Northrop/EADS KC-30 Is Larger, More Capable... And
Cheaper?
We now know more about the Pentagon's reasoning behind opting to
delay ruling on the contentious KC-X aerial tanker contract... and
we have to say, they seem to have a valid point.
According to The Washington Post, the Pentagon's top procurement
officer said Boeing's bid to supply 68 KC-767s under the initial
stages of KC-X came to $15.4 billion... almost $3 billion more than
a consortium led by EADS and Northrop Grumman estimated for
their larger, newer KC-30A.
John Young, undersecretary for acquisition, technology and
logistics, told the Post Wednesday that Boeing's tanker "was
smaller and should have been cheaper... A member of the American
public might conclude that Boeing sought to charge more than the
Defense Department reasonably expected."
In addition to the uneasy feeling of potential price gouging on
Boeing's part, Young added that the Airbus-sourced KC-30A offered
by Northrop/EADS "provided more tanker capability and offload rate
and was substantially cheaper to develop." Northrop also promised
an earlier delivery date than Boeing did, he added.
As ANN reported, last week Defense Secretary
Robert Gates terminated the competition for a US Air Force airborne
tanker replacement, saying the process had become too politically
charged to guarantee a fair winner. That ruling came after Boeing
mounted a successful protest to the Government Accountability
Office over the Air Force's initial choice of the KC-30.
In its decision, the
GAO ruled the Air Force "undermined by a number of prejudicial
errors that call into question the Air Force's decision." Among the
findings was the revelation the Air Force held Northrop's hand in
dealing with some shortcomings of its bid.
The GAO discovered that in one case, USAF officials told Boeing
it had met a set of objectives... but later said it had not, after
discussions had already closed. Conversely, the Air Force told
Northrop about areas its bid had fallen short on, then gave the
company time to alter its proposal.
The government watchdog agency also found the Air Force's math
was flawed, in determining the KC-30 would be cheaper to operate in
the long run... but Young reasserted Wednesday the KC-30 would have
been cheaper for the Air Force to purchase, though he conceded both
offerings were "technically outstanding."
The price discrepancy may be explained by a couple of factors.
Boeing may have charged a higher price to help offset development
costs on the KC-767, which has been under development since 2002.
Conversely, EADS may have deliberately underbid its program, in
hopes of gaining a foothold in the US defense market.
Young defended the decision to pass off KC-X until the next
presidential administration. "We would have picked the ingredients,
the menu, and fixed the meal, only to serve the meal to the next
team -- along with the bill -- and I'm uncomfortable with that," he
said.
In a separate interview, Young told The Wall Street Journal he
feels the entire procurement process may be flawed, and is in
desperate need of simplification. He notes the Air Force initially
had 37 key criteria requirements for KC-X... but 800 less-important
factors.
"Having that many tradeable requirements creates a fertile field
for protest issues," he said. "Frankly, the circumstances and
course of events are rewarding bad behavior, which cannot become
the norm for defense acquisition."
Boeing spokesman Dan Beck told the Post the company was "not
interested in discussing the past," saying only that Boeing was
preparing for the next KC-X bidding war. Northrop's Randy Belote
said "We look forward to the opportunity to compete again and are
confident that we will achieve the same result."