The Frankenstein Complex: Pentagon Blinks and Boeing Wins
(Source: defense-aerospace.com; published Sept. 15, 2008)
By Giovanni de Briganti

PARIS --- Of all possible outcomes to the US Air Force’s $39 billion competition to buy a new tanker aircraft, its Sept. 10 cancellation by US Defense Secretary Robert Gates is the worst, combining as it does a capitulation before Boeing’s political clout; an admission that the Pentagon’s acquisition machinery in a worst state than was thought; and an acknowledgement that, when the stakes get high enough, military needs take a back seat to all other considerations.

None of this bodes well for the future of US defense acquisition.

By mid-August, when the first deadline for issuing the final RFP amendment was missed, it was becoming clear that the revised acquisition plan unveiled by Gates on August 6 was coming off the rails, since the proposed timeline, with contract award on Dec. 31, would slip too close to the Jan. 20 inauguration of the new Administration.

No explanation was given for the slippage: the amended RFP was still expected daily as late as early September, and there was no official indication the process was in trouble. Yet, Gates suddenly “determined that the best course of action is to provide the next Administration with full flexibility regarding the requirements, evaluation criteria and the appropriate allocation of defense budget to this mission.”

No explanation was given as to what had changed between Aug. 6 and Sept. 10 to prompt the program’s termination, yet it is obvious that Boeing’s threat to pull out of the competition if it was not given six months – instead of the 45 days proposed by Gates – to prepare its new proposal carried the day. For once, no press conference was organized to explain the weather change in Pentagon policy on this issue, in itself an implicit acknowledgement of just how far things had degraded.

Quite why Gates should have been worried by Boeing’s threat to pull out remains a mystery, since there is no obligation that multiple companies should bid for Pentagon contracts. In fact, by pulling out, Boeing would have conceded that, after seven years and three competitions, it was still unable to come up with a competitive bid, and this would have reflected worse on company management than on the Pentagon.

Ralph D. Crosby Jr., chief executive of EADS North America, said the decision represented “a major failure of the defense acquisition system,” adding that “If the special interests of one contractor have prevailed over the highest priority needs of the U.S. armed forces, it is a terrible precedent.” Right, but so what? Does anyone else care?

Gates acknowledged that the Pentagon was at fault by saying he canceled the deal “in no small part because of mistakes and missteps along the way by the Department of Defense.”

But no explanation was provided as to why a process that was still viable and valid on Aug. 6 had become an untenable example of Pentagon incompetence by Sept. 10. Nor do we know why Pentagon acquisition chief John Young proved as powerless as the air force to complete the program.

Stepping back, the biggest question today is whether a contract ultimately worth $100 billion or more can ever be awarded competitively. It is clear that Boeing’s impressive success in derailing a competition it had already lost twice will encourage future losers of major contracts to litigate, raising the specter of an endless cycle of awards, GAO protests, re-bids, and re-protests. As Gates noted, such processes have become “enormously complex and emotional,” and will ultimately overwhelm the staffing capacities even of acquisition administrations as large as the US Air Force’s or the Pentagon’s.

Needless to say, Northrop Grumman will have the same opportunity to protest if Boeing were to win the next competition, freezing the process for six months or a year, because it will be virtually assured that the GAO will find cause to sustain a protest in any tender of such complexity.

It is clear, then, that the only way the US Air Force will get its new tankers is to split the contract between the two bidders. The next question is how it will persuade both Boeing and Northrop Grumman to go with a split program, and thus miss out on at least half of the profits, now that the Pentagon has so publicly buckled under to Boeing’s threat of pulling out.

Another issue is that the credibility of both Air Force and Pentagon is in now tatters, not only because their acquisition processes have been shown to be so ineffective, but also because they have made so many conflicting statements about the state of the KC-135 fleet.

For years, we have heard that the aircraft are so old, so decrepit and so ready to fall apart that their urgent replacement was the Air Force’s top acquisition priority. Yet, on Sept. 10, Gates noted that “the current KC-135 fleet can be adequately maintained to satisfy Air Force missions for the near future,’ and that “sufficient funds will …maintain the KC-135 at high-mission capable rates.”

So, which is it? Are they falling apart, or will they remain mission-capable for the near future? It would be nice to know, once and for all.

Another issue is who will pay, and how much, for these protracted and ultimately sterile competitions. The Pentagon might be liable for civil damages for its abrupt and unexplained termination of the tanker program, and EADS Chief Executive Louis Gallois implied as much when he said on Sept. 10 that “we have a contract and will seek an appropriate conclusion to that contract.” Given that Gates has acknowledged that DoD was at fault, thereby admitting liability, the question of financial compensation cannot be dismissed off-hand.

Among all these questions, and many others to come, there is only one certainty: after three competitions stretching over seven years, and unnamed thousands of man-hours, the US Air Force is no closer today to buying a new tanker than it was in 2001.

That is the most damning indictment of the Pentagon’s acquisition processes. It also is proof the world has changed that since Gen. Eisenhower’s time, and not for the better.

Today, the danger is no longer the military-industrial complex that Ike famously warned about, but the Frankenstein-like industrial complex that was since created by the Pentagon, and which has now so comprehensively and so visibly taken on a life of its own.

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