KC-46 Refueling Tanker Faces More Delays, Auditors Say

A new study suggests the Air Force's KC-46 refueling tanker has saved $7.3 billion in lifetime costs for the program but could face additional delays.

The Government Accountability Office, the investigative arm of Congress, issued a report Friday that said further tests on the tanker, known as the Pegasus, may likely further delay the program -- which is already 14 months behind schedule -- penalizing Boeing Co., the prime contractor on the project.

"GAO's analysis shows there is risk to the current delivery schedule due to potential delays in Federal Aviation Administration certifications and key test events," the report's analysis reads.

"Boeing must also complete over 1,700 test points on average for each month from February to September 2017, a level that is more than double what it completed in the last 11 months," it said.

Boeing was supposed to deliver the initial 18 aerial-refueling planes by August 2017. With ongoing snafus throughout the program -- which began in 2013 -- such as initial design problems in its refueling boom, Boeing and Air Force officials have said the first delivery could be February 2018 at the earliest.

GAO thinks it's more likely to be October 2018 -- if that.

"Program officials agree that there is risk to Boeing's test completion rate until it obtains Federal Aviation Administration approval for the design of all parts, including the pods, but test mitigation strategies are underway," the report said.

GAO noted this is its sixth report on this issue.

Boeing has completed 53 percent of planned testing since developmental test flights began in 2015. Between March 2016 and January 2017, the company completed an average rate of "811 test points per month."

But at that rate, GAO projects that Boeing "would finish the remaining 13,706 test points in early June 2018, 9 months later than the planned completion date."

A silver lining may be that the program's total acquisition cost estimate "has decreased about $7.3 billion, or 14 percent, since the initial estimate," the report said, even though the program has suffered cost overruns -- all at the expense of Boeing.

The Air Force awarded Boeing a fixed-price $4.9 billion contract in 2011. The company is responsible for any cost overruns.

GAO said the savings are due to "no requirements changes" and "fewer engineering changes than expected."

Including development, procurement and military construction costs, "the total program acquisition cost now stands at $44.4 billion. This is about $7.3 billion less than the original estimate of $51.7 billion," it said.

In January, Boeing, the world's largest aerospace company, said the tanker program added yet another pre-tax charge, this time for $312 million, in the last quarter of 2016, bringing the total program cost overrun to $2.3 billion.

"We are disappointed with the tanker charge we took in the fourth quarter, but it's well understood and defined," CEO Dennis Muilenburg told reporters during a conference at the time.

"I will say that the nature of the risk on the program is clearly changing as expected, and we moved now from the development program into the initial production program," he said.

That same month, the Air Force awarded Boeing a $2.1 billion contract for the next 15 KC-46A refueling tankers. In August, the service awarded Boeing a $2.8 billion initial production contract for 19 KC-46 refueling tankers, as well as spare parts.

The latest contract would bring the production total to 34 of the modified 767-based aircraft.

Without a solid timeline for when the first KC-46 may be delivered, the Pegasus won't even begin to join the Air Force's fleet until at least 2019.

Boeing plans to build 179 tankers for the service.

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