The Obama Pentagon proclaims it's commitment to reformed acquisition and greater competition. Robbin Laird, international defense consultant who advised the Air Force on the last tanker competition, argues in this commentary that Northrop's decision to pull out of the KC-X competition will pose a basic test of the administration's commitment and it's ability to oversee a major program.
The Northrop Grumman and EADS planes were cheaper on a per unit basis than Boeing when Northrop won. Boeing claimed that the overall operating costs of the 767 would be lower but those “savings” were to be realized in the period after the contract. The Air Force picked the A330 in part because it better fit their concept of operations for the new 5th generation aircraft as well. NG is a major player in the 5th generation effort; Boeing is not.
After Gates fired Air Force Secretary Mike Wynne and Air ForceChief of Staff Mike Moseley, they failed to close the loop on the tanker and to make the award before the end of the Bush Administration.
The Obama Administration re-launched the RFP process and denied that it was a new competition. This meant that Boeing knew all the details of the NG proposal from the last competition; NG did not know Boeing's information. NG asked for this data, but the Administration claimed they could not share it because of “proprietary considerations.” This meant that Boeing could bid again with certainty of the per unit price and could shape its “life cycle costs” around the 767.
The RFP was written in such a way to become platform-centric to the exclusion of the concept of operations. This is equivalent to Fed-Ex operating a fleet, developing a business concept of operations, but buying its airplanes based on per unit cost, rather than fleet performance. The Air Force officers in charge of the fleet have consistently made the point that they are only interested in fleet con-ops and fleet costs; the Administration ignored their perspectives, in favor of OSD management of a platform-centric per unit cost.
Further, the Administration in putting together its RFP assembled a list of requirements and metrics against the requirements without regard to prioritization of operational performance. This meant that insignificant items were weighted at the same level as strategically significant items.
Even more telling was the fact that the impact of the F-35 and F-22 fleet is not considered at all on the future con-ops of the Air Force, Navy, and Marine Corps or of coalition partners. The operational characteristics and operating zones for the 5th generation aircraft are completely different form legacy aircraft. This consideration is of no significance as well which, in blunt terms, means that you are buying a tanker fleet for yesterday’s force, not the future force. And what makes this doubly crazy is that you already know the characteristics of the future fleet, so such a consideration is not difficult.
The tanker choice is between Boeing and the Administration. This will be a fundamental test of the Administration’s new acquisition strategy and capabilities. Instead of competition, the Administration will manage a sole-source contract. The Administration has claimed with its new procedures, approaches and personnel, it will be able to drive out best value and manage stable requirements. The tanker contract is the test.
• Will the civil servants hired by the Administration wring out best value from a single supplier? • Will the new acquisition team contain cost and requirements growth? • As Boeing adds a new cockpit and new refueling system, both untested in a tanker environment, how will the new civil servant team know how to shape future capabilities against the platform it is buying today? • How quickly will Boeing deliver?
The test will be the pudding for the new Administration. The Administration has focused upon increased competition across the board. And officials like Carter and Assad have been focusing on shortening the length of contracts and re-competiiton and competition at every level of procurement. But one might add that the preoccupation with increased competition at the $100 Million level seems to not work at the $40 Billion dollar level. So what is the point of increased competition, if it does not affect the biggest procurement choices?