US Secretary of Defense Bob Gates has not revealed how the new Obama administration will approach buying new tankers, a task twice botched in spectacular fashion by the previous administration. But it appears at least one option - dividing the contract between Boeing and Northrop Grumman/EADS North America - is off the agenda, at least according to Gates.
A former intelligence chief and university president, Gates is not fond of political gimmicks trussed up as policy proposals. Rather, he has shown consistent scorn for a series of split-purchase proposals that, while politically expedient, are operationally ridiculous.
Far from being a smart decision, a split-purchase makes the scandalised lease deal for 100 Boeing KC-767s smell like a rosy bargain for taxpayers.
Advocates of a split-purchase attempt often use the argument that the economics of a competitive sourcing strategy favour it. The reasoning goes that it would be more efficient to buy from mostly off-the-shelf products from two sources, using market forces to compel the contractors to behave.
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Gates is right to rubbish such nonsense. His repeated arguments against the proposal focus on the cost of buying redundant crews, infrastructure and training systems, and these are sensible objections.
But there is also a purely economic case against the split-purchase contract. The Department of Defense is not an airline or aircraft lessor. It lacks the power, despite being a monopsony buyer, to play Boeing against Airbus in hopes of striking a better bargain, because buying nothing is generally not an option.
In this market the DoD is always at a disadvantage to its suppliers as soon as a contract is signed. The only difference between a sole-source contract and split-purchase is that the DoD is beholden to two contractors instead of just one.
Ideally, the DoD might accrue some benefit from holding an annual contest and dividing the spoils between the Boeing and Northrop-led teams.
But the tanker contract is far from ideal. There has never been such a shameless display of political meddling in the history of US military acquisition. Each yearly award would become instant grist for more politically motivated graft at the taxpayer's expense.
Even so, Gates may be unable to stop the split-purchase advocates massing in Congress, and that will be unfortunate for the taxpayer - not to mention the USAF's tanker crews.
Source: Flight International
