DoD Testers Express Concerns with KC-46A Schedule

One of the issues facing Boeing (BA) and the KC-46A new aerial tanker program is that it is already behind schedule. The Air Force originally planned to award a contract in 2001-2002 timeframe and have new tankers flying before 2010. The contract was not awarded until almost a decade later and the first aircraft will begin service in 2017. This was caused by three attempts to conduct the source selection with Boeing winning the third round from EADS North America, part of EADS (EADS:P).

This has meant the current initial development contract is very short. Boeing is planning on taking commercial B-767 aircraft off of their line, installing a new cockpit from the 787 as well as necessary military gear. They also need to demonstrate that the aircraft is able to meet the requirements of the Air Force and keep it all within cost as Boeing agreed to a fixed price development contract.

The Director, Operational Test & Evaluation (D,OT&E) which is an independent body within DoD responsible for evaluating programs performance as well as their overall test plans releases an annual report reviewing major defense programs and their test plans. They expressed concerns to Congress that the KC-46A is hoping to conduct a very aggressive test campaign. In their report, which may be found on their website here, they write that in their opinion “The DOT&E review of the post-Milestone B draft TEMP indicates the KC-46 test program is not executable.”

This is due for the following reasons:

 

  • The plan requires 42 hours of testing a month compared to an average of 30 on similar large aircraft military programs.
  • It assumes that only 15 percent of the tests would be repeated.  A higher repeat rate adds time to the overall testing program.
  • There is not time in the schedule to fix issues found in Developmental Testing (DT) prior to Operational Testing (OT).
  • There is not enough time allocated to test the fuel boom with Air Force and Navy aircraft.
  • The OT time is too short for the 750 flight hours planned to be flown and D,OT&E calculations estimate that 1,250 hours is the minimum required.

 

The organization recommends a new Test & Evaluation Master Plan (TEMP) be developed that includes a more realistic schedule for testing.

The Air Force, of course, disputes D,OT&E claims and believes the testing schedule is appropriate and executable. They feel that they have structured the program to support a proper OT decision and then into production and service.

The other pressure is on Boeing as an extension of the test program will cost them money. The fixed price contract has already reached a point where there is little slack or money left in it. More flight hours, more tests and more re-work will cost Boeing and reduce the potential for any profit on this contract. The Air Force recognizes this as they add in their defense of the program that they “structured the KC-46 development contract as a fixed price contract to protect the DoD and taxpayers from any cost growth on the program if the test program is not executed as planned.” So Boeing will pay for these issues if any.

D,OT&E can tend to be very conservative when it comes to these types of assessments but that does not mean they are right. One of the biggest issues affecting program development timelines is the need for more testing. Problems are discovered that were not necessarily anticipated and they take time to fix and then there is also time added to do the test again. The KC-46A is probably looking at a test program that will take some amount of time between their estimate and D,OT&E. Even if there is only a little growth it will affect Boeing’s cost and bottom line.

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Recriminations in Kansas for Boeing

As can be expected with Boeing’s (BA) decision to close their Wichita, KS facility and move work to Washington and Texas the politicians who represent the state are not happy. Many Congressman and Senators who provided support to Boeing to win the KC-46A contract from the U.S. Air Force feel betrayed.

They cite the fact that Boeing executives basically promised the work would be done in Kansas if the contract was one creating thousands of jobs in that state.

The Mayor of Wichita, Carl Brewer, feels the same way. He claims Boeing has betrayed the city by their decision. Wichita has invested millions of the taxpayers money in the plant which has been open since the 1930’s and built bombers during World War II and the Cold War. Now in about 24 months it will stop work and the jobs will be eliminated or moved.

The decision by Boeing based the company claims on cost considerations alone highlight what may happen across the U.S. as the defense budget shrinks and programs are cut or eliminated. Similar scenes have happened before in the 70’s and 90’s as military spending has been reduced. Wichita may be the first of many cities this time around.

That, of course, does not make those who supported Boeing feel better but now they may join the Florida and Alabama representatives who tried to aid Northrop Grumman (NOC) and EADS North America, part of EADS (EADS:P) who worked for those companies to win the KC-X contract. The goal for them of course was investment and jobs in a time when manufacturing ones are hard to find.

As government spending is cut back there will be many other politicians crying foul.

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Will EADS Protest?

Now that the U.S. Air Force and Defense Department have awarded the KC-X new aerial tanker contract to Boeing (BA) for their KC-46A aircraft the major question is whether the losing EADS NA (EADS:P) bid will protest? In 2008 when the Air Force selected Northrop Grumman (NOC) and EADS Boeing did protest and the choice was overturned leading to this current iteration of the contest. Considering this is the only fixed wing aviation program in the near future or at least until the Next Generation Bomber program emerges it may be hard for EADS not to protest on the chance that they might win or at least there would be another competition.

In their public statement the company is non-committal about the chances of filing a protest with the Government Accountability Office (GAO). They say “EADS North America officials today expressed disappointment and concern over the announcement by the U.S. Air Force that it had selected a high-risk, concept aircraft over the proven, more capable KC-45 for the nation’s next aerial refueling tanker.” but they also say ““Though we had hoped for a different outcome, it’s important to remember that this is one business opportunity among many for EADS in the United States,”. So read into that what you may.

At a minimum the filing of an unsuccessful protest would delay the initiation of the contract for about 100 days making the delivery of any new tankers to the Air Force even later then they will be after an almost ten year process to build a new one.

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EADS Claims Able to Lower Price on Offer This Time Around

With the submission of their second proposal for the KC-X aerial tanker program EADS (EADS:P) stated that due to production increases they were able to lower the price on their KC-30 tanker aircraft. Chairman of EADS North America, Ralph Crosby, said by about six percent.

EADS and Boeing (BA) are trying for a second time to win the new tanker for the U.S. Air Force that will replace the aging KC-135R aircraft. In 2008 EADS which was teamed with Northrop Grumman (NOC) won the last contest which was overturned on protest by Boeing. The two companies submitted their final proposals last week.

Boeing has not provided such details but has previously stated that their smaller KC-767 aircraft has better fuel efficiency and maintenance costs that will save the Air Force money over the long run.

In recent testimony the Secretary of Defense, Robert Gates, indicated that the award announcement will be made in a few weeks following up on the Air Force’s budget document which indicated prior to April 1st.

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Both Companies Submit Final Proposals But Will Continuing Resolution Allow Award?

It has been confirmed that both Boeing (BA) and EADS North America (EADS:P) submitted their final proposals for the KC-X aerial tanker program. The Air Force had asked that they be submitted by today and both companies turned them in early.

One pressing question that remains is if the Department of Defense remains under Continuing Resolution (CR) for the rest of the year rather then Congress passing a proper budget is it possible to award the new contract? It looks like the Republican controlled House is planning on doing CR until the new Fiscal Year (FY) starts in October. There has not yet been any statement from the Government on this question.

One would think that even if the source selection is carried out and a winner chosen with the caveat that the contract award would have to wait until the next FY it might affect the pricing. Having a requirement to guarantee the pricing for several months has not been identified yet and it would have some effect on each company’s bids.

As everything with this program nothing is easy and it seems this third attempt may be even more complex and controversial than the first two.

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EADS Bids A330MRTT for Indian Contract

The Indian military as part of its ongoing efforts to upgrade the overall technology of their equipment has tendered a contract for new aerial tankers. Currently they use a version of the Russian Ilyushin (IL)-78 tanker developed several years ago and in service with the Russian military. Reportedly Airbus, and EADS (EADS:P) company, and Ilyushin will submit bids for this contract.

Last year Airbus had submitted a proposal to sell the A330MRTT tanker to India but the contract award was canceled by the Finance Ministry as being too expensive. This contest is a result of that decision.

The A330MRTT is undergoing certification testing for Australia as well as being built for the United Kingdom and the U.A.E. and Saudi Arabia. It is also going to be EADS North America’s submission for the KC-X tanker contract for the U.S. Air Force.

Of note the existing IL-78 tankers have been supporting the flight demonstrations for India’s MMRCA new fighter contract. This means they have required the contestants to be modified to work with the IL-78. Competitors include the F/A-18, Rafael, SAAB Gripen, MiG and Eurofighter. This demonstrates that the IL-78 may be able to fuel a fleet of modern Western aircraft.

If Airbus does win the Indian competition it is only for a few aircraft but it will aid them in getting their production processes in place to get ready for the much larger KC-X contract. The more of the model of the aircraft flying as well will help them with the overall cost of the aircraft and program. Just as the more 767 tankers Boeing (BA) sells to other countries the better for them.

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Rumors Percolate of a February Award for KC-X

There are starting to be media reports that indicate the U.S. Air Force will announce the winner of the KC-X aerial tanker contract in February of this year. The decision had been planned before the end of 2010 but due to delays in reviewing the proposals and the inadvertent slip up of sending the competition’s information to the two bidders it has now moved to 2011.

In a recent presenstion the Secretary of the Air Force, Michael Donley, said that Senate hearings into the information mess may be limited due to the current source selection process. To some this indicates the Air Force does not want the hearing near the decision announcement. The award and potential protest would also constrain what information could be given to the Senate and discussed at the hearing.

Sean O’Keefe, EADS North America’s CEO, also recently said that he expects the award soon. He believes best and final offers will be submitted before January 31st and then the Air Force decision in February.

This will be the third attempt to buy a replacement for the KC-135 aircraft since 2001. The Air Force, Boeing (BA) and EADS (EADS:P) all hope that it will be the last and final try.

There is a good chance no matter who wins the award that there will be a protest. The 35 billion plus contract for these aircraft is the biggest military aviation contract right now. It is critical to both companies aircraft production plans and would give them a significant advantage in future tanker competitions world wide.

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Loren Thompson Predicts EADS Win

The well known aerospace analyst writes that based on discussions he has had it looks good for EADS North America to win the current KC-X new aerial tanker competition. He believes that the information accidentally shared by the U.S. Air Force with EADS and its U.S. competitor, Boeing (BA), indicate that the analysis by the source selection board favors EADS A330 MTT based bid.

EADS did win the contest two years ago teamed with Northrop Grumman (NOC) only to have it overturned on protest by Boeing. The Government Accountability Office (GAO) ruled that the Air Force had not applied its own criteria properly in evaluating those bids.

This time around EADS bid by itself and proposed basically the same aircraft. Boeing bid a modified version of their 767 tanker incorporating parts of the new 787 cockpit and other improvements.

Last month the Air Force had to admit it sent information to the two bidders about the others after mixing up the CD’s with data.

In Thompson’s analysis the data showed the Air Force favoring the EADS aircraft. Of course Boeing will have a chance to protest if they really do lose this contract.

In another piece of this very complicated puzzle this latest development may have serious affects on the latest attempt to replace the KC-135 Cold War era tankers.

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Alabama Remains Supportive of EADS North America

Governor Bob Riley (R-AL) made a speech yesterday to the Economic Development Association of Alabama at which he discussed upcoming industries moving to Alabama. He stressed his administration’s continuing efforts to move large manufacturing facilities to the state. Riley will leave office this year due to term limits.

He is hoping that EADS North America will win the KC-X contract before he does go as one of the key industrial developments for the state. Now Riley is always going to be positive about this effort right up to the time a winner is announced but it does illustrate how well EADS has built relations with leadership in Southern states that have benefited from their investment.

Riley has seen some successes with the building of a Hyundai assembly plant in the state and the ongoing construction of a steel mill by ThyssenKrupp which will open in the near future.

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EADS North America Turns in Proposal Today

EADS North America, the American subsidiary of EADS (EADS:P), turned in their proposal for the KC-X aerial tanker today to the U.S. Air Force. This represents their second attempt to win the program and the Air Force’s third try.

EADS North America will base their program on a modified Airbus A330 transport aircraft. As with the previous attempt in 2008 they will assemble the aircraft at a facility in Mobile, AL. Then they will receive the necessary modifications to meet the U.S. requirements. Airbus will also assemble all of their A330 transports at this new facility if EADS does win the contract when it is awarded in November.

Boeing (BA) will also turn in their proposal by tomorrow. A third contended, U.S. Aerospace, has committed to submit a proposal by Friday if the Air Force does not grant their extension request.

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