KC-46 Tanker Modernization: Aircraft Delivery Has Begun, but Deficiencies Could Affect Operations and Will Take Time to Correct
Fast Facts
The Air Force contracted with Boeing to turn commercial aircraft into aerial refueling tankers. The contract is an infrequently-used type intended to protect the government from cost overruns and incentivize the contractor to keep costs down.
After a nearly 3-year delay, the Air Force accepted the first plane in January—with critical defects that don't meet contract standards. The Air Force is withholding the remaining 20% of the price until the defects are addressed.
Now that some of the planes are arriving, we recommended that the Department of Defense share lessons learned from this contracting approach with other DOD acquisition programs.
KC-46 aerial refueling tanker in action
One aircraft refueling another aircraft mid-flight, above the clouds
Highlights
What GAO Found
Costs for the KC-46 program remain lower than expected, as shown below.
Initial and Current Acquisition Cost Estimates for the KC-46 Tanker Aircraft (then-year dollars in millions)
|
February 2011 |
January 2019 |
Percent Change |
|
|
Development |
7,149.6 |
5,857.7 |
-18 |
|
Procurement |
40,236.0 |
34,188.7 |
-15 |
|
Military construction |
4,314.6 |
2,872.1 |
-33.4 |
|
Total |
51,700.2 |
42,918.5 |
-17 |
Source: GAO presentation of Air Force Data. │ GAO-1 9 - 480
The Air Force accepted the first KC-46 in January 2019, but Boeing remains nearly 3 years behind schedule. As shown below, Boeing now plans to deliver the first 18 aircraft with all three aerial refueling subsystems by June 2020.
Original and Current Program Schedule
Program officials expect the KC-46 to meet key performance goals over the next few years as it accumulates 50,000 fleet hours. However, the Air Force is accepting aircraft that do not fully meet contract specifications and have critical deficiencies, including ones that affect (1) the operators' ability to guide the fuel delivery boom into position, and (2) the boom itself. The deficiencies could affect operations and cause damage to stealth aircraft being refueled, making them visible to radar. Program officials estimate it will take 3 to 4 years to develop fixes for the deficiencies and a few more years to retrofit up to 106 aircraft. The Air Force and Boeing will incur costs to fix the deficiencies, with the Air Force's portion estimated to be more than $300 million. The Air Force is withholding 20 percent payment on each aircraft until Boeing fixes the deficiencies and non-compliances. Meanwhile, the Air Force has limited some refueling operations.
GAO identified a number of insights that could benefit other programs, including the use of a fixed-price-type development contract and a correction of deficiencies clause in the contract that protected the government from some cost increases. The Department of Defense agreed to provide lessons learned about the KC-46 program for future acquisition programs based on a recommendation GAO made in March 2012, but does not plan to do so until development is complete in 2021. GAO believes other programs could benefit from insights identified in this report if they were disseminated sooner.
Why GAO Did This Study
Aerial refueling—the transfer of fuel from airborne tankers to combat and airlift forces—is critical to the U.S. military's ability to effectively operate globally. The Air Force initiated the KC-46 program in 2011 to replace about a third of its aging KC-135 aerial refueling fleet. Boeing was awarded a fixed-price incentive contract to develop the first four aircraft, which are being used for testing. Boeing was also required to deliver the first 18 fully capable aircraft by August 2017. The program plans to eventually field 179 aircraft.
This report assesses the program's progress toward meeting cost, schedule, and performance goals. The report also assesses how the program's contracting and sustainment planning approach could inform other acquisition programs.
GAO analyzed cost, schedule, performance, test, manufacturing, contracting, and sustainment planning documents; and interviewed officials from the KC-46 program office, other defense offices, such as the Defense Contract Management Agency, the Federal Aviation Administration, and Boeing.
Recommendations
GAO recommends that the Department of Defense disseminate insights in this report about the KC-46's contracting and sustainment planning experiences for consideration by acquisition programs, particularly those that plan to use a fixed-price-type development contract or a commercial derivative aircraft. The Department of Defense concurred with the recommendation.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should ensure that the KC-46 program office disseminates insights we identified in this report about the KC-46's contracting and sustainment planning experiences for consideration by acquisition programs, in particular those considering a fixed-price-type development contract or a commercial derivative aircraft. |
DOD agreed with this recommendation. In December 2020, the Assistant Secretary of the Air Force for Acquisition, Technology and Logistics disseminated a lessons learned document on the KC-46 experiences to Air Force Program Executive Officers and to the Army and Navy Service Acquisition Executives. The report provides an overview of insights we included in the June 2019 report, as well as additional insights by the Department of the Air Force on how the government can better execute fixed-price development contracting strategies for commercial derivative programs by continually managing risk.
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