MODERATOR: Welcome, and thank you for joining us this afternoon. Today it's my privilege to introduce to you Mr. Shay Assad. Mr. Assad is the director of Defense Procurement and Acquisition Policy, and as such he will be bringing you up to date and briefing you on the KC-X aerial refueling tanker draft request for proposal, or as we call it around here, the RFP.
He is also prepared to talk to you about the status of the overall source selection process. There are obviously things with respect to the competition itself that he will not be able to get into, but he will try to frame this for you so you understand the direction in which the department is headed, some of our milestones that we hope to achieve and how we are addressing some of the recommendations of the General Accounting Office.
So with that, Mr. Assad.
MR. ASSAD: Thank you.
MODERATOR: Thank you.
MR. ASSAD: Good afternoon. About a month ago, Secretary Gates said that we would address each of the GAO's findings and their rulings with regard to KC-X, that they were serious matters. And in fact, we are doing that and we are addressing them in a very measured and serious way to ensure that we, in fact, can execute this procurement in a manner that's fair to both parties and is in the best interests of the warfighters and the taxpayers.
We issued the draft RFP today to both Boeing and Northrop Grumman. Our plan and our process, as we go forward, is to have a period of time when we will discuss with them the elements of the draft RFP. That will take about a week or so. We hope to have both offerors in to meet with our team next week sometime. Each offeror will be provided an equal amount of time to sit down and discuss face- to-face what their views are of the draft RFP.
Sometime in the middle of the month we expect to issue the final RFP amendment and then we'll give both offerors about 45 days to submit their revisions to their proposals. We gave the offerors originally 60 days to submit proposals, so this is about the same amount of time.
And then that'll come to about 1 October. From 1 October through some time in late November, we'll be having discussions with the offerors as well as evaluating their proposals. And those discussions will take two forms: written questions going back and forth to the offerors and their written responses and then face-to-face oral discussions with both Northrop and Boeing as it relates to their proposals.
We would then hope to close discussions around the end of November, early December, request a best and final offer or what we now term final proposal revisions in the first week in December, and complete our evaluations and award right around New Year's Eve, hopefully, and then debrief the successful and unsuccessful offerors sometime in the first week in January.
We're on schedule to make that happen. And, you know, now we're just in the middle of the process that's involved in how you deal with the competition.
And those are the general -- or the general structure, if you will, of what it is that we're doing. I'd be happy to answer any questions that you might have about how -- about that process or how we will go forward to ensure that we get this competition concluded, get the warfighters what they need at a price that the taxpayers can be pleased with.
And with that, yes, ma'am?
Q There were a number of KPPs and KSAs that the GAO found to be scored inappropriately or not according to the rules. How do you plan to address that in this new revised RFP?
MR. ASSAD: What we've done is we've provided the offerors very clear and unambiguous insight into the relative order of importance of the technical factors that we're going to evaluate. And we've also provided them a cross-referenced matrix that takes all of those KPPs and KSAs -- KPPs being key performance parameters, KSAs being key system attributes -- and other requirements, and we've -- we're mapping or we have mapped all of those requirements across the areas of capability that we're evaluating -- aerial refueling, airlift, operational utilities, survivability, and what's called other requirements.
So the offerors will clearly see where all of the KPPs and KSAs reside. They'll understand fully what the priority of those KPPs, KSAs and other requirements are in terms of each of the areas of capability and within an area of capability. So we've been very -- we've tried to be meticulous in ensuring that the offerors have a very clear and unambiguous understanding of the relative order of importance of our requirements.
Q Is that allowing you to score what was called, earlier in the competition, extra credit?
MR. ASSAD: Well, there's different ways we give consideration. Not to get too technical, but there are certain threshold requirements that we in fact can provide added consideration for.
There are other technical requirements that we can't. It depends upon whether it's a KPP or a non-KPP, whether there's an objective. There's a lot of technical issues here. But yes, it gives us the full capability to properly recognize the strengths of each offer.
Q Can you talk about the changes to the measure of the life- cycle of the aircraft, and how that figures into the priorities that are being set forward for the offerors?
MR. ASSAD: Yes.
One of the things that Mr. Young said, at the press conference that was held about a month ago, was that we would ground ourselves in the Capabilities Development Document.
That's the document that the warfighter provides to us that says, this is our requirement. And they've established that the service life of the aircraft is 40 years. So we'll do all of our life-cycle cost estimating on a 40-year service-life basis.
Q Could you describe our outline the other changes, significant changes the amendment makes to the original RFP?
MR. ASSAD: Well, what we've tried to do: The changes that we've made have been focused on being responsive to the GAO rulings and findings. And we've made very clear, the key change to the RFP has been that we now have highlighted and made very clear, to the offerors, what the relative importance of each mission capability area is and what the relative importance of our requirements within each of those capability areas is.
We have distinguished the fact that we are going to measure life- cycle cost on a 40-year basis. We've ensured that we're going to evaluate in terms of fuel, fuel offload, that we will recognize value over threshold, as it regards to fuel offload.
And those are the key areas within the RFP that we've made changes to.
Q In terms of looking at the 40-year life cycle costs, are you looking at the cost of fuel over that life span?
MR. ASSAD: Yes, we are. Yes. We'll look at several aspects of the government ownership. We're really measuring -- when I say life cycle costs, we're measuring costs associated with government ownership of those aircraft over that 40-year period.
Q How -- is GAO going to be involved in the process at all? Have you asked them to review your draft RFP, or will they review the finalized RFP?
MR. ASSAD: There really isn't a role that GAO plays at this particular time, other than to be notified on how we are responding to their recommendations. And they would only be involved if there was some subsequent question of law or some subsequent question with regard to an offeror protesting how we're implementing those findings.
Q Just to be clear, you are going to be able to give extra credit for additional fuel offload and other things that -- like cargo capacity or passenger capacity? You will -- you do intend to give extra credit for those things?
MR. ASSAD: Well, let's -- I'll use the term that we use, which is, we give positive consideration to those key performance parameters where we exceed the thresholds that we have established, but we don't give any consideration above the objective -- that is, the highest amount, if you will, in terms of what we're evaluating. And so in this particular case with fuel offload, it was always our intention to give positive consideration for the amount of fuel offload above threshold.
What the GAO found was that when we wrote the RFP, they did not agree that the way we constructed the language allowed us to do that. We've now revised the language to make it unambiguous that we intend to provide consideration above threshold for fuel offload.
Q The House Defense Appropriations Subcommittee put out a list of requirements in their recently marked-up bill that it would be -- that the money would be conditioned on $900 million next year for this program. Did you consult this list on coming up with the RFP? Do you feel like the RFP meets these requirements?
MR. ASSAD: Well, we're still reviewing the HAC language, but I can tell you that from what I've seen, most of what's there really addresses the GAO findings, and that's exactly what it is that we're trying to do. So from that degree, there's an alignment between us. In terms of the overall view of the legislation, I think we're still in the process of taking a look at that.
Q And one specific one is regarding consideration of trade space. Did that make it into your -- ?
MR. ASSAD: Well, consideration of trade space has always been a requirement of the RFP.
Q And can you just, as a quick follow-up, tell us what would be the consequences if that money were not disbursed on October 30 -- on October 1st when the fiscal year begins? Would that delay your schedule?
MR. ASSAD: I'm really not prepared to answer that right now, but we can take it to -- you know, and I'd be happy to get back to you with an answer.
Q Have you terminated or do you plan to terminate the contract that already exists with Northrop, or do you plan to keep that in like a holding or standby mode?
MR. ASSAD: Well, what the GAO said in their finding, in their ruling, was that we should resolicit -- in other words, amend the RFP, change it as we saw appropriate, get revised proposals, reevaluate those proposals and do a new source selection. They said if that process resulted in a new -- a new selection -- in other words, Boeing instead of Northrop -- then, they said, that's when we should terminate the Northrop contract, which is now in a stop work. We should terminate the Northrop contract completely and then proceed with a different contract.
If, however, Northrop Grumman was the successful offer, than we simply would lift the stop work order and modify it accordingly.
Q Well, how does that address the specific issues of the overrun, breakaway and the two-year depot maintenance issue, because GAO essentially found that they were noncompliant with the RFP and that award was based on a noncompliant proposal, so --
MR. ASSAD: In both cases, during discussions, we intend to have very direct discussions with both offerors, frankly, as it relates to the different issues, the technical issues that were brought up in the GAO's findings and we will also bring up that matter of depot maintenance and the compliance with the statement that they will, in fact, support the two-year maintenance. So they would have to comply with those particular requirements in order to continue with award.
Q Would you say that this revised RFP has been changed substantially or would you call the modifications pretty minor in nature?
MR. ASSAD: I would say that they are responsive to -- fully responsive to GAO's direction, but I would not consider this to be a substantial modification to the RFP. We are very measured, very specific about addressing the areas that needed to be addressed. And GAO, on the -- I think it was -- I'm pretty sure of this, but don't quote me. But I think it's on page 69, paragraph three, line one. It said, hey, if you need to change the RFP in order to address these issues then you should proceed and do that. And that's exactly what we've done.
Q Has a new source selection evaluation team been appointed? And if so, to what extent does the Air Force have a role in it?
MR. ASSAD: Yes. The Air Force is playing a significant role, as are the other services in the Source Selection Advisory Committee.
Mr. Young (sp) mentioned that the Source Selection Advisory Committee would be made up of all new members. That has in fact taken place. They've all been appointed. There is an independent review team, a Source Selection Advisory Committee independent review team. That is also made up of all SES and general officers, who will independently review what the SSAC does as we go along.
Q In changing the life cycle calculations from 25 years to 40 years, does that mean that the Air Force can now be expected to plan to fly these planes for 40 years, whereas previously the plan was to begin to replace them after 25 years?
MR. ASSAD: Well, I think the plans -- I know that the service life of the aircraft according to the CDD is 40 years. So it's not clear to me why -- if there was a plan to replace them at 25 years, I'm not familiar with it.
Q Sir, the GAO took a number of issues with the computer modeling used on a number of the requirements in the RFP. Have those been changed?
MR. ASSAD: Yeah.
Q Have they been thrown out?
MR. ASSAD: The specific issue that the GAO took issue with was, as we were examining some of the costs associated with one of the offerors, that we use the modeling technique to establish the government's position. We won't be using any models as it relates to establishing cost realism. We're going to do what I'll call classic cost realism analysis, engineers evaluating the proposals in detail and then coming up with government positions. So we will not utilize Monte Carlo simulations in our cost analysis.
Q Some in Congress have been pointing to U.S. Code Title 10 to say that industrial base concerns and manufacturing percentages, et cetera, should be considered. Is it still your position that those shouldn't be considered, or are they not --
MR. ASSAD: Oh, no. No, that's a requirement in law to consider those things.
And we did.
Q (Off mike.)
MR. ASSAD: Yeah.
I think, you know, we're required to do an analysis as part of the program planning and acquisition cycle. And you know, the department did that analysis and continues to do analysis as we go along. So I think that we've complied with the law.
Q Any change from this RFP to the last one?
MR. ASSAD: No, I don't think so.
Q Can you explain then how -- because it seemed to me that that wasn't a factor in the decision before. Is it an analysis that has to be done, and then it doesn't have to be considered? And who --
MR. ASSAD: Yeah.
It's not part of the RFP process in itself. It's a part of the overall program plan that you have to do that.
MODERATOR: Let's take a couple more.
MR. ASSAD: Yes, sir.
Q I'm confused by those last couple of answers.
MR. ASSAD: Yeah.
Q In congressional testimony, the Air Force has testified that workforce considerations were not at all a part of the decision- making process.
MR. ASSAD: That's correct.
What I said was, it was not part of the RFP process. It really was -- it's part of the overall establishment of a program plan that you look at those considerations. But it's not part of the evaluation process for KC-X.
Q What's the purpose of looking at them?
MR. ASSAD: Well, the purpose is to determine frankly before you start your competition, do you believe that you have the industrial capability in fact to supply these products? And I don't think there's any doubts about that.
Q The Air Force had the structure, when they did the first selection, where they had two teams, it seemed like, assigned; one team, it seemed, to each proposal. And the two didn't really talk at that level. They talked at a higher level.
Do you plan to follow that structure? Or how do you plan to make sure that the conversation -- (off mike)?
MR. ASSAD: Well, we will have -- it is not uncommon to have two contracting officers or contracts managers, if you will, conducting the conversations between the different offerors.
But what we will ensure is that we'll have OSD participation, frankly, as observers, in many of these discussions to ensure that that exactly does take place.
Q Going back to the industrial base issue. On the '09 -- the acting -- (inaudible) -- appropriations bill apparently includes some -- there's some report language requiring DOD to take industrial base concerns into account. If that were -- if that legislation was enacted -- and I know report language isn't binding -- do you see it having any impact on --
MR. ASSAD: Well, I really -- I haven't seen that language, so I'm reluctant to comment on it. I can just tell you that the industrial base analysis requirements that were referenced in the hearing with Mr. Young, that in fact those did take place.
Q Sir, early on in the process you had talked about -- or the Air Force had talked about cost and price being among the least important factors in terms of making the decision. And you now outlined in this document the sort of relative importance of aerial refueling versus -- not quite so much for survivability, utility and airlift. Where does price -- and you know where do life-cycle costs and price of the proposal -- where do those figure in? How do they rate? I mean, is it one, two, three --
MR. ASSAD: Well, it's -- I'm reluctant to -- because we're in the middle of draft RFP and discussing that with the offerors I'm kind of reluctant to provide that type of information. But let me just say in general that the way we're evaluating life-cycle cost in terms of its relative order of importance is unchanged from the old RFP to the new RFP. What we are doing, however, is -- and they're government ownership life-cycle costs. But we're looking at the acquisition costs separately as an element of cost and price and that's a little different than what we did before.
MODERATOR: Thank you, much, folks.
Q Nobody asked the protest question, though. Are you guys prepared to deal with a protest if one comes?
MR. ASSAD: We always have to be prepared to deal with protests.
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