The Lectern: Split buy for Air Force tanker?
The Oct. 1 issue of The Government Contractor has an interesting feature article called "Splitting the baby: Why the Air Force needs two tankers," by Jeffrey Green, a former House Armed Services Committee staffer (who in his current consulting job represents neither Boeing nor Northrop) about what the Air Force should be doing regarding the ill-fated tanker replacement deal.
Green recommends that the Air Force do a split buy for low-rate initial production (the first 10 to 15 aircraft each for the two companies) and then choose one of them for full production, based on the best-value choice that emerges from actual production rather than the more make-belief world of paper proposals.
Given the toxic politics around this issue, the political appeal of such an approach is obvious. And, in my view, some version of "fly before you buy" is an approach that should be considered more often by the government than it is — not just for weapons but also for IT systems — because it allows the government to keep competitive forces working a longer period of time and to make final decisions based on better, more realistic information.
The objection to this approach, of course, is that it more or less increases the government's costs during development and ramp-up because two contractors are working on the project rather than one. Some studies from the 1970s (there don't seem to be more recent ones) suggest that the government often recoups these costs through lower prices and better products developed in this ongoing-competition environment, but clearly the issue of how to deal with cost duplication is an important one that will have an impact on the desirability of this approach on a case-by-case basis.
Sometimes, for example, the competitors don't need to go through full-scale development before the government is in a position to make a choice between them, which lowers duplicate costs. In the case of the Air Force tanker, Green argues that much of the duplicative cost could be recovered because the "loser" is still likely to be able to sell significant numbers of the planes it has developed to foreign governments, many of which won't have the same high-performance requirements that perhaps the loser might not have been able to meet. (A problem with this argument, I think, is that the loser might be technically equivalent or even better, but higher cost, which would then make foreign military sales less likely.)
Green's idea is an intriguing one that seems to me to merit consideration.
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Read more by posts by Steve Kelman:
The Lectern home page
The Lectern: Taxes are the price I pay for civilization
The Lectern: The Financial crisis, students and jobs
Posted by Steve Kelman on Oct 14, 2008 at 12:10 PM