The tanker program is late, but it's costing less than the estimates.
A video on the Boeing web site shows a KC-46A tanker built from sheet metal to test flight in three minutes. In reality, the program is three years behind schedule.
The Air Force awarded Boeing the contract to build 175 new aerial refueling tankers back in 2011. In some ways the KC-135 replacement program dates back to the turn of the century. Anyhow, one selling proposition was that Boeing would refit it’s tried-and-true 767, still flying in the second-tier airlines. Boeing still makes a freight version.
But plain-Jane freighter to military tanker? That’s like converting a house into a dental office. The outside appearance may not change, but inside pretty much everything is altered. Still, to save costs, the planes start out in the existing 767 factory.
The Air Force finally started accepting the first few production copies of the KC-46 earlier this year. The Government Accountability Office reports the Air Force will have accepted — conditionally — 19 KC-46s by the end of August. Some 50 are in different degrees of construction.
Based on my reading of the GAO report, this is one weird program, but weird in some good ways. On the challenging side:
GAO report author Jon Ludwigson agreed that the Air Force concluded the utility of the planes as delivered outweighs the cost of waiting until every requirement is met. Air Force staff will conduct operational testing on two non-stealth aircraft, like the B-52 and the F-15.
Late and needing post-development work — such conditions are hardly unknown in Defense contracting. But this is also worth noting:
How is this possible? Ludwigson says it’s because of the way the Air Force went about the procurement. It insisted on a fixed cost deal to limit its own risk and shift more to the supplier, held its requirements steady, and included a price hold-back for unmet specifications. That’s known to have a correction of deficiencies clause. It is in fact holding back 20 percent of the agreed-to price for those initial 19 copies.
It’s not perfect. For instance, GAO wishes the Air Force had tied progress payments to performance, rather than incurred costs. The government isn’t free of risk.
The famed Paris Air Show starts today. Boeing, a company with more than a couple of headaches, will be showing several products. Those don’t include the troubled 737 MAX, which the company is still working to get re-certified. But it will be showing the Pegasus, as the KC-46 is also called. Pegasus was a white flying horse, not a white elephant.
Development of a machine like a brand new tanker is a dizzyingly complex engineering and managerial challenge. But given the numbers, and the ultimate capabilities of the plane, it’s a relatively good procurement tale.
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Tom Temin is host of the Federal Drive and has been providing insight on federal technology and management issues for more than 30 years.
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