June 19, 2008—In recommending on June 18 that the Air Force set aside the KC-X tanker award to Northrop Grumman/EADS from late February, the Government Accountability Office specified seven “significant errors” on the part of the Air Force that it said made the acquisition process unfair to Boeing.
First, the GAO said the Air Force didn’t follow its own criteria in measuring the capabilities of the two airplanes and was vague specifying how much weight various factors would be given. Boeing offered to satisfy more non-mandatory requirements than Northrop Grumman, but this offer was ignored by the service, GAO said.
Second, GAO determined that the Air Force gave credit to Northrop Grumman for exceeding requirements in aerial refueling when the rules said no credit would be given above a certain level, which Boeing had met. This was a “key discriminator” between the two proposals, the Air Force said, but shouldn’t have been, according to GAO’s ruling.
Third, the Air Force shouldn’t have credited Northrop Grumman with being able to refuel all USAF aircraft equipped with refueling gear in accordance with current procedures, because that hadn’t been documented.
Fourth, the Air Force told Boeing at one point that the company had fully satisfied a particular requirement, but the service then changed its mind and failed to tell Boeing of the change in assessment. At the same time, USAF was continuing to talk with Northrop Grumman about satisfying the same requirement.
Fifth, when Northrop Grumman wouldn’t provide a plan for setting up organic depot maintenance within two years of the award, the Air Force unfairly treated the failure as an “administrative oversight,” even though this point was a key requirement of the competition.
Sixth, the Air Force’s evaluation of the two entrants’ most likely life cycle costs was “unreasonable,” and the service admitted during GAO’s review that it had made “a number of errors … that, when corrected,” made Boeing’s the lowest-cost entry, GAO said. USAF’s evaluation originally had Boeing slightly higher than Northrop Grumman in total cost. Further, the Air Force calculated military construction costs using a hypothetical model, the validity of which wasn’t proven, and didn’t calculate milcon for the specific airplanes in each proposal.
Finally, GAO said, the Air Force increased Boeing’s stated costs, believing that the company’s failure to fully explain how it arrived at its figures made the given numbers suspect. However, GAO said the Air Force didn’t prove that Boeing’s numbers were unrealistic and that using a computer model to calculate them was “unreasonable” on the service’s part, because the data it used were derived from overall program performance and not just the non-recurring engineering part of the program.
For these reasons, the GAO recommended that the Air Force accept revised bids from both companies and decide anew which one should supply the new tanker aircraft to begin replacing its aged KC-135s.