By Marina Malenic
The Air Force yesterday unveiled the long-awaited solicitation for the KC-X tanker replacement fleet, making only minimal changes to a draft version released late last year.
Deputy Defense Secretary William Lynn, Pentagon acquisition czar Ashton Carter, and Air Force Secretary Michael Donley briefed lawmakers on the final request for proposals (RFP) for the aerial-refueling aircraft.
“We have crafted this approach to favor no one except the warfighter and the taxpayer,” Lynn told reporters at a Pentagon briefing later in the day. “We’ve steered straight down the middle.”
Pentagon officials have said an initial contract for 179 airplanes to replace the Eisenhower-era KC-135 could be worth up to $50 billion.
Executives at Boeing [BA], one of the two industry competitors for the contract, last month said they expected the Air Force to continue with plans for fixed-price development. According to the terms of the final document, competitors must meet all performance requirements before price becomes a factor.
The RFP has 372 mandatory requirements–reduced from the 808 listed in the prior competition. To qualify, a bidder will have to satisfy all of these requirements. Another 93 “tradespace” requirements would be evaluated according to a pre-specified point system. But those factors will only be scored if there is a less than one percent difference between the final adjusted price of the two bids.
Representatives from the rival industry team, EADS North America and Northrop Grumman [NOC], have said this evaluation model favors Boeing’s smaller plane.
EADS-Northrop Grumman won a contract to build 179 tankers for the Air Force in February 2008. The contract was canceled when U.S. auditors upheld a Boeing protest tied to Air Force missteps in evaluating bids. The Northrop Grumman-EADS team has threatened to walk away from the bidding if the final RFP is not altered substantially to make a Northrop Grumman-EADS bid viable from a business standpoint.
Donley said the service has revised fuel and ownership cost estimates in the final RFP.
“What has not changed is that we are being objective and crystal clear about how the winning offeror will be selected,” Donley said.
Some analysts in Washington said Northrop Grumman-EADS might not to bid on the contract given the terms of the RFP.
“Northrop is likely to continue to believe that the contract favors Boeing,” said Richard Aboulafia, an aerospace industry analyst at the Teal Group in Fairfax, Va.
Northrop Grumman-EADS supporters have also backed a split buy alternative. Mobile, Ala., officials traveled to Washington, D.C., this week to tout a dual buy as an immediate jobs-generator. A tanker-dual-buy campaign called Build Them Both also launched this week (Defense Daily, Feb. 24).
Donley told lawmakers earlier this week, however, that the Pentagon remains opposed to splitting the contract between the two competitors. He said a minimum economic order would likely be 12 aircraft, meaning the Air Force would need to find the resources to buy 24 tankers per year.
Northrop Grumman spokesman Randy Belote said yesterday that the company will “analyze the RFP and defer further public comments until its review of the document has been completed.”
Boeing released a statement critical of the Pentagon’s decision not to take action against European Union subsidies to EADS parent company Airbus or weigh life cycle costs into its pricing analysis.
“[W]e are disappointed that the RFP does not address some of our key concerns, including Airbus’ unfair competitive advantage derived from subsidies from its sponsor European governments–subsidies that the World Trade Organization has found to be illegal and harmful to U.S. workers and industry–and how fuel and military-construction costs over the life of the tankers will be factored into consideration of the competing bids,” Boeing vice president for the program, Jean Chamberlin, said in a statement. “We will review the RFP in its entirety and in detail before offering further assessment.”
Northrop Grumman supporters on Capitol Hill also criticized the RFP. Senator Richard Shelby (R-Ala.) said the document “discredits the integrity of the entire process” and called the new acquisition guidelines “an illusion of a fair competition.” Shelby added that, “the Alabama delegation has repeatedly expressed our concern to Department of Defense officials that the draft RFP released in September was flawed and unfairly tilted the playing field to one competitor over the other. I’m disappointed that those problems have not been satisfactorily addressed in the final RFP.”
Northrop Grumman’s tanker, if chosen by the Defense Department, would be built in Alabama.
“Additional capabilities that would better protect the lives of our men and women in uniform were neglected in the draft RFP,” Shelby said in a press statement. “Substantial changes that bring those factors into consideration in the final RFP are necessary to have a full and transparent competition, yet the Air Force did not make a single revision to the key warfighter requirements. The RFP clearly favors a smaller, less capable airframe and I am concerned the Department may not get two competitive bids in this process.”
Boeing supporters, however, were generally pleased.
House Appropriations defense subcommittee vice chairman Norm Dicks (D-Wash.) expressed approval for the decision to move ahead with a 40-year life cycle for the new fleet. He told reporters at the Capitol that the long life expectancy “is a fundamental plus for the smaller aircraft, the [Boeing] 767…[because] it’s going to be less expensive to operate.
“I think when you do all the analysis, that could be decisive,” he added. “I think that’s one of the reasons that Northrop Grumman … is having concerns about this.”
Dicks also reiterated support for an accelerated buy rate as advocated by his predecessor, former subcommittee Chairman John Murtha, who died earlier this month.
Still, some Boeing supporters criticized the Pentagon for not taking a harder line against European Union subsidies to Airbus. Rep. Todd Tiahrt (R-Kan.) said in a statement that he is concerned that the subsidies give “the French tanker a hidden cost advantage when they should be held to the same standard as U.S-based companies.”
“If Airbus decides it cannot fulfill the needs of our warfighters, then the Department of Defense should not delay in awarding the contract to the Boeing KC-767,” Tiahrt added.
House Armed Services Committee (HASC) Chairman Ike Skelton (D-Mo.) noted that the tanker replacement effort “has gone on for eight years, and we need to move forward this year” with a contract.
HASC Air and Land Forces Subcommittee Chairman Rep. Adam Smith (D-Wash.) said in a statement that the RFP “seems to more clearly lay out the overall criteria being used in the selection process and will help clarify the bidding process.”
The Air Force plans to buy 179 tankers, beginning with seven in 2013, 12 in 2014 and 15 in 2015, according to a five-year budget plan released earlier this month in conjunction with the president’s Fiscal Year 2011 defense spending request. The Air Force plans to spend $11.7 billion on the tanker program in the five years starting with FY ’11.