By Marina Malenic
The Air Force has projected that splitting a procurement contract for new tanker aircraft between industry rivals Boeing [BA] and Northrop Grumman [NOC] would nearly double the program’s $35 billion price tag, the service’s top civilian official told lawmakers yesterday.
“This would double, almost, the tanker piece of the Air Force’s procurement program…and we think the dual award would not make sense,” Air Force Secretary Michael Donley told the Senate appropriations defense subcommittee.
Defense Secretary Robert Gates has consistently opposed splitting the KC-X contract, arguing that both development and logistics costs would increase substantially. Gates last year canceled the politically charged competition between Boeing and a Northrop Grumman-EADS industry team.
Since then some members of Congress, keen on avoiding another rematch followed by stalemate, have proposed the idea of buying tankers from both companies.
Donley said the service shares Gates’ concern that a dual buy “would be more expensive for the taxpayer in at least three dimensions.” Specifically, the strategy would: require the development of two airplanes instead if one; result in two logistical infrastructure processes in support of the effort instead of one; and, as Donley put it, “in the near term especially, we are concerned about the impact of the Air Force’s budget and the Department of Defense’s budget, generally.”
Sen. Patty Murray (D-Wash.), asked Donley how the Air Force plans to make sure that a revived contest, which Pentagon officials have said they expect to kick off this summer, will be a fair one.
“We have taken measures inside the Air Force to strengthen our source selection process,” Donley told the panel. “Since the events of last summer, we have increased our focus training on lessons learned from the two protests that were sustained last summer.”
Earlier this week, Chris Chadwick, president of Boeing military aircraft, told reporters that the Air Force has reopened discussions on the program with his staff. A Northrop Grumman spokesman confirmed that talks with that company have also resumed.
Murray, a Boeing supporter, asked Donley whether the Pentagon is taking into account the health of the domestic industrial base in making the tanker purchasing decision. She successfully included an amendment in the procurement reform bill signed into law last month requiring the Pentagon to report on the effects that canceling an acquisition program would have on the nation’s industrial base.
Donley replied that the department “has an interest in tracking how industrial base issues get affected by departmental level decisions and making sure those are taken into account as we go forward.”
Sen. Richard Shelby (R-Ala.), a supporter of the Northrop Grumman-EADS team, advocated use of a “best value” method for determining a winner that would not strictly be based on price. Shelby has previously expressed concerns about a cost shoot-out, advocated by some Pentagon officials, because Boeing last year received its rival’s pricing data as a result of its successful protest of Northrop Grumman-EADS’ since-terminated February 2008 contract award.
Air Force Chief of Staff Gen. Norton Schwartz would only say that the service wants to buy “the best possible airplane as quickly as we possibly can.”