The Air Force’s KC-46 next-generation aerial refueling tanker program has a development contract that provides contractor incentives to control costs and limits the government’s liability for increased costs over a certain amount, but overlap among development and production activities add risk to the program, according to a new Government Accountability Office report.
Because of these risks, the report, KC-46 Tanker Aircraft (GAO-12-366), recommends the Under Secretary of Defense for Acquisition, Technology and Logistics, currently Frank Kendall in an “acting” status, “closely monitor the cost, schedule and performance outcomes of the KC-46 program to identify positive or negative lessons learned.” The Senate Armed Services Committee on Thursday will consider Kendall’s formal nomination as Pentagon acquisition chief.
Boeing [BA] won the KC-X contract to replace the aging KC-135 tanker in February 2011.
The report, which was released yesterday, said the $4.4 billion fixed-price incentive (firm target) development contract that provides contractor incentives to control costs limits the government’s liability to about $500 million. The report also said “overall schedule risk is moderate” because the Defense Department’s chief testing official, Michael Gilmore, finds the testing schedule “not executable as currently planned” and some critical technologies have not met the standard of maturity in best practices. These three critical technologies are: Three-dimensional (3D) display screens at boom operator positions, the Airborne ESTAR software module and threat correlation software.
“While designing a new tanker using a modified commercial platform is not as technically challenging as a more revolutionary weapon system, the program still faces some technical risks, including technologies that have not yet been demonstrated during flight.” the report said, referring to Boeing’s plan to turn a commercial aircraft, the 767-2C, into a militarized KC-46 tanker.
The report said, according to the KC-46 program office, schedule risk stems from four primary factors: flight testing, in-line provisioning, Federal Aviation Administration (FAA) certification and software. The report said the Office of the Director for Operational Test and Evaluation (OT&E) determined that the development test program is not executable as planned because the KC-46 program office is concerned Boeing will not be able to achieve planned flight test flying hour rates for military certifications and military testing, currently set at 50 hours per aircraft per month.
In-line provisioning is a concern because Boeing has an additional requirement to prepare the aircraft for military modifications while still on the commercial production line, according to the report. FAA certification is also a potential problem because Boeing plans on accomplishing a portion of the two FAA certifications required, one for the commercial 767-2C aircraft and the other for military modifications planned for the commercial aircraft, concurrently instead of one at a time, which is more typical, according to the report.
The report said software could be a problem because the program office said modifications to commercial software to separate classified from unclassified information and enable other military capabilities will increase risk associated with software development. But the program office also said it is focusing on software early in the program to mitigate risk, according to the report.
Finally, GAO recommended Kendall “closely monitor” the cost, schedule and performance of the KC-46 program because as one of only a few major acquisition programs to award a fixed-price incentive (firm target) development contract in recent years, evaluating performance and identifying lessons learned will be very illustrative and important to help guide future acquisition programs.