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Extended Interview: Mark McGraw, vice president of Boeing’s tanker program

May 6, 2008 at 5:50 PM EST

TRANSCRIPT

KWAME HOLMAN: What were your expectations going into this tanker competition and … did you consider yourself, as some people had told us they considered you the odds on favorite to win?

MARK McGRAW, vice president of Boeing’s tanker program: Well, we always felt confident that we had the right solution, but if you go back to the beginning of the process and it’s really kind of a long one, I mean the process for me has been going on for about two years when the initial analysis of alternatives and then we went through the request for information process, then going through the draft request for proposals, finally getting the proposals, submitting proposals, getting feedback from the Air Force and working Q&A if you will with them and ultimately coming to the final proposal revision and then the decision.

A lengthy process over two years really felt throughout that, you know, obviously we had our challenges, but we were very confident of our platform and I think in the end we still feel we had the more capable platform. We were much lower cost and we had the added advantage of we were going to support more American jobs than our competitor.

KWAME HOLMAN: Come decision day, what was your reaction?

MARK McGRAW: Shock and surprise. I mean, it’s obviously a moment in a day I will never forget in my career. Very tough because we had expected to win. We felt confident and I think the feeling on the street, even with our competitor the day before was that we were going to win this competition. And then to hear it and then the shock and then frankly was very concerned when we were hearing things that were leaking out that it had been a slam dunk.

Northrop won four out of five sections. Some of those things was very concerning because again all of the feedback we’d gotten from the Air Force throughout the process was very, very positive…

When we went into the debrief, expected to kind of hear finally why we had not been selected in this competition and got a very detailed brief on the Air Force and it was kind of again, kind of a surreal day in the sense that I was expecting to get a wire brush pretty good during that debriefing, but at the end of the briefing frankly I felt I had just heard the winner’s brief, but still had the nightmare that we weren’t selected. I mean they loved our airplane.

We had many more strengths than our competitor, but at the end they would kind of take what I’ll call kind of trivial capabilities of the competitor, bring those up to major discriminators, a lot of our major discriminators were diminished. It almost felt like a briefing that was supposed to be our winner’s brief had been turned into a one that was given to us as not selected. But that also gave us encouragement frankly to look at this real hard as far as the protest.

Did the rules of the game change?

KWAME HOLMAN: There's been a lot of talk ... that the rules of the game were changed. Is that your assertion?

MARK McGRAW: Early on we were studying the 76 and triple-7 extensively and both would have made very good tankers and we always told the Air Force, what are your requirements? I mean what you write down as far as what you want is going to guide us as far as what we're going to offer. It was clear when we first started seeing the requirements from the Air Force that a medium sized tanker, frankly the 767 met all the requirements across the board and was obviously a more affordable platform as far as operating over its life, saving the taxpayers billions of dollars.

We did see things especially in this integrated fleet assessment that were done to help and I would say it was done more to help the bigger airplane. I think Northrop was really struggling to be able to actually complete some of these missions that the Air Force had defined in this integrated fleet assessment. But in the end it was very surprising to hear all this talk of more, more, more and bigger is better because we had not gotten any of that throughout the process.

KWAME HOLMAN: Would a layperson on the street say this bidding was rigged in favor of another competitor because ... of the need to have competition?

MARK McGRAW: Rigged is maybe a little strong. You know, I think the Air Force always had a real challenge here. They wanted to be able to write down what they really wanted in their next generation tanker and specify that in their requirements and they really had to do that because again we had a whole family of airplanes we could offer. Our competitor, they were going to offer the A-330 based platform no matter what. That's all they had.

So they had to write the requirements in a way that would keep Northrop in but still specify what they want and you'll remember in early '07, Northrop, after seeing kind of the final drafts of the request for proposal was ready to quit. They didn't think their airplane was going to be competitive. And even though promises were made to not change the request for proposal to accommodate Northrop, that's what exactly was done.

Now we saw some of that and accepted it cause we thought we still had the right answer but there were changes made in certain areas that concerned us greatly and we made that very vocal but again promises were made to us on how the evaluation was going to be conducted in the end game and that's where we think the fundamental disconnect happened. We were not evaluated fairly. I think the evaluation of Northrop was generous and ultimately it kind of came out as a tie and the Air Force made the decision that they did. And to this day I do not understand why the Air Force made that decision.

KWAME HOLMAN: ... Why is your way of doing it better than Northrop's way of doing it?

MARK McGRAW: Well, a key thing the Air Force always wanted in this tanker was they still wanted it to be primarily a refueler. I mean that is the primary job of the airplane so the boom, that stick on the back of the airplane is the key component to the aircraft. And they love the KC-135. I mean it does the mission very well. It's just old and it had some features, it doesn't have some features they wanted to have.

They did want to be able to do secondary missions like cargo and passenger carriage, but those were truly secondary missions. This airplane was going to have a role for aero-medical evacuation, a key component getting wounded soldiers to the facilities they need. And they also wanted to have things like a receptacle so the aircraft could be refueled. They wanted to have defensive systems so it would be safe. Those kind of things.

We met all those requirements and frankly in many of those areas were far superior to what Northrop has offered. One of the things that shocked us frankly as we've gone through this protest and we kind of discover what our competitor offered, that boom on the back of the airplane, the key component where again EADS is developing their first generation boom for the KC-30, the Air Force had serious concerns about the design of that boom.

Frankly, I think the Air Force almost looked at it and was not sure it was going to work. Some of the things we've seen in statements is it may not have been safe. Those kind of things and I'm not too sure if Northrop, there's talk that they actually were proposing designing a whole new boom system and I don't know if the weaknesses we saw outlined for Northrop are their current boom, a new boom, the EADS boom, I don't know, but it's just shocking in the end if this is primarily a tanker, and at the end the Air Force had major concerns about the ability of that boom to work, that they still selected that airplane.

KWAME HOLMAN: They say they've flown, tested, flying colors.

MARK McGRAW: None of the above. The boom that EADS is developing has flown on an A-310 demonstrator aircraft. Started flying in early '06 and two years later finally made their first dry contacts and they've done at least limited wet contacts where they actually transferred fuel.

The A-330 tanker, the first one for Australia, they've been flying the airplane around but the boom has just been stowed on the aircraft. They have yet to even lower the boom in-flight. We've delivered two of the most advanced tankers in the world to Japan. We're far more advanced than our competitor in experience. I think some of those statements are just flat out false.

Larger aircraft issues

KWAME HOLMAN: Let's talk about the bigger, heavier, ramp issues, parking issues. Are those issues big to you? One of your consultants, General Fogleman told us that ... 25 feet is too close to park planes together on a busy ramp.

MARK McGRAW: Yeah, I think, you know, the size of the airplane and really how you base tankers in theater when you deploy frankly hundreds of tankers which America does which no other country does, because we have a large tanker fleet, bedding down the tankers if you will always becomes a challenge. If you look back on Iraqi Freedom, hundreds of tankers in theaters that many had to be based hours away from the theater just because of lack of ramp space.

So one of the things that's great about the KC-135, it carries a lot of fuel in a small package and that was a desired feature of the airplane. We're the closest fit to that carrying a similar load in a slightly larger package. The KC-30 carriers a little bit more fuel, fuel that I would say in the history of Air Force Operations said is never going to be used but it's a huge airplane. It would be the second biggest airplane in the Air Force inventory short of the C-5 galaxy cargo plane. So basing these aircraft is a critical challenge and is going to drive billions of dollars of infrastructure costs at bases around the world.

But it's fascinating when you look at a real scenario of operations, the medium size tanker actually is more effective than the big tanker and I think even in the Air Force's evaluation, as we've gotten into it, in these employment scenarios they saw that same thing. But also that medium sized tanker that uses less fuel, it takes up a lot less base space so there's more free bases for other aircraft. And it's, we are much more tolerant to what are called base denial situations.

As an example you know when we went into Iraq, Turkey wasn't very happy about that without prior coordination so they took away a key base at Incirlik. A big base close to the fight that had a big impact on tanker ops. I think if the KC-30 would have been in theater at that time as the primary tanker for the U.S. Air Force it could not have completed the missions required. And that to me is an amazing fact that those kind of things weren't taken into account, maybe to the extent they should have in this competition.

KWAME HOLMAN: ...Ron Sugar told us today both planes would require some infrastructure changes, bigger hangars -- your plane would require a bigger hangar, too.

MARK McGRAW: Not necessarily. Really from a wingspan and a length standpoint we can fit in the existing hangars. There probably would be some minor modifications. Our tail is a little taller, but if you look at other things besides hangars like where the fuel hydrants are to fill the aircraft and those kind of things, much more extensive requirements on military construction on the competitor's airplane, I think to the tune of billions and billions of dollars and our analysis of the Air Force is cost evaluation. And this also is part of the basis of our protest is they grossly underestimated the difference between the two aircraft as far as military construction.

KWAME HOLMAN: Did the Air Force ... not warn you where they were leaning?

MARK McGRAW: Well, we were very surprised at the statements made at the briefing but let me just talk about air lift and cargo for a second. I mean we still bring a wide body airplane that has a real cargo floor in it by the way where our competitor does not, and while the KC-30 may have more volume for cargo, we can carry just about as much weight. And frankly we can carry that weight much more efficiently.

So I would argue even though there's been a lot of talk about the competitor's airlift capability, we're actually the better airlifter and we're much more efficient there. Passengers, a key thing I think is we were by far the more survivable airplane. And that's critically important now as tankers are being used closer to harm's way. People are shooting at them and the Air Force, thank goodness rated our airplane far superior in the area of survivability.

KWAME HOLMAN: Because you're smaller, more maneuverable?

MARK McGRAW: Not only smaller and more maneuverable but we put much better defensive systems on the airplane than our competitor. So we found it strange that it was more of a desire to carry more passengers in a more dangerous aircraft than it was to carry a smaller number in a very safe aircraft.

KWAME HOLMAN: This has turned into the dual of the titans, has it not?

MARK McGRAW: It's a very important program. I mean obviously it's the Air Force No. 1 acquisition program so it's been very important to us. This has been a franchise for us for a long time so we are very focused on keeping the business. But you know frankly, we're taking the step we have because we weren't treated fairly we don't think and it's not only important for this competition but it's for future competitions.

I mean I don't know how I could compete on a future competition if I can't believe that what the Air Force writes down as their requirements or the customer writes down as their requirements really reflects what they want and need. If they say they're going to evaluate you one way and then they evaluate you a different way, how can you know how to compete in the future? And that's why we've taken this, and also too I'd say, especially with what we're finding as far as the protest, we are really keeping the end war fighter in mind here. I think we still need to get them the plane they need.

Exporting jobs?

KWAME HOLMAN: Do you associate yourself with the remarks of Sen. Patty Murray (D-Wash.) who says this is a $40 billion to a foreign company, exporting jobs?

MARK McGRAW: Well I think the decision has shined a pretty good light on some of those issues. I mean there's the jobs for sure which is very important in this country especially maybe as we maybe head into a recession. National security aspects, you know I think aero-refueling technology has been a national asset of the United States. We developed it, we invented it, and we're the best at it and I think if this decision stands, we're going to be exporting that capability offshore.

And I welcome kind of the spotlight on those issues and the dialog that is going to no doubt happen in the Congress over the next months if not longer. But that's almost a paralleled activity with our protest. Our protest is all about the airplane. It's all about the process. It's all about fairness and in the end, and why I get kind of spun up about this, especially for what we're seeing in the protest documentation, I am convinced we had the better airplane at the lower cost and was going to have all those benefits of those American jobs.

KWAME HOLMAN: ...Is this fight going to end up costing U.S. taxpayers money, delays, the lobbying efforts that may get rolled into the ultimate cost of things?

MARK McGRAW: Well, we obviously are always concerned about the delays. You know ... and that was part of our decision process in taking this again, an extraordinary step for the Boeing company. You know we have not protested a decision since we've become an integrated Boeing company. And you compare that with our competitors who just since 2000, I think Northrop's protested 10 different contracts going in the past. So we do not do this. A lot of times we'll go in and if we lost a competition fairly, we'll take that, learn from it and move onto the next one.

But again, we had to take this step. I do worry about the delays as far as impact to the war fighter but again this, this program has been delayed for years and years and gone on very methodically. I think hopefully maybe just a few more months to get to the, what I think is the right decision and to shed a little light on what has gone on here, I think is very worthwhile.

Split the difference?

KWAME HOLMAN: Any chance the Air Force and would you welcome splitting the difference? Half the 179 to you, half to Northrop?

MARK McGRAW: We've always felt the split buy really never made sense as far as really if you were going off to develop two different tankers for, and cutting the buy in half and all that, I still don't think it makes sense. However, you know, we'll have to look at maybe what kind of outcomes potentially are discussed if the GAO (Government Accountability Office) should rule in our favor.

KWAME HOLMAN: Do you have confidence in the GAO that whatever decision they will render will and should be viewed as though the final word on this?

MARK McGRAW: I think our argument is compelling. I was encouraged by the fact that the motions to dismiss by both the U.S. Air Force and Northrop Grumman were thrown out in their entirety and that decision came rather quickly. I take that as a positive sign and again I think the GAO looking at what we've seen so far, I think -- well, I don't want to think for the GAO -- but we'll just need to see how it comes out.