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The Long Sordid Path To KC-46 (2011)


At first, no one thought the competition for a KC-135 replacement would be a sexy program to cover. Not compared to the work being done to field a ballistic missile defense system, mature unmanned aircraft or design the F-35 -– contemporary programs to the so-called KC-X. Building a refueler is hardly a high-technology affair.

But, what the U.S. Air Force’s KC-X lacked in technology appeal, it made up for with a good old fashioned Washington scandal, a transatlantic food fight and twists and turns that familiarized many onlookers with the Government Accountability Office’s bid protest process far more than they imagined –- or wanted.

In the course of finally selecting a Boeing 767-based design in 2011 (long thought to have been a shoo-in at the outset of analyses in 2000), KC-X spanned more than 10 years and eight Air Force secretaries or acting secretaries. It racked up multiple protests, two winners (only the second one stuck), two prison inmates and one very angry senator with a very long memory. (Sen. John McCain –- now chairman of the powerful Senate Armed Services Committee -- continues to ride the Air Force hard for its procurements including the Evolved Expandable Launch Vehicle system and F-35 due to the tanker fracas.)

What should have been a straightforward integration to modify a commercial jet with refueling and cargo systems evolved into the procurement scandal that has scarred –- and some fear defined -– a generation of Air Force procurement experts.

The Air Force’s 2002 plan to sole-source the lease of 767-based tankers from Boeing got the project off on the wrong path. Yes, you read that correctly. Former Air Force Secretary James Roche actually wanted to lease refuelers specific to the service’s requirements from Boeing in a deal that would have forced the service to pay a second fee to buy the jets at the end of the term. Sound like a used-car sham? It kind of was. Enter Sen. John McCain, who fingered the project as a sweetheart deal for Boeing and kicked off an inquiry.

He found that it was indeed a sweetheart deal, but not just about the tanker.

Subsequent investigations revealed that the deal was in-fact overpriced and offered bad terms for the government. Its primary backer in the Air Force, former senior procurement official Darleen Druyun, was found to have negotiated several deals biased toward Boeing –- including the Small-Diameter Bomb contract and the now defunct C-130 Avionics Modernization Program –- in exchange for a high-paying vice presidency spot at the company after she left public service. She also got her daughter on board.

But, in the end both she and Boeing’s former chief financial officer, Michael Sears, did time as a result of the malfeasance. Not exactly shining moments for Boeing or the Air Force. It was this affair that accounts for why at every Boeing facility today there are still highly conspicuous signs about ethics at every turn.
So, that tanked the lease.
Then there was KC-X: The Sequel. In this go, the Air Force managed to bungle the surprise source selection of an A330-based tanker proposed by Airbus Military -– then known as the EADS North America and its U.S. prime, Northrop Grumman. The choice of the larger tanker stunned Boeing. In order to win with its larger, more expensive aircraft, Airbus effectively convinced the service that it should overhaul not just what tankers it used but how to conduct the mission. The vast fuel and cargo capacity of the so-called KC-45 opened new doors to conducting long-haul missions and persistent refueling ops.

With Boeing’s loss, its European rival got a largely government-funded final assembly facility on U.S. soil, in Boeing’s own back yard.

Preparing that particular cover story will always be one of my fondest Aviation Week memories. We held sending the cover to the printers by a day (a VERY unusual step as we incur a financial penalty) and essentially dummied two covers –- one for a Northrop win and one for a Boeing win. As soon as we got the word, we pushed the throttle on cranking out the cover and the story. What was most fun, though, was the mixture of anxiety and focus in the news room that night. It just so happened my European commercial aviation colleague and our former Pentagon editor, Robert Wall, was in Washington that night. Thankfully, his expertise on Airbus and our collective work on defense produced a terrific story. We all shared the shock of the decision and, I think, a couple of bottles of wine after that night’s hard work as I recall.

But, the story was not over.

Boeing protested, poked holes in the selection in the media and eventually won. The Air Force was back to square one with then a twice tattered reputation for botched oversight of the program. The service kicked off a new, revised procurement.

In 2011, the Air Force got it right -- at least in terms of not executing a ham-handed source selection. Boeing’s redesigned 767-based tanker won after the company undercut Airbus’ bid by a whopping 10%, perhaps a sign of the desperation on the part of the company to retain this legacy line of work.  

Boeing bought into the project and has thus far used $425 million of its own funds before taxes to keep it vectored toward delivering 18 KC-46s by August 2017. The price of victory could grow. Last fall, Pentagon procurement chief Frank Kendall opened the door to yet another charge, as risk remains to meet the contract obligations.

Strategically, time will tell if the decade of fighting, legal bills and financial buy in was worth the price for Boeing. Despite its loss, Airbus has established a stateside final assembly facility for commercial airliners in Mobile. So, Boeing’s ultimate goal of keeping the company’s commercial manufacturing work off on foreign shores failed.

All that said, the next round will come. The Air Force’s refueler plan includes a KC-Y and KC-Z in the coming years.

Read the February 28, 2011 edition story

► Aviation Week is approaching its 100th anniversary in 2016. In a series of blogs, our editors highlight editorial content from the magazine's long and rich history, including viewpoints from the industry's most iconic names and stories that have helped change the shape of the industry.

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