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

REP. ABERCROMBIE: Secretary Young, thank you for your patience. I trust you were listening in. And you have a statement which we will incorporate into the record. If you wish to summarize it or take sections of it, that's fine. And I think we'll just move ahead. Mr. Skelton's been able to join us again. And then, subsequent to your statement, we'll go to questions or commentary -- for your observations and your commentary and/or answer to questions, and then we'll take a short break again, and then we'll go into the closed session.

Secretary Young, please proceed. And thank you again for coming.

MR. YOUNG: Certainly. Chairman Abercrombie, Chairman Skelton, Ranking Member Saxton and distinguished members of the subcommittee, thank you for the chance to testify on the department's --

REP. ABERCROMBIE: Can you bring the mike just a touch closer, please? Thank you.

MR. YOUNG: Thank you for the chance to testify on the Defense Department's plans for proceeding with the Air Force tanker competition. After seven years, it is critical that the Defense Department move forward with the purchase of a new tanker for our war- fighters. The KC-(X) replaces the KC-135 tanker aircraft that are rapidly reaching the end of their service life. The oldest tanker is 50 years old, and the average age is 47 years.

KC-(X) represents the first phase of a three-phase tanker replacement program, and the Defense Department intends to compete for the future KC-(Y) and KC-(Z) phases. This afternoon I will briefly summarize how the Defense Department plans to move forward.

I want to note that the department is in the middle of an active, competitive source selection. We generally do not discuss ongoing source selections or competing proposals. First, such a discussion could taint the competition. In this case we have a solid competition that is advantageous to the war-fighter and the taxpayer. We want to protect and encourage that competition.

Second, complete discussion of the proposals or their evaluation would include proprietary information of companies and source selection information of the government. Public release of such information would not only affect the competition but also implicate the Trade Secrets Act, a criminal statute, and the Procurement Integrity Act, which provides both criminal and civil sanctions. Thus I am very limited in my ability to discuss these matters in open session. I would ask your patience and assistance in maintaining the integrity of this process while I also try to be as forthcoming as possible at this hearing.

The Government Accountability Office completed a comprehensive review of the KC-(X) tanker competition. The Defense Department accepts the GAO findings. In reviewing roughly 110 protest issues, which do include a number of overlapping issues, the GAO issued eight specific findings. The GAO found no basis to sustain the vast majority of the protest issues. The eight findings are correctable. None of the findings suggest a concern with our acquisition strategy, and we will continue with a best-value source selection approach, with the intention of awarding a single contract.

I want to assure you the department will address each of the findings in completing a new source selection for the tanker program. Building on a carefully and thoroughly reviewed foundation of documents and discussion, the Defense Department will amend the tanker request for proposals, or RFP, and seek modified proposals from industry bidders.

We anticipate releasing a draft RFP amendment to industry for comment in late July or early August. The department will conduct a new source selection based on modified proposals submitted in response to the amended RFP. Grounded in the war-fighters' requirements and the pursuit of best value for the taxpayer, the Defense Department is the only organization that can fairly and knowledgeably conduct this competition.

The department plans to complete the proposal evaluation and reach a source selection decision by late 2008 or early 2009. Secretary Gates directed, with the full support of the Air Force, the appointment of a new source selection authority and completely new joint membership on the Source Selection Advisory Committee.

Secretary Gates made these changes to maintain objectivity and to assured all interested parties that the process will be fair and equitable. The Defense Department has reviewed and considered the idea of awarding a contract to both companies. In the department's judgment, this approach would be a mistake because it would result in an extraordinarily higher cost, as well as complicated logistics, training and operations for the Air Force.

A dual reward ill serves both the taxpayer and the Air Force. The Defense Department and the taxpayer are far better served by reserving the opportunity to hold competition for KC-(Y) and KC-(Z). Competition has driven innovation and cost control in this nation, and a strategy to award to both companies undermines these principles.

We will seek to make only adjustments in the RFP which are grounded in the GAO findings, the war-fighters' requirements, and our obligation to get best value for the taxpayer. I would ask the support of this committee and your colleagues in allowing the Defense Department to conduct a fair, open and transparent new source selection process.

We will make every effort to earn the confidence of industry, the Congress and the American people in the new solicitation. The Defense Department does not care which tanker wins the competition. The Defense Department's sole objective is to get the required capability for the men and women who serve this nation at the best price for the taxpayer.

I look forward to working with the Congress in support of this important program, and I'm prepared to answer your questions.

REP. ABERCROMBIE: Thank you, Mr. Young. In that context that you just outlined, where you said you're prepared to earn the confidence of the American people, on March 11th of this year you testified before this subcommittee that, and I quote, "I ask part of my acquisition technology and logistics team to observe the source selection process and help the Air Force," unquote, and, quote, "The department did its very best" -- underlined by me, emphasis by me -- "The department did its very best to evaluate two very high-quality proposals with excellent dialogue with both industry partners," unquote.

If the department did its very best during this task source selection, what specific changes are you going to make for the upcoming KC-(X) source selection process to regain that confidence that you just stated you wished the public to have in you and the Department of Defense?

MR. YOUNG: As I noted, Secretary Gates will change the source selection authority. He will change the Source Selection Advisory Committee. And we have studied in great detail all of the GAO findings. We will seek to address those findings, again, grounding ourselves in the requirements document and the pursuit of best value for the taxpayer. We will have an independent team review this.

One of my only regrets is that what I told you was we began the independent team review process in December. Final proposals were turned in in, I think, March. We needed to start from the very beginning. We now have the opportunity to start with the very beginning and have a team, an independent team, observe this process and try to make sure we have multiple eyes looking at all angles of the competition.

REP. ABERCROMBIE: When you say observe the process, are you not taking over the process?

MR. YOUNG: That's correct, sir.

REP. ABERCROMBIE: So you won't be observing. You'll be implementing.

MR. YOUNG: But I'll have an independent team observing the process also and advising me.

REP. ABERCROMBIE: All right. Then that leads me to the timing question. Do you have confidence that the department can make a source KC-(X) source selection decision by the end of the year? And what challenges do you foresee that could prevent the department from doing so?

I think, for our purposes here in the Congress, from an oversight point of view, this is an election year. I expect we'll adjourn well before the election. There's some question as to whether we might come back. I think we need to have confidence that this can be done by the end of the year, especially because of the length of time that it's taken to get to this stage.

MR. YOUNG: Mr. Chairman, it's an excellent question. I think when you start on a journey, you have to have a goal, one. Two, this competition has drawn out for seven years now. It's very important to get on with it. I cannot guarantee you we will make that schedule. This is an event-driven schedule. Every single day is critical. There is probably an infinite number of obstacles.

As you heard in earlier testimony, when we release the draft RFP, the draft request for proposals, that is a protestable issue. The air is charged around this competition. The Congress is watching it very carefully. So we -- I have a personal obligation, the department has an obligation, to the war-fighter and to you to try to deliver this product. I can't anticipate all the roadblocks that will come up, but we have laid out an aggressive schedule. We will try to make it. I cannot guarantee you --

REP. ABERCROMBIE: Okay. Again, though -- I'm sorry; I've got to pursue this with you a little bit -- an aggressive schedule. Is it by the end of the year? Is it going to be before the new Congress is sworn in and the new president is sworn in?

MR. YOUNG: If we are --

REP. ABERCROMBIE: I'll tell you, if you don't, if you don't finish by the end of the year, then this thing is going to start all over again, and it's going to take a heck of a lot longer. Now, and this also, I suppose -- it takes me to my next and last question, which has to do with the acquisition system.

I mean, if you're going to change all the criteria, then it may take longer, if it's just going to be something else. We need to go into that a little bit. And I think everybody here has -- some more than others, because of the constituency situation and all the rest, but our principal constituency, as has been pointed out, is the war- fighter and the taxpayer.

Now, is the timing question -- well, then, I'll ask you my other question and perhaps you can combine the answer. The DOD currently maintains control of the Air Force base system acquisition decisions, and now the KC-(X). As the senior acquisition official -- and you know how much respect I have for the work that you're doing; I've expressed that both publicly and privately to you, and I say again publicly that the procedures that you're using in your everyday work, including your work on the weekends, is something that I approve of personally, and I think the Congress appreciates.

As the DOD senior acquisition official, what is your view of the Air Force acquisition system? And what changes, if any, is your office going to implement to ensure that the Air Force deficiencies are corrected in a timely manner? And will the DOD solution be to maintain permanent control of major Air Force acquisition decisions? Now, that's obviously a little bit of a separate question, but you have that power right now.

And I realize there's another administration coming and a new Congress to be elected. So the question, I think, is pertinent, because whatever time you have left, my view has always been you do your job, regardless of whether somebody else has done theirs or will do theirs or whether there's going to be some change in the future. There's no excuses for not doing your job when it's your responsibility. That's an observation, not an accusation.

MR. YOUNG: No, but could I try to address it?


MR. YOUNG: I've spoken to the entire acquisition team several times now, and I speak to them weekly in notes. And I fundamentally reject the notion that we're into the drift period at the end of the administration.


MR. YOUNG: This is a precious opportunity for me for the next several months to do as many things right as I possibly can. My principals disagree with putting this process on auto-pilot. So I have to do the best I can to start a process that could yield a source selection. If forces object to that, I still have to try to make progress and I have to try to do it right. I may not make the end of the year, but I'm going to make every effort to do that.

With regard to the Air Force acquisitions process and control, I'll speak in general -- or I'll speak on the specific term you mentioned, space. I personally -- my personal opinion -- I fundamentally disagree that a single service should have the total acquisition decision authority and milestone authority for a set of programs, as was done in space. And I would intend to retain acquisition authority over space programs. It provides a check and balance in the system.

I am very happy with the service, the Air Force of any of the services, to execute their programs to the standards that I am trying to set. When those standards are not met, I intend to pull milestone decision authority, make programs special interest programs, and exercise OSD oversight of programs to achieve better results, which is what you're asking for.

REP. ABERCROMBIE: And you'll do that with the KC-(X).

MR. YOUNG: I will do that initially with the KC-(X) on the source selection. I (potentially yield ?) contract execution to the Air Force until such time as I felt that execution was not meeting the standards.

REP. ABERCROMBIE: Very good. Thank you.

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