GAO KC-X Decision Highlights

1. The KC-30 Not Only Was Not The Best Value, It Was Not Even Eligible For Award.

• “[T]he Air Force improperly accepted [NG/EADS’] proposal, where that proposal clearly
took exception to a material solicitation requirement” to plan for and support establishment of
an Air Force depot maintenance capability within two years after delivery of the first full-rate
production aircraft. p. 54.

– The Air Force repeatedly told NG/EADS it did not meet this “minimum program task[],”
yet NG/EADS refused to satisfy it, stating in its Final Proposal Revision (FPR) that
NG/EADS would address this requirement after award. pp. 51-52.

– GAO rejected the Air Force view that NG/EADS’ failure to satisfy this material
requirement—which an Air Force witness testified was “important”—was “an
administrative or documentation oversight.” pp. 53-54. In fact, the Air Force witness
admitted that NG/EADS did not forget about the issue, nor was its FPR silent on the
issue; NG/EADS just decided not to address it. p. 53 note 77.

• NG/EADS’ proposal also “could not be accepted,” Op. 38 n.54, because it failed to establish
that the KC-30 can refuel all currently compatible planes using current Air Force procedures,
which was a mandatory minimum requirement. p. 38.

– The Air Force repeatedly told NG/EADS the KC-30 could not achieve speeds required to
overrun “various fighter aircraft” and an unnamed plane. p. 39. After urging the Air
Force to change its procedures to accommodate NG/EADS and then claiming the RFP
did not require it to meet overrun speeds, p. 39 note 57, NG/EADS proposed a solution
that the Air Force improperly accepted.

– Despite GAO’s request to produce knowledgeable witnesses, p. 40 note 59, the hearing
and record did “not establish that the Air Force understood [NG/EADS’ proposed
solution], nor does it demonstrate that the agency had a reasonable basis upon which to
accept [NG/EADS’] promises of compliance.” pp. 41, 45.

– The Air Force also failed to recognize, let alone analyze, whether the KC-30 could
achieve the speeds necessary to perform “breakaway” maneuvers from receiver aircraft in
dangerous flight conditions. pp. 46-47.

2. Under The Rules Of The Competition, Boeing Provided The Best Value Proposal.

• The RFP solicited “proposals that satisfy as many . . . requirements as possible.” p. 32. It
also set forth a hierarchy of requirements in the following order: Key Performance
Parameters, Key System Attributes, and other requirements. p. 10.

• Boeing met more than three times as many requirements as NG/EADS in higher level
requirements, yet the Air Force found NG/EADS to offer more value without “any
consideration” that Boeing met “significantly more SRD requirements,” p. 30, or “any
meaningful consideration to the weights” of the requirements. p. 31. “This . . . is not a
matter of simply counting strengths . . ., but of evaluating the advantages and disadvantages .
. . consistent with the RFP’s evaluation scheme.” pp. 32-33.
 • GAO rejected the decision to assign NG/EADS a key discriminator for exceeding the Fuel
Offload versus Radius Range KPP objective by more than Boeing, given that the RFP
“unambiguously” said no credit would be given for exceeding KPP objectives. p. 35. “The
evaluation record thus shows that, instead of this being a discriminator, [NG/EADS] and
Boeing should have received equal credit.” p. 31 notes 45, 35-38.

• GAO held that the errors outlined above are illustrative and such errors “permeate[d] the
evaluation of the” most important Mission Capability subfactor. p. 33 note 46.

3. The Air Force Admitted That Its Cost Calculation Errors Rendered Boeing The Low-Cost
Solution.

• The “Air Force admits that in ‘defending this protest’ it discovered five errors . . . , which,
when corrected, would result in Boeing displacing [NG/EADS] as the offeror with the lowest
evaluated MPLCC” by approximately $92 million. p. 56-57.

• The Air Force’s evaluation of MILCON costs was otherwise flawed.

– The agency’s MILCON cost evaluation was to be based upon “‘the offeror’s proposed
KC-X aircraft solution,’” which is the general rule. p. 57.

– Here, the MILCON evaluation was based upon site surveys conducted before the receipt
of proposals; thus, the Air Force did not evaluate MILCON costs related to the offerors’
proposed aircraft, and no further evaluation of the additional MILCON costs for each
aircraft was performed after proposals were received. p. 57.

– Nor did the Air Force “consider in its evaluation of MILCON costs the offerors’ own
estimates of likely MILCON . . . included in their proposals.” p. 58.

– Nor was the “Air Force’s notional (hypothetical) methodology for assessing likely
MILCON costs” reasonable. The agency conducted site surveys at four Air Force bases
and then extrapolated the results of one site survey to six other bases. Yet, that one base
has “‘a great deal more infrastructure’” than other airbases and “thus cannot be used as a
reasonable forecast of potential MILCON costs, such as for pavement improvements for
runways, ramps, and parking aprons . . .” p. 60.

• The Air Force unreasonably increased Boeing’s nonrecurring engineering costs without
finding them to be unrealistic. pp. 61-66.

– “[T]he Air Force made no determination that Boeing’s estimated $[Deleted] billion for
SDD non-recurring engineering costs was unrealistic.” p. 63. In the absence of a such a
determination, it was unreasonable to adjust Boeing’s costs. pp. 63-66.

– Even if an adjustment had been appropriate, however, “the agency’s use here of its Monte
Carlo simulation model” was unreasonable because the reports upon which it was based
address cost growth at an overall program level, and the Air Force has not shown that to
be a “reliable predictor of anticipated growth in a single cost element, such as non-
recurring engineering cost . . .” p. 65.
4. The Air Force Treated Boeing Unfairly By Holding Misleading Discussions.

• In Operational Utility, the Air Force not only failed to account for the fact that Boeing was
assessed “major discriminators” relating to 17 different requirements, compared to just two
requirements for NG/EADS, it conducted unfair, misleading discussions. pp. 48-49.

• The Air Force told Boeing months before FPR that it met the only KPP objective in
Operational Utility—Net-Ready Capability—which should have earned Boeing a “major
discriminator.” Thus, Boeing did not change its FPR. pp. 48-49.

• Yet, the Air Force later changed its evaluation (finding Boeing “partially met” that KPP
objective) without notice to Boeing, even though it continued to tell NG/EADS that it had
only partially met that KPP objective and even though it had discussions after FPRs were
received and evaluated. pp. 48-49. The Air Force thus conducted misleading and unequal
discussions that “favor[ed]” NG/EADS. pp. 49-50.

5. GAO Found That The Air Force Made Additional Errors Requiring Correction.

• NG/EADS’ risky, nascent boom approach requires reevaluation.

– GAO elicited Air Force testimony to “‘explain why evaluated weaknesses in

[NG/EADS’] boom have low schedule or cost risk.’” p. 50 note 72.

– The testimony in response was “conclusory.” GAO thus ruled that “this is also a matter
that the agency should consider further.” p. 50 note 72.

• The Air Force’s assessment of fuel costs requires reevaluation.

– The “agency did not do much more than an assessment that the offerors’ own proposed
fuel burn rates . . . was reasonable.” However, “even a small increase in the amount of
fuel that is burned per hour by a particular aircraft would have a dramatic impact on the
overall fuel costs . . .” pp. 66-67 note 89.

– “Given our recommendation . . ., this is another matter that the agency” should “review to
ascertain whether a more detailed analysis of the fuel costs is appropriate.” pp. 66-67
note 89.

6. Remedy

• GAO recommended “the Air Force reopen discussions . . . , obtain revised proposals, re-
evaluate the revised proposals, and make a new source selection decision, consistent with this
decision. If the Air Force believes that the RFP . . . does not adequately state its needs, the
agency should amend the solicitation prior to conducting further discussions . . . . If Boeing’s
proposal is selected for award, the Air Force should terminate the contract awarded to
[NG/EADS]. We also recommend that Boeing be reimbursed the reasonable costs of filing
and pursuing the protest, including reasonable attorneys’ fees.” p. 67.