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Extended Interview: Air Force Gen. Gregory Martin

May 6, 2008 at 5:45 PM EDT

TRANSCRIPT

KWAME HOLMAN: General, talk a little bit about how this contract for these new tankers was approached.

GEN. GREGORY MARTIN (Ret.), former commander, Air Force Material Command, Wright-Patterson Air Force Base, Ohio: I think first of all, to start the process off what’s most important to realize is that we did what was called an analysis of alternatives. Now that analysis was conducted by Rand Corporation and my recollection is it took a little over two years for the study to be done and then the vetting process that occurred. I have to tell you that that analysis of alternatives was probably the most heavily vetted analysis that we’ve ever done in any of the services for an acquisition program.

KWAME HOLMAN: Why was it so meticulous?

GEN. GREGORY MARTIN: Well, it was because of the background. It was the background that had occurred. Initially the Air Force in the late ’90s was approached about replacing their KC-135s. But the Air Force chose what I would call a phased modernization program. They had modernized the fighters in the ’80s, the bombers in the late ’80s, early ’90s. We were at that time, the late ’90s, modernizing our air lift force with C-17s and C-130Js and it was intended to do the analysis of alternatives for the tanker replacement in the 2005 timeframe. But about ’98 we started seeing very serious corrosion and fatigue problems on our KC-135 force including the E models which had never gone through the significant modification. At one time I think we had 176 aircraft in depot maintenance for over and above work, meaning more work than was normal to be done. That’s about 35 percent of your tanker force that was in maintenance.

So the lease thing sounded like a pretty good idea for the oldest aircraft we had, the aircraft were available and that all started rolling. But analysis and alternatives had not formally been done. And so the issue unfolded with Sen. (John) McCain (R-Ariz.) and therefore when we did this analysis of alternatives, it was very clear that we wanted what we considered to be a totally unbiased effort by a well-recognized analysis shop to do that work and then it was vetted. That vetting process took about 8 months and that was to make sure that there were never going to be anyone who would claim that whatever we were trying to in the leasing was just rolled over into the procurement. It was a very, very conscious effort to make this perfectly pristine.

KWAME HOLMAN: What is the Air Force looking … to have a brand new plane do?

GEN. GREGORY MARTIN: Great question. The tanker that we’re replacing, the KC-135 fleet, in this case it was the R-model because in the late ’80s we had gone through re-engining and doing a bunch of other modifications for it was a very, very efficient and very capable aircraft, but it was 40 years old. And we were finding fatigue problems and corrosion and other things and of course with aircraft that old they’re going to age out.

The Air Force I believe as a result of the analysis of alternatives believe that the replacement aircraft, newer technology, newer air frame, much longer life and hopefully lower life cycle cost because it would be more efficient, less maintenance, hours to maintain and all of those sorts of things, would be something equivalent to, or slightly better than the KC-135R. We weren’t looking for, you know, the 2 million pound behemoth. We weren’t looking for something that was necessarily smaller and less capable, we were looking for something that was as or slightly more capable than the current airplane that we’re using because as I said, it was a very capable aircraft.

KWAME HOLMAN: In the early stages … was Boeing considered the odds-on favorite?

GEN. GREGORY MARTIN: I would think most people felt that Boeing had the expertise, Boeing had the lineage if you would and the experience at not only designing, but then operating, maintaining and sustaining in terms of engineering the tanker force. So I would say yes, most people felt that this would be something that Boeing would probably fare very well in.

The competition

KWAME HOLMAN: Why did Northrop get into it?

GEN. GREGORY MARTIN: First of all, if you look at the analysis of alternatives, there were really -- I think Rand had considered three categories of aircraft. There was a small, medium and large. In the small category you're looking at something like a 737 or an A-320 or an A-319. In the large category they were looking at a triple-7 Boeing, an A-340, four engine aircraft or 747. And in the medium category the 767 and the Airbus 330 were in that class.

As they did their analysis, they believed that that middle sized class was probably best suited to satisfy the Air Force needs. You know if you went large that's not a bad thing. It's just that you'll probably buy fewer of them because they're more expensive, but they do a lot more for you. It was believed based on the war scenarios that needed to be played, that you needed a certain number of aircraft and given that number they needed to be about the midsize class.

KWAME HOLMAN: Do you agree by the way that a midsize was the way to go?

GEN. GREGORY MARTIN: Yeah I think so. For sure on the initial trounch. Now you know the Air Force has divided this into three sectors. The first is 179. We don't know what the second will be and then there's a third which gives the Air Force the opportunity to buy the first 179 and either modify or buy more of, or have a completely different competition and then last replace the large air tankers that we have today known as the derivative of the KC-10, I mean the DC-10 or known as the KC-10. Those are large aircraft and perhaps that last trounch or category would fit there. The Air Force hasn't defined that yet, so we don't know. But in general I would just say that the medium sized looked about right and that's what Rand concluded.

KWAME HOLMAN: ... The Air Force deeply wanted a competition, not a sole source contract. What happened there?

GEN. GREGORY MARTIN: Were these accusations that Boeing made? ... What I'd say is this. First of all, during the request for information, RFI, the Air Force asked the contractors to provide information on what types of aircraft they might choose to compete and how they might satisfy the emerging needs. The requirements document had not yet been completed yet, so that information phase starts the process really for the contractors to get involved. And it's in that area that you get into quite a bit of discussion about well, am I just way oversized and overpriced, and wouldn't be able to compete in competition or properly compete? Am I too small? Do I have the right mix or am I going to have to start with something new, and something new can be very, very costly to develop.

So the first stage is really a winnowing, if you will, down to those competitors and those systems that have a good chance of meeting the Air Force needs. Now it's in that process that you get into quite a bit of what I consider to be yeah but and what if. Well, if you did this then I got a problem here, but if you do that I've got a, I think we can do this. That's the kind of discussion that goes on.

I think it's important to realize that at that time the Air Force was talking about a capability based acquisition program. What that means is we're not going to tell you how many aircraft to buy or that we'll buy, we're going to tell you what we want to replace in terms of capability. You tell us how many aircraft that will take of your brand and we will then have a competition to determine through analysis whether that's enough and what the costs are. Because if you do it that way, you could have a bigger, more expensive airplane, but you buy fewer of them but it meets the need according to the operational models that are used. So that was the discussion that was going on.

About September, as I recall, of 2006, the Air Force decided that they were going to replace 179 KC-135Rs and they were going to buy 179 new aircraft. Once that occurred, you were no longer doing just a capability based acquisition. You were doing a forestructure buy based on the requirements that you had and at that point it was going to be which aircraft had the best lifecycle cost, characteristics, which aircraft had the least technical risk, which aircraft had the most, or the least program management risk, which ones met the operational performance parameters, and there was another category where we could compare the fleet effectiveness value between one competitor and another. The Air Force could compare that, each competitor would present its case.

During that period of time, Northrop Grumman was pretty concerned about the lack of emphasis by the Air Force on cargo and passenger capacity. Because the airplane they were going to compete had a large cargo deck and had the ability to carry lots of cargo, lots of passengers and deliver lots of fuel. What they were concerned about was they were bigger, probably more expensive and if they didn't get credit for the extra capacity they had, this was not going to be a comfortable competition. So they worked very hard with the Air Force to try and get them to put into their request for proposal credit for more cargo and, and passenger capacity.

Again, about September of 2007, the Air Force made it very clear that this was a tanker first, not an airlifter, not a cargo aircraft, a tanker. That was a gut shot I think to Northrop Grumman. That was a serious gut shot. They were very concerned about that. Because as the RFP (Request for Proposal) evolved, the RFP stated that the replacement tanker should be able to carry as much cargo and as many passengers as the KC-135R period. That's only like six pallets and the A-330 could carry 30 or 32 pallets. So you see they've got capacity there well beyond what the Air Force needs and that's a tough, tough decision for industry to make. So that whole process I think went back and forth and ultimately the RFP was delivered and Northrop Grumman decided to compete, even though the passenger and cargo key performance parameters were kept very low.

Request for proposal process

KWAME HOLMAN: Is that at the point, general, ... when Northrop, according to Boeing, said you've got to give us credit?

GEN. GREGORY MARTIN: Well, what I would say is this -- that the Air Force tried to run a very open and transparent request for proposal development process where each of the contractors were allowed to give inputs on a regular basis to the program office. Those comments were then taken into account, responded, and sometimes there were alterations made, sometimes no alterations made. I can't give you a line by line, but I do know this that the Air Force held the ground on its cargo and passenger capacity being very low and Northrop Grumman was concerned about whether they would be able to compete or not but they ultimately chose to.

KWAME HOLMAN: So then came decision day. Were you surprised by the outcome?

GEN. GREGORY MARTIN: No, I wasn't. As I went through the process and I watched, now I don't know what the bid price were, the consultant team was not involved in the negotiations that that company had with its suppliers to determine what its bid cost would be, so I'm not sure what the cost was. But in terms of the performance, in terms of what's called the fleet effectiveness value or the ability of the aircraft to fly from the fields given to you, in the scenarios, using the models, I believe that Northrop Grumman had designed an appropriate aircraft to do what the Air Force needed done.

I believe that Boeing may have been concerned about the characteristics that the Airbus airframe had and decided to change the wing, change the flaps, engines, six generation boom, digital avionics and beef up the landing gear to ensure they were going to be able to deliver more than the basic 767. That was my impression from what I had seen from the press reports. When they did that, I believe they injected a certain amount of risk above and beyond normal risk for program management. And I think that's probably worked to their detriment.

KWAME HOLMAN: Do you think the Air Force looked at those new capabilities that Boeing was proposing to put on its 67 and wondered if they could deliver them?

GEN. GREGORY MARTIN: Well, I think that what you do is you put your cost estimation team together. When you do source selection you have cost estimation people, you have engineering assessment folks. You take a look at the proposals that are presented to you and you use what I consider to be physics and engineering to determine whether they can perform what they say they can. Both from an aeronautics standpoint, engineering standpoint, and then a production standpoint. And you assess a certain amount of risk to that company's ability to deliver on the schedule, on a cost as they proposed.

I don't know what the Air Force decided in this case, but from an outsider, in this case we were not involved in source selection, from an outside perspective it appeared to me that the changes that Boeing had planned to put on the aircraft would have caused me, if I were on source selection, to judge them higher risk than what I would have judged the Northrop Grumman and EADS...

KWAME HOLMAN: ...Higher risk for whether they could do it cost effectively?

GEN. GREGORY MARTIN: Whether they could do it for the cost and the schedule that they had proposed. In other words, the Air Force wants to have these aircraft on the ramp, operating by a certain date, let's say 2013 as I recall. Now, in order to do that you have to have an airframe that, that can be delivered to the test and evaluation people and we know how long testing takes, we know we find things in testing that need to be fixed, so our history shows us that it takes four years or so from the time an aircraft's delivered for us to go through testing, alright.

The question now is if you back that up to 2009 will they be able to produce this aircraft that they have proposed and start flying it by 2009 so they can get through, it's about four years of testing, and then the things they find retrofitted back into the production line so the first aircraft coming out meets the requirements. That's a time schedule that there are some objective characteristics to it, but there are also subjective based on past performance, based on what our knowledge about the engineering business and developing aircraft.

The two aircraft

KWAME HOLMAN: ...General then tick off, if you could, your reasons for believing that the Northrop plane is superior to Boeing's offer.

GEN. GREGORY MARTIN: Well first of all, from an operational performance perspective, it will be able to operate, I believe, with greater gas and therefore longer on station times, longer fuel delivery, or more fuel delivery to the aircraft than needed in more scenarios. It has longer range, it has longer fuel characteristics and best I can tell from the analysis, it has similar characteristics for operating out of airfields. It's a little bigger. There may be some ramp issues but in the end it doesn't look like in any of the models or scenarios that is a restrictor, given that it has more fuel and more capacity.

KWAME HOLMAN: Excuse me, no problems with tearing up the airfields belonging to allies and that because of a heavier weight?

GEN. GREGORY MARTIN: Well, there's always a concern of that. The footprint of the aircraft on the ramp and on the runways are always a concern and something that has to be adjudicated up front before we go into those airfields. But the point that I'm making is that I think we have over dramatized that in some of the rhetoric that I've seen, after the award selection was announced. And because it does have more fuel, it can operate from bases that are further away, that where you wouldn't necessarily have that problem. So there's flexibility that you have that you wouldn't have with an aircraft that perhaps doesn't carry as much fuel.

Plus, from a flexibility standpoint for the operational commander, it has a huge airlift and cargo carrying capacity that I think will be beneficial to the war fighter, not just in the deployment where we refuel fighters or bombers on route and take their material package with them and their support package, their people, but in the theater itself it can do double duty. I've heard one operational commander say sort of like doing tanking work during the day and cargo work at night. Well it's not that simple, but the fact is that you can do both simultaneously and that gives the commander a lot of flexibility.

KWAME HOLMAN: On that point, General Fogleman ... said that we have plenty of airlift, we don't need a tanker refueler to serve, also.

GEN. GREGORY MARTIN: I haven't heard General Fogleman's comments, but most of the commanders will tell you the airlift is always a shortfall in our overall capability to close the force as fast as the commander wants forces on the ground and having an aircraft that's flexible is a useful thing under any scenario for not only delivering fuel, but delivering passengers and cargo. Again, I don't know the context of General Fogleman's comments.

KWAME HOLMAN: ... You had more to take off in terms of superior capabilities?

GEN. GREGORY MARTIN: Yeah, I think, second it's a newer aircraft, I think about 10 years younger. It's digital. It's a sunrise system perhaps rather than sunset. The production line is growing, it's not declining. So what you'll find is there'll be something of great value is the ability to service that aircraft worldwide without necessarily relying on a centralized pipeline system for a support. I think that will be the advantage in the logistics system because engines, landing gear, other parts are uh more readily available and the system as I said is still in production and growing.

I think myself that competition for follow-on aircraft is very important and you will now have another aircraft manufacturing capability in the United States for final assembly and for militarization. So you will have continuous competition on follow-on types of aircraft for the United States military with an American company. This is Northrop Grumman and EADS North American and as they grow in Mobile, Ala., I think you'll find that there'll be an opportunity for us to continue to keep prices down by continuous competition for follow-on aircraft. Whether they be tankers or surveillance aircraft or reconnaissance aircraft or other replacement for the 707 airframe that we have today.

A foreign company?

KWAME HOLMAN: What do you make of the charges coming from someone such as Sen. Patty Murray (D-Wash.) saying this is really a $40 billion transfer of U.S. funds to a foreign company?

GEN. GREGORY MARTIN: Well, I would characterize it this way. The engineering work has been done by the Airbus manufacturing. Obviously some of the profits will go to the company, but the labor costs will be paid to American laborers in America and all of the suppliers -- and I think there's 230 suppliers in 49 states -- will be supplying their wares to this aircraft. So for our industry and for our labor force I think it's a win. I don't see many people in Georgetown, Kentucky, complaining about the steady work they get building a Toyota for Americans in America with American labor. In fact, the Avalon and the Solaro that are built there along with the Camry are only built for America, it's not exported.

So I think what we have to do is take a look at both sides of the equation. One is, where is the industrial base in terms of engineering and oh, by the way, where's the profit go or part of it, and then where is the labor force and what's the right balance. And that's not an issue that the acquisition community is allowed to deal with in their source selection. That's something that I think our administration and the Congress should worry about and we'll see some results of that probably, but in this case, the acquisition agent said I'm going for the aircraft that's going to give me the most capable performance for the best cost and least risk and that's the decision they made.