By Marina Malenic
NEWPORT, R.I.–Guaranteeing rivals Boeing [BA] and Northrop Grumman [NOC] each a piece of a contract to produce a new Air Force aerial refueling tanker would add some $7 billion to the program’s development cost over five years, Defense Secretary Robert Gates said last week.
Several key lawmakers, including Rep. John Murtha (D-Pa.), the House Appropriations Defense subcommittee chairman, have spoken in favor of splitting the contract between the rivals and foregoing another controversial competition.
“I would look at it from the other perspective–and that is, what are the consequences and costs of having two tankers?” Gates said in response to questions following a speech at the Naval War College here.
The development cost would double from the current estimated $7 billion to $14 billion, he said. Splitting the buy also means the government gets no pricing benefit from competition.
“Any leverage that we might have in terms of cost control disappears,” Gates said.
Further, the program as currently structured would be conducted as a three-phase competition. The first buy–the KC-X–is for 179 tankers. It would be followed by the KC-Y and the KC-Z.
“If we encounter problems with those, it seems to me you’re in a position to reopen the competition and go forward from there,” Gates said.
The Air Force’s effort to replace its Eisenhower-era KC-135 fleet was foiled last summer when the Government Accountability Office (GAO) sustained Boeing’s March 11 protest of the award to Northrop Grumman and industry partner European Aeronautic Defense and Space Co. (EADS). The auditors found that the service “had made a number of significant errors that could have affected the outcome of what was a close competition” and recommended that the bidding be reopened (Defense Daily, June 19, 2008). Gates revived and then eventually shut down the effort for a cooling off period last fall (Defense Daily, Sept, 11, 2008).
The secretary has said he plans to restart the competition this summer and announce a winner by early next year (Defense Daily, April 7).