[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 110-157]

                       SOURCE SELECTION AND PATH

                         FORWARD REGARDING THE

                        AIR FORCE KC-(X) PROGRAM

                               __________

                                HEARING

                               BEFORE THE

                    AIR AND LAND FORCES SUBCOMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             JULY 10, 2008

                                     

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                    AIR AND LAND FORCES SUBCOMMITTEE

                   NEIL ABERCROMBIE, Hawaii, Chairman
JOHN SPRATT, South Carolina          JIM SAXTON, New Jersey
SOLOMON P. ORTIZ, Texas              HOWARD P. ``BUCK'' McKEON, 
SILVESTRE REYES, Texas                   California
ADAM SMITH, Washington               JEFF MILLER, Florida
MIKE McINTYRE, North Carolina        JOE WILSON, South Carolina
ELLEN O. TAUSCHER, California        FRANK A. LoBIONDO, New Jersey
ROBERT A. BRADY, Pennsylvania        TOM COLE, Oklahoma
JIM MARSHALL, Georgia                ROB BISHOP, Utah
DAN BOREN, Oklahoma                  MICHAEL TURNER, Ohio
HANK JOHNSON, Georgia                PHIL GINGREY, Georgia
JOE SESTAK, Pennsylvania             CATHY McMORRIS RODGERS, Washington
GABRIELLE GIFFORDS, Arizona          GEOFF DAVIS, Kentucky
KENDRICK B. MEEK, Florida            W. TODD AKIN, Missouri
KATHY CASTOR, Florida                DOUG LAMBORN, Colorado
                 Heath Bope, Professional Staff Member
                Lynn Williams, Professional Staff Member
                      Ben Glerum, Staff Assistant
      












                        C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2008

                                                                   Page

Hearing:

Thursday, July 10, 2008, Source Selection and Path Forward 
  Regarding the Air Force KC-(X) Program.........................     1

Appendix:

Thursday, July 10, 2008..........................................    71
                              ----------                              

                        THURSDAY, JULY 10, 2008
   SOURCE SELECTION AND PATH FORWARD REGARDING THE AIR FORCE KC-(X) 
                                PROGRAM
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Abercrombie, Hon. Neil, a Representative from Hawaii, Chairman, 
  Air and Land Forces Subcommittee...............................     1
Hunter, Hon. Duncan, a Representative from California, Ranking 
  Member, Committee on Armed Services............................     4
Saxton, Hon. Jim, a Representative from New Jersey, Ranking 
  Member, Air and Land Forces Subcommittee.......................     4
Skelton, Hon. Ike, a Representative from Missouri, Chairman, 
  Committee on Armed Services....................................     3

                               WITNESSES

Gordon, Daniel I., Deputy General Counsel, Government 
  Accountability Office; and Michael Golden, Managing Associate 
  General Counsel, Procurement Law Division, Government 
  Accountability Office..........................................     6
Young, Hon. John J., Jr., Under Secretary of Defense for 
  Acquisitions, Technology and Logistics.........................    40

                                APPENDIX

Prepared Statements:

    Gordon, Daniel I.............................................    75
    Handy, Gen. John.............................................    90

Documents Submitted for the Record:

    GAO Decision Matter of The Boeing Company Report.............   103
    GAO Protests of Air Force Procurements Sustained during FY 
      2005 - FY 2008.............................................    98
    Size Comparison Chart KC-30 is Overkill......................    95
    Testimony submitted by the Hon. M. Jodi Rell, Governor of 
      Connecticut................................................    96

Witness Responses to Questions Asked During the Hearing:

    Mr. Abercrombie..............................................   174
    Mrs. Boyda...................................................   174
    Mr. Dicks....................................................   174
    Mr. Miller...................................................   175
    Mr. Skelton..................................................   173
    Mr. Tiahrt...................................................   175

Questions Submitted by Members Post Hearing:

    Mr. Abercrombie..............................................   179
    Mr. Bonner...................................................   192
    Mr. Dicks....................................................   184
    Mrs. McMorris Rodgers........................................   192
    Mr. Miller and Mr. Dicks.....................................   192
 
   SOURCE SELECTION AND PATH FORWARD REGARDING THE AIR FORCE KC-(X) 
                                PROGRAM

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                          Air and Land Forces Subcommittee,
                           Washington, DC, Thursday, July 10, 2008.
    The subcommittee met, pursuant to call, at 2:07 p.m. in 
room 2118, Rayburn House Office Building, Hon. Neil Abercrombie 
(chairman of the subcommittee) presiding.

 OPENING STATEMENT OF HON. NEIL ABERCROMBIE, A REPRESENTATIVE 
    FROM HAWAII, CHAIRMAN, AIR AND LAND FORCES SUBCOMMITTEE

    Mr. Abercrombie. Aloha, everyone. Thank you for coming. As 
you can see, we have separated the combatants as far as 
possible physically. And welcome to all interested Members.
    We will proceed in regular order today. We do have--the 
subcommittee has guests, including the Chairman and the Ranking 
Member today. And we will try to move expeditiously with the 
hearing today. Subsequently, depending upon how the membership 
feels, we are going to have to go to a closed session. Certain 
proprietary elements associated with the issue require that. 
And we will have to make a decision then as to whether to move 
to 2337 or stay here while the equipment is taken out. We will 
decide that when the time comes. I would prefer to stay here if 
it can be done expeditiously, and maybe by that time people 
will want to take a break anyway. So I am just going to move 
ahead at this stage.
    Today the Air and Land Forces Subcommittee meets to receive 
testimony from the Government Accountability Office (GAO) and 
the Office of the Secretary of Defense (OSD) on the Air Force's 
aerial tanker program. We will have two panels. The first panel 
includes Government Accountability Office witnesses, Mr. Daniel 
Gordon, who we are pleased to see. I have got Daniel. Right. 
There you are, Mr. Gordon. Sorry. This got in the way. Daniel 
Gordon, who is the Deputy General Counsel for the GAO; and Mr. 
Michael Golden, the Managing Associate General Counsel of the 
GAO, a friend of the committee already, the Procurement Law 
Division.
    The second panel, witnesses will be the Honorable John J. 
Young, Jr., who is the Under Secretary of Defense for 
Acquisition, Technology and Logistics (USD(AT&L)), another 
friend to the committee. We are very grateful to have him here 
today.
    We have members of the full committee, as I have indicated, 
including the Chairman and Ranking Member, and members from 
other committees that have asked to attend the hearing because 
of their interests. I ask unanimous consent that 
nonsubcommittee members be allowed to participate in today's 
hearing after all committee members have had the opportunity to 
ask questions. Any objection?
    Hearing none, we will move ahead with the idea that 
nonsubcommittee members will be recognized at the appropriate 
time.
    After completion of the second panel with Secretary Young, 
as I indicated, we will adjourn the hearing and possibly 
reconvene in 2337, depending upon the situation at that time. 
We will convene a meeting of the subcommittee to address the 
acquisition-sensitive information. Ms. Sue Payton, who is the 
Assistant Secretary of the Air Force for Acquisition, will join 
our other witnesses at that closed meeting.
    I don't have to tell anyone here how important the tanker 
program is, how important the integrity of the DOD acquisition 
process is, or how important the integrity of the GAO protest 
review process is, or indeed how important our constitutional 
role is in overseeing these processes.
    When Secretary Young saw us back in March, he commented 
that the OSD staff was more involved in observing the tanker 
source selection, quote, because it is so important to the 
Nation that we successfully conduct these source selections, 
unquote. I couldn't agree more with the statement of Secretary 
Young then, nor could I agree more now. Yet with all the effort 
and oversight that went into this particular source selection, 
the acquisition system failed. And unfortunately, this isn't 
the first time in the recent past that the acquisition system 
has failed us.
    We had been assured by the most senior Office of the 
Secretary of Defense and Air Force acquisition officials that 
the tanker source selection was handled fairly, openly, and 
quote, well executed, unquote. That does not appear to have 
been the case, resulting in huge expense to the taxpayers, 
seemingly endless delays, and personnel flying very old tanker 
aircraft that have become increasingly expensive to maintain. 
It is not an infrequent occurrence that we read about tanker 
aircraft experiencing in-flight emergencies and having to abort 
their missions for emergency landings, the most recent ones 
being in Afghanistan two weeks ago and the former Pease Air 
Force Base in New Hampshire last week.
    These tankers are old and getting older. We have little 
experience with flying 45-year-old aircraft, and no experience 
in flying 70- to 80-year-old aircraft, which our constituents 
are going to have to do if we are not able to move 
expeditiously. The acquisition process, in my judgment, has to 
be fixed. The questions we need to answer include: Is it too 
complex? Do we have the right people? Do they have the right 
training? Does it consider the right factors? Is this primarily 
an Air Force problem? Are the selection criteria too 
subjective, providing such latitude to Pentagon and GAO 
reviewers that in close competitions well-intentioned 
professionals can come to opposite conclusions? Is the 
integrity of the process on all sides being confirmed?
    This is the start of trying to get complete answers. We 
must act promptly. We must act properly. And we must fix the 
system. We have asked Mr. Gordon and Mr. Golden from the GAO to 
provide some context for the GAO decision relative to other 
protests, the GAO protest consideration process, and the 
details of their decision on the specific tanker protest.
    I want to add parenthetically that I believe that it serves 
the interests not only of the Armed Services Committee, but the 
Congress as a whole to have the GAO indicate in public how its 
decision-making process relative to other protests and the 
consideration of the process itself takes place, because that 
may be something with which we are simply not familiar. We take 
it for granted, but we don't know exactly how it works.
    We will also want to hear their views on what needs to be 
done to fix the acquisition process. We have asked Secretary 
Young to tell us about how he will proceed, and what will be 
done differently in the new source selection to have a 
satisfactory acquisition outcome.
    I am, of course, very pleased to have my mentor and 
Chairman here, Chairman Ike Skelton.
    Mr. Chairman, do you have any opening remarks?

STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM MISSOURI, 
             CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Yes, I do.
    Let me compliment Mr. Abercrombie on calling this hearing. 
I think it is of utmost national importance that we have this 
today, and I thank him for this opportunity.
    Chairman Abercrombie, I welcome today's witnesses and will 
make just a few brief remarks, if I may.
    As everyone in this room is painfully aware, this matter of 
replacing the Air Force's KC-135 fleet is one that has taken 
wrong turns and dragged on far longer than it should. 
Collectively, I believe we are letting down the American 
warfighter, not so much in current operations, but in future 
operations where the KC-135 fleet is at risk and reaching the 
end of its service life without adequate replacement. That 
really concerns me.
    As concerned as I am about the impact of failures on the 
Air Force's tanker program and the tanker fleet, I am equally, 
if not more concerned about what these failures might mean for 
acquisition generally. This source selection was thought to be 
the most thoroughly vetted, carefully considered process in the 
Department's history. I was certainly told as much. However, 
the GAO uncovered basic and fundamental errors in the process 
that are highly troubling: unequal discussions with 
competitors, determinations on the basic acceptability of a 
proposal made without significant analysis or apparent 
documentation, even seemingly errors in arithmetic.
    My hope is that today's hearing will focus not just on 
these issues, but on how our acquisition system allowed such 
errors to occur. We must have requests for proposals that 
represent what the Department actually wants and that doesn't 
mislead competitors. We must have decisions about whether 
proposals meet the government's basic requirements, made in 
ways that are sound and, of course, verifiable. We must have 
calculations of costs that are realistic and are accurate that 
we can actually produce. Do we have the people and the systems 
in place to produce those positive outcomes?
    So I look forward to Secretary Young providing answers to 
those questions and recommendations on the issues before us 
today. I certainly wish to welcome the two witnesses we have 
before us, as well as Secretary Young in a later moment.
    Again, I compliment Mr. Abercrombie on calling this very 
important meeting and hearing. Thank you.
    Mr. Abercrombie. Thank you very much, Mr. Chairman.
    I will now turn to the Ranking Member of the full 
committee, the former Chairman of the committee, our colleague 
and my very good friend, and equally a mentor to me who is 
leaving, we all regret, I can tell you, Mr. Hunter. And if you 
have remarks, I would appreciate hearing them at this time.

    STATEMENT OF HON. DUNCAN HUNTER, A REPRESENTATIVE FROM 
    CALIFORNIA, RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Hunter. Well, thank you, Mr. Chairman. And thanks for 
inviting Ike and I to participate in the hearing, a very 
important hearing. And I think the Chairman said it well. I 
would just add that while the air bridge that is so important 
to the projection of American military power is obviously 
critical to us, and upgrading that air bridge with a new fleet 
of tankers is of great interest, and an important American 
national interest, equally important is maintaining the 
aerospace industrial base in this country upon which our 
military force and capability in the future is girded. So thank 
you again for having the hearing, and I look forward to the 
witnesses.
    Mr. Abercrombie. Thank you very much, Chairman Hunter.
    And then just before we begin then formally, I would like 
to turn to our last speaker before the testimony, my good 
friend and colleague from New Jersey Mr. Jim Saxton, my partner 
not only on this subcommittee, but on other committees in the 
Congress as well, again whose leave-taking I most personally 
regret very, very much. And we wish to say to you, Mr. Saxton, 
at this time that we are looking forward to your remarks.

STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE FROM NEW JERSEY, 
        RANKING MEMBER, AIR AND LAND FORCES SUBCOMMITTEE

    Mr. Saxton. I thought you were going to say you are looking 
forward to my demise.
    Thank you, Mr. Chairman. I appreciate being here today, and 
I want to thank our witnesses for being here as well.
    As you said, Mr. Chairman, we are here today to learn about 
the Department's plan for the way ahead with the KC-(X) tanker 
acquisition after the GAO upheld the contract award protest by 
the Boeing Company.
    Yesterday Secretary of Defense Gates announced that the 
original request for proposal will be amended to address the 
GAO findings, and the competition will be reopened. I look 
forward to learning more about how this will be executed, and 
am specifically interested in learning about the timeline, 
because as both you, Mr. Chairman, and the Chairman of the full 
committee Mr. Skelton have said, time is not on our side on 
this issue.
    As all the members of the subcommittee know, every day that 
goes by that we aren't fielding a new tanker is one day longer 
that the already aged KC-135s must continue to operate. We need 
to get on with this, and we need to get on with it as soon as 
possible.
    As part of the discussion today, I hope we will be able to 
get into the broader issues of the defense acquisition process, 
what I would like to call the elephant in the room. How does 
the High-Priority Acquisition Program, with intense oversight 
and scrutiny at the highest levels of the Department of 
Defense, fall so short of the mark? Is it lack of personnel 
with the critical acquisition skills that are needed? Has the 
complexity of the modern weapons system raised the complexity 
of the acquisition process? Or are the policies and procedures 
in place adequate to guide decision-making?
    The bottom line is that we need to get on with this 
process. But in that vein, I just want to say this: I am 
concerned about the requirements development process and the 
manner in which the requirements drive the acquisition. I have 
been told by an old friend--and I will tell you who the old 
friend is because he has written it himself for publication--
his name is General John Handy, Retired. I have been told by 
him personally that on this subject that the Air Force very 
well--he served the Air Force very well, and he shared with me 
his opinion that the Air Force's original selection of the A330 
was a terrible decision.
    Now, let me just say I have no personal stake in this 
issue. Neither of the companies or any of their associated 
companies are located in my district or my State. My only 
concern is that we get a tanker that fits the bill. And his 
thought, he thought the decision had two fatal flaws, that is 
General Handy; first, that over time the life cycle of the 
operation of the A330, we were going to end up spending an 
awful lot more money keeping that airplane flying than it would 
have cost to fly the 767. He also said that if we buy these 
A330's, we won't be able to park enough of them in the theater 
because they are too large. They take too long of a runway to 
land, and he said now, in his mind, the warfighter requirement 
to have a tanker that we can afford to operate in the years to 
come and to have a tanker that we can actually park in the 
theater of operations are clear basic requirements.
    Now, this is not somebody that has an axe to grind. I am 
not advocating for Boeing, and I am not advocating for their 
competitor. Our job here is to try to oversee a process that 
gets the right equipment for the warfighter. That is the only 
objective that we have. And I have relied over the years on 
people like General Handy, who are so knowledgeable about these 
issues, for guidance on these issues.
    With that I welcome our witnesses, and I look forward to 
hearing the testimony, Mr. Chairman, and thank you. This is a 
really important hearing, and I hope that we can accomplish 
something good as a result.
    Mr. Abercrombie. Very good. As you just said, time is not 
on our side. Nice timing. Here, Mr. Gordon, I apologize to you. 
We have business at hand. It is the last business of the day. I 
understand there to be four votes, including a recommittal, 
which means we are likely to be gone for 40 minutes or better. 
This is not the way I would like----
    Mr. Golden. We understand, Mr. Chairman.
    Mr. Abercrombie. Just for the record, I wish we had days 
where we had hearings and days when we have voting. 
Unfortunately, we have hearings and voting on the same days. Of 
course, all of the witnesses' prepared statements will be 
included in the record. We now have 15 minutes to vote. How 
long is your opening statement?
    Mr. Gordon. Less than five minutes, Mr. Chairman.
    Mr. Abercrombie. Why don't you proceed, and then we will go 
to Mr. Gordon and see if we can get the statements in before we 
have to leave, although Members, of course, can leave at any 
time.

    STATEMENT OF DANIEL I. GORDON, DEPUTY GENERAL COUNSEL, 
GOVERNMENT ACCOUNTABILITY OFFICE; AND MICHAEL GOLDEN, MANAGING 
ASSOCIATE GENERAL COUNSEL, PROCUREMENT LAW DIVISION, GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Gordon. Thank you, Mr. Chairman. Mr. Chairman, Ranking 
Member Saxton, and from the full committee Chairman Skelton and 
Ranking Member Hunter and other members of the committee, my 
colleague Michael Golden and I thank you for the opportunity to 
be here today to discuss GAO's June 18th decision sustaining 
the Boeing Company's protest of the Air Force's award of the 
aerial refueling tanker contract to Northrop Grumman. I 
understand, Mr. Chairman, that my written statement will be 
introduced into the record.
    Mr. Abercrombie. That is correct.
    Mr. Gordon. Thank you.
    With that, and with the 67-page decision that GAO has 
published, I will, and I think it will accommodate the 
committee's schedule, be very brief in my remarks today and 
limit them to some context for the GAO bid protest decision.
    GAO has been deciding bid protests since the mid-1920's, 
and shortly after we were established in 1921.
    Mr. Abercrombie. Mr. Gordon, could you pull the mike just a 
tad closer?
    Mr. Gordon. Yes, sir.
    Bid protests are challenges, usually by unsuccessful 
bidders, to Federal agencies' procurement actions, and 
especially to the award of the contracts. Since the 1980's, our 
protest process has been set out in law, the Competition in 
Contracting Act, or CICA, as we often call it.
    Two points are worth highlighting about our bid protest 
process under CICA. First, protests are a way of holding 
government accountable. Just as in GAO's primary audit role, 
our bid protest process serves as a way to hold agencies 
accountable for their actions. And our work is and must be 
independent, fact-based, and impartial.
    Second, protests are legal disputes. Unlike GAO in its 
audit role, our bid protest function is a legal one, carried 
out by our Office of General Counsel. In deciding protests, GAO 
is acting in a quasi-judicial capacity, adjudicating, much like 
the Court of Federal Claims which also hears protests, the 
allegations raised by a protester and deciding whether the 
contracting agency followed procurement law and regulation. The 
resulting decision, such as our decision on the Boeing protest, 
is a legal decision, and it does not address broad programmatic 
issues, as GAO routinely does in its audit work.
    In that context, a few brief remarks about the Boeing 
protest and our ruling on it. Boeing raised many challenges, 
and GAO considered them all. To be sure that we had the facts 
that we needed to resolve the protest and that we were being 
fair to all of the parties, Boeing, the Air Force, and Northrop 
Grumman, we allowed the parties to make voluminous submissions 
to us, all the parties. We conducted a hearing over five full 
days at which we heard testimony from 11 Air Force witnesses 
that the Air Force selected. We invited Boeing and Northrop to 
provide witnesses, but they declined to.
    Our review of that very large record led us to conclude 
that the Air Force had made a number of significant errors that 
could have affected the outcome of what was a close competition 
between Boeing and Northrop Grumman, and because of that, we 
sustained Boeing's protest.
    We did also deny a number of challenges that Boeing raised. 
We recommended that the Air Force reopen discussions with the 
offerors, obtain revised proposals, reevaluate those revised 
proposals, and then make a new source selection decision.
    But in closing these brief remarks, I do want to underscore 
what our protest decision does and does not say. It does say 
that we found serious errors in the procurement process that 
could have affected the outcome of, again, what was a close 
competition. But our legal decision does not say anything about 
the merits of Boeing's and Northrop's proposed tankers.
    With those very brief remarks, Mr. Chairman, Michael Golden 
and I will be happy to respond to questions, whether it is 
before or, if you prefer, of course, after the break.
    [The prepared statement of Mr. Gordon can be found in the 
Appendix on page 75.]
    Mr. Abercrombie. Mr. Golden, does Mr. Gordon's statement 
stand for you at this point?
    Mr. Golden. Yes, Mr. Chairman.
    Mr. Abercrombie. Thank you.
    I am very pleased, Mr. Gordon, that you made that 
statement, because I think it sets exactly the foundation for 
the hearing.
    Mr. Gordon. Thank you.
    Mr. Abercrombie. The GAO is not here to talk about the 
merits or demerits of the proposals as to the Air Force. The 
question that you are answering is how the protest--the 
circumstances and the context of the protest, your decision-
making process, and then the reasons for your decision, which 
we will go into when we return.
    Inasmuch as Mr. Golden has no remarks at this stage, I 
think rather than get into questions that can't necessarily be 
answered, I will adjourn--or recess rather until the final vote 
is taken. And then we will--within five minutes of the last 
vote being called, we will come back into session.
    [Recess.]
    Mr. Abercrombie. Thank you very much for waiting. I am 
afraid the vote took a bit longer--votes took a bit longer than 
we anticipated. Mr. Skelton and Mr. Hunter are detained for 
other reasons for the moment. So we will proceed.
    I was going to almost say Mr. Gordon, would you like to 
repeat what you said? But I think the statement was excellent, 
not only succinct, but insightful, and provides an excellent 
and firm foundation for our questions.
    Mr. Gordon. Thank you.
    Mr. Abercrombie. I have a couple myself, and then we will 
go to the Members in the order of their appearance at the 
hearing. I do want to indicate as well, Mr. Gordon, no 
disrespect to you or Mr. Young, but some of the Members are 
required to leave because of plane reservations, and it was 
unavoidable.
    Mr. Gordon. We understand.
    Mr. Abercrombie. We originally anticipated being in session 
tomorrow, and that has been altered, so some people have had to 
make alternative plans.
    I want to preface this question to you, Mr. Gordon, and 
obviously, Mr. Golden, if you think it is appropriate, I would 
appreciate your answer as well. I want to preface this question 
by saying I am not trying to imply any wrongdoing during the 
GAO's evaluation of this or any other protest. For our benefit, 
can you explain to the committee what internal checks and 
balances the GAO Procurement Law Division implements to ensure 
integrity and objectivity as you evaluate protest allegations? 
You indicated in your testimony that you, in fact--that is, in 
fact, your goal and your object and the ethos, if you will, 
that you follow. But for purposes of the record, can you 
elucidate for us exactly how you implement the integrity and 
objectivity that you cited? That is, the GAO is charged with 
evaluating DOD source selection processes for fairness and in 
accordance with the request for proposals. How does the GAO 
ensure that its evaluation, that is to say GAO's evaluation, of 
the DOD source selection process is fair and unbiased?
    Mr. Gordon. Thank you, Mr. Chairman. Let me offer an 
answer, and then if my colleague, Mr. Golden, wants to 
supplement it, that would be fine.
    Several different layers are in the answer. And if you 
don't mind, I will go through several of them to give the 
committee a sense of what we do to ensure the reliability, 
fairness, and fact-based nature of our bid protest decisions.
    First, as I said earlier, they are products of our Office 
of General Counsel. Attorneys only are working on them, and 
they are done by a separate group. The attorneys that handle 
our bid protests do only bid protests. They are specialized in 
the area, and they have extensive expertise. We were somewhat 
embarrassed when we did a quick count and added up the years of 
experience handling bid protests by the team that worked on 
this, because I am afraid we got to over a century of 
experience when we were totaling up the years. So we were 
dealing with a group----
    Mr. Abercrombie. You never embarrass Members of Congress by 
totaling up years of experience.
    Mr. Gordon. In addition, we have a careful internal review 
process as a draft decision goes up where we rigorously check 
and question and doubt ourselves to be sure that we are getting 
the answer right. You will see citations throughout the 
decision. And, in fact, if I could, I would say that the 
decision itself is one of the best guarantees, because in this 
case, admittedly, it was an unusually long decision, but in 
that sense it is actually a good example in the context of this 
hearing.
    Mr. Abercrombie. So the 67 pages, 69 pages, 67 pages is 
actually a distillation then of this process; is that fair?
    Mr. Gordon. It is, but it is a very transparent 
distillation, Mr. Chairman. That is to say anybody reading 
those 67 pages can see what GAO was thinking. We are totally 
transparent. And we work very hard to be sure that we fairly 
state the arguments. As you read through the decision, I know 
everyone here has had a chance to look at it, you will see us 
say, this is what Boeing argued, this is what the Air Force 
responded, and in many cases Northrop made this argument, and 
we explain why we ultimately came down on one side or the 
other.
    And a final layer, if I could, is external to us, but it is 
an important one, because I think you were saying in your 
opening remarks, Mr. Chairman, who audits the auditors? Of 
course, though, we are not auditors in this function, we are 
attorneys, but who checks on us? The fact is that once we issue 
the decision, that is not the end of the process. Not only is 
there appropriate congressional oversight, such as in this 
hearing, but the parties themselves have the right to request 
that we reconsider our decision, and that happens every year. 
We do get requests for reconsiderations. I would note that 
neither the Air Force nor Northrop Grumman, or, for that 
matter, Boeing requested in this instance that we reconsider 
our decision.
    And finally, as I said, there is a completely external 
process, and that is a dissatisfied protester who thinks we 
haven't been fair can go to the Court of Federal Claims and 
file a protest there. And there are a handful of disappointed 
protesters each year who lose at GAO and file protests at the 
court. The court usually, but not in every case, agrees with 
GAO.
    Mr. Abercrombie. That has not happened in this case, right?
    Mr. Gordon. That has not happened in this case.
    Mr. Abercrombie. Thank you.
    Do you have anything else to add to it, Mr. Golden?
    Mr. Golden. No.
    Mr. Abercrombie. Then I have one other question, and we 
will move on. Thank you very much. I want to ask a question 
concerning historical data. In fact, you just mentioned that 
the decisions have been reversed only in a few instances. With 
regard, then, to the historical data you provided the committee 
concerning the Department of Defense's (DOD) last five years--
we requested that of you, and you did provide it--and the GAO's 
protest sustainments, now in this instance regarding Air Force 
contracts, if I read your information--the information you sent 
me correctly, over the last 5 years the GAO has sustained 191 
of 843, or 23 percent, of merit protests filed against DOD 
contract rewards, approximately 1 out of 4. The GAO has 
sustained 54 of 179, or 30 percent, of the merit protests filed 
against the Air Force contract awards. This makes the Air Force 
average 33 percent greater than the DOD average.
    Has the GAO performed any trend analysis as to why the Air 
Force protest sustainments are higher than the DOD average? And 
if so, could you share those findings with the committee?
    Mr. Gordon. The short answer, Mr. Chairman, is that 
unfortunately, we don't have a lot to offer in terms of 
explaining the difference in the rates of protests being 
sustained between the Air Force and the other services, or for 
that matter the other Federal agencies. I think, though, there 
are several points that the committee might find of interest in 
that regard.
    First of all, we discuss the bases for protests being 
sustained internally and also externally. We have a very 
vigorous outreach program that goes to the Air Force, as well 
as the other services and Federal agencies, and includes the 
private bar as well, in which we talk through and explain what 
are the issues that are causing us to sustain protests?
    Let me give you, if I could, one quick example. We ran into 
a series of protests being sustained now it is probably 7 or 8 
years ago that involved public-private competitions under 
Circular A-76. That was an issue where we could point and say--
--
    Mr. Abercrombie. Would you say what the A-76 is for those 
who are not familiar with it?
    Mr. Gordon. Of course, Mr. Chairman.
    Circular A-76, issued by the Office of Management and 
Budget (OMB), calls for cost comparisons when the agency is 
making a decision to contract work out to the private sector, 
and in theory bringing work into the public sector. Those 
decisions were a nice example of a systemic problem that we 
were seeing. Similarly, you could point to, and we have pointed 
to, a series of decisions involving organizational conflicts of 
interest, where we have said there is an unusual number of 
protests that we are sustaining involving this issue. And both 
Mike Golden, who now heads the Bid Protest Unit at GAO, and I, 
who used to head that unit, have worked very hard in reaching 
out to the private sector and to the public sector, the 
agencies and the civilian side, and at DOD, to discuss those 
things.
    There is one other thing, if I could, Mr. Chairman, about 
the statistics that you might find illuminating. We count 
protests in our data, but you will often get multiple protests 
in one procurement. For example, on the front page of the bid 
protest decision in the Boeing case, you will see that, in 
fact, in the GAO system it is actually eight protests, because 
Boeing filed multiple protests. But it is, of course, only one 
procurement that was at issue, albeit an extremely important 
one.
    We went back and looked at the number of Air Force 
procurements--not protests, but Air Force procurements--that 
were successfully protested over the past five years, and I 
think that it helps put the numbers in proportion. In fiscal 
2008 to date, there have been two Air Force procurements where 
GAO sustained the protests. One of the two, obviously, was the 
tanker. In fiscal 2007, there were seven Air Force procurements 
where GAO sustained the protest. In fiscal 2006, there were 
seven. Now, it is true that the number of protests was larger 
because there were multiple protests of one procurement. In 
fiscal 2005, there were four Air Force procurements that were 
successfully protested. And in fiscal 2004, there were three. 
The numbers are relatively small, but I don't want, when I say 
that, to discount the importance of the basis for protests that 
we sustain or the importance for our warfighters of having a 
procurement held up because of the flaws in the procurement 
that causes GAO to sustain the protest.
    Mr. Abercrombie. So the number--if I understand you 
correctly, the number is less important than the reasons for 
it. Supposing you add all those up, and it is 12 or 13 or 14 
sustainments. If there was a trend in those sustainments where 
the same problem appeared----
    Mr. Gordon. Yes.
    Mr. Abercrombie [continuing]. Have you had a chance to look 
at that kind of thing, a particular way in which the process 
was implemented that caused the procurement protest to be 
sustained more than once?
    Mr. Gordon. I am not sure, and I will give my colleague----
    Mr. Abercrombie. If you don't have the answer right now, I 
think it is something worth looking at.
    Mr. Gordon. We have looked at it, Mr. Chairman. And that is 
what we will see, and what we tell the agencies when we do our 
outreach visits is often what is at issue is a very 
straightforward matter. We see situations in which they lay out 
evaluation criteria in the solicitation, and then they deviate 
from those criteria. They either add a criterion that is not 
included in the solicitation, so they have an undisclosed 
evaluation criterion, which isn't fair to the offerors, or they 
have one which they fail to take into account even though it is 
in the solicitation.
    Mr. Abercrombie. Are you citing that because you found that 
more than once?
    Mr. Gordon. It is something that comes up with some 
frequency. And let me see if my colleague wants to supplement 
it.
    Mr. Golden. I thought prior to this, Mr. Chairman, you had 
expressed an interest when we talked last about this. I went 
back, and I will share this with the committee, where we are 
going through, because it requires us to research back and look 
at the cases individually.
    But in 2007, for instance, there were a number of cases 
concerning the evaluation ground rules being deviated from and 
our holding the Air Force accountable. But there were a number 
of protests that bear no relationship that we were sustaining, 
small business issues, a sole source that was not justified, 
and we will share that information with you----
    Mr. Abercrombie. Okay. Very good.
    Mr. Golden [continuing]. Because it may be helpful to see 
in terms of identifying trends and what is going on, because I 
think you do have to look at the individual cases.
    Mr. Abercrombie. Very good. Thank you. Thanks for your 
answers. I wish every hearing we could have questions and 
responses as direct and as helpful as yours have been already.
    Mr. Gordon. Thank you.
    [The information referred to can be found in the Appendix 
on page 98.]
    Mr. Abercrombie. Mr. Hunter.
    Mr. Hunter. Thank you, Mr. Chairman. And again, thanks for 
letting myself and the Chairman sit in on the hearing.
    Gentlemen, just real quickly, and then I may have a 
question or two at the end of the hearing, but it looked to me 
like the finding that the Air Force credited Northrop Grumman 
for proposing to exceed what they call a solicitation key 
performance parameter objective for fuel offload versus 
unrefueled range, that is the amount of fuel a tanker could 
afford to offload to a receiver aircraft at a given distance of 
flight by the tanker without itself refueling, that they gave 
that a greater--gave that a heavy weight with respect to the 
Northrop Airbus aircraft even though the solicitation plainly 
provided that no consideration would be given for proposing to 
exceed key performance parameter objectives. And I agree with 
that, that it appeared that they did give--the Air Force did 
give weight to that particular aspect of performance.
    I guess my question is is that factor, in analyzing this 
competition the way it is framed--in your professional opinion, 
should exceeding the performance parameters be a consideration 
that, in fact, should be redefined in a future competition? Do 
you have any opinion as to whether or not this competition was 
well-framed--I guess that is my--I guess that is my question, 
and you have had a chance to study the competition fairly 
carefully--in such a way that extra credit is given if the 
competitor comes with an aircraft that exceeds parameters in 
certain areas?
    Mr. Gordon. I understand, Representative Hunter, and I want 
to be very careful here in my answer, and I want to be very 
precise in responding to your question.
    We do not have an opinion about whether it is a good idea 
to give the offerors extra credit for exceeding the level of 
the objective in this case. It is a very good demonstration of 
what we are looking for in a protest in terms of deciding 
whether to sustain it.
    When we have in front of us the award of a contract that is 
being challenged, the ground rules of the competition are a 
given for us. It is too late for anybody to say, oh, the ground 
rules should have been different. The only question in front of 
us is did the agency follow the ground rules when it assessed 
the competing proposals? And as you recognize, the problem here 
was that the agency had in a sense caught itself, because it 
had said in the ground rules that if there was an objective, 
you wouldn't get extra credit for exceeding it. There was an 
objective, Northrop exceeded it by quite a bit, and Northrop 
got all that extra credit. We have no opinion, we have no view 
on whether it was a good idea.
    Incidentally, had we weighed in and said we think you 
should give extra credit in advance, had we taken a position, I 
would have concerns about our having independence. And it is 
critical for us to have independence. We have to be able to 
look in the protest and say did the agency follow its ground 
rules?
    Mr. Hunter. Okay. With respect to runways, you know, one 
thing that I saw after the competition was over were analyses 
of the number of runways available to U.S. forces for power 
projection around the world and a limited number of runways 
with one aircraft, that is a bigger 330, and a higher number of 
runways for the smaller aircraft, that is the Boeing aircraft. 
Was that, in fact, a weighted factor? Was there a minimum 
number of runways which could be accommodated, or was that 
considered to be a factor in which you had a graduated 
weighting?
    Mr. Gordon. Well, I am more confident, if I could, 
Representative Hunter, in telling you it is not an issue in the 
protest, but let me check with my colleagues.
    Mr. Hunter. Yeah, I know you have got some comment there.
    Mr. Gordon. I am told, Representative Hunter, that it, in 
fact, was not an evaluation factor at all. And as I said, it 
was not a protest issue whatsoever.
    Mr. Hunter. Let me just comment on this, and, Mr. Chairman, 
again, thank you for letting us sit in on this.
    You know, I listened to Mr. Saxton, and he quoted General 
Handy, who is a person on whom we have relied greatly with 
respect to his professional expertise in these issues. And he 
points out that a large number of runways can't be accommodated 
by one of the planes. The fact that this wasn't in the 
parameters, in the competition parameters, the fact that it is 
difficult--and I know you can't comment on it, but it is 
difficult to explain the weighting system on such things as 
offloading fuel at range, because if offloading great amounts 
of fuel at range were important, the 777 offloads almost twice 
as much fuel at range than either one of the two competitors 
and has a 1,900-mile greater range.
    It appears to me that this is an excellent illustration, 
this competition is an excellent illustration of the need for 
Congress to involve itself in the objectives of the 
competition, that is to say, whether or not we want to have 
aircraft that can utilize all the runways that are available 
for power projection; whether we want to have aircraft that 
have greater legs, shorter legs; and if there is a trade-off, 
where that trade-off should be.
    And finally, on the issue of subsidy, you know, we have a 
defense industrial base here which is supported by the 
taxpayers of the United States, and the idea that we have 
allowed into this competition a company which is subsidized, in 
fact, which the U.S. Government believes, in fact, is unfairly 
subsidized, by the treasury of the nations which comprise the 
aircraft company, and yet that is not considered in this 
competition, also, I would think, compels us to come to the 
conclusion that Congress should weigh in on setting the 
parameters on this competition. And I think perhaps that is 
where we have missed the mark, because it appears to me that 
several important criteria and objectives were not set in this 
competition. And the party which has the oversight to set them 
is, in fact, the U.S. Congress.
    I don't know if you have any comment on that or whether you 
can have a comment on it. But I think that you did your job 
very effectively in terms of looking at what you were handed 
and ascertaining as to whether the glove fit the hand. In this 
case it didn't.
    Mr. Gordon. I appreciate----
    Mr. Abercrombie. Mr. Gordon, you need not tell the Congress 
what to do, but if you care to comment, you are welcome.
    Mr. Gordon. On the contrary, Mr. Chairman, I was going to 
thank Mr. Hunter for his understanding that we can't comment on 
that. We defer to the Congress for their role and to the Air 
Force and the Department of Defense for theirs.
    Mr. Hunter. Thank you, Mr. Chairman, for letting me sit in 
on this. And I think that there clearly is a case to be made 
for our involvement in setting these parameters before a future 
competition.
    Mr. Abercrombie. Mr. Skelton chooses to pass at this point, 
so Mr. Spratt is next.
    Mr. Spratt. In your opening paragraphs you indicate that 
you had 11 witnesses as part of your appeal. Did these 
witnesses include members of the Source Selection Team?
    Mr. Golden. Yes.
    Mr. Gordon. Yes, they did.
    I should say, sir, if I could, that we actually--it was a 
fairly unusual--there were several things that were unusual 
about this case, even though broadly it was handled under our 
normal procedures. One unusual thing was that none of the 
parties asked for a hearing. GAO initiated the hearing, which 
we have the right to under our regulations, because we thought 
it was important to be sure, A, that we understood everything 
that happened, and, B, that the parties got a chance to tell us 
their side of the story.
    Boeing and Northrop Grumman did not want to provide 
witnesses, and we didn't feel we needed them, so that was fine. 
The Air Force we told we did need to have information. We gave 
them point by point what the issues were that we needed to hear 
from them about, and they selected, the Air Force selected, the 
11 Air Force witnesses who came to address those issues. And in 
direct response to your question, that was both on the Cost 
Evaluation Team and on the Technical Evaluation Team.
    Mr. Spratt. For example, you took exception to the fact 
that Northrop Grumman had not shown that it could refuel all 
tanker-capable aircraft. There was a problem also, I think, 
with overrun velocity and things of this nature. When you 
presented that particular problem to the witnesses, the Air 
Force witnesses, did they have a corrective answer or an 
explanation?
    Mr. Gordon. We asked those questions. We had testimony at 
length on each of the issues that you named, and our conclusion 
in the end was that the record did not provide an adequate 
basis.
    Again, I want to underscore it is not the GAO decided that 
the Northrop plane wouldn't meet the requirements. We made no 
determination about the capacity of the Northrop plane or the 
Boeing plane. What we concluded was that the Air Force hadn't 
explained why it was comfortable in saying that, yes, the 
Northrop plane would meet the requirements.
    If I could give you one example of those, in the overrun 
issue, and the overrun and breakaway both involve speed. 
Incidentally, this is an area where there is some proprietary 
information, but we think we can fully explain the decision 
without getting into proprietary information.
    The Air Force during the procurement had concern about the 
overrun speeds for the Northrop Grumman plane. They raised 
questions about it. Northrop answered. We looked at the record. 
We couldn't understand why the Air Force had decided that it 
had gotten an adequate basis to say, yes, Northrop's plane 
meets the overrun requirement, and that is why we pursued that 
at the hearing. And at the end of the day, we still had 
concerns.
    The breakaway procedures, actually that was not something 
that the Air Force raised concerns about during the 
procurement. So overrun they raised during the procurement, 
Northrop responded, and we didn't think that the answer was 
satisfactory. Breakaway was raised for the first time during 
the protest. So it was particularly important when we raised 
questions about it in the pleadings and then in the hearing. 
And again, we found the answers unsatisfactory, not that GAO 
reached a conclusion about the capacity of the Northrop plane, 
but we did not think that the Air Force had a reasonable basis 
for its finding that the Northrop plane met the breakaway 
requirements.
    Mr. Spratt. Another of the exceptions that you raised was 
that the Air Force in its Request for Proposal (RFP) weighted 
certain requirements and certain features of the airplane, but 
then in awarding the contract did not adhere to those same 
weightings or features.
    Mr. Gordon. Yes, sir.
    Mr. Spratt. Do you have an explanation for that, or did the 
Air Force provide you with an adequate explanation for that?
    Mr. Gordon. They provided us an answer. We pursued it at 
length in this numerous record in the back and forth at the 
hearing. We just didn't find it persuasive.
    Let me be fair, and we try to be fair to everybody on every 
issue, it is true that in the briefing slides to the Source 
Selection Advisory Committee (SSAC) and to the Source Selection 
Authority, they did begin essentially by saying, well, here is 
the weighting scheme. The key performance parameters (KPP) are 
weighted higher than the key system attributes (KSA), which are 
weighted higher than the others. But then when we looked at the 
evaluation decision itself, we saw no--no account being taken 
of the fact that Boeing's strengths tended to be associated 
with the more highly weighted KPPs, whereas Northrop's tended 
to be associated with the less highly weighted others. So our 
concern was that they simply hadn't followed the weighting 
scheme.
    Mr. Spratt. One final question. If the GAO wanted expert 
advice about runway speed, overrun speeds and things of this 
nature, or certain features of the airplane, where did you go 
for that advice? Or did you have access to that advice?
    Mr. Gordon. We got a lot of advice. First of all, we had 
three parties that had a great interest in getting us advice, 
and each of the parties was able to bring in whether affidavits 
or declarations of consultants or experts that they wanted. The 
Air Force had the added opportunity through the hearing to 
provide witnesses that could educate GAO, walk GAO through the 
questions. GAO also has internal resources that we draw on, 
although that was done to a limited extent, but we have 
internal resources that were able to advise us. So we felt very 
comfortable that we understood the issues as articulated by 
Boeing and the responses of the Air Force and Northrop.
    Mr. Golden. Can I just clarify one thing?
    Mr. Spratt. Yes, sir.
    Mr. Golden. On the weighting issue, we looked at the record 
that we had, the evaluation record. We were looking for 
contemporaneous documentation that it was weighted in 
accordance with the evaluation criteria. And that was what was 
lacking in that situation, okay, the documentation from the 
evaluation team, from the SSAC, that they looked and weighted 
appropriately and consistent with the evaluation criteria and 
the RFP.
    Mr. Spratt. Thank you very much.
    Mr. Abercrombie. Mr. Saxton.
    Mr. Saxton. Thank you, Mr. Chairman.
    I would like to ask a question, and I hope that you will 
share your--if this doesn't come right in your lane, I hope 
that you will kind of step out of your lane a little bit and 
give us your opinion, because you have been very much involved 
in this process, and you have some insights that we can't have 
because we have not done the study that you have.
    So it is my belief that the former Air Mobility Command 
(AMC) Commander, who I--tankers, of course, are assets of the 
Air Mobility Command. The former Air Mobility Command 
Commander, who I mentioned earlier, John Handy, has written 
quite articulately about what he believes--how he believes this 
situation went wrong. And I would just like to say what he has 
said in his words to you and then ask you if you would tell us 
why you think the criteria that he thinks important were either 
not considered or were not relevant to the final decision that 
was made by the Air Force. Is that fair?
    Mr. Gordon. Yes, sir. You can certainly ask. We will do our 
best.
    Mr. Saxton. Okay. Here we go. Handy says that, first of 
all, you need to recall that we started this acquisition 
process in order to replace the Eisenhower-era KC-135 aircraft 
with a modern version capable of accomplishing everything the 
current fleet does. Now, that is the KC-135 fleet, of course. 
Thus, the required aircraft is of small to medium size, much 
like the KC-135. Makes sense if you are going to ask it to do 
all the things that the current fleet can do that it would be 
similar in size to the KC-135. Not a large aircraft, he says, 
like the KC-10, because the KC-10 has a different role. We use 
the KC-10 in what is called an air bridge. We fly them and 
refuel our aircraft on the way to and from the theater. That is 
the air bridge concept, and that is what the larger aircraft 
that we have to do today does. It doesn't perform--that is, the 
KC-10 does not perform well in theater, according to John 
Handy, because it is too large.
    Why a smaller to medium aircraft he asks? Because first of 
all, you want tankers to deploy in sufficient numbers in order 
to accomplish the assigned tasks. You need to bed them down on 
the maximum number of fields around the world along with our 
forces, or close to our forces; that is, airborne fighters, 
bombers, and other mobility assets in need of fuel close to the 
fight or right over the fight. And he says that KC-135-like 
aircraft take up far less ramp space, is far more maneuverable 
on the ground, and does not have the risk of jet blast 
reorganizing the entire ramp.
    Second set of requirements, he says, is survivability. The 
aircraft and crew must be able to compete in a threat 
environment that contains enhanced surface-to-air missiles and 
other significant threats. And I won't read the whole 
paragraph, but he concludes by saying all this means the 
warfighter has the requirement for a large number of highly 
flexible, agile, and survivable aircraft. A smaller airplane.
    I also want to--he goes on the third set of requirements, 
his requirements. We also want the acquired aircraft to be 
integrated with current defense transportation system. That 
means--and I don't know what the number means exactly--that 
means that 463-L compatible pallets, floor-loaded--a floor-
loaded on the freighter aircraft--the load on the freighter 
aircraft floor capable and compatible with the current modern 
airlift fleet. When we put passenger seats in the aircraft, we 
want to be sure that the existing aircraft seats fit the 
airplane. Again, this all mitigates to a small or medium-sized 
aircraft.
    Mr. Saxton. So if you look at these rather simple 
requirements and look at the previous offerings from industry, 
he says anyone would probably agree with me that the KC-767 
more closely fits these needs.
    So, again, my question is, if the operators define the 
requirements and if the requirements are these that are similar 
to these that former the boss of AMC has pointed out to us, how 
do we go so far in the other direction?
    Mr. Gordon. Congressman, I will tell you that I am very 
proud of the attorneys in our bid protest shop and the work 
that they do. But part of their talent is knowing when not to 
get ``out of their lane'', to use your phrase; and I think we 
would be out of our lane, and not in a good way, for us to lose 
sight of what GAO's role is, what the Congress' role is and 
what the DOD and the Air Force's role is.
    It is not for GAO to tell the Department of Defense or the 
Department of the Air Force how much flexibility they need in 
their planes, the survivability, the size of the planes. Those 
are issues that are within the province of the Department of 
the Defense, the Department of the Air Force, obviously, 
without minimizing Congress' role. It is not for GAO.
    I would, though, if I could, make a couple of points that 
may be relevant. In the audit side of the House at GAO, we do 
look at some of these questions. We have been issuing reports 
since I believe at least 1996 about the need to replace the 
tanker fleet. It is something that GAO does look at.
    Or, for example, last year there was testimony, I believe 
in front of this very subcommittee, by GAO expressing concern 
that the Air Force's decision to include the airlift capacity 
with the refueling capacity in the same plane was made--that 
decision was made without the required analysis.
    So that in terms of looking at the decision-making process, 
GAO has looked at the decision-making process and expressed 
concern. But, that said, in determining the requirements, it is 
not for GAO to usurp the role of the Department of the Air 
Force and DOD.
    Mr. Abercrombie. Would you yield a moment?
    I would suggest that Mr. Young is listening to the hearing 
so far and he may be making notes as we speak.
    Mr. Gordon. He will be far better placed to respond to the 
questions along those lines than we can.
    Mr. Abercrombie. He may be not as quite as comfortable as 
you.
    Is that it, Mr. Saxton?
    Mr. Smith is next, to be followed by--we will figure it 
out.
    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Saxton really asked the question, and I know you are 
not the one in the position to answer it, so I won't restate 
it. But there is a sort of a different way of asking a similar 
question.
    I mean, certainly it is baffling in this, because it seems 
in mid-process that the Air Force rather radically changed 
their mind about what they were looking for. And I think what 
the GAO went through and looked at was that they did not 
adequately justify that change of mind in terms of the cost, in 
terms of a lot of things. That, as we have heard from many 
witnesses here, it is just very difficult to understand that 
how they all of a sudden understand that bigger was better when 
there was considerable evidence to the contrary. But not your 
area.
    The question I am curious about is how the RFP process 
works. Because it seems like that big of a change in the middle 
of it should require more than just sort of the nudging and 
moving that happened inside of this. It should require an 
entire rebid, which, as I understand it, they didn't do; and 
maybe you can explain to me how this works out.
    Because there was a point in this process when in fact 
Airbus was rumored to be contemplating withdrawing their bid 
because they simply did not fit what was being asked for and 
for one very simple reason. Their plane was too big. It didn't 
fit the requirements.
    And then all of a sudden there were some conversation, some 
letters from Members of Congress who were advocating on the 
Airbus side of the bid saying, can't you sort of look at this a 
little bit differently? And, presto, they looked at it a little 
bit differently; and Airbus submitted their bid.
    And that seems bad, in a word, like sort of--well, how 
could I put this exactly--not within what the process should 
be. If you, in fact, look at it and say, okay, we made a 
mistake. We should--you know, we have a different requirement 
here. We are going to--shouldn't you go back and restart the 
process at that point a little more formally than the Air Force 
in fact did in this case?
    If you can sift through that and address those points, that 
would be helpful.
    Mr. Gordon. Representative Smith, accurately describing 
your requirements, telling the vendors what matters more to you 
and what matters less to you is extremely important. Because 
the vendors put together, the companies put together their 
proposals based on the ground rules. They read the solicitation 
very carefully, especially the evaluation criteria. They will 
put their proposal together based on what you and the 
government tell them you care about.
    If you care more about price, they are going to sharpen 
their pencils more. If you care more about technical 
capability, they may give you a more expensive solution with 
more technical capability.
    I do want, though, to point out some issues very relevant 
to our decision in this case. I don't think it is fair to say 
that we saw evidence that the Air Force changed its collective 
mind. We had very specific concerns where we, when we drilled 
down, we concluded that the Air Force had not followed the 
ground rules properly. But the talk of the Air Force changing 
its mind and deciding that it wanted a larger plane is not us 
speaking. It is not our bid protesters.
    Mr. Smith. Understood. Let me just say that the most 
important part in that to me is not so much whether or not they 
changed their mind but that they sort of decided that bigger 
was a little bit better without the sufficient rigor behind 
that decision that went into the original RFP that tracked what 
Mr. Saxton was saying in terms of what the requirements were.
    And that is the problem. Not just because, you know, as you 
said, the vendors won't know what to ask for but because you 
wind up with something that the taxpayers aren't getting their 
money's worthy because you haven't actually analyzed all of 
these questions being raised, and all of a sudden you are 
asking for something on the fly. That is the larger concern.
    Mr. Gordon. I understand your point, sir. I think that our 
decision doesn't go to the extent that you are saying.
    If I could say a slightly different point but it may also 
be helpful to the committee; and that is that there is a long 
history, of course, of procurements and, in fact, in protest 
procurements to the Air Force.
    In the Druyen matter, which happened several years ago, we 
had evidence, admitted evidence, in that case of criminal 
misconduct. We had no evidence no allegation of evidence of 
criminal misconduct, and we never saw a whit of evidence of 
criminal misconduct. There was no evidence, there are no 
allegations but also no evidence, not an iota of evidence of 
intentional wrongdoing by any Air Force official. This was not 
a case of criminal impropriety or of intentional wrongdoing. 
They had the rules, and there were several discrete areas in 
which they deviated from those rules.
    Mr. Smith. I understand.
    One quick area and then I thank the chairman's indulgence.
    In terms of lifecycle costs, that is one of the big things. 
I mean, the bigger the plane, the more fuel it is going to use. 
And we have all this evidence that the KC-135 very rarely even 
uses all the fuel that it has. So if you are expanding 
capacity--and the fuel I'm talking about here is the fuel that 
it takes to fly the plane, as opposed to what it is 
delivering--do you think that lifecycle costs with regard to 
the fuel costs were adequately considered when looking at these 
two bids?
    Mr. Gordon. We had concerns about the lifecycle costs, 
although there are several different components. Partly there 
were some errors--as you know from the decision, the Air Force 
admitted a few errors in the calculation of costs. But, in 
addition, we had concerns with the methodology that the Air 
Force used in estimating the costs.
    With respect to fuel, that was one of the issues where we 
didn't sustain the protest because of the fuel costs. We didn't 
think that the record gave us a basis to sustain it. But we had 
enough concern about the way the Air Force was calculating fuel 
costs that we said, since we are sustaining the protest anyway, 
we think that the Air Force should pursue that.
    We made the same point with respect to the boom approach 
from Northrop Grumman. When the Air Force said Northrop's boom 
approach caused only low schedule of cost risk, we didn't 
sustain the protest of that issue, but we had enough concern 
that the----
    Mr. Abercrombie. Mr. Gordon, excuse me. Can you explain for 
those who don't know what the boom question actually involves 
physically?
    Mr. Gordon. I want be to sure that I don't misspeak, Mr. 
Chairman. Northrop had their technical approach--and we are not 
going to get into proprietary information--but their approach 
of connecting the plane that was doing the refueling with the 
plane that was being refueled--and you are going to quickly get 
to the edge of my technical knowledge.
    Mr. Abercrombie. Okay, now everybody knows what we are 
talking about now.
    Mr. Gordon. That boom approach had aspects to it which 
caused the Air Force to call it a weakness. Notwithstanding 
that, the Air Force said the approach didn't pose anything more 
than a low schedule to cost risk, a surprising juxtaposition to 
call it a weakness but then say there is only a low schedule to 
cost risk.
    We explored the issue to a certain extent, didn't find 
enough to sustain the protest, but because of our concern in 
this area we suggested that the Air Force should go back and 
look at this issue and the fuel cost issue.
    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Abercrombie. Thank you.
    Mr. Miller is next.
    Mr. Miller of Florida. Thank you, Mr. Chairman.
    In your opening comments, you had said that the GAO's role 
is quasi judicial: provide an objective, independent and 
impartial process for the resolution of disputes. Correct?
    Mr. Gordon. Yes.
    Mr. Miller of Florida. But then you used words like 
significant, reasonable, unreasonable, improper, refused, which 
could inflame people one way or another--in fact, one member 
left this room as we were going to a vote--using some of your 
words, to boost their cause. So words do and wordsmithing does 
mean something different.
    I am curious about GAO and the union issue, which nobody 
has raised at this point. Back in 2007, September, the analysts 
at GAO voted to join the International Federation of 
Professional and Technical Engineering, known as IFPTE.
    IFPTE announced its campaign to support the Boeing bid in 
January of 2008 and lobbied Congress. February 2008, Air Force 
announced the award to Northrop Grumman. March, 2008, GAO's 
IFPTE issued a press release blasting the Air Force, claiming 
falsely that the contract was being awarded to a French 
company. April, IFPTE sent letters in a press release arguing 
that Congress should defund the program. It also stressed its 
strong relationship to Boeing which had brought the protest. 
June of 2008, GAO upholds Boeing's protest.
    Can you tell me unequivocally and show me how you come to 
this decision that there was no bias by anybody at GAO in this 
report?
    Mr. Gordon. Yes, sir. I can tell you that unequivocally 
there was no bias related to the union issue or any other issue 
in the way we handled this protest.
    First of all, I am not sure that membership in the union 
would, in fact, disqualify GAO analysts for working on a job in 
which the union had a position. But we don't need to reach that 
question. The union--as you recognized in your statement, the 
union organized our analysts. The bid protests are decided by a 
separate shop. It has zero analysts in it, zero members of the 
union in it. Those who decide the bid protests are my 
colleagues in the Office of General Counsel. There is zero 
members of the union in the Office of General Counsel.
    [The information referred to can be found in the Appendix 
on page 175.]
    Mr. Miller of Florida. What do the analysts do?
    Mr. Gordon. Analysts write reports for Congress in response 
to congressional requests----
    Mr. Miller of Florida. They don't do anything for anybody 
within GAO, providing information for the attorneys or the 
team, providing--they just report to Congress. They don't 
report----
    Mr. Gordon. They do our very important audit work.
    Mr. Miller of Florida. Did any analyst that is a member of 
the union provide any information to the team?
    Mr. Gordon. There was----
    Mr. Miller of Florida. That is all right.
    Mr. Gordon. I do have an answer for you.
    Mr. Miller of Florida. You are taking my time.
    Mr. Gordon. No, sir.
    Mr. Miller of Florida. Yes, you are.
    Mr. Gordon. I apologize.
    Mr. Abercrombie. That is all right. Jeff, you have time. Go 
ahead, Mr. Gordon.
    Mr. Miller of Florida. You are answering my question.
    Mr. Gordon. Yes, sir.
    Mr. Miller of Florida. My question. Not the chairman's. 
Mine.
    Mr. Gordon. The work was done, the writing was done 100 
percent by our attorneys. Our attorneys consulted with one 
person, who was an auditor, in order to ensure that we were 
using the correct technical words. That auditor had no input 
whatsoever to the outcome of the protest.
    Mr. Miller of Florida. So somebody with the union did in 
fact have input into the writing of the report?
    Mr. Gordon. No, sir. Absolutely not.
    Mr. Miller of Florida. They did provide information to the 
person that wrote the report.
    Mr. Gordon. They checked to be sure we were using the right 
technical language. Nothing else. And that person was not 
involved in any way, shape or form in resolving the protest.
    Mr. Miller of Florida. You said that Northrop Grumman 
refused to commit to the required two-year time frame, 
referenced the depot issue. They refused to commit to the 
schedule. And I am just wondering, because the depot portion 
was--the funding was in the contract. Northrop Grumman said it 
would support the organic depot concept and meet any schedule 
that was required. Although you said that wording did not 
correspond to the two-year requirement, somehow an agreement to 
meet the requirement in the schedule is not good enough. You 
just needed it written down?
    Mr. Gordon. The Air Force twice--at least twice--went to 
Northrop Grumman and they said they needed this commitment to 
provide support for the two year transition----
    Mr. Miller of Florida. But didn't the Air Force say it was 
an administrative oversight?
    Mr. Gordon. After the fact.
    Mr. Miller of Florida. They didn't refuse. They didn't say 
we are not going to get it to you, correct?
    Mr. Gordon. They did not provide it. And that is a 
difference.
    Mr. Miller of Florida. They did not refuse to provide it, 
correct?
    Mr. Gordon. The words that Northrop Grumman's attorneys 
used in their final submission to us after the hearing was 
``Northrop Grumman made an intentional decision''--those are 
their attorney's words--``not to address this''.
    Mr. Miller of Florida. Then why wouldn't you have used in 
your comments that same thing? You used an intentional--you 
used the word refused, instead of an intentional decision.
    Mr. Gordon. When the Air Force twice asks for something 
that a company declines intentionally to provide them, I don't 
see the difference.
    Mr. Miller of Florida. And that is why we have got a 
problem with the report. Because you are saying out of 100 plus 
issues, we are down to 7. Yet you are saying that there are 
significant and serious issues, so you are feeding the fire in 
this decision.
    My time has run out, and I will wait if we have another 
round. Thank you.
    Mr. Gordon. May I respond.
    Mr. Abercrombie. Yes. No, Jeff take the time.
    Mr. Miller of Florida. I have two other people.
    Mr. Abercrombie. Okay. I want to make sure everybody 
understands. Take all the time you want. This is a serious 
issue. We have no place to go. So if you want--do you feel----
    Okay. Mr. Larsen is next. We are going to limit his time. I 
know him.
    Mr. Dicks. The witness can respond.
    Mr. Gordon. On the issue of there being 100 or more than 
100 issues that were raised, I have seen numbers like that 
floating around the press. We don't understand how people come 
up with those numbers. You can count the number of counts or 
issues or arguments or allegations that a protest raises in 
many different ways. We don't focus on this being 7 out of 100 
or more than 100. We focus on the 7 that we found that caused 
us to sustain the protest.
    Mr. Miller of Florida. Mr. Chairman, then I need to 
respond.
    Mr. Abercrombie. Okay.
    Mr. Miller of Florida. It is very difficult. You are using 
a bureaucratic answer. You want to be able to say it could have 
been 10 and we found 7 serious issues. That is what you are 
implying. So that is what I am saying. Be very careful with how 
you word your answer, because you are continuing to fan the 
fire, and it is not necessary.
    Mr. Abercrombie. Mr. Larsen.
    Mr. Golden. May I say something, Mr. Chairman?
    Mr. Abercrombie. Yes.
    Mr. Golden. It is not our intention to be fanning any 
flames.
    What happened--and it is really a two-step process and--
when we do these cases and, obviously, it is a process that--
for the first time, one of the few times we are talking about, 
we look, identify flaws in the procurement, and then we assess 
whether they are prejudicial, whether they could have resulted 
in prejudice to the company, in this case Boeing. And that is 
our--that is the assessment we made.
    Whether it was three, four, five, okay, six or seven, we 
found the totality of those issues, okay, to result in 
prejudice; and I don't think--you know, the language used in 
this decision is not very different than other decisions where 
we have similar issues.
    Mr. Abercrombie. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Just to point on this, I don't feel sorry for Northrop 
Grumman/Airbus. I don't feel sorry for Boeing in this. I feel 
sorry for the warfighter in all this. And sometimes your job at 
GAO is to come tell us things that we don't like to hear. And 
that is usually what you come tell us, honestly. And so, you 
know, thank you for doing that and not just today but every 
time we ask you to come up here.
    So the first question I want to ask you is having to do 
with the KPPs and the KSAs. Just to clarify for me, the Air 
Force RFP specifically said it wouldn't award extra credit for 
a tanker that had additional fuel off-load capability; and then 
essentially extra credit was given anyway. Is that about right?
    Mr. Gordon. Right. Again, it has nothing to do with their 
sense of the merits. It was just a ground rule that says, if 
there was an objective, you don't get extra credit for 
exceeding it. And there was an objective, and yet they gave 
Northrop extra credit.
    Mr. Larsen. On the flip side, page 30 of the report, the 
Air Force failed to give the Boeing offer credit for meeting 
far more systems requirement documents (SRD) requirements than 
the Airbus proposal. Is that correct?
    Mr. Gordon. Yes. We saw no evidence that Boeing was given 
credit for offering many more SRD requirements than Northrop.
    Mr. Abercrombie. Excuse me. Mr. Gordon, can you say what 
that--you characterized it with an alphabet.
    Mr. Gordon. I apologize. Systems requirements document. And 
the most unfortunate thing, Mr. Chairman, is that we used the 
word requirement here, and they don't mean a requirement. It 
was sort of a desirable.
    The solicitation said the Air Force wanted as many as 
possible of those systems requirements, documents requirements; 
and Boeing offered far more of those than did Northrop. But we 
didn't see evidence that Boeing was given credit for it.
    Mr. Abercrombie. Can I ask everybody, if you get to the 
acronyms and so on, use the full designation and then say what 
it is. It is because most everybody here knows what it is all 
about but not everybody does, and this is for the record. So 
just for clarity's sake.
    Mr. Gordon. Point well made. Thank you, Mr. Chairman.
    Mr. Larsen. A-OK, Mr. Chairman.
    Then you also determined that Air Force failed to consider 
that Boeing's proposal--the proposal's strengths referred to as 
major discriminators were in vital KPP, or key performance 
parameter, areas, whereas the Airbus proposal strengths were in 
areas that were weighted relatively lower in non-key 
performance and key system attribute requirements. Is that 
correct?
    Mr. Gordon. It is.
    Mr. Larsen. Page 31.
    Mr. Golden. Yes.
    Mr. Larsen. So it does seem that the Air Force gave 
Northrop Airbus extra credit when it wasn't supposed to and 
didn't give the Boeing offer credit when it was supposed to.
    Mr. Gordon. In those instances, that is true.
    Mr. Larsen. In those instances.
    Moving--as we move forward, there has been some discussion 
about how the Air Force would potentially amend a new RFP. And 
I don't know if you can answer this, and maybe it is a question 
I am asking for the next panelist. But if you can please offer 
an answer, how should Congress--or perhaps how would you as 
well--but how should Congress look at an amended RFP that 
changes the relative weights for certain requirements that were 
weighted differently in this RFP but not other requirements?
    Mr. Gordon. Two parts to the answer, if I could, 
Representative Larsen.
    First of all, I am sure your next panelist, Secretary 
Young, will be the better person to answer than we would; and 
that relates to the second point.
    GAO, what is going to happen is this, assuming, as I 
understood from Secretary Gates' press conference yesterday, 
that the Air Force is in fact going to implement our 
recommendation, amend the solicitation, have discussions, get 
revised proposals and then move forward. We can't speak about 
what particulars the agency, the Air Force should or should 
not--what steps they should take in those amendments for at 
least two reasons. Reason number one, it is up to the Air Force 
to decide its requirements, not us. Reason number two, in fact, 
one of the private companies when it sees the amendments, could 
file a protest with us. And we have to maintain our 
independence.
    They could--one of the companies could say, by what the Air 
Force is doing in the solicitation, they are skewing the 
competition in favor of the other side, either one of the 
companies; and they have the right to protest the amendment to 
the solicitation. And, as a result, we can't speak to the 
particulars of what the Air Force should or should not do in 
amending the solicitation.
    Mr. Larsen. If I may, Mr. Chairman, just another question.
    Mr. Abercrombie. One more.
    Mr. Larsen. As a ``for instance'' on that, if the DOD--in 
this case AT&L--should be responsible for the next steps in 
this, said, fuel off-load capability is going to be more 
important and we are going to add more points for that this 
time around, but fuel costs which you did not say they ought to 
but it certainly seemed from the report said they may want to 
certainly take that into consideration, fuel costs and fuel 
use, fuel costs should not be a heavy factor. That would seem 
to some to say that that might skew the process. They may try 
to make it look objective, but it would certainly look to some 
like it would skew the process toward one offeror over the 
other offeror.
    Mr. Gordon. Your example proves my point. Someone could 
protest and say that that was an anti-competitive change to the 
solicitation and it restricted the competition unduly. We will 
not be able to speak to that.
    Mr. Abercrombie. Thank you.
    Mr. Akin.
    Mr. Akin. Thank you.
    Mr. Abercrombie. Excuse me. Mr. Akin, just before we 
proceed, the reference was made to AT&L. That means 
acquisition, technology and logistics and refers to the Under 
Secretary of Defense, Mr. Young.
    Mr. Gordon. Mr. Chairman, I apologize.
    Mr. Abercrombie. You are A-OK.
    Mr. Gordon. What does A-OK stand for?
    Mr. Abercrombie. I hesitate to say.
    Mr. Akin. Thank you, Mr. Chairman.
    The third finding in your comments here, we found that the 
Air Force determined that Northrop Grumman's proposed aircraft 
could refuel all current Air Force fixed-wing tanker-compatible 
aircraft using current Air Force procedures required by the 
solicitation. Is it my understanding that the KC-10 could not 
fly slow enough for some assets that had to be refueled 
currently? Is that the problem?
    Mr. Gordon. The Northrop plane. The KC-10 is one of the 
current tankers.
    Mr. Akin. Excuse me. The Northrop plane, did it have 
trouble flying slow enough to refuel some of the aircraft that 
we wanted to refuel?
    Mr. Gordon. We are very close to proprietary information, 
but I can tell you that, in fact, the issue wasn't that it 
couldn't fly slow enough.
    Mr. Akin. But the report's findings was that it could not 
refuel some of the planes that the KC-135 could refuel.
    Mr. Golden. What it concluded was that the record did not 
demonstrate--the evaluation record that we got from the Air 
Force did not demonstrate that. Therefore, we could not find 
their conclusion reasonable.
    Mr. Gordon. Nothing in the decision goes to the 
capabilities of the Northrop plane or the Boeing plane. It goes 
to the way the Air Force did the evaluation.
    Mr. Akin. I see. So it may be that Northrop plane could do 
it fine.
    Mr. Gordon. Absolutely.
    Mr. Akin. But it was just in terms of procedurally there 
was no proof that it could.
    Mr. Gordon. I am not sure it would use the word 
``procedural'', but we are not expressing a view on whether the 
Northrop or the Boeing plane could meet the requirements.
    All we know is that when we looked at the record and we 
went through these issues, these are, in fact, the overrun and 
breakaway issues we were talking about earlier. We investigated 
these at great lengths with the witnesses at the hearing as 
well as in the written record; and they did not provide, in our 
view, a reasonable basis for their conclusion. The planes may 
well have had the capability.
    Mr. Golden. Typically, what we are doing in this kind of 
record is we are looking for an analysis. And what you said is 
right, documentation, exactly what you said.
    Mr. Akin. As other members have commented, I appreciate you 
are very strict in keeping on that line very precisely in terms 
of doing what your job is and all of us have an interest in 
making sure that you do that. We don't want to pull you over 
the line. So I appreciate your clarifying that point.
    That is all I had. Thank you.
    Thank you, Mr. Chairman.
    Mr. Abercrombie. Thank you.
    Mr. Dicks, to be followed by Mr. Rogers.
    Mr. Dicks. Mr. Chairman, I think Mr. Rogers is a member of 
the committee. Do you want to go with him first?
    Mr. Abercrombie. We are going Republican, Democrat, 
Democrat, Republican.
    Mr. Dicks. Thank you, Mr. Chairman. Thank you very much.
    One of the findings of GAO's protest decision is that the 
Air Force conducted misleading and unequal discussions with 
Boeing. Could you tell us what part of the proposed evaluation 
this related to and why it was a concern and how the source 
selection was conducted?
    Mr. Gordon. Thank you.
    The question goes to--actually, I should point out that 
this is an instance where this word that has certainly caught 
people's attention--the word ``misleading''--it is, for better 
or for worse, a standard word in the case law in this area both 
at GAO and in the Court of Federal Claims and that is----
    Mr. Dicks. Is it equivalent to lying?
    Mr. Gordon. No, sir.
    Mr. Dicks. Okay.
    Mr. Gordon. No, sir. What happened in this case with regard 
to one of the objectives of a key performance parameter, and 
this one related to operational utility, was that the Air Force 
told Boeing at one point that Boeing had fully satisfied the 
objective. At some point thereafter, the Air Force changed its 
assessment, which they are permitted to do. They changed their 
assessment and concluded that Boeing had only partially met the 
objective.
    The problem was they continued with discussions with Boeing 
and with Northrop Grumman and didn't tell Boeing that they had 
changed their mind. Had they told Boeing, we have decided you 
only partially met this particular key performance parameter 
objective, that would have been permissible. But, as it was, 
Boeing was left advised that they had fully met it, all right, 
and understandably felt that they didn't need to make any 
change in their proposal, and that the impact of that was to 
meet the standard of what we call in the case law misleading 
discussions. In the discussions, they said you fully met it. 
After the fact, it turned out that was no longer true.
    Mr. Dicks. Now you said that there was nothing done here 
that was illegal. But if you read your report, it comes across 
to me as if there was a bias or a predisposition to go in one 
direction here and that they did everything twisting and 
turning to make the thing come out the way they wanted to.
    You talked about the fact that there was three to one in 
these key discriminators in favor of Boeing, but that was 
discounted, that there was a miscalculation in the addition on 
military construction, a very major issue, that made Northrop 
Grumman the low bidder. And if there hadn't been a protest, no 
one could have ever known. If Boeing hadn't protested, no one 
would have ever known.
    Now this bothers me very much. Because there was--you 
didn't say ``illegality''. You said there wasn't any 
illegality. But there was certainly unauthorized discussions 
with the press immediately after the release of the decision, 
which is not supposed to happen. It is unfair to Congress. It 
is unfair to the Boeing Company. And it was done immediately. 
This was an overwhelming decision. It is a slam dunk. They won 
on every single point. And this was directly from the Air 
Force. Is that proper? Is that appropriate conduct for the Air 
Force?
    Mr. Gordon. Congressman, I can't speak to the propriety of 
those contacts between the Air Force and the press. What I can 
say--I want to go back and be sure the record is clear.
    On the issue of illegality, it is a word that we tend not 
to use. When we sustain the protest, it means that we conclude 
that the procuring agency, the Air Force in this case, violated 
procurement law, either statute or regulation, in a way that 
was detrimental, prejudicial, as we say, to this protester's 
ability to get the contract. So, in that sense, we did make a 
finding of unlawful action.
    What we didn't find--it wasn't alleged by Boeing, and we 
didn't see an iota of evidence of it. We didn't find that there 
was intentional wrongdoing, no evidence of bias, no evidence of 
criminality. That is absolutely true.
    On your comment, Congressman, with respect to the value of 
the protest in terms of airing these concerns, we very much 
concur. The protests provide a very important avenue for 
holding agencies accountable for their actions.
    Mr. Dicks. You know, I have been around here a long time. 
General Handy mentions it in his op-ed, that this is almost an 
unprecedented series of charges or protests sustained by the 
GAO against the Air Force and that these are not minor matters, 
that these were major matters that could have changed the 
outcome. In fact, the addition mistakes, in fact, changed who 
was the low bidder. So from your perspective, these are not--as 
people are characterizing these, these are not minor matters. 
These are significant issues that the GAO has decided, isn't 
that correct?
    Mr. Gordon. Yes. We choose our words very carefully. We 
would not characterize the errors we found as minor. We, after 
great deliberation, would characterize them as significant 
errors that could have affected the outcome of what was a close 
competition between Northrop Grumman and Boeing.
    Mr. Dicks. Thank you, Mr. Chairman.
    Mr. Abercrombie. Thank you.
    Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    That is a perfect segue----
    Mr. Abercrombie. Excuse me. To be followed by Mr. Tiahrt 
and then Mr. Bonner.
    Mr. Rogers. That was a perfect segue into what I want to 
talk about, and that is I want to limit my comments to process. 
I understand that is all that you reviewed and you did say 
``could have.'' There is no evidence that you found, from my 
reading of this, that these seven or eight points where there 
is a deviation in process did in fact change the outcome. Is 
that correct?
    Mr. Gordon. That's right. We are not saying that Boeing 
should have been selected. That is not what we were saying in 
the report.
    Mr. Golden. What we said in the report is that it meets the 
legal standard of showing prejudice. That doesn't mean that the 
result would necessarily change.
    Mr. Rogers. Right. I want to make it clear. I know you 
touched on this a couple of times. There is no evidence that 
bribes was offered this time around in the bidding of this 
contract, is that correct?
    Mr. Gordon. That is absolutely correct. Neither bribes nor 
any other criminal conduct.
    Mr. Rogers. No malfeasance, no impropriety of any kind 
Northrop Grumman demonstrated in winning in this contract?
    Mr. Gordon. No intentional impropriety.
    Mr. Rogers. It was a clean bid process in the way of 
misbehavior is concerned.
    Mr. Gordon. We saw no evidence of intentional misconduct.
    Mr. Rogers. I want to make the point--I know several folks 
want to talk about the merits of the contract being issued to 
Northrop, and I know we are going to talk more about that on 
the next panel. But you found nothing as to the merits of which 
plane was better or not.
    Mr. Gordon. That's right. Nothing in our decision should be 
read to say that the Northrop plane is better or the Boeing 
plane is better.
    Mr. Rogers. In this process, the Air Force is the customer, 
is that correct?
    Mr. Gordon. In the sense that they are making the purchase, 
yes.
    Mr. Rogers. They are making the purchase, and the Air Force 
selected the Northrop Grumman plane, and from what I read there 
is no evidence that there was impropriety in the way they made 
their selection. So you are not saying they didn't get the best 
plane?
    Mr. Gordon. We are not expressing an opinion about it one 
way or the other.
    Mr. Rogers. I want to go back to a point that you were 
talking about with Mr. Miller and that is the number of issues. 
We had a briefing with your office a couple of weeks ago that 
was not public and there was a specific number of protests that 
were offered by Boeing. Do you know that number?
    Mr. Gordon. It depends what you mean. There were eight 
protests that were filed. One moment.
    Mr. Golden. Are you talking about--I think I identified 22 
major issues at that briefing.
    Mr. Rogers. That is my point. There were 22 issues that 
they visited as being possible deviations.
    Mr. Golden. Yes, and I pointed out there were subsets and 
other arguments related to those major----
    Mr. Rogers. So that may have been where the hundred or so 
items came from that Mr. Miller referenced?
    Mr. Golden. I have seen it even higher at times, to be 
honest with you.
    We looked at everything. We didn't spend a lot of time 
counting. We had a deal with all the issues in the protest.
    Mr. Rogers. But of the 22 that were offered you found 14 
that was no problem.
    Mr. Gordon. I am not sure we would count them that way.
    Mr. Golden. I think that the issues are integrated. It is 
hard to divide them in the way people would like to. We found 
seven issues that we sustained, that we found in favor of the 
protest, that we found problems with the procurement.
    Mr. Rogers. I guess the point I want to leave here with 
knowing is that you folks just dealt with process. You are just 
a legal team looking at the process, and you are not making any 
statement that the wrong plane was selected or that this 
process deviation in fact changed the outcome or would have 
changed the outcome. You are just saying that it could have, 
but there is no evidence of impropriety or criminal behavior or 
anything that would lead somebody looking at this to go to say, 
well, but for those seven items, Boeing would have won this 
contract.
    Mr. Golden. I think we have been pretty clear in the 
written testimony and our testimony today that we did not--our 
job is not to evaluate the merits of the planes or decide which 
plane--what we focus on is violations. Our role is to look and 
examine when a protest is filed, deal with allegations of 
violations of law regulations in the selection process.
    Mr. Rogers. That is my point. I hear too many of my 
colleagues and folks in the private sector who point at this as 
if it was like the last contract where there was all this 
improper behavior, and that is not what I have been reading or 
hearing from you all in our private briefing or in this one. 
And that is just there are seven deviations in process that may 
or may not have made any difference at all.
    Thank you, Mr. Chairman.
    Mr. Abercrombie. Is that it for you, Mr. Rogers?
    We will go to Mr. Tiahrt.
    Mr. Tiahrt. Thank you, Mr. Chairman.
    I am a little worried when I have the only seat in the 
House without a microphone.
    Mr. Abercrombie. I am sorry, Mr. Tiahrt. I was distracted. 
Did you ask me something?
    Mr. Tiahrt. No, I was just making a comment without an 
acronym.
    As I count--I am reading through the report of your 
executive summary, whatever you call it. I find eight areas 
that you have, rather than seven. I have heard seven repeated a 
couple times, but I think eight is probably the proper number.
    You guys look at about 1,200 different protests a year, is 
that about right? This year you have already looked at I think 
1,000, is that about right?
    Mr. Gordon. I didn't hear the last statement.
    Mr. Tiahrt. How many protests have you looked at this year, 
approximately?
    Mr. Gordon. We get something on the order of 1,300 protests 
a year, plus or minus 200.
    Mr. Tiahrt. What has been your experience when one of the 
bidders to a proposal fails to meet the requirements of that 
proposal?
    Mr. Gordon. I think you probably mean when the company that 
receives the contract is alleged not to have met the 
requirements of the competition, am I right?
    Mr. Tiahrt. No. I mean, during the bidding process, what 
usually occurs when one of the bidders fails to meet the 
requirements?
    Mr. Gordon. It depends on the context. We have a 
complicated procurement system.
    In brief, there are some situations in which they are 
simply out. That is the end of the matter. They are 
nonresponsive, and they are not considered.
    There are other situations in the negotiated procurement 
context where it is perfectly normal for the agency to decide 
that this bidder, this offeror, fails to meet the requirements 
in this area, that area and the other. You then have 
discussions, negotiations, and during those discussions you 
raise with them your concern. You haven't met the requirements 
here, there and the other. After discussions, all the companies 
get a chance to revise their proposals and then they will be 
evaluated. So you hope that at the end of the process they have 
acceptable proposals.
    Mr. Tiahrt. Would you consider this a negotiated contract 
or----
    Mr. Gordon. Yes, this was a negotiated procurement.
    Mr. Tiahrt. And so, even in a negotiated contract, when a 
contractor fails to meet the requirements or chooses not to 
meet the requirements, what is the normal process?
    Mr. Gordon. If at the end of the day you have a proposal 
that doesn't meet the requirements, you can't make award to it. 
You are either going to have another round of discussions or 
they are not going to get the contract.
    Mr. Tiahrt. So if a contractor chooses not to meet the 
requirements then either you need to go into renegotiations or 
reject the contract, is that what you said?
    Mr. Gordon. Yes, if it is a material requirement.
    Mr. Tiahrt. Okay, and I noticed in one of the material 
requirements according to your report that--I think it was the 
second one--that one of the two bidders made a decision not to 
meet the requirement, made a decision not to meet the 
requirement and therefore was noncompliant. And according to 
the FAR, Federal Acquisition Regulations, section 14.404-2, it 
falls into the category of rejection of individual bids. Was it 
not a little bit peculiar that this bid was not rejected 
because of failure or noncompliance?
    Mr. Gordon. It actually goes back to what I was saying 
before when I said there is a dichotomy between some 
situations----
    Mr. Tiahrt. You also clarified that by saying even in a 
negotiated contract that if one party chooses not to meet the 
requirements, then it is not an acceptable bid.
    Mr. Gordon. I understand. But the part of the Federal 
Acquisition Regulation that you cited actually is not relevant 
here. Because you have cited a part of the Federal Acquisition 
Regulation which would be important in the context of 
invitation for bids, sealed bidding.
    In negotiated procurements, the agency has the right to 
pursue the matter, all right? What they can't do is say, we 
have a material requirement, this company hasn't met it, and 
yet we are still going to make award to them. That is an 
unacceptable solution. They have to do one or the other.
    Mr. Tiahrt. I understand that. And perhaps I got the wrong 
section in the FAR, but it is still applicable that if you fail 
to meet the requirements, even in a negotiated contract, as you 
explain this is, and in confirmation in your report, it says 
that there is a choice made to not comply with the requirements 
of this contract. And yet the Air Force accepted the 
procurement and awarded the contract.
    Mr. Gordon. They essentially concluded that the requirement 
to provide the help with the transition to the organic level--
the organic depot level maintenance capability was not 
material. Because they called it an administrative oversight, 
and we just didn't see that as supported.
    Mr. Tiahrt. And, further, in areas where it was not clear 
whether one of the two bidders met the requirements, they 
failed to provide any evidence that they did.
    You cited earlier the off-load of fuel. You cited the 
overrun requirements. You cited the breakaway requirements. You 
cited the boom requirements. You also mentioned the depot 
levels maintenance requirements. So here we have multiple areas 
where there was no evidence that one of the bidders met the 
requirements of the contract, or of the proposal, the RFP. Is 
that unusual?
    Mr. Gordon. The way you characterize the situation goes 
beyond what we found. The Air Force found----
    Mr. Tiahrt. Wait a minute. Did you not find there was 
insufficient information on the boom? Whether it could meet the 
requirements or not? Did you not tell me that there were 
requirements that there were insufficient information about? 
Did you not say the same thing about the breakaway 
requirements?
    Mr. Gordon. We had concern about the sufficiency of the 
basis of the agency's findings.
    Mr. Tiahrt. So it appears to me that, where they couldn't 
meet the requirements, the Air Force was obviously vague about 
whether they even analyzed it properly and they couldn't 
provide you with the information to confirm that they did meet 
the requirements.
    Mr. Gordon. We certainly had concerns as to each one of the 
issues. But I don't want to overstate the concerns. We were not 
in a situation where we would have ever considered saying, oh, 
Northrop cannot meet the requirements and therefore the 
contract should go to Boeing. What we saw was that the agency--
that the Air Force hadn't done enough to establish that 
Northrop's solution would work.
    Mr. Tiahrt. Thank you for confirming what I thought; and 
that was, were there areas where there was a question on 
whether they met the requirements or not, there was 
insufficient data provided by either the Air Force or the 
bidders to the contract. Because it is appearing several times 
at least, on five different occasions--and you specified two of 
them--two of the eight items that you identify directly address 
it, and then you mentioned several others at the end of your 
report. I think it is a considerable problem.
    I also was a little bit concerned about the extra credit 
item that was referred to earlier. It seems that you found that 
extra credit was considered when one of the two bidders 
exceeded a threshold----
    Mr. Gordon. An objective, yes.
    Mr. Tiahrt [continuing]. And then exceeded the objective. 
Because normally the way this works--and correct me if I am 
wrong--but a request for a proposal has a threshold. In this 
case, it is the KC-135R. That is what is characterized in the 
request for the proposal. That is the threshold.
    Normally, there is an objective. And when you reach the 
objective then you get the extra credit and all parties that 
reached that objective get the extra credit. Is that not 
correct?
    Mr. Gordon. I am not sure that I would characterize that as 
normal. But the situation here was fairly straightforward. If 
you met the objective, you were to get credit for it as it's a 
meets. If you went above the objective, all right, you weren't 
supposed to get extra credit. And as to one of the objectives, 
Northrop exceeded the objective and got extra credit.
    Mr. Tiahrt. In one? What about passenger capacity? Was 
there extra credit given there?
    Mr. Gordon. That, I understand from my colleagues who are 
more expert on technology, was not a KPP objective. So the 
issue of exceeding the objective and improperly being given 
credit, it is improper only because the solicitation said we 
will not give you credit for exceeding the objective. If it 
hadn't said that, they could have done it. But that arose only 
in connection with the one objective that we cite.
    Mr. Tiahrt. Which was the fuel capability?
    Mr. Gordon. Yes.
    Mr. Tiahrt. I guess I was referring to Secretary Payton 
when she mentioned in the contract award that there was extra 
credit for passenger and extra credit for cargo, and I think 
she may even--the medical package pallets may be mentioned.
    Mr. Golden. The cargo capability, that was permissible 
under the solicitation. These other items you are talking about 
were--it was permitted on the solicitation to give credit for 
that. It was not for the fuel, for want of a bad summary, the 
fuel capability requirement.
    Mr. Abercrombie. Mr. Tiahrt, Ms. Payton will be in the 
closed session, if you want to pursue that further.
    Mr. Tiahrt. Thank you for your assistance, Mr. Chairman. I 
will wait until then to pursue that then.
    Mr. Abercrombie. Mr. Bonner.
    Mr. Bonner. Thank you, Mr. Chairman. Also, thank you for 
allowing those of us who are not a member of your subcommittee 
and full committee to be here.
    Mr. Abercrombie. May I say before you begin, Mr. Bonner, 
Mrs. Boyda chooses to pass at this juncture, and unless there 
is a second round we will move to Mr. Young. And then, 
subsequent to that, I am going to take a show of hands as to 
whether we just stay here and allow the media to leave or 
whether we adjourn to 2337.
    Mr. Bonner. Thank you.
    Good evening, Mr. Gordon. Please help me and help 
especially the people back in my district who were so excited 
on February 29th when the Air Force made the decision that the 
Northrop Grumman EADS team had won the account contract. Help 
us understand the process, because that is in fact what you all 
are here to discuss.
    Am I right or wrong that in the conclusion and 
recommendation of the findings of the GAO where you said, but 
for these errors we believe that Boeing would have had a 
substantial chance of being selected for award--would you ever 
sustain a protest if you didn't have a sufficient number of 
findings where the protester would have had a chance for the 
award?
    Mr. Gordon. No. Prejudice, as we call it, is a requirement 
for us to sustain the protest. And we often see cases where the 
agency made errors of procurement law, but it didn't make a 
difference.
    We have to have a situation where the protester--not only 
were there violations of procurement law regulation but where 
the ``but for those errors'' the protester would have had a 
substantial or significant--you see both words in the case 
law--chance of obtaining the award.
    Mr. Bonner. The reason I raise that, as my colleague, Mr. 
Miller, raised earlier, words are powerful, and many people 
have chosen to take the word ``substantial'' and make it into 
something perhaps bigger than it is or perhaps what it is. Is 
``substantial'' anything other than a justification for the 
sustaining of the protest?
    Mr. Gordon. It is the basis for sustaining the protest, but 
it is a meaningful word. It is not--it can't be a situation 
where the chances of the company winning the contract would 
have been negligible, de minimis. There was a substantial----
    Mr. Bonner. It they had been negligible, then you would not 
very likely have had reasons to sustain the protest.
    Mr. Gordon. Yes. Yes.
    Mr. Bonner. Further in this conclusion, did either of you 
have a chance to see the press conference yesterday with 
Secretary Gates?
    Mr. Gordon. We both did. We watched it together.
    Mr. Bonner. Then in the conclusion where you say, we 
recommend the Air Force reopen discussion with the offerors, 
obtain revised proposals, re-evaluate the revised proposals and 
make a new source selection decision consistent with this 
decision--I know some parts of that recommendation have not 
necessarily had time to come to fruition, but, based on what 
you saw yesterday, do you believe Secretary Gates, on behalf of 
the Department of Defense, has acted in good faith on the GAO's 
recommendations and the process going forward is adequate, 
based on your recommendations?
    Mr. Gordon. Adequate goes to the colloquy that we had 
earlier. We need to see the details. We have gotten nothing in 
writing. And even when we get something in writing, we will 
wait to see whether the private companies, either one of them, 
files a protest.
    But if you want an initial informal opinion, it certainly 
sounded to me like Secretary Gates was acting in good faith to 
implement the recommendations, but that doesn't bind GAO in 
terms of a protest that we might get down the road. I think he 
used words very close to ``we intend to implement GAO's 
recommendation.''
    Mr. Bonner. Would I be correct or incorrect if I said in 
that, in the report, the GAO stated that the Air Force 
calculated correctly that the KC-45 could off-load more fuel 
over distance?
    Mr. Gordon. I didn't understand the question.
    Do you understand it?
    Could you restate the question?
    Mr. Bonner. Sure. Would I be correct or incorrect if I said 
that the GAO stated that the Air Force calculated correctly 
that the KC-45 could offload more fuel over distance?
    Mr. Golden. I think the answer is yes.
    Mr. Bonner. Would I be correct or incorrect if I stated 
that the GAO found that the Air Force correctly reported that 
the KC-45 was superior in air refueling efficiency?
    Mr. Golden. I think the wording is--could you repeat the 
wording? We didn't----
    Mr. Bonner. Sorry, I am from Alabama.
    Mr. Golden. It is not your fault.
    We are very careful in these decisions. What we are 
reviewing is the reasonableness of the agency's actions. And 
so----
    Mr. Abercrombie. Mr. Golden, excuse me. Could you speak a 
little more into the microphone? I realize you are addressing 
Mr. Bonner.
    Mr. Golden. I am sorry.
    What we are doing in these decisions is reviewing the 
reasonableness of the Air Force's actions, their evaluation 
findings. And I am not sure that either of these now that you 
are raising really were, in a sense, a protest issue that we 
went to the merits and assessed. So I am hesitant to say 
definitively, you know, give you a definitive response on these 
things.
    Mr. Bonner. Okay, forgive me. I thought that you had nodded 
in the affirmative that they both were correct.
    I could go down a list, just as our friends on the other 
side could as well, making their point. I don't intend to do 
that.
    Mr. Golden. No. Is what you are saying did the Air Force 
report that to us in the record?
    Mr. Bonner. It was my understanding that the GAO stated 
that the Air Force in both cases calculated correctly that the 
KC-45 could offload more fuel over distance and that the Air 
Force correctly found that the KC-45 was superior in air 
refueling efficiency.
    And I was just asking if that is consistent with your 
understanding of your work.
    Mr. Gordon. I hesitate to say this, Congressman, but if you 
could point us to someplace in our decision where it is there.
    Mr. Golden. Right.
    Mr. Gordon. We don't think that is actually in the 
decision. But it is a very long decision----
    Mr. Bonner. It is.
    Mr. Gordon [continuing]. And perhaps our collective 
memories are----
    Mr. Dicks. I thought we weren't getting into the planes.
    Mr. Bonner. Well, I won't take any more of your time on 
that. I would just like to, since so much has been made 
earlier----
    Mr. Abercrombie. Could I say, Mr. Bonner?
    Mr. Bonner. Yes, sir.
    Mr. Abercrombie. If you would yield for a moment.
    Mr. Bonner. Absolutely.
    Mr. Abercrombie. Could I suggest that you take a look and 
get back to Mr. Bonner?
    Mr. Bonner. With pleasure.
    Mr. Gordon. Okay, with pleasure.
    Mr. Abercrombie. And to the committee.
    Mr. Bonner. Mr. Chairman, I don't have another question, 
just a comment in closing for this panel.
    Mr. Abercrombie. Go ahead.
    Mr. Bonner. So much has been made of General Handy's 
opinion. He is a respected leader in the Air Force. I think it 
should be noted that he is also a former commander of U.S. 
TRANSCOM. He retired in 2005. And the current commander of U.S. 
Transport Command (TRANSCOM) , General Schwartz, as well as the 
current commander of Air Mobility Command, General Lichte, were 
both very involved in setting the requirements for tanker. And 
those requirements from the Air Force expressed a preference 
for a larger, more capable, more flexible aircraft.
    I don't say that on the record to ask for your comment. I 
just wanted to say, with no disrespect to the general whose 
name has been mentioned so often, there are many generals, 
current and retired, who have expressed an opinion on this. And 
I don't know that that necessarily has anything to do with the 
process; I just wanted to get it on the record.
    Mr. Chairman, thank you.
    Mr. Abercrombie. Thank you, Mr. Bonner.
    Mr. Miller has a follow-up question, I believe, and I have 
one question for the record. And then unless someone else has a 
desire to ask questions again at this stage, we will go to Mr. 
Young.
    And I would remind the other members that after Mr. Young, 
as I say, we will take a show of hands, which I hope will say 
we are going to stay here. Both Mr. Gordon and Mr. Golden, as 
well as Mr. Young and I believe Ms. Payton, will be at the 
closed session. We will just take a very short break and 
continue.
    Oh, Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    Real quick, and I know and appreciate the time that you 
have given to us today and the clarity with which you provided 
the answers.
    You had said in one of the items that the Air Force said 
that the KC-45 could, in fact, refuel all Air Force aircraft. 
You said that you felt as though they had not provided enough 
documentation to prove that. Is that correct?
    They needed to provide better documentation to prove that 
they thought that the boom could refuel all aircraft.
    Mr. Gordon. You pointed out earlier, Congressman, and 
rightly so, that words matter. I want to look at our words and 
be sure that I answer you with the right words.
    Mr. Miller. Okay.
    Mr. Gordon. All right. Our finding was that the record 
didn't show that the Air Force reasonably determined that 
Northrop Grumman's proposed aircraft could refuel all current 
Air Force fixed-wing tanker-compatible aircraft using current 
Air Force procedures, which was required by the solicitation.
    Mr. Miller. And I lay that as groundwork to ask this 
question. Is that one of the significant errors that could have 
affected the outcome of the contract?
    You consider a judgment on GAO's part that the Air Force 
made--I mean, I would rather have somebody who flies for a 
living make the determination rather than somebody who flies a 
desk make the determination as to whether or not it could 
provide air fueling requirements for the Air Force.
    And so I am just saying, do you still contend that is a 
significant issue, that the Air Force didn't prove it?
    Mr. Gordon. We think it is a significant issue, yes, sir.
    Mr. Miller. That is all.
    Thank you very much.
    Mr. Abercrombie. Mr. Dicks, did you have a follow-up?
    Mr. Dicks. Yeah, just briefly. On page 66 of the report, in 
a footnote, I think it says, ``The report also recommends that 
fuel costs, because of their dramatic effect on lifecycle cost, 
be considered in a future evaluation of proposals.''
    And I have a chart, Mr. Chairman, that I would like to see 
submitted into the record, along with General Handy's 
statement, which basically lays out the difference in fuel 
consumption between these two aircraft.
    Mr. Abercrombie. Without objection. Without objection, the 
document will be entered in the record.
    [The chart referred to can be found in the Appendix on page 
95.]
    [The prepared statement of General Handy can be found in 
the Appendix on page 90.]
    Mr. Abercrombie. Now, did you want to re-ask your question?
    Mr. Dicks. Did you say yes--you just said yes to the fact 
that there was a recommendation that fuel costs be considered 
in the future in the footnote?
    Mr. Golden. It is footnote 89 I believe you are talking 
about. And we said, ``Given our recommendation below that the 
Air Force re-evaluate proposals and obtained revised proposals, 
this is another matter that the agency may wish to review to 
ascertain whether a more detailed analysis of the fuel costs is 
appropriate.''
    That is the language in the decision that I think you are 
referring to.
    Mr. Dicks. Yes. Thank you very much.
    Mr. Abercrombie. Can you site the page that you are 
referring to?
    Mr. Golden. I am sorry. It is page 66, footnote 89.
    Mr. Abercrombie. Thank you.
    And Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Just to clarify, I, too, hope that the Air Force can 
certainly define what their requirements are. Your job is not 
to do that, and you have been very clear about that. Your job 
is to ensure that, in this process, the agency followed what 
they said they were supposed to do under the law. And so your 
conclusions are based on whether or not the agency did.
    And if they can't back it up with documentation, as I 
understand it, then you have to call foul on them. They have to 
back up what they say they are going to do. And, in many 
regards, when you cite these significant errors, they were not 
able to back that up.
    And that is what your job is to do in these protests. It is 
not to fly an airplane or fly a desk or anything else. It is to 
hold the agency accountable. In this case, it happens to be the 
Air Force. In other protest decisions, it is whatever agency is 
having to make a procurement decision.
    Is that generally correct?
    Mr. Golden. Yeah. Under the Federal Acquisition 
Regulations, the agencies are required to document and support 
their evaluation record. There are specific requirements. And--
--
    Mr. Larsen. And when they don't, you have to call them on 
it if there is a protest.
    Mr. Gordon. But I want to be very concrete here. With 
respect to the overrun speeds, the Air Force itself had 
concerns during the procurement about whether the Northrop 
plane would, in fact, meet the requirement.
    With respect to breakaway, that didn't come up until the 
protest. But the problem isn't our making a judgment about 
whether the plane meets the requirement.
    Mr. Larsen. Right.
    Mr. Gordon. Our question is to the Air Force, tell us why 
you made that determination.
    Agencies, including the Air Force in this procurement, in 
this protest, get enormous leeway. This is not, in this case or 
in any case that we have, a question of ``reasonable minds can 
differ, and GAO decided X.'' This is, if you will, the agencies 
get to make the decision. The agencies have huge leeway. We 
give them deference in making those decisions.
    What we do is say, we want to be sure that you follow the 
evaluation criteria and that what you said holds together. It 
is when we ask and get an answer that doesn't hold together--
not because we are experts in the technology, but because we 
are seeing a concern, and we are asking what is the response to 
the concern, and the response is simply not satisfactory. That 
is why we sustained this protest ground.
    Mr. Larsen. But, gentlemen, I can assure you that the pro-
GAO faction in Congress is bigger than the pro-Northrop, pro-
Boeing and pro-Air Force factions put together. I assure you of 
that. You do a great job, and we rely on you for a lot of 
things.
    Mr. Gordon. Thank you.
    Mr. Golden. Thank you.
    Mr. Larsen. Thanks.
    Mr. Abercrombie. Thank you.
    One question for the record before Mr. Young comes, because 
I am not clear on it, and I think everybody needs to know this 
on the subcommittee and those who are interested.
    Did the GAO call Secretary Payton, who is the source 
selection authority, and/or Lieutenant General Hudson, the 
chair of the Source Selection Advisory Council, as witnesses 
during the protest hearings?
    And with regard to your answer, why would they be called or 
why would it be likely that they should be called or not 
likely? Why or why not, depending on your answer, affirmative 
or negative.
    Mr. Gordon. Absolutely. Neither one was called. But it is a 
very helpful question in terms of giving us a chance to explain 
to the subcommittee how this process works.
    We told the Air Force and the private parties exactly what 
our questions were. We told them what the issues were that we 
intended to explore in the hearing. We let the Air Force 
identify the people they felt were best qualified to answer 
those questions. If the Air Force had picked the source 
selection authority, we would have been delighted to have the 
SSA in front of us, and we would have proceeded with that.
    In fact, we gave the Air Force and the private parties 
fairly extensive notice of the need to hold a hearing, because 
we recognized that, when you are calling high-level officials, 
it is tough to get on their calendars.
    So we gave them advance notice of the hearing dates in 
order that they would be able to bring both the SSA, the source 
selection authority, and the chair of the SSAC that you 
mentioned. We wanted to provide them every opportunity so they 
could do it if they felt that those people should be the 
witnesses for the Air Force.
    Mr. Abercrombie. You understand why I asked the question. 
Because it was clear from your testimony that you did not pick 
the people coming to answer the questions; the Air Force did.
    Mr. Gordon. We nor Northrop nor Boeing picked them.
    Mr. Abercrombie. Right. And that is why I asked the 
question, because it struck me as, I don't know, strange. 
Again, regardless of the side one is on or if one doesn't have 
a side, it struck me as almost incomprehensible that either the 
source selection authority or the General in charge of the 
advisory council would not be among those chosen to come to 
speak to you.
    The fact that they were not is something I am going to have 
to find out about. And I think all the members will be 
interested in that.
    Maybe you can't answer that. When I said ``why not,'' 
simply because they didn't choose them, right?
    Mr. Gordon. Yes.
    Mr. Abercrombie. That is your answer?
    Mr. Gordon. Mr. Chairman, I would say there are 
occasionally protests----
    Mr. Abercrombie. I am editorializing here a bit, I realize, 
because it is incomprehensible to me that they wouldn't come.
    Mr. Gordon. I understand. Mr. Chairman, that was their 
call.
    There are situations in which GAO says, we need a 
particular official. The classic example would be where we have 
gone through the record--and we always go through the written 
record before we have the hearing. We sometimes go through the 
record and we can see a particular evaluator or sometimes a 
source selection official has changed their mind or there is an 
inconsistency in the record. We will say, ``We have a document 
that shows that Mr. Jones did something. We want to hear from 
Mr. Jones.'' This was not a case like that.
    Mr. Abercrombie. I understand that.
    Mr. Gordon. We left it to the agency.
    Mr. Golden. Yeah. And, Mr. Chairman, in all fairness, we 
identified issues, and we told the parties, ``Hey, give us the 
people who can best talk about these issues.'' I mean, and, you 
know, I think your question is best raised with the Air Force.
    Mr. Abercrombie. Right. It is going to be raised there. I 
just wanted to make sure that I had it correct, because I will 
tell you that I assumed--and I will tell you, I would be very 
surprised if any member sitting here didn't assume that the 
source selection authority and/or the Chief Advisory Council 
general wouldn't be the first two to be, you know, cited to 
come. So we are going to have to find out about that.
    But I recognize that that wasn't something that you had to 
pursue. That is something we have to pursue. And I wanted to 
make sure I was right.
    And if that is it--I know you are still standing by. I 
appreciate that. I must confess to you that I--well, I thought 
we had a different set of timing. So I didn't make any 
arrangements for dinner and so on. I am just going to have to 
keep right on going. So I presume that also part of the GAO 
charter is this fortitude.
    Mr. Gordon. We live to serve, sir.
    Mr. Abercrombie. Thank you.
    Mr. Golden. Be glad to do it.
    Mr. Abercrombie. So I am going to ask you to stand by, and 
then we will ask Mr. Young to come at this point.
    Mr. Dicks. How about a three-minute break, Mr. Chairman?
    Mr. Abercrombie. Yes. While Mr. Young is coming--Norman, 
wait, wait, wait. Norm, time out. Before you go--well, okay.
    Mr. Dicks. Yes, Mr. Chairman?
    Mr. Abercrombie. I have his proxy.
    Mr. Dicks. I am still here.
    Mr. Abercrombie. Can we take a vote right now? Can we just 
stay here and have them clear, rather than everybody having 
to--okay.
    That is what we will do, Doug.
    Mr. Dicks. But that is after Mr. Young.
    Mr. Abercrombie. Yeah, after Mr. Young. Then we will have 
the second part of the hearing, and we will give the media a 
chance to break. Maybe you can have your offices send over a 
sandwich or something.
    So we will recess for three minutes while Mr. Young puts on 
his armor and gets into his chair.
    [Recess.]
    Mr. Abercrombie. Secretary Young, thank you for your 
patience. I trust you were listening in.
    And you have a statement, which we will incorporate into 
the record. If you wish to summarize it or take sections of it, 
that is fine. And I think we will just move ahead.
    Mr. Skelton has been able to join us again.
    And then, subsequent to your statement, we will go to 
questions or commentary for your observations and your 
commentary and/or answer to questions. And then we will take a 
short break again, and then we will go into the closed session.
    Secretary Young, please proceed. And thank you, again, for 
coming.

   STATEMENT OF HON. JOHN J. YOUNG, JR., UNDER SECRETARY OF 
       DEFENSE FOR ACQUISITIONS, TECHNOLOGY AND LOGISTICS

    Secretary Young. Certainly.
    Chairman Abercrombie, Chairman Skelton, Ranking Member 
Saxton and distinguished members of the subcommittee, thank you 
for the chance to testify on the Department's----
    Mr. Abercrombie. Can you bring the mike just a touch 
closer, please? Thank you.
    Secretary Young. Thank you for the chance to testify on the 
Defense Department's plans for proceeding with the Air Force 
tanker competition.
    After seven years, it is critical that the Defense 
Department move forward with the purchase of a new tanker for 
our warfighters. The KC-(X) replaces the KC-135 tanker aircraft 
that are rapidly reaching the end of their service life. The 
oldest tanker is 50 years old, and the average age is 47 years.
    KC-(X) represents the first phase of a three-phase tanker 
replacement program. And the Defense Department intends to 
compete for the future KC-(Y) and KC-(Z) phases.
    This afternoon I will briefly summarize how the Defense 
Department plans to move forward. I want to note that the 
Department is in the middle of an active, competitive source 
selection. We generally do not discuss ongoing source 
selections or competing proposals.
    First, such a discussion could taint the competition. In 
this case, we have a solid competition that is advantageous to 
the warfighter and the taxpayer. We want to protect and 
encourage that competition.
    Second, complete discussion of the proposals or their 
evaluation would include proprietary information of the 
companies and source selection information of the Government. 
Public release of such information would not only affect the 
competition but also implicate the Trade Secrets Act, a 
criminal statute, and the Procurement Integrity Act, which 
provides both criminal and civil sanctions.
    Thus, I am very limited in my ability to discuss these 
matters in open session. I would ask your patience and 
assistance in maintaining the integrity of this process, while 
I also try to be as forthcoming as possible at this hearing.
    The Government Accountability Office completed a 
comprehensive review of the KC-(X) tanker competition. The 
Defense Department accepts the GAO findings. In reviewing 
roughly 110 protest issues, which do include a number of 
overlapping issues, the GAO issued eight specific findings. The 
GAO found no basis to sustain the vast majority of the protest 
issues.
    The eight findings are correctable. None of the findings 
suggest a concern with our acquisition strategy. And we will 
continue with a best-value source selection approach, with the 
intention of awarding a single contract.
    I want to assure you the Department will address each of 
the findings in completing a new source selection for the 
tanker program. Building on a carefully and thoroughly reviewed 
foundation of documents and discussion, the Defense Department 
will amend the tanker request for proposals, or RFP, and seek 
modified proposals from industry bidders. We anticipate 
releasing a draft RFP amendment to industry for comment in late 
July or early August. The Department will conduct a new source 
selection based on modified proposals submitted in response to 
the amended RFP.
    Grounded in the warfighters' requirements and the pursuit 
of best value for the taxpayer, the Defense Department is the 
only organization that can fairly and knowledgeably conduct 
this competition. The Department plans to complete the proposal 
evaluation and reach a source selection decision by late 2008 
or early 2009.
    Secretary Gates directed, with the full support of the Air 
Force, the appointment of a new source selection authority and 
completely new joint membership on the Source Selection 
Advisory Committee. Secretary Gates made these changes to 
maintain objectivity and to assure all interested parties that 
the process would be fair and equitable.
    The Defense Department has reviewed and considered the idea 
of awarding a contract to both companies. In the Department's 
judgment, this approach would be a mistake, because it would 
result in an extraordinarily higher cost, as well as 
complicated logistics, training and operations for the Air 
Force. A dual award ill-serves both the taxpayer and the Air 
Force. The Defense Department and the taxpayer are far better 
served by reserving the opportunity to hold competition for KC-
(Y) and KC-(Z). Competition has driven innovation and cost 
control in this Nation, and a strategy to award to both 
companies undermines these principles.
    We will seek to make only adjustments in the RFP which are 
grounded in the GAO findings, the warfighters' requirements, 
and our obligation to get best value for the taxpayer. I would 
ask the support of this committee and your colleagues in 
allowing the Defense Department to conduct a fair, open and 
transparent new source selection process. We will make every 
effort to earn the confidence of industry, the Congress and the 
American people in the new solicitation.
    The Defense Department does not care which tanker wins the 
competition. The Defense Department's sole objective is to get 
the required capability for the men and women who serve this 
Nation at the best price for the taxpayer.
    I look forward to working with the Congress in support of 
this important program, and I am prepared to answer your 
questions.
    Mr. Abercrombie. Thank you, Mr. Young.
    In that context that you just outlined, where you said that 
you are prepared to earn the confidence in the American people, 
on March 11th of this year you testified before this 
subcommittee that, and I quote, ``I asked part of my 
acquisition, technology and logistics team to observe the 
source selection process and help the Air Force,'' unquote. And 
quote, ``The Department did its very best,'' underlined by me, 
emphasis by me--``The Department did its very best to evaluate 
two very high-quality proposals with excellent dialogue with 
both industry partners,'' unquote.
    If the Department did its very best during this past source 
selection, what specific changes are you going to make for the 
upcoming KC-(X) source selection process to regain that 
confidence that you just stated you wish the public to have in 
you and the Department of Defense?
    Secretary Young. Well, as I noted, Secretary Gates will 
change the source selection authority. We will change the 
Source Selection Advisory Committee. And we have studied in 
great detail all of the GAO findings. We will seek to address 
those findings, again, grounding ourselves in the requirements 
document and the pursuit of best value for the taxpayer.
    We will have an independent team review this. One of my 
only regrets is that what I told you was we would begin the 
independent team review process in December. Final proposals 
were turned in in, I think, March. We needed to start from the 
very beginning. We now have the opportunity to start at the 
very beginning and have a team, and an independent team, 
observe this process and try to make sure we have multiple eyes 
looking at all angles of the competition.
    Mr. Abercrombie. When you say ``observe the process,'' are 
you not taking over the process?
    Secretary Young. That is correct, sir.
    Mr. Abercrombie. So you won't be observing; you will be 
implementing.
    Secretary Young. But I will have an independent team 
observing the process also and advising me.
    Mr. Abercrombie. All right. Then that leads me to the 
timing question. Do you have confidence that the Department can 
make a sound KC-(X) source selection decision by the end of the 
year? And what challenges do you foresee that could prevent the 
Department from doing so?
    I think for our purposes here in the Congress, from an 
oversight point of view, this is an election year, I expect we 
will adjourn well before the election. There is some question 
as to whether we might come back. I think we need to have 
confidence that this can be done by the end of the year, 
especially because of the length of time that it has taken to 
get to this stage.
    Secretary Young. Mr. Chairman, that is an excellent 
question. I think when you start on a journey you have to have 
a goal, one. Two, this competition has drawn out for seven 
years now. It is very important to get on with it.
    I cannot guarantee you we will make that schedule. This is 
an event-driven schedule. Every single day is critical. There 
is probably an infinite number of obstacles. As you heard in 
earlier testimony, when we release the draft RFP, the draft 
request for proposals, that is a protestable issue. The air is 
charged around this competition. The Congress is watching it 
very carefully.
    So I have a personal obligation, the Department has an 
obligation to the warfighter and to you to try to deliver this 
product. I can't anticipate all the roadblocks that will come 
up, but we have laid out an aggressive schedule. We will try to 
make it. I cannot guarantee you we will make it.
    Mr. Abercrombie. Okay, again, though, but I am sorry, I 
have to pursue this with you a little bit.
    An aggressive schedule--is it by the end of the year? Is it 
going to be before the new Congress is sworn in and a new 
President is sworn in?
    Because, I will tell you, if you don't, if you aren't 
finished by the end of the year, then this thing is going to 
start all over again. And it is going to take a heck of a lot 
longer.
    And this also, I suppose, takes me to my next and last 
question, which has to do with the acquisition system then. I 
mean, if you are going to change all the criteria, then it may 
take longer. If it is just going to be something else--we need 
to go into that a little bit.
    And I think everybody here has their--some more than others 
because of the constituency situation and all the rest, but our 
principal constituency, as has been pointed out, is the 
warfighter and the taxpayer.
    Now, is the timing question--and I will ask you my other 
question, and perhaps you can combine the answer.
    The DOD currently maintains control of Air Force space 
system acquisition decisions and now the KC-(X). As the DOD's 
senior acquisition official--and you know how much respect I 
have for the work that you are doing. I have expressed that 
both publicly and privately to you. And I say again publicly 
that the procedures that you are using in your everyday work, 
including your work on the weekends, is something that I 
approve of personally and I think the Congress appreciates.
    As the DOD's senior acquisition official, what is your view 
of the Air Force acquisition system? And what changes, if any, 
is your office going to implement to ensure that the Air Force 
deficiencies are corrected in a timely manner?
    And will the DOD solution be to maintain permanent control 
of major Air Force acquisition decisions? Now, that is 
obviously a little bit of a separate question, but you have 
that power right now.
    Secretary Young. Yes, sir.
    Mr. Abercrombie. And I realize there is another 
administration coming and a new Congress to be elected. So the 
question, I think, is pertinent, because whatever time you have 
left--my view has always been you do your job, regardless of 
whether somebody else has done theirs or will do theirs or 
whether there is going to be some change in the future. There 
are no excuses for not doing your job when it is your 
responsibility. That is an observation, not an accusation.
    Secretary Young. No, but could I try to address it?
    Mr. Abercrombie. Yes.
    Secretary Young. I have spoken to the entire acquisition 
team several times now, and I speak to them weekly in notes. 
And I fundamentally reject the notion that we are into the 
drift period at the end of the administration.
    Mr. Abercrombie. Good.
    Secretary Young. This is a precious opportunity for me, for 
the next several months, to do as many things right as I 
possibly can. My principles disagree with putting this process 
on auto-pilot. So I have to do the best I can to start a 
process that could yield a source selection. If forces object 
to that, I still have to try to make progress, and I have to 
try to do it right. I may not make the end of the year, but I 
am going to make every effort to do that.
    With regard to the Air Force acquisitions process and 
control, I will speak on the specific term you mentioned, 
space. Personally, my personal opinion, I fundamentally 
disagree that a single service should have the total 
acquisition decision authority, milestone authority for a set 
of programs, as was done in space. And I would intend to retain 
acquisition authority over space programs. It provides a check 
and balance in the system.
    I am very happy with the service, the Air Force, or any of 
the services to execute their programs to the standards that I 
am trying to set. When those standards are not met, I intend to 
pull milestone decision authority, make programs special 
interest programs, and exercise OSD oversight of programs to 
achieve better results, which is what you are asking for.
    Mr. Abercrombie. And you will do that with the KC-(X)?
    Secretary Young. I will do that initially with the KC-(X) 
on the source selection. I would potentially yield contract 
execution to the Air Force until such time as I felt that 
execution was not meeting the standards.
    Mr. Abercrombie. Very good. Thank you.
    We are going to move to Representative Boyda and then to 
Representative Saxton.
    Mrs. Boyda. Thank you very much, Mr. Chairman, for such an 
important hearing.
    And we all appreciate the work that you are doing.
    I have the pleasure of representing two very large and 
important Army installations and the head of the National Guard 
in Kansas. We just very proudly put to bed a KC-135E after 51 
years of service. You can imagine where my question is going.
    It would appear, when you are looking at it, as if there is 
a surely unintentional but yet significant bias that is brought 
into the whole program when we look at a lifecycle that is 25 
years.
    Can you just comment on that? I have some follow-up 
questions, too. But why was 25 years chosen? Do you think that 
it, in fact, does have a bias?
    I think the KC-135s were initially predicted to last for 10 
years. As I say, it was lovingly tucked in bed after 51 years, 
the oldest one in our fleet.
    Could you just comment on that, please?
    Secretary Young. Certainly. I apologize, but I do want to 
be clear: I absolutely reject the notion of bias in the 
enterprise.
    Mrs. Boyda. Certainly, I fully believe that it would have 
been unintentional, had it been there. But do you think it put 
some bias into it?
    Secretary Young. I want to talk about moving forward.
    Mrs. Boyda. Okay.
    Secretary Young. I think----
    Mrs. Boyda. My question, maybe in the interest of time for 
everybody, can we get to 40, 50 years, is where we are going? 
Why would we not have a lifecycle that is more representative 
of what the expected lifecycle of this is to really be? Why 
would we cut that in half?
    Secretary Young. Well, I don't know--there are a couple of 
things. The truth is, KC-135s currently have, on average, 
17,000 hours, and they have a structural life of 36,000 to 
39,000 hours. Those airplanes have plenty of life. We could 
continue with those airplanes structurally. Those airplanes 
were designed in a time where we developed more robust 
structures. Today's airplanes have less robust structures. I 
think it remains to be seen whether those planes can serve for 
25, 40 or 50 years.
    Having said that, also there is another important piece. 
And we are constantly having this discussion across the board 
in acquisition in the Defense Department about lifecycle costs 
and properly prioritizing lifecycle costs, which are still a 
predicted and projected issue versus the known cost of 
developing and purchasing something.
    We should assess both. But the future is somewhat soft. We 
have seen in many systems, particularly our fighter aircraft, 
that how we use those aircraft are different than what we 
projected, and so we experience different lifecycle costs 
associated with them. So it is very hard to predict that.
    And the Air Force made a decision that was grounded in the 
concept that it is hard for us to predict lifecycle costs 
accurately, and certainly out to longer periods of time, you 
certainly can't predict what the price of fuel will be out----
    Mrs. Boyda. Excuse me for interrupting, but it seems as if, 
in the evaluation, some of the criteria would be looking at if 
they were 25, if they were 35, if they were 45, or 20, 30 and 
40, to have a full evaluation of what some contingency may be.
    It seems as if, you know, again, these 135s, maybe the next 
ones aren't going to last for 50 years, but there is, I think, 
a very strong possibility that they will last beyond the 25 
years. And so should that not be included as a criteria for 
what if these go?
    The price of gas--do you know what is the price of fuel 
that will be put into that equation?
    Secretary Young. I could get that for the record for you.
    [The information referred to can be found in the Appendix 
beginning on page 174.]
    Mrs. Boyda. Okay. I assume that, as greenhouse emissions, 
all of these political and important factors are taken in, the 
fact that this aircraft uses so much less fuel I would think 
would be a very, very significant portion of this, in addition, 
of course, weighed into all of these. But the lifecycle costs--
you know, I just bought a new car, and clearly, what do you 
think the number-one issue that I was worried about?
    Secretary Young. I am sure fuel consumption, in today's 
environment.
    Mrs. Boyda. Yes.
    Secretary Young. You don't know whether that car will last 
5 years or 10 years or 15 years and what it will cost you at 
year 15 versus year 5.
    Mrs. Boyda. I understand that. But, again, I think we have 
a historical record to say that these planes--you know, let me 
point out again, too, I think everybody in this room knows it, 
but that 51-year-old KC-135 was built by the Boeing 
Corporation. I think everybody always appreciates that. It was 
projected to be out there for 10 years; it stayed out there for 
50 years.
    So when will we know what the lifecycle projections in the 
RFP will be? You will be putting that out with the RFP, or will 
you be able to comment on that any earlier?
    Secretary Young. We will put that in the RFP.
    I had a chance to talk with one of your colleagues, 
Congressman Dicks, yesterday, and so I wanted to adjust the 
discussion I had with him. I can do it in responding to your 
question. But I have gone----
    Mrs. Boyda. Let me just say in closing, too, as I see that 
I am getting to the yellow, that, you know, the people in 
Kansas ultimately want the very best value for our fighters and 
the very best value for our tax dollars as well. Ultimately, 
that is what they all want; would never suggest anything else.
    But this has become something that has gotten so much 
attention. I would just ask that you would consider, if you are 
going to use 25, then also consider if it would do. So that, 
when this comes out, we will be able to say to the good people 
of America, not just Kansas, that you have considered what the 
consequences are of this over the long term in any of these 
given scenarios and evaluated those and weighted those 
accordingly.
    So I certainly appreciate your----
    Secretary Young. As I said in my opening statement--and I 
had to go back and review the record after my discussion with 
Congressman Dicks--the capability development document, or the 
requirements document, suggests that the tanker should have a 
life of 40 years. So we are going to consider lifecycle costing 
for 40 years, because I told him I would ground myself in the 
requirements documents.
    Mrs. Boyda. All right.
    Secretary Young. I also, though, as I said, intend to 
ground myself in best value and reasonably known costs for the 
taxpayer. So we intend to evaluate the development costs and 
the procurement costs, and have that as a higher-confidence 
estimate, I believe, than the lifecycle costs, but we will 
evaluate both.
    Mrs. Boyda. So you will be using the 40 years in the 
lifecycle cost? Is that what you are saying?
    Secretary Young. I said we are going to consider that. I 
need to understand--and I am not going to make changes based on 
discussions in hearings and with Members of Congress. But I 
will tell you----
    Mr. Dicks. I think it is in the document that you 
suggested.
    Secretary Young. Right. It is grounded in the document. And 
I need to understand how I will do that. Because I don't want 
either of the bidders to perceive there was unfairness or not. 
But at least one grounded number is 40 years. Another grounded 
number is the original competition to 25 years. We need to 
decide how to handle that. But, for sure, I would expect, based 
upon the requirements document, that we will added 40. We may 
delete 25. I need some room to make those decisions.
    Mrs. Boyda. Thank you very much.
    I yield back.
    Mr. Abercrombie. Thank you.
    Mr. Saxton, to be followed by Mr. Skelton, Mr. Miller and 
Mr. Courtney.
    Mr. Saxton. Mr. Secretary, thanks for being with us today.
    As you indicated earlier, under your leadership, DOD will 
now assume the responsibility for the completion of this 
acquisition program. And we know how hard you work and how 
diligent you are about your commitment to these types of 
matters. And so it gives us a good feeling that you are in the 
position that you are.
    Can you tell us, in as specific a way as you can, how you 
will do this differently going forward? Are there changes that 
you will make in the process? Are there changes that you will 
make in requirements? How will this process move forward under 
your leadership?
    Secretary Young. I think it will be hard for me to talk 
about it in specific terms, particularly without the draft RFP.
    To the extent I can talk to you about it, one, I have 
already mentioned the personnel changes that Secretary Gates 
directed.
    I think the other major issue we have to do is prioritize 
the requirements. As has been noted, there were some 808 
specific requirements. And I believe it is fair to say the GAO 
said, if we had a prioritization, we needed to indicate that 
and state that. And so the RFP will work to make that clear, so 
that both the industry teams can understand what we value, what 
the warfighter values, grounding ourselves in the requirements 
document, and then use that to let them modify their proposals. 
And then we will grade those proposals.
    We will have the more independent team. And I think we 
will, as I have just discussed, look at costs a little 
differently. I think we will elevate cost in that discussion, 
so that we are balancing the requirements with the cost in 
trying to get what the warfighter needs and what the taxpayer 
can afford.
    Mr. Saxton. If you were watching the hearing earlier, you 
may have heard several discussions regarding the size of the 
aircraft.
    There are those who believe that the intent in replacing 
the KC-135 fleet was to do so with an aircraft that could do 
the mission that the KC-135 does. And there are those, as you 
probably heard, that believe that the larger aircraft cannot do 
the mission in the same manner as efficiently and as safely, 
perhaps, as the more moderate-sized aircraft.
    Any comments?
    Secretary Young. Certainly. I prefer to not talk about the 
size of the aircraft.
    The requirement, the threshold requirement or minimum 
requirement for fuel offload is the current capability of the 
KC-135R. The capability development document clearly states 
that exceeding the fuel offload or radius threshold--this is 
how much fuel can be offloaded at different distances--is the 
objective requirement, exceeding it.
    The requirements document record indicates that the 
objective is greater than the threshold, and that there is 
added value--I quote--that there is ``added value to the 
warfighter for additional offload.'' It was debated in the 
Defense Department making the threshold and the objective the 
same, and it was determined that there was clearly operational 
value associated with additional fuel offload.
    Fuel offload is one of 800 factors. It should be given 
consideration because this is a tanker. While the objective is 
for more fuel, it should be bounded and I think will be bounded 
by cost. And those are how we will approach this going forward, 
in this and other areas.
    Mr. Saxton. Thank you, Mr. Chairman.
    The Chairman [presiding]. Mr. Secretary, in the absence of 
Mr. Abercrombie, I am claiming seniority and will take this 
opportunity to ask a few questions, if I may.
    It struck me a few moments ago, you used the phrase 
``maintain objectivity.'' And that, of course, is what everyone 
sees a necessity for. There was a necessity for it before. And 
the good gentlemen seated behind you from the GAO said the 
train came off the tracks seven different times.
    Now, as I understand it, you were not personally involved 
in assisting the Air Force in this decision. Is that correct?
    Secretary Young. As the senior DOD acquisition official, I 
approved the milestone that let the Air Force award the 
contract. So I don't want to tell you I was totally uninvolved. 
But I was not part of the source selection process or the----
    The Chairman. Right. That is my question. Some of your 
staff was; is that correct?
    Secretary Young. Some of the staff participated in an 
oversight team that I established, as I noted, late in the 
game. I don't know that any of my staff was on the Source 
Selection Advisory Committee.
    No, there were no OSD staff members on that committee.
    The Chairman. Did any of your staff members that were 
familiar with this procedure note any of the seven sustained 
objections that the GAO sustained----
    Secretary Young. I think the answer is----
    The Chairman [continuing]. Before the decision?
    Secretary Young. Right. The answer is, no, we did not. And 
we have talked about that at some length.
    The Chairman. Well, what assurance do we have, in light of 
the train coming off the tracks seven times in the past, that 
the objectivity will be maintained in the future process?
    Secretary Young. Mr. Chairman, one thing I think, I don't 
want to confuse objectivity with the seven findings. I would 
add to that, one, we will start with objectivity.
    Two, I believe the two proposals totaled 11,000 pages. The 
RFP was a thousand pages. And then the record goes well beyond 
that. And I certainly would compliment GAO for combing through 
that record.
    There were some very detailed things found in that record 
that I agree probably should have been seen. But it will be 
difficult, in an enterprise of this scope, to guarantee there 
will be absolutely no error. We will make that effort, going 
forward.
    That is part of why Secretary Gates believes we should 
address the GAO findings and build on this substantial record 
and make corrections to the record through the amended RFP and 
the modified proposals, in an effort to hopefully mitigate and 
avoid any further mistakes or errors or issues.
    The Chairman. The previous selection was made upon an RFP 
that was made public and available to the contractors. Will 
that same RFP remain in force and effect in the future for a 
future selection?
    Secretary Young. Well, it won't be the same RFP. We will 
amend that RFP, put it out in draft form, give industry a 
chance to comment, and obviously the Congress will have a 
chance to see it.
    And then, as you heard in the previous panel, that RFP 
action is a protestable action. Were that to be protested, to 
Chairman Abercrombie's point, we cannot possibly make a source 
selection decision this year.
    The Chairman. The potential contractors have the right to 
question the RFP. Is that correct?
    Secretary Young. That is correct, sir. They have the right 
to protest it. They certainly have the right to engage the 
Government in discussions about aspects of the RFP that they 
are comfortable with or uncomfortable with. That is the avenue 
I hope they will take, so that we can get an RFP--you know, 
obviously, both parties will jockey for that RFP to be to their 
advantage. The Government will try to continue to navigate the 
water of the requirements and getting best value for the 
taxpayer.
    The Chairman. What is the remedy if one or more of the 
contractors disagree with the RFP? This is a procedural 
question. Do they have the right to protest that to the GAO, as 
well?
    Secretary Young. Yes, sir.
    The Chairman. The RFP?
    Secretary Young. Yes, sir, they can protest the RFP.
    The Chairman. For a layman such as I, if there is a new 
RFP--which stands for what, Mr. Secretary?
    Secretary Young. We would call it, in the legal terms, it 
would be we will amend the request for proposal, the RFP.
    The Chairman. All right. So to a country boy like me, we 
would say the criteria will be changed for any future source 
selection.
    Secretary Young. I am less likely to say the criteria will 
be changed, because we have a capability development document 
that has been modified a time or two, but in existence, I think 
finalized in 2006. It states our requirements.
    What we need to do, and I believe consistent with the GAO 
findings, is the Government has the right to make clear which 
of those requirements we may place greater or lesser value on.
    There was some concern on the part of the GAO that we--I 
really don't want to speak for the GAO, and I want to limit my 
talking about the past. But, in this case, I will give myself a 
little license to answer your question.
    We told the offerors we would like you to meet as many of 
our requirements as possible, and we did not do, I think, an 
adequate job of saying which of those requirements were most 
important to the warfighter.
    We need to, in the new RFP--I don't think we want to change 
the requirements; there is a long history there--but we do need 
to state for the industry bidders which ones are important, so 
they can address those in their proposals and then we can 
evaluate their efforts.
    The Chairman. I think I understand you, Mr. Secretary.
    Secretary Young. Okay.
    The Chairman. A basic question, and I would hope you could 
answer this. In Title 10, subsection A, part 4, chapter 144, 
section 2440, entitled ``Technology and Industrial Base 
Plans,'' it states that, ``The Secretary of Defense shall 
prescribe regulations requiring consideration of the national 
technology and industrial base in the development and 
implementation of acquisition plans for each major defense 
acquisition program.'' And I would assume that this proposed 
contract is a major defense acquisition program.
    Did the Department prescribe regulations as prescribed by 
this section?
    Secretary Young. I believe we have existing regulations to 
implement this section. And I would like to get for, if I could 
borrow your words, the country boy that cited the code to me 
how exactly those regulations were applied in this particular 
solicitation. I think that is your question.
    The Chairman. Would you answer that for the record?
    Secretary Young. Yes, sir.
    The Chairman. I would appreciate it.
    Well, my objective is the same as yours, Mr. Secretary, is 
that the objectivity be maintained in this whole process. And I 
wish you well.
    Secretary Young. Thank you.
    [The information referred to can be found in the Appendix 
beginning on page 174.]
    The Chairman. Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    Mr. Secretary, I know you have already said you don't want 
to go back, but I want to know a couple of things. Because I 
asked some questions to GAO, and we are just trying to find out 
some parameters.
    You used the number 110 in the protest from Boeing, and 
they said they don't know where that number came from. And I am 
just trying to figure, where did that number come from? Where 
do you come with 110?
    Secretary Young. Because I had the luxury of watching the 
hearing, the Air Force could answer this question, but I will 
tell you what they told me, because I asked the same question.
    It is my understanding the Air Force, who had to be able to 
address these issues, counted the number of issues in each 
filing, and that totalled 110 issues. The Air Force has 
analyzed that, and they feel--and this is subject to judgment--
that there are 52 discrete issues. So there is, as I said, a 
significant degree of overlap in the issues.
    I heard the GAO say a different view of this. So I don't 
know. We can go do some homework for you on the record on that. 
But the Air Force came up with that number, and I asked them 
the basis for it, and those are the two pieces of information 
they gave me.
    Mr. Dicks. Mr. Chairman? Could we get an answer from the 
GAO on the same subject?
    The Chairman. Let's let the gentleman----
    Mr. Miller. For the record?
    The Chairman. For the record. Let the gentleman testify. If 
we need to recall witnesses, we can do that at the proper time.
    Mr. Miller. Also, to your knowledge, were there any 
protests to the RFP, the original RFP?
    Secretary Young. Not to GAO, sir. That is the only forum 
for a protest. There were----
    Mr. Miller. Well, I am sorry, then I misunderstood what you 
said. You said there was a way that contractors could be 
engaged in the process. And you said they try to mold to their 
specifications.
    Secretary Young. As part of our open and transparent 
efforts, when we issue a draft RFP, we issue it for industry to 
offer their comments. So there is no question industry offered 
comments to that draft RFP. We adjudicated those in some 
manner.
    I mean, the Government reserves the right to request what 
it seeks to buy. The only avenue beyond that, you know, we try 
to be responsive and listen to industry, but then when we issue 
a final RFP, they would have to protest it.
    And to be clear, neither bidder protested this RFP. They 
understood the terms and conditions of the RFP and accepted it.
    Mr. Miller. And, Mr. Secretary, that was my question, did 
either one protest the final RFP, and your answer is no.
    Secretary Young. No, sir.
    Mr. Miller. What process----
    Secretary Young. Can I add another comment, too?
    Mr. Miller. Please.
    Secretary Young. My team has pointed out the Inspector 
General was asked to review whether the RFP reflected our 
requirements document, and the Inspector General did review 
that and did issue a report stating that the RFP reflected our 
requirements document.
    Mr. Miller. What process is the Department going to employ 
to deal with, again, proprietary information, given the fact 
that the contractor that was selected, much of their 
information is now known, in protecting in this limited 
rebidding process?
    Secretary Young. We are going to continue to protect 
proprietary information. It is required, as I noted, by law.
    I am not sure I know everything that has been said or 
discussed. Some of the information that is out there is 
speculation. And some of it, though, is not proprietary. It 
reflects the total cost to the Government. That includes 
Government costs, Government-furnished equipment.
    So I am not sure to what degree very vendor-specific 
proprietary information is out there. It should not be. We will 
continue to protect it and not release that information.
    Mr. Miller. This question may have been asked already, but 
do you anticipate giving additional credit in the new RFP for 
cargo or passenger capacity?
    Secretary Young. I believe that cargo and passenger 
capacity were issues that were discussed in the protest. The 
GAO findings do not disagree with how the Government handled 
those issues. I am not seeking to change issues that were not 
subject to sustained protests unless they don't reflect the 
requirements document. And, again, I believe the RFP reflects 
the way the Government wanted to handle cargo and passengers in 
the RFP.
    Mr. Miller. My question surrounds maybe a change in the 
platform that one of the contractors might offer. Do you 
anticipate the possibility that Boeing may put the 777 in, 
knowing that there may be an opportunity to gain additional 
points? And if that happens, are we going away now from the KC-
135 to more like KC-10 requirements in the type of aircraft 
that we are trying to procure?
    Secretary Young. Well, the requirement will not change. And 
I would again note that the requirements document clearly says 
the threshold is the KC-135R and the objective is to carry more 
fuel than that aircraft.
    Legally, it is my understanding that modified proposals can 
be modified to the degree that they are substantially new 
proposals. You can change the item you initially proposed; you 
can propose a totally new item. The industry bidders have 
substantial license in modifying their proposal to propose a 
different aircraft.
    Mr. Miller. My time is running out. I am sorry, Mr. 
Secretary, but if they were to propose the 777, what would that 
do to the expedited proposal process that you are talking about 
trying to get done by the end of the year?
    Secretary Young. It is one of the issues that I alluded to 
with Chairman Abercrombie. We will take whatever time is 
necessary to properly evaluate that. If a totally new aircraft 
is proposed, I expect it will take more time than we have 
allotted in the schedule to evaluate that proposal.
    Mr. Miller. Thank you.
    Mr. Abercrombie. Mr. Miller, I suggest that when we get to 
the following session that we can pursue this in a little more 
depth.
    Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    Secretary Young, I am sure you probably don't want to keep 
going back to this question of objectivity, but, frankly, for 
people watching this hearing in the public, I think there are 
still a lot of questions about Secretary Gates's decision to 
have your office now in charge of this, given the fact that 
your office has a history in terms of the prior decision.
    And I am still a little unclear from your testimony so far 
about exactly what the involvement of your office was in the 
last go-around. You described earlier that it was, sort of, 
late in the game. And I was just wondering if you can help me 
understand what you mean by that.
    Are you saying that your office did an after-the-fact 
review after the Air Force completed its process, or was your 
office involved at an earlier stage?
    Secretary Young. There was an enormous amount of history 
that preceded me. I became acting in July. I was confirmed by 
the Senate in November. The members of the staff in that office 
worked with the Air Force through this process in the way we 
work with people on every acquisition.
    I took the step in December of asking a small team in my 
office to go observe the source selection process. They had a 
limited amount of time. They did not have the kind of time to 
comb through in the level of detail that the GAO did. And I 
think that is probably the answer as to why we did not find 
these things, because we had highly-qualified people go and 
start to observe the process, but not do it from the beginning, 
and they did not spend the 120 days in the hearing process that 
GAO did.
    But, in the end, my team's primary role was to observe that 
process. They made suggestions to the Air Force that the Air 
Force corrected. And I think you would hear that from Secretary 
Payton. But they did not participate in making the source 
selection decision. I did not participate in making the source 
selection decision.
    Mr. Courtney. So then your testimony is basically that you 
started to get involved with this process in December of 2007, 
with the decision in February.
    Secretary Young. But they were looking at it from the point 
of view of, was the Air Force properly evaluating the 
proposals? I did not want us to make basic mistakes in 
evaluating the proposals or grading. I wanted to be able to 
ensure fairness. Those are the kinds of questions I ask my 
team, to make sure that everyone was being treated equally and 
fairly.
    Mr. Courtney. And in terms of the people who were involved 
in it, I mean, is it your intention to have those individuals 
continue or to take on this task from this point forward?
    Secretary Young. Yes.
    Mr. Courtney. Same people?
    Secretary Young. I would expect those same people to, 
again, provide independent oversight. I have not put those 
people on the--or Secretary Gates has not put those people on 
the Source Selection Advisory Committee. That is a new set of 
people.
    Mr. Courtney. So that is a completely different cast of 
characters?
    Secretary Young. Yes, sir.
    Mr. Courtney. Who are not in any way connected to the prior 
decision?
    Secretary Young. That is correct. All of the joint people 
we are putting on the panel were in no way connected. And we 
are seeking to have people--the Air Force people that will be 
on that panel, we are seeking to have people that were not 
involved in the previous source selection decision.
    Mr. Courtney. Well, again, as Mr. Skelton said, I think the 
Secretary's decision and announcement yesterday certainly gave 
a lot of people the impression that we are starting with a 
clean, new process. But given the fact that people have had 
contact with the prior decision, I think there is a lot of 
concern that is starting to surface now about really whether or 
not, you know, we are dealing with the same umpire making the 
same call. And----
    Secretary Young. Sir, all I can tell you is that discussion 
originates in a point of view that people in the Pentagon, in 
the acquisition team, have a bias as to what they want to buy. 
As I said in the beginning, and I have issued notes to this 
effect, the acquisition team does not favor any entity or any 
proposal or any company.
    The acquisition team takes the requirements and goes out 
and takes advantage of what has made America work. We ask 
companies to propose creative and innovative and competitive 
ideas. We evaluate those ideas and make a source selection 
decision.
    I have X amount of expertise in the Department to 
successfully pick a tanker. I would tell you the one thing to 
do is go take people that have never touched or seen a tanker 
and have a source selection through that process. I mean, I 
have to use some of the expertise that is in the Department to 
do this. And, mostly, I am using expertise in the acquisition 
team.
    And, indeed, we have made an effort, through the 
Secretary's direction, to pick people for the Source Selection 
Advisory Committee that were not party to the first source 
selection to get the very objectivity you seek.
    Mr. Courtney. Well, I hope for your sake and our country's 
sake that it all, sort of, plays out in a way that the 
confidence level is there. But, to me, I can understand why 
some people would be concerned.
    But one other question I guess is just, you testified 
earlier that there could be an amendment to the RFP, given----
    Secretary Young. That is a term of art, that we need to 
amend the RFP to address the GAO findings and make sure the 
requirements are--well, to address the GAO findings.
    Mr. Courtney. And you indicated that would be something 
that would then be----
    Secretary Young. Issued in draft form for comment.
    Mr. Courtney. By Congress, as well?
    Secretary Young. Congress can review that, yes, sir.
    Mr. Courtney. And are you envisioning that by the end of 
September or October?
    Secretary Young. It is my hope that we could issue the 
draft RFP--my team cringes--I say late July, they say early 
August. Every day here----
    Mr. Abercrombie. Excuse me, Mr. Young. Will you defer for a 
moment?
    Mr. Courtney. Absolutely.
    Mr. Abercrombie. If you say July----
    Secretary Young. Late July.
    Mr. Abercrombie [continuing]. You get a team that says 
July. If somebody says August, show them the door.
    Secretary Young. Yes, sir.
    Mr. Abercrombie. My staff and every staff of every Member 
here works for the public interest . If they don't want to work 
for the public interest, tell them to get a job that pays wages 
by the hour.
    Thank you, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman. I have no further 
questions.
    Mr. Abercrombie. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    I have two questions.
    The amended RFP, are you just going to reopen the eight 
items that GAO addressed when you amend?
    Secretary Young. As a minimum, we are going to seek to 
address the GAO findings. I want to make sure the requirements 
are reflected in that RFP.
    We obviously have to--one of the findings says that we to 
indicate any prioritization or weighting the Government wants 
to assign to those requirements. So I need to address the GAO 
finding by also making sure my requirements are well-reflected 
and properly reflected in the RFP. And if there are things in 
the RFP that are beneficial to the taxpayer, I will address 
those.
    Obviously, we have discussed how we evaluate cost. 
Evaluating cost as one giant lifecycle bundle I think is 
awkward. I think we should assign some value to the known cost 
of developing and buying the aircraft, but we also will likely 
make an adjustment and make sure we properly evaluate the 
lifecycle costs, but look at those two in terms of our relative 
confidence in the two numbers.
    Mr. Rogers. Well, to use your phrase, the GAO went through 
this with a fine-toothed comb and they only found these eight 
areas where there seem to be at least the hint of a problem. So 
why would you go outside the four corners of those eight areas? 
Seems like you are inviting more of a problem when you do that.
    Secretary Young. I don't want to give you the wrong 
impression. It is my intent to try not to go outside the four 
corners of those areas.
    But the GAO--I don't think there is a specific finding 
related to cost. And I think it is in the interest of the 
taxpayer to make sure we--well, there is a specific finding 
with regard to the cost model. But the totality of the cost 
evaluation, I think we want to consider making sure we properly 
evaluate that for the benefit of the taxpayer. It overlaps with 
the GAO finding. So we are going to try and stay in that box, 
sir.
    Mr. Rogers. Right. Thank you.
    The other thing, it goes back to Chairman Abercrombie's 
point. I am very concerned about this dragging on too long. We 
should have had this thing being built already.
    And I may be displaying my ignorance here and you may have 
already talked about it, but why would it possibly take more 
than six months to complete this? You talked about getting it 
done by the end of the year. That seems awfully bureaucratic 
and bogged down. Why would it take that long?
    Secretary Young. I ask myself these questions regularly, 
Congressman. But I would tell you, I have learned--I have been 
involved, in the far past, with one protested source selection. 
I have been involved in four other source selections that were 
not protested. There is a substantial--I mean, it takes time to 
receive 11,000 pages, review 11,000 pages, and grade it to a 
level of scrutiny that the GAO will decide is adequate.
    Source selections have become extraordinarily sophisticated 
endeavors. If we limit the change--I mean, that is what the 
answer would be. And the answer to me is, if we limit the 
change, and industry is cooperative, and the Congress allows us 
the opportunity to proceed, we may be able to do it in six 
months and, in that process, create a record that can withstand 
what may well result in additional GAO scrutiny through another 
protest. Because it is hard to see a situation where either 
company is going to accept whatever outcome of this 
competition.
    Mr. Rogers. Okay.
    Thank you, Mr. Chairman.
    Mr. Abercrombie. Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Thank you, Secretary Young, for being here.
    And I am sure you are aware of this, but just for the 
record, there is a lack of confidence at this point in the 
process because of a lot of the mistakes that were made. And I 
take you at your word that there was not a bias on your part or 
within the Air Force. It just seems coincidental that all of 
the mistakes were made in the favor of one company and against 
another. That many of the subjective judgments were made that 
way as well has given to a lack of confidence.
    I mean, at the most fundamental level, you got the math 
wrong, okay? The low bidder that was identified was not the low 
bidder if you added it up correctly. And you can comment on 
that in a minute; I will give you that opportunity. But it does 
lead to a lack of confidence. So this is going to be very well-
scrutinized when you say you are going to go back and change 
the RFPs.
    And my first question on changing the RFPs, as I look at 
what the GAO found, I don't see why it is necessary, off the 
top, to change the RFPs to meet them.
    I mean, just three of the findings: The Air Force did not 
reasonably evaluate the capability of Northrop Grumman's 
proposed aircraft to refuel all current Air Force planes--there 
is other stuff there--that was one of them. The Air Force 
unreasonably evaluated Boeing's estimated nonrecurring 
engineering costs, blah, blah, blah. The Air Force did not 
reasonably evaluate military construction costs associated with 
the aircraft.
    Why couldn't you just go back and get it right? Why do you 
need to change the RFP? Couldn't you go back and reasonably 
assess those things?
    So that is the first question, is the necessity of changing 
the RFP. And, like I said, we are skeptical about the needs to 
change that RFP and what will happen in those changes.
    That is a question. Why are you changing the RFP when you 
could simply go back and do correctly what the GAO identified 
that the Air Force is doing incorrectly?
    Secretary Young. We are going to change the RFP in order to 
address the GAO findings.
    Mr. Smith. I thought I asked a fairly clear question there. 
Maybe I didn't.
    Secretary Young. I think the rest of the question is an 
editorial comment based on----
    Mr. Smith. The first time part was an editorial comment. I 
had to get that out. I apologize. I will give you perfect time 
to respond to that. The second part of the question was a very 
specific question.
    You are saying you are going to go back in and change the 
RFPs in response to the GAO. Makes us a little nervous, where 
the RFPs have been shifting, and the whole issue about--I know 
you don't want to talk about the size of the tanker, but at the 
end of the day that is the issue. The Air Force, back in 2002, 
laid out a very clear set of specifics as to why a larger 
tanker wouldn't work, and now they have said they are going 
back to change that on the fly, which has created a large 
number of problems.
    But the question is, specifically, you have said you have 
to change the RFPs in response to the GAO. I just read you 
three of their findings, which simply said that the Air Force 
did not reasonably evaluate what happened. I don't see why 
there is a need to change the RFP for that. They could go back 
in and reasonably evaluate those things.
    That is my question. Does that make sense?
    Secretary Young. Yes. And I think, when I say ``change,'' 
in some areas we may not have to change the RFP. We just may 
have to issue the RFP and let the bidders propose modified 
proposals and make crystal-clear that, in the proposals and 
through discussions with industry, they must provide certain 
pieces of information required by the RFP. And I think some of 
the GAO findings demand that information. We will make clear 
that information is required.
    Mr. Smith. In what areas do you think the GAO does require 
the changing of the RFP?
    Secretary Young. I believe the first two findings of the 
GAO, one--again, I hesitate, but I have studied this. Well----
    Mr. Abercrombie. Want to take a moment and refer to notes 
or take a look?
    Secretary Young. No, no. It is really an issue--some of 
this can be better discussed in the closed session. I will seek 
to address it in the open session.
    The first finding says that we had 808 requirements and we 
graded them down at the detailed level, and we had not, I 
think, if I can paraphrase--GAO is here, and they can comment 
in the closed session--but we needed to be clear with industry 
on the relative value of those 800 requirements. And we agree 
with that. Because everything in those 800 requirements is not 
equal. In the source selection process, we did not make that 
adequately clear. So we need to clarify that in a new RFP so 
industry can bid accordingly.
    I think the other issue is fuel offload. That is the second 
finding. In that area, as I noted, we accept the GAO finding. I 
would tell you we don't agree. Because the capability 
development document clearly with a record says that the 
objective was to provide more fuel offload capability than a 
KC-135R. And I have documents I can provide to you that say it 
was discussed and that there is operational value for the 
warfighter to carry additional fuel. And so we need to clarify 
that in the RFP and let industry teams bid accordingly.
    Mr. Smith. Okay.
    I am out of time, Mr. Chairman. Thank you.
    Mr. Abercrombie. Thank you.
    At this juncture, before I move to Mr. Larsen, Mr. Courtney 
has requested that a letter addressed to the committee for 
today's hearing from the Honorable M. Jodi Rell, who is the 
Governor of Connecticut, be submitted for the record, which I 
will do, without objection.
    [The information referred to can be found in the Appendix 
on page 96.]
    Mr. Abercrombie. And now Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Secretary Young, thanks for coming today.
    I want to just clarify some terms. Are you the new source 
selection authority?
    Secretary Young. Secretary Gates announced at a press 
conference that I am the new source selection authority. We 
would normally not reveal that information. That is a decision 
he can make.
    Mr. Larsen. Okay. Okay. All right.
    And the new Source Selection Advisory Committee, is that 
the independent team that you talk about, or is that something 
separate?
    Secretary Young. No, that is--through the normal source 
selection procedure, people use different acronyms but we have 
a source selection evaluation team that evaluates and analyzes 
in technical detail the proposal. They provide that data, with 
possibly some judgments, to a Source Selection Advisory 
Committee, who begins to aggregate and evaluate and pass 
judgment on that data, so that committee can make a 
recommendation or at least provide relative values to the final 
source selection authority.
    Mr. Larsen. So the independent team that you discuss, then, 
is what?
    Secretary Young. Independent team would be a small team of 
people who will watch the work of the Source Selection Advisory 
Committee and ensure that they fairly judge, fairly use and 
equitably use tools, if we do an analysis or a model or a 
review, we do it equally between all parties and just make sure 
all procedures are followed.
    And then I hope, given the chance to start from the very 
beginning, they will have a chance to see whether the process 
the SSAC is taking and make sure they create, as I think you 
heard from the GAO today, an adequate record to explain the 
Government's action so that we can have a decision supported 
fully by the record.
    Mr. Larsen. Okay.
    Mr. Chairman, I will just note that the red light is on. I 
know I haven't been at this for five minutes. If you could take 
care of my light there, so I don't use too much of Norm's time.
    Mr. Abercrombie. I don't know if you can get a consensus on 
that. Go ahead. Take all the time you want. [Laughter.]
    Mr. Larsen. If I could, Mr. Smith from Washington brought 
up a point about the GAO's findings and whether or not you 
actually need to do just a better job of documenting the 
decision versus actually changing the RFP.
    Can you help me understand, help the committee understand, 
how you will choose to make a decision about does something 
need to change versus we just need to do a better job of 
documenting a decision?
    Secretary Young. Well, that is the process we are going 
through right now. To the extent we need to change it, it will 
be based on the findings that GAO had and then how well those 
findings are grounded in our requirements document, because we 
are going to give that the greatest weight.
    I think in every case, though, we are going to seek to have 
as robust a record as possible, because I have to anticipate 
another protest.
    Mr. Larsen. You have mentioned a couple of times, used the 
term, that you need to elevate the costs. As I recall in the 
original RFP, the cost price criteria was not the number-one 
criteria. In other words, you weren't going to necessarily 
decide on the least-expensive-per-unit offer. It was going to 
be a factor, but that doesn't necessarily define best value.
    But now you are discussing more, I have heard several times 
you say ``bounded by costs,'' ``elevating costs.'' Are you 
trying to tell us something there? Are you trying to tell us 
something, that costs might have more weight this time around 
than before?
    Secretary Young. I need to talk with you about that in 
closed session. I can answer that question.
    I can just tell you that cost was significantly further 
down the list and----
    Mr. Larsen. In the----
    Secretary Young. In the major factors. And I believe, 
across the board in the Defense Department, I am being asked by 
the Congress to make cost a more important factor.
    Mr. Larsen. I will take that as a general comment, and we 
can explore that maybe a little bit later.
    And then also with regards to costs, you talked about 
development and procurement. And you sound like you feel much 
more confident in trying to develop development costs and 
procurement costs for the sake of trying to evaluate a 
decision. But lifecycle costs, you are still a little less 
confident about how to develop something that is a little more 
hard and fast.
    Is that accurate?
    Secretary Young. I think I just want--well, I don't know. I 
shouldn't speak for you. There is a greater certainty----
    Mr. Larsen. I am asking objectively. I am not trying to----
    Secretary Young. No, there is a greater certainty--well, 
for one, the day I make a source selection, if I am able to 
award the contract, the development costs, I am going to sign 
and start paying them tax money. I should know that pretty 
well. I am going to have bid prices for the first five lots of 
airplanes.
    So those are going to be higher-confidence numbers than 
lifecycle. That does not relieve me of the burden of doing the 
best I can to predict lifecycle costs. I have just tried to 
tell you I think I am going to, under any circumstance, have 
the most confidence in the development and production costs, 
and I am going to do my best to have some level of confidence 
in the lifecycle costs.
    And then I have to recognize that I can't predict the price 
of fuel and that the warfighter is going to use this airplane 
like every other airplane and weapon in a different way, no 
matter how well I predict it.
    Mr. Larsen. I will just conclude with this, because I see 
the yellow light is on, and I know I am probably over my time 
in reality; certainly now, with the red light.
    But you have mentioned the eight points in the GAO 
findings, you have to address those at a minimum. You are 
looking at the capabilities and requirements document and best 
value.
    But with regards to fuel costs, that is really fully 
mentioned and more fully discussed in a mere footnote in the 
GAO report, footnote 89 on page 66. We have all that memorized 
over here.
    However, with fuel costs being what they are today, does 
that elevate itself out of a footnote for you and into 
something much more important for you to be looking at?
    Secretary Young. Well, I disagree with the idea that it 
wasn't important to start with. We evaluated lifecycle costs. 
But I would agree with you that from--we respect even the 
footnotes. And I have already asked the team and we have agreed 
and made plans that we will, as a minimum, re-evaluate our 
lifecycle process. And if we think there are changes to be made 
to give it higher confidence for everyone participating, we 
will do that. I accept that and respect GAO's comment in that 
regard.
    Mr. Larsen. Great.
    Thank you, Mr. Chairman.
    Thank you, Secretary Young.
    Mr. Abercrombie. Thank you, Mr. Larsen.
    Mr. Marshall is the last member of the committee, so rather 
than go to Mr. Tiahrt right now, we will go to Mr. Marshall and 
then to Mr. Tiahrt.
    Mr. Marshall. Thank you, Mr. Chairman.
    I apologize for me being here earlier. We have been in a 
commodities market hearing all day long, trying to get a handle 
on these prices that people are suffering with.
    I guess I have two questions.
    First, I assume in the source selection process, as it goes 
forward, you will not be taking into account impact on the U.S. 
economy jobs-wise, you won't be taking into account whether or 
not the competition is appropriately balanced in light of 
foreign subsidies, that neither of those things will be taken 
into account. Is that correct?
    Secretary Young. We don't expect to do that.
    Mr. Marshall. So you don't expect to. You don't plan to. 
You are legally prohibited from doing that? Have you discussed 
this?
    Secretary Young. I think we could probably talk further in 
the closed session. But in the open session, as I--competition, 
innovation and open markets are the principles that guide this 
country. And they are embedded in our laws and rules governing 
Pentagon acquisition. And so we will execute the new 
procurement within those laws and regulations. And those laws 
and regulations do not direct and don't require and, I think, 
don't necessarily yield best value for the warfighter if we 
factor in certain economic aspects of the competition.
    Mr. Marshall. I think the only way that I can ask the 
second question is by generally referring to an experience that 
I had in a closed session on this matter and then use that to 
inquire concerning process.
    Shortly after the decision was announced, the acquisition 
decision was announced, we had a closed briefly at which those 
making the decision explained why the decision was made that 
way. And one of the things that struck me is that there was a 
particular characteristic of the platform that was selected 
that the decision-makers found very attractive. That particular 
characteristic was included in the RFP. And if you could look 
at me, this would help me. Let's say both parties were required 
by the RFP to reach a standard of 50 percent, let's say, and 
then the RFP generally says that going beyond that is 
desirable, you know, that would be great. And in the discussion 
that we had in closed session, classified session, the 
decision-makers were saying that the platform that was chosen 
went well beyond in this particular characteristic, and we 
really liked that, and here are the reasons we really like 
that.
    In a subsequent closed session with GAO, I was left with 
the impression that going beyond in a particular category was 
not something that was supposed to be given weight unless both 
parties understood that it was going to be given weight. And I 
asked GAO whether or not a protest had been made about this 
particular thing, and the answer was, no, no protest had been 
made. And then it occurred to me, well, of course no protest 
would have been made, because the other party, the party that 
lost, Boeing in this instance, would not have known that the 
decision-makers were particularly attracted to this particular 
characteristic.
    So it concerns me that both parties, as we move forward, 
have to know very clearly what kind of weight is going to be 
put on all these different characteristics. Because it really 
would be very unfortunate if we get to a point where we are 
finding out that some characteristic became particularly 
attractive to the decision-makers and both parties did not know 
that, and that characteristic was not necessarily decisive but 
an important one in making the actual decision.
    Secretary Young. Let me try to address that.
    My guess is you are talking about fuel offload. That has 
been discussed here. The Air Force intended to assign credit 
for carrying more fuel than the KC-135R, consistent with the 
warfighting requirements. The requirements document makes----
    Mr. Marshall. That is not what I was talking about, but go 
ahead.
    Secretary Young. Okay. Well, I won't read that statement if 
you are not talking about that.
    Mr. Marshall. It is a general inquiry about the process as 
this has evolved. I have kind of been left with the impression 
that a factor was taken into account that to a degree that one 
party didn't even appreciate and wouldn't have known to protest 
about because nobody would have even told the party. Certainly, 
I wasn't going to go tell the party.
    Secretary Young. Yeah, it is hard. Maybe we could do this 
in the closed session.
    But I think we are in agreement that, in the amended RFP, 
we need to be very clear with industry about any parameters or 
grouping of parameters that we assign as a priority to get the 
capability that the warfighter wants, so that industry can bid 
accordingly. And so we will make that robust effort to be very 
clear in the RFP about the things we will value and how we will 
grade them, so that industry can respond.
    Mr. Marshall. Thank you, Mr. Chairman.
    Mr. Abercrombie. Mr. Tiahrt.
    Mr. Tiahrt. Thank you, Mr. Chairman. And thanks for 
allowing us non-committee members to be involved in the 
process.
    Mr. Abercrombie. It is a pleasure.
    Mr. Tiahrt. Specifically you were going to read something 
on the fuel offload. And the RFP has a baseline or a threshold 
of the KC-135R, as far as fuel offload. Normally, when an RFP 
is evaluated, you have a threshold and then an objective, and 
if both parties meet the objective they both get scored 
equally.
    You mentioned that the objective was more fuel offload 
capability. More fuel offload capability means one more pound. 
So technically, if that is still in the RFP, then both parties 
would be scored equally by having one more pound of fuel than a 
KC-135R. Is that correct?
    Let me restate this. If the threshold is a KC-135R and 
objective is more fuel offload, then one pound of more fuel to 
offload at any point in, you know, a thousand aeronautical 
miles or whatever you choose, technically then both bidders, in 
this case, would qualify the maximum amount allowable for 
additional fuel capacity. Is that not correct?
    Secretary Young. You are speaking from the perspective of 
the GAO finding----
    Mr. Tiahrt. No, I am from the perspective of the RFP.
    Secretary Young. The RFP was intended to reflect the 
requirements document. And the requirements document clearly 
says that the objective is to carry additional fuel. There is a 
record that says there is benefit to the warfighter for having 
additional fuel offload capacity.
    Mr. Tiahrt. It is the key performance parameters--excuse 
me--where this was stated. What I am saying is that additional 
fuel capability is one pound. So if both bidders----
    Secretary Young. The GAO interpretation is to assign equal 
value to 1 pound, 1 gallon or 1,000 gallons. But I do not 
believe the requirements document nor the American people 
believe that 1 gallon more is the same as 1,000 gallons more.
    Mr. Tiahrt. Well, then what is the expected criteria? 
Because this is very critical, and it can predetermine who 
wins. And you said yourself you don't want that to happen.
    Secretary Young. That is correct.
    Mr. Tiahrt. So what is the criteria?
    Secretary Young. The criteria is going to be grounded in 
the requirements document, which says the objective is to carry 
additional fuel. And that will have to be balanced against the 
other 800 requirements. And it will have to be balanced against 
the costs we will have to pay to get that capability.
    Mr. Tiahrt. Well, if you don't define the objective, then 
you won't know if both parties have met the objective. Because 
what you have created is a very subjective scenario. And 
according to the key performance parameters, objective means it 
is a finite level. So I think this is something to be looked at 
very cautiously in the future, and I think you need to keep 
that in mind.
    Second thing: According to the manufacturing plan, as I 
understand it, about 90 percent of one of the two bidders will 
be built overseas in foreign countries. So it will be by 
companies in foreign countries.
    The airplane that the Boeing company proposes is subject to 
five regulations that have waived by the DFARs, the Defense 
Federal Acquisitions Regulations, for foreign suppliers in 
North Atlantic Treaty Organization (NATO) countries. I think it 
is paragraph 225 in the DFARs.
    Will you waive the Foreign Corrupt Practices Act for EADS 
of Europe?
    Secretary Young. We are buying--the bidders in this 
competition are--well, I was going to try to not say the 
company names today. We have two bidders in this competition, 
and they are both American companies. They are subject to all 
the rules and regulations that are in place.
    Mr. Tiahrt. I didn't ask that. I said, will you require the 
European companies that are providing parts, which is about 90 
percent of the parts for one of the two bidders here, will you 
require that they are subject to the Foreign Corrupt Practices 
Act? Or are you going to waive that regulation for 90 percent 
of one product and apply it to 100 percent of the other 
product?
    Secretary Young. We are not waiving regulations application 
to the industry proposers, either industry----
    Mr. Tiahrt. Are you going to require cost accounting 
standards for the European companies that are going to provide 
parts that you will have to maintain and service once they have 
been purchased?
    Secretary Young. We are treating each bidder equally. And 
that is, the U.S. company bidders must comply with all 
regulations, including cost accounting standards.
    Mr. Tiahrt. So you are going to waive them for the 
Europeans then. You are going to waive these regulations for 
the Europeans.
    Secretary Young. We are not waiving any regulations, sir.
    Mr. Tiahrt. You are waiving the regulations for the 
Europeans, by the way you just explained it to me. And, in 
doing so, you have created an unlevel playing field and an 
unfair advantage to one bidder over the other.
    Ninety percent of the product is built in Europe. And they 
don't have to comply with five specific regulations: the cost 
accounting standards, the Foreign Corrupt Practices Act, the 
international trafficking in arms regulations, the Berry 
amendment, and the buy-American provisions. Those are the five 
regulations that have been waived by the Department of 
Defense--not Congress, by you guys.
    Are you going to force them to comply with them, just like 
you do the American companies? Because if you don't, American 
workers are put at a disadvantage.
    Secretary Young. Both companies, both bidders, must comply 
with all the regulations and laws you just cited. Both of those 
bidders are reaching outside of their defense company 
headquarters to get commercial products. Both of those 
commercial product providers are not subject to some elements 
of all those regulations you talked about.
    But all the commercial products are subject to the same 
regulations. And the defense companies that are bringing those 
commercial products into and modifying them to deliver the U.S. 
Government a tanker are fully subject to all the regulations. 
And we will not be waiving regulations with regard to that.
    Mr. Tiahrt. You will not apply these five regulations to 90 
percent of one of the two bids. That is just what you have told 
me. You said the American portion will. Well, fine, we will 
apply the regulations equally for 10 percent of the product. 
But for 90 percent, we are going to make a disadvantage for 
American workers here by allowing no cost accounting standards, 
no Foreign Corrupt Practices Act, no international trafficking 
in arms regulations.
    Those are very expensive regulations to implement. And you 
going to implement it entirely on one body, and you are waiving 
it entirely for 90 percent of another body. That is an unfair 
advantage.
    Secretary Young. We are implementing it uniformly to the 
two bidders.
    Mr. Tiahrt. For all parts that are going to be supplied?
    Secretary Young. Equally. We are applying it equally to the 
two bidders.
    Mr. Tiahrt. Okay. I am glad to hear that.
    And you are going to do an industrial capability assessment 
that was brought up earlier by Mr. Skelton?
    Secretary Young. I would like to answer that for the 
record. I believe we will do that. It is required.
    [The information referred to can be found in the Appendix 
beginning on page 175.]
    Mr. Tiahrt. I see my time is up, Mr. Chairman, but I have 
some additional questions.
    Mr. Abercrombie. In a manner of speaking only.
    Let's see. Mr. Dicks, then Mr. Bonner. And if there is no 
other round of questions or commentary sought, then I suggest 
we will move right to the closed session. I think some of this 
may be able to be dealt with a little bit more explicitly at 
that point. Mr. Saxton will have a follow-up, and that will be 
it.
    So Mr. Dicks is in the barrel right now.
    Mr. Dicks. Thank you, Mr. Chairman.
    In March 2007, the GAO issued a report entitled, ``Air 
Force Decision to Include a Passenger and Cargo Capability in 
Its Replacement Refueling Aircraft Was Made Without Required 
Analysis.'' Has that been corrected?
    If you want to answer that one for the record.
    Secretary Young. I will get you a record document. I 
believe the requirements document does reflect that 
requirement.
    [The information referred to can be found in the Appendix 
on page 174.]
    Mr. Dicks. They have stated that the proper analysis wasn't 
done. This was 2007, so maybe we can get that corrected as 
well.
    Let me just say--and I have great respect for Mr. Young--I 
am very troubled by this whole thing. And I go back to Mr. 
Saxton and his comments about General Handy. I have been in 
this game for 30 years up here, okay, and 30 years on the 
Defense Appropriations Subcommittee.
    And what bothers me here is that we were misled, the 
Congress was misled. Secretary Wynne testified before our 
committee, and I was talking to him, and I asked him, how we 
are going forward on this? And he says, ``Sir, as we look at 
this, we would tell you that our highest motivation is actually 
medium-sized tankers. Then our highest motivation is mixed 
fleet. Our last thing we want to do is to have a whole fleet of 
large airplanes.'' The A-330 is larger than the KC-10. And so 
to describe both of these as medium-sized tankers is not 
accurate. Okay? This is a great, big airplane.
    Now, yesterday, Senator Levin was briefed by Secretary 
Gates, and in that briefing the Secretary told Chairman Levin 
that we are going to give extra credit in the next competition 
to the bigger size of the 330. And this was stated, and I have 
checked it and verified it with the Senator himself. This means 
that you are predisposed here. There has been no consultation 
with Congress up until today. You are going to say that the 
bigger tanker gets more credit, and for these issues, for fuel 
offload I guess. I don't know about passengers and aeromedical 
and cargo.
    But this is the wrong decision, John, the wrong decision, 
because you don't want this great, big monstrous airplane that 
is going to take up space on the runways. This plane is so big 
that it is going to require billions of dollars in military 
construction.
    What we want is a replacement for the--Congress was told--a 
replacement for the KC-135. And smaller is better. Because when 
we get down to the calculation of fuel, our analysis is that if 
you have 140 of the bigger airplanes, the airbuses, and they 
fly for 750 miles, which is in the RFP, over 40 years, that the 
difference in fuel is $35 billion, an extra $35 billion. This 
is what we are spending today for these tankers. This is like I 
have enough money then to buy another 179 tankers.
    So I am pleased that you are going to use 40 years in 
lifecycle cost. But I feel that we were misled. I mean, Mr. 
Miller came up day after day with all these charts. ``We want 
medium-sized tankers, we want medium-sized tankers.'' This was 
in the testimony. And all of a sudden, lo and behold, we get 
this great, big monster that doesn't fit into any of our 
military construction facilities. This is going to cost 
billions of dollars in extra military contruction (MILCON) at a 
time when we don't have that kind of extra money.
    So lifecycle cost has to be looked at properly. It was just 
a cursory thing in the first go-around. They just looked at the 
submissions from both companies and said, ``You know, I guess 
they are okay.'' No independent analysis was done. And we need 
to have independent analysis. We need to know the truth for the 
American people.
    We cannot afford to squander $35 billion on fuel, and 
especially when we are now supposed to be committed to dealing 
with greenhouse gasses and we are supposed to be having a 
conservation ethic. You know, the Secretary got up there the 
other day and started complaining about the fuel costs. He said 
every time the cost of fuel goes up $1 a barrel, my bill goes 
up $130 million. So fuel is a big issue.
    And I plead with you, stay with the existing RFP. You know, 
what really bothers me is that the people on the House side 
were not told, we were not told what Secretary Gates told 
Senator Levin. We were not told that they were going to give 
additional credit in the new RFP so that the bigger plane would 
get more credit. I wasn't told that. You didn't tell me that 
when you briefed me. I checked with Mr. Murtha; he wasn't told 
that. Only one person that I can tell was Senator Levin. Now, 
he happens to confirm people. He confirmed the Secretary of 
Defense, and I would assume that the Secretary would want to be 
open and candid. Nobody else was open and candid.
    Now, I hope you can tell me--and I hope and plead for you 
to take this thing seriously that you cannot change this thing 
now in a way that will be prejudicial. Or you know what is 
going to happen. You know what is going to happen. There will 
be another protest, and we won't get anything done.
    I mean, this is a serious problem. And I say to you, stay 
with the existing RFP. Let's see where the chips fall. But 
don't make a modification that is going to look just like you 
are giving this thing to Northrop Grumman and EADS. I plead 
with you not to do that.
    Mr. Abercrombie. Mr. Young, now that you have that 
information, Mr. Young, perhaps in the closed session Mr. Dicks 
will ask you a question. But----
    Secretary Young. Could I please have the chance to comment?
    Mr. Abercrombie. Yes, you can comment, but you can answer 
at length, I think, in the closed session as well.
    Secretary Young. I think these are much more open-session 
issues.
    For one, I have every personal reason to believe that 
Secretary Gates has been extremely open and candid with 
everyone. And I cannot leave that on the record.
    Two, I have had----
    Mr. Dicks. Well, I checked with the other people, and they 
were not told. I was not told.
    Secretary Young. Can I----
    Mr. Abercrombie. Go ahead.
    Secretary Young. I have had discussions with Secretary 
Gates. He has expressed an interest in understanding the 
parameters, but he has also given me and the team license to go 
figure out how the requirements should be stacked and not. So I 
can assure you Secretary Gates, in personal discussions with 
me, has made no decision about how we would score anything and 
what we would weight. So I do not think he would have said that 
to Senator Levin, Chairman Levin.
    We announced as alternatives, as I have right here, the 
briefing characterizes the 767, the 787, and the 330 as medium-
class airplanes. They are viewed in the analysis alternatives 
as medium airplanes.
    We will not give extra credit for additional fuel. We will 
give credit for how much fuel you carry. You must carry the 
threshold amount, and then we intend to give credit, consistent 
with the requirements document, for the fuel you carry beyond 
that. And we are working those details in the RFP.
    The military construction costs are included in the 
analysis, and they were assessed. Both airplanes are 
significantly bigger than a KC-135 and do drive a certain 
amount of military construction.
    I disagree with your estimates of the fuel burn. We have 
data and I have seen the data, I can't comment on the data in 
public, but those are not accurate estimates of the fuel burn.
    We will do exactly what you have said, and that is have an 
independent team look at how we estimate the lifecycle costs. 
Because I think you have a very good point about that.
    And I think those are the key things I wanted to be sure 
and discuss with you.
    Mr. Abercrombie. Thank you.
    Mr. Bonner.
    Mr. Bonner. Thank you, Mr. Chairman.
    Any time I am in the same room with my friends and 
colleagues from Washington State and Kansas, I sometimes feel 
compelled to respond to their comments. But I know that is not 
the purpose of this hearing, so I will choose not to do that.
    Mr. Secretary, after the lease scandal that resulted in 
officials from the Air Force and Boeing losing their jobs and, 
in some instances, going to jail, is it not true that it was 
Congress that charged the Department of Defense and the Air 
Force with the responsibility--it was a congressional mandate, 
was it not, to go down the path of a competitive source 
selection process, not a sole source contract as was the case 
in 2001, but a competitive selection process, charging you with 
the responsibility to provide the warfighter and the taxpayer 
with the best-value tanker?
    Secretary Young. That is correct, Congressman. And the one 
thing I would tell you--I was trying to look forward, but in 
looking back, that process yielded some very attractive 
aircraft from both bidders for the Government at very 
attractive prices.
    Mr. Bonner. And so I guess my question is, do you still 
feel bound by that congressional mandate to go down the path of 
a competitive source, not a sole source contract?
    Secretary Young. Absolutely, sir. I see no benefit in my 
experience across the acquisition enterprise, setting this 
aside--sole sources limit our flexibility in negotiating 
prices.
    And I talked earlier about the fact that, even in a dual 
source process, which some have discussed, we have considered 
that and rejected that, because I believe that will cost the 
taxpayer more in the end. We get best value through a 
competitive source selection of a single source who has bid in 
a competitive environment and offered us, hopefully, an 
excellent deal.
    Mr. Bonner. If, by chance, someone sitting back home in 
Wichita, Kansas, or Seattle, Washington, or Mobile, Alabama, 
were watching this hearing this evening, there might be some 
confusion, because it seems that at times some Members have 
said, ``Stick with the RFP,'' and other times have said, ``Go 
against the RFP.'' So let me go back to a point that 
Congresswoman Boyda raised and make sure that I am clear in 
understanding your response.
    I believe you said that the Inspector General looked at the 
RFP and determined in the affirmative that the RFP reflected 
the requirements document. Yet, in the response to 
Congresswoman Boyda's question, did I hear you correctly in 
saying that you would consider going to a 40-year lifecycle 
cost, even though the current RFP was for a 25-year lifecycle 
cost?
    Is that not inconsistent with the requirements document? 
Because, to my knowledge, the GAO did not bring this up as one 
of the eight issues that was raised.
    Secretary Young. Yes, Congressman, in continuing to 
research this issue, I have learned that the capability 
development document does require a 40-year life for this 
aircraft. And so I need to, with our team, reconcile the RFP at 
25 years but the requirements document at 40. That would lead 
me to conclude that we should at least consider lifecycle 
estimate through 40 years, because I am going to continue to 
try to ground myself in the existing documents and buying what 
the warfighters ask me to buy.
    Mr. Bonner. Just a couple more questions. So much has been 
said today, but probably not enough has been said about 
yesterday's announcement that Secretary Gates had and that you 
participated in.
    Could you give the committee and the American people some 
idea of what type of schedule and process for revealing RFP 
changes to the offerors we might be looking at?
    Secretary Young. Congressman, by necessity, this process 
has to be event-driven. So I can lay out our notional schedule 
and what we would like to do by working aggressively. And that 
is, we would like to issue the draft request for proposals in 
late July, early August, for industry comment. Hopefully we can 
finalize that and issue the final request for proposals in mid-
August.
    We would give industry 45 days to submit their proposals, 
asking them to turn in proposals in early October. They were 
given 60 days the first time. We believe this is an adequate 
amount of time.
    And then we would seek to evaluate the proposals and create 
this record of how we evaluate the proposals, which will be 
necessary for any future protests, and announce a source 
selection decision by the end of the year.
    As I have noted, there are any number of factors that can 
delay those events and, therefore, mean I can't make the 
schedule. This is not going to be a schedule-determined 
program. It will be a event-determined program. We are going to 
seek to make this decision in a timely manner for the sake of 
the warfighter.
    Mr. Bonner. And, again, just for the record, my last 
question, I want to make certain we are all clear. To your 
knowledge, neither you nor Secretary Gates have predisposed in 
terms of a decision about which tanker the Department of 
Defense will end up choosing? Because there has been some 
allegation that that decision has already been made.
    Secretary Young. I can assure you, Congressman, that 
Secretary Gates is indifferent and has absolutely no opinion 
about which tanker we buy. And I also would like to assure you, 
as I said in my discussion, I do not care which tanker we buy.
    I want to get the best deal for the taxpayer. I want this 
program to be successfully executed, so I can tell the chairman 
we did it. And I want to meet the warfighters' requirements. I 
could care less which airplane does that.
    Mr. Bonner. Thank you, Mr. Chairman.
    Mr. Abercrombie. Thank you very much, Mr. Bonner.
    Mr. Saxton has one brief follow-up question, and then we 
are going to close out this portion and get right to the closed 
briefing.
    Mr. Saxton. Mr. Secretary, as you well know, following your 
receipt and the evaluation of the former proposal and 
presumably the follow-on proposal, there is a review that is 
called the Milestone B Review, which is intended to determine 
whether or not the next phase is ready to start, which would be 
the development phase. And following the Milestone B Review, 
you issued a Milestone B report, or decision.
    I assume that the process will involve Milestone B process 
again, since there will be potentially new proposals?
    Secretary Young. We are reviewing that and whether I would 
revoke the Milestone B that I granted and have a new Milestone 
B or how we would approach that.
    If I could, I would use that as an opportunity to comment. 
In the Milestone B process, I approve that the program is fully 
funded. I meet some of the criteria that the Congress has 
levied on the Department, to say the technology is ready, the 
program is fully funded, et cetera, et cetera. I approve those 
criteria.
    I have adopted a practice of asking people to talk to me in 
neutral terms about the multiple bids so that I have some sense 
that the source selection process was done properly and I have 
grounds for approving Milestone B.
    I, in this case, in most cases, do not get the source 
selection specific information or the specific bidder 
information. I seek to grant the Milestone B in accordance with 
your certification criteria and my reasonable confidence that 
the process has been executed well.
    Mr. Saxton. So you are saying that you haven't made a 
decision about how----
    Secretary Young. I haven't made a decision yet about 
whether it is proper to revoke the Milestone B. That would be 
my inclination, and have a new Milestone B process.
    This is a little bit awkward in that I will be, as 
Secretary Gates announced, both the source selection authority 
and the Milestone B official, which is extremely unusual in the 
Department.
    Mr. Saxton. Thank you.
    Mr. Abercrombie. Very good. Thank you, Mr. Young.
    As soon as I adjourn the hearing, I would appreciate 
everyone except for the members, the witnesses and their staffs 
and the committee staff--that is to say, the subcommittee and/
or full committee staff. Personal staff will not be able to 
stay. So everyone else will have to clear the room, including 
our media friends, as soon as possible.
    The moment that is done, we will proceed to a closed 
meeting of the subcommittee with Mr. Young, our GAO friends and 
Ms. Payton. And everyone will be at the table at the same time.
    [Whereupon, at 7:35 p.m., the subcommittee proceeded in 
Closed Session.]
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                            A P P E N D I X

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

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                             July 10, 2008

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             RESPONSE TO QUESTION SUBMITTED BY MR. SKELTON

    Secretary Young. It is important to note that industrial policy 
issues such as the health of the overall industrial base supporting 
defense are broader than individual source selections. The primary 
focus of the source selection process is to select the best acquisition 
option, evaluated on the basis of warfighting capability, cost, and 
schedule. However, the Department also has in place the industrial 
policies and structured procedures necessary to identify, evaluate, and 
preserve when necessary essential industrial and technological 
capabilities that might otherwise be lost. Within these policies and 
procedures, the Department has the ability to establish, and has 
established, administratively imposed (by DOD policy, not statute) 
restrictions within the Defense Federal Acquisition Regulations (DFARS) 
precluding the use of foreign products for specific defense 
applications when necessary to ensure military readiness.
    10 U.S.C. 2440 requirements are implemented by Federal Acquisition 
Regulations (FAR) Part 34 and Department of Defense Initiative (DODI) 
5000.2, which require development of a program acquisition strategy, 
and the Defense Acquisition Guidebook (Chapter 2.3. Systems 
Acquisition: Acquisition Strategy), which describes best practices. The 
Industrial Capability section of the Guidebook states that ``to satisfy 
10 U.S.C. 2440, development of the acquisition strategy should include 
an analysis of the industrial base capability to design, develop, 
produce, support, and, if appropriate, restart an acquisition 
program.'' The Guidebook further describes that the industrial 
capability analysis (as summarized in the Acquisition Strategy) should 
consider DOD investments needed to create or enhance certain industrial 
capabilities; and the risk of industry being unable to provide program 
design or manufacturing capabilities at planned cost and schedule.
    When the analysis indicates that industrial capabilities needed by 
the Department of Defense are in danger of being lost, the DOD 
Components should determine whether government action is required to 
preserve the industrial capability.
    Industrial capability assessments are conducted at Milestones B and 
C. In addition, earlier in the program--at Milestones A and B or 
whenever technology opportunities are identified--market surveys are 
conducted. The market survey is a primary means of determining the 
availability and suitability of commercial items and the extent to 
which these items have broad market acceptance, standards-organization 
support, and stability. Market research supports the acquisition 
planning and decision process, supplying technical and business 
information about commercial technology and industrial capabilities. 
Market research tailored to program needs continues throughout the 
acquisition process and during post-production support. FAR Part 10 
addresses market research and FAR Subpart 7.1 requires the acquisition 
plan to include the results of completed market research and plans for 
future market research.
    With respect to the KC-X, the Department has already conducted 
several industrial capabilities-related assessments and more are 
planned. It is important to note that because the majority of 
technological and industrial capabilities employed by the KC-X are 
commercial in nature, the Department focused its attention on those 
capabilities that are defense-unique.
    In 2003, the Air Force identified aerial refueling as a ``defense-
unique capability'' and evaluated companies that produced boom 
refueling equipment to determine their technical capabilities and 
financial viability.
    In December 2006, to support source selection, the Air Force 
completed the official KC-X program market analysis required by the 
Program Acquisition Strategy. The result of the market research 
confirmed the most cost effective solution to the Air Force requirement 
for a new aerial refueling tanker to replace the current tanker fleet 
was a new medium-to-large commercial-derivative aircraft modified to 
meet specific military requirements for refueling, net-centric 
communication, cargo capacity, and aeromedical evacuation. Two 
companies indicated a willingness and capability to perform the entire 
set of tasks. Because the contemplated tanker aircraft were to be 
commercial-derivative aircraft, the Air Force market research team 
evaluated risks associated with the KC-X program by reviewing industry 
publications and technical studies, attending industry technical 
symposia, as well as visiting aircraft manufacturers, potential engine 
suppliers, companies specializing in aircraft modification and 
overhaul, U.S. and European aircraft certification agencies, current 
and projected future refueling tanker users (i.e., militaries of United 
Kingdom and Australia), airlines, supply chain managers, and other 
military users of commercial-derivative aircraft. During those 
evaluation visits, the team reviewed the performance characteristics of 
the proposed commercial items and ability of those items to meet user 
requirements, the extent to which the follow-on support systems were 
unique or common to already-fielded fleets, commercial contracting 
business practices being employed to date, and how technology insertion 
was and could be handled. Specifically, the team evaluated contracting, 
test and evaluation, logistics, program management, and engineering as 
they applied to ongoing programs and how they might apply to the KC-X 
program. The survey identified no industrial or technological problems 
that would negatively impact program performance. The Air Force 
summarized the results of the market research in the Milestone B 
Acquisition Strategy.
    In March 2008, following the source selection decision, the Air 
Force and the Office of the Deputy Under Secretary of Defense for 
Industrial Policy conducted a post source selection industrial 
capabilities assessment to evaluate the industrial base impacts of the 
KC-45A tanker award, focused on: (1) the extent to which the decision 
promoted/retarded a competitive marketplace; (2) the viability of any 
associated essential industrial/technological capabilities; and (3) 
potential economic impacts on Boeing as an enduring competitor for 
defense products.
    All assessments completed to date have concluded that the 
industrial base is well positioned to not only meet the needs of the 
KC-X program, but also the Department's future tanker requirements. 
Moreover, assessments did not identify any technological or industrial 
problems that would negatively impact program performance, nor did they 
identify any at-risk essential technological or industrial 
capabilities.
    In accordance with DODI 5000.2 and the Defense Acquisition 
Guidebook, the KC-X program will revisit and update these industrial 
capability assessments for future milestone decisions. System 
producibility will be addressed in detail at the Milestone C decision. 
[See page 50.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. DICKS
    Secretary Young. In a May 4, 2007 memorandum, the Department of 
Defense formally non-concurred with the Government Accountability 
Office (GAO) findings, citing the lack of passenger and cargo analysis 
as ``contrary to fact.'' Through the Joint Capabilities Integration and 
Development System (JCIDS) process, the Air Force presented analysis 
and rationale for the passenger and cargo capability required in its 
replacement tanker aircraft. The Joint Requirements Oversight Council 
(JROC) and the Air Force concluded that the analysis was sufficient 
justification for the capability, and the JROC validated the passenger 
and cargo requirement (See Capability Development Document for KC-135 
Replacement Aircraft (KC-X), December 27, 2006). Requirements so 
promulgated are deemed sufficient to initiate an acquisition program. 
As required by section 2366a of title 10, United States Code, I 
certified on February 28, 2008 that the JROC had accomplished its 
duties, including an analysis of the operational requirements for the 
program. [See page 64.]
                                 ______
                                 
           RESPONSE TO QUESTION SUBMITTED BY MR. ABERCROMBIE
    Mr. Gordon. GAO prepared a document that identifies the protests of 
Air Force procurements that were sustained during fiscal years 2005 
through 2008 and that describes the bases for the sustains. GAO has not 
identified trends beyond what is in the document. [See page 11 and 
document on page 98.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MRS. BOYDA
    Secretary Young. As part of the life cycle cost analysis, the 
government will use $4.07 in Fiscal Year 2008 as the price for a gallon 
of gas (jet fuel). Fuel cost per gallon will be updated at final 
proposal revision to reflect latest available information at that time. 
[See page 45.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. MILLER
    Mr. Gordon. As we explained at the hearing, the protest was handled 
by GAO attorneys, and no GAO attorneys are within the IFPTE bargaining 
unit. Since the hearing, we have verified, and we can now confirm and 
expand on a number of points that we made at the hearing. During the 
protest, the attorneys responsible for drafting the decision consulted 
with four other GAO employees who are not attorneys. Specifically, the 
attorneys consulted with one analyst, who is within the IFPTE 
bargaining unit, and three other employees who are not (two economists 
and an assistant director). These employees provided technical 
assistance to GAO's attorneys handling the protest, but did not have 
any substantive input into GAO's resolution of the protest. [See page 
21.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. TIAHRT
    Secretary Young. It is important to note that industrial policy 
issues such as the health of the overall industrial base supporting 
defense are broader than individual source selections. The primary 
focus of the source selection process is to select the best acquisition 
option, evaluated on the basis of warfighting capability, cost, and 
schedule. However, the Department also has in place the industrial 
policies and structured procedures necessary to identify, evaluate, and 
preserve when necessary essential industrial and technological 
capabilities that might otherwise be lost. Within these policies and 
procedures, the Department has the ability to establish, and has 
established, administratively imposed (by DOD policy, not statute) 
restrictions within the Defense Federal Acquisition Regulations (DFARS) 
precluding the use of foreign products for specific defense 
applications when necessary to ensure military readiness.
    10 U.S.C. 2440 requirements are implemented by Federal Acquisition 
Regulations (FAR) Part 34 and Department of Defense Initiative (DODI) 
5000.2, which require development of a program acquisition strategy, 
and the Defense Acquisition Guidebook (Chapter 2.3. Systems 
Acquisition: Acquisition Strategy), which describes best practices. The 
Industrial Capability section of the Guidebook states that ``to satisfy 
10 U.S.C. 2440, development of the acquisition strategy should include 
an analysis of the industrial base capability to design, develop, 
produce, support, and, if appropriate, restart an acquisition 
program.'' The Guidebook further describes that the industrial 
capability analysis (as summarized in the Acquisition Strategy) should 
consider DOD investments needed to create or enhance certain industrial 
capabilities; and the risk of industry being unable to provide program 
design or manufacturing capabilities at planned cost and schedule.
    When the analysis indicates that industrial capabilities needed by 
the Department of Defense are in danger of being lost, the DOD 
Components should determine whether government action is required to 
preserve the industrial capability.
    Industrial capability assessments are conducted at Milestones B and 
C. In addition, earlier in the program--at Milestones A and B or 
whenever technology opportunities are identified--market surveys are 
conducted. The market survey is a primary means of determining the 
availability and suitability of commercial items and the extent to 
which these items have broad market acceptance, standards-organization 
support, and stability. Market research supports the acquisition 
planning and decision process, supplying technical and business 
information about commercial technology and industrial capabilities. 
Market research tailored to program needs continues throughout the 
acquisition process and during post-production support. FAR Part 10 
addresses market research and FAR Subpart 7.1 requires the acquisition 
plan to include the results of completed market research and plans for 
future market research.
    With respect to the KC-X, the Department has already conducted 
several industrial capabilities-related assessments and more are 
planned. It is important to note that because the majority of 
technological and industrial capabilities employed by the KC-X are 
commercial in nature, the Department focused its attention on those 
capabilities that are defense-unique.
    In 2003, the Air Force identified aerial refueling as a ``defense-
unique capability'' and evaluated companies that produced boom 
refueling equipment to determine their technical capabilities and 
financial viability.
    In December 2006, to support source selection, the Air Force 
completed the official KC-X program market analysis required by the 
Program Acquisition Strategy. The result of the market research 
confirmed the most cost effective solution to the Air Force requirement 
for a new aerial refueling tanker to replace the current tanker fleet 
was a new medium-to-large commercial-derivative aircraft modified to 
meet specific military requirements for refueling, net-centric 
communication, cargo capacity, and aeromedical evacuation. Two 
companies indicated a willingness and capability to perform the entire 
set of tasks. Because the contemplated tanker aircraft were to be 
commercial-derivative aircraft, the Air Force market research team 
evaluated risks associated with the KC-X program by reviewing industry 
publications and technical studies, attending industry technical 
symposia, as well as visiting aircraft manufacturers, potential engine 
suppliers, companies specializing in aircraft modification and 
overhaul, U.S. and European aircraft certification agencies, current 
and projected future refueling tanker users (i.e., militaries of United 
Kingdom and Australia), airlines, supply chain managers, and other 
military users of commercial-derivative aircraft. During those 
evaluation visits, the team reviewed the performance characteristics of 
the proposed commercial items and ability of those items to meet user 
requirements, the extent to which the follow-on support systems were 
unique or common to already-fielded fleets, commercial contracting 
business practices being employed to date, and how technology insertion 
was and could be handled. Specifically, the team evaluated contracting, 
test and evaluation, logistics, program management, and engineering as 
they applied to ongoing programs and how they might apply to the KC-X 
program. The survey identified no industrial or technological problems 
that would negatively impact program performance. The Air Force 
summarized the results of the market research in the Milestone B 
Acquisition Strategy.
    In March 2008, following the source selection decision, the Air 
Force and the Office of the Deputy Under Secretary of Defense for 
Industrial Policy conducted a post source selection industrial 
capabilities assessment to evaluate the industrial base impacts of the 
KC-45A tanker award, focused on: (1) the extent to which the decision 
promoted/retarded a competitive marketplace; (2) the viability of any 
associated essential industrial/technological capabilities; and (3) 
potential economic impacts on Boeing as an enduring competitor for 
defense products.
    All assessments completed to date have concluded that the 
industrial base is well positioned to not only meet the needs of the 
KC-X program, but also the Department's future tanker requirements. 
Moreover, assessments did not identify any technological or industrial 
problems that would negatively impact program performance, nor did they 
identify any at-risk essential technological or industrial 
capabilities.
    In accordance with DODI 5000.2 and the Defense Acquisition 
Guidebook, the KC-X program will revisit and update these industrial 
capability assessments for future milestone decisions. System 
producibility will be addressed in detail at the Milestone C decision. 
[See page 64.]
?

      
=======================================================================


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             July 10, 2008

=======================================================================

      
                 QUESTIONS SUBMITTED BY MR. ABERCROMBIE

    Mr. Abercrombie. My question is (a) Whether GAO ``believed it would 
be beneficial for GAO to be involved in DOD's source selection 
processes prior to contract award to ensure objectivity and process 
adherence is followed? If so, should it only be for Major Defense 
Acquisition Programs, or all DOD acquisition programs? If not, why 
not'' and (b) ``Please provide GAO's views of how protests of the 
source selection process could be changed to significantly reduce 
extensive delays between events, yet remain fair to all parties.''
    Mr. Gordon. In response to the direction of the Competition in 
Contracting Act of 1984 (CICA), which directs GAO to provide for the 
independent, expeditious, and inexpensive resolution of protests, 31 
U.S.C. Sec. 3554, GAO has developed a protest process that balances the 
need to hold procuring agencies accountable and to protect aggrieved 
offerors' due process rights with the need to ensure that government 
procurements are not unduly disrupted. While CICA provides for 
procurements to be suspended pending resolution of protests, CICA also 
allows for agencies to move forward with a procurement, when a 
determination is made that the procurement is urgent or that it is 
otherwise in the interest of the United States to proceed, 
notwithstanding a pending protest. 31 U.S.C. Sec. 3553.
    We do not think that involving GAO in DOD's source-selection 
processes prior to contract award would be beneficial to the 
procurement process or consistent with our traditional bid protest 
role. Indeed, involvement by GAO in the source-selection process prior 
to contract award could jeopardize GAO's ability to later review post-
award protests of DOD's evaluation and source selection decision: such 
involvement prior to award would raise questions regarding GAO's 
independence and objectivity. Also, to the extent that the Chairman is 
asking whether it would be helpful for GAO to hear protests of source-
selection processes prior to award, we think that this would be ill 
advised. Contract awards are rarely protested, and allowing pre-award 
protests of source-selection processes would likely lead to 
``defensive'' protests by firms that, in fact, would have been chosen 
for award of the contract. It is, in our view, wiser to allow protests 
of source-selection processes only by firms that have been harmed by 
those processes--that is, firms that learn that they were not selected 
for award.
    That said, we constantly review our protest process for ways to 
make it more efficient and expeditious, and recent figures demonstrate 
the result. So far in fiscal year 2008, GAO has closed over 1,200 
protests; the average number of days during which a protest is open was 
only 43 calendar days. We frequently use alternative dispute 
resolution, which results in many protests being resolved early. Even 
for protests for which a decision was issued on the merits 
(approximately 250 cases), GAO decided those cases in an average of 81 
calendar days, a substantially shorter time than the 100 days permitted 
under CICA.
    Mr. Abercrombie. Secretary Payton, according to GAO written 
testimony, the Air Force over the last five years has the highest 
percentage of all the military services for sustained source-selection 
protests. What are the systemic acquisition issues in the Air Force and 
how do these issues get resolved in a timely manner? What changes are 
you planning to make in either personnel or processes within the Air 
Force source-selection and acquisition system?
    Secretary Payton. The Air Force did see a marked increase in the 
protest sustain rates in FY05 and subsequent years following 
investigations into source selections potentially influenced by a 
former Air Force acquisition official. The ten sustained protests in 
FY05 and FY06, as a result of this individual's actions, skewed the 
numbers. However, when viewed in the longer historical context, it 
appears current bid protest sustain rates for the Air Force have 
returned to historical norms.
    In FY08, the Air Force has only 2 out of 89 protested solicitations 
sustained. This number is comparable to the Army (2) and the Navy (4). 
In some cases, the statistics reported by GAO appear to show a higher 
number of sustained protests than are actually the case. In a protest 
for a particular procurement, the disappointed offeror may submit a 
number of filings for the same protest. For statistical purposes, the 
GAO treats each filing as a separate protest. In the KC-X protest, the 
protestor made eight filings, which the GAO counted as eight protests. 
Protests in most high-dollar, complex acquisitions, result in multiple 
filings.
    In terms of systemic acquisition issues, the Air Force will be 
assessing many areas as part of its September response to the Acting 
Secretary of the Air Force regarding Air Force acquisition and KC-X GAO 
lessons learned. We will also be commissioning the Center for Naval 
Analysis (CNA) to conduct an independent review. Some common themes 
that have already emerged include assessing evaluation methodology for 
Most Probable Life Cycle Cost, proper evaluation of bidder proposals 
for responsiveness to requests for proposal, assigning more people with 
contracting experience to the source selection team, employing 
independent review teams beginning with requirements definition and 
continuing throughout the entire source selection process and enhancing 
the skills and numbers of subject matter experts.
    Following the release of our analysis and the delivery of the CNA 
report, we will study the recommendations and codify, as appropriate, 
in Air Force Instructions. We look forward to discussing more 
definitive personnel and process improvements upon completion of our 
reviews.
    Mr. Abercrombie. Secretary Payton, were you allowed to review the 
appropriate protest documentation from Boeing to substantiate their 
100+ issues?
    Secretary Payton. I was allowed to review all of the information 
that Boeing filed with the Government Accountability Office, including 
the 100+ protest issues contained in eight different filings. However, 
I was not allowed to review any Boeing documentation such as emails or 
briefing charts that could have substantiated their alleged 
interpretations of the solicitation during the conduct of the source 
selection from January 2007 through early 2008 because the GAO denied 
the Air Force request for Boeing's substantiating documentation. Please 
find attached the public version of the Air Force document request and 
Boeing's objection to the document request that further identifies the 
specific documents the Air Force requested from Boeing.
    Mr. Abercrombie. Secretary Payton, why did your legal team not 
allow you to testify at the GAO protest hearing?
    Secretary Payton. In April, in accordance with its bid protest 
procedures, 4 C.F.R. 21.7(b), GAO conducted a pre-hearing conference 
that identified the specific issues it would review at the KC-X bid 
protest hearing. The specific detailed technical evaluation issues 
identified by GAO for testimony at the KC-X bid protest hearing could 
not be answered by me, and were best answered by the Air Force 
technical evaluators who performed the evaluation as members of the 
Source Selection Evaluation Team. A more complete answer that covers 
constraints on my hearing participation from early March through the 
conclusion of the hearing, is under GAO protected information and can 
be provided upon Boeing and Northrop Grumman consent.
    Mr. Abercrombie. Secretary Payton, as a source-selection authority 
that has now gone through GAO protest proceedings and hearings, what in 
your opinion would you change about the way GAO conducts the protest 
and hearing process and are there any changes you would suggest to make 
it equitable for the agency involved? Would you consider it fair, 
equitable, and productive for the agency to have an opportunity to 
cross-examine or call as witnesses representatives from each competitor 
involved in the source-selection protest?
    Secretary Payton. The Air Force is collecting and analyzing lessons 
learned from the KC-X protest. We are carefully considering proposed 
changes that would make the protest process more equitable and 
efficient for both the agency and the taxpayer. We look forward to 
sharing these recommendations with the committee after we complete this 
assessment.
    Mr. Abercrombie. Secretary Young, do you agree or disagree with all 
of GAO's findings and recommendations contained in their protest 
decision? Why or why not?
    Secretary Young. We have fully accepted the GAO's findings and 
recommendations and we are taking the necessary steps to fully 
implement those findings and recommendations.
    Mr. Abercrombie. Secretary Young, given the scrutiny and diligence 
that the Air Force states they used to select the platform for KC-(X) 
and the subsequent GAO findings that resulted during the protest 
review, what in your opinion needs to be corrected within the Air Force 
acquisition system and can it be corrected in a timely manner?
    Secretary Young. Air Force acquisition professionals need to ensure 
the Request for Proposal (RFP) requirements are clearly stated and that 
the evaluation criteria are clearly laid out in the RFP. They also need 
to ensure the evaluation is consistent with the RFP evaluation 
criteria. It is essential that well experienced contracting, technical 
and legal personnel are involved throughout the major system 
competitions. I also think the Air Force, and the rest of the Defense 
Department, will need to exercise greater care and discretion in 
specifying requirements. I have already taken steps to ensure that is 
the case with regard to the KC-X competition. For many DOD programs, 
the number of requirements (hundreds) and the length of requirements 
documents (hundreds of pages) has become excessive.
    Mr. Abercrombie. Secretary Young, what metrics and evaluation 
factors will you use to determine whether or not the Air Force will 
regain programmatic control of the KC-(X) program after your source-
selection decision?
    Secretary Young. What has changed since GAO's sustainment of 
portions of the protest is the elevation of the Source Selection 
Authority (SSA) to OSD. In addition, a new Source Selection Advisory 
Council has been identified to assist in source selection. Programmatic 
and execution authority of the KC-(X) program has not changed and 
remains with the Air Force. As an Acquisition Category (ACAT) - 1D 
program, OSD will serve as the Milestone Decision Authority. In that 
role, OSD will continue to chair Defense Acquisition Boards and program 
status reviews to continually assess progress. Therefore, following the 
source-selection, the KC-(X) program will receive the same level of 
oversight as our other ACAT - 1D programs.
    Mr. Abercrombie. Secretary Young, how will you ensure that the 
future source-selection processes for Air Force major acquisition 
programs are in accordance with established acquisition policies/
procedures and that proposals are evaluated in accordance with requests 
for proposals?
    Secretary Young. I have directed that the Director of Defense 
Procurement ensure that a complete review of Air Force policies/
procedures takes place and that those policies/procedures are in 
accordance with established acquisition policies/procedures. I have 
directed that the Director of Defense Procurement issue policy guidance 
institutionalizing the process of independent reviews of major weapon 
system competitions to ensure that evaluation criteria are reasonable 
and are adhered to. Further, we are using this opportunity to review 
all Service and Agency source selection procedures to identify 
differences and best practices. The Department will seek greater 
standardization around a common set of best practice procedures as we 
execute future competitive procurements.
    Mr. Abercrombie. Secretary Young, as the senior acquisition 
official for DOD, what internal mechanisms do you have in place to 
incorporate acquisition ``lessons learned'' or recommendations that 
result from outside agency reviews and studies of the DOD acquisition 
system? Can you provide recent examples of changes that DOD has 
incorporated from ``outside experts'' and what metrics are you using to 
evaluate the changes?
    Secretary Young. As the senior acquisition executive for DOD, I 
have several internal mechanisms to incorporate acquisition ``lessons 
learned'' or recommendations that result from outside agency reviews 
and studies of the DOD acquisition system. I have a strong personal 
interest in this area and have taken specific actions to ensure we 
learn from our mistakes as well as our successes. First, I would 
mention the guidance that I incorporate with decisions on defense 
acquisition programs. A good example is the implementation of 
innovative solutions for specific system components, proven through the 
testing process. In the Mine Resistant Ambush Protected (MRAP) vehicle 
program, this played a key role enabling future vehicle survivability 
and performance improvements. In this example, testing demonstrated a 
need to revise our requirement for vehicle gun ports. We shared this 
information among all vendors, and changes were immediately made. The 
MRAP Joint Program Office (JPO) encouraged the vehicle contractors to 
share information on lessons learned and technology enhancements. We 
made every effort to leverage commercial vehicle technologies and 
determined the program would, to the extent consistent with meeting 
Warfighter needs, procure MRAP vehicles with only the technical data 
and computer software license rights absolutely necessary to satisfy 
our requirement to procure the vehicles rapidly and in quantity. From 
the first pre-solicitation MRAP conference, the leadership of the MRAP 
program emphasized to all offerors, government offices, and supporting 
organizations that sharing of best practices is both expected and 
encouraged. There are also many instances where Government 
Accountability Office (GAO) recommendations were implemented by the 
Department. One example, GAO report 07-675R, ``Defense Transportation 
Coordination Initiative (DTCI),'' illustrated how DOD took numerous 
actions to incorporate lessons learned from the prototype program in 
its planning for DTCI. Specifically, GAO identified 36 lessons learned 
including successes and problems from the prototype, and determined 
that DOD had taken actions that were responsive to each of these. As 
part of my Strategic Goals Implementation Plan, Strategic Thrust 3, we 
established a Defense Acquisition University (DAU) Living Library to 
host a collection of video presentations of program managers sharing 
lessons learned with the acquisition workforce. In Fiscal Year 2008, we 
set a goal to populate the library with 10 interviews and 20 lessons 
documents by June 2008. We exceeded the goal with examples that 
include: ``JSF Lessons Learned from the PEO,'' RADM Enewold, NAVAIR; 
``Uniqueness of Shipbuilding Acquisition Process,'' RADM (ret) 
Hamilton, PEO for Ships; ``Implementing Lean Six Sigma,'' Michael 
Joyce, Lockheed-Martin; and ``Structuring Programs for Success,'' Major 
General Riemer, PEO F-22. Numerous lessons documents are also available 
at the web site (www.dau.mil). My weekly e-mail notes to our Component 
Acquisition Executives, Program Executive Officers and major program 
managers provide leadership guidance on procedures, processes, 
behaviors and sharing of lessons learned with the acquisition 
workforce. Feedback indicates the workforce is vigilantly tuned into 
the weekly notes as they are widely considered a powerful leadership 
message directly from the Defense Acquisition Executive. While these 
are just several highlights, the Department continues to emphasize 
sharing of lessons learned and partnerships through technical 
performance reviews, information exchange meetings and various outreach 
and communications media such as WebCasts, and conferences. We also 
host the DOD Acquisition Best Practices Clearinghouse (BPCh), which 
facilitates the selection and implementation of systems engineering and 
software acquisition practices appropriate to the needs of individual 
acquisition programs.
    Mr. Abercrombie. Secretary Young, are there any statutory barriers 
preventing DOD from regaining the required acquisition expertise to 
successfully perform a source-selection?
    Secretary Young. Generally, no. Specifically, there are, the 
Congressional caps of management headquarters personnel, the 
inflexibility of hiring processes, the limited flexibility of the 
budget process, and constraints on salaries make timely hiring of 
highly qualified acquisition expertise extremely difficult if not 
impossible.
    Mr. Abercrombie. Secretary Young, do you believe it would be 
beneficial for GAO to be involved in DOD's source-selection processes 
prior to contract award to ensure objectivity and process adherence is 
followed? If so, should it only be for Major Defense Acquisition 
Programs, or all DOD acquisition programs? If not, why not?
    Secretary Young. The Government Accountability Office (GAO) 
absolutely should not be involved in the source selection process. GAO 
needs to be impartial in the protest process and having them engaged in 
the actual source selection will make it extremely difficult for the 
GAO to be independent and impartial when hearing protests. Further, the 
issue in most cases is not process adherence but flaws in establishment 
of the process, flaws with varying degrees of importance. GAO takes an 
extremely literal view of process adherence without regard to the 
importance and likely impact or relevance of flaws. Under this 
construct, given the complex nature of defense procurements and the 
propensity of industry to protest, there is a great risk that the 
Defense Department will lose significant time and money on procurements 
in the future.
    Mr. Abercrombie. Secretary Young, the Air Force requested 
approximately $832.0 million for the KC-(X) program in the fiscal year 
2009 budget request. Do you anticipate a reduced funding requirement 
for fiscal year 2009? If so, what is your estimate?
    Secretary Young. We do not anticipate a reduced funding requirement 
for fiscal year 2009. In the 2009 budget request, the Department 
requested $894.5M for the KC-X program. This requirement remains valid 
based on contract award in late December 2008. The funding provided in 
the amended RFP will be based on full support of this budget request.
    Mr. Abercrombie. Secretary Young, as a previous source-selection 
authority that has gone through GAO protest proceedings and hearings, 
what in your opinion would you change about the way GAO conducts the 
protest and hearing process? Would you consider it fair, equitable, and 
productive for the agency to have an opportunity to cross-examine or 
call as witnesses representatives from each competitor involved in the 
source-selection protest?
    Secretary Young. The Government Accountability Office (GAO) 
adjudicates the protest issues brought forward by the protesting 
offeror. Generally, a protest addresses an issue where the protestor 
believes the DOD did not follow the required Request for Proposal (RFP) 
evaluation processes. If the protestor has information appropriate to 
the issue under protest, it should be made available during the GAO 
protest process. I do believe that, depending on the nature of the 
protest issue, it may be appropriate for representatives to be 
witnesses at the GAO hearing.
    Mr. Abercrombie. Secretary Young, what is the Department's record 
in being able to estimate the life cycle--years in inventory--of 
various major programs of record?
    Secretary Young. To estimate the life cycle of a major program, the 
Department makes assumptions about certain aspects of a program, using 
engineering studies and a variety of factors such as the anticipated 
operational concepts, expected usage rates, etc., which are used to 
inform estimates at program decision points. Other factors such as in-
service modifications, actual usage, maintenance strategies, and 
upgrades also affect the life cycle after program initiation. We do not 
retroactively go back and make detailed comparisons of how all these 
factors played out over the life cycle of the systems, and any estimate 
we would produce would be specific to the weapons systems we would 
sample. In my experience, we frequently use systems in manners 
different than originally postulated, ensuring that the true life cycle 
costs are different. Further, I have seen a number of programs promise 
significant life cycle savings through hardware design, technology or 
new maintenance practices. Again, these savings are not always realized 
for a variety of reasons. These realities about estimation of lifecycle 
costs suggest to me that DOD should not overly weigh life cycle costs 
in program decisions and program competitions.
    Mr. Abercrombie. Secretary Young, what is the Department's record 
in being able to estimate the life cycle costs (LCC) of various major 
programs of record?
    Secretary Young. To estimate life cycle costs, the Department makes 
assumptions about certain aspects of a program, using engineering 
studies and a variety of factors such as the anticipated operational 
concepts, expected usage rates, etc., which are used to inform 
estimates at program decision points. Other factors such as in-service 
modifications, actual usage, maintenance strategies, and upgrades also 
affect the life cycle after program initiation. We do not retroactively 
go back and make detailed comparisons of how all these factors played 
out over the life cycle of the systems, and any estimate we would 
produce would be specific to the weapons systems we would sample.
    I believe a review of the record would reveal that DOD makes 
reasonable, informed projections of life cycle costs and frequently 
finds that the projections, assumptions and promised results all 
change.
    Mr. Abercrombie. Secretary Young, is it of value and how much value 
to include LCC as a discriminator in source selections for major 
acquisition programs?
    Secretary Young. In general, Government ownership Life Cycle 
Costing (LCC) should be included as a technical factor in the 
evaluation process. LCC should not be a cost/price factor because of 
the uncertainty associated with estimating costs out for 20-40 years 
which is typically the range of service life for our systems. In my 
opinion, Life Cycle cost certainly should not be an equal factor to the 
development and acquisition cost. While Operation and Support (O&S) 
cost represent a significant portion of the life cycle costs, these 
costs should not be over weighted in this or other source selections 
for several reasons. First, it is impossible to predict life cycle 
costs over 15-40 with accuracy. Second, all systems have significant 
life cycle costs--it is only the relative difference which is of 
interest, and this relative difference has a high degree of 
uncertainty. Third, most DOD programs have historically optimistically 
underestimated life cycle costs. Finally, DOD frequently uses platforms 
in very different ways than originally planned, significantly altering 
the life cycle costs. For these and other reasons, I believe it is a 
disservice to the taxpayer to give substantial weight to O&S cost in a 
source selection. O&S cost should be considered, but generally not on 
an equal basis with the development and acquisition costs.
    Mr. Abercrombie. Secretary Young, is it not better practice to 
provide a range of most probable life cycle costs estimates, plus or 
minus 10 or twenty percent of the best estimate of LCC, to preclude 
inferring greater fidelity in LCC than experience or cost estimating 
tools allow?
    Secretary Young. I believe Government Ownership Life Cycle Costing 
(LCC) estimates are just that; estimates, especially since we generally 
project the costs out 20 to 40 or more years. I believe LCC should be 
done in discounted constant dollars. It is appropriate for the 
estimators to discuss the confidence they have in their estimates and 
use a range where appropriate.
    Mr. Abercrombie. Secretary Young, please provide the Department's 
views of how the source selection protest process could be changed to 
significantly reduce the extensive delays between events, yet remain 
fair to all parties.
    Secretary Young. The Government Accountability Office (GAO) protest 
process has been developed over time. There is an ``express option'' 
that results in a GAO finding within 65 days. To my knowledge, the GAO 
has always honored the Department's requests to use the express option. 
Whether or not the GAO can further streamline the process is a question 
that would be more appropriate for GAO to answer.
    Mr. Abercrombie. Secretary Young, please provide the amount 
reimbursed by the Department to Boeing for its costs associated with 
its tanker contract award protest.
    Secretary Young. The Air Force estimates that it will reach an 
agreement with Boeing on legal fees near the end of calendar year 2008. 
We will then inform Congress.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. DICKS
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that DOD ``will conduct a new source selection.'' 
Does DOD agree that a future source selection process for the KC-X 
Tanker will be a totally new process that is free from information and 
conclusions that were part of the previous source selection? If not, 
why not?
    Secretary Young. The current solicitation will be amended with 
appropriate changes taking into account the Government Accountability 
Office (GAO) findings and recommendations and to allow the Department 
to make a new source selection. The offerors will be able to make an 
entirely new proposal or update the proposal they previously submitted. 
The Source Selection official and the Source Selection Advisory 
Committee will be staffed with an entirely new set of individuals. The 
Source Selection Evaluation Team factor or subfactor leads who were 
involved in sustained GAO findings are also being replaced.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that DOD ``will conduct a new source selection.'' 
What measures will be taken to ensure that a future source selection 
evaluation process is totally new and free from ``carry-over'' effects 
of the previous evaluation? Will all evaluation data, notes, 
correspondence and records from the previous source selection process 
be removed and sequestered so that they are not accessible to personnel 
at all levels of a new source selection process?
    Secretary Young. The Department intends to amend the Request for 
Proposal (RFP), as appropriate, request revised proposals, engage in 
negotiations to resolve any issues found as a result of the evaluation 
of revised proposals, and conduct a new source selection on the basis 
of those revised proposals. In areas where the offerors make no 
changes, the prior evaluation materials will be available for use by 
the Source Selection Evaluation Team (SSET). In those areas involving 
sustained Government Accountability Office (GAO) findings, if the 
offerors updated proposal does not resolve the issue to the 
satisfaction of the Department, then negotiations will be conducted. 
The technical evaluation of proposals is a technical evaluation of 
facts and data. Despite representations to the contrary, these 
technical evaluations are not subject to ``carryover'' effects.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that DOD ``will conduct a new source selection.'' 
What guidance will the SSET and the SSAC be given with respect to using 
or ignoring past evaluation information, materials and conclusions?
    Secretary Young. Offerors will be asked to update their proposals. 
The Source Selection Evaluation Team (SSET) will reevaluate the 
complete updated proposal and provide their findings to the Source 
Selection Advisory Council (SSAC) and Source Selection Authority (SSA). 
The SSET will be permitted to utilize previous evaluation materials and 
analyses if an Offeror's proposal remains unchanged in the area being 
evaluated. The new SSAC, since it is an entirely new set of 
individuals, will do a new comparative analysis of the offers and make 
an award recommendation to the SSA.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that DOD ``will conduct a new source selection.'' 
Does DOD agree that it is a leadership imperative to give extra 
attention to ensuring that a new source selection be conducted in a 
manner that is free of any ``carry-over'' from the previous evaluation 
and bias of the existing situation?
    Secretary Young. Yes. The Department assigned a new Source 
Selection Authority (SSA) and a new Source Selection Advisory Council 
(SSAC) with no members from the prior SSAC being included. Further, the 
Department assigned advisors to both the SSA and the SSAC to ensure the 
process is conducted in accordance with the Federal Acquisition 
Regulation/DOD Federal Acquisition Regulations (FAR/DFARS) and the 
Request for Proposal (RFP). A peer review process has been established 
to review the source selection process at key points and provide their 
findings to the SSA. However, in some cases where offeror proposals 
haven't changed, the Source Selection Evaluation Team (SSET) will be 
allowed to utilize the relevant evaluations and analysis previously 
performed to support the SSET evaluation.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that DOD ``will conduct a new source selection.'' 
The previous solicitation process entailed a period of 9 months from 
time of release of the Request for Information (RFI) and the release of 
the final Request for Proposals (RFP). The time from initial draft RFP 
to final RFP was 4 months. If the future amended KC-X Tanker RFP leads 
either industry bidder to conclude that it must offer a substantially 
different solution and proposal, will DOD allow sufficient time for the 
bidder to develop the new proposal if industry requests additional 
time?
    Secretary Young. It is important to note that the requirements will 
not change in the revised RFP. Indeed the requirements to be used were 
validated in 2005 and have been consistently used in the tanker 
acquisition process. Thus, it is a matter of fact that all bidders have 
literally had years to understand DOD requirements and develop an 
appropriate, competitive proposal. Nonetheless, the Department will 
allow sufficient time to the offerors. If a legitimate basis for 
additional time is made by one or both of the offerors, we will give 
that request careful consideration recognizing that we must be fair to 
both offerors.
    Mr. Dicks. The GAO decision of the Boeing protest to the KC-X 
Tanker source selection concludes that the Air Force did not properly 
evaluate the relative value of the two proposals as it considered the 
many requirements that they offered to satisfy. In summing up this 
point, GAO concluded that ``our review of the record indicates that & 
the Air Force failed to evaluate proposals in accordance with the RFP's 
evaluation criteria. That is, the record evidences that the Air Force 
failed to assess the relative merits of the offerors' proposals based 
upon the importance assigned to the various SRD requirements by the RFP 
or to account for the fact that Boeing proposed to satisfy far more SRD 
requirements than did Northrop Grumman.'' (page 33) The RFP reflects 
requirements that have been established in the Capability Development 
Document, and the prior ``RFP provided that KPP requirements were more 
important than KSA requirements, which were in turn more important than 
non-KPP/KSA requirements.'' Will a future RFP and source selection 
evaluation maintain the same weighting valuation of all requirements in 
which KPP requirements are more important than KSA requirements, which 
are more important than non-KPP/KSA requirements?
    Secretary Young. Yes.
    Mr. Dicks. The GAO decision of the Boeing protest to the KC-X 
Tanker source selection concludes that the Air Force did not properly 
evaluate the relative value of the two proposals as it considered the 
many requirements that they offered to satisfy. In summing up this 
point, GAO concluded that ``our review of the record indicates that & 
the Air Force failed to evaluate proposals in accordance with the RFP's 
evaluation criteria. That is, the record evidences that the Air Force 
failed to assess the relative merits of the offerors' proposals based 
upon the importance assigned to the various SRD requirements by the RFP 
or to account for the fact that Boeing proposed to satisfy far more SRD 
requirements than did Northrop Grumman.'' (page 33) Will a follow-on 
source selection evaluation process document the use of those weighted 
requirements at all stages of the source selection, including the SSAC 
and SSA?
    Secretary Young. We have clearly articulated the relative 
importance of the evaluation factors, sub-factors, elements and sub-
elements to both Offerors. We will document the use of those weighted 
requirements at all stages of the source selection.
    Mr. Dicks. In the prior source selection, the System Requirements 
Document (SRD) for the KC-X Tanker is clear that ``the Primary mission 
of the KC-X is to provide worldwide, day/night, adverse weather aerial 
refueling (AR) on the same sortie to receiver capable United States, 
allied and coalition military aircraft.'' That SRD established the 
requirement for refueling in paragraph 3.2.1.1.1 (Fuel Offload and 
Radius Range (KPP #2)), which defined a threshold level of fuel offload 
vs. radius range. The objective for this was to be ``capable of 
exceeding the fuel offload versus unrefueled radius range'' threshold. 
In his July 10th testimony to the Air and Land Forces Subcommittee, 
Under Secretary Young testified that the ``capability document record 
indicates that the objective is greater than the threshold and that 
there is added value, I quote, `that--there is added value to the war 
fighter for additional offload.' '' Other than paragraph 3.2.1.1.1 of 
the previous SRD, where else in the RFP documents was it clear to 
bidders that added value would be given for additional offload 
capacity?
    Secretary Young. I referred to the CDD which is the Capability 
Development Document. That document is clear that the Warfighter's 
requirement was and is that there is added value to providing fuel 
above the threshold amount. We have modified section 3.2.1.1.1 to 
reflect that exact intent.
    Mr. Dicks. In the prior source selection, the System Requirements 
Document (SRD) for the KC-X Tanker is clear that ``the Primary mission 
of the KC-X is to provide worldwide, day/night, adverse weather aerial 
refueling (AR) on the same sortie to receiver capable United States, 
allied and coalition military aircraft.'' That SRD established the 
requirement for refueling in paragraph 3.2.1.1.1 (Fuel Offload and 
Radius Range (KPP #2)), which defined a threshold level of fuel offload 
vs. radius range. The objective for this was to be ``capable of 
exceeding the fuel offload versus unrefueled radius range'' threshold. 
In his July 10th testimony to the Air and Land Forces Subcommittee, 
Under Secretary Young testified that the ``capability document record 
indicates that the objective is greater than the threshold and that 
there is added value, I quote, `that--there is added value to the war 
fighter for additional offload.' '' In a future RFP, will there be an 
explicit numerically bounded objective level?
    Secretary Young. No.
    Mr. Dicks. In the prior source selection, the System Requirements 
Document (SRD) for the KC-X Tanker is clear that ``the Primary mission 
of the KC-X is to provide worldwide, day/night, adverse weather aerial 
refueling (AR) on the same sortie to receiver capable United States, 
allied and coalition military aircraft.'' That SRD established the 
requirement for refueling in paragraph 3.2.1.1.1 (Fuel Offload and 
Radius Range (KPP #2)), which defined a threshold level of fuel offload 
vs. radius range. The objective for this was to be ``capable of 
exceeding the fuel offload versus unrefueled radius range'' threshold. 
Under Secretary Young testified to the Air and Land Forces Subcommittee 
that ``While the objective is for more fuel, it should be bounded and I 
think will be bounded by cost.'' Does DOD agree that the objective for 
fuel offload also should be bounded by other significant factors such 
as the major operational negative impacts resulting from larger 
aircraft being able to operate out of fewer airfields and the 
congestion that large aircraft create on the ground at airfields?
    Secretary Young. No. The objective will only be bounded by the 
amount that an Offeror proposes above threshold.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that ``While the objective is for more fuel, it 
should be bounded and I think will be bounded by cost.'' Does DOD agree 
that the objective for fuel offload also should be bounded by other 
significant factors such as the major operational negative impacts 
resulting from larger aircraft being able to operate out of fewer 
airfields and the congestion that large aircraft create on the ground 
at airfields? In the context of statements that there is great value in 
additional fuel offload capacity, respond to the following:
    What are the average fuel offload per sortie figures for the KC-135 
fleet and the KC-10 fleet? What are the average offload per sortie 
figures for the KC-135 fleet and for the KC-10 fleet in recent combat 
theater environments? If, as has been reported, the average combat 
scenario fuel offload is 60,000-65,000 pounds of fuel per sortie, what 
is the basis for putting great emphasis on much larger fuel offload 
capacity? Has either DOD or the Air Force established and documented a 
changed operational construct for aerial refueling such that it is 
clear that additional refueling capacity will be used?
    Secretary Young. In recent combat theater environments, the average 
scheduled offloads for the KC-135 and KC-10 in 2007 were 62,000 and 
84,000 pounds respectively. For January through March of 2008 the 
average scheduled offload for the KC-135 was 68,000 pounds while for 
the KC-10, it was 105,000 pounds.
    Smaller offloads may be reflected if training sorties and other 
peace time activities are included. Figure 1 below reflects inclusion 
of all sorties flown by KC-10 and KC-135 aircraft from 1 October 2006 
through 30 Sep 2007.


Figure 1. Average fuel offloaded by AMC tankers FY2007. Fuel offloaded 
in pounds, one gallon JP-8 equals approximately 6.7 pounds. Source: 618 
TACC/XOND Data Division

    The requirement does not put greater emphasis on much larger fuel 
offload capacity. The requirement recognizes the benefit of increased 
fuel offload capacity in effectively accomplishing a range of 
warfighting scenarios. The requirement is defined by analyzing and 
integrating the tanker capacity required to meet various DOD 
warfighting plans. The average peacetime fuel offload does not define 
the warfighting requirement and purchasing a tanker which only meets 
peacetime demand would result in a tanker fleet that was totally 
inadequate to meet any DOD war plans.
    The need for additional refueling capacity is not based on a 
changed operational construct. These capabilities are derived from 
validated operational requirements resident in the current construct 
that has for years defined the number of tanker and airlift platforms 
necessary to meet the National Military Strategy. The last Mobility 
Capabilities Study provided a range of aircraft numbers that could meet 
operational objectives based on the acceptance of different levels of 
risk. When combined together, fiscal realities and acceptable risk have 
resulted in the acquisition and sustainment of a fleet of mobility 
aircraft at or near the lower end of that scale. As we recapitalize 
aging aircraft in the mobility fleet, the primary objective is to 
maintain existing air refueling and airlift capabilities along with the 
associated level of risk. A secondary objective is to expand 
capabilities in refueling capacity when fiscally and operationally 
feasible; thus reducing overall risk and increasing the ability/
certainty to fully meet all objectives (wartime and peace time) in an 
effective and efficient manner.
    Mr. Dicks. As a percentage of available capacity, what is the 
average cargo transport that has been performed by the KC-135 fleet and 
the KC-10 fleet?
    Secretary Young. Air Mobility Command (AMC) does not track 
percentage of available capacity in relationship to average cargo 
movements on the tanker fleet as a metric. However, overall cargo 
movement is tracked and is provided below for fiscal year 2007.


Figure 1: Table displaying the percentage of refueling, airlift and 
dual role tanker sorties. Source of data: 618 TACC/XOND Data Division.

    Mr. Dicks. What has been the average cargo transport performed by 
the KC-135 fleet and the KC-10 fleet in recent combat theater 
environments?
    Secretary Young. Figure 1 displays fiscal year 2007 collected data 
with regard to cargo movement on GWOT tanker missions.


Figure 1: Table displaying the percentage of refueling, airlift and 
dual role tanker sorties. Source of data: 618 TACC/XOND Data Division.

    Mr. Dicks. Has the DOD/Air Force established and documented a 
changed operational construct for how refueling tankers will be used 
such that a significantly larger cargo capacity is anticipated? If so, 
what is it?
    Secretary Young. The DOD/Air Force has not changed the operational 
construct for employing air refueling assets. Mobility requirements 
have always remained grounded in the National Military Strategy, 
providing a range of tanker and airlift capability that can meet 
operational objectives based on the acceptance of different levels of 
risk. When combined together, fiscal realities and acceptable risk have 
resulted in the acquisition and sustainment of a fleet of mobility 
aircraft at or near the lower end of that scale. As we recapitalize 
aging aircraft in the mobility fleet, the primary objective is to 
maintain existing capabilities along with the associated level of risk. 
A secondary objective is to expand capabilities when fiscally and 
operationally feasible; thus reducing overall risk and increasing the 
ability/certainty to fully meet all objectives (wartime and peace time) 
in an effective and efficient manner.
    Mr. Dicks. As a percentage of available capacity, what is the 
average passenger transport that has been performed by the KC-135 fleet 
and the KC-10 fleet?
    Secretary Young. Air Mobility Command (AMC) does not track 
percentage of available capacity in relationship to average passenger 
movements on the tanker fleet as a metric. As specified by current 
mission planning guidance (AFPAM 10-1403), AMC uses planning factors of 
68 passengers/23 pallet positions for the KC-10 and 46 passengers/6 
pallet positions for the KC-135.
    A good example of mission data that is tracked and useful in 
response to this question is in figure 1. Figure 1 shows fiscal year 
2007 data with regard to cargo movement on AMC tanker missions. This 
data is driven by mission requirements versus aircraft capacities.


Figure 1: Table displaying the percentage of passengers (pax) on 
refueling, airlift and dual role tanker sorties. Source of data: 618 
TACC/XOND Data Division.

    Mr. Dicks. What has been the average passenger transport performed 
by the KC-135 fleet and the KC-10 fleet in recent combat theater 
environments?
    Secretary Young. Figure 1 displays fiscal year 2007 data with 
regard to passenger movement on GWOT tanker missions. This data is 
driven by mission requirements versus aircraft capacities.


Figure 1: Table displaying the percentage of refueling, airlift and 
dual role tanker sorties. Source of data: 618 TACC/XOND Data Division.

    Mr. Dicks. Has the DOD/Air Force established and documented a 
changed operational construct for how refueling tankers will be used 
such that a significantly larger passenger capacity is anticipated? If 
so, what is it?
    Secretary Young. The DOD has not changed its construct for 
passenger capacity within its air refueling fleet. The inherent 
capability for self deployment and opportune cargo provides the 
warfighter flexibility in meeting today's and tomorrow's fight. 
Maintaining this capability is one of the DOD's primary considerations 
while expanding this capability is desired, if fiscally and 
operationally feasible.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. Will the membership of the Source 
Selection Evaluation Team (SSET) be entirely different from the 
previous SSET?
    Secretary Young. No. The SSET factor and sub factor leads who were 
involved in a sustained Government Accountability Office (GAO) finding 
are being replaced. Some 150 individuals were involved in the SSET 
evaluation. Much of the prior evaluation was not a subject of the 
protest.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. Who will determine the membership of 
the SSET for the re-competition of the KC-X program?
    Secretary Young. As the Under Secretary of Defense for 
Acquisitions, Technology and Logistics, I will approve the SSET 
membership.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. The GAO decision on the KC-X Tanker 
protest highlighted gaps in knowledge and expertise of some key 
personnel on the SSET (pages 44 and 63 of the GAO report). In staffing 
a future SSET, what steps will DOD take to ensure that it is staffed 
with personnel with the necessary background, expertise and judgment?
    Secretary Young. Source Selection Evaluation Team (SSET) membership 
is being reviewed to ensure the personnel have the appropriate 
background, expertise and judgment. Where appropriate, new members, 
including functional area leads, will be appointed.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. Will the membership of the SSAC be 
entirely different from the previous SSAC?
    Secretary Young. Yes.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. Who will determine the membership of 
the SSAC for the re-competition of the KC-X program?
    Secretary Young. As the Under Secretary of Defense for Acquisition, 
Technology and Logistics, I will make recommendations for SSAC 
membership to the Deputy Secretary of Defense. The Deputy Secretary of 
Defense will appoint the new SSAC members.
    Mr. Dicks. Under Secretary Young testified to the Air and Land 
Forces Subcommittee that there will be a new Source Selection Authority 
(SSA) and Source Selection Advisory Council (SSAC) for a future KC-X 
Tanker source selection process. Will the SSAC include senior military 
personnel with operational experience in air mobility (refueling and 
airlift)?
    Secretary Young. Yes.
    Mr. Dicks. In testimony to the Air and Land Forces Subcommittee, 
Under Secretary Young stated that DOD will ``have an independent team 
look at how we estimate the life-cycle cost'' in the source selection. 
Does Secretary Young's statement mean that an independent team will 
develop a life-cycle cost estimate? Or does the statement mean that an 
independent team will review the approach that a DOD team takes?
    Secretary Young. An independent team will review the methodology 
that the Source Selection Evaluation Team (SSET) uses. They will also 
review whether the SSET follows that methodology in their evaluation.
    Mr. Dicks. In testimony to the Air and Land Forces Subcommittee, 
Under Secretary Young stated that DOD will ``have an independent team 
look at how we estimate the life-cycle cost'' in the source selection. 
Will the independent cost analysis team be from an organization outside 
of DOD? How will the team be selected?
    Secretary Young. A Federally Funded Research & Development Center 
(FFRDC) will review the work of the Source Selection Evaluation Team 
(SSET) to ensure the evaluation was done in accordance with the Request 
for Proposal (RFP) requirements. The FFRDC was selected on the basis of 
its experience and the fact that it has no relationship with either of 
the offerors.
    Mr. Dicks. Under Secretary Young's testimony to the Air and Land 
Forces Subcommittee included the statement that ``Evaluating cost as 
one giant bundle, I think, is awkward. I think we should assign some 
value to the known cost of developing and buying the aircraft, but we 
also will likely make an adjustment and make sure we properly evaluate 
the life cycle costs, but look at those two in terms of our relative 
confidence in the two numbers.'' Under Secretary Young's comments 
clearly show intent to more strongly weight near-term program costs 
over longer term operation and support (O&S) costs. Historical data 
shows that O&S costs for Air Force programs represent approximately 70% 
of total ownership costs (GAO letter report to Sen. Inhofe, August 
2000). Historical data also shows that development costs are not well 
known as evidenced in GAO's July 2008 report (GAO-08-619) that found 
that ``eight of the 20 programs [studied] have reported development 
cost growth of more than 35 percent, resulting in the need for nearly 
$19 billion in additional funding.'' Since development costs and O&S 
costs both have significant uncertainty, but O&S costs represent the 
high burden on the taxpayer, does DOD agree that O&S costs should be 
given very substantial weight in evaluating total life-cycle costs of 
proposals? If not, why not?
    Secretary Young. O&S costs will be evaluated as part of the Most 
Probable Government Ownership Life Cycle Costs (MPGOLCC). We will be 
estimating these costs over a 40 year period. As with any estimate that 
is projected out beyond 40 years, there will be a high degree of 
uncertainty and approximation associated with this MPGOLCC estimate.
    On the other hand, we are confident that we can more accurately 
evaluate the Contractor's proposed Acquisition costs. The government is 
seeking to buy a commercial derivative product and this effort contains 
significantly less risk than other weapon systems development efforts 
which are developing new capability and relying on unproven technology. 
Hence, acquisition will have more weight than Government Ownership 
Costs in the Cost/Price factor.
    While Operation and Support (O&S) cost represent a significant 
portion of the life cycle costs, these costs should not be over 
weighted in this or other source selections for several reasons. First, 
it is impossible to predict life cycle costs over 15-40 with accuracy. 
Second, all systems have significant life cycle costs--it is only the 
relative difference which is of interest, and this relative difference 
has a high degree of uncertainty. Third, most DOD programs have 
historically optimistically underestimated life cycle costs. Finally, 
DOD frequently uses platforms in very different ways than originally 
planned, significantly altering the life cycle costs. For these and 
other reasons, I believe it is a disservice to the taxpayer to give 
substantial weight to O&S cost in a source selection. O&S cost should 
be considered, but generally not on an equal basis with the development 
and acquisition costs.
    Mr. Dicks. At the Air and Land Forces Subcommittee hearing, 
Congressman Norm Dicks submitted for the record a fuel consumption 
chart published by Conklin & de Decker Aviation Information. The chart 
estimates and compares life-cycle fuel consumption and fuel costs for 
the Airbus A-330 commercial aircraft and the Boeing 767-200 aircraft, 
based on actual usage. In his testimony at the hearing, Under Secretary 
Young told Congressman Dicks, ``I disagree with your estimates of the 
fuel burn. We have data, and I have seen the data, I can't comment on 
the data in public, but those are not accurate estimates of the fuel 
burn.''
    What is the basis for DOD's data for fuel consumption? Are DOD's 
data based on actual usage experience for aircraft? Are they based on 
bidders' proposals? Are they based on an independent estimate?
    Secretary Young. The offerors provided fuel burn rates for 
computing life cycle costs. The source selection evaluation team did 
independent estimates of fuel burn rates to cross check the offerors' 
data. The estimates were based on flight profiles that allowed the 
assessment of average fuel burn rates over a wide range of operating 
conditions. The cross check demonstrated that both offerors' proposed 
fuel burn rates were reasonable. therefore the offerors' burn rates 
were used in the life cycle cost calculations.
    Mr. Dicks. The data that Congressman Dicks submitted for the record 
is based on commercial aircraft. It would be reasonable to expect that 
a commercial aircraft that is modified for use as a tanker would have 
different fuel consumption, but that both competing aircraft would be 
affected in the same manner and approximately to the same extent. Does 
DOD agree with this? What unit cost for aviation fuel was used in the 
previous life-cycle cost estimation that was used in developing Most 
Probable Life Cycle Cost? What unit cost for aviation fuel will be used 
as the basis for a future life cycle cost calculation in a new source 
selection evaluation and how was the figure derived?
    Secretary Young. The previous evaluation priced fuel at $2.35/gal. 
It was the established price used across the Department at the time the 
Request for Proposal (RFP) was issued (or time of Final Proposal 
Revision (FPR)). The current Department price is $4.07/gal. The 
evaluation will be done using whatever price the Department has in 
place at time of FPR.
    It is reasonable to assume two commercial aircrafts fuel 
consumption would be affected in the same manner and to reasonably the 
same extent if both are modified to a tanker role in a similar fashion. 
We note that in the data Congressman Dicks submitted for the record, 
one aircraft is significantly different than the baseline aircraft 
proposed to the Air Force. As such, it is not reasonable to conclude 
that the results presented in the Congressman Dicks submitted data can 
be used to draw inferences about the KC-X program. Fuel consumption by 
commercial and commercial-derivative aircraft is very mission profile 
dependent and generally highly proprietary information. The Defense 
Department will evaluate all proposed air craft using data.
    Mr. Dicks. The GAO decision on the KC-X Tanker protest identified 
some significant issues concerning the evaluation of military 
construction costs. Not only were there computational errors, but the 
evaluation also neglected to consider unique costs of the specific 
proposals, and neglected to use representative costs for basing at 
Fairchild AFB from the bidders. Will a future source selection 
evaluation consider the unique MILCON costs of each bidder's proposal 
by conducting site surveys after receipt of the proposals? Will bidders 
again be asked to submit estimated cost for basing at Fairchild AFB, 
and will those costs be used in the source selection evaluation?
    Secretary Young. No.
    Mr. Dicks. Will a future source selection evaluation consider 
construction costs that would be incurred at bases around the world in 
fighting the wartime scenarios that are part of the Integrated Fleet 
Aerial Refueling Assessment?
    Secretary Young. No.
    Mr. Dicks. Personnel costs are a significant portion of the O&S 
costs for any weapon system. How did the Air Force evaluate personnel 
costs in estimating Most Probable Life Cycle Cost (MPLCC) for the 
previous KC-X source selection?
    Secretary Young. The costs of Air Force, Air National Guard, and 
Air Force Reserve personnel were based on the number of personnel in 
the KC-X Manpower Estimate Report (MER) provided by Air Mobility 
Command and salary rates taken from Air Force Instruction (AFI) 65-503. 
The numbers of Air Force, Air National Guard, and Air Force Reserve 
personnel were multiplied by the appropriate salary rates from AFI 65-
503 to yield the cost of personnel for KC-X. Identical manpower 
estimates were used for all offerors.
    Mr. Dicks. Personnel costs are a significant portion of the O&S 
costs for any weapon system. Did the cost estimating models account for 
system-specific or industry-standard differences? For example, is it 
common to evaluate personnel costs for aircraft weapon systems based on 
the weight of an aircraft or the addition of OBOGGS?
    Secretary Young. No. Personnel manning is based on wartime 
conditions and typically do not vary based on peacetime conditions. 
Adjustments to manning can only be made after extensive use of the 
aircraft in the operational environment.
    Mr. Dicks. Personnel costs are a significant portion of the O&S 
costs for any weapon system. Were personnel costs for organizational- 
and depot-levels developed using current Air Force organizational 
constructs? If not, did the model assume that all 179 aircraft were 
going to be stationed at one base?
    Secretary Young. Personnel costs were estimated in accordance with 
Air Force personnel methodologies which considered Air Force 
organizational constructs for both organizational and depot level 
maintenance.
    Mr. Dicks. Maintenance costs are a significant portion of the O&S 
costs for a weapon system. How did the Air Force evaluate maintenance 
costs in estimating Most Probable Life Cycle Cost (MPLCC) for the 
previous KC-X source selection?
    Secretary Young. The Air Force asked offerors to provide both 
unscheduled and scheduled maintenance costs for KC-X as part of the 
Request for Proposal (RFP). Offeror inputs were evaluated by source 
selection team members with backgrounds in cost, logistics, and depot 
operations. Based on the source selection team's analysis, maintenance 
costs were adjusted as appropriate. Resulting maintenance costs were 
included as part of the MPLCC and offerors were briefed on all 
adjustments.
    Mr. Dicks. Maintenance costs are a significant portion of the O&S 
costs for a weapon system. Were supply costs considered at the 
organizational and depot levels?
    Secretary Young. Yes.
    Mr. Dicks. Maintenance costs are a significant portion of the O&S 
costs for a weapon system. Does the cost estimating model used for the 
KC-X Tanker source selection consider the frequency of planned depot 
visits, i.e., a 6-year depot cycle versus an 8-year depot cycle?
    Secretary Young. The Operation and Support (O&S) evaluation will 
consider the frequency of planned depot visits. The original source 
selection and cost estimates considered these factors.
    Mr. Dicks. In performing the KC-X source selection, are relative 
environmental impacts of proposals a part of the evaluation? Will DOD 
consider the relative contributions to green house gases of the 
aircraft that are proposed?
    Secretary Young. No.
                                 ______
                                 
             QUESTION SUBMITTED BY MR. MILLER AND MR. DICKS
    Mr. Miller and Mr. Dicks. Did GAO count the total number of issues 
raised by The Boeing Company in the protest, where the Air Force 
represented that there were a total of 110 issues?
    Mr. Gordon. We did not count the total number of issues raised by 
Boeing in its protests, and we have no position on what the ``correct'' 
number would be. From our review of these pleadings, we identified, 
after issuance of our decision, 22 main protest issues, many of which 
had sub-issues. We recognize that different parties can count issues, 
and sub-issues, differently, and counting issues is not germane to our 
protest process. More importantly, as we stated in our decision and in 
our testimony, we considered all of Boeing's protest allegations.
                                 ______
                                 
                    QUESTION SUBMITTED BY MR. BONNER
    Mr. Bonner. Did GAO find that the Air Force had properly calculated 
that Northrop Grumman's proposed aircraft could offload more fuel over 
distance and had a better air refueling efficiency than Boeing's?
    Mr. Gordon. GAO did not make such a finding.
                                 ______
                                 
              QUESTIONS SUBMITTED BY MRS. MCMORRIS RODGERS
    Mrs. McMorris Rodgers. Representing eastern Washington which is 
home to Fairchild AFB, one of the Air Force's largest tanker hubs, I 
understand first-hand the importance of the American Tanker to not only 
military operations, but humanitarian efforts around the world. I 
consider myself, and I hope others do too, a strong supporter of the 
Air Force and all the good things the Service does each and every day. 
I know each Airman embodies the core values of Integrity First, Service 
before Self and Excellence In All We Do&..Throughout this entire award 
process, we've heard the Air Force boast about making the KC-X contract 
award an ``open and transparent'' process&that the Air Force wanted to 
make sure they ``got this one right.'' Although Boeing submitted a 
laundry list of concerns in their GAO protest, I'm surprised by how 
basic the 7 items the GAO based their decision on seem to be, and I 
quote: The agency did not assess the relative merits of the proposals 
in accordance with the evaluation criteria. The agency violated 
evaluation provisions for giving consideration for exceeding KPP 
objects when it said it wouldn't Awarding the contract without being 
able to show that the Northrop Grumman submission meets all stated 
requirements Using ``notional'' (or hypothetical) reasoning and 
modeling when calculating Boeing's life cycle costs and non-recurring 
engineering costs--These seem like basic acquisition concepts--My 
question is simply WHAT HAPPENED? How could these issues have been 
overlooked? Were the wrong people assigned key oversight 
responsibilities, is proficiency lacking in the acquisition career 
field, was the process too cumbersome&what? And what needs to be done 
to fix the problems?
    Secretary Payton. Your reputation as a strong supporter of the Air 
Force is well known and I appreciate that support for the mission. The 
Air Force is collecting and analyzing lessons learned from the KC-X 
source selection. We are reviewing every step of the process from 
requirements definition, to RFP development and release, to proposal 
evaluation and documentation of the source selection record, to the 
Most Probable Life Cycle Cost calculations with a focus on personnel, 
procedures, processes, schedule pressures and complexity levels. These 
lessons learned will map the GAO sustained items with a root cause 
assessment and resulting recommendations for source selection 
improvements. While it is important to note that the GAO did not find 
any intentional wrong doing or bias on the part of the Air Force, we 
must take adequate time and apply rigor as we discover and 
institutionalize the KC-X lessons learned. We will provide our initial 
findings to Acting Secretary of the Air Force Donley in September. Also 
in September, we will ask the Center for Naval Analysis to initiate an 
independent review of the KC-X source selection with findings reported 
out to Acting Secretary Donley in December. I look forward to 
discussing the findings of our internal review of lessons learned with 
you as soon as they are complete. Again, thank you for your strong 
support of the Air Force.
    Mrs. McMorris Rodgers. I've heard Sectary Gates is considering 
moving other Air Force acquisition programs under OSD oversight. Can 
you provide a brief summary of those programs?
    Secretary Payton. The Air Force is not aware of any programs being 
considered for OSD oversight.
    Mrs. McMorris Rodgers. The GAO report included a recommendation 
that Boeing be ``reimbursed the reasonable costs of filing and pursuing 
their protest, including reasonable attorneys' fees.'' Do you have an 
estimate of how much these ``reasonable costs'' are?
    Secretary Payton. The amount of bid protest costs incurred by 
Boeing is proprietary data and was submitted by Boeing under the GAO 
protective order, preventing the release of the details publicly. At 
this time, it is inappropriate for the Air Force to comment on what are 
Boeing's ``reasonable costs.'' Pursuant to the GAO bid protest rules, 4 
C.F.R. Sec. 21.8(f), the Air Force contracting officer will negotiate 
with Boeing to resolve the claim or otherwise issue a decision on the 
claim.
    Mrs. McMorris Rodgers. If the re-bid process results in Boeing 
receiving the contract award, is the Air Force liable to pay Northrop 
Grumman a penalty for terminating the contract award? If so, how much?
    Secretary Payton. The Northrop Grumman contract contained a 
standard contract provision from the Federal Acquisition Regulation 
(``FAR'') that allowed the Air Force to issue a proper stop work order 
to Northrop Grumman when Boeing filed its protest. 48 C.F.R. 
Sec. 52.233-3, FAR contract clause entitled ``Protest After Award (Aug 
1996).'' The Northrop Grumman contract also contains a FAR provision 
that allows the Air Force to terminate the contract for its 
convenience. 48 C.F.R. Sec. 52.249-6, FAR contract clause entitled 
Termination (Cost Reimbursement) (May 2004). This FAR contract 
provision governs the general termination proceedings and establishes 
costs that are payable by the Air Force to Northrop Grumman upon a 
contract termination. Generally, the costs reimbursable are those 
incurred for performance of the contract before the effective date of 
the termination, a portion of the contract fee, costs to terminate 
subcontracts, and reasonable settlement costs of the work terminated. 
The termination costs would not be known until a termination decision 
is made and a settlement is negotiated.

                                  
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