Thursday, June 19, 2008

The Plot Thickens

Yet another black eye for USAF and its senior leadership… Yesterday the Government Accountability Office (GAO) issued a three page press release titled “GAO SUSTAINS BOEING BID PROTEST; Agency Recommends Air Force Reopen the Bid Process,” which upheld Boeing’s protest over the Air Force’s award for the multi-billion dollar next generation tanker aircraft to Northrop-Grumman/EADS. This is not good news following the cashiering of the Secretary of the Air Force and the Chief of Staff, let alone the fact this is the second major procurement program that has been successfully protested in two years (see: CSAR-X. Boeing lost that one.). From the Air Force Association’s Daily Report:

Back to the Drawing Board: The Government Accountability Office yesterday (July 18) recommended that the Air Force throw out its selection of the KC-45 aerial tanker contract to Northrop Grumman and seek revised proposals from that company and Boeing, which protested the choice in early March. The GAO cited seven "significant errors" (see below) in the Air Force's handling of the $40 billion contract award and determined it would be unfair to let the award stand. "We recommend that the Air Force reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source-selection decision," the GAO said in a three-page release articulating its ruling. Furthermore, it said the Air Force should pay Boeing's legal and administrative costs in bringing the protest--potentially tens of millions of dollars. The GAO suggested that if the Air Force doesn't think the original solicitation "adequately" states the service's needs, it should re-write the document prior to beginning new talks with the two competitors. A similar ruling in the Air Force's combat search and rescue helicopter competition has led to a two-year litigation delay in getting that program under contract, suggesting that the launch of the tanker program could be delayed at least that long, as well. A GAO official told the Daily Report that the recommendations do not suggest that the Air Force "start over," that is open the competition to other bidders, but rather refine the way that it asks for information and evaluates the answers it gets. The GAO said that it also denied some of Boeing's complaints--without saying which ones--because records failed to show that the Air Force had done anything wrong "with respect to those challenges." Further, the agency pointed out that its ruling shouldn't be construed as a comment on the relative merits either of Boeing's KC-767 or Northrop Grumman's KC-30 tanker models. The GAO's decisions focused only on the process.


Air Force Response to GAO Decision: Air Force acquisition executive Sue Payton issued a statement late yesterday saying USAF "will do everything" it can "to rapidly move forward" now that the GAO has recommended that it reopen the KC-X tanker contest to revised bids from Boeing and Northrop Grumman (see above). "As soon as possible, we will provide the Air Force's way ahead," she said. "We appreciate the GAO's professionalism and thoroughness in its assessment of the protest of the KC-45A source selection." USAF is currently reviewing the GAO's decision and, once that process is complete, it said it will be in a position to determine the best course of action. The service has 60 days to respond to GAO's findings of June 18, which sustained Boeing's legal complaint. Looking forward, Payton said, the Air Force "will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."

While the GAO’s decision isn’t legally binding, the atmosphere in Washington at the moment, coupled with the Air Force’s seeming incompetence at running major procurements, makes a re-evaluation of the bids likely…at least according to the majority of the defense analysts I’ve read on this subject. This is not good news for our war-fighters, as it’s likely the AF will kick the tanker can into next year (as noted above, too):

Loren Thompson, a defence analyst at the Lexington Institute, said it was important to realise that the GAO was challenging the process, not the result of the competition, a point also made by Louis Gallois, the chief executive of EADS.

Mr Thompson and other analysts suggested that the result of the GAO assessment was that the decision over which tanker to finally choose would be up to the next administration.

This being an election year, we doubt whether any decision will be made rapidly,” said Rob Stallard, an analyst at Macquarie Securities. “Political support for both sides is vocal and entrenched, and in our opinion we would not be surprised if the DoD [Department of Defence] ultimately buys both Airbus and Boeing tankers.”

Emphases mine. It’s clear this fight will continue for some time, and the political ducks are already lining up, as we speak.

It’s a damned shame the Air Force couldn’t or wouldn't comply with its own acquisition process and left itself open to so much criticism by making fundamental errors that could and should have been avoided, assuming I’ve read the GAO’s critique correctly. What’s worse, though, is the fact the program is going to experience significant delays, regardless of whether Boeing or EADS wins. The KC-135 airframe’s (USAF’s current strategic tanker) average age is 47 years… and that’s simply too damned old for any machine, let alone a military aircraft.

This whole ugly story stretches back to September, 2001… and Reuters has provided a timeline with all the significant milestones in the tanker saga. What with unethical conduct involving military-industrial-complex “revolving door” issues, investigation upon investigation, prison terms, the downfall of a Fortune 50 CEO, and one high-level USAF acquisition official’s suicide, this reads more like a frickin’ soap opera than a military procurement. Or a high-tech version of the Keystone Cops, at the very least.

Dang. What’s happening to my Air Force?

(image by Northrop-Grumman)


  1. If Boeing had got the bid, would there have been any charges? This all seems like a lot of lawyer talk for "we didn't get what we wanted so we are going to whine that we were ill-informed." Maybe the USAF was not so much to blame as they were not so good at covering their butt.

  2. I tend to agree with Lou. It seems like the only thing that matters anymore is to be right. Or at least be the winner, whether you are right or not.

  3. Lou: We'll never know if Northrop would've protested had Boeing won. The GAO report is 69 pages long and won't be released until Boeing and N-G/EADS come back and identify proprietary info that will be redacted in the public report. But yesterday's press release was pretty harsh on the Air Force and indicated Boeing didn't get treated fairly. God only knows what really went on...

    As for me? I hope Boeing gets the deal. It just pains me to think of USAF flying frickin' Airbus tankers.

    Amy: Unfortunately, one has to be politically correct these days, too. While I have NO idea what really happened, it looks like the AF was still smarting from the abortive tanker lease/buy deal with Boeing that was slapped down by Congress, led by My Boy McCain. I think they over-reacted, favoring EADS over Boeing in the fear they would get their collective butts kicked yet again, were they to choose Boeing. It smells like that, anyway. Once again: strictly my opinion, based on stuff I've read.

  4. "If Boeing had got the bid, would there have been any charges?"

    Short answer, yes. Like Buck alluded to in the post, this wasn't about the decision. This was about the process, and the USAF's acquisitions people are apparently so incompetent that they can't even do their jobs properly.

    Thanks for the link to the Reuters timeline. I've obviously followed the KC-X saga closely, but I had forgotten about the suicide of Druyun's replacement. I don't think you could've come up with a more convoluted tale if you had tried.


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