Pentagon Announces Requirement for New Aerial Tanker Competition

News in Balance:

WASHINGTON, Sept. 24, 2009 -- The needs of warfighters and value for taxpayers are at the heart of the new draft request for proposal for aerial refueling capability, Deputy Defense Secretary William J. Lynn said here today.

Lynn, Air Force Secretary Michael B. Donley and Ashton B. Carter, defense undersecretary for acquisition, technology and logistics, briefed the Pentagon press on the draft RFP to replace the Air Force’s aging KC-135R tanker fleet.

This is the second time the contract has been competed. The Government Accountability Office, the investigative arm of Congress, recommended that the Air Force re-bid the contract – originally won by a Northrop-Grumman/EADS/Airbus consortium in February 2008. Boeing protested the decision, and in June 2008 the GAO agreed that there were irregularities in the contracting process.

The GAO said the previous process for selecting a winner was too subjective. DoD took this to heart, and officials stressed this draft RFP is not a rerun of the last competition.

“This time we will be crystal clear about what we want and what the bidders need to do to win,” Lynn said.

Price is important in the competition, but it will not be the only factor, Lynn said. “First of all, we’ll look at price from a broad perspective, not just acquisition cost,” he said. “We’re going to include certain aspects of life-cycle cost, in particular fuel burn and military construction; and we’re going to look at non- price factors, particularly how each aircraft that the companies might bid would meet warfighting requirements.”

DoD and Air Force officials worked closely together to ensure the process this time will be fair, open and transparent. Air Force and DoD officials developed the source selection strategy and it has been approved by Defense Secretary Robert M. Gates.

“The Air Force source selection authority will execute this strategy,” Lynn said.

The warfighter requirements – devised by Air Mobility Command – for the tanker fleet have not changed since the last procurement try. “But the warfighter has specified which requirements are necessary for the tanker to ‘go to war on Day 1,’” he said.

These requirements are on an acceptable/not acceptable basis, he said. The team has also identified capabilities that would provide some additional value, but are not mandatory.

The buy is for 179 aircraft valued at around $35 billion. If all goes as planned the contract could be awarded next summer. The draft RFP will hit the streets tomorrow. It will be a fixed-price incentive contract in the development phase, and the first five production lots will be a firm fixed-price contract. The remaining production will be a not-to-exceed contract.

“This is going to constrain prices considerably, we believe,” Lynn said. “It’s shifting the department from a cost-plus world more towards a fixed-price world, and we think that that’s going to be an important element in avoiding cost overruns.”

Air Force Secretary Donley said the newest KC-135R entered the Air Force in 1964. The first production model of whatever aircraft is selected would enter the force in 2015 with an initial operating capability set for 2017.

Donley said the defense and Air Force teams reviewed the 808 requirements the old RFP had.

“We conducted extensive reviews of the requirements, eliminating duplication, refining definitions, combining where appropriate and ensuring all requirements were measurable,” Donley said.

The draft RFP has 373 mandatory requirements. Still there is some value in non-mandatory capabilities, and Donley said the team identified 93 of these added-value capabilities and assigned points to them.

The defense officials said they want to make the selection process as objective as possible. The RFP spells out exactly what warfighting capabilities are needed, but also details what efficiencies are desired, said Undersecretary Carter. To test warfighting effectiveness, evaluators fly each of the offeror’s aircraft against he Integrated Fleet Aerial Refueling Assessment model, Carter said.

The model posits a situation where the United States is executing several major war plans simultaneously, and tanker demand is at a peak. The model will answer the question of how many tanker aircraft are needed to execute these real-world war plans.

But there is another consideration: The cost of ownership, Carter said.

“These are the elements, of the life-cycle cost of the tanker, that are under the control of the offerors and which therefore can fairly be used to discriminate the offerors,” he said. “The vendors do determine the aircraft design, which in turn determines how much fuel they will burn, over the next 40 years, carrying out the day-to-day tasks.”

Military construction projects needed to accommodate the aircraft are also taken under consideration, he said. Costs to adjust hangars, ramps, taxiways and runways for the aircraft will be taken into account.

“So both wartime effectiveness and peacetime efficiency we will assess for each aircraft,” Carter said. “We will ‘dollarize’ those assessments and in dollar terms adjust the bid prices.”

(Report by Jim Garamone, American Forces Press Service.)