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May 1, 2008  

Still playing politics

KC-45A tanker award outcry is misplaced

The initial shock may be over about the Air Force awarding the KC-45A tanker contract to Northrop Grumman and its prime subcontractor, Airbus parent EADS, but the political gamesmanship that’s permeated the competition from the start has only ratcheted up.

Few military procurement contracts have caused as much angst as this one. Boeing was widely considered the shoo-in for the contract (as I wrote in “Tanker checkmate: Why Boeing will win the aerial refueler contest,” AFJ, February 2007) despite having it yanked in 2004 over the scandal involving former Air Force procurement officer Darleen Druyan.

The history of the competition is well-known, so only a brief recap is necessary: Northrop teamed with EADS to offer the KC-30, a derivative of the commercial Airbus A330-200. GE Aviation was selected to provide the engines. The KC-30 had a new refueling boom designed especially for the airplane but — at the time of submission — it had not been tested. This test came only hours before the award was announced.

Boeing, having lost the original contract because of the scandal, resubmitted a bid for the KC-767, but revised the offering from the version sold to Italy and Japan (the KC-767A) to one combining components from several 767 types. This KC-767AT (Advanced Tanker) was to use the fuselage from the 767-200ER, the wings from the 767-300ERF, the flaps, landing gear and components from the 767-400, and a new version of the Pratt & Whitney engines that have long-powered the 767. The KC-767AT was Boeing’s answer to the troubled KC-767A program, which was years late and suffered from flutter and certification problems. The KC-767AT was a beefier design that probably was far better than the “A” version. The only problem, if one wants to call it that, and one that Northrop capitalized on, was that the “AT” was a “paper” airplane, and the sixth-generation boom Boeing offered with it was also only a design. The troubled “A” version and the paper “AT” design became focal points of the risk element, offsetting the risk associated with the production model of the KC-30 — at facilities that haven’t been built, using a work force that had never assembled an airplane using parts “hopscotched” (to use Boeing’s quaint term) from all over Europe.

There is far more to the competition on the merits than this short description. But the merits often got lost in the noise of the accompanying political campaign, and the merits have largely been lost in the politics that erupted following the award.

As for the war fighter? During the competition, Boeing and its supporters set the bar in the debate by saying the Air Force had to make the best choice for the war fighter (presumably by selecting the KC-767). Northrop, late to the game in its rebuttal PR effort, agreed with the concept but naturally concluded that the KC-30 best served the war fighter. But now it’s, “What war fighter?” The politicians are wringing their hands over the jobs America will “lose,” technology “transfer” to Europe and the benefit to Boeing’s rival, France’s Airbus. The war fighter and his needs, if mentioned at all, have become an afterthought.

In a full-page ad explaining why it protested, Boeing settled on the theme “It doesn’t add up.” In it, Boeing complained that the Air Force changed the rules during the evaluation, and Boeing didn’t know it and had no clue the Air Force wanted a bigger airplane. Boeing also claims risk factors were ignored for the KC-30, while Boeing was unduly penalized and didn’t get credit for having delivered two KC-767As to Japan. On the latter point, Boeing is off the mark. The first airplane was delivered nine days before the award was announced, years late and almost certainly too late for the Air Force to consider the delivery in the evaluation process. The second airplane was delivered to Japan five days after the award was announced.

Northrop and the Air Force reject Boeing’s protest as invalid on a number of “timely” issues: If Boeing objected to various steps or criteria, it was required to protest at the time, not after the award. The Air Force went even further in its response to Boeing’s Government Accountability Office filing. It said, essentially, that Boeing blew it, terming the cost/risk issue Boeing’s “own fault.” In April, the GAO denied requests from Northrop Grumman and the Air Force to throw out Boeing’s protest; the GAO has 100 days from the March 11 filing to determine if Boeing’s complaints have merit. Even if the GAO ultimately rejects Boeing’s protest — especially if it does — the fight will shift in earnest to Congress, where hearings have already been held. Lobbyists for Boeing and Northrop (and presumably EADS) are working the Hill feverishly. In the end, the House may well find a way to block a Northrop award. After all, at the behest of Rep. Duncan Hunter, R-Calif., the House passed a “buy American” bill early in the tanker competition designed to block the Northrop bid. The Senate refused to go along, however.

At the risk of being proved wrong again (I predicted in the AFJ article that Boeing would win and held to that belief right up to 30 minutes before the award was announced), I predict that a similar outcome is likely. The House might reject the funding, but the Senate won’t, and a conference bill will fund the KC-45.

SCOTT HAMILTON is founder of the aviation consulting firm Leeham Co.

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