H.R. 6540: To require the Secretary of Defense, in awarding a contract for the KC-X Aerial Refueling Aircraft Program, to consider any unfair competitive advantage that an offeror may possess

H.R. 6540

To require the Secretary of Defense, in awarding a contract for the KC-X Aerial Refueling Aircraft Program, to consider any unfair competitive advantage that an offeror may possess

Date
December 21, 2010 (111th Congress, 2nd Session)

Staff Contact
Communications

Floor Situation

H.R. 6540 is expected to be considered on the House floor on Tuesday, December 21, 2010, under a suspension of the rules, which requires a two-thirds majority vote to pass.  This legislation was introduced by Rep. Jay Inslee (D-WA) on December 17, 2010.

Bill Summary

H.R. 6540 would require the Secretary of Defense, in awarding a contract for the KC-X aerial refueling aircraft program (or any successor program), to consider any unfair competitive advantage that an offeror may possess.

The bill would define "unfair competitive advantage" as a situation in which the cost of development, production or manufacturing is not fully borne by the offeror for such contract.

Additionally, H.R. 6540 would require the Secretary to provide a report to Congress detailing any unfair competitive advantage that any offeror may possess.  Lastly, the bill would require the Secretary to take into account the findings of the report when evaluating competing bids.

Background

This bill is similar to a provision included in the Defense Authorization bill (H.R. 5136) approved by the House in May 2010.

The KC-X is the Air Force's next generation aerial refueling aircraft and is the replacement for the KC-135. The $35 billion program is expected to purchase 179 new airliners that are modified for refueling planes in flight.  Boeing and a consortium headed by the European Aeronautic Defense and Space Company (EADS) were in competition for the contract, which would cover the first one-third of the tankers to be built and could eventually be worth $100 billion.  The Air Force awarded the contract in February 2008 to EADS and Northrop Grumman.  The initial $12.1 billion contract provided for the purchase of the first 68 KC-45s of the anticipated 179 aircraft.

In March 2008, Boeing formally protested the Air Force's decision to the Government Accountability Office (GAO), claiming the Air Force had tilted the competition in Airbus's favor by not adequately disclosing the plane's requirements to Boeing.  In June 2008, the GAO agreed with Boeing and ordered that the competition be started again.  Later, Northrup Grumman dropped out of the process, leaving EADS and Boeing as the sole two bidders.

Furthermore, in March 2010, the World Trade Organization (WTO) ruled that European governments had illegally injected large amounts of subsidies into Airbus. Opponents of giving the contract to EADS claim that subsidies had underwritten Airbus's commercial aircraft development costs, including the A330 aircraft on which the KC-45 tanker is based.  Supporters of EADS claimed their plane won the initial competition on technical merit and that Boeing also has received subsidies in the form of wide-reaching defense contracts over the years.  The European Union also filed a case with the WTO concerning such alleged U.S. subsidies to Boeing.  In a confidential report that has yet to be released, the WTO reportedly found that Boeing benefited less than its European competitor from government support.

Earlier this year, the Department issued new requirements and selection criteria for the initial contract for the new plane, which is expected to be awarded soon.  The contract is expected to be a fixed-price deal, rather than one where the government pays the contractors' reported costs. The Air Force, which again has been given control over the program, has announced that the WTO ruling will not be factored into the final decision.

Cost

As of press time, CBO had not released a score of this legislation.