Air Force KC-X Tanker Aircraft Program:
Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
July 30, 2009
Congressional Research Service
7-5700
www.crs.gov
RL34398
CRS Report for Congress
P
repared for Members and Committees of Congress
Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Summary
The Administration’s proposed FY2010 defense budget requests $439.6 million in Air Force
research and development funding to begin a new program for acquiring new 179 KC-X aerial
refueling tankers. The 179 KC-Xs, which could be procured at an annual rate of 12 to 18 aircraft
and cost roughly $200 million each, would replace roughly one-third of the Air Force’s aging
fleet of KC-135 aerial refueling tankers. The Air Force and the U.S. Transportation Command
state that replacing the KC-135s is their highest recapitalization priority.
The two expected competitors for the KC-X program are Boeing, which is expected to offer a
KC-X based on the Boeing 767 or Boeing 777 commercial airliner, and an industry team
consisting of Northrop Grumman and the European Aeronautic Defense and Space Company
(EADS—the parent company of Airbus), which is expected to offer a KC-X based on the Airbus
A330 commercial airliner. A Boeing KC-X would be assembled in Seattle, while a
Northrop/EADS KC-X would be assembled in Mobile, AL.
The administration’s proposed new KC-X program follows previous unsuccessful attempts by the
Department of Defense (DOD) to implement a KC-X acquisition program for replacing the KC-
135s. The history of those earlier attempts forms an important part of the context for the
Administration’s proposed new KC-X program, particularly in terms of defining the capabilities
that are needed in the KC-X and designing and conducting a fair competition between aircraft
offered by Boeing and Northrop/EADS.
The issue for Congress in FY2010 is whether to approve, reject, or modify the Administration’s
request for FY2010 research and development funding for the new KC-X program, and whether
to take any action to define the acquisition strategy for the new KC-X program. Key acquisition-
strategy issues include whether to procure one KC-X design or two, and (if only one design is to
be procured, as the Administration prefers), how to structure and conduct the competition for
determining the winning design.
The House and Senate Armed Services Committees, in their markups of the FY2009 defense
authorization bill (H.R. 2647/S. 1390), both recommend approving the Administration’s request
for $439.6 million in research and development funding for the KC-X program.
Section 1044 of H.R. 2647 would repeal Section 1081 of the FY2008 defense authorization act
(H.R. 4986/P.L. 110-181 of January 28, 2008), which directed the Secretary of the Air Force to
conduct a pilot program of at least five years’ duration to assess the feasibility and advisability of
utilizing commercial fee-for-service air refueling tanker aircraft for Air Force operations.
Section 1058 of S. 1390 would amend Section 1081 of the FY2008 defense authorization act
(H.R. 4986/P.L. 110-181 of January 28, 2008), to make changes intended to facilitate the
implementation of a fee-for-service air refueling support pilot program.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 1
Roles and Missions of Aerial Refueling Aircraft .................................................................... 1
Current Fleet of Large Aerial Refueling Aircraft.................................................................... 2
KC-135 Stratotanker ....................................................................................................... 2
KC-10 Extender .............................................................................................................. 3
Earlier Attempts at a KC-X Program to Replace the KC-135s................................................ 3
Leasing Authority of 2002............................................................................................... 4
Leasing and Purchasing Authority of 2003 ...................................................................... 4
Developments in 2004 and 2005 ..................................................................................... 4
RAND Study of 2006...................................................................................................... 5
KC-X Competition of 2007-2008 .................................................................................... 5
Administration’s Proposed New KC-X Acquisition Program ................................................. 6
FY2010 Funding Request................................................................................................ 6
Number of Aircraft Contemplated ................................................................................... 6
Potential Cost of Program ............................................................................................... 6
Administration Plan: Competition for a Single Design..................................................... 7
Expected Competitors ..................................................................................................... 7
DOD Statements on KC-X as a High Priority .................................................................. 7
Industrial Base ...................................................................................................................... 8
Employment Effects as Asserted for 2007-2008 Competition .......................................... 8
Domestic Content as Discussed in 2007-2008 Competition ............................................. 9
FY2009 Legislative Provisions.............................................................................................. 9
Issues for Congress ................................................................................................................... 10
Build One Design Or Two? ................................................................................................. 11
Summary of Arguments ................................................................................................ 11
Potential Intermediate Alternative Building One Design at Two Sites ............................ 13
Terms for a Competition...................................................................................................... 13
Lowest Price vs. Best Value .......................................................................................... 13
Performance Requirements and Evaluation Factors ....................................................... 14
Air Force or OSD Management of Competition............................................................. 16
Legislative Activity for FY2010 ................................................................................................ 16
FY2010 Funding Request.................................................................................................... 16
FY2010 Defense Authorization Bill (H.R. 2647/S. 1390) .................................................... 16
House ........................................................................................................................... 16
Senate ........................................................................................................................... 18
Tables
Table D-1. Boeing 767 Suppliers............................................................................................... 28
Table D-2. Airbus 330/350 Suppliers ......................................................................................... 29
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Appendixes
Appendix A. Section 8159 of FY2002 Defense Appropriations Act ........................................... 20
Appendix B. Section 135 of FY2004 Defense Authorization Act ............................................... 22
Appendix C. KC-X Competition of 2007-2008.......................................................................... 24
Appendix D. Boeing 767 and Airbus 330 Suppliers ................................................................... 28
Appendix E. Potential Longevity of KC-135 Fleet..................................................................... 31
Contacts
Author Contact Information ...................................................................................................... 34
Acknowledgments .................................................................................................................... 34
Congressional Research Service
Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Introduction
The Administration’s proposed FY2010 defense budget requests $439.6 million in Air Force
research and development funding to begin a new program for acquiring new 179 KC-X aerial
refueling tankers.1 The 179 KC-Xs, which could be procured at an annual rate of 12 to 18 aircraft
and cost roughly $200 million each, would replace roughly one-third of the Air Force’s aging
fleet of KC-135 aerial refueling tankers. The Air Force and the U.S. Transportation Command
state that replacing the KC-135s is their highest recapitalization priority.
The two expected competitors for the KC-X program are Boeing, which is expected to offer a
KC-X based on the Boeing 767 or Boeing 777 commercial airliner, and an industry team
consisting of Northrop Grumman and the European Aeronautic Defense and Space Company
(EADS—the parent company of Airbus), which is expected to offer a KC-X based on the Airbus
A330 commercial airliner. A Boeing KC-X would be assembled in Seattle, while a
Northrop/EADS KC-X would be assembled in Mobile, AL.
The administration’s proposed new KC-X program follows previous unsuccessful attempts by the
Department of Defense (DOD) to implement a KC-X acquisition program for replacing the KC-
135s. The history of those earlier attempts forms an important part of the context for the
Administration’s proposed new KC-X program, particularly in terms of defining the capabilities
that are needed in the KC-X and designing and conducting a fair competition between aircraft
offered by Boeing and Northrop/EADS.
The issue for Congress in FY2010 is whether to approve, reject, or modify the Administration’s
request for FY2010 research and development funding for the new KC-X program, and whether
to take any action to define the acquisition strategy for the new KC-X program. Key acquisition-
strategy issues include whether to procure one KC-X design or two, and (if only one design is to
be procured, as the Administration prefers), how to structure and conduct the competition for
determining the winning design. Congress’ decision on this issue could affect DOD capabilities
and funding requirements, and the aircraft manufacturing industrial base.
Background
Roles and Missions of Aerial Refueling Aircraft
Aerial refueling aircraft—commonly called tankers—provide in-flight refueling services to
bombers, fighters, strike fighters, airlift aircraft, surveillance aircraft, and other types of aircraft
flown by the Air Force, Navy, and Marine Corps. Tankers enable other aircraft to deploy quickly
to distant theaters of operation, and to remain in the air longer while operating in those theaters.
Aerial refueling capability is a critical component of the U.S. military’s ability to project power
overseas and to operate military aircraft in theater with maximum effectiveness.
1 In the designation KC-X, C means a cargo-type aircraft, K means that the aircraft is specifically an aerial refueling
tanker, and X means the design of the aircraft has not been determined.
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Current Fleet of Large Aerial Refueling Aircraft
KC-135 Stratotanker
The Air Force’s current fleet of large tankers consists mostly of KC-135 Stratotankers. The Air
Force states that, as of September 2008, a total of 453 KC-135s were in the inventory of the Air
Force (182 aircraft), the Air National Guard (206 aircraft), and the Air Force Reserve (65
aircraft).2 Somewhat confusingly, the Air Force also states that the service’s Air Mobility
Command (AMC) as of September 2008 managed an inventory of more than 481 Stratotankers,
including 294 flown by the Air National Guard and Air Force Reserve in support of AMC
missions.3 The commander of the U.S. Transportation Command, in February 2009 testimony to
Congress, mentioned a figure of 415 KC-135s.4 The Air Force states that:
The KC-135 Stratotanker provides the core aerial refueling capability for the United States
Air Force and has excelled in this role for more than 50 years. This unique asset enhances the
Air Force’s capability to accomplish its primary missions of Global Reach and Global
Power. It also provides aerial refueling support to Air Force, Navy and Marine Corps and
allied nation aircraft. The KC-135 is also capable of transporting litter and ambulatory
patients using patient support pallets during aeromedical evacuations.5
The KC-135s are among the oldest of the Air Force’s aircraft. The first production KC-135 was
delivered to the Air Force in 1957, and the final one was delivered in 1965.6 DOD and Air Force
documents for FY2010 state variously that average age of the KC-135 fleet in 2009 is more than
45 years,7 47 years,8 48 years,9 or more than 48 years.10 The aircraft have received various
2 Air Force Fact sheet on the KC-135, available online at http://www.af.mil/information/factsheets/factsheet.asp?fsID=
110. The fact sheet was accessed by CRS on July 29, 2009, at which time it carried a date of September 2008.
3 Air Force Fact sheet on the KC-135, available online at http://www.af.mil/information/factsheets/factsheet.asp?fsID=
110. The fact sheet was accessed by CRS on July 29, 2009, at which time it carried a date of September 2008.
4 Statement of General Duncan J. McNabb, USAF Commander, United States Transportation Command, Before the
House Armed Services Air & Land Forces and Seapower & Expeditionary Forces Subcommittees [Hearing] On the
State of the Command, February 25, 2009, p. 6.
5 Air Force Fact sheet on the KC-135, available online at http://www.af.mil/information/factsheets/factsheet.asp?fsID=
110. The fact sheet was accessed by CRS on July 29, 2009, at which time it carried a date of September 2008.
6 A total of 732 KC-135s were delivered to the Air Force.
7 See, for example, Department of Defense, Fiscal Year 2010 Budget Request, Summary Justification, May 2009, p. 1-
50, or United States Air Force, FY 2010 Budget Overview, SAF/FMB, May 2009, p. 48.
8 See, for example, Department of Defense, Fiscal Year 2010 Budget Request, Summary Justification, May 2009, p. 1-
16.
9 See, for example, Department of the Air Force, Fiscal Year (FY) 2010 Budget Estimates, Research , Development,
Test and Evaluation (RDY&E) Descriptive Summaries, Volume II, Budget Activities 4 – 6, May 2009, Exhibit R-2,
RDT&E Budget Item Justification, [PE]0605221F, KC-X, Next Generation Aerial Refueling Aircraft, page 1 of 8
(page 559 of the overall document).
10 See, for example, Department of the Air Force, Presentation to the House Armed Services Committee Subcommittee
on Air and Land Forces, United States House of Representatives, Combined Statement of: Lieutenant General Daniel J.
Darnell, Air Force Deputy Chief Of Staff For Air, Space and Information Operations, Plans And Requirements
(AF/A3/5) Lieutenant General Mark D. Shackelford, Military Deputy, Office of the Assistant Secretary of the Air
Force for Acquisition (SAF/AQ) Lieutenant General Raymond E. Johns, Jr., Air Force Deputy Chief of Staff for
Strategic Plans And Programs (AF/A8), May 20, 2009, p. 17.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
upgrades and modifications over the years, including new engines.11 For a discussion of the
potential longevity of the KC-135 fleet, see Appendix E.
KC-10 Extender
The Air Force as of September 2008 also operated 59 KC-10 Extender aerial refueling aircraft.
The KC-10s are much younger than the KC-135s—the first KC-10 entered service in 1981.12
Earlier Attempts at a KC-X Program to Replace the KC-135s
The advanced age of the KC-135 fleet, and what to do about it, has been a matter of concern for
policymakers since at least 1996.13 The Obama Administration’s proposed new KC-X program
follows previous unsuccessful attempts by DOD to implement a KC-X acquisition program for
replacing the KC-135s. The history of those earlier attempts, summarized below, forms an
important part of the context for the Administration’s proposed new KC-X program, particularly
11 Air Force Fact sheet on the KC-135, available online at http://www.af.mil/information/factsheets/factsheet.asp?fsID=
110. The fact sheet was accessed by CRS on July 29, 2009, at which time it carried a date of September 2008. The fact
sheet states that:
Of the original KC-135A's, more than 415 have been modified with new CFM-56 engines produced by CFM-
International. The re-engined tanker, designated either the KC-135R or KC-135T, can offload 50 percent more
fuel, is 25 percent more fuel efficient, costs 25 percent less to operate and is 96 percent quieter than the KC-135A.
Under another modification program, 157 Air Force Reserve and Air National Guard tankers were re-engined with
the TF-33-PW-102 engines. The re-engined tanker, designated the KC-135E, is 14 percent more fuel efficient than
the KC-135A and can offload 20 percent more fuel.
Through the years, the KC-135 has been altered to do other jobs ranging from flying command post missions to
reconnaissance. RC-135s are used for special reconnaissance and Air Force Materiel Command’s NKC-135A’s
are flown in test programs. Air Combat Command operates the OC-135 as an observation platform in compliance
with the Open Skies Treaty.
The KC-135R/T model aircraft continue to undergo life-cycle upgrades to expand its capabilities and improve its
reliability. Among these are improved communications, navigation, auto-pilot and surveillance equipment to meet
future civil air traffic control needs.
12 Air Force fact sheet on the KC-135, available online at http://www.af.mil/information/factsheets/factsheet.asp?id=
109. ]. The fact sheet was accessed by CRS on July 29, 2009, at which time it carried a date of September 2008. The
fact sheet states that:
The KC-10 Extender is an Air Mobility Command advanced tanker and cargo aircraft designed to provide
increased global mobility for U.S. armed forces. Although the KC-l0’s primary mission is aerial refueling, it can
combine the tasks of a tanker and cargo aircraft by refueling fighters and simultaneously carry the fighter support
personnel and equipment on overseas deployments. The KC-10 is also capable of transporting litter and
ambulatory patients using patient support pallets during aeromedical evacuations.
The KC-10 can transport up to 75 people and nearly 170,000 pounds (76,560 kilograms) of cargo a distance of
about 4,400 miles (7,040 kilometers) unrefueled.
In addition to KC-135s and KC-10s, the Air Force, Marine Corps, and Navy operate additional smaller refueling
aircraft. The Air Force uses modified C-130s to refuel Air Force special operations and combat search and rescue
helicopters. The Marine Corps uses modified C-130s to refuel Marine helicopters and fighters. Some Navy aircraft
have been configured to give them a secondary capability to refuel other Navy or Marine Corps aircraft in flight.
13 In 1996, the General Accounting Office (now the Government Accountability Office) asserted that the long-term
viability of the KC-135 fleet was questionable and advocated expeditiously studying replacement options. (General
Accounting Office, U.S. Combat Airpower[:]Aging Refueling Aircraft Are Costly to Maintain and Operate,
GAO/NSIAD-06-160, August 1996.) DOD countered at the time that KC-135 airframe hours were low and that the Air
Force could sustain the fleet for another 35 years.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
in terms of defining the capabilities that are needed in the KC-X and designing and conducting a
fair competition between aircraft offered by Boeing and Northrop/EADS.
Leasing Authority of 2002
In response to concerns about the aging KC-135 fleet, Section 8159 of the FY2002 defense
appropriations act (H.R. 3338/P.L. 107-117 of January 10, 2002) authorized the Air Force to lease
up to 100 Boeing 767s (and also up to four Boeing 737s) for not more than 10 years. The leased
767s were to be modified into aerial refueling tankers and used as replacements for KC-135Es—
the oldest and least capable KC-135s. For the text of Section 8159, see Appendix A.
The leasing arrangement authorized by Section 8159 became a matter of debate, in part because it
appeared to depart from traditional acquisition processes and, some observers argued, had the
potential for weakening congressional oversight of tanker acquisition. The General Accounting
Office (now the Government Accountability Office) concluded that a lease would cost more than
procuring the aircraft.14 Other observers argued that Air Force arguments in favor of the lease
contradicted the service’s position of just a year prior regarding the urgency for replacing the KC-
135s.15 Congress examined the leasing arrangement in four hearings, culminating with two Senate
committee hearings in September 2003.16
Leasing and Purchasing Authority of 2003
Section 135 of the FY2004 defense authorization act (H.R. 1588/P.L. 108-136 of November 24,
2003) legislated a compromise between leasing proponents and opponents by authorizing the
Secretary of the Air Force to lease up to 20 tankers, and to use a multiyear procurement (MYP)
arrangement beginning as early as FY2004 to procure up to 80 tankers using incremental funding.
Section 135 also required the Secretary of Defense to conduct a study to identify alternative
means for maintaining and providing training for leased or purchased tankers. For the text of
Section 135, see Appendix B. Another provision of the act—Section 134—prohibited the Air
Force from retiring more than 12 KC-135Es in FY2004.
Developments in 2004 and 2005
On February 1, 2004, Deputy Secretary of Defense Paul Wolfowitz requested that the Defense
Science Board (DSB) conduct an independent analysis of the KC-135E fleet. On February 24,
2004, acting Undersecretary of Defense for Acquisition Michael Wynne directed the Air Force to
14 General Accounting Office, Military Aircraft[:] Observations on the Air Force’s Plan to Lease Aerial Refueling
Aircraft, Statement of Neal P. Curtin, Director, Defense Capabilities and Management, Testimony before the
Committee on Commerce, Science, and Transportation, United States Senate, GAO-031143T, September 3, 2003, 22
pp.
15 In 2001, the Air Force reported that the KC-135 fleet would incur “significant cost increases” between 2001 and
2040, but that “no economic crisis is on the horizon ... there appears to be no run-away cost-growth,” and that “the fleet
is structurally viable to 2040.” (KC-135 Economic Service Life Study, Technical Report F34601-96-C-0111, February
9, 2001.) At that time, the Air Force position on tanker modernization was to conduct an analysis of alternatives (AOA)
to determine the optimal replacement option for KC-135s. The service would begin recapitalization in the 2012 time
frame to meet KC-135 retirement by 2040, when the Air Force expected the KC-135 to reach the end of its service life.
16 For a discussion, see CRS Report RL32056, The Air Force KC-767 Tanker Lease Proposal: Key Issues For
Congress, by Christopher Bolkcom.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
conduct an aerial refueling AOA. DOD deferred using the authority granted in Section 135 until
the completion of both the DSB report and an internal investigation by the DOD Inspector
General (IG) on potential improprieties by Boeing Company executives.17
RAND Study of 2006
In 2006, RAND Corporation concluded an Analysis of Alternatives (AOA) for recapitalizing the
Air Force’s KC-135 fleet. The AOA concluded that purchasing new commercially-derived tankers
was the most cost-effective means of initially recapitalizing the fleet.18
KC-X Competition of 2007-2008
Consistent with the findings of the 2006 RAND report, the Air Force in early 2007 released a
formal request for proposals (RFP) for the procurement of 179 new KC-X tankers.19 Boeing
responded to the RFP with the KC-767—a tanker variant of the Boeing 767-200 commercial
airliner. A team consisting of Northrop Grumman and EADS responded to the RFP with the KC-
30 (later called the KC-45)—a tanker version of the Airbus 330-200 commercial airliner. A March
2009 GAO report summarizes subsequent events:
On February 29, 2008, the Air Force selected a consortium consisting of Northrop Grumman
and the European Aeronautic Defense and Space Company (EADS)—the parent company of
Airbus—over Boeing to build the KC-X tankers. In March 2008, Boeing filed a bid protest
with GAO. On June 18, 2008, GAO sustained Boeing’s protest and, consistent with that
decision, recommended that the Air Force reopen discussions with the offerors, obtain
revised proposals, re-evaluate the revised proposals, and make a new source selection
decision. In July 2008, the Secretary of Defense stated that there would be a new solicitation
requesting revised proposals from industry, and the Undersecretary of Defense for
Acquisition, Technology and Logistics would replace the Air Force as the source selection
authority. DOD expected to award the new contract by December 31, 2008. However, on
September 10, 2008, the Secretary announced his decision to terminate the second
competition noting there was not enough time for DOD to complete a competition that would
be viewed as fair and competitive in such a highly-charged environment by January 2009,
when the next administration would take office. He stated that rather than handing the next
administration an incomplete and possibly contested process, the next team should review
the military requirements objectively and craft a new acquisition strategy. Further, he added
17 On April 20, 2004, Darleen A. Druyan, the former lead Air Force negotiator on the tanker lease proposal, pleaded
guilty to one charge of criminal conspiracy. Ms. Druyan admitted to secretly negotiating an executive job with the
Boeing company while still overseeing the $23 billion leasing arrangement between the Air Force and Boeing.( R.
Merle, “Ex-Pentagon Official Admits Job Deal,” Washington Post, April 21, 2004.) Lease supporters argued that Ms.
Druyan was a single “bad apple” and that her actions did not negate the merits of leasing Boeing 767s for use as
tankers. In February 2005, however, the DOD IG reportedly concluded that Air Force Secretary James Roche misused
his office when he lobbied the Office of Management and Budget (OMB) to support the lease concept. (R. Jeffrey
Smith, “Roche Cited for 2 Ethics Violations,” Washington Post, February 10, 2005.) The IG’s final report concluded
that four other senior DOD officials were guilty of evading Office of Management and Budget (OMB) and DOD
acquisition regulations that are designed to demonstrate best business practices and to provide accountability. The DOD
IG found that senior DOD officials knowingly misrepresented the state of the KC-135 fleet and air refueling
requirements.( Department of Defense, Office of the Inspector General, Management Accountability Review of the
Boeing KC-767A Tanker Program, OIG-2004-171, May 13, 2005.)
18 KC-135 Recapitalization Analysis of Alternatives. Briefing to Congress, January 26-27, 2006.
19 “Air Force Posts KC-X Request for Proposals,” Air Force Print News Today, January 31, 2007, online at
http://www.af.mil/news/story.asp?id=123039360.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
that DOD plans to continue funding the program in the fiscal year 2010 through 2015
budget. The Chief of Staff of the Air Force stated that a new KC-X competition could take
the new administration between 8 months and 4 years to complete.20
For additional discussion of the RFP, Boeing’s protest, and GAO’s ruling on Boeing’s protest, see
Appendix C.
Administration’s Proposed New KC-X Acquisition Program
FY2010 Funding Request
The Administration’s proposed FY2010 defense budget requests $439.6 million in Air Force
research and development funding to begin a new program for acquiring new 179 KC-X aerial
refueling tankers.21
Number of Aircraft Contemplated
The proposed new KC-X program envisages replacing the KC-135 fleet in three stages, of which
the 179 new KC-Xs would represent the first stage, replacing roughly one-third of the KC-135
fleet. The replacement tankers to be procured in second and third stages of the effort would be
designated KC-Ys and KC-Zs.
Potential Cost of Program
A March 2009 GAO report states that the procurement cost of 179 KC-Xs could be about $35
billion,22 or an average of about $195 million per aircraft. The Air Force testified in May 2009
that it has budgeted about $3.5 billion per year for a projected procurement rate of 12 to 18
aircraft per year,23 which would equate to an average cost of about $195 million to $290 million
per aircraft. GAO states that, when the projected KC-Ys and KC-Zs are added in, the KC-135
replacement effort “is expected to involve the procurement of about 600 aircraft over 40 years at
a cost that could exceed $100 billion,”24 or an average cost of roughly $170 million per aircraft.
20 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-09-
326SP, March 2009, p. 156.
21 The requested funding is found in the Air Force’s research development, test and evaluation (RDT&E) account in PE
(i.e., program element, meaning line item) 0605221F, KC-X, Next Generation Aerial Refueling Aircraft.
22 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-09-
326SP, March 2009, p. 156.
23 Department of the Air Force, Presentation to the House Armed Services Committee Subcommittee on Air and Land
Forces, United States House of Representatives, Combined Statement of: Lieutenant General Daniel J. Darnell, Air
Force Deputy Chief Of Staff For Air, Space and Information Operations, Plans And Requirements (AF/A3/5)
Lieutenant General Mark D. Shackelford, Military Deputy, Office of the Assistant Secretary of the Air Force for
Acquisition (SAF/AQ) Lieutenant General Raymond E. Johns, Jr., Air Force Deputy Chief of Staff for Strategic Plans
And Programs (AF/A8), May 20, 2009, p. 17
24 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-09-
326SP, March 2009, p. 156.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Administration Plan: Competition for a Single Design
The Administration wants to build a single KC-X design, and wants to conduct a competition to
select that design. The Air Force testified in May 2009 that:
The Air Force and the Department of Defense have been considering options for conducting
a new source selection since the previous competition was terminated by the Secretary of
Defense in September 2008. It is the Air Force’s desire to begin the competition in Summer
2009 and award a contract in early 2010.25
On July 27, 2009, it was reported that:
The Pentagon has notified prospective bidders that the long-awaited draft request for
proposals for the U.S. Air Force’s KC-135 replacement competition is now planned for
release in mid-September—with a formal draft likely to follow in October. If this schedule
holds, selection of the winning replacement refueling tanker design could be in mid-2010.
That is roughly a six-month slip from earlier plans for the program.26
Expected Competitors
Boeing is expected to offer a KC-X based on either the Boeing 767 or Boeing 777, while the
Northrop/EADS team is expected to offer a KC-X based on the Airbus A330.
DOD Statements on KC-X as a High Priority
DOD states that “with the average age of the [KC-135] inventory over 45 years old, a new Tanker
has become an operational necessity as well as a financially prudent decision to meet refueling
requirements.”27 The U.S. Transportation Command testified in February 2009 that:
My number one recapitalization priority is replacing the fleet of 415 Eisenhower-era KC-
135s with a new platform to preserve a unique asymmetric advantage for our nation. The
KC-X with multipoint refueling allowing same sortie service to Air Force, Navy, Marine and
coalition aircraft will address the significant risk we are currently carrying in air capacity and
address further capability risks associated with an airframe that is almost 50 years old - and
will be over 80 years old by the time we recapitalize all of them. The ability to carry cargo
and operate forward with defensive systems will be a game changer when the aircraft is not
needed as a tanker. Further delays in replacing this aircraft will add significant risk to our
ability to rapidly project combat power to support the nation and our allies. It is imperative to
expedite a smart, steady reinvestment program.28
25 Department of the Air Force, Presentation to the House Armed Services Committee Subcommittee on Air and Land
Forces, United States House of Representatives, Combined Statement of: Lieutenant General Daniel J. Darnell, Air
Force Deputy Chief Of Staff For Air, Space and Information Operations, Plans And Requirements (AF/A3/5)
Lieutenant General Mark D. Shackelford, Military Deputy, Office of the Assistant Secretary of the Air Force for
Acquisition (SAF/AQ) Lieutenant General Raymond E. Johns, Jr., Air Force Deputy Chief of Staff for Strategic Plans
And Programs (AF/A8), May 20, 2009, p. 17.
26 “Tanker RFP,” Aerospace Daily & Defense Report, July 27, 2009: 1. See also Amy Butler, “Draft Tanker RFP Slips
Into Fall,” Aerospace Daily & Defense Report, July 16, 2009: 1-2; and David Morgan, “Pentagon Eyes September For
Next Step In Aerial Tanker,” Reuters.com, July 15, 2009.
27 Department of Defense, Fiscal Year 2010 Budget Request, Summary Justification, May 2009, p. 1-50.
28 Statement of General Duncan J. McNabb, USAF, Commander, United States Transportation Command, Before the
(continued...)
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
The Air Force testified in May 2009 that:
The KC-X remains the Air Force’s highest procurement and recapitalization priority. Air
refueling is critical to the entire Joint and Coalition team’s ability to project combat power
around the world. The current fleet of Eisenhower-era KC-135s averages over 48 years old.
KC-X tankers will provide increased aircraft availability, more adaptable technology, more
flexible employment options, and greater overall capability than the current fleet of KC-
135R/T tankers. The KC-X will be able to refuel receptacle and probe-equipped aircraft on
every mission and to receive fuel in-flight plus carry cargo, passengers, & conduct
aeromedical evacuation. The KC-X will also be equipped with defensive systems to enhance
its utility to the warfighter.
The KC-X program is based on a planned purchase of 179 aircraft and is the first of up to
three recapitalization programs to replace the entire legacy fleet. The Air Force has budgeted
approximately $3.5 billion per year for a projected annual production rate of 12-18 aircraft.
But even with this level of investment, it will take several decades to replace the 400+ KC-
135s. Given the age of the fleet and the time required to recapitalize, it is absolutely critical
for the Air Force to move forward now on this program.29
Industrial Base
Employment Effects as Asserted for 2007-2008 Competition
Boeing’s plan for the 2007-2008 KC-X competition called for 767s to be assembled at the Boeing
plant in Everett, WA and be converted into tankers (KC-767s) at Boeing’s plant in Wichita, KS.
Boeing claimed that 44,000 U.S. workers from 300 U.S. suppliers would be involved in building
the KC-767.30
The Northrop/EADS plan for the 2007-2008 KC-X competition called for assembling its KC-X
(originally called the KC-30, and later the KC-45) at a new plant planned for Mobile, AL.
Northrop/EADS stated that assembling KC-Xs there would create 2,000 new jobs. Northrop
originally stated that its proposal would result in 25,000 direct and indirect U.S. jobs—a
calculation that Northrop/EADS stated was based a Department of Commerce employment
model. Subsequently, Northrop raised its job estimate to approximately 48,000 direct and indirect
jobs and 230 suppliers from 49 states. Northrop based the revised estimate on feedback received
from suppliers and a Department of Labor employment model.31 In January 2008, EADS
(...continued)
House Armed Services Air & Land Forces and Seapower & Expeditionary Forces Subcommittees [Hearing] On the
State of the Command, February 25, 2009, pp 6-7.
29 Department of the Air Force, Presentation to the House Armed Services Committee Subcommittee on Air and Land
Forces, United States House of Representatives, Combined Statement of: Lieutenant General Daniel J. Darnell, Air
Force Deputy Chief Of Staff For Air, Space and Information Operations, Plans And Requirements (AF/A3/5)
Lieutenant General Mark D. Shackelford, Military Deputy, Office of the Assistant Secretary of the Air Force for
Acquisition (SAF/AQ) Lieutenant General Raymond E. Johns, Jr., Air Force Deputy Chief of Staff for Strategic Plans
And Programs (AF/A8), May 20, 2009, p. 17.
30 Boeing press release, “Boeing KC-767 Tanker Win Would Benefit Arizona Economy,” November 26, 2007.
31 Press release, “Northrop Grumman Updates Job Projections for Air Force KC-45A Program,” March 11, 2008,
available online at http://www.irconnect.com/noc/press/pages/news_releases.html?d=138001.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
announced that it would conduct final assembly of all commercial freighter versions of the Airbus
330-200 at the Mobile, AL, facility, increasing the potential number of new jobs that would be
created at Mobile if the Northrop/EADS KC-X were selected.32
Domestic Content as Discussed in 2007-2008 Competition
In the 2007-2008 KC-X competition, some observers questioned whether the Northrop/EADS
proposal satisfied requirements in the Buy American Act, which requires the federal government
to purchase domestically manufactured goods. The statute defines goods to have been
domestically manufactured if their components have “substantially all” been mined, produced, or
manufactured within the United States. 33 The definition of “substantially all” has been left to the
Federal Acquisition Regulations (FAR). In the FAR, a good is considered “domestic” if the cost
of domestically produced components exceeds 50% of the value of the whole article.34
One way a KC-X contractor could potentially satisfy requirements of the Buy American Act is by
having 50% or more of total cost of their proposed aircraft produced in the United States.
Reportedly, approximately 85% of Boeing’s KC-X in the 2007-2008 competition would have
been manufactured in the United States.35 Northrop/EADS stated that “at least 58 percent” of its
proposal in the 2007-2008 KC-X competition would be comprised of products manufactured by
U.S.36 For a listing of Boeing 767 and Airbus A330 suppliers, see Appendix D.
FY2009 Legislative Provisions
The FY2009 defense authorization act (S. 3001/P.L. 110-417 of October 14, 2008) contained
three provisions relating to Air Force tanker aircraft:
• Section 131 amended an earlier provision—Section 135(b) of the FY2007
defense authorization act (H.R. 5122/P.L. 109-364 of October 17, 2006)—to
require the Air Force to maintain at least 74 of the KC-135Es that are retired by
the Air Force after September 30, 2006, in a condition that would allow recall of
that aircraft to future service in the Air Force Reserve, Air National Guard, or
active forces aerial refueling force structure. (Section 135(b) had originally
required that each KC-135E retired after September 30, 2006, be maintained in
such a condition.)
• Section 132 repealed Section 135 of the FY2004 defense authorization act (H.R.
1588/P.L. 108-136 of November 24, 2003)—the provision discussed earlier (see
32 Jen DiMascio, “Airbus Vows to Boost Business in Alabama If it Can Make Tankers There,” Defense Daily, January
15, 2008. Some observers have estimated a market for 200 Airbus 330-200 freighters over the next 10 years. As of
January 2008, Airbus had orders for approximately 60 aircraft. (“Airbus 330,” Jane’s All the World’s Aircraft,
February 19, 2008, available online at http://www.janes.com.)
33 For more information on the Buy American Act, see CRS Report 97-765, The Buy American Act: Requiring
Government Procurements to Come from Domestic Sources, by John R. Luckey.
34 FAR § 25.101.
35 Eric Rosenburg, “Boeing Duels for Tanker Deal,” Seattle Post-Intelligencer, September 30, 2007, available online at
http://seattlepi.nwsource.com/business/333751_tanker01.html.
36 “Northrop Grumman’s KC-45 Tanker: Making the Right Choice,” January 25, 2007, available online at
http://www.northropgrumman.com/kc45/benefits/choice.html.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
“Leasing and Purchasing Authority of 2003”) that authorized the Secretary of the
Air Force to lease up to 20 tankers, and to use a multiyear procurement (MYP)
arrangement beginning as early as FY2004 to procure up to 80 tankers using
incremental funding.
• Section 133 required the Secretary of Defense to submit a report to the
congressional defense committees by March 1, 2009, regarding the KC-X
competition was terminated on September 10, 2008.
The text of Section 133 is as follows:
SEC. 133. REPORTS ON KC-(X) TANKER AIRCRAFT REQUIREMENTS.
(a) Report Required- Not later than March 1, 2009, the Secretary of Defense shall submit to
the congressional defense committees a report regarding the competition for the KC-(X)
tanker aircraft that was terminated on September 10, 2008. The report shall include the
following:
(1) An examination of original requirements for the KC-(X) tanker aircraft, including an
explanation for the use of the KC-135R tanker aircraft as the baseline for the KC-(X) tanker
aircraft.
(2) A summary of commercial derivative or commercial off-the-shelf aircraft available as
potential aerial refueling platforms using aerial refueling capabilities (such as range, offload
at range, and passenger and cargo capacity) in each of the following ranges:
(A) Maximum gross take-off weight that is less than 300,000 pounds.
(B) Maximum gross take-off weight in the range from 301,000 pounds maximum gross take-
off weight to 550,000 pound maximum gross take-off weight.
(C) Maximum gross take-off weight in the range from 551,000 pounds maximum gross take-
off weight to 1,000,000 pound maximum gross take-off weight.
(D) Maximum gross take-off weight that is greater than 1,000,000 pounds.
(b) Reassessment Required- The Secretary of Defense shall reassess the requirements for
aerial refueling that were validated by the Joint Requirements Oversight Council on
December 27, 2006. Not later than 30 days after the reassessment, the Secretary shall submit
to the congressional defense committees a report containing the complete results of the
reassessment.
Issues for Congress
The issue for Congress in FY2010 is whether to approve, reject, or modify the Administration’s
request for FY2010 research and development funding for the new KC-X program, and whether
to take any action to define the acquisition strategy for the new KC-X program. Key acquisition-
strategy issues include whether to procure one KC-X design or two, and (if only one design is to
be procured, as the Administration prefers), how to structure and conduct the competition for
determining the winning design.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Build One Design Or Two?
The Administration wants to build only one KC-X design. Some observers, including some
Members of Congress, have expressed interest building two designs (i.e., both a Boeing and
Northrop/EADS design).
Summary of Arguments
The Administration and other supporters of building a single design could argue one or more of
the following:
• Building two designs would increase KC-X development costs by requiring the
development of two aircraft, increase KC-X procurement costs by splitting the
production learning curve for the program between two sources, and increase
KC-X life-cycle operating and support costs by requiring the Air Force to
maintain two sets of KC-X training, maintenance, and support, facilities. Air
Force Secretary Michael Donley testified to the Senate Appropriations
Committee on June 4, 2009, that procuring two KC-X designs would nearly
double the program’s estimated $35 billion procurement cost.37 If two KC-X
designs are built, the Air Force for some time will bear the costs of operating four
different types of tankers—KC-135s, KC-10s, and the two KC-X designs.
• KC-X procurement costs will be constrained (and KC-X production quality and
schedule adherence will be maintained) with production of a single design
because the KC-X builder will understand that its performance in building KC-
Xs will influence DOD thinking on whether to use that firm to build KC-Ys and
KC-Zs, or to execute other DOD acquisition programs. Since tankers are based
on commercial airliners, building a single KC-X design now will not prevent
DOD from holding an effective competition in future years for KC-Ys and KC-
Zs.
• DOD cannot afford to procure more than about 18 KC-Xs per year without
reducing funding for other defense programs, so producing a second KC-X
design for the purpose of being able to produce more than 18 KC-Xs per year is
not important.
• DOD has learned lessons from the 2007-2008 KC-X competition, and
consequently will be able to structure and conduct a new KC-X competition that
is fair to both sides and whose result, if challenged, will be upheld by GAO.
Supporters of building two designs could argue one or more of the following:
• Building two designs would permit annual competition in the production of KC-
Xs, which will constrain KC-X procurement costs (and ensure production quality
and schedule adherence) more effectively than using single source to produce all
KC-Xs. 38 The Navy is contemplating continued production of its two Littoral
37 See, for example, Marina Malenic, “Air Force Says Tanker Split But Would Nearly Double Program Cost,” Defense
Daily, June 5, 2009: 1-2.
38 Among those who make this argument is Jacques Gansler, who served as Under Secretary of Defense for
Acquisition, Technology and Logistics during the Clinton Administration, believes competitive dual sourcing is a good
(continued...)
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
Combat Ship (LCS) designs in part for this reason.39 The 2006 RAND analysis of
alternatives for the KC-X found that, “a mixed [Air Force tanker] fleet ... has
(...continued)
fit for the KC-X program, since both competing aircraft already have established worldwide logistics networks. Gansler
in 2006 compared cost growth for ten DOD aircraft programs developed without production competition to the cost of
seven commercial aircraft produced in a competitive environment. He found that the ten single-source DOD acquisition
programs had an average cost increase of 46%, while the seven competitively produced commercial airliners had an
average cost decrease of 16% over the life of the program. For the KC-X program, Gansler assumed a purchase of 100
new tankers with a base price of $125 million dollars and a 75/25 split favoring the best-value candidate. (Gansler’s
analysis considered a 75/25 split to be illustrative and found other splits such as 60/40, etc. could be expected to
produce similar savings.) Based on these assumptions, he found a competitively sourced tanker acquisition would
potentially generate $7.7 billion in cost savings compared to a single-source tanker program, provided the cost growth
averages of the single-source and competitively sourced aircraft programs examined earlier in his study were repeated
in the KC-X program. (Jacques S. Gansler and William Lucyshyn, “Competition in the USAF Tanker Replacement
Program,” presentation slides, June 12, 2006, slides 18-19, 24, 35, and 40.)
John Lehman, who was Secretary of the Navy during the Reagan Administration and is a strong supporter of using
competition in procurement, cited Gansler’s study in a June 8, 2009, opinion column advocating the use of competition
in the KC-X program. The column also stated:
One such opportunity [for improving defense acquisition] is the current competition to replace the 45-year-old
U.S. Air Force tanker fleet. This is a source selection between Boeing and Northrop Grumman conducted to award
another 40 years of competition-free monopoly to the winner of the beauty contest. Under these Pentagon rules,
the contestants are judged on which can produce the best fantasy about how low their prices will be in future
decades, free of competition, producing their wondrous but still unbuilt airplane....
The air tanker program is a perfect candidate to return to the competitive cost control of yore.
Bureaucrats will argue against it for the following reasons:
• With a planned buy of only 179 it is not big enough to split. No. The Navy got huge benefits
from competing frigates, destroyers, cruisers and submarines with total numbers far lower than
the tanker.
• Split competition requires freezing designs and fixed-price contracts, which prevents change
orders. Yes.
• Operating and maintaining two types of aircraft is more difficult and costly than one. No. The
Air Force proved that wrong when they made the case for expeditionary air wings now
successfully operating five or more different aircraft types.
• The two candidates, the A330 and B767 derivatives, are too different to compete apples to
apples. No. It is easy to normalize range/payload/etc. to compete fairly every year with
different airplanes.
• Managing two contractors is more work than one. Yes.
In such a common-sense procurement, the government gets huge benefits: Just as in the “Toyota
culture” of constant innovation, the two contractors will be under constant pressure to improve
ideas and productivity, knowing their competitor is doing the same, and the price can be expected
to drop each year.
In past successful split programs, the final design was locked, so the contractors could bid fixed-
price. As technology advanced, there were block upgrades after two to five years where the design
specifications were modified to incorporate innovations; the new design was frozen again until the
next block upgrade.
(John Lehman, “When 2 Is Cheaper Than 1,” DefenseNews.com, June 8, 2009.)
39 For more on the LCS program, see CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background,
Oversight Issues, and Options for Congress, by Ronald O'Rourke
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
comparable cost-effectiveness, so there is no reason to exclude a priori an Airbus-
Boeing mixed buy on cost-effectiveness grounds.”40
• Producing two KC-X designs will enhance DOD’s potential for using
competition in the future for the procurement of KC-Ys and KC-Zs,
• Building two designs would make possible a combined annual KC-X production
rate at the Boeing and Northrop/EADS facilities of up to 36 aircraft per year,
which would permit the Air Force to replace KC-135s more quickly, reducing the
risk that KC-135s might reach the end of their service lives before they are
replaced, and reducing more quickly KC-135 maintenance costs.
• In light of past difficulties in structuring and conducting a KC-X competition that
is fair to both sides, building both designs would permit the KC-X program to
proceed more expeditiously.
Potential Intermediate Alternative Building One Design at Two Sites
An alternative to building one design or two would be to have the two competitors build a single
design—an approach that the Navy uses for the production of surface combatants and attack
submarines. Under this approach, DOD would select a single design to build (either the Boeing
design or the Northrop/EADS design), and that design would be built by both Boeing and
Northrop/EADS. Advocates could argue that this approach would avoid the added development
and operation and support costs associated with building two designs, and that if each KC-X were
produced jointly by Boeing and Northrop/EADS (similar to how each Virginia-class attack
submarine is built jointly by General Dynamics and Northrop),41 it could avoid some of the added
costs of splitting the production learning curve between two sites. Advocates could also argue that
having both firms build a single design would provide a potential for building up to 36 KC-Xs per
year, should policymakers determine that such a rate is affordable.42
Terms for a Competition
If a single KC-X design is to be built, an additional issue for Congress is how DOD should
structure and conduct the competition so as to ensure that it fair to both sides and will withstand
any protest by the losing bidder.
Lowest Price vs. Best Value
One issue is whether DOD should select the winning design on the basis of lowest cost (and
technically acceptable) or best value. The question is significant because some observers believe
that a selection based on lowest cost might be more likely to favor one design, while a selection
based on best value might be more likely to favor another. Advocates of a competition based on
40 Michael Kennedy et al., Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary, RAND
Corporation, 2006, p. 12.
41 For a discussion of the joint production approach for Virginnia-class attack submarines, see CRS Report RL32418,
Navy Attack Submarine Procurement: Background and Issues for Congress, by Ronald O'Rourke
42 For an article discussing the possibility of building one KC-X design at multiple sites, see John M. Doyle, “Rep.
Taylor Suggests Multiple Tanker Assembly Sites,” Aerospace Daily & Defense Report,” May 20, 2009: 5.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
lowest cost might argue that it would be easier to design and implement, and easier to defend in
the event of a protest.43 Advocates of a competition based on best value might argue that it would
have a higher likelihood of taking into account considerations that are not strictly cost related, but
nevertheless important to meeting Air Force requirements for its future tanker fleet
Performance Requirements and Evaluation Factors
An additional question regarding the terms of the competition concerns the performance
requirements for the KC-X and the evaluation factors that will be used in the KC-X competition.
A March 6, 2009, news report stated:
The restart of the Air Force next-generation tanker competition took a major step forward
last week when the Joint Requirements Oversight Council revalidated the program’s
requirements, according to defense officials.
43 A May 1, 2009, news article that provided a perspective in favor of basing the decision on lowest cost stated:
The Pentagon should set price above bonus capabilities when selecting a winner in the $35 billion competition to
build a new fleet of aerial-refueling aircraft, the military’s former top acquisition official said this week in his last
hours on the job.
Meeting with reporters on his last day on the job—April 27—Pentagon acquisition chief John Young said this
method would generate less controversy and be less burdensome on taxpayers. Young’s successor, Ashton Carter,
took the oath of office later that day.
“The government could possibly go and successfully have a best-value competition on tanker, but not with 800
requirements, almost all of which are tradeable,” Young said during the April 27 meeting at the Pentagon. “To
successfully do that, the government is going to have to articulate ... a smaller set of requirements and be crystal
clear about the relative priorities of those requirements.”
Last fall, a military official laid out two courses of action the Pentagon could take when awarding a contract. The
first is called “lowest price, technically acceptable,” and the second, “best value.”
The first strategy requires a bidder to meet a number of threshold requirements. If those benchmarks are met, the
final decision is made based on price. The second strategy requires bidders to meet the threshold requirements and
a number of supporting requirements. The decision is made by who meets the most secondary requirements.
Since last fall, Air Force requirements and acquisition officials have been working to whittle down the massive list
of tanker requirements. A lack of clarity in the lengthy list is what ultimately led the Government Accountability
Office to sustain a protest filed by Boeing, which lost the competition to Northrop Grumman-EADS in February
2008.
In March, Inside the Air Force reported that the service had nearly halved the number of “evaluation elements” it
will use when evaluating proposals for the KC-X tanker.
“I think the government can successfully go down that route and succeed, but there’s no question it could be
controversial,” Young said this week.
If both competitors meet the desired requirements, the Pentagon should ultimately choose the less expensive
proposal, he said.
“If they are technically acceptable—[and] meet the requirements—ask people for their best price to meet those
requirements and pick [a winner] that way,” Young said. “That gets the best deal for the taxpayer.
“I’m struggling to see what the downside of that is,” he continued. “I think, given the clearly demonstrated
propensity for controversy in this space, you may have to go to those strategies.”
Taking his views a step further, Young said he penned a memo to acquisition officials noting this best-price
strategy could prove useful when evaluating future competitions. In some cases, the Pentagon is paying more for
capabilities it does not need.
“Once I have something that meets my articulated, prioritized technical requirements, I ought to go get the best
price for the taxpayer,” he said. “What is the downside to that?”
(Marcus Weisgerber, “Young Claims USAF Should Make Price Top Factor In KC-X Competition,” Inside the Air
Force, May 1, 2009.)
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
The JROC—chaired by Vice Chairman of the Joint Chiefs of Staff Marine Corps Gen. James
Cartwright—discussed the KC-135 tanker replacement program during a Feb. 26 meeting at
the Pentagon, according to sources. At press time (March 5), a JROC memorandum had not
been signed, according to one defense official.
The JROC must validate a requirement before a major, high-budget program enters the
acquisition phase.
“The requirement didn’t change,” Air Mobility Command chief Gen. Arthur Lichte told
reporters last week when speaking about the tanker competition, not the JROC meeting....
Over the last few months, AMC requirements officials have been refining a list of more than
800 sub-requirements that were part of the original request for proposals
“We’ve gone back over and scrubbed them so as to make sure that, when we put a
requirement out there, we didn’t make too many sub-requirements,” Lichte said at the same
conference in Florida.
“We want to make sure we’re specific where we need to be specific [and] consolidate some
of those requirements,” he said during a Feb. 26 briefing.
For instance, “if we wanted defensive systems, we could describe that in maybe 25 different
requirements,” Lichte said, noting a cleaned -up version could instead state the new tanker
needs a Large Aircraft Infrared Countermeasure system.
“I think we’ve got [the requirements] to the right level and now we’re waiting for OSD to
make the final decision and to go forward with whatever acquisition strategy that we’re
going to have,” he said. 44
A March 20, 2009, news report stated:
The Air Force has simplified the evaluation factors it plans to use when it re-examines bids
for the KC-X next-generation tanker replacement program, according to service officials.
This comes as Defense Secretary Robert Gates this week reaffirmed his position against
buying two different aerial refueling aircraft.
Service officials hope trimming more than 800 “evaluation elements” will “clarify and
condense” the new request for proposals, making it “more understandable to solicitors,” one
service official said this week.
“We’re somewhere around half of the evaluation elements that we had before,” the official
said. “I think industry will find a much clearer depiction of what it is we’re asking for, but
the basic requirements have not changed.”
Air Force officials briefed the Joint Requirements Oversight Council late last month on the
service’s process for clarifying and condensing evaluation factors, according to the official.
The panel reaffirmed the fundamental next-generation tanker requirements as stated in the
analysis of alternatives and capabilities development document remain sound.
“Nothing has fundamentally changed,” the official said.
44 Marcus Weisgerber, “JROC Revalidates Air Force KC-X Tanker Program Requirements,” Inside the Air Force,
March 6, 2009.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
At press time (March 19), the group has not issued a JROC memorandum.45
Air Force or OSD Management of Competition
An additional question is whether the KC-X competition will be managed by the Air Force or by
the Office of the Secretary of Defense.46
Legislative Activity for FY2010
FY2010 Funding Request
The Administration’s proposed FY2010 defense budget requests $439.6 million in Air Force
research and development funding to begin a new program for acquiring new 179 KC-X aerial
refueling tankers. The requested funding is found in the Air Force’s research development, test
and evaluation (RDT&E) account in PE (i.e., program element, meaning line item) 0605221F,
KC-X, Next Generation Aerial Refueling Aircraft.
FY2010 Defense Authorization Bill (H.R. 2647/S. 1390)
House
The House Armed Services Committee, in its report (H.Rept. 111-166 of June 18, 2009) on H.R.
2647, recommends approving the Administration’s request for $439.6 million in research and
development funding for the KC-X program. (Page 190, line 88) The committee’s report states:
KC–X
The committee notes that the KC–X program is planned to replace the Department of the Air
Force’s KC–135 aerial refueling tanker fleet, which now has an average aircraft age of 47
years. The committee also notes that the KC–X program has been subject to delays resulting
from contractor protests to the Government Accountability Office, and believes that further
delay in the acquisition of the KC–X aerial refueling tanker could jeopardize Department of
Defense requirements for global mobility. Accordingly, the committee strongly urges the
Department to include the necessary funds in its Future Years Defense Program to rapidly
conduct source selection and to award a KC–X aerial refueling tanker contract as
expeditiously as possible. (Pages 100-101)
The report also states:
KC–X tanker replacement program
45 Marcus Weisgerber, “Air Force Simplifies KC-X Evaluation Factors That Will Appear In RFP,” Inside the Air
Force, March 20, 2009.
46 For an article discussing the issue of who will manage the KC-X competition, see Amy Butler, “USAF Could Lose
Oversight Of Next Tanker Duel,” Aerospace Daily & Defense Report, May 18, 2009: 4.
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Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress
The committee believes that the Department of Defense should implement measures to
ensure competition throughout the lifecycle of the KC–X tanker replacement program to
ensure that the program delivers the best capability to the warfighter and the best value to the
U.S. Government. Accordingly, the committee urges the Secretary of Defense to utilize as
many of the competitive measures specified in subsection (b) of section 202 of the Weapon
Systems Acquisition Reform Act of 2009 (Public Law 111–23) as is practicable when
developing the acquisition strategy and source selection plan. The committee notes that the
intent of section 202 is to require the Secretary of Defense to plan for persistent competition
to control program costs and improve the reliability of the KC–X tanker acquired by the
Department throughout the program’s lifecycle, including development, procurement, and
sustainment. (Page 203)
Section 1032 of H.R. 2647 requires Secretary of Defense shall submit to the congressional
defense committees a report on the force structure findings of the 2010 Quadrennial Defense
Review (QDR). The report is to include the analyses used to determine and support the findings
on force structure, and description of any changes from the previous quadrennial defense review
to the minimum military requirements for major military capabilities. Regarding Section 1032,
the committee’s report states:
The committee expects that the analyses submitted will include details on all elements of the
force structure discussed in the QDR report, and particularly the following:...
(3) A description of the factors that informed decisions regarding aerial refueling aircraft
force structure, including: the modeling, simulations, and analyses used to determine the
number and type of aerial refueling aircraft necessary to meet the national defense strategy;
the force sizing constructs used including peak demand; the number and type of aerial
refueling aircraft necessary to meet the national security objective; the changes made, and
supporting rationale for the changes made, to the aerial refueling aircraft force structure from
that proposed in MCS–05; and the operational risks associated with the planned aerial
refueling aircraft fleet, based on requirements of combatant commanders, and measures
planned to address those risks;... (Page 388)
Section 1044 of H.R. 2647 would repeal Section 1081 of the FY2008 defense authorization act
(H.R. 4986/P.L. 110-181 of January 28, 2008), which directed the Secretary of the Air Force to
conduct a pilot program of at least five years’ duration to assess the feasibility and advisability of
utilizing commercial fee-for-service air refueling tanker aircraft for Air Force operations.
Regarding Section 1044, the committee’s report states:
The committee is aware that the Air Force has conducted initial analysis to develop the
program structure for the pilot program, based on two diverse options, and has received
feedback from potential providers in the aviation industry. However, based on its review of
data gathered to date, the committee is concerned that the pilot program will be a costly
alternative with little operational benefit and is not in the best interest of the Air Force. (Page
391)
The committee’s report also states:
Fee for Service Refueling
The budget request contained $10.0 million for a fee-for-service refueling pilot program. The
committee recommends eliminating the funds for the pilot program.
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A provision is included elsewhere in this title [Section 1044] that would repeal the
requirement to conduct a fee-for-service pilot program. (Page 284; see also page 282 for the
recommended line-item reduction)
Senate
Division D of S. 1390 as reported by the Senate Armed Services Committee (S.Rept. 111-35 of
July 2, 2009) presents the detailed line-item funding tables that in previous years have been
included in the Senate Armed Services Committee’s report on the defense authorization bill.
Division D recommends approving the Administration’s request for $439.6 million in research
and development funding for the KC-X program. (Page 687 of the printed bill, line 88) The
committee’s report states:
KC–X tanker replacement program
The committee regards the need to modernize the current fleet of KC–135 aerial refueling
tanker aircraft as a vital national security priority and supports the KC-X tanker
recapitalization program, as well as efforts by the Air Force both to maintain the existing
fleet and augment capability with aerial fee-for-service, if it proves cost-effective under the
pending pilot program. Given the troubled history of the program, the committee expects that
the Department of Defense will pursue a process of procuring replacement tankers that will
ensure that the joint warfighter receives the best capability at the best price. The committee
believes that this can only be achieved by an acquisition strategy that does not pre-determine
the outcome of the competition and a competition that is fair and open. In addition, the
committee believes that, in accordance with the principles of the Weapon Systems
Acquisition Reform Act of 2009 (Public Law 111–23) and as a means of improving
contractor performance, the Department of Defense must ensure that the acquisition strategy
of the KC–X program includes measures that ensure competition, or the option of
competition, throughout the life cycle of the program, where appropriate and cost-effective.
(Page 99)
Section 1058 of S. 1390 would amend Section 1081 of the FY2008 defense authorization act
(H.R. 4986/P.L. 110-181 of January 28, 2008), which directed the Secretary of the Air Force to
conduct a pilot program of at least five years’ duration to assess the feasibility and advisability of
utilizing commercial fee-for-service air refueling tanker aircraft for Air Force operations. The
committee’s report states:
The committee recommends a provision [Section 1058] that would provide an exemption to
the 5–year limitation on multiyear contracts and make other minor changes to enable the Air
Force to implement a fee-for-service air refueling support pilot program.
Section 1081 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law
110–181) directed the Secretary of the Air Force to conduct a pilot program to assess the
feasibility and advisability of utilizing commercial fee-for-service air refueling tanker
aircraft for Air Force operations.
The Air Force has been working with the private sector to implement this pilot program. The
Air Force has informed the committee that results from their formal request for information
process indicate that a multiyear contract that exceeds the current 5-year limit would be
necessary to promote adequate competition and reduce program costs. The Air Force needs
to have authority to make commitments for the 8-year pilot program in order to issue a
request for proposal. The Air Force also needs to be able to offer carriers insurance coverage
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similar to that provided to civil reserve air fleet (CRAF) program partners. This provision
would provide the Air Force with those authorities. (Page 179)
The text of Section 1058 is as follows:
SEC. 1058. MULTIYEAR CONTRACTS UNDER PILOT PROGRAM ON
COMMERCIAL FEE-FOR-SERVICE AIR REFUELING SUPPORT FOR THE AIR
FORCE.
(a) Multiyear Contracts Authorized- The Secretary of the Air Force may enter into one or
more multiyear contracts, beginning with the fiscal year 2011 program year, for purposes of
conducting the pilot program on utilizing commercial fee-for-service air refueling tanker
aircraft for Air Force operations required by section 1081 of the National Defense
Authorization Act for Fiscal Year 2008 (P.L. 110-181; 122 Stat. 335).
(b) Compliance With Law Applicable to Multiyear Contracts- Any contract entered into
under subsection (a) shall be entered into in accordance with the provisions of section 2306c
of title 10, United States Code, except that—
(1) the term of the contract may not be more than 8 years;
(2) notwithstanding subsection 2306c(b) of title 10, United States Code, the authority under
subsection 2306c(a) of title 10, United States Code, shall apply to the fee-for-service air
refueling pilot program;
(3) the contract may contain a clause setting forth a cancellation ceiling in excess of
$100,000,000; and
(4) the contract may provide for an unfunded contingent liability in excess of $20,000,000.
(c) Compliance With Law Applicable to Service Contracts- A contract entered into under
subsection (a) shall be entered into in accordance with the provisions of section 2401 of title
10, United States Code, except that—
(1) the Secretary shall not be required to certify to the congressional defense committees that
the contract is the most cost-effective means of obtaining commercial fee-for-service air
refueling tanker aircraft for Air Force operations; and
(2) the Secretary shall not be required to certify to the congressional defense committees that
there is no alternative for meeting urgent operational requirements other than making the
contract.
(d) Limitation on Amount- The amount of a contract under subsection (a) may not exceed
$999,999,999.
(e) Provision of Government Insurance- A commercial air operator contracting with the
Department of Defense under the pilot program referred to in subsection (a) shall be eligible
to receive government provided insurance pursuant to chapter 443 of title 49, United States
Code, if commercial insurance is unavailable on reasonable terms and conditions.
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Appendix A. Section 8159 of FY2002 Defense
Appropriations Act
The text of section 8159 of the FY2002 defense appropriations act (H.R. 3338/P.L. 107-117 of
January 10, 2002) is as follows:
SEC. 8159. MULTI-YEAR AIRCRAFT LEASE PILOT PROGRAM. (a) The Secretary of
the Air Force may, from funds provided in this Act or any future appropriations Act,
establish and make payments on a multi-year pilot program for leasing general purpose
Boeing 767 aircraft and Boeing 737 aircraft in commercial configuration.
(b) Sections 2401 and 2401a of title 10, United States Code, shall not apply to any aircraft
lease authorized by this section.
(c) Under the aircraft lease Pilot Program authorized by this section:
(1) The Secretary may include terms and conditions in lease agreements that are customary
in aircraft leases by a non-Government lessor to a non-Government lessee, but only those
that are not inconsistent with any of the terms and conditions mandated herein.
(2) The term of any individual lease agreement into which the Secretary enters under this
section shall not exceed 10 years, inclusive of any options to renew or extend the initial lease
term.
(3) The Secretary may provide for special payments in a lessor if the Secretary terminates or
cancels the lease prior to the expiration of its term. Such special payments shall not exceed
an amount equal to the value of 1 year’s lease payment under the lease.
(4) Subchapter IV of chapter 15 of title 31, United States Code shall apply to the lease
transactions under this section, except that the limitation in section 1553(b)(2) shall not
apply.
(5) The Secretary shall lease aircraft under terms and conditions consistent with this section
and consistent with the criteria for an operating lease as defined in OMB Circular A-11, as in
effect at the time of the lease.
(6) Lease arrangements authorized by this section may not commence until:
(A) The Secretary submits a report to the congressional defense committees outlining the
plans for implementing the Pilot Program. The report shall describe the terms and conditions
of proposed contracts and describe the expected savings, if any, comparing total costs,
including operation, support, acquisition, and financing, of the lease, including modification,
with the outright purchase of the aircraft as modified.
(B) A period of not less than 30 calendar days has elapsed after submitting the report.
(7) Not later than 1 year after the date on which the first aircraft is delivered under this Pilot
Program, and yearly thereafter on the anniversary of the first delivery, the Secretary shall
submit a report to the congressional defense committees describing the status of the Pilot
Program. The Report will be based on at least 6 months of experience in operating the Pilot
Program.
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(8) The Air Force shall accept delivery of the aircraft in a general purpose configuration.
(9) At the conclusion of the lease term, each aircraft obtained under that lease may be
returned to the contractor in the same configuration in which the aircraft was delivered.
(10) The present value of the total payments over the duration of each lease entered into
under this authority shall not exceed 90 percent of the fair market value of the aircraft
obtained under that lease.
(d) No lease entered into under this authority shall provide for—
(1) the modification of the general purpose aircraft from the commercial configuration,
unless and until separate authority for such conversion is enacted and only to the extent
budget authority is provided in advance in appropriations Acts for that purpose; or
(2) the purchase of the aircraft by, or the transfer of ownership to, the Air Force.
(e) The authority granted to the Secretary of the Air Force by this section is separate from
and in addition to, and shall not be construed to impair or otherwise affect, the authority of
the Secretary to procure transportation or enter into leases under a provision of law other
than this section.
(f) The authority provided under this section may be used to lease not more than a total of
100 Boeing 767 aircraft and 4 Boeing 737 aircraft for the purposes specified herein.
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Appendix B. Section 135 of FY2004 Defense
Authorization Act
The text of Section 135 of the FY2004 defense authorization act ((H.R. 1588/P.L. 108-136 of
November 24, 2003) is as follows:
SEC. 135. PROCUREMENT OF TANKER AIRCRAFT.
(a) LEASED AIRCRAFT- The Secretary of the Air Force may lease no more than 20 tanker
aircraft under the multiyear aircraft lease pilot program referred to in subsection (d).
(b) MULTIYEAR PROCUREMENT AUTHORITY- (1) Beginning with the fiscal year 2004
program year, the Secretary of the Air Force may, in accordance with section 2306b of title
10, United States Code, enter into a multiyear contract for the purchase of tanker aircraft
necessary to meet the requirements of the Air Force for which leasing of tanker aircraft is
provided for under the multiyear aircraft lease pilot program but for which the number of
tanker aircraft leased under the authority of subsection (a) is insufficient.
(2) The total number of tanker aircraft purchased through a multiyear contract under this
subsection may not exceed 80.
(3) Notwithstanding subsection (k) of section 2306b of title 10, United States Code, a
contract under this subsection may be for any period not in excess of 10 program years.
(4) A multiyear contract under this subsection may be initiated or continued for any fiscal
year for which sufficient funds are available to pay the costs of such contract for that fiscal
year, without regard to whether funds are available to pay the costs of such contract for any
subsequent fiscal year. Such contract shall provide, however, that performance under the
contract during the subsequent year or years of the contract is contingent upon the
appropriation of funds and shall also provide for a cancellation payment to be made to the
contractor if such appropriations are not made.
(c) STUDY OF LONG-TERM TANKER AIRCRAFT MAINTENANCE AND TRAINING
REQUIREMENTS- (1) The Secretary of Defense shall carry out a study to identify
alternative means for meeting the long-term requirements of the Air Force for—
(A) the maintenance of tanker aircraft leased under the multiyear aircraft lease pilot program
or purchased under subsection (b); and
(B) training in the operation of tanker aircraft leased under the multiyear aircraft lease pilot
program or purchased under subsection (b).
(2) Not later than April 1, 2004, the Secretary of Defense shall submit a report on the results
of the study to the congressional defense committees.
(d) MULTIYEAR AIRCRAFT LEASE PILOT PROGRAM DEFINED- In this section, the
term `multiyear aircraft lease pilot program’ means the aerial refueling aircraft program
authorized under section 8159 of the Department of Defense Appropriations Act, 2002
(division A of P.L. 107-117; 115 Stat. 2284).
(e) SENSE OF CONGRESS- It is the sense of Congress that, in budgeting for a program to
acquire new tanker aircraft for the Air Force, the President should ensure that sufficient
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budgetary resources are provided to the Department of Defense to fully execute the program
and to further ensure that all other critical defense programs are fully and properly funded.
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Appendix C. KC-X Competition of 2007-2008
This appendix provides additional information and discussion on the KC-X competition of 2007-
2008.
Request for Proposal
In January 2007, the Air Force released its formal RFP for the KC-X acquisition program.
Assistant Secretary of the Air Force Sue Payton reportedly emphasized that the Air Force had
completed a rigorous review process for KC-X to ensure the RFP mirrors joint war-fighting
requirements.47 The RFP outlined nine primary key performance parameters:
• Air refueling capability
• Fuel offload and range at least as great as the KC-135
• Compliant Communication, Navigation, Surveillance/Air Traffic Management
(CNS/ATM) equipment
• Airlift capability
• Ability to take on fuel while airborne
• Sufficient force protection measures
• Ability to network into the information available in the battle space
• Survivability measures (defensive systems, Electro-Magnetic Pulse (EMP)
hardening, chemical/biological protection, etc.)
• Provisioning for a multi-point refueling system to support Navy and Allied
aircraft48
In November 2007, Ms. Payton explained the evaluation criteria that the Air Force used in
determining the KC-X competition. The KC-X evaluation factors are:
• Factor 1—Mission Capability. Mission capability includes five subfactors listed
in descending order of importance:
• Subfactor 1.1—Key System Requirements
• Subfactor 1.2—Subsystem Integration and Software
• Subfactor 1.3—Product Support
• Subfactor 1.4—Program Management
• Subfactor 1.5—Technology Maturity and Demonstration
• Factor 2—Proposal Risk
47 “Air Force Posts KC-X Request for Proposals,” Air Force Print News Today, Press Release 070107, January 30,
2007, online at http://www.af.mil/pressreleases/story_print.asp?id=123039273.
48 Ibid.
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• Factor 3—Past Performance
• Factor 4—Cost/Price
• Factor 5—Integrated Fleet Air Refueling Assessment49
The Air Force considered the first three KC-X evaluation factors of equal importance. The final
two factors were considered of equal importance, but less important relative to the first three
criterion. Lastly, the Air Force regarded “Factors 1, 2, 3, and 5, when combined, [to be]
significantly more important than factor 4.”50
Boeing Protest
Air Force officials debriefed both Boeing and Northrop officials on how their respective bids
were scored in March 2008. On March 11, 2008, Boeing protested the Air Force’s decision to the
GAO.51 On March 26, 2008, both the Air Force and Northrop separately filed motions for the
GAO to dismiss portions of Boeing’s protest.52 GAO rejected these motions.53 Work on the KC-
45A stopped while the GAO considered the protest.54
Boeing’s protest was based on a perception that the Air Force used a flawed process in the KC-X
selection process. For example, in a press release detailing Boeing’s rationale for protesting,
Boeing stated:
It is clear that frequent and often unstated changes during the course of the competition—
including manipulation of evaluation criteria and application of unstated and unsupported
priorities among the key system requirements—resulted in selection of an aircraft that was
radically different from that sought by the Air Force.55
Boeing stated that both teams received identical ratings across the five evaluation areas in the
KC-X competition. Boeing claimed that the Air Force’s treatment of both Boeing’s cost estimates
and Boeing’s past experience of building Air Force tankers, if scored differently, could have
affected the outcome of the source selection.56 In response to Boeing’s protest, an Air Force press
release stated:
Proposals from both offerors were evaluated thoroughly in accordance with the criteria set
forth in the Request for Proposals. The proposal from the winning offeror is the one Air
Force officials believe will provide the best value to the American taxpayer and to the
49 USAF slide obtained from “Performance Comes First,” Air Force Association Daily Report, November 21, 2007,
online at http://dailyreport.afa.org/AFA/Reports/2007/Month11/Day21/1028factors.htm.
50 Ibid.
51 Boeing News Release, “Boeing Protests U.S. Air Force Tanker Contract Award,” March 11, 2008, online at
http://www.boeing.com/ids/globaltanker/news/2008/q1/080311b_nr.html.
52 Andrea Shalal-Esa, “Air Force, Northrop Ask GAO to Dismiss Boeing Protest,” Reuters, March 26, 2008.
53 Susanna Ray and Edmond Lococo, “Northrop Loses Effort to Dismiss Boeing Protest,” Bloomberg News, April 2,
2008, online at http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2hruo2xpyFQ.
54 Sean Reily, “Air Force Keeps Tanker Freeze,” Mobile Press-Register, March 18, 2008, online at http://www.al.com/
press-register/stories/index.ssf?/base/news/120583171412090. xml&coll=3.
55 Boeing Company News Release, “Boeing Protests U.S. Air Force Tanker Contract Award,” March 11, 2008, online
at http://www.boeing.com/news/releases/2008/q1/ 080311b_nr.html.
56 Ibid.
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warfighter. Air Force members followed a carefully structured process, designed to provide
transparency, maintain integrity and promote fair competition. Air Force members and the
offerors had hundreds of formal exchanges regarding the proposals throughout the evaluation
process. Air Force officials provided all offerors with continuous feedback through
discussions on the strengths and weaknesses of their proposals. Several independent reviews
assessed the process as sound and thorough.57
GAO Ruling on Protest
On June 18, 2008, the GAO announced that it had completed its examination of DOD’s decision
to award Northrop the KC-X contract (for 80 aircraft) and found that Boeing’s complaint had
merit.58 GAO’s managing associate general counsel for procurement law, Michael R. Golden,
stated:
Our review of the record led us to conclude that the Air Force made a number of significant
errors that could have affected the outcome of what was a close competition between Boeing
and Northrop Grumman. We therefore sustain Boeing’s protest. We also denied a number of
Boeing’s challenges to the award to Northrop Grumman, because we found that the record
did not provide us with the basis to conclude that the agency had violated the legal
requirements with respect to those challenges.
GAO recommended that discussions between the government and the bidders be resumed, that
bidders be given the opportunity to submit revised proposals, and that the Air Force make a new
decision based on this additional input. The Air Force is not statutorily obliged to heed GAO’s
recommendations but must respond to them within 60 days (i.e., by August 17, 2008).59
GAO made clear that it was not passing judgment on the relative merits of the proposed aircraft.
Instead, GAO stated that it assessed whether the Air Force complied with statutory and regulatory
requirements in evaluating the competing bids. GAO cited seven specific reasons for sustaining
portions of the Boeing protest, which are summarized below:
1.
The Air Force evaluation did not follow the prioritization of technical requirements specified in its own
solicitation. Nor did it give credit to the Boeing proposal for satisfying the greater number of non-
mandatory technical criteria, though the solicitation expressly requested this.
2.
The Air Force used the degree to which the Northrop Grumman bid exceeded a specific key
performance objective as an important discriminator between proposals, despite the solicitation’s
provision stating that this would not be the case.
3.
Solicitation required that proposed tankers be able to refuel all fixed-wing, tanker-compatible Air Force
aircraft using existing Air Force procedures. The protest record did not support the Air Force’s
determination that the Northrop Grumman proposal did so.
4.
Air Force discussions with each of the bidding companies were unequal and misleading. Boeing was told
that it had fully satisfied a key operational utility parameter, yet the Air Force later determined that the
57 “Air Force Officials Respond to Boeing Protest,” Air Force Print News Today, March 12, 2008, online at
http://www.af.mil/news/story_print.asp?id=123089878.
58 GAO, “Statement Regarding the Bid Protest Decision Resolving the Aerial Refueling Tanker Protest By The Boeing
Company B-311344 et al.,” Government Accountability Office (Washington, D.C.), June 18, 2008. Available on the
World Wide Web at http://www.gao.gov/press/boeingstmt.pdf.
59 GAO also recommended that the Air Force consider amending its proposal solicitation before engaging the
companies in the discussions, that it reimburse Boeing for the cost of filing and pursuing the protest, and that it
terminate the existing contract with Northrop Grumman if Boeing’s proposal is ultimately selected.
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Boeing proposal only partial y met the requirement. The Air Force continued its discussion with
Northrop Grumman on the same key parameter without informing Boeing that its assessment had
changed.
5.
Northrop Grumman refused to agree to a specific solicitation requirement regarding the development of
Air Force maintenance capability within a specified period. The Air Force unreasonably assessed this to be
an “administrative oversight” and awarded the contract improperly in light of this exception to a material
solicitation requirement.
6.
The Air Force unreasonably evaluated the military construction (hangers, runways, parking aprons, etc.)
required to sustain each of the proposed aircraft. During the protest proceedings, the Air Force conceded
that calculations properly performed would have resulted in a most probable life cycle cost for the Boeing
offer lower than that for the Northrop Grumman proposal.60
7.
The Air Force improperly adjusted upward Boeing’s estimate of the non-recurring (i.e., one-time)
engineering portion of its most probable life cycle cost value. The Air Force would have been able to do
so had it found the cost to be unreasonably low, but it did not. Additionally, the cost model used by the
Air Force to adjust this cost estimate was unreasonable.
60 Life cycle cost refers to the total cost of owning, operating, maintaining, and disposing of a given asset. It is often
referred to as “cradle-to-grave” cost. Life cycle costs are calculated within a range, from lowest to highest. The “most
probable” cost is the one calculated to have the statistically highest probability of being true.
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Appendix D. Boeing 767 and Airbus 330 Suppliers
Table D-1. Boeing 767 Suppliers
Supplier
Parent
Country
Component(s)
Aero Vodochody
Czech Republic
airframe parts (for BAE Systems)
Alenia Italy
wing control surfaces, flaps and leading-edge slats, wingtips,
elevators, fin rudder, nose radome
Avcorp Canada
front and rear spar stiffeners, floor grid details and assemblies,
aft strut fairings
Boeing Canada
Canada
fixed trailing edge panels, composite wing-to-body fairings,
engine strut fairings
Bombardier (Learjet)
Canada
wing trailing edge support structures
Bombardier (Canadair)
Canada
rear fuselage, pressure bulkhead
Daido Steel
Japan
steel sheets
Embraer Brazil
flap
supports
Fuji
Japan
wing fairings, main landing gear doors
Fujukawa Aluminum
Japan
forgings and extensions
GKN Aerospace
(Westland Aerospace,
formerly BP Chemicals;
United Kingdom
flap track fairings
with Lucas Aertspace
Cargo Systems)
Goodrich (Cleveland
United States
main landing gear
Pneumatic)
Hitco Carbon
United States
flap track fairings
Composites
IPTN
Indonesia
flaps, keel beams (for Mitsubishi)
Kaman Aerospace
United States
wing trailing edges
Kawasaki Heavy
Industries
Japan
center-fuselage body panels, exit hatches, wing in-spar ribs
Korean Aerospace
Republic of Korea
wing trailing edges
(Samsung)
LMI Aerospace
United States
skins, wing panels, floor beams, curtain tracks
Lunn Industries (Alcore)
United States
leading edge slat core assemblies (for ASTA)
Menasco Aerospace
United States
nose landing gear unit
Mitsubishi Heavy
Japan
rear fuselage body panels, stringers, passenger and cargo doors,
Industries
dorsal fin
Nihon Kokuki (Nippi)
Japan
wing in-spar ribs, various structural components for Mitsubishi
PPG Industries
United States
landing light lens assemblies, cockpit windows
Shin Meiwa
Japan
tailplane trailing edges (for Northrop Gumman/Vought)
Source: Teal Group
Note: Commercial variants powered by engines manufactured by either General Electric, Pratt & Whitney, or
Rolls Royce.
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Table D-2. Airbus 330/350 Suppliers61
Supplier
Parent
Domicile
Component(s)
Advanced Technology
and Research (ATR)
United States
graphite epoxy underwing fairings (for Aerostructures
Corp.
Corp.)
inner spoilers/airbrakes, center spar, upper wing skin panels,
Aerostructures Corp.
inner and outer wingbox leading edge assemblies (for BAE),
(Now Vought)
United States
outer flaps, flap track shrouds, spoiler parts (for DASA-
EADS)
AHF-Ducommun
United States
leading edge wing skins
Boeing (Aerospace
main gear doors, floor support structure, pressurization
Technologies of
United States
bulkhead between passenger cabin, main landing gear
Australia)
compartment (for Aérospatiale-EADS)
leading edge wing assemblies, nose gear bay and doors, nose
Bombardier (Canadair)
Canada
bottom fuselage, rear sealed frame, ventral beam,
pressurized lateral floor, aft pressure bulkhead (for
Aérospatiale-EADS), inboard front spar assembly (for BAE)
BTR Aerospace
Canada
main landing gear fairings
CC Industries
United States
outer rear spar, main landing gear support, ribs (for BAE)
Ciba-Geigy Corp.
Federal Republic of
Germany
HTA/6376 prepreg on wings
Dowty Aerospace
Canada
Canada
center landing gear
Dowty Rotol (with
Cleveland Pneumatic)
United Kingdom
design and manufacture of main landing gear
Fairchild Dornier
Federal Republic of
Germany
fuselage and wing components, interior panels
Fischer Advanced
Federal Republic of
Composite Components
Germany
interior components (for DASA-EADS)
GKN Aerospace
(formerly BP Advanced
United Kingdom
composite panels (for BAE)
Materials)
General Engineering
Unknown
side stay fairing
Hawker de Havilland,
Australia
Australia
wingtips, winglets, wing root fillet, ribs (for BAE)
Heath Techna
Aerospace
United States
composite components (for BAE)
IPTN
Indonesia
flap track carriages, sheet metal parts (for BAE)
Korean Aerospace
Industries (Daewoo)
Republic of Korea
wing components
Korean Air (with Silat)
Republic of Korea
upper fuselage panels of Section 15 (for Aérospatiale-EADS)
Marion Composites
United States
flap track fairings (for Aerostructures Corp.)
61 The Airbus 350 is a planned model that will be similar in size to the Airbus 330. It was originally expected to be a
derivative of the Airbus 330, but is now expected to be a new design aircraft.
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Parent
Supplier
Domicile
Component(s)
Marvin Group
United States
large ribs (for BAE)
Messier-Hispano-Bugatti
France
nose landing gear, wheels and brakes (option)
Mitsubishi Heavy
Industries
Japan
cargo doors
PPG Industries
United States
cockpit windows
RTI International Metals
United States
titanium on A350
SABCA Belgium
tailcones
(for
DASA)
Shin Meiwa
Japan
wing fairings
Socea
France
rear upper panels of center fuselage section
SOCATA France
composite
belly
fairing
SONACA
Belgium
full-span leading edge slats, slat tracks
Xian Aircraft Co. (AVIC-
Peoples Republic of
1)
China
avionics access doors
Source: Teal Group
Note: Commercial variants of both aircraft types are powered by engines manufactured by either General
Electric, Pratt & Whitney, or Rolls Royce.
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Appendix E. Potential Longevity of KC-135 Fleet
2004 DSB Report and 2006 RAND Analysis
A 2004 Defense Science Board (DSB) task force report examined, among other things, the
potential longevity of the KC-135 fleet.62 The 2006 RAND Analysis of Alternatives (AOA) on
aerial refueling also examined the technical condition of the KC-135 fleet.
The DSB report stated that airframe service life, corrosion, and maintenance costs factors would
potentially determine the KC-135s operational life expectancy. Each of these factors is discussed
briefly below.
Airframe Service Life
KC-135s, along with their associated B-52 bombers, were originally purchased to give the United
States a strategic nuclear strike capability. As a result, both fleets of airplanes spent a significant
amount of time during the Cold War on ground alert. Consequently, in 2004, the average KC-135
airframe had flown only about 17,000 hours of an estimated service life of 36,000 hours (KC-
135E) or 39,000 hours (KC-135R). On this basis, the DSB report concluded that KC-135
airframes were viable until 2040 at “current usage rates.”63 The 2006 RAND AOA similarly
concluded that the KC-135 fleet “can operate into the 2040s,” but not without risks.64
Corrosion
The 2004 DSB report concluded that corrosion did not pose an “imminent catastrophic threat to
the KC-135 fleet” and that the Air Force’s maintenance practices were postured “to deal with
corrosion and other aging problems,”65 but also stated:
However, because the KC-135s are true first generation turbojet aircraft designed only 50
years from the time man first began to fly, concerns regarding the ability to continue
operating these aircraft indefinitely are intuitively well founded.66
Maintenance Costs
A 2004 GAO report stated that KC-135 flying hour costs increased in real (i.e., inflation-adjusted)
terms by 29% between 1996 and 2002.67 The DSB report agreed that KC-135 maintenance costs
had increased significantly, but found that they had leveled off due to Air Force changes in KC-
62 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004, p. iv.
63 Ibid.
64 Michael Kennedy et al., Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary, RAND
Corporation, 2006, pp. 15-16.
65 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004, p. iv.
66 Ibid., p. 17.
67 General Accounting Office, Military Aircraft[:] DOD needs to Determine Its Aerial Refueling Requirements, GAO-
04-439, June 2004, p. 13.
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135 depot processes. The DSB report forecasted modest growth in maintenance costs in the
future.68
Risks Of Flying Older Aircraft
Some observers express about potential problems that may arise in flying 50- to 80-year-old
tankers that could possibly ground the entire KC-135 fleet. The DSB report examined the issue
and concluded that “although grounding is possible, the task force assesses the probability as no
more likely than that of any other aircraft in the inventory of the Services.”69 The 2006 RAND
analysis expressed a belief that it is possible that KC-135s will be able to operate into the 2040s,
but the report expressed a lack of confidence that KC-135s could continue to be operated that
long without risks of major maintenance cost increases, poor fleet availability, or possible fleet-
wide grounding. The RAND analysis concluded that “the nation does not currently have
sufficient knowledge about the state of the KC-135 fleet to project its technical condition over the
next several decades with high confidence.”70 The analysis recommended more thorough
scientific and technical study of the KC-135 to provide a more reliable basis for future
assessments of the condition of the KC-135 fleet.71
2009 News Reports on 2001 DOD Study
A March 13, 2009 news report on a 2001 DOD study on the KC-135 fleet stated:
The cost of maintaining geriatric KC-135 Stratotankers into the 2040s will likely increase
nearly 50 percent over the next 30 years to account for major structural and engine
improvements needed simply to keep the venerable aircraft flying, according to documents
obtained by Inside the Air Force.
The overall annual maintenance will rise from $2.1 billion in fiscal year 2001 to $3 billion in
2040, according to the KC-135 Economic Service Life Study. In all, it will cost the Air Force
more than $103 billion to operate and maintain Stratotankers between 2001 and 2040—
almost triple the cost of buying nearly 200 new KC-X refuelers, according to the report,
which makes its projections using calendar year 2000 dollar amounts....
This is the first time the results of the 2001 study have been reported in full, although some
details have been referenced in a number of Congressional Research Service reports.
The study was conducted before the major boom in tanker missions following the Sept. 11,
2001, terrorist attacks. Since then, tanker missions have increased dramatically to support
combat operations in Afghanistan and Iraq, in addition to refueling fighter jets that
constantly patrol the skies over the United States as part of Operation Noble Eagle.
Air Force Materiel Command chief Gen. Arthur Lichte said he stands behind the 2001 study,
claiming its predictions have been “right on the mark.”
68 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004, pp. iv-v.
69 Ibid, p. 18.
70 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND
Corporation, 2006, p. 16.
71 Ibid.
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“We have pretty high confidence that the things that [the study] suggested to do in the
outyears will come true,” Lichte said during a Feb. 26 briefing with reporters at a conference
in Florida.
While the “structural integrity of the KC-135 fleet remains strong,” costs associated with
maintaining that level of integrity will contribute to the nearly $1 billion jump in in
maintenance costs. In 2001, structure-related upkeep costs were reported at $321 million.
That specific maintenance will increase to $1.1 billion annually in 2040, according to the
report.
Overhauling the R-model tanker’s General Electric F108 engines over the next 30 years is
expected to jump from $13 million to $66 million, the report states.
All KC-135s will need to have their outer skin replaced beginning in 2018 due to corrosion,
according to the report and Lichte....
“Depot level airframe and engine maintenance are the primary cost divers to sustain the KC-
135 fleet through 2040,” the report states.72
A March 6, 2009, news report stated:
Many of the Air Force’s geriatric, Eisenhower-era KC-135 tanker aircraft fleet will have to
have their “skin” replaced beginning around 2018, according to the top general in charge of
Air Mobility Command.
“There was an independent study ... that starts to look at ... the 2018 time frame and
beyond—you need to start thinking about re-skinning the aircraft, the fuselage itself in the
back” of the plane, Gen. Arthur Lichte said in a Feb. 26 briefing with reporters. The study
was conducted in 2000 and published in February 2001.
Over the years, corrosion has built up where rivets hold the skin to the frame of the aircraft.
Thus, the service will likely need to begin improvements late in the decade, he said, noting
the study has been “right on the mark” with all of its other predictions.
“We have pretty high confidence that the things that [the study] suggested to do in the
outyears will come true as well,” Lichte said.
The revelation comes as the Air Force awaits word from the Office of the Secretary of
Defense on when to restart the service’s KC-X next-generation tanker competition. The Air
Force has scrubbed its requirements for the aircraft so that they will be presented in a clearer
fashion, according to Lichte....
In February 2005, then-Pentagon acquisition chief Michael Wynne asked for a paper
detailing what technical and maintenance issues still needed to be addressed that are not part
of a major KC-135 aircraft re-engine effort. A group of subject matter experts was then
assembled to project future maintenance needs out to 2050. The study revealed 44 KC-135
repair issues.
72 Marcus Weisgerber, “Report: KC-135 Maintenance Could Reach $3 Billion Per Year By 2040,” Inside the Air
Force, March 13, 2009.
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“This was a qualitative assessment that relied on engineering judgment, experience and
historical data to estimate future sustainment needs,” according to documents provided by
AMC.
Today it costs $7 million for each KC-135 aircraft that goes through the maintenance depot
every five years, according to Lichte. The service sends about 72 planes through the depot
each year.
“If you can get rid of those [KC-]135s sooner, or have fewer to put through that time period
of re-skinning, then you save some money,” he said.
In addition to new skin, the study found the planes will all need new wiring in the 2020s and
2030s. Also in the 2030s, a large portion of the depot maintenance remains unknown,
according to the documents.73
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
Acknowledgments
The current version of this report incorporates passages from the January 9, 2009 version. The January 9,
2009, version was the final version written by Christopher Bolkcom, Specialist in Military Aviation, who
died on May 1, 2009.
73 Marcus Weisgerber, “Air Force Will Likely Need to Re-Skin Its KC-135 In The 2018 Time Frame,” Inside the Air
Force, March 6, 2009. Ellipses as in original.
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