Washington Watch

Nov. 1, 2009

Another Try at KC-X

Moribund for nearly a year, the KC-X tanker program has begun moving again, but the Air Force won’t be making up for lost time by accelerating the planned buy of new aircraft. In fact, it’s now almost certain that some KC-135s will be in service for 80 years or more.

The tanker competion was relaunched in September. Plans call for the contest to produce a winner by early summer 2010, followed by initial deliveries in 2015 and initial operational capability in 2017. That assumes no further delays.

“We have been at this for several years now and we very much need to succeed,” Air Force Secretary Michael B. Donley said at a Pentagon press conference.

The project was restarted on Sept. 25, with the release of a new request for proposals. Defense Secretary Robert M. Gates, speaking a week earlier at AFA’s Air & Space Conference, announced he was putting the Air Force back in charge of running the program and of choosing the winner, albeit with heavy input from Pentagon overseers and other services.

Gates had withdrawn USAF’s authority when contractor protests caused the program to collapse in 2008.

“The KC-135 entered the Air Force in the mid- to late-’50s,” Donley noted. “The youngest KC-135 was delivered in 1964.” Recapitalizing the fleet will be a “long-term process,” he said.

The Air Force selected Northrop Grumman’s Airbus A330-derived tanker as the winner of the KC-X contest in February of 2008, but Boeing protested the award, and the Government Accountability Office later upheld the protest. The GAO said the Air Force hadn’t followed its own rules in choosing a winner, and had inconsistently or subjectively graded the contractors on various aspects of the program.

The bottom line, the GAO said, was that the contractors couldn’t be sure just what capabilities were most important to the Air Force, or how they would be weighed. Gates terminated the program outright in the fall of 2008, saying it had to start fresh to succeed.

Senior Air Force officials said privately that the KC-X has been limited to 179 aircraft—a rate of about 12 per year—because of a desire to change the program as little as possible, to avoid further contractor protests.

Three Tanker Tracks

With the tanker announcement, the Air Force has resurrected its plans to buy replacement tankers in three rounds: a KC-X, KC-Y, and KC-Z.

The first round—KC-X—seeks procurement of 179 aircraft, delivered over a period of about 15 years, Donley said, meaning it will conclude in about 2030. There are 415 KC-135s in service today, so there will still be 236 or so serving when the last KC-X has been delivered.

The second round—KC-Y—would be launched to replace younger KC-135s. The service’s 59 middle-aged KC-10s, would be replaced with another larger-size tanker in the third—KC-Z—round.

If the KC-Y takes 15 years to buy out, the last USAF KC-135 will retire in 2045. The KC-Z would be bought over a further 10 to 15 years, meaning the KC-10 would also be past its 75th year when it is replaced. No aircraft engaged in day-to-day operations has ever been kept in service so long.

Air Mobility Command has also said that it requires about 471 to 581 tankers right now, and is short by some 52 to 166 aircraft due in part to the sudden retirement—for safety reasons—of all KC-135Es last year.

Asked why the Air Force won’t accelerate the tanker buy, Donley said the three-phase strategy “seems prudent,” given the time it will take to get the aircraft.

Moreover, “we will want to re-evaluate at the end, about 15 years out or so, how we want to approach a KC-Y. How do we approach the next increment of tanker recapitalization?” Previously, senior Air Force leaders have speculated that by the time the KC-X is concluded, new types of aircraft might be available for consideration as a tanker.

Asked about the likely course of action if Congress directs a dual buy—some from both Boeing and Northrop Grumman, as a way to prevent the political gridlock that strangled the last KC-X attempt—Deputy Defense Secretary William J. Lynn III said that “the legislation gives us a choice between the path that we followed or a dual buy, and we are proposing … a single award.”

Picking a single aircraft would save money on development, logistics, training, and personnel, to the tune of billions of dollars. However, Rep. John P. Murtha (D-Pa.), chairman of the House Appropriations Committee’s defense subcommittee, said it is “the sense” of his panel that tankers should be bought at a faster pace, due to the extreme age of the KC-135s.

Lynn said, “The RFP allows us to make a dual buy, and the RFP allows us to make ‘no award.’ But our plan is to make a single award. And I think Congress has really already spoken on that.”

Price “Shoot-out,” or Not

Announcing the KC-X program’s relaunch at the Pentagon, Lynn said, “We’ve taken every step that we can think of to make this a fair and open, transparent competition.” The Pentagon wants to avoid the political turmoil that has derailed the project several times in the last eight years.

Lynn and Pentagon acquisition, technology, and logistics chief Ashton B. Carter explained that definitive scoring plans have been put in place, with simple rules on how much value is assigned to each capability. When a winner is chosen, “everybody’ll know why one side won and the other side lost,” Carter asserted.

Requirements have been distilled, Donley said, from 808 to 373, mostly by consolidating and reducing duplication. Offerors meeting those requirements will then be judged against war plan simulations, worst-case and day-to-day cost of ownership, and the cost of military construction attending each entry.

Although price will be an important consideration, he said, “a price shoot-out … is not what we’re proposing here.”

If, after all evaluations, there is a low bidder by more than one percent, “end of story,” Carter said. But if the bids are within one percent of each other, “then and only then,” a group of 93 desirable qualities will be considered as a tiebreaker, Carter explained. Each will be judged on a pass-fail basis with no partial credit on any but one or two criteria, and even then, weighting is clearly spelled out.

Air Mobility Command has decided that it would like to have those 93 capabilities, or some portion thereof, but isn’t “willing to pay” more than one percent of the overall program cost to get them, Carter noted.

After the “extras” are weighed, if the bids are still within one percent of each other, the winner will be the one that came in lowest after meeting the basic requirements.

Looking at the requirements and weighting assigned, Carter said, the contractors now “know how to win. No doubt.”

Air Force Chief of Staff Gen. Norton A. Schwartz had said a week earlier that he expected the Air Force to release an RFP that was “foolproof.” The Air Force was convinced that its previous tanker competition rules were “fair and open,” and repeatedly uttered that claim, but it proved not to be the case.

Boeing and Northrop Grumman each said they would study the RFP to see whether they would bid, and how. A Boeing spokesman said the company might offer both a KC-767 tanker variant and one based on the much larger 777, but “clearly understands” that its customer wants to buy only one type of aircraft for the job.

Northrop Grumman, though, said it continues to be “concerned” about what it claims was the release of proprietary information about its tanker offering in the last go-around. Boeing was given cost information as part of the debrief about why Boeing lost, and Northrop Grumman said that disclosure now puts its proposal at a “fundamentally unfair” disadvantage, especially since price has apparently taken on a greater importance in the revamped contest.

Carter addressed the issue at the Pentagon press conference, saying that the Defense Department “has examined this claim and found both that this disclosure was in accordance with regulation and, more importantly, that it created no competitive disadvantage because the data in question are inaccurate, outdated, and not germane to this source-selection strategy.”

Sen. Jeff Sessions (R-Ala.), in whose state Northrop Grumman would build the tanker if it wins the contest, introduced legislation shortly thereafter, barring funding for the KC-X unless the Pentagon releases Boeing’s cost data from the last tanker competition. The DOD had previously denied Northrop Grumman’s requests for the data.

Kaminski’s Five Steps

The Pentagon’s acquisition system is broken, and more laws aren’t necessarily the way to solve the problem. What’s needed is a focus on skilled people who are given the authority and money to run programs as they see fit.

That was the prescription offered by Paul G. Kaminski, former Pentagon acquisition, technology, and logistics chief during the Clinton Administration, speaking at AFA’s Air & Space Conference in September.

Kaminski, who was instrumental in shepherding stealth technology from the drawing board to the flight line, said various efforts over the decades to “streamline” defense procurement have usually ended up as personnel-cutting efforts.

During his own tenure, Congress reduced the acquisition workforce, and “there followed three more years of cuts.” This led to a “very serious erosion of the skill and experience base” in the acquisition workforce, and “we’re still harvesting some of those problems,” Kaminski said.

To fix acquisition, he proposed five steps, centered on personnel.

First, Kaminski said programs need to be staffed with people who know the “domain” in which the end product will function, so they can better schedule and organize new projects. He also said more money should be put into programs up-front to get this all-important phase right. There must be emphasis on recruiting and retaining those skilled at systems engineering.

Second, the Pentagon needs to give program managers “responsibility, authority, and accountability,” free from the micromanagement of Pentagon higher-ups and Congress. Kaminski said they should also be given 10 to 20 percent management reserves to cope with inevitable technical problems.

Programs need funding stability, Kaminski said, and his third recommendation would be that both the Pentagon and Congress give up some of their “flexibility” to tinker with projects so that program managers have a predictable funding line to work with. During his tenure as the Pentagon’s No. 3 official, he saw “about 10 percent cuts made retroactively to the investment budget,” a situation that was “very disruptive.”

Up front in a program, there should be “serious attention” to how it will be tested and evaluated later on, Kaminski said, explaining his fourth proposal. The test phase is usually underfunded, and program managers must often expend huge sums meeting test criteria that often don’t relate to real-world use of the system.

Finally, Kaminski said program development time must be slashed, from the current 15 years down to five or less. Less-ambitious objectives for an initial system, followed by steady upgrades, will help, as will implementing the rest of his prescription. However, if this doesn’t happen, he said that the industrial base will be populated by managers who have only managed one program—or less—during their careers, discouraging people from entering the field and doing deep harm to the talent base. Success in the future will depend on having managers experienced in a number of programs, and ideally, from different domains, Kaminski said.