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LIVINGSTON: When companies compete, taxpayers win
Congress must ensure Boeing’s new air tankers stay on budget
After a decade of trying, the Department of Defense finally has arrived at a procurement decision for replacing its aging aerial refueling tanker fleet. Following two failed attempts, this acquisition process reached levels of complexity seldom, if ever, seen before. After both bidders were scrutinized through 372 mandatory requirements and three analytical factors, the competition resulted in what Deputy Secretary of Defense William J. Lynn III termed a “clean winner” based on one overriding factor: price. The winning bid by Boeing was about $3.5 billion lower than the competitor’s and a whopping $16 billion less by comparison with its first tanker bid in 2002.
It appears at first glance that the taxpayer has achieved a significant victory. In 2008, Boeing bid on this program but lost the award. It protested, and the Air Force started the pro-cess all over again. From 2008 to its winning bid in 2011, Boeing reduced its price for completion of the contract by about 25 percent, or approximately $10 billion in less than three years. The savings constitute a major victory for the taxpayer. But victory will slip through our grasp if Congress fails to provide the necessary oversight and guarantee that taxpayers will reap the benefits they’ve been promised.
The foundation has been laid for such oversight. In 2009, Congress passed and the president signed a new Acquisition Reform Act for the Department of Defense. The law instituted additional responsibilities and controls to prevent the perpetual requirement creep, cost growth and schedule delays endemic to large Department of Defense programs. Historically, our window into these events always has been evident after the fact. The new law requires proactive vigilance to arrest cost and requirement growth before it infects programs, thereby avoiding undue increases in expense. The tanker program award is among the first large acquisition programs decided after that law was passed. The successful execution and cost containment of the tanker program will be a key litmus test of the new law’s success - and of the Congress that is tasked with that oversight.
The victory to the taxpayer provides an exclamation point for procurement reform. But this victory must be preserved by ensuring that the savings are claimed and protected and that the aircraft are delivered on time. Congress must protect the taxpayer’s equity by ensuring the development and application of aggressive oversight and control appropriate to this unique and precedent-setting acquisition approach. The innovation in acquisition that achieved these dramatic savings requires a similar innovation in program oversight by the Department of Defense and Congress.
Boeing won by bidding the lowest price for a minimally acceptable capability. The taxpayer also won on price and deserves to preserve that win through rigorous oversight and uncompromising program execution. If not, the only winners will be those who bid low but sold high in the end.
Bob Livingston is former chairman of the House Appropriations Committee. He is a founding partner in the Livingston Group and represents EADS North America.
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