Air Force Air Refueling: The KC-X Aircraft Acquisition Program

Air Force Air Refueling: The KC-X Aircraft
Acquisition Program
Updated August 4, 2008
Christopher Bolkcom and William Knight
Foreign Affairs, Defense, and Trade Division



Air Force Air Refueling: The KC-X Aircraft
Acquisition Program
Summary
KC-X is the first of three planned programs intended to recapitalize the Air
Force’s air refueling fleet. Eventually, the KC-X program is expected to acquire 179
new, commercial off-the-shelf airliners modified to accomplish air refueling. The
program is expected to cost approximately $35 billion. Both Boeing and a
consortium consisting of Northrop Grumman and European Aeronautic Defence and
Space Company (EADS) competed for KC-X. Boeing offered a variant of the 767-
200, while Northrop Grumman submitted a version of the Airbus 330-200. On
February 29, 2008, the Air Force awarded the KC-X contract to Northrop Grumman.
The initial $12.1 billion KC-X contract covers purchase the first 68 KC-45s of the
anticipated 179 aircraft. Boeing protested the Air Force’s decision to the Government
Accountability Office (GAO). GAO upheld the Boeing protest, and in July, Defense
Secretary Robert Gates announced that he would reopen the tanker competition.
Air Force in-flight aerial refueling aircraft, often referred to as “tankers,”
provide both persistence and range to Department of Defense (DOD) fighters,
bombers, airlift and surveillance aircraft. The Air Force’s tanker fleet greatly
multiplies the effectiveness of DOD air power across the continuum of military
operations. Today, the KC-135, which makes up the preponderance of the Air
Force’s tanker force, is among the Air Force’s oldest aircraft. Potential issues for
Congress include:
!How long can the KC-135 fly?
!What is the lowest cost alternative for KC-135 recapitalization?
!How many new tankers does the Air Force require?
!What will KC-X cost?
!What capabilities should KC-X have?
!How will KC-X fit with future tanker requirements?
!Was the competition fair?
!What are the economic and trade effects of the KC-X program?
!What is the impact of Boeing’s contract protest?
!Why did the GAO sustain the protest?
!Can DOD split the tanker contract between the competitors?
!Where does the Air Force plan to base KC-X aircraft?
Government-sponsored analysis concluded that purchasing new, commercial
aircraft to recapitalize DOD’s tanker fleet is the least expensive option for
recapitalizing the KC-135 fleet from a life-cycle cost perspective. It is also the most
capital intensive option. At least three less capital intensive options could potentially
augment the Air Force’s longer-term KC-X program:
!Buy and convert surplus commercial airliners into military tankers
!Re-engine some fraction of the KC-135E fleet
!Develop commercial Fee-For-Service aerial refueling (FFS AR)
This report will be updated as conditions warrant.



Contents
In troduction ......................................................1
Select Legislation..................................................2
FY2009 .....................................................2
FY2008 .....................................................3
FY2007 .....................................................3
Background ......................................................3
Air Refueling in Joint Operations.................................4
Cold War................................................4
1991 Persian Gulf.........................................4
Recent Operations.........................................5
DOD Air Refueling Capabilities..................................5
KC-135 Stratotanker.......................................6
KC-10 Extender...........................................6
Service Organic Air Refueling................................7
Air Refueling Operational Concepts...............................7
Boom vs. Probe and Drogue Air Refueling......................7
Capacity vs. “Booms in the Air”..............................9
Tanker’s Receiver Capability.................................9
Issues for Congress................................................9
How Long Can KC-135s Fly?...................................10
Airframe Service Life.....................................10
Corrosion ...............................................10
Maintenance Costs........................................10
Outlook ................................................11
What Is the Lowest Cost Option for Tanker Recapitalization?..........11
How Many Tankers Does the Air Force Need?......................12
National Military Strategy (NMS)............................13
Mobility Capability Study (MCS)............................14
What Will KC-X Cost?........................................15
What Capabilities Should KC-X Have?...........................15
Airlift Capability: Doors and Floors..........................15
Defensive Systems........................................17
Was the KC-X Competition Fair?................................18
Request for Proposal......................................18
RFP Analysis............................................19
Comparing the Competitors.................................20
What are the Economic and Trade Effects of KC-X?.................21
WTO Dispute............................................22
U.S. Industrial Base Implications............................23
Buy American Act........................................25
What Is the Impact of Boeing’s Protest?...........................25
Why Did the GAO Sustain the Protest?............................27
Can DoD Split the Tanker Contract Between the Competitors?.........29
Arguments Favoring a Split Buy.............................30
Arguments Against a Split Buy..............................30



Potential Options to Augment KC-X Recapitalization....................32
Convert Used Commercial Aircraft into Tankers....................32
Retire or Re-engine KC-135Es .................................33
Viability of the KC-135E Fleet..............................34
Recapturing Modernization Costs............................34
Legislative Action........................................34
Fee-For-Service Air Refueling...................................35
What Independent Studies Say..............................35
Counter Arguments to RAND’s Assumptions...................36
FFS AR Examples........................................36
Legislative Action........................................37
Appendix A. Previous Issue for Congress..............................38
Modernization Controversy.....................................38
Appendix B. KC-135R System Description............................40
Appendix C. KC-10 System Description...............................41
Appendix D. KC-767 System Description..............................42
Appendix E. KC-30 System Description...............................43
Appendix F. Key Suppliers for Commercial Variants of the Boeing 767 and
Airbus 330 ..................................................44
List of Figures
Figure 1. Photo of “Boom” Air Refueling...............................8
Figure 2. Photo of “Hose and Drogue” Air Refueling......................8
Figure 3. KC-135 Refueling Air Force Fighters.........................40
Figure 4. KC-10 Refueling Air Force Fighters..........................41
Figure 5. Artist Impression of KC-767................................42
Figure 6. Artist Impression of KC-30.................................43
List of Tables
Table 1. Tanker Operations in Iraq and Afghanistan, 2004-2007.............5
Table 2. KC-135 and KC-10 Operational Capabilities.....................6
Table 3. Tankers Used in Recent Operations...........................14
Table 4: Suppliers and Corporate Parent Domiciles for Components Incorporated
into the Boeing 767...........................................44
Table 5: Suppliers and Corporate Parent Domiciles for Components Incorporated
into the Airbus 330/350 .......................................45



Air Force Air Refueling: The KC-X Aircraft
Acquisition Program
Introduction
KC-X is the first of three planned programs intended to recapitalize the Air
Force’s air refueling fleet. Eventually, the KC-X program is expected to acquire 179
new, commercial off-the-shelf airliners modified to accomplish air refueling
missions. The program is expected to cost a total of approximately $35 billion. Both
Boeing and a consortium consisting of Northrop Grumman and European Aeronautic
Defense and Space Company (EADS) — the parent company of Airbus — competed
for KC-X. Boeing offered a variant of the 767-200, while Northrop Grumman
submitted a version of the Airbus 330-200.
On February 29, 2008, the Air Force awarded the KC-X contract to Northrop
Grumman. The initial $12.1 billion KC-X contract provides for the purchase the first

68 KC-45s of the anticipated 179 aircraft.1 On March 11, 2008, Boeing filed a2


formal protest of Air Force’s decision, and on June 18, 2008, the Government
Accountability Office (GAO) upheld this protest. On July 9, 2008 Defense Secretary
Robert Gates announced that he agreed with GAO’s findings that the tanker
competition was flawed and that DOD would therefore reopen KC-X bidding
process.
Air Force in-flight air refueling aircraft, or “tankers,” enable Department of
Defense (DOD) fighters, bombers, airlift and surveillance aircraft fly farther and stay
aloft longer. As such, the Air Force’s tanker fleet greatly multiplies the effectiveness
of DOD air power across the full continuum of military operations. Today, the KC-
135, which makes up the preponderance of the Air Force’s tanker force, is among the
Air Force’s oldest aircraft. Potential issues for Congress include:
!How long will the KC-135 remain a viable air refueling platform?
!What is the lowest cost alternative for KC-135 recapitalization?
!How many new tankers does the Air Force require?
!What will KC-X cost?
!What capabilities should KC-X have?
!How will KC-X fit with future tanker requirements?
!Was the competition fair?


1 “Tanker Contract Award Announced,” Air Force Print News, February 29, 2008, online
at [http://www.af.mil/news/story.asp?id=123088392].
2 Boeing News Release, “Boeing Protests U.S. Air Force Tanker Contract Award,” March

11, 2008, online at [http://www.boeing.com/ids/globaltanker/news/2008/q1/080311b_


nr.html].

!What are the economic and trade effects of the KC-X program?
!What is the impact of Boeing’s contract protest?
!Why did the GAO sustain the protest?
!Where does the Air Force plan to base KC-X aircraft?
Government-sponsored analysis concluded that purchasing new, commercial
off-the-shelf aircraft to recapitalize DOD’s tanker fleet is the least expensive option
for recapitalizing the KC-135 fleet from a life-cycle cost perspective. However, this
course of action is also capital intensive in the near-term when compared with other
potential courses of action. At least four alternatives to the Air Force’s KC-X
acquisition were suggested each of which could potentially still be compatible with
the Air Force’s longer-term KC-X program:
!Use a “Split-Buy” model for future tanker recapitalization
!Buy and convert surplus commercial airliners into military tankers
!Re-engine some fraction of the KC-135E fleet
!Develop commercial Fee-For-Service aerial refueling (FFS AR)
Select Legislation
FY2009
The Administration’s KC-X request for FY2009 includes $62 million in
advanced procurement funding for five aircraft expected to be procured in FY2010
and delivered in 2012.3 Additionally, the Administration requested $832 million for
RDT&E funding to support system development and demonstration.4
In their report 110-652 (H.R. 5658) House authorizers denied the Air Force’s
request for advanced procurement funding. The committee included three provisions
related to aerial refueling. Sec. 132 requires the Air Force to maintain at least 46 KC-
135E aircraft in long-term storage. Sec. 133 repeals an out-of-date section from PL
108-136, and Sec. 134 requires the Secretary of the Air Force to report on the process
used to determine KC-X requirements. The House matched the request for R&D
funding. In their report 110-335 (S. 3001) Senate authorizers rejected the Air Force
request for advance procurement and instead transferred these funds to KC-X R&D.
On July 30, 3008, House Appropriators released a statement summarizing their
mark-up of the FY2009 Defense Appropriations Bill. In this press release, the
committee “directs that industrial base concerns be included in the evaluation of the


3 “Aircraft Procurement, Air Force, Volume 1,” USAF Committee Staff Procurement Backup
Book, FY2009 Budget Estimates, February 2008, pp. 2-33.
4 “Research, Development, Test and Evaluation (RDT&E), Descriptive Summaries, Volume
2, Budget Activities 4-6,” Department of the Air Force FY2009 Budget Estimates, February

2008, p. 987.



tanker contract award.”5 Press reporting of this mark-up assert that this provision
gives Boeing an advantage in the revised competition for KC-X.6
FY2008
The Administration requested $314 million for KC-X RDT&E, which
authorizers fully supported.7 Appropriators, as in FY2007, provided $114 million for
RDT&E.8 Additionally, appropriators provided $150 million into a “Tanker
Replacement Transfer Fund” thereby providing the Air Force latitude to use the funds
as needed in procurement, operations and maintenance, and/or RDT&E as needed to
support KC-X acquisition.9
FY2007
The Administration’s KC-X request was for $36 million for advanced
procurement funding and nearly $204 million for research, development, test, and
evaluation (RDT&E). However, authorizers denied the requested procurement10
funding and cut RDT&E funding to $152 million. Appropriators provided at total
of $70 million in funding stating, “the amount provided in the conference agreement
was identified in writing by the Department of Defense as the level needed to meet
all fiscal year 2007 requirements.”11
Background
The KC-X program — currently the Air Force’s top acquisition priority — is
the first of three planned programs intended to recapitalize the Air Force’s air
refueling fleet.12 As part of the KC-X program, the Air Force is expected to acquire
179 new, commercial off-the-shelf airliners modified to accomplish air refueling
missions. The Air Force plans to designate the new aircraft as the KC-45A.13 Future
programs known as KC-Y and KC-Z — each anticipated to replace approximately


5 [http://appropriations.house.gov/pdf/MurthaSubMarkup07-30-08.pdf]
6 Les Blumenthal. “Boeing Tanker Bid Gets Big Boost.” Seattle Times. July 31, 2008. John
Doyle. “Appropriators to USAF: Consider tanker’s industrial base concerns.” Aerospace
Daily & Defense Report. August 1, 2008.
7 H.Rept. 110-477, Conference Report to Accompany H.R. 1585, p. 797.
8 H.Rept. 110-434, Conference Report to Accompany H.R. 3222, pp. 308.
9 Ibid, Section 8112, p. 46.
10 H.Rept. 109-702, Conference Report to Accompany H.R. 5122.
11 H.Rept. 109-676, Conference Report to Accompany H.R. 5631, p. 315.
12 Major General (USAF) Larry Spencer, “FY09 President’s Budget: ‘America’s Edge:
Global Vigilance, Reach and Power,” FY2009 Budget Rollout Brief, February 4, 2008, Slide

8, online at [http://www.saffm.hq.af.mil/shared/media/document/AFD-080204-089.pdf].


13
“Now All We Need is the Aircraft,” Air Force Association Daily Report, January 24, 2008.

one-third of the Air Force’s tanker force — are expected to continue the
recapitalization effort over the next several decades.
To provide the context of why the Air Force is pursuing the KC-X program
today, this section of the report analyzes the role of air refueling aircraft in joint
operations, outlines the DOD’s current air refueling capabilities, and explains key air
refueling operational constructs from which tanker requirements are derived. In
addition, a review of refueling issues previously faced by Congress is provided in
Appendix A.
Air Refueling in Joint Operations
Air refueling has played a significant role in our nation’s national security
beginning in the Cold War and continuing into current military operations. Tankers
increase the range and flexibility of forces and extend the amount of time combat and
surveillance aircraft can stay “on-station.” They also extend the range of fighters,
bombers, and other aircraft. According to Air Force leaders, “Clearly the tanker fleet
is really some of the very fiber that holds our Air Force’s unique global capabilities
together. It is an essential enabler for getting to the fight and fighting the fight.”14
Cold War. The Air Force initially began to purchase the KC-135 fleet in the
mid-1950s to refuel newly acquired B-52 nuclear bombers operated by Strategic Air
Command.15 Additionally, air refueling played a significant conventional role in the
Vietnam War during the 1960s and 1970s by flying 194,687 sorties (an average of
more than 21,000 sorties each year) that refueled 813,378 aircraft with almost 916
billion pounds of jet fuel. A brief review of recent conflicts indicates the
importance of tanker aircraft.
1991 Persian Gulf. During the 1991 Gulf War, tankers contributed to two
objectives: “the speedy deployment of large air forces into the region, and the use of17
these forces in large and complex air combat operations.” First, nearly 100 tankers
formed “air bridges” across the Atlantic and Pacific Oceans that allowed fully loaded
fighters and bombers to deploy nonstop from U.S. bases directly into the Persian Gulf
region. During combat operations, tankers allowed air defense and command and
control aircraft to remain aloft for extended periods of time while extending the range


14 A. Butler, “Air Force Mulling Replacement for Aging, Maintenance-Needy KC-135,”
Inside the Air Force, May 4, 2001.
15 Richard K. Smith, 75 Years of Inflight Refueling: Highlights 1923-1998, Air Force
History and Museum Program, 1998, pp. 44-45.
16 Ibid, p. 60.
17 Thomas A Keaney and Elliot A. Cohen, Gulf War Air Power Survey Summary Report,
Washington, D.C., 1993, p. 190.

of most attack missions.18 In so doing, 306 tankers flew 16,865 missions while
delivering over 800 million pounds of fuel to 51,696 receiver aircraft.19
Recent Operations. In 1999, 175 air refueling aircraft participated in NATO
combat operations in Kosovo by flying 5,215 sorties while transferring more than

253 million pounds of fuel to 23,095 coalition receivers.20 Between September 11,


2001 and the end of 2007, tankers flew 10,400 missions enabling homeland defense
air patrols as part of Operation Noble Eagle.21 Combat operations in Afghanistan
during 2001 and 2002 required 80 tankers that executed 15,468 sorties while
offloading 1.166 billion pounds of fuel to 50,585 aircraft.22 Operation Iraqi Freedom
also required a significant tanker contribution, requiring a peak of 305 tankers in
March of 2003.23 In 2003, 185 tankers flew 6,193 sorties refueling 28,899 receivers
with 376 million pound of fuel.24 Table 1 summarizes tanker contributions to
ongoing operations in both Afghanistan and Iraq from 2004 to 2007.
Table 1. Tanker Operations in Iraq and Afghanistan, 2004-2007
2004 2005 2006 2007
Sort i e s 12,465 12,391 12,787 15,875
Fuel Offloaded (lbs.)740 million778 million871 million946 million
Receivers RefueledN/AN/A42,08379,798
Source: U.S. Central Air Forces/Combined Air Operations Center Public Affairs Office.
DOD Air Refueling Capabilities
Air Force KC-135 Stratotankers and KC-10 Extenders form the preponderance
of DOD’s air refueling capability and the KC-X program is designed to recapitalize
this portion of DOD air refueling capability. Both Stratotankers and Extenders can
also carry passengers and cargo. However, airlift capability comes at the expense of
a corresponding decrease in the amount of fuel they can carry. Further, the Air Force,
Navy and Marine Corps also maintain small refueling fleets tailored to meet service-
specific requirements.


18 Ibid.
19 GAO-04-349, Military Aircraft: DOD Needs to Determine Its Aerial Refueling
Requirements, June 2004, p. 10.
20 Ibid.
21 “Noble Eagle Sorties Continue,” Air Force Association Daily Report, January 4, 2008,
online at [http://dailyreport.afa.org/AFA/datapoints/2008/].
22 GAO-04-349, p. 10.
23 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
pp. 27-28.
24 GAO-04-349, p. 10.

KC-135 Stratotanker. KC-135s first entered service between 1957 and 1965,
as Boeing delivered 732 KC-135A Stratotankers to the Air Force. In the 1980s, KC-

135As were upgraded to KC-135Es with four Pratt & Whitney TF-33 engines —


capable of producing approximately 18,000 pounds of thrust. E-model engines were
obtained from surplus commercial Boeing 707 airliners. Beginning in 1982, other
KC-135As were upgraded to KC-135Rs following modification with four CFM-
56/F108 turbofans — each capable of generating approximately 22,000 pounds of
thrust. Today, the KC-135 fleet averages approximately 46-years of age. Twenty
KC-135Rs have been modified with Multi-Point Refueling System wingtip pods so
they can simultaneously refuel two probe-equipped aircraft.25 Another eight KC-
135Rs have been modified to receive fuel in-flight. On-going modifications are
giving KC-135s advanced avionics that improve reliability and meet increasingly26
stringent global air traffic management requirements. KC-135 aircraft
specifications are listed in Appendix B. Table 2 summarizes selected operational
characteristics of the Air Force’s KC-10 and KC-135 air refueling aircraft.
Table 2. KC-135 and KC-10 Operational Capabilities
InventoryFuel CapacityPassengersCargoa
KC-10A59356,000 lbs.75170,000 lbs
KC-135E85180,000 lbs.5483,000 lbs
KC-135R418200,000 lbs.5483,000 lbs
Sources: The Air Force Handbook 2007, pp. 172-175; current KC-135E inventory verified through
e-mail with SAF/LL, January 28, 2008.
a. Cargo payloads are in lieu of carrying fuel.
KC-10 Extender. The KC-10 combines air refueling and long-range cargo
capabilities into a single aircraft. The KC-10 is more flexible and more capable than
the KC-135 as it can carry much more fuel and can be refueled in the air to increase
delivery range or on-station time. It is, however, less maneuverable on the ground
than the KC-135. All KC-10s use an advanced flying boom27 that can refuel either28
boom or probe and drogue receivers on the same flight. Additionally, 20 KC-10s
have been equipped with wingtip probe and drogue systems similar to ones installed


25 Probe and drogue air refueling is accomplished by a probe-equipped receiver flying the
receiver aircraft’s probe into the tanker’s drogue — a basket attached to the end of a flexible
hose or the tankers boom. Once connected, the tanker transfers fuel to the receiver aircraft.
26 Susan H. H. Young, “Gallery of USAF Weapons,” Air Force Magazine, May 2007, p.

145.


27 Boom in-flight air refueling is accomplished by an Air Force Airman known as the Boom
Operator, flying the tanker’s refueling boom into the receiver’s receptacle. Once connected,
the tanker pumps fuel from its fuel tanks into the receiver’s fuel tanks.
28 Ibid.

on the KC-135.29 The KC-10 currently averages approximately 23 years of age.30
KC-10 aircraft specifications are listed in Appendix C.
Service Organic Air Refueling. The Air Force, Marine Corps, and Navy
maintain some air refueling capability to facilitate certain organic capabilities. The
Air Force operates modified C-130s to refuel Air Force special operations and
combat search and rescue helicopters while the Marine Corps uses modified C-130s
to refuel Marine helicopters and fighters. Further, some Navy aircraft have been
configured to refuel other Navy or Marine Corps aircraft in-flight as a secondary
mission. These aircraft give carrier battle groups organic refueling capability when
operating independently. However, carrier-based naval aircraft are capable of
providing relatively small fuel off-loads in comparison to Air Force tankers. Thus,
the Navy primarily relies on the use of Air Force tankers for long-range flight
operations. 31
Air Refueling Operational Concepts
Air refueling aircraft support a wide variety of aviation missions, such as, but
not limited to: surveillance, air-lift, long-range bombing, battlefield interdiction, and
air superiority. Each of these missions requires different aerial refueling capabilities.
Therefore, when planning the acquisition of a tanker fleet, careful consideration must
be given to a few key attributes. For example, a tanker aircraft’s method of
dispensing fuel – flying boom vs. probe and drogue – is a key factor for mission
planners. For some missions, the gross amount of fuel carried by a tanker must be
weighed against the number of tankers and the number of refueling points (either
boom or hose) that can be brought to bear. Finally, some tankers can themselves be
refueled by other tankers while in flight, which can add considerable flexibility to
certain air operations.
Boom vs. Probe and Drogue Air Refueling.32 Aircraft can be equipped
to be refueled from a flying boom (most Air Force aircraft) or with a probe and
drogue (most Navy, Marine Corps, and allied aircraft). Mission planners must
ensure that tankers in the field are equipped to connect with their intended receiver
aircraft. Figure 1 illustrates “boom” air refueling.


29 The Air Force Handbook 2007, pp. 172-175.
30 “Age of the Active Duty Fleet,” Air Force Magazine, May 2007, p. 63.
31 Department of the Navy (N78) provided to CRS by email September 2, 2005.
32 For more information on aerial refueling methods, see CRS Report RL32910, Air Force
Aerial Refueling Methods: Flying Boom versus Hose-and-Drogue, by Christopher Bolkcom.

Figure 1. Photo of “Boom” Air Refueling
Source: USAF Photo by A1C Lonnie Mast.
Both the KC-10 and KC-135, can perform both “Boom” and “Drogue”
refueling. However, while KC-10s can refuel either type on the same mission, most
KC-135s must be converted from “Boom” refueling to “Drogue” or vice versa on the
ground. This limitation reduces the KC-135s effectiveness in comparison to the KC-
10 and potentially in comparison to the KC-X which is expected to be equipped to
refuel both receiver types on the same mission. Figure 2 illustrates hose and drogue
refueling.
Figure 2. Photo of “Hose and Drogue” Air Refueling


Source: USAF photo by TSgt Erik Gudmundson.

Capacity vs. “Booms in the Air”. The type and number of receivers (Boom
vs Drogue) on a given mission establishes the timing, location and fuel off-load
demands for tankers in the field. Thus, the number of tankers required to support a
mission is sometimes driven by the tanker’s offload capacity. Other times, tanker
mission requirements are based on maintaining sufficient tankers aloft to match the
timing and location of receiving aircraft needs. Planners strive to accomplish air
refueling missions as efficiently as possible while optimizing the effectiveness of the
receiver’s mission. Therefore, planners must ensure scheduled tankers have
sufficient capacity and are scheduled in sufficient numbers to ensure the overall
effects desired by joint force commanders.33 Thus, considering the breadth of
missions DOD might face, and considering a given amount of money, acquisition
officials must weigh whether air forces are best served by a few tankers with lots of
fuel, or more tankers, each of which would carry less fuel.
Tanker’s Receiver Capability. A tanker that is capable of both giving and
receiving fuel in flight may also bolster flexibility for air operations. Because of the
dynamic nature of military operations, the type of aircraft planned to fly a given
mission can change; often at the last minute. Tanker aircraft that themselves can be
refueled in the air can help mitigate these last minute changes by serving as an aerial
“consolidation point.” Tankers that have the “wrong” refueling method (due to a last
minute change in mission) can off-load their fuel into another tanker that has the
“right” refueling method. Optimally, all Air Force tankers would be able to take on
fuel while airborne, but acquiring this capability costs money. How many tankers
should have this capability, and at what cost?
Issues for Congress
The KC-X program is anticipated to begin recapitalizing the Air Force’s
Eisenhower-era KC-135 fleet, which makes up the preponderance of the Air Force’s
tanker force. Potential issues for Congress surrounding the KC-X program include:
!How long can the KC-135s Fly?
!What is the lowest cost alternative for KC-135 recapitalization?
!How many new tankers does the Air Force require?
!What will KC-X cost?
!What capabilities should KC-X have?
!Was the competition fair?
!What are the economic and trade effects of the KC-X program?
!What is the impact of Boeing’s contract protest?
!Why did the GAO sustain the protest?
!Can DOD split the tanker contract between the competitors?
!Where might KC-X aircraft be based?


33 Ibid.

How Long Can KC-135s Fly?
During the controversy that surrounded the Air Force’s 2001 tanker lease
proposal, a Defense Science Board (DSB) task force was formed to study the urgency
of recapitalizing the KC-135 fleet. As part of the study, DSB examined the potential
longevity of the KC-135 fleet. The 2006 RAND Analysis of Alternatives (AOA) also
looked at the technical condition of the KC-135 fleet. The DSB stated that airframe
service life, corrosion, and maintenance costs factors would potentially determine the
KC-135s operational life expectancy.34
Airframe Service Life. KC-135s, along with their B-52 counterparts, were
originally purchased to give the United States a nuclear strategic strike capability.
As a result, both fleets of airplanes spent a significant amount of time during the Cold
War on ground alert. Consequently, in 2004, the average KC-135 airframe had flown
only about 17,000 hours of an estimated service life of 36,000 hours (KC-135E) or
39,000 hours (KC-135R). Thus, the DSB concluded that KC-135 airframe were
viable until 2040 at “current usage rates.”35 The 2006 RAND AOA also concluded36
that the KC-135 fleet “can operate into the 2040s,” but not without risks.
Corrosion. The 2004 DSB Task Force concluded that corrosion did not pose
an “imminent catastrophic threat to the KC-135 fleet” and that the Air Force’s
maintenance practices were postured “to deal with corrosion and other aging
problems.”37 The task force went on to say,
However, because the KC-135s are true first generation turbojet aircraft designed
only 50 years from the time man first began to fly, concerns regarding the ability38
to continue operating these aircraft indefinitely are intuitively well founded.
Maintenance Costs. KC-135 maintenance costs were the subject of
widespread concern earlier in this decade. For example, the Government
Accountability Office found that KC-135 flying hour costs increased by 29%
between 1996 and 2002 when adjusted to constant 2002 dollars.39 In contrast, the
2004 DSB task force agreed that KC-135 maintenance costs had increased
significantly, but found they had leveled off due to changes the Air Force made in its


34 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
p. iv.
35 Ibid.
36 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, pp. 15-16.
37 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
p. iv.
38 Ibid., p. 17.
39 GAO-04-349, “Military Aircraft, DOD needs to Determine Its Aerial Refueling
Requirements,” June 2004, p. 13.

KC-135 depot processes. Based on the more current data, DSB forecasted more
modest growth in the future.40
Outlook. While many believe the Air Force can continue to operate some
number of KC-135s for many years, concerns are often expressed about potential
maintenance problems that may arise in flying 50 to 80 year-old tankers that could
possibly result in the entire KC-135 fleet being grounded. The DSB examined this
issue and concluded: “although grounding is possible, the task force assesses the
probability as no more likely than that of any other aircraft in the inventory of the
S ervi ces.”41
RAND’s AOA was less conclusive. For example, the AOA believe it is
possible that KC-135 will be able to operate in the 2040s. However, the AOA lacked
confidence that future operation could continue without risks of major maintenance
cost increases, poor fleet availability or possible fleet-wide grounding. Further, the
AOA concluded that “the nation does not currently have sufficient knowledge about
the state of the KC-135 fleet to project its technical condition over the next several
decades with high confidence.”42 RAND recommended more thorough scientific and
technical study of the KC-135 to provide a more reliable basis for future assessments
of the condition of the KC-135 fleet.43
What Is the Lowest Cost Option for Tanker Recapitalization?
In 2004, consistent with congressional direction, the Acting Undersecretary for
Defense for Acquisition, Technology and Logistics directed the Air Force to conduct
an Analysis for Alternatives (AOA) for air refueling. The AOA had two purposes
— first, to identify lowest cost options for recapitalizing the Air Force’s KC-135
fleet; and second, to inform recapitalization timing. The RAND Corporation was
subsequently selected to conduct the AOA and the findings were independently44
reviewed for sufficiency both within DOD and by the Institute of Defense Analysis.
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 the above options


40 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
pp. iv-v.
41 Ibid, p. 18.
42 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 16.
43 Ibid.
44 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 1.

!Commercial sources for air refueling45
RAND’s AOA identified the present value of the full spectrum of costs
associated with the various alternatives. While RAND’s AOA considered
alternatives with significant passenger and cargo capability, it considered only the
costs associated with air refueling. As such, RAND’s AOA did not draw conclusions
about the impact of various sized aircraft on ramp space and infrastructure in
operational scenarios. Rather, RAND’s AOA deferred both matters to “senior
decision maker judgment.”46 The 2006 AOA presented the following conclusions
regarding KC-135 recapitalization:
!New commercially-derived tankers of medium to larger size
(300,000 to 1,000,000 pound maximum gross takeoff weight) are the
most cost-effective alternative. Specifically, the AOA found the
Airbus 330 and 340 and the Boeing 747, 767, 777, and 787 all to be
viable candidates.
!Small (e.g., Boeing 737 and Airbus 321) and very large (e.g., Airbus
380) are not cost effective alternatives even in mixed fleets with
medium to large sized tankers.
!Used commercial aircraft are not as cost-effective as buying new
commercial aircraft. However, the cost penalty is not high enough
to exclude this option under certain circumstances. (Note: this option
will be discussed later in this report).
!New-design tankers are not a cost-effective alternative.
!Unmanned tankers are not a cost-effective alternative.
!“Stealthy tankers are significantly more expensive than non-stealthy
tankers, although they offer some effectiveness benefits.” The AOA
defers to military judgement to determine if the additional capability
exists to justify the increased cost
!“There is no compelling reason for the Air Force to outsource aerial
refueling.” (Note: this option will be discussed later in this report.)47
How Many Tankers Does the Air Force Need?
Air refueling requirements ultimately derive from the President’s overall
national security strategy. Based on the President’s strategy, DOD periodically
studies the global threat environment and seeks to identify the military force structure
necessary to meet national objectives, and articulates this analysis in the National
Military Strategy (NMS) and Quadrennial Defense Review (QDR). Next, in the case
of air refueling, DOD examines the status of its fleet and quantifies future air
refueling requirements to judge whether current programs are sufficient to support
DOD force structure and the President’s strategy.


45 Ibid, pp. 7-8.
46 Ibid, p. 9.
47 Ibid, pp. 12-13.

Over the past several years, DOD has conducted three studies that have reached
similar conclusions about the required size of the Air Force’s air refueling fleet. In
2001, DOD released the Tanker Requirements Study 2005 that concluded DOD
required 500-600 KC-135R equivalents to meet the NMS in a “pre-9/11” context.
During the midst of the Air Force’s tanker lease controversy, a Defense Science
Board (DSB) task force examined air refueling requirements in May of 2004 with a
focus of assessing the urgency of initiating KC-135 recapitalization. In June 2004,
DOD began its first “post 9/11” review of transportation requirements. The current
Mobility Capability Study (MCS) was completed in December 2005 and briefed to
Congress in February 2006.
National Military Strategy (NMS). The 2004 DSB task force focused on
assessing the ability of the Air Force’s tanker fleet to meet the NMS. The NMS
defined what is commonly referred to as the “1-4-2-1” strategy by stating,
The force must be sized to defend the US homeland while continuing to operate
in and from four forward regions to deter aggression and coercion and set
conditions for future operations. Even when committed to a limited number of
lesser contingencies, the Armed Forces must retain the capability to swiftly
defeat adversaries in two overlapping military campaigns. Additionally, when
the President calls for an enduring result in one of the two, the force must have48
the capability and capacity to win decisively.
Accordingly, the DSB task force found that homeland defense could require
“up to 122 KC-135 equivalent tankers ... depending on the number of patrol aircraft49
aloft.” Additionally, the task force identified that “the major driver for future aerial
refueling needs is the number and type of nearly simultaneous ‘major’ operations.”50
As such, the task force examined 2003 operations in Iraq as a basis for informing
requirements of a “major” operation. What the task force found was that “direct and
indirect” tankers operations in Iraq “peaked at 319” aircraft with 182 aircraft
“forward deployed” into Central Command’s theater.51 Further, the task force
observed that “one can envision major theater campaigns of greater scale and
intensity than [Iraq].” The task force, however, did not analyze the efficiency of
tankers used to support Iraq operations.52 Table 3 summarizes examples of tankers
used during recent operations.


48 “The National Military Strategy of the United States of America,” 2004, p. 4.
49 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
p. 28.
50 Ibid, p. 27.
51 Ibid.
52 Ibid.

Table 3. Tankers Used in Recent Operations
ConflictTankers Utilized
1991 Persian Gulf War (Iraq/Kuwait) 306
1998 Balkans/Kosovo175
2001 Afghanistan80

2003 Iraq305/319a


Source: CRS compiled from data found in DSB Task Force Report on Aerial Refueling Requirements
and GAO-04-349.
a. DSB reported 319 while GAO cited 305 tankers for Iraq operations.
Based on these studies and assumptions, it has been argued that homeland
defense requirements coupled with any two of the aforementioned operations call for
an air refueling fleet of at least 500 aircraft as reportedly echoed by the Air Force’s

2005 Tanker Requirement Study.


Mobility Capability Study (MCS). According to the unclassified executive
summary of the 2005 MCS, the study assessed the capabilities of the current and
projected force by providing a range of potential resource requirements for inter-
theater (strategic) airlift, intra-theater (tactical) airlift, and air refueling fleets. The
MCS identified a need for between 520 and 640 air refueling aircraft to provide
sufficient capability with acceptable risk.53 By the end of FY2008, the Air Force54
expects to have between 477 and 514 aircraft (0 to 37 KC-135Es, 418 KC-135Rs,
and 59 KC-10s). Thus, by the end of FY2008, the Air Force will potentially possess
an air refueling fleet smaller than the one recommended by the MCS.
Some analysts criticized the MCS for its methodology and focus. In September

2005, the Government Accountability Office (GAO) listed a number of shortcomings55


in methodology for the ongoing MCS. A more detailed GAO criticism followed
in September 2006 after the final MCS was released.56 In light of the criticism, some
have called for DOD or an independent agency to conduct another mobility study to
rectify the MCS’s perceived shortcomings. Consequently, Section 1046 of the 2008


53 “Headquarters Air Mobility Command White Paper, KC-X: The Next Mobility Platform,
The Need for a Flexible Tanker,” February 28, 2007, p. 4.
54 Section 135, 2008 National Defense Authorization Act allows the Air Force to retire 48
KC-135Es immediately and provides contingent authority to retire the remaining 37 KC-

135Es provided the KC-X contract has been awarded and any subsequent protests resolved.


See H.Rept. 110-477, December 6, 2007, pp. 30-31.
55 Defense Transportation: Opportunities Exist to Enhance the Credibility of the Current
and Future Mobility Capabilities Studies, Government Accountability Office, September,

2005.


56 Defense Transportation: Study Limitations Raise Questions About the Adequacy and
Completeness of the Mobility Capabilities Study and Report, GAO, September 2006.

National Defense Authorization Act (P.L. 110-181) directed DOD to conduct a
comprehensive requirements-based study of fixed-wing airlift to include full-
spectrum life-cycle costs of operating current KC-135 and KC-10 fleets, while also
analyzing the impact of planned KC-X aircraft. This study is required to forecast
requirements for 2012, 2018 and 2024 and is due to Congress by January 10, 2009.57
What Will KC-X Cost?
On February 29, 2008, the Air Force awarded the KC-X contract to Northrop
Grumman. The initial contract is for $1.5 billion to purchase four KC-45s for system
design and development and includes five production lot options valued at $10.6
billion to procure an additional 64 aircraft. The Air Force expects the total KC-X
program to cost approximately $35 billion.58
What Capabilities Should KC-X Have?
Both KC-X competitors have the potential to significantly improve the airlift
capability of DOD’s tanker fleet. One issue was how much airlift capability the air
refueling fleet should provide. Also, based on growing threats, some argued that new
tankers should be equipped with defensive systems.
Airlift Capability: Doors and Floors. The Air Force envisions KC-X to be
built from the outset with reinforced floors necessary for carrying either passengers
or cargo in the fuselage, a cargo door sized to facilitate loading and off-loading, and
defensive systems enabling a KC-X to operate in certain threat environments. Even
though airlift is a secondary mission for KC-X, many believe the Air Force should
continue to buy tankers that posses an airlift capabability.
DOD’s Position. Several DOD leaders have pushed for airlift capacity on
tankers. Some believe the 2006 QDR signaled support for a passenger and cargo
requirement for KC-X as it stated, “the Department [of Defense] is also considering
the acquisition of a future KC-X aircraft that will have defensive systems and provide59
significant cargo carrying capacity while supporting its aerial refueling mission.”
Further, joint doctrine explains the value of having tankers with airlift capability.
“Additionally, all USAF tanker aircraft are capable of performing an airlift role
and are used to augment core airlift assets. Under the dual role concept, air
refueling aircraft can transport a combination of passengers and cargo while
performing air refueling. In some circumstances, it may be more efficient to
employ air refueling aircraft strictly in an airlift role. Deploying air refueling
units may be tasked to use their organic capacity to transport unit personnel and


57 H.Rept. 110-477, December 6, 2007, pp. 313-316.
58 Transcript, DOD News Briefing with Secretary of the Air Force Michael Wynne, Gen.
Duncan McNabb, Sue Payton, and Gen. Arthur Lichte, Arlington, VA, February 29, 2008,
online at [http://www.defenselink.mil/transcripts/transcript.aspx?transcriptid=4163].
59 “Quadrennial Defense Review Report,” February 6, 2006, p. 54.

support equipment or passengers and cargo from other units. Air refueling60
aircraft may also be used to support USTRANSCOM airlift requirements.”
In April 2006, General Norton Schwartz, who at the time was Commander of
U.S. Transportation Command, also expressed a strong preference for a multi-role
tanker.
“What we need is a multi-mission tanker that can do both boom and basket
refueling, that can do passenger lift, some cargo lift, and have defensive systems
that allow the airplane to go wherever we need to take it....if we’re going to war
with Iran or Korea or over Taiwan or a major scenario, the first 15 to 30 days are
going to be air refueling intensive. But what I’m talking about is the global war
on terrorism, sir, for the next 15 or 20 or 25 years. That is not an air refueling61
intensive scenario and that’s why a multi-mission airplane to me makes sense.”
How Tankers with Airlift Capability Might Be Employed. General62
Schwartz also expects the KC-X to “mitigate wear and tear on the C-5 and C-17.”
The following scenario is an example of how a KC-X, with doors, floors, and
defensive systems might arguably expand the flexibility of the airlift system. A KC-
X while flying a scheduled combat air refueling mission, could be subsequently
retasked in-flight, land at an airfield located within a threat environment, upload
battle casualties, and air evacuate the patients to needed medical care in another
theater. This example is sometimes cited to illustrate how a KC-X, with defensive
systems not currently found on KC-135s, might provide planners with additional
options to execute an unplanned medical evacuation sortie — perhaps while also
negating the need to tap a strategic airlift platform. Likewise, this scenario could be
applied to the movement of other time-sensitive cargo or passengers. Finally,
passenger and cargo capability allows joint commanders the opportunity to deploy
aircraft support personnel and associated ground support equipment in tandem with
their associated aircraft during aircraft deployment missions.63 By moving the
aircraft, crews, support personnel and equipment together, deploying aviation units
may be able to achieve operational status more quickly at their destination.
Airlift Requirements. The Government Accountability Office (GAO) has
criticized DOD for including a passenger and cargo requirement in KC-X without
conducting required analyses. As a result, GAO made two recommendations to
DOD. First, GAO recommended DOD direct the Air Force to determine, through
analysis, if there is a gap, shortfall, or redundancy to justify adding a passenger or
cargo capability to KC-X and to present results to the Joint Staff’s Joint


60 Joint Publication 3-17, “Joint Doctrine, Tactics, Techniques, and Procedures for Air
Mobility Operations,” August 14, 2002, pp. V-1 and V-2.
61 “Senate Armed Services Subcommittee on Seapower Holds Hearing on FY2007 Budget:
Transportation Command.” CQ Congressional Transcripts. April 4, 2006.
62 General Norton A. Schwartz (USAF), Commander, U.S. Transportation Command,
Written Statement before the Senate Homeland Security and Governmental Affairs
Committee, Federal Financial Management, Government Information, Federal Services, and
International Security Subcommittee, September 27, 2007, p. 6.
63 Air Force Doctrine Document 2-6, Air Mobility Operations, March 1, 2006, p. 48.

Requirement’s Oversight Council (JROC) for validation. DOD did not concur with
this recommendation stating they believed the Air Force had presented sufficient
analyses to the JROC to justify the addition of a passenger and cargo capability for
KC-X. Second, the GAO recommended that DOD direct the Chairman, Joint Chiefs
of Staff to notify the Under Secretary of Defense for Acquisition, Technology and
Logistics before certifying the KC-X program to Congress. DOD concurred with this
recommendation.64
Further, according the Air Force’s KC-X White Paper, “preliminary results of
the in-progress Mobility Capability Study 06 show that tankers are least in demand
when airlift assets are stretched most thin during the early deployment phase of a
conflict.”65 This may be considered significant to some as the strategic airlift fleet
is currently expected to grow to 301 aircraft (190 C-17s and 111 C-5s) — near the
bottom of the MCS 05 required range of 292 to 383 strategic airlift aircraft.66
Cost of Airlift Capability. While many support having an airlift capability
on the Air Force’s next generation tanker, this capability is not without costs. For
example, the 2006 RAND Analysis of Alternatives (AOA) pointed out two potential
costs to adding this capability will:
!“Require additional structure and systems, which increase the cost
of each aircraft.”67 The AOA found that an air refueling fleet where
every aircraft was equipped with airlift capability added 6% to total
life-cycle costs compared to a fleet where no tankers were equipped68
with passenger and cargo capability.
!Increase fleet requirements because “the weight of the additional69
structure and systems means that each aircraft can carry less fuel.”
Summary of Airlift Analysis. The RAND AOA found that the cost-benefit
analysis of adding an airlift capability in future tankers to be “a matter for senior70
decisionmaker judgment.” The amount of airlift ultimately to be provided by the
tanker fleet could have important implications for other air mobility programs.
Defensive Systems. Defensive systems, such as missile warning devices,
radar warning receivers, flares and chaff, facilitate a tanker aircraft’s primary


64 GAO-07-367R, “Defense Acquisitions: Air Force Decision to Include a Passenger and
Cargo Capability in Its Replacement Refueling Aircraft Was Made without Required
Analysis,” March 6, 2007, p. 17.
65 “Headquarters Air Mobility Command White Paper, KC-X: The Next Mobility Platform,
The Need for a Flexible Tanker,” February 28, 2007, p. 6.
66 Ibid, p. 4.
67 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 9.
68 Ibid, p. 14.
69 Ibid, p. 9.
70 Ibid.

mission of in-flight air refueling by potentially enabling the tanker to operate closer
to its refueling track, thus, making more fuel available on each mission. Operations
in Iraq and Afghanistan have found tankers operating in an increasingly hostile threat
environment. For example, the Air Force points out that tankers operating in U.S.
Central Command’s theater were fired upon 19 times in FY2006. Additionally,
defensive systems also increase a tanker’s capability in its secondary mission of
ai rlift.71
Was the KC-X Competition Fair?
In 2006, RAND Corporation concluded an Analysis of Alternatives (AOA) for
recapitalizing the Air Force’s KC-135 fleet. RAND found that purchasing new
commercially-derived tankers was the most cost-effective means of initially
recapitalizing the fleet.72 As a result, the Air Force released a formal request for
proposals (RFP) in early 2007.73 The Boeing Company responded to the RFP with
the KC-767, a variant of the commercial 767-200, while Northrop Grumman teamed
with European Aeronautic Defense and Space Company (EADS) to offer a tanker
version of the Airbus 330-200.
Request for Proposal. In January 2007, the Air Force released its formal
Request for Proposal (RFP) for the KC-X acquisition program. Assistant Secretary
of the Air Force, Sue Payton, reportedly emphasized that the Air Force had
completed a rigorous review process for KC-X to ensure the RFP mirrors joint war-74
fighting requirements. The RFP outlined nine primary key performance parameters:
!Air refueling capability
!Fuel offload and range at least as great as the KC-135
!Compliant Communication, Navigation, Surveillance/Air Traffic
Management (CNS/ATM) equipment
!Airlift capability
!Ability to take on fuel while airborne
!Sufficient force protection measures
!Ability to network into the information available in the battle space
!Survivability measures (defensive systems, Electro-Magnetic Pulse
(EMP) hardening, chemical/biological protection, etc.)


71 “Headquarters Air Mobility Command White Paper, KC-X: The Next Mobility Platform,
The Need for a Flexible Tanker,” February 28, 2007, p. 3.
72 KC-135 Recapitalization Analysis of Alternatives. Briefing to Congress. January 26-27,

2006.


73 “Air Force Posts KC-X Request for Proposals,” Air Force Print News Today, January 31,

2007, online at [http://www.af.mil/news/story.asp?id=123039360].


74 “Air Force Posts KC-X Request for Proposals,” Air Force Print News Today, Press
Release 070107, January 30, 2007, online at [http://www.af.mil/pressreleases/
story_print.asp?id=123039273].

!Provisioning for a multi-point refueling system to support Navy and
Allied aircraft75
In November 2007, Ms. Payton explained the evaluation criteria that the Air
Force used in determining the KC-X competition. The KC-X evaluation factors are:
!Factor 1 - Mission Capability. Mission capability includes five
subfactors listed in descending order of importance:
!Subfactor 1.1 - Key System Requirements
!Subfactor 1.2 - Subsystem Integration and Software
!Subfactor 1.3 - Product Support
!Subfactor 1.4 - Program Management
!Subfactor 1.5 - Technology Maturity and Demonstration
!Factor 2 - Proposal Risk
!Factor 3 - Past Performance
!Factor 4 - Cost/Price76
!Factor 5 - Integrated Fleet Air Refueling Assessment
The Air Force considered the first three KC-X evaluation factors of equal
importance. The final two factors were considered of equal importance, but less
important relative to the first three criterion. Lastly, the Air Force regarded “Factors

1, 2, 3, and 5, when combined, [to be] significantly more important than factor 4.”77


RFP Analysis. There was considerable comment in the media questioning
whether the draft (December 2006) of the KC-X request for proposal (RFP) was
biased toward the capabilities apparent in Boeing’s KC-767. Close review of this
RFP was partially the result of the controversy surrounding the 2001 tanker lease
proposal. It is important to note within this context, that the primary consideration
in DOD’s overall weapon acquisition system is designed to be meeting warfighter
requirements, not what is most profitable to “Company X” or “Company Y.”
Northrop Grumman and Airbus reportedly complained that the original KC-X RFP
did not adequately address how the Air Force would evaluate the candidate aircraft’s
airlift capability. Reportedly, they feared that the Air Force might not weight the
score of KC-30’s airlift capabilities in a favorable manner.
In the absence of detailed airlift evaluation information, however, Airbus could
have offered a smaller aircraft, such as its A300/A310 class, which it might believe
corresponded more closely to Air Force requirements.78 Similarly, if Boeing


75 Ibid.
76 USAF slide obtained from “Performance Comes First,” Air Force Association Daily
Report, November 21, 2007, online at [http://dailyreport.afa.org/AFA/Reports/

2007/Month11/Day21/ 1028factors.htm] .


77 Ibid.
78 The last A300/A310 class aircraft were produced in 2007 and the A300/A310 production
line was terminated. However, if Airbus believed that a smaller sized tanker was more
compatible with Air Force requirements and therefore more competitive than a larger A330-
(continued...)

concluded the Air Force desired a larger aircraft with more airlift capability, it could
have conceivably offered the Boeing 777 aircraft or a larger variant of the Boeing 767
design.
Reduced demand for defense-unique systems and the resulting consolidation of
the defense industrial base has frequently reduced the number of companies available
to provide a given defense article, which can adversely affect competition.
Therefore, often some compromise between a warfighter’s “perfect world”
requirements and real world industrial capabilities is unavoidable. However,
substantially modifying warfighter requirements or Key Performance Parameters
(KPPs)79 to jibe with what industry wants to offer, may appear to some to reflect an
imbalance between requirements and capabilities.
As DOD refined its final requirement, most observers saw nothing obvious in
the KC-X RFP that would inherently bias the contract award in favor of any platform
that could be offered by the competitors. The RFP made clear, however, that the
aircraft’s primary mission is refueling DOD and allied aircraft with the flying boom
mechanism. Any passenger or cargo carrying capability was deemed a “secondary
mission.” Additionally, at the beginning stages of its recapitalization program, the
Air Force potentially has great flexibility in pursing the best KC-X match now as
requirements for planned programs such as KC-Y and KC-Z can later be adapted to
best complement the KC-X selection.
Comparing the Competitors. According to many defense analysts, both
competitors’ proposals offered key improvements over the KC-135 by including:
!Receiver in-flight refueling capability
!Defensive systems
!Advanced booms capable of refueling both “boom” and “drogue”
receivers on the same mission
!Improved airlift capacity and utility
!Wing-mounted pods for hose and drogue systems.
However, debate surrounding the competing proposals often focused on
differences in size. The following is a brief description of both the Boeing KC-767
and Northrop Grumman KC-30 aircraft submissions along with highlights of some
issues frequently raised through the media.
Boeing KC-767. Boeing touted its entrant, a version of the Boeing 767-200
as the “right-sized” tanker. Proponents of the KC-767 argue that it is most similar


78 (...continued)
class aircraft, Airbus could have taken steps to keep the line available for production.
79 Key Performance Parameters (KPP) are defined as “those attributes or characteristics of
a system that are considered critical or essential to the development of an effective military
capability and those attributes that make a significant contribution to the key characteristics
as defined in the Joint Operations Concept.” Defense Acquisitions University Glossary ofth
Defense Acquisitions Acronyms and Terms, 12 Edition, online at [https://akss.dau.mil/pv/
glossary.aspx].

in size and offload capacity to the KC-135. Further, proponents stated that the KC-
767’s smaller “footprint” compared to the competing KC-30 might enable it to better
utilize potentially limited ramp space in forward operating locations. Additionally,
proponents believed the smaller KC-767 to be potentially more fuel efficient due to
its lower gross weight leading to less fuel being burned in transit.80 Selected KC-767
aircraft specifications are listed in Appendix D.
Northrop Grumman KC-30. Northrop Grumman, on the other hand,
believed the KC-30, based on the Airbus 330-200, offered superior value in
comparison to the KC-767 because of its larger size. KC-30 proponents espoused the
aircraft’s potentially greater fuel offload capability and larger airlift capacity in terms
of weight, pallet positions and passengers when compared to the KC-767. As a
result, KC-30 proponents believed their aircraft would reduce the number of aircraft
required to meet some potential operational scenarios.81 Selected KC-30 aircraft
specifications are listed in Appendix E.
International Customers. Both competitors have secured international
customers. Boeing currently has two international customers for the KC-767 — Italy
(4) and Japan (4).82 Likewise, Saudi Arabia (3),83 Australia (5), the United Arab
Emirates (3), and the United Kingdom (14) plan to buy the KC-30 from Airbus, a
division of EADS.84 While some look to the international orders as a potential
signpost for how the Air Force’s KC-X selection should proceed, others will point
out that each country has made its selection based on the unique military
requirements that face each nation. Likewise, DOD’s requirements may differ
considerably from other nations that have recently purchased tanker aircraft.
What are the Economic and Trade Effects of KC-X?
On February 29, 2008, the Air Force awarded the KC-X contract to Northrop
Grumman.85 Some Members of Congress have voiced concerns over the Air Force’s
selection of Northrop Grumman. Though a significant portion of the Boeing 767 is
manufactured outside of the United States and major components of the A330 come
from U.S. suppliers, the partnering of Northrop Grumman with the U.S. subsidiary
of a Europe-based aerospace company has raised concerns for some. Issues raised
by Members in Congress often draw particular attention to Boeing and Airbus
disputes currently before the World Trade Organization (WTO), potential effects on


80 Online at [http://www.boeing.com].
81 “KC-30 Tanker: Total Air Mobility,” online at [http://www.northropgrumman.com/kc30].
82 “The Boeing Company: Boeing 767 Military Versions,” Jane’s All The World’s Aircraft,
March 14, 2007, online at [http://www.janes.com].
83 Marcus Weisgerber, “Saudi Arabia to Buy Three Airbus A-330 Multirole Tankers, EADS
Says,” Inside the Air Force, January 4, 2008.
84 “Airbus Industrie: Airbus Multirole Tanker Transport (MRTT),” Jane’s All The World’s
Aircraft, January 21, 2008, online at [http://www.janes.com].
85 “Tanker Contract Award Announced,” Air Force Print News, February 29, 2008, online
at [http://www.af.mil/news/story.asp?id=123088392].

the U.S. aviation industrial base, and questioning whether the contract met the
requirements of the Buy America Act.
WTO Dispute. The U.S. government has alleged that Airbus’ parent company,
European Aeronautic and Defense Company (EADS), received illegal subsidies from
European governments. Likewise, the European Union (EU) has charged that Boeing
has received illegal subsidies from the United States. Both disputes are being
litigated with the World Trade Organization (WTO).86 Reportedly, a WTO ruling87
regarding the U.S. government charges against EADS may come by summer2008,
while the WTO may rule on the EU’s case against Boeing by November 2008.88
However, some have suggested that an initial ruling may not bring final resolution
to the dispute due to the complexity of the cases and the potential for further89
litigation.
Some in Congress observe that if the WTO dispute is resolved in favor of the
U.S. government,90 that the WTO could under some circumstances allow the United
States to apply tariffs to goods manufactured by Airbus — goods that would not
otherwise be subject to tariffs. Further, some have expressed concern that American
taxpayers could potentially be forced to pay increased costs for the KC-45 as a result
of potential tariffs levied on Airbus products. In response to this concern while
testifying before Congress in March 2008, Under Secretary of Defense for
Acquisition, John Young, stated, “WTO rulings cannot be passed along to the Air
Force or the Department of Defense as a cost on a contract with the Department of
Defense. So if there is a ruling [against EADS] and a penalty, it can’t be passed91
along to us as a cost.”
Others have questioned whether the Air Force’s award of the KC-X contract to
Northrop Grumman could possibly affect the United State’s leverage in settling the
Airbus-Boeing WTO dispute. For example, some in Congress have suggested that
the award of a contract of the size of the KC-X program that has the potential to


86 For an overview of the Boeing/Airbus WTO trade dispute, see CRS Report RL34381,
European Union — U.S. Trade and Investment Relations: Key Issues, coordinated by
Raymond J. Ahearn.
87 “Schwab Says Airbus WTO Case Unaffected by Tanker Decision,” Inside U.S. Trade,
March 7, 2008, online at [http://www.insidetrade.com/secure/dsply_nl_txt.asp?f=wto2002.
ask&dh=106446419&q=].
88 Timothy R. Homan, “WTO Rulings Could Fuel Legislative Fight Brewing Over Tanker
Contract,” CQ Today, March 6, 2008, p. 3.
89 Robert Herzstein, “Don’t Expect the WTO to Resolve the Boeing-Airbus Dispute,”
European Affairs, Spring/Summer 2006, online at [http://www.europeanaffairs.org/
current_issue/2006_spring_summe r/2006_spring_summe r_08.php4].
90 Any possible retaliation sanctioned by the WTO could take many months, if not years, to
materialize. At this point in time, retaliation is very much hypothetical, as is guessing which
sectors or products may potentially be retaliated against.
91 Transcript from the House Armed Services Subcommittee on Air and Land Forces and
Subcommittee on Sea and Expeditionary Forces Hold Joint Hearing on the Department of
the Navy and Air Force Tactical Aviation Programs, March 11, 2008.

benefit a company our government has lodged a complaint against with the WTO
could send mixed signals.92 On the other hand, some have suggested that the political
controversy surrounding the award of the KC-X contract to a consortium that
involves Airbus may increase the likelihood Airbus will attempt to settle its dispute
with Boeing outside of the WTO process in an effort to secure support from members
of Congress. Further, others have speculated that the potential financial boost that
Airbus may enjoy from the KC-X contract could possibly reduce Airbus’s need to
rely on what some perceive as aircraft launch assistance subsidies.93 Still other
observers see only a remote impact of the KC-X contract on the willingness of either
Boeing or Airbus to settle the dispute prior to a WTO ruling. For example, Susan
Schwab, U.S. Trade representative, reportedly stated, “the Air Force procurement has
no impact on our efforts in Geneva to address the launch aid problem.”94
Some in Congress have suggested that Congress should block contracts from
going to foreign companies accused of funding their programs with illegal
subsidies.95 However, some analysts counter that the commercial aircraft industry,
like the personal computer and automobile industries, has globalized, drawing on the
relative strengths of specialized suppliers of components and expertise from around
the world. As a result, the two primary manufacturers, Boeing and Airbus, have both
outsourced key parts of their production processes to overseas firms.96 Further, some
caution that potential trade legislation may “have major repercussions” that may
prove harmful to the U.S. industrial base in the long term.97 To illustrate the impact
of globalization on the commercial airliner manufacturing industry, a list of
subcontractors, corporate parent domiciles and sub-components found on the
commercial variants of the Boeing 767 and Airbus 330 is provided in Appendix F.
U.S. Industrial Base Implications. Some in Congress are concerned about
the implications of awarding the KC-X contract to Northrop Grumman on the United
States industrial base. However, during testimony to Congress, Assistant Secretary
of the Air Force, Ms. Sue Payton, stated that, “job creation, location of assembly and
manufacturing were not part of this evaluation criteria, according to the law” and that
“industrial capacity was not part of the evaluation criteria.”98 To some, there are


92 Ibid.
93 “Schwab Says Airbus WTO Case Unaffected by Tanker Decision,” Inside U.S. Trade,
March 7, 2008, online at [http://www.insidetrade.com/secure/dsply_nl_txt.asp?f=wto2002.
ask&dh=106446419&q=].
94 Ibid.
95 John M. Donnelly, “Air Force Contract Draws More Fire,” CQ Today, March 4, 2008, pp.

1, 4.


96 Gary Clyde Hufbauer, “Boeing vs. Airbus: Fighting the Last War,” Op-ed in Handelsblatt,
June 19, 2007, online at [http://www.petersoninstitute.org/publications/ opeds/
print.cfm? doc=pub&ResearchID=773].
97 Timothy R. Homan, “WTO Rulings Could Fuel Legislative Fight Brewing Over Tanker
Contract,” CQ Today, March 6, 2008, p. 3.
98 Transcript from Hearing on Contract Award for Tanker Replacement Program, Committee
(continued...)

significant differences between the economic impact of the Boeing and Northrop
Grumman proposals. Making an authoritative, “apples-to-apples” comparison on the
amount of direct and indirect jobs from either contractor’s proposal is nearly
impossible. For example, both companies may have used differing methodology and
assumptions in calculating their estimates and estimates are frequently revised.
Further, how the contract award may potentially affect the long-term military
industrial base is unclear.
Boeing’s KC-X plan calls for aircraft assembly to occur at its Everett,
Washington plant. Further, Boeing’s proposal would convert the 767 into a tanker
at its plant in Wichita, Kansas. Boeing claims that 44,000 American workers from

300 U.S. suppliers would be involved in building the KC-767 Advanced Tanker.99


As of January 1, 2008, Boeing had orders to deliver an additional 52 aircraft in the
767 product line.100 Boeing supporters may contend that losing the KC-X line will
result in Boeing’s 767 line becoming unprofitable and subsequently closing. Others
may counter that losing the KC-X may allow Boeing to concentrate more heavily on
its 787 commercial airliner — an aircraft that Boeing had received 817 orders for as
of January 1, 2008.101
Northrop Grumman plans to assemble the KC-45 in a new plant planned for
Mobile, Alabama — a move it believes will result in the creation of 2,000 new jobs.
Northrop Grumman originally indicated their proposal would result in 25,000 direct
and indirect American jobs based a Department of Commerce jobs projection model.
More recently, Northrop Grumman raised its job estimate to approximately 48,000
direct and indirect jobs and 230 suppliers from 49 states. Northrop Grumman based
the revised estimate on feedback received from suppliers and a Department of Labor
formula that projects jobs by specific region.102 Further, EADS announced plans in
January 2008 to conduct final assembly of all freighter versions of the Airbus 330-
200 in Mobile, Alabama — raising the potential for creating new domestic jobs if
their candidate were chosen for KC-X.103 Some have estimated a market for 200
Airbus 330-200 freighters over the next 10 years and as of January 2008, Airbus had


98 (...continued)
on Appropriations, Subcommittee on Defense, United States House of Representatives,
March 5, 2008.
99 Boeing press release, “Boeing KC-767 Tanker Win Would Benefit Arizona Economy,”
November 26, 2007.
100 “The Boeing Company: Boeing 767,” Jane’s All the World’s Aircraft, February 15, 2008,
online at [http://www.janes.com].
101 “The Boeing Company: Boeing 787 Dreamliner,” Jane’s All the World’s Aircraft,
February 20, 2008, online at [http://www.janes.com].
102 Press release, “Northrop Grumman Updates Job Projections for Air Force KC-45A
Program,” March 11, 2008, online at [http://www.irconnect.com/noc/press/pages/
news_releases.html ?d=138001].
103 Jen DiMascio, “Airbus Vows to Boost Business in Alabama If it Can Make Tankers
There,” Defense Daily, Vol. 237, Issue 9, January 15, 2008.

orders for approximately 60 aircraft.104 Thus, proponents of Northrop Grumman’s
KC-X proposal may believe that the long-term economic benefits of obtaining an
Airbus commercial airline production line on U.S. soil are potentially substantial.
Buy American Act. Some have questioned whether Northrop Grumman’s
proposal satisfies requirements in the Buy American Act105 which requires the federal
government to purchase domestically manufactured goods. The statute defines goods
to have been domestically manufactured if their components have “substantially all”
been mined, produced, or manufactured within the United States. The definition of
“substantially all” has been left to the Federal Acquisition Regulations (FAR). In the
FAR, a good is considered “domestic” if the cost of domestically produced
components exceeds 50% of the value of the whole article.106
One way a KC-X contractor could potentially satisfy requirements of the Buy
American Act is by having 50% or more of total cost of their proposed aircraft
produced in the United States. Reportedly, approximately 85% of Boeing’s KC-X107
proposal would be manufactured in the United States. Further, Northrop Grumman
claims that “at least 58 percent” of its proposal will be comprised of products108
manufactured by American companies. Based on those calculations, both
proposed aircraft would appear to satisfy Buy American Act requirements.
What Is the Impact of Boeing’s Protest?
Throughout the KC-X competition, there has been a great deal of speculation
in the media that the award of the KC-X contract would be followed by a bid protest.
Competitors are allowed to protest the award of government contracts to the
Government Accountability Office.109 Air Force officials debriefed both Boeing and
Northrop Grumman officials on how their respective bids were scored in March


104 “Airbus 330,” Jane’s All the World’s Aircraft,” February 19, 2008, online at
[ h t t p : / / www.j a ne s . c o m] .
105 For more information, see CRS Report 97-765, The Buy American Act: Requiring
Government Purchases to Come from Domestic Sources, by John R. Luckey.
106 FAR § 25.101. Members have occasionally attempted to codify a definition of
“substantially all.” The most recent example is S. 581, introduced in the Senate by Senator
Russell D. Feingold on February 14, 2007. The bill would have accepted goods as
domestically produced “if the cost of the domestic components of such articles, materials,
or supplies exceeds 75 percent of the total cost of all components of such articles, materials,
or supplies.”
107 Eric Rosenburg, “Boeing Duels for Tanker Deal,” Seattle Post-Intelligencer, September

30, 2007, online at [http://seattlepi.nwsource.com/business/333751_tanker01.html].


108 “Northrop Grumman’s KC-45 Tanker: Making the Right Choice,” January 25, 2007,
online at [http://www.northropgrumman.com/kc45/benefits/choice.html].
109 For more information on “Protest” process see GAO-06-797SP, “Bid Protest at GAO: A
Descriptive Guide,” Eighth Edition, 2006.

2008. On March 11, 2008, Boeing protested the Air Force’s decision to the GAO.110


On March 26, 2008, both the Air Force and Northrop Grumman separately filed
motions for the GAO to dismiss portions of Boeing’s protest;111 however, the GAO
rejected these motions.112 Work on the KC-45A stopped while the GAO considered
the protest.113
Boeing’s protest is based on a perception that the Air Force used a flawed
process in the KC-X selection process. For example, in a press release detailing
Boeing’s rationale for protesting, Boeing stated:
It is clear that frequent and often unstated changes during the course of the
competition — including manipulation of evaluation criteria and application of
unstated and unsupported priorities among the key system requirements —
resulted in selection of an aircraft that was radically different from that sought114
by the Air Force.
Further, Boeing stated that both teams received identical ratings across the five
evaluation areas in the KC-X competition. Boeing claims that the Air Force’s
treatment of both Boeing’s cost estimates and Boeing’s past experience of building
Air Force tankers, if scored differently, could have affected the outcome of the source
selection.115 In response to Boeing’s protest the an Air Force press release stated:
Proposals from both offerors were evaluated thoroughly in accordance with the
criteria set forth in the Request for Proposals. The proposal from the winning
offeror is the one Air Force officials believe will provide the best value to the
American taxpayer and to the warfighter. Air Force members followed a
carefully structured process, designed to provide transparency, maintain integrity
and promote fair competition. Air Force members and the offerors had hundreds
of formal exchanges regarding the proposals throughout the evaluation process.
Air Force officials provided all offerors with continuous feedback through
discussions on the strengths and weaknesses of their proposals. Several


110 Boeing News Release, “Boeing Protests U.S. Air Force Tanker Contract Award,” March

11, 2008, online at [http://www.boeing.com/ids/globaltanker/news/2008/q1/080311b_


nr.html].
111 Andrea Shalal-Esa, “Air Force, Northrop Ask GAO to Dismiss Boeing Protest,” Reuters,
March 26, 2008.
112 Susanna Ray and Edmond Lococo, “Northrop Loses Effort to Dismiss Boeing Protest,”
Bloomberg News, April 2, 2008, online at [http://www.bloomberg.com/apps/news?pid=
newsarchive&sid=a2hruo2xpyFQ].
113 Sean Reily, “Air Force Keeps Tanker Freeze,” Mobile Press-Register, March 18, 2008,
online at [http://www.al.com/press-register/stories/index.ssf?/base/news/120583171412090.
xml&coll=3].
114 Boeing Company News Release, “Boeing Protests U.S. Air Force Tanker Contract
Award,” March 11, 2008, online at [http://www.boeing.com/news/releases/2008/q1/

080311b_nr.html ].


115 Ibid.

independent reviews assessed the process as sound and thorough.116
Even before the Air Force awarded the KC-X contract to Northrop Grumman,
Force leaders openly worried that any potential protest could result in KC-X program
delays. For example, recently the Air Force’s acquisition deputy, Lt. Gen. Donald
Hoffman, expressed concern that FY2008 dollars could be put at risk by a protest.
However, Congress could potentially remedy this situation by shifting the money to
the Air Force’s Tanker Transfer Fund — an account Congress established that
essentially allows the Air Force flexibility to later designate the year and account for117
KC-X expenditures. Former Air Force Chief of Staff, Gen. T. Michael Moseley,
publically voiced his concern with a possible protest stating, “look what’s happened
to us with the [CSAR-X] helicopter. We lost $800 million in this protest and lost
over a year and a half of operational time because of not being able to field an118
airplane.” However, defense contractors have a statutory right to protest contract
decisions. To many, this right provides both transparency and fairness to the
government’s acquisition process.
Why Did the GAO Sustain the Protest?
On June 18, 2008, the GAO announced that it had completed its examination
of DOD’s decision to award Northrop Grumman the KC-X contract (for 80 aircraft)
and found that Boeing’s complaint had merit.119 GAO’s managing associate general
counsel for procurement law, Michael R. Golden, stated:
Our review of the record led us to conclude that the Air Force made a number of
significant errors that could have affected the outcome of what was a close
competition between Boeing and Northrop Grumman. We therefore sustain
Boeing’s protest. We also denied a number of Boeing’s challenges to the award
to Northrop Grumman, because we found that the record did not provide us with
the basis to conclude that the agency had violated the legal requirements with
respect to those challenges.
The GAO recommended that discussions between the government and the
bidders be resumed, that bidders be given the opportunity to submit revised
proposals, and that the Air Force make a new decision based on this additional input.


116 “Air Force Officials Respond to Boeing Protest,” Air Force Print News Today, March

12, 2008, online at [http://www.af.mil/news/story_print.asp?id=123089878].


117 Marcus Weisgerber, “Hoffman: Industry KC-X Tanker Protest Could Put Funding at
Risk,” Inside the Air Force, February 22, 2008.
118 David A. Fulghum, “Moselely Looks Forward to Getting First New Tankers,” Aerospace
Daily & Defense Report, February 29, 2008, p.2.
119 GAO, “Statement Regarding the Bid Protest Decision Resolving the Aerial Refueling
Tanker Protest By The Boeing Company B-311344 et al.,” Government Accountability
Office (Washington, D.C.), June 18, 2008. Available on the World Wide Web at
[ h t t p : / / www.ga o.gov/ p r e ss/ boei n gs t mt .pdf ] .

The Air Force is not statutorily obliged to heed GAO’s recommendations but must
respond to them within 60 days (August 17, 2008).120
The GAO made clear that it was not passing judgement on the relative merits
of the proposed aircraft. Instead, the GAO assessed whether the Air Force complied
with statutory and regulatory requirements in evaluating the competing bids. GAO
cited seven specific reasons for sustaining portions of the Boeing protest, which are
summarized below:
1.The Air Force evaluation did not follow the prioritization of technical
requirements specified in its own solicitation. Nor did it give credit to the
Boeing proposal for satisfying the greater number of non-mandatory
technical criteria, though the solicitation expressly requested this.
2.The Air Force used the degree to which the Northrop Grumman bid
exceeded a specific key performance objective as an important
discriminator between proposals, despite the solicitation’s provision
stating that this would not be the case.

3.Solicitation required that proposed tankers be able to refuel all fixed-wing,


tanker-compatible Air Force aircraft using existing Air Force procedures.
The protest record did not support the Air Force’s determination that the
Northrop Grumman proposal did so.
4.Air Force discussions with each of the bidding companies were unequal
and misleading. Boeing was told that it had fully satisfied a key operational
utility parameter, yet the Air Force later determined that the Boeing
proposal only partially met the requirement. The Air Force continued its
discussion with Northrop Grumman on the same key parameter without
informing Boeing that its assessment had changed.
5.Northrop Grumman refused to agree to a specific solicitation requirement
regarding the development of Air Force maintenance capability within a
specified period. The Air Force unreasonably assessed this to be an
“administrative oversight” and awarded the contract improperly in light of
this exception to a material solicitation requirement.

6.The Air Force unreasonably evaluated the military construction (hangers,


runways, parking aprons, etc.) required to sustain each of the proposed
aircraft. During the protest proceedings, the Air Force conceded that
calculations properly performed would have resulted in a most probable


120 GAO also recommended that the Air Force consider amending its proposal solicitation
before engaging the companies in the discussions, that it reimburse Boeing for the cost of
filing and pursuing the protest, and that it terminate the existing contract with Northrop
Grumman if Boeing’s proposal is ultimately selected.

life cycle cost for the Boeing offer lower than that for the Northrop
Grumman proposal.121
7.The Air Force improperly adjusted upward Boeing’s estimate of the
non-recurring (i.e., one-time) engineering portion of its most probable life
cycle cost value. The Air Force would have been able to do so had it found
the cost to be unreasonably low, but it did not. Additionally, the cost model
used by the Air Force to adjust this cost estimate was unreasonable.
Because the 69-page GAO decision contains sensitive proprietary and source
selection information, it was issued under a protective order and is not available to
the public. The GAO has directed counsel for the parties to identify information that
cannot be publicly released so that a redacted version may be released and posted on
the agency’s website ([http://www.gao.gov]). GAO typically releases a redacted
public version of a protected decision within two to three weeks after it is issued.122
Can DOD Split the Tanker Contract Between the
Competitors?
Some suggested that the Air Force should split its KC-X acquisition program
between Boeing and Northrop Grumman. Although the Air Force has awarded a
contract to acquire the first 68 KC-45s to Northrop Grumman, some may believe
future KC-X contracts, or potentially the expected KC-Y and KC-Z follow-on
acquisition programs, should be competitively sourced.
RAND’s analysis of alternatives found that, “a mixed [Air Force tanker] fleet
... has comparable cost-effectiveness, so there is no reason to exclude a priori an123
Airbus-Boeing mixed buy on cost-effectiveness grounds.” Others, including 66
Members of Congress, have indicated they believe that “the Air Force’s “winner take
all” KC-X competition remains the most cost-effective approach to initiating
modernization of the tanker fleet.”124 Further, some have suggested that the idea of
a split buy was promoted by the Northrop Grumman team as a hedge against
potentially losing the KC-X deal.125


121 Life cycle cost refers to the total cost of owning, operating, maintaining, and disposing
of a given asset. It is often referred to as “cradle-to-grave” cost. Life cycle costs are
calculated within a range, from lowest to highest. The “most probable” cost is the one
calculated to have the statistically highest probability of being true.
122 For additional information on the GAO bid protest decision process, see Bid Protests at
GAO: a Descriptive Guide, Eighth Ed., 2006 (GAO-06-797SP), available on the World
Wide Web at [http://www.gao.gov/decisions/bidpro/bid/d06797sp.pdf].
123 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 12.
124 Letter from Members of the House of Representatives to Secretary of the Air Force
Michael Wynne, October 2, 2007, online at [http://www.insidedefense.com/
secure/data_extra/pdf6/dplus2007_3355_1.pdf].
125 Demetri Sevastopulo, “U.S. Air Force Will Not Split Tanker Contract,” Financial Times,
(continued...)

Arguments Favoring a Split Buy.126 A leading proponent of “split buy”
KC-X acquisition is Dr. Jacques Gansler, a former Under Secretary of Defense for
Acquisition, Technology and Logistics during the Clinton Administration. Dr.
Gansler has termed his proposal as “Competitive Dual Sourcing” — a concept that
would have Boeing and Northrop Grumman compete annually/periodically — as
often as DOD were to reopen bidding — for portions of the KC-X acquisition. Dr.
Gansler believes that “Competitive Dual Sourcing” is a particularly good fit for the
KC-X program as both competing aircraft already have established worldwide
logistics networks. Dr. Gansler’s analysis is based on comparisons of the cost growth
for ten DOD aircraft programs developed without production competition to the cost
of seven commercial aircraft produced in a competitive environment. He found the
ten single-source DOD acquisition programs had an average cost increase of 46
percent, while the average of the seven competitively produced commercial airliners
had an average cost decrease of 16% over the life of the program.
When analyzing potential savings for the KC-X program, Dr. Gansler, assumed
a purchase of 100 new tankers with a base price of $125 million dollars and a 75/25
split favoring the best-value candidate.127 Based on these assumptions, he found a
competitively sourced tanker acquisition would potentially generate $7.7 billion in
cost savings compared to a single source tanker program provided the cost growth
averages of the single-source and competitively sourced aircraft programs examined
earlier in his study were repeated in the KC-X program.128 Some may counter that
Dr. Gansler’s study does not definitively conclude dual-sourcing will garner savings
or that the magnitude of potential savings would outweigh operational costs, thus
resulting in a lower life-cycle cost for DOD. However, proponents may counter that
the quantity of the Air Force’s projected KC-X purchase — 179 aircraft compared
to 100 aircraft in Dr. Gansler’s study — could potentially yield greater savings than
those found in the study.
Arguments Against a Split Buy.129 Opponents have expressed opposition
to a split buy acquisition strategy for a variety of reasons. Secretary of the Air Force


125 (...continued)
August 6, 2007.
126 Many of the arguments in favor of a split-buy are consistent with arguments for the JSF
F-136 Alternate Engine. For more information on this program, see CRS Report RL33390,
Proposed Termination of Joint Strike Fighter (JSF) F136 Alternate Engine, by Anthony
Murch and Christopher Bolkcom.
127 Dr. Gansler’s analysis considered a 75/25 split to be illustrative and found other splits
such as 60/40, etc. could be expected to produce similar savings.
128 Jacques S. Gansler and William Lucyshyn, “Competition in the USAF Tanker
Replacement Program,” presentation slides, June 12, 2006, slides 18-19, 24, 35, and 40.
129 Many argued that DOD should have split the award of the Joint Strike Fighter (JSF)
program between the competitors. DOD chose instead to award the contract to a single team.
Many of the arguments for this decision are consistent with arguments against a split
purchase of tankers. For more information, see CRS Report RL31360, Joint Strike Fighter
(JSF): Potential National Security Questions Pertaining to a Single Production Line, by
Christopher Bolkcom and Daniel Else.

Michael Wynne reportedly believes the Air Force lacks funding to buy tankers in
sufficient numbers to justify a split arrangement as he stated, “the cost of that would
be prohibitive, unless there was sufficient funding to essentially buy between 24 and
30 [annually].”130 One analyst cited the cost of maintaining separate supply chains
and dual training programs for aircrew and mechanics when he stated, “dual sourcing
is a bad idea that would waste billions.”131 In addition to the costs of operating an air
refueling fleet comprised of potentially four aircraft (KC-10, KC-135, KC-30 and
KC-767) some in Congress believe a split purchase would add needless operational
complexity. Those that hold this view believe the planned fleet — consisting of three
tanker aircraft types — will already provide flexibility. Further, some have noted the
Air Force plans at least two additional tanker competitions (KC-Y and KC-Z) in the
future.132 To some, these potential future programs offer avenues to reopen
competition in the future. Further, a senior Air Force official reportedly told
members of Congress that shifting to a split-buy acquisition strategy would result in
a contract delay of 12 to 18 months while doubling development costs to $4
billion.133
Where Might KC-X Aircraft Be Based?
Aircraft basing decisions are often based on operational considerations,
available infrastructure, and environmental impact among other concerns.
In January 2008, the Air Force released an “Air Force Roadmap” for each of it
major mission areas. The Roadmap lists the following as potential bases “being
considered” for new KC-X aircraft: Altus AFB, OK; Andrews AFB, MD; Bangor
International Airport, ME; Birmingham International Airport, AL; Edwards AFB,
CA; Eielson AFB, AK; Forbes Field, KA; Grand Forks AFB, ND; Grissom Air
Reserve Base, IN; Hickam AFB, HI; Lincoln Municipal Airport, NE; MacDill AFB,
FL; March Air Reserve Base, CA; McConnell AFB, KS; McGhee Tyson Airport,
TN; McGuire AFB, NJ; Pease Air National Guard Base, NH; Phoenix Sky Harbor
International Airport, AZ; Pittsburgh International Airport, PA; Rickenbacker
International Airport, OH; Salt Lake City International Airport, UT; Scott AFB, IL;
Selfridge Air National Guard Base, MI; Seymour Johnson AFB, NC; Sioux Gateway
Airport, IA; and Tinker AFB, OK.134


130 Andrea Shalal-Esa, “U.S. Air Force Sees Single Tanker Winner,” Reuters, December 4,

2007.


131 George Talbot, “Lawmakers: Don’t Split Tanker Contract; Boeing Supporters — 14
Senators and 48 Representatives — Write to Air Force,” Mobile Press-Register, October

13, 2007.


132 Letter from Senators to Secretary of the Air Force Michael Wynne, October 10, 2007,
online at [http://www.insidedefense.com/secure/data_extra/pdf6/dplus2007_3355_2.pdf].
133 Andrea Shalal-Esa, “Split Buy of U.S. Tankers Could Save Billions - Study,” Reuters,
August 3, 2007.
134 “Air Force Roadmap,” online at [http://www.af.mil/library/airforceroadmap/globalreach.
asp].

More recently, Air Force Chief of Staff, Gen. T. Michael Moseley, reportedly
said that he expects the first KC-45 to go to Edwards AFB, CA, for operational
testing. He anticipates the next few aircraft to be assigned to Altus AFB, OK, the
current training base for KC-135s, where pilots and boom operators will validate the
training syllabi for the KC-45. Gen. Moseley reportedly stated that the first
operational KC-45s will go to one of four bases — Fairchild AFB, WA; Grand Forks
AFB, ND; MacDill AFB, FL; or McConnell AFB, KA.135
Potential Options to Augment KC-X Recapitalization
RAND’s 2006 Analysis of Alternative’s (AOA) concluded that purchasing new,
commercial off-the-shelf aircraft to recapitalize DOD’s tanker fleet is the least
expensive option for recapitalizing the KC-135 fleet from a life-cycle cost
perspective — a view widely shared among defense analysts. However, this course
of action is also capital intensive in the near-term when compared with other
potential courses of action. Considering other budget pressures faced by DOD, it
might be infeasible to purchase 500 new tanker aircraft. At least three options could
be pursued to augment the KC-X program:
!Buy and convert surplus commercial airliners into military tankers
!Re-engine some fraction of the KC-135E fleet
!Develop commercial Fee-For-Service aerial refueling (FFS AR)
Convert Used Commercial Aircraft into Tankers
The Air Force has argued against purchasing surplus commercial aircraft and
converting them into military tankers. However, RAND’s AOA appears to agree
with the earlier DSB study — although with distinct caveats — that purchasing used
aircraft may merit additional study. RAND’s AOA found that purchasing used
aircraft as tankers is “generally not as cost effective” (as purchasing new aircraft), but
“...close enough in estimated cost to not exclude it from competition.”136
Some have suggested that surplus DC-10 aircraft, in particular, might offer
attractive means of acquiring air refueling capabilities for less money up-front.137
Those that hold this view point out the Air Force already operates the similar KC-10
— a commercial derivative that “retains 88 percent systems commonality with the
DC-10.”138 Thus, significant additional investments may not be required in
operations, maintenance, and supply if surplus DC-10s were procured and converted


135 David A. Fulghum, “Moselely Looks Forward to Getting First New Tankers,” Aerospace
Daily & Defense Report, February 29, 2008, p.2.
136 Ibid, p. 12.
137 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
p. 36.
138 USAF Fact Sheet, KC-10 Extender, September 2006, online at [http://www.af.mil/
factsheets/factsheet.asp?id=109].

into Air Force tankers. Likewise, some may suggest that surplus aircraft of the
design selected in the KC-X competition may also be worthy of future consideration.
Both of these options would seem to assuage Air Force concerns of adding additional
aircraft types to the air refueling fleet. While it is unlikely that a large portion of the
Air Force’s air refueling fleet could be recapitalized with used commercial aircraft,
proponents of this alternative may believe that even a small number of used aircraft
could potentially free scarce budget dollars for other DOD priorities.
Some have questioned the feasibility of this approach. A 2004 Government
Accountability Office (GAO) study pointed out that there can be a wide variance in
the amount of use the Air Force could expect from used commercial aircraft — some
are relatively new with low flying hours while others are older with high flying
hours.139 The GAO also questioned whether owners would be willing to sell the Air
Force available suitable aircraft.140 Further, each potential used aircraft may require
a unique cost analysis based on airframe service life remaining and the cost of
equipping the aircraft to match like-model airplanes already operating in the Air
Force’s fleet. Additionally, given Air Force opposition to “split-buy” proposals, it
is unlikely the Air Force would support bringing additional aircraft types into its
inventory due to the associated costs for maintenance, spare parts, and crew training.
A factor of potential significance that has arisen subsequent to most of the
independent studies cited in this report is the rising operating costs due to increased
jet fuel prices. This is of particular importance with older, less fuel-efficient aircraft.
According to the International Air Transport Association, the average cost of a barrel
of jet fuel rose from $34.70 in 2003 to $81.90 in 2006.141 As a result, Northwest
Airlines — the last major U.S. passenger airline to operate the DC-10 — announced
it would accelerate retirement of its DC-10 fleet.142 In January 2007, Northwest
removed the DC-10 from scheduled service replacing it with new airliners expected
to provide fuel savings of 35 percent.143 Since the Northwest retired its last DC-10,
jet fuel prices have risen 62% to $116.00 per barrel in February 2008.144 Thus, some
may question the economic merits of converting older airliners into tankers for the
Air Force.


139 Military Aircraft: DOD Needs to Determine Its Aerial Refueling Aircraft Requirements,
GAO-04-349, Washington, D.C., June 2004, p. 27.
140 Ibid.
141 “IATA Economic Briefing: Airline Fuel and Labour Cost Share,” International Air
Transport Association, June 2007, p. 1, online at [http://www.iata.org/NR/rdonlyres/

4A49F6DA-2B12-48A9-A283-E035AEA5D165/0/Airline_Labour_Cost_Share.pdf].


142 Perry Flint, Air Transport World’s Daily News, June 29, 2006, online at
[ ht t p: / / www.at wonl i ne.com/ news/ ot her .ht ml ?i ssueDat e=6/ 29/ 2006] .
143 Press Release, “Northwest Brings Customer Comforts of Airbus A330 Aircraft to Twin
Cities-Honolulu route: Airline Completes Retirement of DC-10 Fleet After 34 Years of
Service,” Minneapolis, January 8, 2007, online at [http://www.nwa.com/corpinfo/newsc/

2007/pr010820071733.html ].


144 “Jet Fuel Price Monitor,” International Air Transport Association, February 15, 2008,
online at [http://www.iata.org/whatwedo/economics/fuel_monitor/index.htm].

Retire or Re-engine KC-135Es
Some have suggested modernizing the KC-135E models into more capable “R”
models as an approach to recapitalizing the KC-135 fleet. In contrast, Air Force
officials have consistently expressed a desire to retire the “E” model fleet. Both
RAND and the DSB made observations about the KC-135 that may be useful in
informing decisions about the KC-135E fleet.
Viability of the KC-135E Fleet. In a 2001 study the Air Force concluded145
that the KC-135E fleet is “structurally viable until 2040.” A 2005 Air Force Study
estimated — with numerous caveats — that KC-135E aircraft upgraded to the “R”146
configuration would remain viable until 2030. Further, the 2004 DSB Task force
pointed out that the engine struts that attach KC-135E-model engines to the aircraft’s
wing are at the end of their service life. The close proximity of the strut to the engine
subjects the struts to high temperatures and corrosive environments. If the KC-135Es
were to be retained, but not re-engined, a major structural repair would have to be
accom p l i s hed.147
Recapturing Modernization Costs. RAND’s AOA did not rule out re-
engining some KC-135Es. However, the AOA determined conversion would only
bolster overall fleet effectiveness by about 2 percent. The study also found that re-
engining “E” models was “not a favorable return on investment unless operated into
late 2030s.”148 Air Force leadership believes that dollars necessary to modernize the
“E” models are better spent on KC-X. For example, former Secretary of the Air
Force, Michael Wynne testified to Congress in October 2007 that,
“One thing that’s for sure is that we have 44-year- old tankers. One thing for sure
is that some of those tankers will go to age 75 before we can retire them, simply
because of affordability — that we cannot afford the rate of growth. Even if we
were to award today, we can forecast that they would be 75 years old.
Our plan is to go ahead and put that program into action — retire the KC-135Es
with the accession of the KC-X. And our plan then is to essentially prolong the
best of the KC-135Rs until we can fully replace and amortize those. The KC-10s
as well will look like they’re going to span and work for another 20 to 25149


years.”
145 KC-135 Economic Service Life Study. Technical Report. February 9, 2001.
146 KC-135 Assessment Report. Air Force Fleet Viability Board. September 2005.
147 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
pp. iv-v.
148 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 15.
149 House Armed Services Committee Holds Hearing on Air Force Strategic Initiatives,
October 24, 2007.

Legislative Action. The 2004 National Defense Authorization Act (NDAA)
allowed the Air Force to retire 12 KC-135Es.150 However, both the 2005 and 2006151
NDAAs prohibited the Air Force from retiring KC-135Es. The 2007 NDAA
allowed the Air Force to retire no more than 29 KC-135Es in FY2007 while
stipulating that all “E” models retired after September 30, 2006 be stored in a manner
that would allow their later recall.152 The 2008 NDAA allowed the Air Force to retire
an additional 48 aircraft and provided conditional authority to retire the remaining

37 KC-135Es upon award of the KC-X contract and after any subsequent protests are153


settled favorably.
Fee-For-Service Air Refueling
Fee-for-Service air refueling (FFS AR) is a potential program where the Air
Force may outsource a portion of its air refueling requirements to a defense
contractor. Both the 2004 DSB task force and the 2006 RAND AOA addressed FFS
AR although some may question the assumptions RAND’s analysis was based upon.
Additionally, some Air Force officials have questioned how much potential interest
there may be in the commercial sector to provide the necessary capital investment
required to develop a fleet of aircraft with air refueling capability.154 Currently, there
is one commercial FFS AR operator, and the United Kingdom’s Royal Air Force is
planning to recapitalize it’s aging tanker fleet with a type of FFS AR program. The
Air Force has been publically supportive of studying FFS AR, but cautious based on
concerns FFS AR may divert funds from its KC-X.155 The 2008 National Defense
Authorization Act stipulated that DOD must further study the FFS AR concept.
What Independent Studies Say. The 2004 DSB task force recommended
that the Air Force consider “arranging for contractors to provide some of the aerial156
refueling needs.” In contrast, RAND’s AOA concluded,
“There is no compelling reason for the Air Force to outsource aerial refueling,
that is, to purchase aerial-refueling capability from private companies instead of157


providing it organically.”
150 H.Rept. 108-354, Section 134, Conference Report to Accompany H.R. 1588, p. 23.
151 H.Rept. 108-767, Section 131, Conference Report to Accompany H.R. 4200, p. 19 and
H.Rept. 109-360, Section 132, Conference Report to Accompany H.R. 1815, p. 28.
152 H.Rept. 109-702, Section 135, Conference Report to Accompany H.R. 5122, p. 33.
153 H.Rept. 110-477, Section 135, Conference Report to Accompany H.R. 1585, pp. 30-31.
154 “Filler’ Up,” Defense Daily, February 19, 2008, Volume 237, Issue 32.
155 Caitlin Harrington, “USAF Pushes for ‘Fee-For-Service’ Aerial Refueling Programme,”
Jane’s Defence Weekly, October 31, 2007, online at [http://www.janes.com].
156 Defense Science Board Task Force Report on Aerial Refueling Requirements, May 2004,
p. ix.
157 Michael Kennedy et al., “Analysis of Alternatives (AoA) for KC-135 Recapitalization,
Executive Summary,” RAND Corporation, 2006, p. 13.

RAND’s AOA reached this conclusion based on two underlying assumptions.
First, the AOA assumed that “all tanker aircraft must carry a common wartime set of
equipment ... be capable of carrying out wartime missions,” and “be capable of
sustaining the high operational tempo associated with wartime.”158 Thus, the AOA
found that based on these requirements, there was “no demonstrable large-scale cost
savings associated with tanker outsourcing.”159 Second, the AOA believed that the
fact that contract tanker operators could also use their aircraft to generate revenue
through the commercial marketplace (e.g., flying cargo flights) while the Air Force
is prohibited from serving commercial markets distorted side-by-side comparisons
of FFS AR with organic air refueling assets.
Counter Arguments to RAND’s Assumptions. Proponents of FFS AR
may point out that while commercial air carriers may have limitations from
participating in combat, they can still make a contribution during wartime. For
example, United States Transportation Command has access to a large number of
commercial airliners during contingencies through the Civil Reserve Air Fleet160
(CRAF). Just as CRAF airliners are able to supplement DOD’s organic airlift
capabilities during surge wartime operations, there may be air refueling contributions
FFS AR partners can make during wartime as well. For example, perhaps FFS AR
contractors could help keep training pipelines open, refuel homeland defense aircraft,
or facilitate deployment across transoceanic air bridges — all missions organic
tankers would need to perform during wartime, but missions that would not likely
expose civilians to combat. CRAF partners, often receive a portion of DOD’s
contract airlift business in exchange for their participation in the program. Further,
CRAF partners remain active in the commercial marketplace. In the same way a FFS
AR contractor may desire to configure the fuselage of their tankers to carry cargo,
thus, giving FFS AR the ability to pursue both government and commercial contracts.
FFS AR Examples. Currently, Omega Air Refueling Services operates two
converted Boeing 707s as a FFS AR carrier servicing the U.S. Navy. Omega also
expects to add a converted DC-10 in 2008.161 Reportedly, Omega would like to
perform FFS AR for the Air Force as well.162
The United Kingdom’s Royal Air Force (RAF) recently signed a $26 million,
27-year contract with Air Tanker to meet its future air refueling needs through a type
of FFS AR program known as the Future Strategic Tanker Aircraft (FSTA)
program.163 In 2004, Air Tanker, a consortium of companies including the VT


158 Ibid.
159 Ibid.
160 For more on CRAF see CRS Report RL33692, Civil Reserve Air Fleet (CRAF), by
William Knight and Christopher Bolkcom.
161 [http://www.omegaairrefueling.com].
162 Caitlin Harrington, “USAF Pushes for ‘Fee-For-Service’ Aerial Refueling Programme,”
Jane’s Defence Weekly, October 31, 2007, online at [http://www.janes.com].
163 Tim Hepner and Golnar Motevalli, “Britain Signs Air Tanker Deal,” Reuters, March 27,
(continued...)

Group, European Aeronautic Defense and Space Company (EADS), and Rolls-
Royce, was selected to manage the FSTA program using the passenger version of the
Airbus 330-200.164 FSTA is a private-finance initiative whereby the RAF will pay
on a “tanker-for-hire” basis subject to agreed upon minimum usage rates.165 When
the planes are not being used by the RAF, Air Tanker would be able to offer them for
hire, presumably as transports, in commercial markets.166 However, obtaining
financing for the FSTA program was problematic. Service entry is now expected in
2011 for the first of 14 leased aircraft.167 Crewing of the planes has also been viewed
by some as controversial. Plans call for flying the planes with a core group of RAF
pilots while supplementing those crews with Air Tanker pilots that will be required
to maintain “reserve” status with the RAF. This arrangement is expected to provide
sufficient RAF aircrew to fill normal peacetime requirements as well as a group of
pilots that can fly in either civilian or military status as requirements dictate.168
Legislative Action. The 2008 National Defense Authorization Act (NDAA)
directs the Air Force to conduct a pilot program of at least five years to evaluate the
feasibility of FFS AR (P.L. 110-181). The evaluation requires the Air Force to assess
FFS AR across a broad range of mission sets to include testing support, training
support to receiver aircraft, homeland defense, deployment support, air bridge
support, aeromedical evacuation and emergency air refueling while integrating FFS
AR into Air Mobility Command’s day-to-day operations. Further Congress has
required the Air Force to submit an annual report to Congressional defense
committees highlighting key operational metrics and assessing the impact of FFS AR
on the Air Force’s flying hour program and aircrew training. Finally, the 2008
NDAA requires the Comptroller General’s office to conduct an annual review with
recommendations for improvement of the Air Force’s FFS AR pilot program as well169
as a final analysis of the pilot program upon program completion (P.L. 110-181).
Reportedly, the Air Force plans to release a request for information to gauge industry170


interest and cost projections for the required FFS AR pilot program.
163 (...continued)

2008.


164 “Airbuse A330 - EADS KC-330 Tanker/Transport,” Jane’s Aircraft Upgrades, August

17, 2007, online at [http://www.janes.com].


165 Keri Smith, “Air Tanker Remains Confident FSTA is on Track,”Jane’s Defence Weekly,
October 31, 2007, online at [http://www.janes.com].
166 Nick Cook, “Tanker PFI is a Pathfinder for Procurement,” Jane’s International Defence
Review, January, 1, 2003, online at [http://www.janes.com].
167 Tim Hepner and Golnar Motevalli, “Britain Signs Air Tanker Deal,” Reuters, March 27,

2008.


168 Nick Cook, “Tanker PFI is a Pathfinder for Procurement,” Jane’s International Defence
Review, January, 1, 2003, online at [http://www.janes.com].
169 H.Rept. 110-477, Section 1081, Conference Report to Accompany H.R. 1585, pp. 335-

336.


170 “Filler’ Up,” Defense Daily, February 19, 2008, Volume 237, Issue 32.

Appendix A. Previous Issue for Congress
One issue of significant interest to earlier sessions of Congress involved the
controversy that surrounded earlier DOD attempts to replace some KC-135s using
a proposed lease program
Modernization Controversy
Modernizing or replacing the Air Force tanker fleet has been a point of
contention for more than a decade. In 1996, the General Accounting Office (GAO)
asserted that the long-term viability of the KC-135 fleet was questionable and
advocated expeditiously studying replacement options. DOD countered that KC-135
airframe hours were low and that the Air Force could sustain the fleet for another 35
years.171 In 2001, the Air Force reported that the KC-135 fleet would incur
“significant cost increases” between 2001 and 2040, but “no economic crisis is on the
horizon...there appears to be no run-away cost-growth,” and “the fleet is structurally
viable to 2040.”172 At that time, the Air Force position on tanker modernization was
to conduct an analysis of alternatives (AOA) to determine the optimal replacement
option for KC-135s. It would begin recapitalization in the 2012 time frame to meet
KC-135 retirement by 2040 when the Air Force expects the KC-135 to reach the end
of its service life.
Section 8159 of the FY2002 National Defense Appropriations Act (P.L.
107-117) authorized the Air Force to lease 100 Boeing KC-767 aircraft to replace
some of the oldest and least capable KC-135s — the “E-models.” This proposal
proved controversial because section 8159 appeared to depart from traditional
acquisition processes and weaken congressional oversight. The Government
Accountability Office also concluded that a lease would cost more than procuring the
aircraft.173 Further, many found Air Force arguments in favor of the lease to
contradict its position of just a year prior. Congress debated the proposed lease in
four hearings, culminating with a pair of Senate hearings in September 2003.174
Subsequently, alleged and admitted ethical violations by government and industry
representatives involved in the lease proposal added to the controversy.
The FY2004 Defense Authorization Act (P.L. 108-136, Sec.135) forged a
compromise between opponents and proponents of the KC-767 by giving the Air
Force permission to lease 20 tanker aircraft and purchase an additional 80 aircraft.
Section 134 of this act prohibited the Air Force from retiring in FY2004 more than

12 KC-135Es. In September 2004, the Air Force announced it had grounded 29 KC-


135Es due to safety concerns. Conferees also mandated that the Air Force conduct


171 GAO/NSIAD-96-160.
172 “KC-135 Economic Service Life Study,” Technical Report F34601-96-C-0111, February

9, 2001.


173 Neil P. Curtan, Military Aircraft: Observations on the Proposed Lease of Aerial
Refueling Aircraft by the Air Force, GAO-03-1143T, Washington, D.C., September 3, 2003.
174 See CRS Report RL32056, The Air Force KC-767 Tanker Lease Proposal: Key Issues
for Congress, coordinated by Christopher Bolkcom.

an air refueling AOA and that an independent assessment be conducted on the
condition of the KC-135E fleet.
On February 1, 2004, former Deputy Secretary of Defense Paul Wolfowitz
requested that the Defense Science Board (DSB) conduct the independent analysis
of the KC-135E fleet, and on February 24, 2004, former acting Undersecretary of
Defense for Acquisition Michael Wynne directed the Air Force to conduct an aerial
refueling AOA. Although it had the statutory authority to proceed, DOD did not
request any funds for FY2005 to lease 20 aircraft or procure 80 aircraft. Defense
Department leaders instead deferred executing either action until the completion of
the DSB report, and an internal investigation by the DOD Inspector General (IG) on
potential improprieties by Boeing Company executives and whether these activities
negatively effected the tanker lease program.
On April 20, 2004, Darleen A. Druyan, the former lead Air Force negotiator on
the tanker lease program, pleaded guilty to one charge of criminal conspiracy. Ms.
Druyan admitted to secretly negotiating an executive job with the Boeing company
while still overseeing the $23 billion deal between the Air Force and Boeing.175
Lease supporters argued that Ms. Druyan was a single “bad apple” and that her
actions did not negate the KC-767’s merits. Reportedly In February 2005, however,
the DOD IG found that Air Force Secretary James Roche misused his office when he
lobbied the Office of Management and Budget (OMB) to support the lease concept.176
The IG’s final report found that four other senior DOD officials were guilty of
evading OMB and DOD acquisition regulations that are designed to demonstrate best
business practices and to provide accountability. The DOD IG found that senior
DOD officials knowingly misrepresented the state of the KC-135 fleet and air
refueling requirements.177


175 R. Merle, “Ex-Pentagon Official Admits Job Deal,” Washington Post, April 21, 2004.
176 R. Jeffrey Smith, “Roche Cited for 2 Ethics Violations,” Washington Post, February 10,

2005.


177 Management Accountability Review of the Boeing KC-767A Tanker Program, Office of
the Inspector General of the Department of Defense, OIG-2004-171, May 13, 2005.

Appendix B. KC-135R System Description
Power plant: Four CFM International CFM-56 turbofans
Wingspan: 130 feet, 10 inches
Length: 136 feet, 3 inches
Height:41 feet, 8 inches
Passengers54
Cargo Pallets6
Maximum Fuel Capacity200,000 pounds
Source: USAF Fact Sheet, KC-135 Stratotanker, online at [http://www.af.mil/factsheets/factsheet.
asp?id=110] and The Air Force Handbook: 2007.
Figure 3. KC-135 Refueling Air Force Fighters


Source: USAF photo by SSgt Suzanne Day.

Appendix C. KC-10 System Description
Power plant: Three General Electric CF6-50C2 turbofans
Wingspan: 165 feet, 4.5 inches
Length: 181 feet, 7 inches
Height:58 feet, 1 inch
Passengers75
Cargo Pallets27
Maximum Fuel Capacity356,000 pounds
Source: USAF Fact Sheet, KC-10 Extender, September, 2006, online at
[ h t t p : / / www. a f . m il/factsheets/factsheet.asp ? id=109].
Figure 4. KC-10 Refueling Air Force Fighters
Source: USAF photo.



Appendix D. KC-767 System Description
Wingspan: 156 feet, 1 inch
Length: 159 feet, 2 inches
Height:52 feet
Passengers190
Cargo Pallets19
Patients97 for aeromedical evacuation
Maximum Fuel Capacitymore than 200,000 pounds
Source: The Boeing Company online at [http://www.boeing.com/ids/globaltanker/usaf/KC_767/specs.
ht ml ] .
Figure 5. Artist Impression of KC-767


Source: Janes All The Worlds Aircraft at [http://www.janes.com].

Appendix E. KC-30 System Description
Wingspan: 197 feet, 10 inches
Length: 192 feet, 11 inches
Height:57 feet, 1 inch
Passengers226
Cargo Pallets32
Patients108 for aeromedical evacuation
Maximum Fuel Capacity245,000 pounds
Source: Northrop Grumman, pamphlet, “KC-30 Tanker: Total Air Mobility.”
Figure 6. Artist Impression of KC-30
Source: Janes All The Worlds Aircraft at [http://www.janes.com]



Appendix F. Key Suppliers for Commercial Variants
of the Boeing 767 and Airbus 330
Table 4: Suppliers and Corporate Parent Domiciles for
Components Incorporated into the Boeing 767
Suppl i e r ParentCount ry Component(s)
Aero VodochodyCzech Republicairframe parts (for BAE Systems)
wing control surfaces, flaps and leading-
AleniaItalyedge slats, wingtips, elevators, fin
rudder, nose radome
AvcorpCanadafront and rear spar stiffeners, floor griddetails and assemblies, aft strut fairings
fixed trailing edge panels, composite
Boeing CanadaCanadawing-to-body fairings, engine strut
fairings
Bombardier (Learjet)Canadawing trailing edge support structures
Bombardier (Canadair)Canadarear fuselage, pressure bulkhead
Daido SteelJapansteel sheets
EmbraerBrazilflap supports
FujiJapanwing fairings, main landing gear doors
Fujukawa AluminumJapanforgings and extensions
GKN Aerospace
(Westland Aerospace,
formerly BPUnited Kingdomflap track fairings
Chemicals; with Lucas
Aertspace Cargo
Systems)
Goodrich (ClevelandUnited Statesmain landing gear
Pneumatic)
Hitco CarbonUnited Statesflap track fairings
Composites
IPTNIndonesiaflaps, keel beams (for Mitsubishi)
Kaman AerospaceUnited Stateswing trailing edges
Kawasaki HeavyJapancenter-fuselage body panels, exit
Industrieshatches, wing in-spar ribs
Korean AerospaceRepublic ofwing trailing edges


(Samsung)Korea

Suppl i e r ParentCount ry Component(s)
LMI AerospaceUnited Statesskins, wing panels, floor beams, curtaintracks
Lunn IndustriesUnited Statesleading edge slat core assemblies (for
(Alcore)ASTA)
Menasco AerospaceUnited Statesnose landing gear unit
Mitsubishi HeavyJapanrear fuselage body panels, stringers,
Industriespassenger and cargo doors, dorsal fin
Nihon Kokuki (Nippi)Japanwing in-spar ribs, various structuralcomponents for Mitsubishi
PPG IndustriesUnited Stateslanding light lens assemblies, cockpitwindows
Shin MeiwaJapantailplane trailing edges (for NorthropGumman/Vought)
Source: Teal Group
Note: Commercial variants powered by engines manufactured by either General Electric, Pratt &
Whitney, or Rolls Royce.
Table 5: Suppliers and Corporate Parent Domiciles for
Components Incorporated into the Airbus 330/350178
Suppl i e r ParentDomicile Component(s)
Advanced Technologygraphite epoxy underwing fairings (for
and Research (ATR)United StatesAerostructures Corp.)
Corp.
inner spoilers/airbrakes, center spar,
Aerostructures Corp.United Statesupper wing skin panels, inner and outerwingbox leading edge assemblies (for
(Now Vought)BAE), outer flaps, flap track shrouds,
spoiler parts (for DASA-EADS)
AHF-DucommunUnited Statesleading edge wing skins
Boeing (Aerospacemain gear doors, floor support structure,pressurization bulkhead between
Technologies ofUnited Statespassenger cabin, main landing gear
Australia)compartment (for Aérospatiale-EADS)


178 The Airbus 350 is a planned model that will be similar in size to the Airbus 330. It was
originally expected to be a derivative of the Airbus 330, but is now expected to be a new
design aircraft.

Suppl i e r ParentDomicile Component(s)
leading edge wing assemblies, nose gear
bay and doors, nose bottom fuselage,
Bombardier (Canadair)Canadarear sealed frame, ventral beam,pressurized lateral floor, aft pressure
bulkhead (for Aérospatiale-EADS),
inboard front spar assembly (for BAE)
BTR AerospaceCanadamain landing gear fairings
CC IndustriesUnited Statesouter rear spar, main landing gearsupport, ribs (for BAE)
Federal
Ciba-Geigy Corp.Republic ofHTA/6376 prepreg on wings
Germany
Dowty AerospaceCanadacenter landing gear
Canada
Dowty Rotol (withUnited Kingdomdesign and manufacture of main landing
Cleveland Pneumatic)gear
Federalfuselage and wing components, interior
Fairchild DornierRepublic ofpanels
Germany
Fischer AdvancedFederal
CompositeRepublic ofinterior components (for DASA-EADS)
Components Ge r ma n y
GKN Aerospace
(formerly BPUnited Kingdomcomposite panels (for BAE)
Advanced Materials)
General EngineeringUnknownside stay fairing
Hawker de Havilland,Australiawingtips, winglets, wing root fillet, ribs
Australia(for BAE)
Heath TechnaUnited Statescomposite components (for BAE)
Aerospace
IPTNIndonesiaflap track carriages, sheet metal parts(for BAE)
Korean AerospaceRepublic ofwing components
Industries (Daewoo)Korea
Korean Air (with Silat)Republic ofKoreaupper fuselage panels of Section 15 (forAérospatiale-EADS)
Marion CompositesUnited Statesflap track fairings (for AerostructuresCorp.)
Marvin GroupUnited Stateslarge ribs (for BAE)



Suppl i e r ParentDomicile Component(s)
Messier-Hispano-Francenose landing gear, wheels and brakes
Bugatti(option)
Mitsubishi HeavyJapancargo doors
Industries
PPG IndustriesUnited Statescockpit windows
RTI InternationalUnited Statestitanium on A350
Metals
SABCABelgiumtailcones (for DASA)
Shin MeiwaJapanwing fairings
SoceaFrancerear upper panels of center fuselagesection
SOCATAFrancecomposite belly fairing
SONACABelgiumfull-span leading edge slats, slat tracks
Xian Aircraft Co.PeoplesRepublic ofavionics access doors
(AVIC-1)China
Source: Teal Group
Note: Commercial variants of both aircraft types are powered by engines manufactured by either
General Electric, Pratt & Whitney, or Rolls Royce.