolish the KC-30 on life cycle costs and this metric can certainly make the Air Force stand up and seriously look at the 787 as a tanker.

Secondly, because Boeing would probably have to strengthen the 787 in order to carry the weight of fuel and other cargo required by the Air Force as well as a cargo door, Boeing would essentially have designed the 787F. Wow two birds with one stone though Airbus certainly would have a lot to say about DoD Tanker money going to design a commercial cargo aircraft.

Lastly, the Air Force would not have to modify airfields due to the weight of the 787 vs the A330 which is heavier. This was a bone of contention with Boeing as the Air Force underestimated the cost of modifications in operating the KC-30 from existing airfields.

CONS

Production - Boeing is already suffering from the production problems with the 787 and then the ramp up of production is looking to be long and painful. They would have no capacity at all to build tankers based on the 787. In order to do so would require 1) additional investment by Boeing and its suppliers to support increased production of the 787 (more autoclaves, larger facilities, more LCFs), 2) a second assembly line that is ITAR compliant. Now the Air Force would probably take anywhere from 12 to 24 tankers a year meaning a rate of 1 to 2 airplanes, these airplanes can be constructed on the existing assembly line but that would mean up to 2 less commercial 787s being delivered to customers who would none too pleased about their delivery slots going to the Air Force. A second line would be required and later can be used to support commercial production if needed.

Development - Boeing will need significant investment in terms of time, money, resources and personnel to turn the 787 from a commercial passenger aircraft into a military air refueler. Right now they're still grappling with the fall out from the production and supply issues that hurt them over the past year. They will still need a lot of these same resources in order to finish the 787-8 development as well as to develop the -3, -9 and -10 variants for commercial customers. Now since this product would come from Boeing IDS, it is possible to transfer engineering resources from the KC-767 and to work on the KC-787 along with a few of the 787 program engineers. Boeing had earlier transfered some engineers and other resources at IDS to the 787 to help alleviate the issues due to the travelled work and production problems. They could do this again to help develop the 787 into a tanker platform.

Boeing might need to develop a new refueling boom (though I wonder if they could adopt the KC-767 boom for the KC-787) as well as floor strengthening and perhaps landing gear strengthening.

Lastly, timing - the Air Force needs these tankers 4 years ago. There would be little to no timing to get a KC-787 design, tooling, and production going. My guess is that it would take up to two years to get the design going and then another 2-4 years for development, testing and operational evaluation. This on top of doing the rebid (which I think would take another 2 years). So assuming the rebid takes place and that Boeing wins the rebid with the KC-787, it would be another 6 to 8 years before a KC-787 is in the hands of USAF pilots. The KC-30 won't certainly take as long.

These are some broad brush strokes...no details...those can be filled in by people who would certainly know better and more information but the KC-787 might be an option that Boeing can look at if they can effectively reduced the risks, timing and costs of doing a KC-787.

The US Government Accountability Office (GAO) ruling that categorically rejects the US Air Force's two-year process to award the KC-X contract sets up a repeat scenario with a changed political backdrop and vastly different views about the product positions of the two competing teams.

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

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

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

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

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

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

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

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

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

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

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

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

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

"The GAO decision backs up each of my concerns," Murray added.

If the Democratic party sweeps presidential and congressional elections in November, Boeing can expect strong political support for keeping the tanker contract away from Airbus, Aboulafia said.

 

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

 

SIDEBAR

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

Here are the categories:

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

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

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

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

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

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

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

• TAnchorman
• Representative Todd Tiahrt's tanker blog
• Boeing's Tanker Facts
• Tanker War Blog

I'm going to invoke "blogger privilege" and republish an item I first posted in August about the KC-X tanker competition. In hindsight, it looks like I goofed up the conclusion. But it's all in good fun. Enjoy.

A tale of two tankers

Nothing says "class" like riding to Seattle on a Boeing Business Jet to cover a KC-767 rally (see photo below), with the movie "Talledega Nights: The Ballad of Ricky Bobby" on both widescreens.

Yet, the movie's paean to jingoistic-hick car racing culture meant more to me than mere slapstick; indeed, it was allegory, emulating the very soul of the twisted and tiresome six-year race by Boeing and Airbus to sell a new tanker to the US Air Force.

Hear me out.

You have the All-American driver Ricky Bobby, an unbeatable NASCAR champion. He is our stand-in for the KC-767.

There is his fellow driver and childhood friend Cal Naughton Jr. Cal faithfully manuevers his car to ensure that his buddy Ricky always wins. Cal, of course, plays the role of the US Congress.

And there is Jean Girard, the effeminate French driver who finally knocks the KC-76... er, Ricky, off his perch and sends him and his car into a lengthy rehabilitation period. You guessed it: Jean is the KC-30.

At this point, Ricky loses his car, his house and his best friend runs off with his wife. (Keep up: Darleen Druyun is the car, James Roche is the house and Congress -- in the form of John McCain -- is the scoundrel friend.)

So, finally, Ricky fights his way back onto the racing circuit and makes a final stand against Jean, the Camus-reading, macchiato-sipping Frenchie driver.

In a predictable twist, Cal (re-assuming the role of congressional stand-in) comes back to Ricky's side, and literally wipes out the rest of the competitive field to give his buddy Ricky a clean shot against Jean on the final lap, cheering him all the way.

But then there's another fateful twist. Neck-and-neck with a few hundred yards before the finish line, there is a massive collision. Both cars do somersaults down the final stretch in a scene that evokes, to me, not a car crash but a contract protest upheld by the Government Accountability Office.

The two drivers -- sore, bruised, but uninjured -- climb out from their cars, eye each other and make a foot-race for the finish line.

I refuse to be a spoiler, but let's just say that it doesn't take a NASCAR bookie to correctly guess how this race is going to end.