Sunday, March 14, 2010

Right Back Where We Started From

Cue Maxine Nightingale.

Way back in 1975, the British R&B singer had a monster hit with "Right Back Where We Started From," a title that aptly summarizes the Air Force's next-generation tanker program. Roughly a decade after the service began trying to replace its aging KC-135s, the USAF is back where it began, with Boeing's KC-767 as the inevitable successor.

That circuitous route is a trail littered with corruption, greed, arrogance and a generous measure of domestic politics. It is a testament to an acquisition process that remains broken, and raises new questions about the long-term ability of the military (and Congress) to run long-term weapons procurement programs in a manner that is remotely fair and efficient.

The initial goal seemed simple enough; much of the Air Force KC-135 fleet, which entered service in the late 1950s and early 1960s, was nearing the end of its service life. And, the service offered a novel solution to the problem; it would lease KC-767 tankers from Boeing, a proposal that would (supposedly) save billions of dollars over the life of the agreement.

But the lease deal was flawed. Congressional critics, led by Arizona Senator John McCain, challenged the claimed savings. There were also questions about how the deal was arranged. The Air Force's former senior acquisition official, Darlene Druyun, took a job with Boeing less than a year after the lease was announced. A subsequent investigation revealed that Druyun was negotiating her civilian job (and positions for her daughter and son-in-law) at the same time the lease deal was being developed.

Ms. Druyun eventually went to jail and the proposed lease was finally scuttled in 2006. That sent everyone back to the drawing board, but there were lingering doubts about the planned selection process, which would (again) pit the KC-767 against the Airbus A330. Documents uncovered during the Druyun investigation revealed that the European entry was actually superior to the KC-767 aircraft in many respects, but Boeing still won the aborted contract.

The next round of the competition featured the same competitors; EADS (the defense arm of Airbus), along with its American partner Northrop-Grumman, offered a tanker variant of the A330, dubbed the KC-45. Boeing eventually settled (again) on the 767 airframe, after suggesting that it might enter a tanker version of its 777 airliner.

Two years ago this month, the Pentagon stunned the aviation industry by selecting the EADS entrant for its next-generation tanker (KC-X). That touched off howls from Boeing and its political allies. The company quickly filed a protest with the Government Accountability Office (GAO), claiming that the bidding process was flawed. Three months later, the Air Force reluctantly agreed and the GAO recommended that the tanker contract be re-bid, for a third time.

By that time, everyone agreed that the tanker acquisition program was an abject disaster. As the request for proposals (RFP) process began again, Defense Secretary Robert Gates took the unprecedented step of stripping selection authority from the Air Force, and transferred it to Defense Undersecretary John Young. It was a humiliating blow for the service, which had run DoD's major air tanker programs for more than 5o years.

About the time Mr. Young inherited selection authority for the new tanker, the program ran into more problems. In September 2008, the Defense Department put solicitations for KC-X on hold, delaying the process once again. The bidding process resumed a year later, amid claims from EADS/Northrop-Grumman that revised tanker requirements favored Boeing and its entry. The U.S.-European team hinted that it might withdraw from the competition and last week made good on that promise, leaving Boeing (and the KC-767) as the sole contender.

At this point, Boeing hasn't won the competition, but it's certainly in the driver's seat. Northrop-Grumman has formally exited the bidding, leaving EADS scrambling to find a new American partner. So far, firms like L-3 Communications and Lockheed-Martin have shown no desire to enter the race at this late stage, so EADS will (most likely) be forced out as well. Boeing is expected to deliver its proposal to the Air Force in May; the service will announce its selection later this year. We'll go out on a limb and predict the next Air Force tanker will be the KC-767.

So, after eight years, billions of dollars spent and no new aircraft (yet), have we learned anything? The answer depends on who you ask. Boeing will rave about the capabilities of its aircraft; politicians brag about thousands of American jobs that will be created or retained over the duration of the contract.

But that doesn't excuse the unmitigated mess that ultimately delivered the KC-767. Unfortunately, the tanker program has become a template for other acquisition efforts. Three contractor teams were engaged in a death match to build the Air Force's new combat search-and-rescue (CSAR-X) until that effort was terminated last year. Boeing initially won that deal (with a last-minute entry), but protests from competing firms forced a rebid. That process was underway when the Pentagon pulled the plug.

With billions of dollars on the table, defense firms will go to any length to secure that next big contract. Unfortunately, the machinations and maneuvering associated with the acquisition process have extended that process beyond any reasonable period. New tankers that should have been on the ramp years ago are still in the pipeline. Now, with any luck, the first KC-767s will start arriving at air mobility units in three or four years, more than a decade after the process first began.

Meanwhile, those Eisenhower-era KC-135s will soldier on, along with a smaller number of KC-10 Extenders, bought during the Reagan Administration. And, once the new tanker buy is complete, the Air Force will begin considering replacements for other platforms, including the E-3 AWACS and the RC-135 series of reconnaissance aircraft. However, Boeing will probably be the front-runner for those contracts, although nothing in the acquisition world is ever guaranteed.

One thing is sure: as the Obama Administration begins to scale back weapons programs, competition for remaining contracts will be even more fierce. In a few years, the battle over KC-X may seem positively quaint, by comparison.


Ray said...

I'm going to reveal my naivete on such matters here, but is there anything that says the Air Force can't put out a "here's what we need. Submit a plane" type of deal, without tons of speculative technology yet-to-be-designed when the contract's signed?

Ed Rasimus said...

Ray, technology on tankers is mature. There's little pie-in-the-sky in this. What it is about is politics, pure and simple. The AF got spattered in the Druyun affair because of her corruption. The RFP process got two major proposals and the AF made a choice. The choice didn't satisfy Boeing and they flexed their political muscle. The result was back to square one. Now the RFP criteria have been written to effectively guarantee a Boeing contract and rule out those aspects of the EADS concept which made it superior.

Bottom line is that politics doesn't translate into military capability. US air doctrine is written on a foundation of deployability which is dependent upon a tanker force.

Corky Boyd said...

Boeing's conduct in the tanker program has been shameful. Aside from the Druyun affair, they hired Tom Dashcle's wife as a lobbyist when he was Senate majority leader (and minority leader). It was a fairly blatant way to funnel a couple of hundred thou to the Dashcle family, but amazingly did not violate Senate ethics rules. Goes to show you the ethical standards in the legislative branch.

Contracts like this aren't won on merit sadly, only political influence.

The Bruyun scandal wasn't Boeing's first ethical lapse. A few years earlier, they got a hold of over 20,000 of Lockheed Martin's EELV drawings and documents from a Lockheed Martin employee who shortly after turned up on Boeing's payroll. After the Penatagon caught up with Boeing, they yanked the contract for nearly a billion dollars of launch vehicles and gave it to Lockheed Martin.

Smelly people dealing with smelly people.

Ed Rasimus said...

Hard to apply senate ethics rules to Representative Dashchle (R-TX, Sugarland).

But I heartily concur regarding Boeing.