By Emelie Rutherford
An adviser to Democratic presidential nominee Sen. Barack Obama (Ill.) said the concept of a dual buy for the Air Force’s aerial refueling tanker competition has merit, and the campaign has not ruled out that option for the contract imbroglio.
Paul Kaminski, the former under secretary of defense for acquisition and technology and an Obama consultant, told reporters Wednesday he “would not categorically rule out that option” of a dual tanker procurement, an idea gaining momentum on Capitol Hill.
“We’ve talked in the campaign about it a bit and…I would say, the only campaign position at this point [regarding the tanker competition] is to try to get a level playing field and not discard any of the options,” Kaminski said at the Information Technology Association of America’s Vision Conference in Springfield, Va.
The Pentagon canceled the politically charged tanker competition last month, leaving the next presidential administration to reassess and restart it. Defense officials had planned to recompete the contract, after pulling a February award to a Northrop Grumman [NOC]-European Aeronautic Defence and Space Co. (EADS) team following an auditor’s sustainment of losing bidder Boeing‘s [BA] contract protest.
A report accompanying the fiscal year 2009 defense appropriations act directs the Pentagon to consider “awarding competitive contracts to more than one offeror.” Lead defense appropriator Rep. John Murtha (D-Pa.) believes a dual buy may be the only option because he predicts a one-winner contact award would spur another protest. (Defense Daily, Sept 26).
Kaminski acknowledged pros and cons of a dual procurement for the tanker.
“If that option were pursued, the only hope I think it has of coming out better, that is in terms of providing all the value, would be the ability to do an annual leader- follower competition that decides how many of which line do you buy, based on the price and performance,” he said. “Now the penalty for that is a greater up-front cost. And so one has to look at the business case to see if that computes. But I wouldn’t rule it out without looking carefully at the business case.”
Kaminski, the Pentagon acquisition leader under President Clinton, noted there are numerous past leader-follower arrangements, such as with the Advance Medium Range Air-to-Air Missile (AMRAAM).
The former Hughes Aircraft was the initial AMRAAM designer and developer, but after Pentagon officials had concerns about its performance they brought in Raytheon, paying the up-front bill to get Raytheon up to speed. The Pentagon made an annual lot buy, with the leader getting the bigger quantity at a bigger profit and the follower got a smaller quantity at a lower profit, he said
Kaminksi said this leader-follower arrangement for AMRAAM “was very successful,” and the Pentagon recouped its initial investment.
“Now this is something that only works obviously if you’re tending to buy a number of things for some period of time,” he said “And that’s a situation that has to be looked at, to see whether this is viable for the tanker.”
Defense Secretary Robert Gates and Boeing-supporting lawmakers have expressed opposition to a tanker dual procurement. Northrop Grumman backers in Congress have said the concept has merit, and aides on defense panels said support appears to be increasing (Defense Daily, Sept. 26, Oct 6).
Kaminski acknowledged concerns about added costs spurred by splitting the tanker competition, calling them “significant issues” to be factored into the business-case decision.
“We have two downsides of” a dual procurement, he said “One is the up-front cost, the non-recurring R&D cost. And then the other is the fixed cost associated of the setting up of [two] maintenance systems. Those are offset a little bit by having these aircraft have a lot of commercial features, from a commercial line. But they’re not completely offset.”
Thus, he said, “there’re some unlikely aspects of it, because you have to be able to offset those costs with an annual production competition saving.”
“My own personal policy would be, if a business case can be presented to me in which there is a savings there, I’d consider it,” he added “Because there is some room for a mixed fleet, in terms of the requirements. There are smaller airports and some smaller offload needs and some larger ones. But it has to make economic sense.”
The campaign of GOP presidential nominee Sen. John McCain (R-Ariz.) did not respond to a request for comment by Defense Daily‘s deadline yesterday.