Northrop Grumman calls new KC-X competition unfair

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Two competitors vying a second time for the $35 billion KC-X contract have responded to the US Air Force's draft request for proposals in stridently different tones.

After successfully protesting the Northrop Grumman/EADS North America team's victory in February 2008, Boeing has adopted a co-operative tone as it considers whether to offer the KC-767, KC-777, or both.

Northrop, however, has already complained that the new acquisition process is "fundamentally unfair", because the Department of Defense briefed pricing details only to Boeing during the last round.

 kc-30 northrop grumman
© Northrop Grumman
Boeing was briefed on the KC-30's price after the last KC-X decision

But Northrop officials so far have stopped short of filing an official protest with the Government Accountability Office, saying instead they will "continue to work with [their] customer to fully resolve this issue".

In response, DoD officials say the basis of Northrop's complaint is irrelevant, as both competitors must adopt new pricing formulas to respond to the USAF's new framework for evaluating requirements.

"We've made many more requirements mandatory," deputy secretary of defence William Lynn said as the draft RFP was released on 25 September. "The offerings are going to have to be different to meet those mandatory requirements."

In comparison with the first round of bidding, the USAF has not fundamentally changed requirements for a new tanker to replace the Boeing KC-135R. But it has changed how they will be evaluated.

 
© abenjamin Gallery on flightglobal.com/AirSpace
The KC-X fleet will replace the USAF's oldest KC-135Rs

Rather than imposing 808 requirements, with only 37 labelled "mandatory", the new acquisition strategy establishes 373 mandatory and 93 non-mandatory requirements.

Although the number has fallen, few previously stated needs have been dropped. Instead, several requirements listed separately in the previous round have been consolidated and clarified, USAF officials say.

Price will be the determining factor if both proposals meet all the mandatory requirements. If the proposed prices are equal, the USAF will score how each proposal meets the non-mandatory requirements. The service is willing to pay up to 1% of the overall value of the contract more for an aircraft that exceeds its baseline performance requirements.

The differences between mandatory and non-mandatory factors are sometimes very subtle. For example, the air force still requires the KC-X aircraft to offload 42,600kg (94,000lb) of fuel after taking off from a 3,050m (10,000ft) runway and flying 1,850km (1,000nm).

A corollary on the non-mandatory list includes providing the same offload and range performance after taking off from a 2,130m runway. It is not immediately clear if such a strategy favours any particular aircraft, since all potential bids apparently meet the non-mandatory criteria for fuel offload.

For example, Boeing has estimated that the KC-767 can offload 44,000kg after a 2,130m take-off roll, which slightly beats the non-mandatory threshold for minimum performance. Its larger KC-777 and the Northrop/EADS Airbus A330-200-based KC-30 both boast larger payload capacity.

 
© Tim Bicheno-Brown/Flight International
Bonus points will be awarded for meeting various range/fuel offload objectives

Unlike the previous round, the bidders now can also receive between four and 10 bonus points for exceeding the minimum fuel offload requirement. This approach appears to neutralise the KC-777's roughly 30% greater payload capacity than the KC-30.

The USAF will award 10 bonus points for the ability to offload 66,750kg of fuel at 1,850km range. According to Boeing data, the KC-777 and KC-30 exceed that standard, so both aircraft would receive equal points.

Another new twist in the KC-X contract involves a new formula for compensating the contractors. In the last round, the DoD followed recent custom by reimbursing the contractor's costs during the development phase, plus adding fees to cover profit margin and incentive payments.

The new KC-X competition, however, requires the bidders to commit to a firm price during the development and production phases. The change shifts the risk burden for cost overruns from the US Treasury to the contractor.

This change reflects a recent trend in acquisition reform to rely more on fixed-price deals for "off-the-shelf" products. Boeing is considering offering the KC-767 and KC-777, and both tankers would be derived from existing models sold to airlines. The rival KC-30 is based on the A330-derived multirole tanker transport design already sold to several foreign countries.

"Here, you're talking about aircraft that are derivatives of commercial aircraft made in great numbers of a kind that have been operated for decades," a senior defence official says.

Have your say on the KC-X debate by visiting Stephen Trimble's The DEW Line blog.