DOD News Briefing on the Air Force KC-46A Tanker contract award

DOD News Brief­ing with Deputy Sec­re­tary Lynn and DOD senior lead­ers to announce the Air Force KC-46A Tanker con­tract award
MR. LYNN: At the start of the process, we made sev­er­al com­mit­ments. We com­mit­ted that the source selec­tion for the KC-X would be fair, open and trans­par­ent; we com­mit­ted that the process would be dri­ven by clear­ly stat­ed require­ments defined by the warfight­er; and we com­mit­ted to a fixed-price con­tract struc­ture that would deliv­er the Air Force a capa­ble air­craft at the most com­pet­i­tive price. Under the over­sight of Dr. Ash Carter, the Under Sec­re­tary of Defense for Acqui­si­tion Tech­nol­o­gy and Logis­tics, the Air Force has made good on each of these com­mit­ments. As a result, this com­pe­ti­tion favored no one except the tax­pay­er and the warfight­er.

Let me now get to what you real­ly want to hear, and have Sec­re­tary Don­ley make today’s announce­ment.

SEC. DONLEY: Thank you, sir. It’s a plea­sure to be here to for­mal­ly announce the results of the source selec­tion process for the Air Force’s num­ber-one acqui­si­tion pri­or­i­ty and oper­a­tional need. KC-X rep­re­sents the first in a series of pro­cure­ments to recap­i­tal­ize our aging aer­i­al refu­el­ing fleet.

Last year, we came here to announce a well-con­ceived strat­e­gy that empha­sized our aim to pro­vide a much-need­ed aer­i­al refu­el­ing plat­form that would enable the warfight­er to go to war on day one. This meant a clear and dis­ci­plined approach to require­ments, rec­og­niz­ing the impor­tance of pro­vid­ing this capa­bil­i­ty at a price the tax­pay­ers could afford, and a clear descrip­tion of how the eval­u­a­tion would be con­duct­ed. We have now com­plet­ed the source selec­tion process as described in the request for pro­pos­als.

The source selec­tion eval­u­a­tion phase spanned sev­en months, and result­ed in an exten­sive offi­cial record. All offer­ers were aware from the very begin­ning of exact­ly how the eval­u­a­tion would be con­duct­ed. The source selec­tion eval­u­a­tion team was com­posed of a 230-plus-per­son joint mul­ti-agency group of sea­soned acqui­si­tion, main­te­nance and oper­a­tional experts. They con­duct­ed mul­ti­ple inter­nal reviews through­out the source selec­tion process to ensure a con­sis­tent, thor­ough­ly doc­u­ment­ed and well-sup­port­ed eval­u­a­tion record. To all of them, we say thank you.

Source selec­tion teams work — under­stand­ably so — immune from spec­u­la­tion and opin­ion in a company’s acqui­si­tion pro­grams, and espe­cial­ly ones of this mag­ni­tude. They do so because they real­ize that this isn’t about opin­ions; it’s about the integri­ty of the source selec­tion process as embod­ied in statutes, reg­u­la­tion and case law. That’s also why we have worked through­out this process to care­ful­ly devel­op a com­pre­hen­sive record of our work.

I would also com­mend the com­pa­nies and those they rep­re­sent for the qual­i­ty of the effort they put into these pro­pos­als. This was a spir­it­ed com­pe­ti­tion, with both offer­ers acquit­ting them­selves well. These are two world-class com­pa­nies, with long-stand­ing rela­tion­ships with the depart­ment that we expect will con­tin­ue.

As promised, we have had ongo­ing and trans­par­ent dia­logue with the offer­ers, to ensure we had a clear under­stand­ing of their pro­pos­als, and that they would have a clear under­stand­ing of our analy­sis of them. Through­out, we’ve also respond­ed to requests for infor­ma­tion from mem­bers of Con­gress, and we appre­ci­ate the man­ner in which our over­sight com­mit­tees have respect­ed the acqui­si­tion process and its legal under­pin­ning.

When it came to require­ments, we want­ed to make absolute­ly cer­tain that the warfight­er was still in charge of stat­ing their require­ments and that, if those require­ments were met, we could go to war on day one.

Gen­er­al Schwartz and I are con­fi­dent that when our young pilots, boom oper­a­tors and main­tain­ers receive this air­craft, they will have the tools they need to be suc­cess­ful at what we ask them to do.

We’ve promised a fair, open and trans­par­ent process, and we con­tin­ue to deliv­er on that today by shar­ing pub­licly those ele­ments of our analy­sis per­mit­ted by statute, fed­er­al acqui­si­tion reg­u­la­tions and pri­or case law.

Infor­ma­tion that is con­sid­ered pro­pri­etary or source selec­tion-sen­si­tive will not be dis­cussed unless specif­i­cal­ly exempt­ed in reg­u­la­tion or case law, out of def­er­ence to the offer­ers and the process as it con­tin­ues for­ward. In short, today’s state­ment will be the extent of our pub­lic release of infor­ma­tion.

This source selec­tion process deter­mined whether or not the pro­pos­als demon­strat­ed the abil­i­ty of an offer­er to deliv­er all 372 manda­to­ry require­ments, and whether non­manda­to­ry capa­bil­i­ties would be addressed. It also took into account fleet mis­sion effec­tive­ness and life cycle costs, as embod­ied in fuel effi­cien­cy and mil­i­tary con­struc­tion costs. We then request­ed and received final pro­pos­al revi­sions from each offer­er.

Here is the infor­ma­tion that we are able to release. Both offi­cer — offer­ers were deemed to have met the manda­to­ry require­ments and were con­sid­ered award­able.

Because the dif­fer­ence between the total eval­u­at­ed prices in present val­ue terms was greater than 1 per­cent, yield­ing sub­stan­tial sav­ings to the tax­pay­er, the non­manda­to­ry capa­bil­i­ties, while eval­u­at­ed, were not used in deter­min­ing the out­come.

The con­tract award­ed today is for the engi­neer­ing and man­u­fac­tur­ing devel­op­ment, the EMD phase, which is val­ued at over $3.5 bil­lion. The over­all pro­gram is val­ued at over 30 bil­lion (dol­lars), with a final amount depend­ing on the options exer­cised.

The pro­gram will deliv­er the first 18 air­craft by 2017. The air­craft will be des­ig­nat­ed the KC-46A.

Fol­low­ing today’s announce­ment, the Air Force will be avail­able to debrief offer­ers at their request. We’ve also indi­cat­ed to Con­gress our will­ing­ness to respond to ques­tions, sub­ject to the lim­i­ta­tions I’ve out­lined ear­li­er. We will have no oth­er pub­lic com­ments fol­low­ing today’s announce­ment, to allow for that process to play out, as it should, between the gov­ern­ment and the com­pa­nies involved.

We hope that all par­ties, rec­og­niz­ing the thor­ough process and intense mul­ti­ple lev­els of review that have gone into this source selec­tion, will respect the deci­sion and allow this impor­tant pro­cure­ment to pro­ceed unim­ped­ed. The warfight­er deserves noth­ing less.

I will say that as far as the tim­ing of today’s announce­ment is con­cerned, it was sim­ply event-dri­ven. We took the time nec­es­sary to ensure that the offers made were deemed accept­able, that there was a clear under­stand­ing between the gov­ern­ment and the offer­ers, and that a fair and objec­tive analy­sis was com­plet­ed and pro­vid­ed mul­ti­ple teams the oppor­tu­ni­ty to review our work for accu­ra­cy and doc­u­men­ta­tion. We have done exact­ly what we’ve said we were going to do, and we took the time to do it right.

A final fre­quent ques­tion regards bas­ing. As we’ve con­sis­tent­ly said, bas­ing deci­sions are made in a sep­a­rate process that involves oth­er orga­ni­za­tions in the Air Force. That process will take place over the course of the next cou­ple of years.

To the men and women of our Air Force, today’s announce­ment rep­re­sents a long-over­due start to a much-need­ed pro­gram. Your Air Force lead­er­ship, sup­port­ed by Dr. Carter and oth­ers through­out the Depart­ment of Defense, is deter­mined to see this through, and we will stand behind this work.

Today, based on all eval­u­at­ed cri­te­ria, price and the results of a well-doc­u­ment­ed process, we announce that the Air Force has select­ed the KC-X pro­pos­al pro­vid­ed by the Boe­ing Com­pa­ny.

Thank you very much.

Q: No ques­tions at all?

MR. LYNN: No, Tony. We’ll take a few ques­tions. But as Sec­re­tary Don­ley indi­cat­ed, there’s a lot of pro­pri­etary source-selec­tion sen­si­tive data, so there’s going to be some things we can’t answer. But go ahead.

Q: (Off mic) — was this a rel­a­tive­ly close com­pe­ti­tion? Did Boe­ing basi­cal­ly edge out EADS, or was there a wide dis­crim­i­na­tor. It did not go into the 93 — your ver­sion of an over­time phase basi­cal­ly, the 93 manda­to­ry. But how close was this? Or was Boe­ing far supe­ri­or in meet­ing the 370 manda­to­ry require­ments? MR. LYNN: I think what we can tell you is Boe­ing was a clear win­ner.

Q: How will you respond to peo­ple who thought the EADS was a — was a bet­ter bang for your buck in this com­pe­ti­tion? Is this — is Boe­ing a bet­ter deal cost-wise to the tax­pay­er?

MR. LYNN: We went through a process that eval­u­at­ed warfight­ing require­ments, eval­u­at­ed price, eval­u­at­ed life-cycle costs. And the process yield­ed the result it did with Boe­ing win­ning.

And I’d just ask Mike if he wants to expand on that.

SEC. DONLEY: No, we out­lined the request for pro­pos­al and the acqui­si­tion strat­e­gy very clear­ly a year ago, and we fol­lowed that process to con­clu­sion.

MR. LYNN: (Inaudi­ble.)

Q: Sec­re­tary, if I’m cor­rect, I think the EMD con­tract from 2008, real­iz­ing that was under a dif­fer­ent RFP [request for pro­pos­al], that was actu­al­ly a low­er price.

So what are you get­ting for the $3.5 bil­lion? Do you get air­planes? Do you get test arti­cles? How much flight test do you get? And why is it a dif­fer­ent price than last time?

MR. LYNN: Mike.

SEC. DONLEY: This is a com­plete­ly dif­fer­ent com­pe­ti­tion. We indi­cat­ed that from the begin­ning. I think if you go back and check the record from a year ago, the EMD phase includes four air­craft I believe.

MR. LYNN: Mm-hmm. That’s right.

SEC. DONLEY: But we have noth­ing more to say about com­par­ing prices or costs from one com­pe­ti­tion to anoth­er. We indi­cat­ed from the very begin­ning that this was a new com­pe­ti­tion.

Q: But did the work scope change then to now — for either win­ner or los­er? (No audi­ble response.)

MR. LYNN: (Inaudi­ble.)

Q: Any con­cerns about the protest that could poten­tial­ly derail this?

MR. LYNN: I mean, the unsuc­cess­ful offer­er has a right to a protest as part of the process. But as we’ve said from a year ago when we first came before you, we think we’ve estab­lished a clear, a trans­par­ent and an open process. We think we’ve exe­cut­ed on that, and that will not yield grounds for protest.

Q: Do you believe that over the decade that it’s tak­en to get to this point in find­ing a new tanker has taught the Depart­ment of Defense a les­son that will help in the future in major pro­cure­ment process­es so that it doesn’t take a decade and three dif­fer­ent selec­tion process­es to buy some­thing so impor­tant to our nation­al defense?

MR. LYNN: I do think we’ve learned impor­tant lessons from this process, and we’ve tried to reflect them in this com­pe­ti­tion, the way we’ve struc­tured it.

And maybe let Ash expand on that.

MR. CARTER: Learned a num­ber of lessons. We’ve cer­tain­ly had the require­ments this time absolute­ly clear from the warfight­er. We said that 366 days ago when we released the RFP.

And also, the con­tracts are fixed-price con­tracts, which is reflec­tive of our belief that this is a tanker that can be well-spec­i­fied and well-defined so that it’s appro­pri­ate con­tract struc­ture. So in many ways, this reflects our efforts to deliv­er bet­ter val­ue to the tax­pay­er and the capa­bil­i­ty of the warfight­er in a bud­get cir­cum­stance which we all real­ize is not going to give us more and more mon­ey every year. So we’re try­ing to man­age to a bud­get, and this is reflec­tive of the kind of dis­ci­pline in acqui­si­tion that’s required.

Q: Ali­son Burns with KIRO in Seat­tle.

Is it your under­stand­ing that this tanker will be built in Everett, Wash­ing­ton? And what are — what is your mes­sage today for those Boe­ing work­ers?
And of course, Gen­er­al Schwartz, we’d love to hear from you.

MR. LYNN: I think we think both com­pa­nies did a ter­rif­ic job. Boe­ing was the suc­cess­ful offer­er. But as Sec­re­tary Don­ley indi­cat­ed, they both were strong offer­ings.

And let me let Gen­er­al Schwartz chime in.

GEN. SCHWARTZ: I would just say that I’m pleased with how this has pro­duced an out­come after an exhaus­tive effort by hun­dreds of the department’s very best peo­ple, that we will get about deliv­er­ing the capa­bil­i­ty that’s long over­due and will stop talk­ing about it.

MR. LYNN: (Inaudi­ble.)

Q: Is the air­port still going to pur­sue its KCY and KCZ strat­e­gy to replace their remain­ing tankers?

MR. LYNN: Yes, there will be fol­low-on.

Q: When do you plan to sign the con­tract, if you haven’t signed it already? And will you allow for work to begin before the protest peri­od runs out, or are you going to wait to find out if there’s a protest to begin work?

MR. CARTER: Let me answer a part of that. Yes, the con­tract is signed, or will be very short­ly. And the — we gave autho­riza­tion for that this after­noon. And work will be able to begin. Obvi­ous­ly, we’re mind­ful of the process of debrief­ing the offer­ors and hav­ing them absorb the infor­ma­tion and so forth, but we’ll get start­ed — (inaudi­ble).

Q: When is that debrief­ing sched­uled?

MR. LYNN: It hasn’t been — they have to request it.

Q: Oh.

MR. LYNN: But it’s avail­able as soon as they request it.

Q: Okay.

Q: Quick ques­tion, Mr. Carter. For the sec­ond and third phas­es, if you can be clear, Boe­ing is not guar­an­teed those phas­es, are they?

MR. CARTER: That’s cor­rect. This is for the first 187 air­craft. There will be in the —

MR. LYNN: One hun­dred sev­en­ty-nine.

MR. CARTER: I’m sor­ry, 179. I apol­o­gize. One hun­dred sev­en­ty-nine air­craft.

Q: So that’s not (win­ner take all ?) for all three phas­es.



Q: Thank you.

Q: EADS was very con­fi­dent that they had the bet­ter plane at the bet­ter price. Do you antic­i­pate that they will protest? And if they do, what would that mean for the pro­duc­tion time­lines?

MR. LYNN: As I indi­cat­ed, the unsuc­cess­ful offer­or has the oppor­tu­ni­ty to pur­sue a protest if they think they have the grounds. We think we’ve put togeth­er a process that was fair, open and trans­par­ent and that does not pro­vide grounds for a protest.

Q: Can you say how past per­for­mance fig­ured in to the eval­u­a­tion cri­te­ria for this com­pe­ti­tion?

MR. CARTER: Past per­for­mance was part of the manda­to­ry require­ments, so it was a require­ment to become a qual­i­fied offer­or. Both of the offer­ors passed that test and were qual­i­fied, along with all the oth­er cri­te­ria that Sec­re­tary Don­ley men­tioned, that qual­i­fied ful­ly both of these offer­ors to par­tic­i­pate in the com­pe­ti­tion.

STAFF: I think we’ll take one, maybe two more here.

Q: Do you have any more infor­ma­tion on how the over­sight process was han­dled with­in OSD, as far as — (off mic)?

MR. LYNN: Ash?

MR. CARTER: The source selec­tion, as we indi­cat­ed, was in the Air Force, and it was an indi­vid­ual in the Air Force who was the source selec­tion author­i­ty, as we indi­cat­ed when we issued the RFP. There were mem­bers of my staff from OSD and else­where in the depart­ment, both experts and over­seers, that par­tic­i­pat­ed in the tech­ni­cal eval­u­a­tions and also who ensured that the process was free and fair in the way that — and fol­lowed the rules of the RFP issued a year ago.

Q: Have you got­ten any indi­ca­tion from EADS whether they will protest? Do you expect one?

MR. LYNN: Just before com­ing on, we informed both offer­ors of the results. That’s all that’s been done.

Q: Can you give us more of a sense of how many of those manda­to­ry require­ments EADS was unable to meet? And you said it was more than 1 per­cent? How many —

MR. LYNN: Both com­pa­nies met all the manda­to­ry require­ments.

STAFF: All right, I can’t count very well, but we’ll do one more. Mr. Sec­re­tary, you pick the last one.

MR. LYNN: (Name inaudi­ble.)

Q: Three years ago you select­ed EADS. And back then, you said this was the best val­ue for the gov­ern­ment. Now you’re select­ing Boe­ing. Our under­stand­ing is their design hasn’t rad­i­cal­ly changed. How can you account for that turn­around?

MR. LYNN: We — I can’t account for how the pri­or com­pe­ti­tion went. I think we struc­tured a com­pe­ti­tion that was fair, that was based on a vari­ety of fac­tors, includ­ing price, includ­ing warfight­ing capa­bil­i­ties, includ­ing life-cycle costs. And Boe­ing was the clear win­ner of that process.

STAFF: All right, folks. Thank you very much.

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)

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