By Michael Sirak
Boeing [BA] remains resolutely against splitting the Air Force’s multi-billion-dollar KC-X tanker program with rival Northrop Grumman [NOC], the senior official leading the company’s KC-767 proposal said yesterday.
“The bottom line for us is that we are really not interested in a split buy,” Mark McGraw, Boeing Tanker Program manager, said Dec. 10 during a teleconference with reporters. “We are in this for winner take all. That is how the competition was defined. That is how the acquisition strategy that the Air Force has approved is defined.
“If you wanted to go [to] a split buy,” he continued, “that would pretty much stop the competition and [it would] have to be done over again…The investments, business cases, all that kind of stuff that each competitor is putting forward is assuming a winner-take-all outcome.”
Boeing’s KC-767 tanker is locked in the final stages of competition against the Northrop Grumman KC-30 aerial refueling platform, which is a militarized version of the Airbus A330 commercial airliner. The two teams handed in their bids in April; the Air Force is expected to choose the winner early next year around February.
The KC-X is the Air Force’s top acquisition priority and the stakes are huge for each company. According to the Air Force’s current plans, the winner would be tasked to build up to 179 new tankers over the next 15 years under a program that could be worth up to $40 billion. The new aircraft will replace the oldest 100 or so of the Air Force’s Eisenhower-era KC-135 tankers. But KC-X is just the start of the KC-135 recapitalization; with more than 500 KC-135s to replace in coming decades, the KC-X winner could have the inside track on securing the remaining work.
The Air Force’s leadership has been clear that it does not see the business case for pursuing a split buy, especially since it can only afford to buy the new tankers in units ranging from the low teens to high teens each year (Defense Daily, Sept. 24). And McGraw said the Air Force has not queried Boeing on pricing for a smaller buy or split buy of tankers.
However, because of the enormous implications of prevailing for the two competing industrial regions in the United States–Boeing in the Pacific Northwest and Northrop Grumman- EADS North America in the South–some in Congress, principally those representing the interests of the latter’s hub in Mobile, Ala., have come out in favor of a split buy as have some outside, but respected analysts (Defense Daily, Aug. 8 and Oct. 12).
But McGraw said the idea does not make sense for the Air Force.
“Basically, it would cost them more with the development side,” he said. “It would, I think, over time really hurt them from an operation-and-support aspect. You know, the Air Force is already going to have three tankers in their inventory when KC-X starts to be fielded. Four would just make the environment that much harder.”
Further, he said, “it would probably drive up the unit cost for each competitor just because they’d be buying a smaller number from each.”
McGraw said split buys, which are also called dual-sourced procurements, have been applied traditionally in cases when the end product had the identical form, fit and function, such as an engine designed to fit into the same fighter aircraft–as opposed to two markedly different types of products trying to serve in the same role, such as the KC-767 and the larger KC-30.
“I just don’t think it works and the Air Force has agreed,” he said of the split buy. “I think the Air Force is trying as best they can to execute this acquisition and do a single-source downselect that won’t be protested, and start moving out on recapitalizing the ‘135s which is really a critical need.”