U.S. Air Force leaders are taking draconian steps to ensure the service's prized Boeing KC-46A tanker program stays in line.
To protect the aerial refueling plane from ever-expanding requirements, changes will not be allowed except at the "highest level," Air Force Secretary Michael Donley told the Senate Armed Services Committee March 17.
Gen. Norton Schwartz, Air Force chief of staff, who was testifying alongside Donley, added that the KC-46 program would be scrutinized "microscopically" to make certain the "offeror delivers what he promised.
"The level of approval for engineering change orders is not going to be at the program office level," Schwartz said.
Though it has yet to be decided who will have final authority to approve such changes, it might be at the very top level of the Air Force leadership.
"It might be at our level," Schwartz said. "The bottom line is, we intend to maintain discipline on this thing."
Analysts applauded the Air Force's move. Historically, contractors would bid low to win competitions and then use the engineering change order mechanism to avoid fulfilling their contractual obligations, said Loren Thompson, an analyst at the Lexington Institute, Arlington, Va.
"It used to be a common practice in the industry that people would bid low and then try to use engineering changes to restore [profit] margins on the program," he said.
With the new approach, the Air Force cuts off that loophole for any potential contractor, Thompson said.
Byron Callan, an analyst at Capital Alpha Partners in New York, also applauded the move.
"That's pretty prudent on their part. … It's the only way they're going to keep the tanker at the cost that it was bid for," he said.
"It may not be great from a Boeing standpoint," Callan added.
However, in cases where a technology is particularly cutting edge, such an approach could backfire.
"If you were to limit engineering changes on something revolutionary like the F-35 [Joint Strike Fighter], you could really foul up the program," Thompson said.
Callan agreed that the new approach to the tanker program would not be a good idea if it were to be applied to all Air Force contracts.
"Trying to think you can just freeze a design that will last five or six years, that's locking yourself into obsolescence," he said.
U.S. Air Force leaders said its KC-46 program will be scrutinized microscopically. (Boeing)
Gen. Norton Schwartz, Air Force chief of staff, who was testifying alongside Donley, added that the KC-46 program would be scrutinized "microscopically" to make certain the "offeror delivers what he promised.
"The level of approval for engineering change orders is not going to be at the program office level," Schwartz said.
Though it has yet to be decided who will have final authority to approve such changes, it might be at the very top level of the Air Force leadership.
"It might be at our level," Schwartz said. "The bottom line is, we intend to maintain discipline on this thing."
Analysts applauded the Air Force's move. Historically, contractors would bid low to win competitions and then use the engineering change order mechanism to avoid fulfilling their contractual obligations, said Loren Thompson, an analyst at the Lexington Institute, Arlington, Va.
"It used to be a common practice in the industry that people would bid low and then try to use engineering changes to restore [profit] margins on the program," he said.
With the new approach, the Air Force cuts off that loophole for any potential contractor, Thompson said.
Byron Callan, an analyst at Capital Alpha Partners in New York, also applauded the move.
"That's pretty prudent on their part. … It's the only way they're going to keep the tanker at the cost that it was bid for," he said.
"It may not be great from a Boeing standpoint," Callan added.
However, in cases where a technology is particularly cutting edge, such an approach could backfire.
"If you were to limit engineering changes on something revolutionary like the F-35 [Joint Strike Fighter], you could really foul up the program," Thompson said.
Callan agreed that the new approach to the tanker program would not be a good idea if it were to be applied to all Air Force contracts.
"Trying to think you can just freeze a design that will last five or six years, that's locking yourself into obsolescence," he said.
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