By Steve Kelman

Blog archive

Air Force's retro acquisition strategy comes with a price

Well, the re-emergence of bid protests has now claimed its first big victim – competition on the huge contract to build a new generation of tankers for the Air Force, as Northrop Grumman announced yesterday that it would not submit a bid.

The never-ending saga of the tanker has generally shown the procurement system at its worst. It started with allegations of favoritism to Boeing that sent a senior Air Force procurement official to jail. The saga continued with congressional outbursts of xenophobia – inspired by Northrop's bid, which included an Airbus manufactured in Europe. In addition, members of Congress seemed more intersted in scoring jobs for their district than focusing on the program's mission. Finally, the story also featured the first bid protest, by the initial loser Boeing, of a major weapons platform contract in a long time.

To bring its misery to an end, the Defense Department (which basically took over the procurement from the Air Force) adopted a retrograde acquisition strategy that takes a number of minimum requirements, grades them pass-fail, and awards the contract to the low bidder who has met these minimums. If this were the approach the Air Force genuinely wanted – not to give extra credit for extra features, thus moving away from the idea of best-value procurement – that would be one thing, although one might question such a judgment. However, the acquisition strategy instead seems designed mainly to "protest-proof" the procurement. With no judgment being used, DOD believes it will be harder to overturn its decision.

However, the problem is that the underlying features of the Airbus that Northrop would have bid – as already adopted for some European militaries – give it more capability but a somewhat higher cost than what Boeing bid. Given the way the acquisition strategy was developed, Northrop basically had no chance to win. So they have now withdrawn from the competition.

The result? No competition for this contract, with the certainly of less-aggressive pricing by Boeing. Probably after award, the government will ask Boeing for features not included in the scaled-down minimum requirements package, in a sole-source environment that again doesn't promote great pricing.

Let's hear it for bid protests and a dysfunctional procurement system.

Posted on Mar 09, 2010 at 9:03 AM


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