Tanker RFP Includes Some Changes (KC-X)

Some changes to the contract pricing structure of the KC-X program will be announced later today by the Defense Dept., according to slides of a tanker presentation obtained by Aviation Week.

Both Boeing and Northrop Grumman/EADS North America, the two would-be competitors, complained that the fixed-price demand by the Pentagon for the production lots placed too much risk in the contractor’s lap. Based on the draft request for proposals (RFP) from September 2009, the first five lots would have been locked in at a fixed price.

Now, however, the pricing structure allows for fixed price for only Lots 1-2. Inflation adjustments are now allowed for Lots 3-13.

Pentagon officials say the fixed-price incentive contact structure for the development phase remains as described in the draft RFP. However, more information on the allowances of this structure are coming to light than previously disclosed by defense officials, including a breakdown of how additional costs would be funded if they crop up in the development phase. “The contract geometry is a 60/40 (government to industry) share ratio with a 125% ceiling and a 12% target profit,” according to the briefing. “ This is ample protection to cover potential integration risk during the [development] phase.”

The Pentagon still plans to conduct a pass/fail review of the mandatory requirements. This strategy was criticized by Northrop and EADS officials who said it dumbed down the competition to favor the least capable aircraft. The briefing notes some changes to those requirements.

The Large Aircraft Infrared Countermeasures will now be government furnished rather than included in the contractors’ prices. Also, the requirement for a microwave landing system, which aids with night or bad weather landings, has been eliminated. Officials say the system is no longer needed. Also, adjustments were made to the quick-start requirements and those for the non-ozone depleting fire suppression systems onboard.

Overall, Pentagon officials are expected to characterize the competition as “best value,” though the 1% price gate will still be in place. This means that additional factors that Northrop sees as advantageous to its offering will not be considered unless the two proposals are within 1% of each other on price. Air Mobility Command, which will operate the aircraft, “does not want to pay a significant premium for non-mandatory requirements,” the briefing says. “The department believes that the anticipated value of the 1% gate (potentially in the $300-500 million range) is a reasonable amount to pay for these non-mandatory requirements.”

Northrop and EADS officials had also complained that the draft RFP did not provide a subjective review of program risk, exposing the government to additional cost if a bidder offers an overly ambitious low price.

Defense Dept. officials still plan to use a pass/fail structure of assessing whether bidders can meet the basic requirements of the system. “To be rated acceptable in technology maturity, potential offerors must substantiate that all critical technologies are at readiness level of at least 6 [or tested in an operationally relevant environment], along with an approach to maturing technologies to a level 9,” the briefing says.

Officials say that the systems engineering and technology maturity risk “will be low because both expected offerors have built and tested tankers for international customers,” according to the briefing.

The desired fuel offload rate from the boom is also expected to stay the same at 1,200 gallons per minute (GPM). Boeing officials had questioned this area, but Air Force officials do “not want the KC-X to have less capability than the KC-135” in this area. The KC-135’s boom offers 1,176 GPM offload.

Jean Chamberlain, the vice president of Boeing’s tanker program, says Boeing has been working on a boom that can meet the requirement, but a prototype will not fly until the development phase of the tanker program. EADS’s boom offered for Australia and other nations, which is now in flight testing, can meet the requirement.

Though Boeing has not formally stated whether it would offer a 767- or 777-based tanker, these requirements point squarely to using the 767 as a baseline to monopolize on the reduced cost of the smaller platform.

Air Force officials still plan to buy 179 tankers through KC-X to replacing aging KC-135s. The first deliveries are expected in 2015 with initial operational capability in 2017.

Offerors will have 75 days to respond, and the government will review the proposals for 120 days prior to selecting a winner if there is a competition. Northrop CEO Wes Bush threatened not to bid in a Dec. 1, 2009, letter to the Pentagon because of the company’s qualms with how the competition would be judged.

Initial reaction from Capitol Hill has fallen along predictable lines. Sen. Patty Murray (D-Wash.), a vocal Boeing proponent, appeared pleased with what she learned in congressional briefings. “Our state and nation need this contract now more than ever,” she said in an emailed statement. “The bottom line is that the tanker brings jobs.”

Sen. Richard Shelby (R), whose Alabama state would be home to final assembly work on the earlier Northrop-EADS plan, slammed defense officials for not changing the RFP enough. “The final RFP discredits the integrity of the entire process,” he said on Senate Web site. “Additional capabilities that would better protect the lives of our men and women in uniform were neglected in the draft RFP. Substantial changes that bring those factors into consideration in the final RFP are necessary to have a full and transparent competition, yet the Air Force did not make a single revision to the key warfighter requirements.”

The AF abitrarily added cost to Boeing’s bid for risk. The GAO found a math error in the AF numbers and the Boeing bid was actually the lower bid.

February 13, 2007 WASHINGTON — Boeing on Monday announced a newly designed KC-767 as its proposed aircraft for a $40 billion Air Force contest to replace 179 refueling planes.

Oct. 28, 2007 Despite a scandal related to a tanker deal that sent two Boeing officials to jail two years ago, the Chicago company has been favored to win the $40-billion award for the fuel-carrying tankers.

It seems that Seattle/Chicago was assuming they would get $40 billion until the details of the Northrop-Grumman bid was leaked to them at the end of 2007

Try Titanium on the A10 - Designed to shrug off 23MM AA rounds. McDonnell Douglas got the machines from Fairchild and moved them to Canada, When Boeing bought MCD, they closed MDCAN and moved the technology back south.

EADS is a European conglomerate, not an American company at all. Northrup Grumman is just pimping for them.The US Govt. has failed to complete a major airframe contract to initial bid numbers ( you know the ones that development costs are spread over) on a major airframe in 30 years - Hence the 70 million plus F22, buying 180, bid numbers based on 740 aircraft, ect.. The DOD will end up overpaying on the tankers, the bulk of the overpayment will end up as administrative charges at EADS. We need to keep manufacturing jobs in the US, Not in Europe. BTW any technology transferred to Europe will be sold to China.

Try Titanium on the A10 - Designed to shrug off 23MM AA rounds.

Wow. You think the A-10's wings are made of titanium? I have no response for that level of knowledge.

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