AY 2014-2015

Acquisition of the KC-46 Pegasus: A Grand Experiment in Strategic Agility

LT COL SCOTT A. DICKSON

USAF SEMINAR 19

DR STEPHEN BASILE, PRIMARY FACULTY ADVISOR The Dwight D. Eisenhower School

for National Security and Resource Strategy National Defense University

Fort McNair, Washington, D.C. 20319-5062

The views expressed in this paper are those of the author and do not reflect the official policy or position of the National Defense University,

the Department of Defense or the U.S. Government.

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ACKNOWLEDGEMENTS Analysis of this depth in so short a period of time relied on the shoulders of many who painstakingly gathered data over the past seven years and graciously shared it with me. My sincere thanks to Lieutenant General Christopher Bogdan and Lieutenant General John Thompson of the United States Air Force for supporting interviews despite their busy schedules. As former KC-46 Program Executive Officers, their insights into the political and strategic complexities of the KC-46 program grounded this paper and allowed for early and timely research decisions into key topic areas.

Most of the data relied on the extensive research conducted by Mr James “Jimmy” Carter, retired Defense Acquisition University professor, who generously donated binders of research spanning eight feet of shelf space, documenting the two source selection periods from 2006-2010. His dedication to his students and the field of acquisition are exemplary and I hope this paper lives up to his expectations.

Also, interviews from numerous past and present KC-46 program management professionals including Dr Pasquale Gambatese, prior Director of KC-46 Development and Production, and Lt Col (Ret) Stephen Rajotte, prior Director of Test, provided key dates to document the program’s timeline as well as insights into the program’s successes and challenges. Incorporation of the different programmatic, financial, and technical perspectives into the paper relied on their selfless participation.

Finally, heartfelt thanks to my peer reviewers, professors, and family who poked and prodded the analysis as I crafted it. I am proud of this work foremost as a product of the relationships in my life rather than any thoughts within it.

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EXECUTIVE SUMMARY To match the pace of change and capture opportunities to incorporate new technologies

and improve existing systems, the Department of Defense should instill strategic agility into its acquisition processes. Strategic agility combines the attributes of flexibility and adaptability to increase the U.S. capability development rate. The tension within the iron triangle of the U.S. legislative branch, executive branch, and industry, coupled with globalization, complicates the challenge. To provide strategic agility, DoD leaders have historically reformed the acquisition process, attempting a new approach or resurrecting a previously less effective approach. Arguably, the KC-46 tanker acquisition program is the latest experiment in determining an effective and efficient acquisition model to deliver strategic agility. As Program Executive Officers, Major General Christopher Bogdan and Major General John Thompson led the program through the initial source selection, preliminary design, final design, and early test phases of the KC-46 Pegasus in the fiscally challenging environment from 2006-2014. The program’s focus on minimizing total aircraft lifecycle costs led to several key decisions regarding acquisition strategy, competition, certification considerations, and program execution. The program succeeded by addressing political concerns early, basing source selection on achievable technologies, shortening delivery time, and empowering program managers during execution. Despite experiencing development and production challenges throughout the last eight years, the GAO in April 2015 reported KC-46 program cost down 5.4% over the past four years with an estimate at completion of $48.9 billion, down from 51.7 billion, mostly due to minimizing engineering changes and changes in construction plans.

Some argue the KC-46 is a limited example of acquisition since its commercial derivative nature significantly lowered technical risk, allowed use of a fixed price contract, and simplified

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execution. However, execution wasn’t simple, encountering several technical challenges including ones which commercial-derivative use were meant to obviate. The program needed and demonstrated strategic agility to adapt to the changing acquisition environment.

Competition, leadership, communications and strategy allowed the KC-46 program to adapt despite a changing acquisition environment. Heated competition – driven by a clear and compelling need – set the stage for constructive leadership involvement and transparent communication leading to a risk-capped acquisition strategy. Leadership engagement – early, consistently and at all levels – allowed for stable requirements throughout the planning, design, and testing process and supported adaptation during execution. Transparent communication to all stakeholders – early, consistently and at all levels – allowed for stable funding throughout the adaption process. An acquisition strategy, forged by the competing interests of the iron triangle and pushing risk to stakeholders most able to manage it, provided a successful framework for adaptive planning and execution of the first FPIF ACAT 1D program in twenty years. As the 114th session of Congress examines acquisition reform, these fundamental attributes, present in the KC-46 program, provide a sound basis for strategically agile acquisition.

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“We can help the Department of Defense reform itself by developing a weapons procurement process that directly responds to the root causes of failure by, for example, starting programs on a solid foundation of knowledge with realistic cost and schedule estimates and budgeting to those estimates; locking in sufficiently defined requirements early; managing the cost, schedule and performance trade-space effectively to ensure that needed capability is procured within a fixed, reasonably short period of time; insisting on early and continued systems engineering; leveraging mature technologies and manufacturing processes; not procuring weapon systems that promise generational leaps in capability in a single bound; and definitely not doing so under cost-plus contracts.

- John McCain, Senate Testimony, December 15, 2011 According to USAF Chief of Staff, General Welsh, “The Air Force’s ability to continue

to adapt and respond faster than our potential adversaries is the greatest challenge we face over the next 30 years.”1 Coined as strategic agility, it combines the attributes of flexibility and adaptability to increase the Air Force’s national security capability development rate to match the pace of change and opportunities to incorporate new technologies and improve existing systems.2 On the surface, Senator McCain’s comments from his 2011 testimony seem to violate strategic agility, trading flexibility and adaptability for predictability and maturity. However, against the backdrop of the KC-46 tanker acquisition program, a deeper examination may reveal a possible acquisition model for these concepts to coexist. While the U.S. defense industrial base works to operate within sequestration, the Department of Defense’s (DoD) acquisition community, with the support of Congress, must refine the current acquisition business model to encourage heated competition, early leadership involvement, and transparent communication to support the USAF’s, and other services’, need for strategic agility.

This tension between the legislative, executive, and industry, known as the ‘iron triangle’, is not new, although the accelerating pace of technology and globalization rapidly changes the operating environment. To meet these environmental changes, DoD leaders have historically tweaked the acquisition process to find a better balance point and, through these efforts, defense procurement has steadily improved towards achieving predicted cost and schedule targets over

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the past five decades3. Occasionally, DoD leaders attempt a new approach, or resurrect a previously less effective approach, to measure its effects in the current environment. Arguably, the KC-46 tanker acquisition program was the latest experiment in determining an effective and efficient acquisition model to deliver that balance.

Discussion and decisions surrounding the initial KC-767A Tanker Lease Program in 2000-2005 provided a controversial start for tanker acquisition and ultimately led to the DoD’s decision to purchase a next generation tanker to replace the U.S. aging KC-135 tanker fleet.a The purchase approach for this acquisition category (ACAT) 1D program, built upon the framework of a commercial derivative aircraft using a fixed price incentive firm (FPIF) contract with stable requirements and funding, had not been used by the United States Air Force since the failed A-12 program over twenty years ago. Program Executive Officers Major General Christopher Bogdan and Major General John Thompson led the KC-46 program at Wright-Patterson AFB through the initial source selection, preliminary design, final design, and early test phases of the KC-46 Pegasus in the fiscally challenging environment from 2006-2014. Their focus on minimizing total aircraft lifecycle costs throughout the time period led to several key decisions regarding acquisition strategy, competition, certification considerations, and program execution. With upcoming KC-Y and KC-Z tanker procurement decisions ahead, a review of the KC-46 program’s execution from 2006-2014 will allow senior policy makers and acquisition professionals to determine whether the KC-46 model represents a significant improvement on current acquisition processes to achieve strategic agility.

As a basis for discussion, this case study builds an initial political chronology of program events and decisions towards the final KC-46 source selection to appreciate the impacts of the a For a complete understanding of the discussion and decisions, read Shahnaz M. Punjabi’s case study entitled “The Iron Triangle Manifested: U.S. Air Force Tanker Lease, 2001-2005.”

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military industrial complex’s iron triangle on the competitive process and the eventual acquisition strategy. Then, key risks and benefits of the acquisition strategy – contract type, compressed schedule, commercial derivatives – are explored to better understand the potential trade-offs and decisions by Generals Bogdan and Thompson during program execution. Building from that understanding, the paper reviews the competing interests surrounding select Engineering and Manufacturing Development (EMD) phase friction points – requirements management, schedule concurrencies, certifications – to analyze early acquisition strategy and execution decisions to adaptively balance cost, schedule, and performance to meet war-fighter needs. Finally, the conclusion summarizes the key principles needed for a strategically agile and adaptive acquisition approach. Building to the Final Source Selection In the 2005 National Defense Authorization Act (NDAA) passed on 28 October 2004, Congress prohibited the United States Air Force from executing a tanker lease program and allowed pursuit of a multiple year procurement for KC-X aircraft to replace the Air Force’s aging KC-135 tanker fleet. This guidance effectively closed extensive lease discussions spanning the previous five years and provided a crucial foundation for a multiple year procurement program; however, the Air Force still needed to decide on the best framework, or acquisition strategy, for the procurement.

Preceding the release of the 2005 NDAA, the DoD Inspector General (IG), at the request of the Deputy Secretary of Defense, published an audit report on the KC-767A Tanker Lease Program, stating the Air Force “used an inappropriate procurement strategy and demonstrated neither best business practices nor prudent acquisition procedures to provide sufficient

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accountability.”4 In an attached letter to the Deputy Secretary of Defense, the DoD IG recommended three options in further pursuit of a new tanker: 1) Proceed with the sole-source acquisition of the Boeing KC-767A Tanker Program for 100 or fewer aircraft, 2) Initiate a new major defense acquisition program (MDAP) based on the results of an analysis of alternatives (AoA) for military tanker aircraft, or 3) Implement a mix of option 1 and option 2 depending on the number of tankers required.

While the IG report was not directive and the Air Force non-concurred with nearly all the recommendations of the report5, the DoD and the Air Force initiated option 2, a new MDAP based on the results from the 2004 KC-135 Recapitalization AoA . The DoD IG report highlighted two main issues which were foundational concerns for the new MDAP including insight into pricing and the overall acquisition strategy. Specifically, the DoD IG stated,

No commercial market for this tanker aircraft exists in order to establish reasonable prices by the forces of supply and demand. Consequently, the commercial item procurement strategy did not provide the Air Force with sufficient cost or pricing data to make multi-billion dollar decisions for the Boeing KC-767A Tanker Program and did not demonstrate the level of accountability needed to conclude that the prices negotiated represent a fair expenditure of DoD funds (Issue A). The Air Force used Section 8159 of the Department of Defense Appropriations Act for FY 2002 to justify its informal acquisition strategy with the primary goal to expeditiously lease 100 Boeing KC-767A Tanker aircraft to replace its aging KC-135E Tanker fleet. In doing so, the Air Force did not demonstrate best business practices and prudent acquisition procedures in developing this program and did not comply with statutory provisions for testing (Issue B).6

Level of accountability, reasonable prices, sufficient cost or pricing data, best business practices, and prudent acquisition procedures were significant terms, resonating with Congressional leaders. Not surprisingly, these principles formed the backdrop for the future KC-46 program. Based on lessons learned from the terminated Tanker Lease program, Senior leadership, including Undersecretary of Defense for Acquisitions, Technology, Logistics (AT&L) Mr. Kenneth Krieg; Acting Secretary of the Air Force Mr. Michael W. Wynne; Assistant Secretary of the Air Force for Acquisition

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Ms. Sue C. Paytonb; and Air Force Chief of Staff General T. Michael Moseley, elected to pursue a competitive acquisition strategy to procure a KC-X, slating the next generation tanker as the Air Force’s number one acquisition. Earlier in 2004, Michael W. Wynne, as Acting Under Secretary of Defense AT&L, initiated an Air Force AoA for KC135 recapitalization and, on 28 May 2004, a Senior Steering Group selected RAND Project AIR FORCE to conduct the study.7 Overall, RAND considered the following alternatives for recapitalization: newly purchased commercial-derivative tankers, used commercial-derivative tankers, newly purchased military-derivative tankers, newly designed tankers, unmanned aerial vehicles as tankers, stealthy tankers, fleets comprised of a combination of all options, and commercial sources for air refueling.8 In March 2006, RAND delivered the 1900-page final report to Office of the Secretary of Defense (OSD) which the Program Analysis and Evaluation (PA&E) directorate of OSD and the Institute for Defense Analyses (IDA) reviewed for sufficiency, objectivity and methodology.c From those reviews, OSD (AT&L) concluded, ”the Defense Department has high confidence that the results of this AoA are robust and provide a sound basis for KC-135 recapitalization” 9 The study’s report was subsequently released in April 2006.

In focusing the effort, the study answered two questions in regards to each alternative, “What is the most cost-effective alternative for replacing the KC-135?” and “When should the recapitalization assets be acquired?” with the answer to the second question dependant on the answer to the first. Besides aerial refueling, the study’s cost analysis discussed access characteristics and cargo capability as two additional cost effectiveness discriminating factors. However, the cost-effectiveness of these two factors varied widely depending on the operational

b On April 25, 2006, Sue Payton was appointed by President George W. Bush to this office. Payton joined the Department of Defense in 2001 when she was named Deputy Under Secretary of Defense for Advanced Systems and Concepts. Her role in the Tanker Lease program is unknown. c PA&E conducted a sufficiency check and IDA conducted the objectivity and methodology review. PA&E found the study sufficient and IDA concluded the study was objective and the methodology sound.

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use scenario selected.d To provide consistent and repeatable analysis, these factors were not included but the study recommended senior decision makers consider them in the final decision.e In determining when to begin acquiring, the analysis assumed the last replacement tanker would be procured no later than 2050, based on the then-planned retirement of all KC-135 tankers. Varying start dates and durations were analyzed between 2011-2041 and between 10-40 years, respectively.

From this analysis, RAND concluded the most cost-effective solution was the newly-purchased commercial derivative in the medium to large size range (300,000 to 1,000,000 pounds maximum gross takeoff weight).f These included aircraft based on the Airbus 330, the Airbus 340, the Boeing 767, the Boeing 787, the Boeing 777, and the Boeing 747. Also, the study stated, “there is no reason to exclude a priori an Airbus-Boeing mixed buy on cost-effectiveness grounds.”10 Significantly, the study asserted this alternative was very sensitive to the “green” aircraft price, or the price of the commercial derivative aircraft prior to integration with military systems. Therefore, the study concluded a sound acquisition strategy pursuing a commercial-derivative solution should be based on acquiring the lowest possible green aircraft price.g

d Access characteristics, such as required parking area, varied the cost-effectiveness upto 6%. Cargo capability, depending on configuration, varied the cost-effectiveness upto 30%. e Access characteristics were defined by the alternative’s parking requirements and number of airfields. Cargo capabilities, the ability to carry passengers or cargo, were not included in the analysis as they would add additional costs outside of the primary aerial refueling role. The study suggested senior decisionmakers should weigh the benefit of these additional factors in their final decision. The first source selection only considered them in Factor 1; in the second source selection, these factors were also considered in the IFARA adjustment. f Used commercial derivative aircraft were a potential alternative if the need for electronic survivability in a nuclear environment was not required. Additionally, based on the number of used aircraft available at the time of the study, the market could only provide 10-25% of the replacement tanker requirement. g In retrospect, integration of military systems into the “green” aircraft would be troublesome for the program as mentioned later, potentially effecting Boeing’s total contract cost and the program’s schedule.

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A review of reasons why other alternatives, particularly newly-developed tankers and unmanned tankers, were not deemed cost effective yields interesting foreshadowing for future tanker acquisition decisions. The study acknowledged newly-developed tankers could provide aerodynamic efficiencies and tanker-specific cost-saving features; however, the study concluded the increased research and development costs of a brand-new tanker coupled with the associated higher production costs with a new design would not overcome the savingsh. The report specifically highlighted, “Production costs are higher because there are no shared production-learning economies with a commercial version of the aircraft.”11 From this statement, the study obviously assumed some production cost-savings in the commercial-derivative alternative arising from production-learning economies. Interestingly for future KC-Y and KC-Z consideration, unmanned tankers were deemed to “offer no appreciable wartime benefits, and they have less operational flexibility than manned tankers.”12

With the AoA’s choice of a commercial derivative aircraft, the USAF still needed to address the study’s suggestion of a mixed-buy or split-buy strategy, i.e. two different aircraft from two different contractors, and whether it would be advantageous to the government. For Congressional members, a split-buy would spread needed jobs to a wider range of constituencies and, therefore, held political appeal. To what level the USAF or DoD considered this recommendation is unknown. Initially, this suggestion was ruled out and Mr. Krieg released the Tanker Replacement Acquisition Decision Memorandum (ADM) on April 13, 2006, outlining

h In effect, the study concluded the short-term development and production costs would outweigh the long-term fuel-savings benefits. With the DoD as the single largest energy user in the nation consuming $16.2B of petroleum in 2012 and estimating $16.9B in 2013, it seems unlikely fuel savings for 179 aircraft over 40 years would not account for the short-term development costs, especially when production-learning economies could be factored into later production lot buys.

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the program’s acquisition strategy. However, the question of a split-buy dominated the program’s conversation for the next two years.

From OSD’s ADM, the Air Force began the KC-X concept refinement phase which eventually culminated with Ms. Sue Payton’s release of the Request for Proposal (RFP) on January 30, 2007. The phase quickly began on April 25, 2006 with the release of a Request for Information which elicited a hearty eighteen responses from industry. The overall phase, lasting approximately eight and a half months, specified nine primary key performance parameters in Table 1 (KPP), refined over 800 tanker requirements, and ended the Joint Integrated Capabilities and Development System (JCIDS) requirements process which had begun in November 2004 as part of the Tanker Lease program. The effort produced two draft RFPs for review, the first on September 25, 2006, and a second one on December 15, 2006i, providing adequate time for coordination from all affected agencies. The Air Force was confident of success as “Payton stressed that the department has gone through a rigorous review process for KC-X and has validated that the RFP accurately reflects the requirements as laid out by the warfighter.”13

On April 10, 2007, the Air Force received two proposals, one from The Boeing Company proposing the KC-767, a variant of their 767-200 Long Range Freighter commercial airliner, and i Important to later developments, the Request for Proposal only covered the system development, demonstration and production for 80 KC-X aircraft, rather than the 179 aircraft intended in the KC-X increment of the next-generation tanker.

Key Performance Parameters (KPP) Air Refueling Capability Fuel Offload and Range at least as great as KC-135 Compliant Communication, Navigation, Surveillance/Air Traffic Management equipment Airlift Capability Ability to Receive Fuel while Airborne Sufficient Force Protection Measures Ability to Network into the Information available in BattleSpace Survivability Measures Provisioning for a Multi-Point Refueling System to support Navy /Allied receivers

Table 1: KPPs from First KC-46 Request for Proposal

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the other from a combined Northrop Grumman and European Aeronautical Defense and Space Company (NG/EADS) team proposing the KC-30 (later called the KC-45), which was a variant of their Airbus 330-200 commercial aircraft. For clarity, Airbus, in 2007, was the name of the commercial aircraft division of parent company EADS; later, in 2014, EADS assumed the name Airbus Group and is now commonly called Airbus.j With the proposals in hand, the Air Force conducted the mandatory training of its source selection team over the next two months and the proposal evaluation period began. In November 2007, Ms. Sue Payton explained the evaluation criteria to each offeror with the Air Force weighing the first three evaluation factors (1-3) equally and the second two factors (4-5) equally but of lesser importance to the first three (see Table 2). Confusingly, the Air Force also emphasized “Factors 1, 2, 3, and 5, when combined, [to be] significantly more important than factor 4.”14 The emphasis on the combined value of mission capability, proposal risk, past performance, and air refueling assessment over the cost/price suggested the Air Force’s commitment to a “best value” solution over a “lowest price, technically acceptable” one. However, this emphasized rule logically contradicted earlier weightings and, in hindsight, suggested unforeseen future complexity in evaluating the proposals against the criteria. j In 2014, EADS assumed the name Airbus Group and reorganized its divisions into Airbus, Airbus Defense and Space, and Airbus Helicopters.

KC-X Evaluation Factors Factor 1 Mission Capability Subfactor 1.1 Key System Reqts 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 Factor 3 Past Performance Factor 4 Cost/Price Factor 5 Integrated Fleet Air Refueling Assessment Table 2: KC-X Evaluation Criteria from First Request for Propsal, provided by http://dailyreport.afa.org/AFA/Reports/2007/Month11/Day21/1028factors.htm

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With the Air Force evaluating two proposals, public conversation returned to a split-buy strategy, possibly offering both contractors a portion of the 179 aircraft. This approach, used during the A-10 ammunition program, the Tomahawk missile program,15and the F100 engine program,16 would require amending the initial RFP but, based on previously discussed Congressional desires, might be warranted. In July 2007, Dr Jacques Gansler, previous Under Secretary of Defense for Acquisition, Technology and Logistics from November 1997 until January 2001, presented a briefing on competitive dual sourcing versus a sole-source or non-competitive split-buy. Though demonstrating a potential $16.6B savings on a 50%-50% split-buy, the approach required the Air Force to absorb an additional year of testing to the schedule, increased up-front research and development costs, and recurring costs of maintaining two KC-X aircraft. On the other hand, a competition between the two solutions should encourage innovation, enhance quality, remove dependency, reduce production cost, and strengthen the overall industrial base.17

Air Force staff officers crafted and circulated two point papers highlighting these elements of Gansler’s compelling argument to Department leadership. Ultimately, Secretary of Defense Gates commented in a September 18, 2008 letter to Congressman Ike Skelton, “While [dual award] may appear attractive…it would result in significant additional expense (billions of dollars) to the taxpayers…I would strongly oppose such an approach and recommend a veto to the President should such a directed acquisition strategy be presented in legislation.”18

The Air and Land Forces Subcommittee of the Armed Services House Committee requested the GAO examine the Air Force’s KC-X program competition strategy and various alternatives. In a September 18, 2007 briefing, the GAO concluded the Air Force did consider other alternatives, including a split-buy, but, due to budgetary pressures from near term

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development constraints and the $3 billion ceiling on future annual KC-X procurements, did not conduct a comprehensive business case analysis to consider total life cycle costs.19 The GAO highlighted eleven areas for additional consideration, including effects on competitor’s economic production rates; and training, supply, and maintenance operations impacts.20 In response, Congressman Murtha, in a September 26, 2008 article to Defense Daily, countered, “Let me tell you, we’re not going to have tankers if we don’t do that [dual award], I’m convinced…There’ll be a protest, no matter who wins the next competition. So I’m trying to convince both sides, look, put your best plane forward as it is.”21 Boeing’s Tanker Program Manager, Mark McGraw, stated on December 10th,

"The bottom line for us is that we are really not interested in a split-buy. We are in this for winner take all. That is how the competition was defined. That is how the acquisition strategy that the Air Force has approved is defined. If you wanted to go [to] a split-buy that would pretty much stop the competition and [it would] have to be done over again…The investments, business cases, all that kind of stuff that each competitor is putting forward is assuming a winner-take-all outcome."22 Ultimately, the single-source strategy was maintained. The exact reasons are unclear and, despite the closure of the Tanker Lease program, tensions continued to heighten between Congress, the Department of Defense, and the military-industrial base while over 150 Air Force personnel deliberated on the source selection.23

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The Air Force initially chose to award the KC-X acquisition to a single producer, the NG/EADS team, and their commercial derivative Airbus A330 proposal, on February 29, 2008. While both firm’s proposals were determined to be advantageous to the government and many of the proposal ratings are equal in Table 3, the evaluation favored the A330 in mission capability, past performance, cost/price, and the air refueling assessmentk.24 Specifically, the source selection authority found that “Northrop Grumman’s proposal was better than Boeing’s proposal in four of the five factors evaluated and equal in one.”25 This selection stunned the aviation industry.26 Not surprisingly, on March 11, 2008, in accordance with procurement regulations, Boeing lodged an official protest against the award to the Government Accountability Office (GAO), highlighting 111 protest allegations against the selection and “challenging the Air Force’s technical and cost evaluations, conduct of discussions, and source selection decision.”27 Removing all doubt on the selection’s importance to the military-industrial complex, this was the first time in eight years Boeing protested a contract loss.28

After deliberating on the allegations, reviewing the Air Force’s source selection information, and conducting numerous hearings, the GAO sustained 8 of the 111 allegations in k The Integrated Air Refueling Assessment used a factor of 1 as equivalent to a KC-135 aircraft. Values higher than one are considered better than capability provided by the KC-135.

KC-X Evaluation Factors Boeing NG/EADS 1: Mission Capability/ 2: Proposal Risk 1.1: Key System Reqts Blue / Low Blue / Low 1.2: Subsystem Integration and Software

Green / Mod Green / Mod 1.3: Product Support Blue / Low Blue / Low 1.4: Program Management Green / Mod Green / Mod 1.5: Technology Maturity and Demonstration

Green Green

3: Past Performance Satisfactory Satisfactory 4: Cost/Price $108.044B $108.010B 4.1 Cost Risk SDD / Prod Phases Mod / Low Low / Low 5: Integrated Fleet Air Refueling Assessment 1.79 1.90 NOTE: The Table lists Mission Capability and Proposal Risk ratings for each subfactor, separated by a slash Table 3 : 2008 USAF KC-X Proposal Evaluations

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an June 18, 2008 report (see Figure 1).l Put simply, the GAO condemned the fair and openness of the selection process, not the ability of either aircraft to meet the Air Force’s requirements. This point and the actual findings framed future actions and rhetoric from all sides of the iron triangle.

Reactions varied depending on the agency’s self-interests. Boeing thanked the GAO for their professionalism and diligence. The Air Force insisted the decision process was fair and transparent, mindful of perceptions and the ongoing re-competition of the CSAR-X helicopter program where the GAO had upheld Sikorsky’s and Lockheed Martin’s protest regarding the decision. Recompeting the tanker contract would further delay the Air Force’s number one acquisition program and extend, once again, the timeline in replacing the aging KC-135s. To mitigate this risk, Defense Secretary Gates announced the next KC-X source selection would be an expedited recompetition.29 Congressional responses varied depending on whether the Congressman’s constituency benefited from the decision. Unwilling to accept any tarnish on an l Interestingly, the GAO emphasized their findings did not address the respective merits of the two solutions but addressed failings within the process.

The Air Force Did not evaluate the offeror’s technical proposals under the Subfactor 1.1 Did not include in the Request for Proposal a key aerial refueling discriminator within Subfactor 1.1 which was used in favor of the NG-EADS proposal Did not properly evaluate the NG-EADS aircraft’s ability to refuel all current Air Force aircraft Conducted misleading and unequal discussions with Boeing in regards to the operational utility area of Subfactor 1.1 NG-EADS proposal took exception to a material solicitation requirement relating to Subfactor 1.3 Did not reasonably evaluate military construction costs Unreasonably evaluated Boeing’s estimated non-recurring engineering costs associated with its proposed system development and demonstration

Figure 1: Government Accountability Office's 2008 Sustained Finding on KC-X Award decision

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estimated $35B procurement and desiring to maintain open and fair competition, the Department of Defense rescinded the contract award, appointed a new leader, Mr. John Young, Undersecretary of Defense, AT&L, in charge of source selection source, and established a new goal of re-awarding the contract by December.30 Not directly spoken, removal of the source selection process from the Air Force was not a vote of confidence to Air Force acquisition.

DoD’s initial objectives were to address each of GAO’s process concerns and amend the existing RFP by adding clear weightings to each of the criteria, allowing each offeror to resubmit. However, politics prevented this timeline. With the looming 2008 Presidential election pitting Senators Barack Obama and John McCain, the Bush administration decided to delay the decision for the next administration after the election. The additional time also allowed DoD and the Air Force to thoroughly fulfill each objective. On September 10, 2008, Secretary Gates called for a ‘cooling-off period’ stating, “Over the past seven years, the process has become enormously complex and emotional.”31 With this delay, each participant in the iron triangle evaluated how the new plan and administration would affect the decision calculus.

Nonetheless, Air Force warfighters still required a new tanker with warfighting capability; Air Force and DoD leadership needed to maintain a fair and competitive acquisition strategy to achieve that capability at a sensible price. The next year was filled with rhetoric and political posturing surrounding four main questions: 1) Are the requirements adequately defined; 2) Is the proposed source selection criteria fair and transparent, particularly in light of the World Trade Organizations ruling on foreign subsidies; 3) Should the Air Force be in charge of the source selection; and 4) Is a split-buy decision in the best interest of the nation.32 From a credibility point of view, DoD leaders understood the Air Force needed to retain source selection

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authority and the cooling-off period succeeded in that regard. OSD allowed the USAF to maintain source selection authority with oversight, as always, by OSD.

Additionally, the GAO report highlighted numerous confusing and conflicting requirements in the original RFP, precluding any real argument over the need to revise the value-based RFP. However, the scope of the revisions was hotly debated by the entire military-industrial complex. What requirements are mandatory and non-mandatory? Who decides? How will the non-mandatory requirements be used in the case of a tie? The questions focused around the issue of how value would be decided by the government, as this would ultimately determine the winner. As USAF Secretary Donley stated in a September 24, 2009 briefing, the second RFP trimmed the initial 800+ requirements with 37 mandatory ones down to 373 mandatory requirements with 93 trade-space or non-mandatory ones. While the actual number of requirements did change, Secretary Donley stressed that “we undertook significant changes, without changing the requirements but to make a better linkage between the requirements written by the warfighter and the RFP that’s going out tomorrow…”33 Establishing a link between the warfighter, who knows what he needs, and the published document was critical in re-establishing process credibility while reasserting a fair and open competition.

With an established link between requirements and war-fighter value, conversation switched to cost calculations and the inclusion of foreign trade subsidies within the calculation. On September 4, 2009, the World Trade Organization (WTO) delivered a preliminary ruling in favor of a case submitted in 2005 by the United States on behalf of Boeing where the United States claimed the European Union (EU) subsidized tens of billions of euros in ‘launch aid’ to EADS/Airbus.34 In counterclaims, the EU contended the United States provided Boeing at least 24 billion dollars since the 1980s.35 While this ruling complicated the messaging of the RFP, the

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government could not establish a precedent on a preliminary ruling with a final ruling possibly years away. Mitigation measures were appropriately implemented and clearly vocalized by Ashton Carter, then Undersecretary of Defense, AT&L stating, “We have, however, added a “hold harmless” clause to the draft RFP, meaning that any penalties assessed [to EADS/Airbus] in final rulings would not be passed to the U.S. taxpayer.”36

In a joint DoD-USAF announcement on September 24, 2009, the DoD ended the cooling period, briefing the public on its new KC-X competition strategy and explaining the new evaluation strategy. The new value-based evaluation strategy paralleled a lowest priced, technically acceptable approach where the lowest cost proposal meeting all 373 mandatory requirements would win. However, to assess value, the evaluation strategy included two interesting elements: life cycle price adjustment factors and the non-mandatory requirements. First, the total proposed price would be adjusted in terms of needed MILCON to support the proposed aircraft (MILCON adjustment), expected fuel usage rate assessment (FURA) over a 40-year time frame (FURA adjustment), and finally the number of aircraft needed to accomplish specific air refueling war-fighting scenarios (Integrated Fleet Air Refueling Assessment or IFARA adjustment). To ensure proposal accuracy with the fuel usage rates and protect taxpayer’s interests, the final contract would contain a price adjustment clause if the KC-X’s actual range fell below predicted. Finally, if any proposal’s adjusted price was within 1% of the lowest price, the ability of each offer to meet each non-mandatory requirement would be assessed on a pass/fail basis and the offer meeting the most would win. This evaluation strategy ensured war-fighters received a tanker which met all mandatory requirements, motivated competitors to offer their lowest price, and rewarded competitors for meeting non-mandatory requirements. This approach was later validated as a Best Practice by the Department of

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Defense in its Better Buying Power 2.0 philosophy, “The Department needs to improve its ability to define the value to the Department of performance that is above minimum levels so that it can make appropriate source selections and so that industry can bid intelligently.”37 In this source selection, the method of evaluation would be clear.

Like the fuel usage clause, the new RFP included several other unique aspects to increase competition and reduce government risk. The RFP mandated each proposal utilize FAA certification of the aircraft and systems to the maximum extent possible to leverage already accepted government safety processes and reduce the government’s exposure to schedule slips due to slow military certification. The proposal stated the government would not provide any equipment, known as government-furnished equipment (GFE), to an offeror, once again limiting government-induced delays, and subsequent liability, due to late arriving equipment. Finally, the proposal required each offeror’s CEO to certify the acceptance of all terms and conditions of the RFP, minimizing politics encountered during the protest period with upfront CEO involvement. In this RFP, the government clearly separated its schedule and cost risks from the contractor.

With these aspects in mind, Boeing and NG/EADS carefully considered their past bids against the new competition strategy. Northrop was concerned with their ability to compete.38 “On December 1, 2009, Wes Bush, the president and chief executive officer of Northrop Grumman, sent a letter to Under Secretary Carter stating that unless the draft RFP were revised substantially, Northrop Grumman would decline to bid in the KC-X competition.”39 In the letter, Northrop stated their belief the new request for proposal would favor a smaller tanker than the A330 and presenting a bid under these conditions would create “contractual and financial burdens on the company that we simply cannot accept.”40 EADS CEO chief executive Louis Gallois also voiced his opinion the following day, acknowledging the rules offer a "huge

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advantage" to Boeing.41 Pentagon spokesman Bryan Whitman responded that both offerors had suggested changes favoring their offering “but the Department cannot and will not change the warfighter requirements for the tanker to give advantage to either competitor.”42

On February 25, 2010, the Department of Defense released the 2nd request for proposal on the KC-X tanker program, consistent with the briefing from September 24, 2009. Differences between the draft RFP and the final RFP are listed in Table 4 with substantial financial differences reflected in out-year production lots. After reviewing the final RFP for over a week, EADS and NG withdrew from the competition on March 8, 2010. While the US government’s behind-the scenes efforts are unclear, Pentagon Press Secretary Geoff Morrell during a March 31, 2010 news briefing indicated EADS, without NG, wished to re-enter the competition, provided more time could be provided. Accommodating to maintain competition, the Pentagon agreed to extend the proposal sixty days to July 8, 2010, absorbing the additional time within their proposal evaluation period to maintain the same decision deadline.43 Some critics charged the extension provided unfair favoritism to EADS, especially in light of actions by Ukranian and U.S. team Antonov/Aerospace. Antonov/Aerospace submitted a bid after July 8, 2010, which the DoD refused to consider; the GAO denied their protest on October 10, 2010.

Derived from November 9, 2010 KC-X Program Review briefing Table 4: Differences between draft and final Request for Proposal

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With the additional time, EADS re-entered the competition with its North American division on April 20, 2010. Despite all of the discussion surrounding Boeing’s smaller aircraft advantage in the new RFP, two aspects now provided EADS a competitive edge: NG’s departure and the predicted softening of the Euro.44 With EADS now as the prime contractor, EADS could remove the estimated 10-15% margin claimed by NG from their bid price. Additionally, with the predicted strengthening of the US dollar against the Euro, a US contract would be worth more to European EADS in euros now than in the first selection, allowing for more aggressive bidding. With the new evaluation strategy only considering non-mandatory requirements if each proposal’s price was within 1%, EADS believed their chances were still competitive. "The answer really boils down to one of price," says Ralph Crosby, chairman of EADS NA. "Our risk is small because our development is advanced. This implies that our price for the [system development and demonstration] part of the contract may be lower. Our competitor hasn't fully defined their airplane, let alone started to build it. Their price will be a determinate of what they offer."45 EADS and Boeing both submitted bids on July 8, 2010 and the Air Force’s second evaluation period began on 10 July.

Potentially complicating the evaluation on June 30, 2010, the World Trade Organization(WTO) delivered a final ruling on the US/Boeing foreign subsidy case, deciding “that some launch aid subsidies Airbus received from European governments for its aircraft programs are ‘actionable’,” including the A330 on which the EADS tanker is expected to be based.46 “The cumulative effect of these subsidies over the last 40 years has been to ‘displace the imports of a like product of the United States into the European market,’ the WTO found. But it is not merely the European market from which U.S. exports were displaced. The panel cited Australia, Brazil, China, Taiwan, Korea and Mexico as other markets where Boeing lost

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market share due to illegal Airbus subsidies.”47 Equally of note, the WTO report stated the U.S. failed to prove that "through the use of subsidies, the European Communities and certain European Community member states [caused] injury to the United States' domestic industry” nor did the U.S. establish that subsidies resulted in "significant price undercutting by the subsidized product."48 In response to the EU-Airbus counterclaims, the WTO on September 15, 2010 released an interim report stating, “roughly one-quarter of the $10.4 billion in research aid from NASA, and only a portion of the $2.2 billion in tax breaks from Washington state [were determined] to be illegal subsidies…”49

From a trade perspective, these rulings affected the aircraft industry, yet DoD maintained U.S. law did not provide them the authority or require them to consider WTO rulings in their evaluation. USAF Secretary Donley was quoted as saying, “The judgment inside the executive branch—not just the Air Force or [Defense Department], but working with our interagency partners—is that it would not be appropriate for the Department of Defense, in a single contract action, to take action representative of a WTO decision.”50 Congress debated requiring the DoD to consider WTO rulings and the House passed HR 6540 on December 21, 2010 requiring the Secretary of Defense to consider “any unfair competitive advantage that an offeror may possess” and submit a report to Congress on such advantages51; however, the bill was never introduced in the Senate.

Meanwhile, the KC-X source selection team reviewed each proposal and competition clearly had driven prices down. Boeing’s total proposed price for the KC-X was $31.5B,

Boeing EADS 2002 Sole Source Lease $48B N/A 2008 Competitive Bid $42B $38.5B 2011 Competitive Bid $31.5B $35.1B Data derived from EADS North America presentation Table 5: KC-X Bid History

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approximately $16.5B lower than the original $48B 2002 sole source lease bid and approximately $10.5B lower than the 2008 competitive bid (see Table 5). With all proposals meeting the 372 technical performance requirements, the selection hinged on the war-fighter fuel usage, MILCON, and IFARA adjustments and whether each proposal’s adjusted price would fall within 1% of each other to consider the non-mandatory requirements. Throughout the summer and fall of 2010, the source selection team assessed each proposal, assessing all mandatory requirements, determining Factor 2 adjustments, and clarifying aspects of the proposals with each offeror. During clarifications, the SSP inadvertently delivered each of the opposing offeror’s IFARA data to the other offeror; however, no pricing or proprietary information was exchanged. In the end, while the EADS proposal benefited from having an already developed tanker with lower EMD cost, the Boeing proposal benefited from a cheaper production price (see Table 6). The non-mandatory requirements were not factored into the source selection decision since the other proposal was not at or within 1% of the lowest proposal’s total evaluated price. Based on the evaluation strategy, Boeing’s KC-46 proposal was the clear winner, setting the stage for General Bogdan to explain the results to the iron triangle and the competitors.

Factors Boeing EADS North America

Factor 1 Mandatory Requirements Acceptable Acceptable Factor 2 Total Proposed Price

(Present Value) $21.4B $23.4B

Fuel Usage $500M Advantage

MILCON $300M

Advantage

IFARA $800M Advantage

Factor 3 Non-Mandatory Requirements

Price Differential > 1% EMD $4.4B $3.5B

Total Evaluated Price (Present Value) $20.6B $22.6B Data derived from EADS North America Presentation Table 6: 2011 Competitive Bid Evaluations Factors

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However, convincing Congress of the result would not be easy. As previously mentioned, the House of Representatives passed bill H.R. 6540, with a vote of 325-23, requiring the Secretary of Defense to consider “any unfair competitive advantage that an offeror may possess” when evaluating KC-X bids and submit a report to Congress on such advantages.52 While intending to provide Congress information necessary to conduct its oversight role, it required the Secretary of Defense to determine fairness and publicly publish each offeror’s advantages and, by inference, disadvantages relative to the other offeror. The Senate did not pass the bill prior to the adjournment of the 111th Session; however, near the start of the next session on January 27, 2011, the Senate Armed Services Committee (SASC) held a hearing to determine if the laws and fair competition regulations had been appropriately followed. Whether an unwritten compromise, this public forum allowed Congress to perform its oversight and provided DoD and Air Force leaders an opportunity to update Congress on the proposal evaluation progress without publically divulging an offeror’s competitive advantages. This time around, Congress was convinced of the appropriateness of the process. On February 24, 2011, the United States Air Force publicly awarded the contract to Boeing.53 Yet, while politically acceptable, the selection held risk. Interestingly, the 2011 RFP guidance removed assessment of contractor performance and proposal risk from the source selection criteria. The GAO perceived evaluating proposal risk during the initial protest as a “double hit” since the USAF added risk dollars into the Cost factor.54 With the changes in the 2011 RFP guidance, evaluating past performance was considered a non-relevant discriminator for an approach with would most likely favor the lowest price, technically acceptable solution unless each proposal’s cost was within 1%.55 In the 2008 RFP guidance, risk was assessed, monetized, and used to adjust the Most Probable Cost to the government.

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As was previously mentioned, Boeing’s proposed aircraft design was new, albeit based on a proven commercial aircraft; EADS already had a flying aircraft in the Spanish and Australian Multi-Role Tanker Transport aircraft.m While the “fixed price incentive firm (FPIF)” nature of the contract limited Air Force cost liability, the Air Force had not attempted an FPIF contract of this size since the A-12 program over twenty years ago. Complicating the risk, shortly before the initial baseline review, Boeing declared the program’s cost would reach the contract ceiling, in essence acknowledging their total cost would exceed the bid price before starting the engineering and manufacturing development phase of the program.56 Under an FPIF contract, the government incentivizes the contractor to save costs by sharing the savings with the contractor in a pre-negotiated way until total costs exceed a fixed amount, known as the Point of Total Assumption, where the contractor assumes responsibility for all of the costs.57 Contrary to the acquisition strategy, Boeing’s early indication to exceed the bid price during development meant the incentive part of the FPIF would no longer motivate Boeing to share cost savings with the government, since they already expected to lose money on the development contract. After competition drove Boeing to reduce overall price 25% and their required assets available (RAA) delivery schedule from 90 months to 76 months, Boeing would work to recoup lost development money during the production run or any requirement changes during execution. To balance these actions, General Bogdan would need to tightly control follow-on production cost overruns and, most importantly, war-fighter requirements creep.

Adding to the risk, Boeing’s proposed development schedule was highly compressed to meet the 76-month RAA delivery deadline. For example, the schedule required the USAF to approve and commit to test plans prior to finalizing the aircraft design. As a commercial m Spanish Authorities certified the MRTT in October 2010 and the Australians received their first MRTT in June 2011.

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derivative aircraft, the success of the aggressive tanker schedule rested on Boeing’s success with producing commercial aircraft; however, to demonstrate the aerial refueling capability critical to the tanker, the contract required Boeing to certify the KC-X’s refueling interoperability with thirteen receiver capable aircraft. No previous tanker had ever been required to test to this level. These risks would color future decisions for Generals Bogdan and Thompson in the design and execution of the KC-46 MDAP. Designing the KC-46

After much debate, the iron triangle of Congress, DoD, and the industrial base had finally delivered an acquisition strategy and contractor to build the U.S.’s next generation tanker. Arguably, the KC-46 will represent a revolutionary leap in Global Reach; “For the first time in tanker aircraft history, delivery will include: defense capabilities; Chemical, Biological, Radiological, and Nuclear (CBRN) survivability; theater tactical data link (TDL); secure voice; global command and control (C2) data link; text chat and email with controlling Air and Space Operations Center (AOC).”58 Under the historical umbrella of the failed FPIF A-12 program, Generals Bogdan and Thompson had to transition broad requirements from the JCIDS-approved Initial Capabilities Document (ICD) into a specific design with Boeing’s commercial and military divisions as the contractor, the Federal Aviation Administration (FAA) as the certifier, Air Mobility Command (AMC) as the customer, and the strategic iron triangle as the funding stream. Balancing their competing interests into a producible, certifiable, effective, and affordable design was now the strategic problem. Aspects of the acquisition strategy complicated and clarified the balance; central to all were DoD’s consensus of stable requirements and subsequent promise of stable funding, built from the early turmoil of the source

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selection. In the end, through the entire team’s strong efforts, the KC-46 design and Critical Design Review (CDR) was completed three months ahead of schedule. To achieve that result, General Bogdan, as Program Executive Officer (PEO) into the Preliminary Design Review (PDR), and later General Thompson, as PEO into the CDR and thru the Test Readiness Review, coalesced competing interests to transform a commercial aircraft to meet next generation tanker requirements, manage commercial supply chain insights affecting the schedule, understand FAA certification within the construct of a commercial-derivative aircraft, and comprehend responsibilities of a first-ever robust tanker-receiver air refueling certification.

Throughout the design process, the structure of the development team, from Boeing to AMC to the Program Management Office (PMO), affected the program’s execution speed and schedule. By design, the PMO and AMC retained most of the personnel from the source selection team, minimizing spin-up time. To leverage Boeing’s already established commercial production processes, Boeing Defense Systems (BDS) created a primary KC-46 team which coordinated with the Boeing Commercial Aircraft (BCA) KC-46 team. Under this arrangement, BDS handled top-level management interfaces with the PMO and military component design allowing BCA to concentrate on commercial component design, integration, and production.59

Facilitating this structure and aligned with the acquisition strategy, KC-46 production was split into three phases: (1) building a Boeing commercial 767-200 Extended Range airplane; (2) provisioning to an intermediate 767-2C commercial freighter; and then (3) transitioning the freighter to the final KC-46 military aircraft. Originally, the first two phases would be accomplished at Boeing’s Everett, WA commercial facility and the final phase would be

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accomplished at Boeing’s Wichita, KS military facility.n Complementing this approach, the FAA would provide an Amended Type Certification (ATC) and Supplemental Type Certification (STC) following Phase 2 and the military would be responsible for the Military Type Certification after Phase 3, fulfilling the initial proposal requirement to utilize FAA certification to the maximum extent. This structure, while supporting best commercial and military practices, contributed positively and negatively to future program conduct.

With the contractual deadlines of April 2012 for PDR and September 2013 for CDR, the PMO, AMC, and Boeing worked to refine the requirements from the nine Key Performance Parameters (KPPs) of the Initial Capabilities Document into the tiered Level 1 specifications (L1) and finally into the Level 2 specification (L2). Despite the two source selections, the KPPs had changed only in wording, not concept, from the first KC-X source selection (see Table 1 and Table 7). While the DoD acquisition process produces an abundance of documentation, the creation and synchronization of three sets of documents primarily dominated KC-46 leadership’s attention: the tiered Air Vehicle Specifications (AVS), the tiered Support Systems Specifications (SSS), and the Test and Evaluation Master Plan (TEMP).

Strategically important, the TEMP, as a DoD coordination document, describes where and how a system will be verified and

n Later in the program, Boeing elected to create a KC-46 Transition Center at their Seattle, WA facility. Saving on transportation and integration costs, this movement had small impacts on the iron triangle as approximately 200 jobs were lost at the Wichita, KS facility in the process. Presciently, the move eased future concurrent actions due to complications arising in phase two.

KPP Requirement 1 Tanker Air Refueling Capability 2 Fuel Offload versus Radius 3 Civil/Military CNS/ATM 4 Airlift Capability 5 Receiver Air Refueling Capability 6 Force Protection 7 Net-Ready 8 Survivability 9 Simultaneous Multi-Point Refuelings

Table 7: KC-46 Final Key Performance Parameters

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requires approval through USAF and DoD senior leadership. From a military-industrial complex perspective, the TEMP lists what DoD-owned or industry-owned test and range facilities will receive program dollars to operate and, more importantly, maintain those facilities. For some high-dollar, low-use facilities, the revenue stream from MDAPs primarily sustain their existence and the jobs associated with those facilities. While the KC-X RFP did not mandate the use of DoD-owned test facilities, the use of DoD-owned test facilities could be costed as a zero cost resource in the offeror’s proposal if used. Proposal cost had to include the cost of non-DoD test facilities. As the final TEMP supports, Boeing elected to use many of their own test facilities in lieu of DoD-owned facilities, such as Edwards AFB or Pax River.

Heightening the importance of this work, the tiered Level 1 and Level 2 specifications were contractual once accepted by the USAF during PDR and CDR, respectively. Since Level 1 specifications document both performance requirements, e.g. to what level the KC-46 will achieve desired capabilities, and the associated verification requirement, e.g. how the capabilities will be verified, all interested partners needed to agree on the interpretation from the ICD and the choice of specification wording. These agreements established the scope of the requirement which translated into potential cost and schedule savings to the contractor or potential performance and schedule shortfalls to the war-fighter. While not strategic in process, understanding the scope of each L1 and subsequent L2 requirements, with their corresponding second or third order effects, was vital to determine the overall strategic value and capability the KC-46 would ultimately provide. To build consensus, over twenty successful reviews were conducted between Boeing, the PMO, and AMC prior to PDR.60 Fourteen months after contract award, the PMO held PDR on April 23-25, 2012 with an Executive Outbrief to the AMC Commander, General Raymond Johns, on April 26-27.

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Despite the reviews, KC-46 PDR ended with AMC not convinced the design represented war-fighter requirements, highlighting 27 concerns ranging from aeromedical evacuation capabilities to fuel tank maintainability to ballistic protection.61 To some, these late-breaking concerns demonstrated poor coordination between the teams; others praised the thoroughness of the post-PDR review, thankful these concerns were voiced now rather than rippling through the program later. Fifteen of the 27 concerns were quickly abated, as the design was subsequently shown to cover the concerns; however, the remaining twelve represented significant challenges for the team as some felt these non-critical requirements were not part of the original ICD. While PDR was successful and the L1 specification accepted by Air Force, AMC released a May 12th memo documenting these twelve concerns, affectionately called “the Dirty Dozen” by the PMO.

After the success of PDR, General John Thompson replaced General Bogdan at the helm of the KC-46 program in Aug 2012, along with most of the program’s senior leadership. Charged with meeting warfighter requirements and constrained by the fixed price nature of the contract, General Thompson focused his new senior leadership team and the PMO on the final stages of design into CDR, finishing TEMP coordination, and resolving the Dirty Dozen concerns.

Changing any KC-46 requirements already under contract would require an engineering change proposal (ECP), potentially adding cost to the fixed-price contract and violating DoD’s mandate for stable requirements. Convincing Boeing the change was traceable to a preexisting requirement would preserve cost yet potentially impact the development and production schedule. In subsequent KC-46 program briefings, senior leaders would frequently remark, knowing the programmatic risk associated with changing requirements, that the best statement in

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the briefing was “No ECPs currently on contract.”62 Ultimately, through effective strategic leadership and communication, all Dirty Dozen concerns were addressed by CDR, either incorporated within the design, mitigated with other design aspects, or slated for post-aircraft delivery modification. Despite the fixed-price contract, the PMO actively monitored costs, particularly management reserve, to provide insight on schedule. With Boeing’s Latest Revised Estimate (LRE) holding steady over the contract ceiling cost until the summer of 2014, the use of management reserve (MR) quickly became a potential indicator of schedule trouble. Large contractor MR allocations in a specific area, particularly if the PMO suspected the area was behind schedule, normally predated the announcement of a schedule slip. From a different perspective, this activity confirmed competition with EADS had forced Boeing to underbid the KC-46 contract, yielding maximum value per dollar for the taxpayer. Thankfully, due to the fixed price nature of the contract, the Government’s investment was capped, as long as requirements and funding remained stable.

With costs capped, General Thompson focused the PMO on schedule execution and poor insight into the contractor’s supply chain management hampered the team’s ability to predict cost, schedule, and performance impacts. Under the contract, Boeing was not required to share all supplier’s metrics, only those development items using FPIF contract dollars. With high commercial part reuse of a commercial-derivative aircraft, this contract veil hid a large portion of the metrics. As the program progressed, Boeing declared BCA as a supplier to, rather than a partner with, BDS, adding further to the veil.o o In response to a Defense Contracting Management Agency report citing the lack of substantiating information for work performed by BCA, Boeing agreed in the summer of 2014 to provide milestone metric insight, improving overall program insight into the schedule

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To gain insight into the impacts of this highly compressed and fast pace execution schedule, Generals Bogdan and Thompson mandated monthly execution reviews to drive their team’s analysis of all available metrics to predict future costs, schedule, and performance. In an effort to increase transparency and aid communication, multiple stakeholders across the iron triangle were invited to attend, including Boeing, the Government Accountability Office, and the Defense Contract Management Agency. The data and conclusions from these execution reviews formed the foundation of subsequent quarterly dialogue with USAF, OSD, and Congress, ensuring consistent, credible and clear messages throughout the iron triangle. Out of these execution reviews, two aspects of schedule overlap seemed to threaten KC-46 success: simultaneous production/design efforts and overlapping test/design efforts. While not unique to KC-46 acquisition, the schedule compression at the outset, due to competition from EADS, created initial schedule assumptions which caused then-unknown schedule complexities. For example, the program’s integrated master schedule mandated the government approve detailed flight test plans prior to government approval of the L2 design specifications. With any changes after approval requiring additional funding, this schedule required the PMO to approve the test method of an item without fully knowing the design of the item. On the surface, the assumption to identify early flight test constraints via test plans was applauded since late scheduling of flight test assets historically impacts a program’s schedule and costs negatively. This aspect, among others, drove the Director of Operational Test and Evaluation to predict the KC-46 initial operational test and evaluation (IOT&E) period would slip 6 to 12 months:

There are indications that the start of initial operational test and evaluation, which is scheduled for May 2016, may slip 6 to 12 months. According to the Director of Operational Test and Evaluation, more time may be needed to train aircrew and maintenance personnel and verify maintenance procedures. Developmental flight testing activities are also a concern due to the need for extensive coordination among government agencies, the need for timely access to receiver aircraft (aircraft the KC-46 will refuel while in flight), and the aggressive test pace.63

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From CDR in July 2013 through the early stages of the Test Readiness Review in October 2014, the PMO, AMC, and Boeing conducted four months of “boot camp” reviews to re-align this test/design mismatch. Whether or not IOT&E slips, clear and trusted communication at all levels ultimately overcame this built-in schedule overlap, maintained iron triangle confidence in the schedule, and finally supported the GAO’s overall 2014 conclusion that the tanker’s program is “generally on track but upcoming schedule remains challenging.”64 Contributing to the challenge, simultaneous production and design assumptions negatively impacted the schedule, as indicated by the unplanned wiring harness analysis and overhaul of previously laid wiring bundles in the spring 2014. During the reviews to mitigate the test/design mismatch, Boeing/FAA/PMO teams identified potential electromagnetic interference of wiring bundles due to the designed spacing between the bundles. Interestingly, the previously-discussed KC-135 AoA believed using a commercial-derivative aircraft from established commercial aircraft providers would yield cost and schedule savings from prior learning on these types of problems. This problem, among others, led program senior leaders to direct a reexamination of all wiring bundles to restore safety confidence in the design. Communication between BDS and BCA engineering and production teams, exacerbated by the current compression and pace of the schedule, and the complex integration of in-development military systems with already established commercial systems are possible causes. The reexamination led to an increase of $242 million to Boeing’s KC-46 program cost.65 As Boeing’s chairman James McNerney stated during a July 2014 earnings call, “The charge is driven by higher spending to complete systems installation on the tanker test aircraft and maintain the schedule for delivering this vital capability to the war fighter,” Boeing spokesman Jerry Drelling further elaborated, “The increased spending is primarily related to additional

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engineering and systems installation rework needed to meet contract specs, mainly in the area of wiring.” In the KC-46 acquisition strategy, the use of a commercial derivative aircraft coupled with Boeing’s strong commercial aircraft production performance was meant to mitigate this type of integration risk. Regardless of cause, this realized risk rippled through the iron triangle, calling into question the credibility of the design and the sustainability of a schedule already executing at an accelerated pace. Testing the KC-46

Building on the CDR foundation, General Thompson redirected the PMO towards sustainment planning and testing the KC-46 in preparation for the low rate initial production decision in August 2015p.66 As outlined in the acquisition strategy, the KC-46 contained two unique testing aspects beyond normal aircraft testing, FAA certification and air refueling certification.67 Aligning program schedule execution and the iron triangle’s competing interests to mitigate the risks associated with these two aspects dominated leadership’s attention.

Common for military multi-engine aircraftq, maintaining FAA certification on military aircraft leverages the FAA’s Military Certification Office and its processes to maintain an aircraft’s safety pedigree, theoretically reducing overall DoD lifecycle costs and shifting the communication burden between the FAA and the contractor. However, determining the “fit” of military commercial-derivative systems into already existing government assessment processes is complicated and not always clear. Obviously, aspects of the KC-46’s mission and systems are outside the normal operations of commercial aircraft, preventing full FAA certification. For p In early 2015, the KC-46 program slips the low rate initial production decision 2 months to October 2015 to allow for more air refueling testing prior to the decision. q The Air Force T-43, C-9, KC-10, E-4, VC-25, C-32, C-40s, Gulfstreams, C-130J and CV-22 engines maintain their airworthiness IAW FAA processes

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those inherently military systems, Boeing was required by the contract to demonstrate the FAA’s inability to certify the design and gain government approval.68 Additionally, Boeing had the contractual burden to change the design if a different design could be certified by the FAA. Proper government management reduced lifecycle costs; however, in the best interests of the government, judicious trade-offs eased previously-mentioned design/test/production schedule complications.

To align competing interests with design and certification efforts along a fast-paced schedule, the PMO, Boeing, and the FAA adopted a “Test Once” planning approach. Program success, as measured by schedule, hinged on designing test plans, test methods, and test instrumentation with proper sequencing to minimize repetition while supporting the full collection of all necessary data to meet stakeholder’s verification or certification requirements. This tight coupling of events supported the program’s streamlined testing timeline with some downstream risk if test anomalies derailed the sequencing. Concurrent risk reduction testing in contractor’s simulator facilities from winter 2013 through summer 2014, prior to the actual formal testing, and test execution exercises running through test approvals and test data handling were conducted as mitigation measures to “Test Once” risk. Furthermore, the four months of previously mentioned design/test “boot camp” reviews identified and resolved testing disconnects amongst stakeholders.

Though most disconnects were resolved, the reviews highlighted testing concerns with the KC-46 air refueling certification approach. As the replacement for one third of the DoD’s air refueling force, the KC-46’s refueling interoperability with US Air Force, US Navy, and international air force aircraft underpinned future joint and coalition military operations.69

“More movement towards increased interoperability is required. In particular, interoperability preparation, training, qualification and certification between tankers and receivers needs to be performed prior to the assets being declared as part of an Expeditionary Force. Only this way can

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certification make air forces more interoperable, enabling them to participate in a Joint Operations Area far from their bases of deployment.”70 Certifying the breadth of tanker-receiver pairs to provide this level of interoperability had never

been done on an Air Force acquisition program. In two air refueling certification phases, the Air Force planned to certify nineteen tanker-receiver pairs. Initially, the FAA agreed to certify aerial refueling operations up to the point of actual contact between the tanker and receiver aircraft. However, since commercial aircraft commonly do not fly within the “wake” of other aircraft, air refueling certification was deemed inherently military. To accept the risks of flying two aircraft in close vertical proximity and the interactions of their fuel systems once connected, the PMO and other military stakeholders needed a higher burden of verification proof than Boeing had originally planned. Not surprisingly, the increased standards involved additional flight test time and flight test assets, increasing cost and schedule. While the DoD could operationally field the KC-46 with less than the full certification of all planned tanker-receiver aircraft, the contract would be left unfulfilled. As the KC-46 program entered its Test Readiness Review in fall 2014 and faced an LRIP decision in summer 2015, a way-forward on air refueling certification had not yet been determined. A favorable LRIP decision depends on basic demonstration of the KC-46’s aerial refueling capabilities according to the DoD acquisition decision memorandum. Based on future test results, all levels of program leadership will need to resolve this issue, balancing warfighter requirements and safety against program’s cost-schedule-performance execution. Conclusion The KC-46 Tanker Modernization Program, through the strategic empowered leadership of Airman such as Generals Christopher Bogdan and John Thompson, leveraged the benefits of

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competition and commercial-derivative aircraft to overcome the legacy of the failed Tanker lease program. While experiencing development and production challenges throughout the last eight years, the KC-46 program still plans to deliver the U.S.’s next generation tanker with all performance requirements within government costs and within the contractual delivery date. In April 2015, the GAO reported KC-46 program cost down 5.4% over the past four years with a EAC of $48.9 billion, down from $51.7 billion, mostly due to “fewer than expected engineering changes and changes in military construction plans.”71 However, due to the wiring issue, some late part deliveries and the air refueling challenges previously discussed, the LRIP production decision has been delayed two months until October 2015.

Further delays may occur from the previously discussed schedule risk. Challenges from the compressed schedule and built-in design, test, and production phase overlaps, as suggested in the GAO’s 2015 KC-46 report, may produce an RAA delay.72 At initial inception, this risk was considered low based on maturity: a mature commercial-derivative aircraft, a mature commercial aircraft provider, and mature technologies. To further mitigate this risk, the contract contained a correction of deficiency clause, requiring Boeing to fix any discovered deficiencies through the final configuration audit on all aircraft, whether in production or in Air Force possession, at no cost to the government. This clause transferred the schedule overlap risk to Boeing. Regardless, KC-46 events suggest an acquisition program’s level of integration, despite the maturity of the development and production technologies, may be an additional indicator of future schedule concerns. With integration as a guide, the length of future KC-46 delays will depend on Boeing’s production pace, discovered test anomalies, and the success of future certification work.

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To keep future delays in perspective, the GAO in 2008, during KC-46 MDAP inception, reviewed 96 programs and reported an average research and development cost growth of 42% and an average schedule delay of 22 months.73 Six years later, the GAO’s 2014 MDAP review concluded, “when assessed against first full estimates, the total cost of the 2013 portfolio has increased by nearly $448 billion with an average delay of 28 months in operating capability.”74 Based on current performance and that yardstick, the KC-46 program still seems a success with available margin for future delays.

Some experts argue these cost increases and delays result from a U.S government “designing and producing equipment on political and technological premises that are outdated by the time the equipment reaches the field” and “to counter this, military departments must dramatically narrow the time between the initiation of a concept and its realization.”75 Elaborating on this idea,

“DOD program managers are put in a very different situation. DOD leadership rarely separates long-term wants from needs based on credible, future threats. As a result, DOD starts many more programs than it can afford--creating a competition for funds that pressures program managers to produce optimistic cost estimates and to overpromise capabilities. Moreover, our work has shown that DOD allows programs to begin without establishing a formal business case. And once they begin, requirements and funding change over time. In fact, program managers personally consider requirements and funding instability—which occur throughout the program—to be their biggest obstacles to success. Program managers also believe that they are not sufficiently empowered to execute their programs, and that because much remains outside of their span of control, they cannot be held accountable.”76 With discipline, The KC-46 program and its acquisition strategy embodied this mindset: ironing out political premises early, basing the source selection on achievable technologies, shortening delivery time to 76 months, and empowering program managers during execution.

While the KC-46 PMO must still deliver an operationally effective and suitable air refueling platform to the U.S. war-fighter, holding cost, schedule, and performance within affordable limits does not solely warrant calling the KC-46 program a successful experiment in

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strategic agility; some may argue the KC-46 is a rather limited example of acquisition since its commercial derivative nature may have significantly lowered technical risk and allowed use of a fixed price contract. Once the right acquisition and source selection strategy was attained, the straight-forward execution provided a good example of how low technical risk limits government’s cost risk. However, execution wasn’t straightforward, encountering several technical challenges including ones which commercial-derivative use were meant to limit or obviate. The program needed and demonstrated agility to adapt to the changing environment.

What allowed the KC-46 program to adapt? Heated competition -- driven by a clear and compelling need -- set the stage for constructive leadership involvement and transparent communication leading to a risk-capped acquisition strategy. Leadership engagement -- early, consistently and at all levels -- allowed for stable requirements throughout the planning, design, and testing process and supported adaptation during execution. Transparent communication to all stakeholders – early, consistently and at all levels – allowed for stable funding throughout the adaption process. An acquisition strategy, forged by the competing interests of the iron triangle and pushing risk to stakeholders most able to manage it, provided a successful framework for adaptive planning and execution of the first FPIF ACAT 1D program in twenty years. As the 114th session of Congress examines acquisition reform, these aspects, present in the KC-46 program, appear to provide a sound basis for strategically agile acquisition. These principles are not new; however, the exhibited discipline by leaders such as Generals Bogdan and Thompson to maintain them seems refreshing. Within the fiscally-constrained environment of sequestration and Congressional gridlock, the DoD must continue to seek discipline to its core principles, holding faith to the lessons-learned of years studying acquisition reform. As seen in the KC-46 Tanker Modernization Program, Gen Welsh’s desire

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for strategic agility in acquisition, predicated on speed and precision, may rely more on disciplined and principled people, rather than new processes, to execute programs quickly, decisively, and thoroughly to achieve warfighter success.

1 Mark A Welsh, Foreword letter of America’s Air Force: A Call to the Future, July 2014 2 Air Force Public Affairs Agency, OL-P. “Strategic Agility is the future of the Air Force”. July 30, 2014. Accessed on April 22, 2015. Available at http://www.af.mil/News/ArticleDisplay/tabid/223/Article/486897/strategic-agility-is-the-future-of-the-air-force.aspx. 3 David S.C. Chu and Nurith Berstein, “Decisionmaking for Defense,” New Challenges, New Tools for Defense Decisionmaking, Stuart E. Johnson, Martin C. Libicki, Gregory F. Treverton eds. Santa Monica: RAND, 2003, p27. 4 Office of the Inspector General, Acquisition of the Boeing KC–767A Tanker Aircraft (Department of Defense, 2004), available at http://www.DODig.mil/Audit/reports/fy04/04-064.pdf (accessed December 8, 2014). 5 Department of the Air Force, “Air Force Response to DoD IG Draft Report, ‘Acquisition of the Boeing KC-767A Tanker Aicraft,’ Project Number D2004AE-0063.” March 17, 2004. Available at http://www.DODig.mil/Audit/reports/fy04/04-064.pdf (accessed December 8, 2014). 6 Office of the Inspector General, Acquisition of the Boeing KC–767A Tanker Aircraft (Department of Defense, 2004), available at <http://www.DODig.mil/Audit/reports/fy04/04-064.pdf> (accessed December 8, 2014). 7 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND Corporation, 2006, pp. 15-16. 8 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND Corporation, 2006, pp. 15-16. 9 Diane Wright, “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Forward,” OUSD(AT&L), 2006, pp. 15-16. 10 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND Corporation, 2006, pp. 12. 11 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND Corporation, 2006, pp. 13. 12 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization, Executive Summary,” RAND Corporation, 2006, pp. 13. 13 Department of the Air Force, “Air Force Posts Request for Proposals for Tankers”, January 30, 2007. Available at http://www.defense.gov/Releases/Release.aspx?ReleaseID=10463 (accessed January 7, 2015). 14 USAF slide obtained from “Performance Comes First,” Air Force Association Daily Report. November 21, 2009. Available at http://dailyreport.afa.org/AFA/Reports/2007/Month11/Day21/1028factors.htm. 15 New York Times, “The Lesson of the Great Engine War”, February 13, 1984. Available at http://www.nytimes.com/1984/02/13/opinion/the-lesson-of-the-great-engine-war.html (accessed January 9, 1984). 16 Robert Drewes, “The Air Force and the Great Engine War”, December 16, 1987. Available at www.dtic.mil/dtic/tr/fulltext/u2/a187934.pdf (accessed January 9, 2015).

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17 Dr Jacques S. Gansler, “Competitive Dual Sourcing” (briefing, Center for Public Policy and Private Enterprise, School of Public Policy, University of Maryland, Maryland, 10 July 2007). 18 Emelie Rutherford. "Final Defense Appropriations Bill, Murtha Suggests Dual Competition For Tanker." Defense Daily 239, no. 62 (September 26, 2008): 1. International Security & Counter Terrorism Reference Center, EBSCOhost (accessed January 9, 2015). 19 GAO, “KC-X Tanker Competition” (briefing, Air and Land Forces Subcommittee, Armed Services House Committtee, Washington D.C, 18 September 2007). 20 GAO, “KC-X Tanker Competition” (briefing, Air and Land Forces Subcommittee, Armed Services House Committtee, Washington D.C, 18 September 2007). 21 Emelie Rutherford. "Final Defense Appropriations Bill, Murtha Suggests Dual Competition For Tanker." Defense Daily 239, no. 62 (September 26, 2008): 1. International Security & Counter Terrorism Reference Center, EBSCOhost (accessed January 9, 2015). 22 Michael Sirak. 2007. "Boeing Rejects Again Idea of Split Buy In Air Force KC-X Tanker Contest." Defense Daily 236, no. 48: 2. International Security & Counter Terrorism Reference Center, EBSCOhost (accessed January 9, 2015). 23 Shane Harris. “Own the Sky”. Washingtonian. November 2010. p52. 24 GAO, Decision on B-311344, et. al., United States Government Accountability Office. June 18, 2008. p16. 25 GAO, Decision on B-311344, et. al., United States Government Accountability Office. June 18, 2008. p25. 26 Shane Harris. “Own the Sky”. Washingtonian. November 2010. p52. 27 GAO, Decision on B-311344, et. al., United States Government Accountability Office. June 18, 2008. p3. 28 Shane Harris. “Own the Sky”. Washingtonian. November 2010. p52. 29 Marina Malenic and Emelie Rutherford. 2008. "DoD To Reopen Tanker Competition With Young At Helm; Contract Award Expected This Year." Defense Daily 239, no. 7: 1. International Security & Counter Terrorism Reference Center, EBSCOhost (accessed April 24, 2015). 30 2008. "Congress homes in on KC-X contest." Flight International 174, 11. OmniFile Full Text Select (H.W. Wilson), EBSCOhost (accessed January 10, 2015). 31 Shane Harris. “Own the Sky”. Washingtonian. November 2010. p52. 32 Ronald O’Rourke. “Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress”. Foreign Affairs, Defense, and Trade Division (CRS). October 23, 2009. p12. 33 Ronald O’Rourke. “Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress”. Foreign Affairs, Defense, and Trade Division (CRS). October 23, 2009. p12. 34 Nicola Clark. “Five-Year Dispute on Aircraft Claims Loses Its Urgency”. New York Times. September 3, 2009. Available at http://www.nytimes.com/2009/09/04/business/global/04wto.html. Accessed January 11,2015. 35 Nicola Clark. “Five-Year Dispute on Aircraft Claims Loses Its Urgency”. New York Times. September 3, 2009. Available at http://www.nytimes.com/2009/09/04/business/global/04wto.html. Accessed January 11,2015. 36 Ronald O’Rourke. “Air Force KC-X Tanker Aircraft Program: Background and Issues for Congress”. Foreign Affairs, Defense, and Trade Division (CRS). October 23, 2009. p18. 37 Frank Kendall. Better Buying Power 2.0: Continuing the Pursuit for Greater Efficiency and Productivity in Defense Spending, MEMORANDUM FOR DEFENSE ACQUISITION WORKFORCE, The Under Secretary of Defense (ATL) Nov 13, 2012. 38 Wes Bush, public statement on US Air Force aerial refueling tanker program. March 8, 2010. Accessed on February 27, 2015. Available at http:\\www.managementconcepts.com\Portals\0\MCPress\Supplemental_Materials\Rumbaugh\Chapter 7\Northrop Grumman Statement.pdf.

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39 Jeremiah Gertler. “Air Force KC-46A Tanker Aircraft Program: Background and Issues for Congress.” Congressional Research Service. February 25, 2011. p9. 40 Jeremiah Gertler. “Air Force KC-46A Tanker Aircraft Program: Background and Issues for Congress.” Congressional Research Service. February 25, 2011. p10. 41 Stephen Trimble. 2010. "KC-X choice key for DoD." Flight International 177, 29-34. OmniFile Full Text Select (H.W. Wilson), EBSCOhost (accessed February 27, 2015). 42 Ratnam Gopal and Alison Fitzgerald. “Northrop Declines Tanker Bid on ‘Financial Burdens’ (Update2)”. Bloomberg.com. December 1, 2009. 43 Geoff Morrell. “DOD News Briefing with Geoff Morrell on the KC-X Tanker from the Pentagon”. March 31, 2010. Accessed on February 27, 2015. Available at http://www.defense.gov/transcripts/transcript.aspx?transcriptid=4596. 44 Stephen Trimble. 2010. "KC-X choice key for DoD." Flight International 177, 29-34. OmniFile Full Text Select (H.W. Wilson), EBSCOhost (accessed February 27, 2015). 45 Stephen Trimble. 2010. "KC-X choice key for DoD." Flight International 177, 29-34. OmniFile Full Text Select (H.W. Wilson), EBSCOhost (accessed February 27, 2015). 46 Madhu Unnikrishnan. 2010. "Act One." Aviation Week & Space Technology 172, no. 25: 26. Military & Government Collection, EBSCOhost (accessed February 27, 2015). 47 Madhu Unnikrishnan. 2010. "Act One." Aviation Week & Space Technology 172, no. 25: 26. Military & Government Collection, EBSCOhost (accessed February 27, 2015) 48 Madhu Unnikrishnan. 2010. "Act One." Aviation Week & Space Technology 172, no. 25: 26. Military & Government Collection, EBSCOhost (accessed February 27, 2015) 49 John W. Miller and Daniel Michaels, “Boeing Received Illegal Aid, WTO Says,” The Wall Street Journal, September 16, 2010. 50 Scott Fontaine, “Senators blast Donley, Schwartz on KC-X process,” Air Force Times, May 12, 2010. 51 Jeremiah Gertler. “Air Force KC-46A Tanker Aircraft Program: Background and Issues for Congress.” Congressional Research Service. February 25, 2011 52.US Congress. House. 2010. Defense Level Playing Field Act. H.R. 6540. 111th Cong. Accessed on May 5, 2015. Available at https://www.congress.gov/bill/111th-congress/house-bill/6540. 53 Jeremiah Gertler. “Air Force KC-46A Tanker Aircraft Program: Background and Issues for Congress.” Congressional Research Service. February 25, 2011. 54 Interview with Mr Steven Rajotte, May 5, 2015. 55 Interview with Mr Steven Rajotte, May 5, 2015. 56 Interview with Program Office Employee, Apr 11, 2015. 57 DAU Acquipedia. “Fixed Price Incentive (Firm Target) Contract Type “. Accessed on Apr 12, 2015. Available at https://dap.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=6794b407-22e0-4d83-aff9-80474fc70014. 58 General Paul Selva. “KC-46A Concept of Operations (CONOPS)”. Dec 2012. Air Mobility Command. p iii. 59 Interview with Mr Pasquale Gambatese, Director of KC-46 Production/Development. 12 Apr 2015. 60 Interview with Mr Pasquale Gambatese, Director of KC-46 Production/Development. 12 Apr 2015. 61 KC-46 PDR Executive Session Notes, 26 April 2012. 62 Interview with Mr Hobert Turner, Deputy Single Program Manager, KC-46. 15 Apr 2015. 63 GAO. “KC-46 Tanker Aircraft: Program Generally on Track, but Upcoming Schedule Remains Challenging”. GAO-14-190. Apr 10, 2014. Accessed on Apr 12, 2015. Available at http://www.gao.gov/products/GAO-14-190.

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64 GAO. “KC-46 Tanker Aircraft: Program Generally on Track, but Upcoming Schedule Remains Challenging”. GAO-14-190. Apr 10, 2014. Accessed on Apr 12, 2015. Available at http://www.gao.gov/products/GAO-14-190. 65 Aaron Mehta. “Boeing reports $272 million hit due to KC-46”. Defense News, Jul 25, 2014. Accessed on April 21, 2015. Available at http://archive.defensenews.com/article/20140725/DEFREG02/307250028/Boeing-Takes-272-Million-KC-46-Hit. 66 John Thompson. Concluding speech of the CDR Executive Session. 11 Jul 2013. 67 KC-46 Program Management Office. “KC-46 Tanker Modernization Program Acquisition Strategy, Ver 01.4”. Jul 1, 2010. Para 1.5.2. 68 KC-46 PMO. “KC-46 Contract.” Section H. 69 KC-46 Program Management Office. “KC-46 Tanker Modernization Program Acquisition Strategy, Ver 01.4”. Jul 1, 2010. 70 2007. "Air-to-Air Refuelling in Expeditionary Operations." Military Technology 31, no. 8: 97-100. Academic Search Premier, EBSCOhost (accessed April 12, 2015). 71 GAO. “KC-46 Aircraft: Key Aerial Refueling Capabilities Should Be Demonstrated Prior to the Production Decision”. GAO-15-308. April 2015. Accessed on April 14, 2015. Available at http:\\www.gao.gov\assets\670\669530.pdf. 72 GAO. “Key Air Refueling Capabilities Should Be Demonstrated Prior to the Production Decision”. April 2015. Accessed on April 24, 2015. Available at http://www.gao.gov/assets/670/669530.pdf. 73 GAO. “Charting a Course for Lasting Reform”. 2008. 74 GAO, “Defense Acquisitions: Assessments of Major Defense Acquisition Program”. March 2014. Accessed on January 31, 2015. Available at www.gao.gov/assets/670/662184.pdf. 75 Richard Danzig. “Executive Summary,” Driving in the Dark Ten Propositions about Prediction and National Security, Center for a New American Security. December 2011, p6. Available at http:\\www.cnas.org/drivinginthedark. 76 U.S. Government Accountability Office. “Better Support of Weapon System Program Managers Needed to Improve Outcomes.” GAO-06-110. Washington, D.C.: November 2005. Accessed on January 31, 2015. Available at http://www.gao.gov/new.items/d06110.pdf