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Summary

On September 24, 2009, the Department of Defense (DOD) announced its proposed strategy for conducting a new competition between Boeing and a team consisting of Northrop Grumman and the European Aeronautic Defense and Space Company (EADS--the parent company of Airbus) for a program to build 179 new KC-X aerial refueling tankers for the Air Force. The estimated total value of the 179-aircraft KC-X program is approximately $35 billion. Boeing is expected to offer a KC-X design based on either its 767 or 777 airliner (or two designs, one based on the 767, the other on the 777), while Northrop/EADS is expected to offer a KC-X design based on the Airbus A330 airliner. Boeing would build its KC-X in Seattle, WA, and Wichita, KS, while Northrop/EADS would build its KC-X in a plant that would be established in Mobile, AL. The KC-X acquisition program is a subject of intense interest among supporters of Boeing and Northrop/EADS and other observers because of the dollar value of the contract, the number of jobs it would create, and the importance of tanker aircraft to U.S. military operations, and because previous attempts by DOD to move ahead with a KC-X acquisition program over the last several years have led to controversy and ultimately failed. DOD's proposed new KC-X acquisition strategy poses several potential oversight issues for Congress, including whether DOD has adequately defined the required capabilities for the KC-X, whether DOD's proposed method for evaluating the Boeing and Northrop/EADS bids against those requirements is fair and transparent, the contract types that DOD is proposing to use for the program, whether a September 4 World Trade Organization (WTO) preliminary ruling on commercial aircraft subsidies should be taken into account in evaluating the KC-X bids, whether the Air Force should be in charge of the new KC-X competition, and whether DOD should consider splitting the KC-X program between Boeing and Northrop/EADS.The issue for Congress in FY2010 is whether to approve, reject, or modify DOD's proposed new KC-X competition strategy, and whether to approve, reject, or modify the Air Force's request for FY2010 research and development funding for the new KC-X program. Congress' decision on these issues could affect DOD capabilities and funding requirements, and the aircraft manufacturing industrial base. FY2010 defense authorization bill: The conference report (H.Rept. 111-288 of October 7, 2009) on the FY2010 defense authorization bill (H.R. 2647) authorizes the Administration's request for $439.6 million in Air Force research and development funding for the KC-X program. Section 1081 of H.R. 2647 amends Section 1081(a) of the FY2008 defense authorization act (H.R. 4986/P.L. 110-181 of January 28, 2008) to require the Secretary of the Air Force to conduct a pilot program to assess the feasibility and advisability of using commercial fee-for-service air refueling tanker aircraft for Air Force operations, unless the Secretary of Defense submits a notification that pursuing such a program is not in the national interest. Section 1082 provides authority to the Secretary of the Air Force to use multiyear contracts to conduct the pilot program described in Section 1081 of the FY2008 defense authorization act. FY2010 DOD appropriations bill: The House Appropriations Committee, in its report (H.Rept. 111-230 of July 24, 2009) on H.R. 3326, recommends $439.6 million in research and development funding for the KC-X program, as requested by the Administration, but transfers this funding from the Air Force's research and development account to a "Tanker Replacement Transfer Fund" established by Section 8112 of the bill as reported by the committee. The Senate Appropriations Committee, in its report (S.Rept. 111-74 of September 10, 2009) on H.R. 3326, recommends $409.6 million in research and development funding for the KC-X program--a $30 million reduction from the Administration's request, with the reduction being for "Contract award delay." The recommended funding is located in the Air Force's R&D account, as requested.

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