Panel I of a Hearing of the House Armed Services Committees Air and Land Forces Subcommittee - The Source Selection and Path Forward Regarding the Air Force KC-(X) Program

Statement

REP. ADAM SMITH (D-WA): Okay. Thank you, Mr. Chairman.

Mr. Saxton really asked the question, and I know you're not the one in a position to answer it, so I won't restate it. But there is a, sort of, a different way of asking a similar question.

I mean, certainly it is baffling in this because it seems, in mid-process, that the Air Force rather radically changed their mind about what they were looking for, and I think what the GAO went through and looked at was that they did not adequately justify that change of mind -- in terms of the costs, in terms of a lot of things that, as we have heard from many witnesses here, it's just very difficult to understand how they all of a sudden decided that bigger was better when there's considerable evidence to the contrary -- but not your area.

The question I am curious about is how the RFP process works, because it seems like that big a change, in the middle of it, should require more than just sort of the nudging and moving that happened inside of this. It should require an entire rebid which, as I understand it, they didn't do.

And maybe you can explain to me how this works out, because there was a point in this process when, in fact, Airbus was rumored to be -- was contemplating withdrawing their bid because it simply did not fit what was being asked for, and for one very simple reason -- their plane was too big. It didn't fit the requirements.

And then all of a sudden there was some conversations; there were some letters from members of Congress who were advocating on the Airbus side of the bid, saying can't you sort of look at this a little bit differently. And then, presto, they looked at it a little bit differently and Airbus submitted their bid.

And that seems "bad," in a word. Like, sort of, well, how could I put this exactly, 'not within what the process should be.' If you, in fact, look at it and say, okay, we made a mistake; we should, you know -- we have a different requirement here; we're going to -- shouldn't you go back and restart the process, at that point, a little more formally than the Air Force, in fact, did in this case?

If you can sift through that and address those points, that would be helpful.

MR. YOUNG: Yes, Representative Smith.

Accurately describing your requirements, telling the vendors what matter more to you and what matters less to you is extremely important, because the vendors put together -- the companies put together their proposals based on the ground rules. They read the solicitation very carefully, especially the evaluation criteria.

They'll put their proposal together based on what you and the government tell them you care about. If you care more about price, they're going to sharpen their pencils more. If you care more about technical capability, they may give you a more expensive solution with more technical capability.

I do want, though, to point out some issues very relevant to our decision in this case. I don't think it's fair to say that we saw evidence that the Air Force changed its collective mind. We had very specific concerns where we -- when we drilled down, we concluded that the Air Force had not followed the ground rules properly. But the talk of the Air Force changing its mind and deciding that it wanted a larger plane, is not us speaking, it's not our bid --

REP. SMITH: Understood.

And let me say that most important part in that, to me, is not so much whether or not they changed their mind, but that they, sort of, decided that bigger was a little bit better without the sufficient rigor behind that decision -- that went into the original RFP that tracked what Mr. Saxton was saying, in terms of what the requirements were.

And that is the problem, not just because, you know, as you said, the vendors won't know what to ask for, but because you wind up with something where the taxpayers aren't getting their money's worth because you haven't actually analyzed all of these questions that are being raised, and all of a sudden you're asking for something, kind of, on the fly. That is the larger concern.

MR. YOUNG: I understand your point, sir. I think that our decision -- it doesn't go to the extent that you're saying.

If I could say a slightly different point, but it may also be helpful to the committee, and that is that there's a long history, of course, of procurement. And, in fact, in (protest ?) procurements of the Air Force, in the Druyun matter, which happened several years ago, we had evidence -- admitted evidence in that case, of criminal misconduct. We had no evidence, no allegation of evidence of criminal misconduct, and no -- we never saw a whit of evidence of criminal misconduct.

There was no evidence -- there were no allegations, but also no evidence. Not an iota of evidence of intentional wrongdoing by any Air Force official. This was not a case of criminal impropriety or of intentional wrongdoing. They had the rules and there were several discrete areas in which they deviated from those rules.

REP. SMITH: Understood.

One quick area, and then thank the chairman's indulgence.

In terms of lifecycle costs, that's one of the big things. I mean, the bigger the planes, the more fuel it's going to use.

We have all this evidence that the KC-135 very rarely even uses all of the fuel that it has.

So if you're expanding capacity, and the fuel I'm talking about here is the fuel that it takes to fly the plane as opposed to what it's delivering, do you think that life-cycle costs with regard to the fuel costs were adequately considered when looking at these two bids?

MR. GORDON: The -- we had concerns about the life-cycle costs, although there are several different components.

Partly there were some errors, as you know, from the decision. The Air Force admitted a few errors in the calculation of costs. But in addition, we had concerns with the methodology that the Air Force used in estimating the costs.

With respect to fuel, that was one of the issues where we didn't sustain the protest because of the fuel costs. We didn't think that the record gave us a basis to sustain it. But we had enough concern about the way the Air Force was calculating fuel costs that we said, since we're sustaining the protest anyway, we think that the Air Force should pursue that.

We made the same point with respect to the boom approach from Northrop Grumman. We were -- when the Air Force said Northrop's boom approach caused only low schedule-to-cost risk, we didn't sustain the protest of that issue. But we had enough concern that the --

REP. SMITH: Mr. Gordon, excuse me. Can you explain, for those who don't know, what the boom question actually involves physically?

(Cross talk.)

MR. GORDON: It's the -- I want to be sure that I don't misspeak, Mr. Chairman.

Northrop had their technical approach, and I don't -- we're not going to get into proprietary information. But their approach of connecting the plane that was doing the refueling with the plane that was being refueled, and you're going to quickly get to the edge of my technical knowledge, by the way.

REP. SMITH: That's okay. Everybody understands what we're talking about now.

MR. GORDON: That boom approach had aspects to it which caused the Air Force to call it a weakness, right? Notwithstanding that, the Air Force said the approach didn't pose anything more than a low schedule-to-cost risk; a surprising juxtaposition to call it a weakness but then say there's only a low schedule-to-cost risk.

We explored the issue to a certain extent, didn't find enough to sustain the protest. But because of our concern in this area, we suggested that the Air Force should go back and look at this issue and the fuel cost issue.

REP. SMITH: Thank you, Mr. Chairman.

Source