KC-46 TANKER 

AIRCRAFT

Acquisition Plans 

Have Good Features 

but Contain Schedule 

Risk

Report to Congressional Committees

March 2012

GAO-12-366

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-366, a report to 

congressional committees 

March 2012 

KC-46 TANKER AIRCRAFT

Acquisition Plans Have Good Features but Contain

Schedule Risk 

Why GAO Did This Study

Aerial refueling is essential to global 

U.S. military operations. The backbone 

of the nation’s tanker forces—the KC135 Stratotanker—is over 50 years old

on average with age-related problems 

and increasing support costs that could 

ground the fleet. Given this, the Air 

Force has initiated the $51.7 billion 

KC-46 program to start replacing the

current fleet. Plans are to produce 18 

tankers by 2017 and 179 aircraft 

through 2027. Other follow-on 

procurements are anticipated to 

replace all KC-135s (see graphic).

The National Defense Authorization 

Act for Fiscal Year 2012 requires GAO 

to annually review the KC-46 program 

through 2017. This report addresses 

(1) the program’s acquisition strategy, 

including its contracting approach; (2) 

the major schedule and technical risks; 

and (3) the extent the program’s 

acquisition strategy and documentation 

comply with policy, legislation, and 

best practices. To address these 

areas, GAO reviewed key documents 

on the program’s contract and cost 

baseline. GAO discussed the major 

schedule and technical risks with 

program office officials and examined 

an independent technology readiness 

assessment. GAO also assessed the 

acquisition plan and required 

documentation to determine 

compliance with acquisition legislation, 

policy, and best practices. 

What GAO Recommends

GAO recommends DOD leadership 

monitor the progress and outcomes of 

this contract to provide lessons learned 

for future acquisition programs, and the 

program fully implement metrics to 

track achievement of key performance 

parameters. DOD fully concurred.

What GAO Found

The KC-46 program has established its acquisition strategy for development and 

production, including total cost, procurement quantities, and key milestone dates. 

The program is using a $4.4 billion fixed-price incentive (firm target) development 

contract that provides contractor incentives to control costs and limits the 

government’s liability for increased costs over a certain amount. While estimated 

development costs are currently $900 million higher than the February 2011

contract award amount, the government’s share of these extra costs is limited to 

about $500 million. The program has identified key performance parameters, but 

has not yet fully implemented the metrics for tracking their achievement.

There is broad agreement that KC-46 schedule risk is a concern. In GAO’s 

assessment, significant concurrency, or overlap, among development and 

production activities add risk to the program. The Air Force and contractor 

have assessed overall schedule risk as moderate, citing concerns about

software and the ability to complete development flight testing on time. 

Further, the DOD’s chief testing official finds the testing schedule not 

executable as currently planned. While designing a new tanker using a 

modified commercial platform is not as technically challenging as a more 

revolutionary weapon system, the program still faces some technical risks, 

including technologies that have not yet been demonstrated during flight. 

The KC-46 program’s acquisition strategy provides a good framework for 

meeting GAO’s knowledge-based best practices, and generally adheres to 

defense policy guidance and recent acquisition reform legislation. DOD

waived the requirement for a preliminary design review before the program 

began system development and demonstration, but this design review is 

planned for March 2012. Although the program’s three critical technologies 

have not yet achieved the level of maturity indicated in best practices, they 

have reached a level of maturity consistent with DOD policy. Given that the 

KC-46 is one of only a few major programs in recent years to use a fixedprice incentive contract and the importance of tanker replacement to 

national security, rigorous monitoring of the program’s progress will be 

essential. 

Notional Representation of Air Force Plans to Replace Tanker Fleet

View GAO-12-366. For more information, 

contact Michael J. Sullivan at (202) 512-4841, 

or sullivanm@gao.gov. 
 

Page i GAO-12-366 KC-46 Tanker Aircraft 

Letter 1 

Background 2

KC-46 Program Has Established Its Acquisition Strategy 7

Key Events in Program Schedule Are Concurrent and Technical 

Challenges Exist 12

With Some Exceptions, the Program’s Development Strategy 

Generally Adheres to Best Practices, Acquisition Reform 

Legislation, and DOD Policy 18

Conclusions 24

Recommendations for Executive Action 25

Agency Comments 25

Appendix I Scope and Methodology 28

Appendix II KC-135 Fleet Capabilities Compared to KC-46 Planned Capabilities 

for Aerial Refueling 30

Appendix III DOD and KC-46 Program Office Implementation of Applicable 

Sections of the 2009 WSARA 31

Appendix IV KC-46 Program Compliance with Key Requirements Documents 33

Appendix V Comment from the Department of Defense 34

Appendix VI GAO Contacts and Acknowledgments 39

Tables

Table 1: Comparison of Current KC-135 versus Planned KC-46 

Performance Capabilities 7

Table 2: Approved KC-46 Quantities, Cost, and Schedule 8

Contents
 

Page ii GAO-12-366 KC-46 Tanker Aircraft 

Table 3: KC-46 Development Contract Values and Current 

Estimates 9

Table 4: Description of KC-46 Key Performance Parameters 12

Figures

Figure 1: Notional Representation of Plan for Air Force Tanker 

Fleet Replacement 5

Figure 2: Conversion of Boeing 767-2C into KC-46 Aerial Refueling 

Tanker 6

Figure 3: Planned KC-46 Program Concurrency between 

Development and Production 13

Figure 4: KC-46 Planned Program Events Compared to GAO Best 

Practices 21

Abbreviations

CAPE Cost Assessment and Program Evaluation 

DOT&E Director, Operational Test & Evaluation 

DOD Department of Defense 

EMD Engineering and Manufacturing Development 

FAA Federal Aviation Administration

ICE Independent Cost Estimate

KPP Key Performance Parameters

OSD Office of the Secretary of Defense 

SCP Service Cost Position

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Page 1 GAO-12-366 KC-46 Tanker Aircraft 

United States Government Accountability Office 

Washington, DC 20548

March 26, 2012

Congressional Committees

Aerial refueling—the transfer of fuel from an airborne tanker to a receiving 

aircraft—is critical to global U.S. military operations, allowing its aircraft to 

fly further, stay airborne longer, and carry more weapons, equipment, and 

supplies. According to the Air Force, the national security strategy cannot 

be executed without aerial refueling. Military operations in Iraq and 

Afghanistan during the last decade depended on tankers to get the 

military’s fighters, bombers, and airlifters to the Middle East and operate 

while there. That said, the backbone of the U.S. large tanker fleet, the 

KC-135 Stratotanker, is over 50 years old on average and costing 

increasingly more to maintain and support. In 2004, we reported on 

Department of Defense (DOD) concerns that age-related problems could 

potentially ground the aerial refueling fleet and cripple support to combat 

forces.1 In February 2011, the Air Force awarded a contract that began a 

$51.7 billion effort to replace its fleet by starting the KC-46 program.2

The National Defense Authorization Act for Fiscal Year 2012 requires that 

we review the KC-46 program and report by March 1 each year, ending in 

2017.

The 

Air Force plans to develop, test, and procure 18 KC-46 tankers by 2017, 

and then go on to procure a total of 179 aircraft to replace about two-fifths 

of the KC-135 fleet.

3

 

1

GAO, Military Aircraft: DOD Needs to Determine Its Aerial Refueling Aircraft 

Requirements, 

In response, this report examines (1) the program’s acquisition 

strategy, including its contracting approach; (2) the major schedule and 

technical risks faced by the program; and (3) the extent to which the 

program’s acquisition strategy and documentation comply with DOD 

acquisition policy, legislation, and commercial best practices. To address 

these areas, we reviewed key documents outlining key aspects of the 

program’s acquisition strategy. We also discussed the major program 

schedule and technical risks with program office officials and examined 

GAO-04-349 (Washington, D.C.: June 4, 2004).

2

The KC-46 designation refers to the acquisition program, while the designation for the 

actual tanker aircraft being procured is the KC-46A. However, for purposes of this report, 

we will use the KC-46 designation throughout.

3

Pub. L. No. 112-81, § 244.

 
 

Page 2 GAO-12-366 KC-46 Tanker Aircraft 

an independent technology readiness assessment. We also reviewed the 

program’s acquisition plan and required documentation to determine the 

extent it complied with relevant acquisition legislation, policy, and best 

practices. We conducted this performance audit from September 2011 to 

March 2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. See appendix I for more 

information on our scope and methodology.

While several types of aircraft provide aerial refueling services, the 

principal effort is currently carried out by the Air Force fleet of 414 KC-135 

aircraft. Originally fielded in the 1950s, KC-135 aircraft are considered the 

mainstay of the tanker fleet, supporting combat air assets, deployment of 

airlift aircraft, and nuclear combat refueling missions. With an average 

age of nearly 51 years and more than 16,000 flight hours on each aircraft, 

the KC-135s will approach over 80 years of age when the fleet is retired 

as projected in the 2040 time frame. In 1981, the Air Force began 

supplementing its fleet of KC-135s with the procurement of 60 KC-10s (of 

which 59 remain in service today), multi-role aircraft that transport air 

cargo and provide refueling. Much larger than the KC-135, the KC-10 

provides both boom and hose and drogue refueling capabilities4

 

4

Currently, Air Force fixed-wing aircraft refuel with the “flying boom.” The boom is a rigid, 

telescoping tube that an operator on the tanker aircraft extends and inserts into a 

receptacle on the aircraft being refueled. Air Force helicopters, and all Navy and Marine 

Corps aircraft refuel using the “hose and drogue.” The “hose and drogue” system involves 

a long, flexible refueling hose stabilized by a drogue (a small windsock) at the end of the 

hose.

on the 

same flight and can conduct transoceanic missions. The KC-10s now 

average about 27 years of age with more than 26,000 flight hours on 

each, and their service life is expected to end around 2045. The Air Force 

has upgraded and modified both fleets in recent years, providing 

improved avionics and new engines on the KC-135 along with newer 

communication systems to comply with international and federal air traffic 

requirements.

Background
 

Page 3 GAO-12-366 KC-46 Tanker Aircraft 

In 1996, GAO reported that the aging KC-135s would eventually need to 

be replaced.5 We recommended that DOD consider looking at dual-use 

aircraft—which could be used as a tanker or a cargo carrier, depending 

on their missions. In 2001, the Air Force reported that the KC-135 fleet 

would incur much greater operations and maintenance (O&M) costs 

between 2001 and 2040, but that it would be structurally sound to 2040.6

Air Force officials stated in 2005 that engine strut fatigue caused by longterm heat exposure and corrosion posed the greatest threat to the KC135 fleet and O&M costs were increasing. These costs, nearly $2 billion 

in fiscal year 2010, are expected to grow to $6 billion per year by fiscal 

year 2018. The 2012 Air Mobility Master Plan also expresses concerns 

that advanced adversary threats pose greater risk to the current tanker 

fleet and that the KC-135 fleet lacks defensive capabilities required to 

operate and succeed against either current or future threats.

Plans to begin replacing the KC-135 fleet were first developed in 2001 

with Congress authorizing a pilot program to lease 100 Boeing 767 

aircraft modified for aerial refueling, subsequently called the KC-767A 

aircraft.7

After the canceled tanker leasing deal, an Analysis of Alternatives (AOA)

This leasing deal was ultimately canceled, however, after a DOD 

investigation found that a senior Air Force official improperly approved the 

leasing deal.

8

was conducted which determined that use of a tanker based on a 

commercial aircraft would be the most cost-effective way to replace the 

Air Force’s aging fleet of KC-135s. In January 2007, DOD issued a 

request for proposal (RFP)9

 

5

GAO, U.S. Combat Air Power: Aging Refueling Aircraft Are Costly to Maintain and 

Operate, 

to procure 179 such tankers. On February 

GAO/NSIAD-96-160 (Washington, D.C.: Aug. 8, 1996).

6

“KC-135 Economic Service Life Study,” Technical Report F34601-96-C-0111, Feb. 9, 

2001.

7

Pub. L. No. 107-117, § 8159.

8

The AOA is an important element of the defense acquisition process. An AOA is an 

analytical comparison of the operational effectiveness, suitability, and life-cycle cost (or 

total ownership cost, if applicable) of alternatives that satisfy established capability needs.

Defense Acquisition Guidebook, 3.3.1.

9

The Federal Acquisition Regulation (FAR) provides for the use of RFPs in negotiated 

acquisitions to communicate government requirements to prospective contractors and to 

solicit proposals. FAR § 15.203(a). 

Tanker Replacement 

History
 

Page 4 GAO-12-366 KC-46 Tanker Aircraft 

29, 2008, the Air Force awarded the first contract of a three-phased 

approach, called the KC-45, to a partnership between Northrop Grumman 

and the European Aeronautic Defence and Space Company (EADS) to 

build four aircraft for testing and then manufacture 175 production aircraft.

Boeing, the competing bidder, filed a protest with the Government 

Accountability Office (GAO) protesting the Air Force’s decision. In June 

2008, GAO determined that the Air Force had made significant errors, 

including not assessing the relative merits of the proposals in accordance 

with the evaluation rules and criteria set out in the RFP, which could have 

affected the outcome of the competition.10

On February 24, 2010, the Air Force released a significantly revised KC-X 

RFP. One year later, Boeing won the new competition to develop and 

build 179 new KC-46s at an estimated cost of $51.7 billion. The 

development portion of the contract to design and build 4 test aircraft, and 

then bring those aircraft to a final production configuration, is valued at 

$4.4 billion. The Air Force plans to exercise two contract options for 19 

initial production aircraft that are required, in part, for the contractor to 

meet the requirement to produce and deliver 18 aircraft by 2017.

Additional contract options can be exercised to allow for production of the 

remaining 156 aircraft through year 2027 at a target rate of 15 aircraft per 

year. Separate competitions are planned for later acquisitions, called the 

KC-Y and KC-Z phases, to replace the rest of the KC-135 fleet. Figure 1 

below depicts a notional schedule of how the Air Force plans to replace 

its current KC-135s over the next several decades.

As a result, the Office of the 

Secretary of Defense (OSD) directed the Air Force in September 2008 to 

terminate the contract and conduct a new competition.

 

10The Boeing Company, B-311344 et al., June 18, 2008, 2008 CPD ¶ 114. 
 

Page 5 GAO-12-366 KC-46 Tanker Aircraft 

Figure 1: Notional Representation of Plan for Air Force Tanker Fleet Replacement

Note: KC-46 build-up represents planned production quantities, not planned deliveries and does not 

include four development test aircraft. 

The KC-46 program is planning to turn a Boeing commercial aircraft (the 

767-2C) into a militarized KC-46 tanker that is more capable than the KC135. Boeing is currently developing the 767-2C, which is based on a 

Boeing 767 model airframe modified to include a cargo door, new fuel 

tanks and an advanced flight deck display borrowed from the new Boeing 

787 aircraft. Militarization of this airframe includes the addition of the 

refueling boom, centerline drogue system with wing refueling pods, a 

remote air refueling operator station that includes panoramic threedimensional displays and threat detection and avoidance systems using 

advanced software to automatically re-route the aircraft away from 

threats. Program officials consider the integration of military hardware and 

software on a commercial platform to be the primary technical risk. Figure 

2 below shows the intended conversion of the 767-2C into the KC-46 

aerial refueling tanker.

KC-46 Program
 

Page 6 GAO-12-366 KC-46 Tanker Aircraft 

Figure 2: Conversion of Boeing 767-2C into KC-46 Aerial Refueling Tanker

The new tanker is also planned to have several capabilities that existing 

KC-135s do not have. For example, the KC-46 is expected to be able to 

refuel in a variety of night-time settings, including covert (not easily 

visible) mode which the KC-135 cannot do. In addition, it is intended to 

have countermeasures which protect large aircraft from infrared missile 

threats. The KC-46 fleet will also have more aircraft with the capability to 

refuel two aircraft at the same time, with the entire fleet able to conduct 

this mission, and the ability to carry more cargo, passengers, and medical 

patients. Table 1 compares the current capabilities of the KC-135 with the 

planned capabilities of the new KC-46 tanker. (More detail on the planned 

capabilities is included in appendix II.)
 

Page 7 GAO-12-366 KC-46 Tanker Aircraft 

Table 1: Comparison of Current KC-135 versus Planned KC-46 Performance 

Capabilities

Key capability KC-135 KC-46

Primary function Aerial refueling and airlift with 

200,000 lbs. total fuel for 

refueling

Aerial refueling and airlift with 

207,672 lbs. total fuel for 

refueling

Boom refueling Hydraulic system with 1,176 

gallons per minute refueling 

rate

Computer assisted with 1,200 

gallons per minute refueling 

rate

Hose and drogue 

refueling

Permanent system does not 

exist—must be temporarily 

added

Permanent centerline hose and 

drogue system

Refueling of two aircraft 

at the same time

Limited to 20 tankers with the 

capability to attach wing pods 

and conduct multipoint 

refueling of two aircraft

All tankers have the capability 

to attach wing pods and 

conduct multipoint refueling, 

but only 46 sets of wing pods 

will be procured

Cargo/passenger/

medical patient

6 cargo pallets, 53 

passengers, 44 medical 

patients

18 cargo pallets, 114 

passengers, 58 medical 

patients

Defensive systems Does not possess sufficient 

systems 

Protection from nuclear, 

infrared (heat seeking 

missiles), and biochemical 

threats

Night-time refueling Restricted in tactical missions Able to refuel in tactical 

missions 

Source: GAO presentation of Air Force data. 

The KC-46 program has established its acquisition strategy for aircraft 

development and production, which includes a total cost estimate of 

$51.7 billion, aircraft quantities to be procured, key milestone dates, and 

test and manufacturing schedules. The KC-46 program is using a fixedprice contract for development, designed to provide a profit incentive for 

the contractor to control costs, while limiting government liability for 

increased costs over a certain amount. The program has also identified 

nine key performance parameters (KPP) critical to enabling the KC-46 to 

meet mission requirements, but has not yet fully implemented metrics that 

will be used to track the achievement of these KPPs.

In February 2011, senior defense leaders approved the KC-46 program’s 

entry into the acquisition process at the Engineering and Manufacturing 

Development (EMD) phase (called Milestone B). Table 2 summarizes 

planned quantities, costs, and milestone dates approved at that time.

KC-46 Program Has 

Established Its 

Acquisition Strategy

KC-46 Approval of 

Baseline Cost, Schedule, 

and Aircraft Quantities
 

Page 8 GAO-12-366 KC-46 Tanker Aircraft 

Table 2: Approved KC-46 Quantities, Cost, and Schedule

Expected quantities

Development quantities 4 

Procurement quantities 175

Total quantities 179

Cost estimates (then-year dollars in millions)

Development $7,149.6

Procurement $40,236.0

Military Construction $4,314.6

Total program acquisition $51,700.2

Unit cost estimates (then-year dollars in millions) 

Average program acquisition $288.8

Average procurement $229.9

Key milestones

Program contract award (Milestone B) February 2011

Low rate initial production (Milestone C) August 2015

Initial operational test and evaluation start May 2016

Full rate production decision June 2017

Required assets available (18 aircraft operationally ready) August 2017

Source: GAO presentation of Air Force data. 

Defense officials established a total acquisition program baseline cost of 

$51.7 billion. The development cost estimate of $7.1 billion includes $5.3 

billion for the development contract and $1.8 billion for other costs, 

including air crew and maintenance training systems, operational testing, 

and program office support. The procurement cost estimate of $40.2 

billion is based on projected prices for procuring 175 aircraft in annual 

quantities of up to 15 aircraft through fiscal year 2027. At this price, 

aircraft would cost almost $230 million on average. Military construction 

costs to build hangars, maintenance and supply shops, and other facilities 

to house and support the KC-46 fleet are estimated at $4.3 billion.

Following a successful initial production decision, the Air Force plans to 

exercise the first two production contract options. After the options are 

exercised, Boeing will be required to provide the Air Force with a total of 

18 operationally ready aircraft 78 months after development contract 
 

Page 9 GAO-12-366 KC-46 Tanker Aircraft 

award, which would be by August 2017.11 Further contract options are 

planned to continue through 2027, until a total of 179 aircraft are bought. 

In February 2011, the Air Force awarded Boeing a fixed-price contract to 

develop, test, and manufacture four KC-46 aircraft. The specific contract 

arrangement used by the KC-46 program is a fixed-price incentive (firm 

target) (FPIF) contract. Table 3 provides development contract details 

and the current contract and government estimates to complete 

development.

Table 3: KC-46 Development Contract Values and Current Estimates

Source: KC-46 Selected Acquisition Report, the Federal Procurement Data System – Next Generation, and GAO calculations. 

a

Total contract amounts are different from FPIF amounts because they include two firm fixed price 

contract line items, one for technical data license rights and one for testing. 

The contract is designed to provide a profit incentive for the contractor to 

control or even reduce costs. It specifies target cost, target price, and 

ceiling price amounts, with the latter being the maximum amount that may 

be paid to the contractor. The target price is $4.4 billion and the ceiling 

price $4.9 billion. The contract specifies a 60/40 incentive ratio for sharing 

savings in the event of underruns, or sharing cost in the event of 

overruns. The government’s share is 60 percent while Boeing’s is 40 

percent. Cost sharing ends when the contract price reaches the $4.9 

billion ceiling. Thereafter, provided the Air Force is not responsible for any 

of the additional costs associated with the overruns, the contractor would 

be responsible for all additional costs associated with the overruns and 

would be obligated to perform the contract. If the Air Force is responsible

 

11 According to program officials, the government will hold Boeing accountable to the 

terms and conditions of the contract and seek consideration from Boeing if they do not 

perform to the contract requirements.

Development Contract 

Includes Features to 

Control Cost, Schedule, 

and Performance Risk

Dollars in millions

FPIF contract line items Total contract

Contract amounts

a

Target price $4,327.3 $4,393.9

Ceiling price $4,831.0 $4,897.6

Current estimates

by:

Contractor $5,096.9 $5,163.5

Government $5,284.4 $5,351.0
 

Page 10 GAO-12-366 KC-46 Tanker Aircraft 

for any of the cost overruns, they may have to renegotiate the terms and 

conditions of the contract with Boeing. The KC-46 program’s current 

government estimate to complete development is $5.3 billion, which is 

about $900 million more than the contract target price and about $400 

million more than the ceiling price. The Air Force believes this additional 

$400 million may be necessary to cover schedule risk for the remainder of 

development, and if it is, Boeing must pay these costs.

According to program officials, a change in system requirements, 

although unlikely, would be a circumstance that could increase the Air 

Force’s exposure to additional costs. As stated in a memorandum from 

the OSD Office of Cost Assessment and Program Evaluation,12

The KC-46 contract is one of only a few major weapon system programs 

in recent years to employ a fixed-price development contract. In the past, 

DOD has typically used cost-reimbursement contracts in which the 

government pays all allowable incurred costs to the extent prescribed by 

the contract. Legislation and defense policy now directs the Milestone 

Decision Authority for a major defense acquisition program to select the 

contract type for a development program at the time of a decision on 

the 

biggest risk to the KC-46 program is the Department’s ability to minimize 

changes to the contract. The memorandum maintains that on the whole, 

DOD has demonstrated limited ability to maintain stable requirements and 

limit changes to program technical baselines on previous complex 

weapon system programs, and that minimizing such change is essential 

to the success of the KC-46. In view of these concerns, program officials 

state it is very unlikely any requirements will be changed, and to help 

ensure this, they have instituted a process to control changes.

Specifically, any engineering or contract changes affecting system 

requirements or having the potential to impact program cost, schedule, 

and performance baselines must be approved by the Air Force Service 

Acquisition Executive in consultation with the Secretary and the Chief of 

Staff of the Air Force. Moreover, the contract contains options for the 175 

production aircraft, establishing firm, fixed pricing for two initial production 

lots and not-to-exceed pricing for subsequent full-rate production lots.

Program officials maintain that this pricing will likely stay intact as long as 

the contract is not opened to negotiate modifications.

 

12The Office of Cost Assessment and Program Evaluation provide independent cost 

estimates for major DOD weapon system programs.
 

Page 11 GAO-12-366 KC-46 Tanker Aircraft 

Milestone B that is consistent with the level of program risk for the 

program. The Milestone Decision Authority may select either a fixed-price 

type contract (including a fixed-price incentive contract); or a cost type 

contract. The use of fixed-price contracts, when warranted, limits the 

government’s exposure to weapon system cost increases. Defense 

officials believe that a fixed-price development contract is appropriate for 

this program because KC-46 development is considered to be a relatively 

low risk effort to integrate mature military technologies onto a well-defined 

commercial derivative aircraft.

In addition to the type of contract used, there are also provisions in the 

KC-46 development contract that further limit the government’s liability 

and are intended to help manage performance risk. For example, Boeing 

has to correct any deficiencies in the KC-46 discovered during the 

development program. The correction of deficiencies shall be 

accomplished on the four development test aircraft and all production 

aircraft, as appropriate, to bring them to the final configuration at no 

additional cost to the government. In addition, there is a special contract 

provision that requires each aircraft to demonstrate a certain fuel usage 

rate before the government accepts the aircraft. If any aircraft burn fuel 

above this rate, Boeing is required to propose a corrective action at no 

cost to the government. Boeing is not allowed to propose a relaxation of 

contract requirements to resolve any fuel usage issues, but if Boeing 

cannot meet the required usage rates, there are contract provisions 

allowing for a decrease in the amount paid to Boeing.

The Air Force has identified nine specific KPPs critical to enabling the 

KC-46 to meet its primary mission of providing worldwide, day and night, 

adverse weather aerial refueling. Several of these parameters have been 

established to address performance characteristics that are limited or 

nonexistent in the current tanker fleet. For example, in 2005 only 8 KC135 aircraft (1.5 percent) had the capability to receive fuel from another 

aerial refueling tanker while airborne. This limited capability can prohibit 

the extension of aircraft forces and can result in inefficient use of assets. 

By establishing a KPP to allow for the KC-46 fleet to receive fuel from 

other tankers, the Air Force hopes to address this shortcoming. Table 4 

describes the planned KC-46 KPPs.

Key Performance Goals 

Have Been Identified but 

Metrics for Measuring 

Achievement Are Not Yet 

Fully Implemented
 

Page 12 GAO-12-366 KC-46 Tanker Aircraft 

Table 4: Description of KC-46 Key Performance Parameters

Key performance parameter Description

Tanker air refueling capability Aircraft shall be capable of accomplishing air refueling of 

all DOD current and programmed (budgeted) receiver 

aircraft. The aircraft shall be capable of conducting both 

boom and drogue air refueling on the same mission. 

Fuel offload versus radius Aircraft shall be capable of carrying certain amounts of 

fuel (to use in air refueling) certain distances.

Operate in civil and military 

airspace 

Aircraft shall be capable of worldwide flight operations in 

all civil and military airspace.

Airlift capability Aircraft shall be capable of transporting certain amounts 

of both equipment and personnel.

Receiver air refueling 

capability

Aircraft shall be capable of receiving air refueling from 

any compatible tanker aircraft.

Force protection Aircraft shall be able to operate in chemical and 

biological environments.

Net-ready Aircraft must be able to have effective information 

exchanges with many other DOD systems to fully 

support execution of all necessary missions and 

activities.

Survivability Aircraft shall be capable of operating in hostile threat 

environments.

Simultaneous multi-point 

refueling

Aircraft shall be capable of conducting simultaneous 

drogue refueling on multiple aircraft.

Source: GAO presentation of Air Force data. 

Near the end of KC-46 development, a series of independent tests and 

evaluations are planned to validate whether the aircraft meets these 

KPPs. However, the Air Force still has to fully implement the specific 

metrics needed to measure progress against the KPPs. In future reports, 

we will include an evaluation of metrics established for each of these 

KPPs as well as whether the program is on track to meet them.

Schedule risk on the KC-46 program is a concern and technical 

challenges will need to be overcome. The program has an accelerated 

schedule with significant overlap, or concurrency, among the 

development, testing, and production of initial aircraft. Also, while 

designing a new tanker that uses a modified commercial platform may not 

be as technically challenging as an all new weapon system, the program 

still faces some technical risks, including three critical technologies that 

have not yet been tested in a realistic environment.

Key Events in 

Program Schedule 

Are Concurrent and 

Technical Challenges 

Exist
 

Page 13 GAO-12-366 KC-46 Tanker Aircraft 

The significant amount of concurrency in the KC-46 schedule among 

planned development, testing, and production activities are highlighted by 

the shaded area in figure 3. 

Figure 3: Planned KC-46 Program Concurrency between Development and Production

The decision to begin low-rate initial production is scheduled for August

2015, before significant development and testing activities are completed. 

While about 6 months of 767-2C flight testing is planned to be conducted 

prior to KC-46 flight testing to help prove the aircraft’s design and flying 

Significant Concurrency 

Poses Risks to KC-46 

Development and 

Production Schedule
 

Page 14 GAO-12-366 KC-46 Tanker Aircraft 

qualities, only about 60 percent of the dedicated KC-46 development 

flight testing is planned to be completed by the start of low-rate initial 

production, when the Air Force estimates $1.38 billion will be needed for 

seven aircraft. Funding commitments will be required even sooner; DOD 

will present the budget request for KC-46 initial production to Congress in 

February 2014.

The intent of development flight testing is to demonstrate the maturity of 

the design and to discover and fix design and performance problems 

while the aircraft is being developed. Beginning production before testing 

has successfully demonstrated that the design is mature and that aircraft 

will work as intended increases the likelihood of discovering deficiencies 

during production, when it is most expensive to correct them. Similarly, 

systems already built and fielded may require substantial modifications, 

resulting in additional program costs.

The Air Force and Boeing are both concerned about the risks in the KC46 development and test schedule. In August 2011, a joint Boeing and Air 

Force team completed a detailed review to identify risk associated with 

the program’s technology, cost, and schedule. As a result of that review, 

the Air Force determined that the schedule, culminating with the delivery 

of 18 aircraft by August 2017, contained moderate risk.13

According to the KC-46 program office, schedule risk stems from four 

primary factors:

Other major 

areas examined during this review were assessed as low risk.

• Flight testing. Completing the flight test program on time will require 

efficient, synchronized use of DOD, Air Force, and Federal Aviation 

Administration (FAA) test facilities and resources. The KC-46 program 

office is concerned that Boeing will not be able to achieve planned 

flight test flying hour rates for military certifications and military testing, 

currently set at 50 hours per aircraft per month, given the amount of 

coordination and synchronization of test resources required. Boeing is 

also continuing to evaluate plans for the flight test program due to 

concerns it may contribute to program schedule risk. For these and 

other reasons, DOD’s Office of the Director, Operational Test and 

 

13The delivery of these aircraft must be accompanied by all the required training 

equipment, support equipment, and the support necessary for their sustainment. 
 

Page 15 GAO-12-366 KC-46 Tanker Aircraft 

Evaluation, has determined that the development test program is not 

executable as planned.

• In-line provisioning. Boeing typically uses one facility as its 

commercial aircraft production line and another to install military 

modifications on commercial aircraft. However, on the KC-46 

program, Boeing will do extra preparatory work—provisioning—at its 

commercial facility to accommodate the military modifications planned 

at its other facility. This represents an additional requirement to 

prepare the aircraft for military modifications while still on the 

commercial production line. According to the program office, this 

increases the level of risk for accomplishing the work on time.

• Federal Aviation Administration certification. According to the 

program office, two FAA certifications, one for the commercial 767-2C 

aircraft and a supplemental one for the military modifications planned 

for the commercial aircraft, are required for the KC-46 before it is 

deemed airworthy. Boeing intends to accomplish a portion of both of 

these certifications concurrently, rather than one at a time, which is 

more typical. According to the program office, if problems arise during 

this concurrency, not much time will be left in the schedule for Boeing 

to recover.

• Software. The program office told us that modifications to commercial 

software to separate classified from unclassified information and 

enable other military capabilities will increase risk associated with 

software development. However, they also stated that they are 

focusing on software early in the program to ensure Boeing puts the 

proper emphasis on this area and keeps the program schedule on 

track.

Boeing has also identified risks in the program’s software development 

effort that could delay the program’s schedule or drive increased cost if 

realized. Software development growth can occur because of bad 

estimates, poor requirements, and poor execution of the software 

development plan. If the amount of software being developed grows, 

more staff and more time will be needed. There can also be delays in the 

integration of hardware and software if software deliveries from suppliers 

are late. Late delivery can result in hardware and software not being 

integrated in time to support flight testing, which in turn can mean flight 

test schedule delays.

A further complication to the KC-46 schedule was Boeing’s January 2012 

announcement that it was closing its Wichita, Kansas finishing facility at 

the end of 2013. When the contract was awarded, Boeing had planned to 

militarize the KC-46 at the Wichita facility. Now, that work will be moving 

to the Puget Sound facility in Seattle, Washington to be co-located with 
 

Page 16 GAO-12-366 KC-46 Tanker Aircraft 

the 767-2C development effort. KC-46 program officials stated that they 

are working closely with Boeing to understand the impact of this decision 

on the KC-46 program but will hold Boeing to its contractual delivery date 

of August 2017.

If the provisions in the current contract remain intact, the government’s 

cost liability will be safeguarded should any of the foregoing risks 

materialize into problems. However, these provisions cannot prevent 

delays in delivering aircraft should problems be discovered late in 

development or while production is underway.

While a tanker largely based on a commercial platform and subsystems 

may not be as technically challenging as developing a wholly new 

weapon system like the Joint Strike Fighter, DOD regulations still require 

requisite critical technologies to be sufficiently mature prior to starting 

system development in order to minimize technology risk down the road. 

As required by DOD policy, a technology readiness assessment was 

conducted by an independent team of subject matter experts. Overall, the 

team reviewed and assessed 36 technologies and determined that three 

are new or novel and are needed for the KC-46 tanker to meet 

performance and mission capabilities. These three technologies—3-

Dimensional Display, Airborne ESTAR, and Threat Correlation 

Software—have been demonstrated in a relevant environment14 in 

accordance with DOD and statutory requirements.15

• Three-Dimensional Display. The display screens at boom operator 

stations inside the KC-46 aircraft provide the visual cues needed for 

the operator to monitor the aircraft being refueled before and after 

contact with the refueling boom or drogue. The images of the aircraft 

on the screens are captured by a pair of cameras outside that aircraft 

that are meant to replicate the binocular aspect of human vision by 

supplying an image from two separate points of view, replicating how 

 

14GAO has previously defined technology readiness level 6 to mean that a model or 

prototype close to final form, fit and function has been tested in a high fidelity laboratory 

environment or in a simulated operational environment. GAO, Defense Acquisitions: 

Assessments of Selected Weapon Programs, Appendix III, GAO-09-326SP (Washington, 

D.C.: March 2009).

1510 U.S.C. Section 2366b(a)(3)(D); Department of Defense Instruction 5000.02, 

Operation of the Defense Acquisition System, enc. 2, para. 5.d. (4) (Dec. 8, 2008). 

KC-46 Will Have Some Risk 

Stemming from New 

Technical Content
 

Page 17 GAO-12-366 KC-46 Tanker Aircraft 

humans see two points of view, one for each eye. The resulting image 

separation provides the boom operator with greater fidelity and a 

more realistic impression of depth, or a third dimension. Similar 

technology has been used on two foreign-operated refueling aircraft 

and a representative model in tests with other Boeing tankers.

• Airborne ESTAR. This software module is planned to have an 

algorithm that allows for automatically re-routing and constructing new 

flight paths for the aircraft that are safe, flyable, and avoid potential 

threats. The algorithm is new and novel technology, critical to meeting 

operational requirements. Airborne ESTAR has been tested in a 

simulation that provided data on its performance, interfaces, and 

functionality.

• Threat Correlation Software. Somewhat similar to Airborne ESTAR, 

this new software module serves to correlate tracks from multiple 

potential threats and automatically help re-route the tanker’s flight 

path to avoid them.

These technologies have not yet been demonstrated in a realistic 

environment, a higher level of maturity that is a best practice.16 We have 

previously reported that programs that began development with 

technologies demonstrated to this level experienced less cost growth than 

programs with less mature technologies.17

In addition to the critical technologies identified, the KC-46 program office 

identified other integration and technical areas where management will 

need to focus efforts to mitigate risk. The program office identified the 

following three areas as being among the more significant:

To the extent that alternatives 

or workarounds are available for any of the KC-46’s technologies, these 

risks would be mitigated.

• Radar Warning Receiver integration. A radar warning receiver 

warns a pilot that a threat aircraft’s radar is tracking the KC-46, but 

 

16GAO has previously defined technology readiness level 7 to mean that an actual system 

prototype has been integrated with key supporting subsystems to demonstrate full 

functionality and flight-tested in a realistic operational environment. GAO, Defense 

Acquisitions: Assessments of Selected Weapon Programs, Appendix III, GAO-09-326SP

(Washington, D.C.: March 2009). Our extensive body of work in commercial best practices 

suggests that this higher standard be attained for each critical technology before a new 

acquisition enters system development. 

17GAO, Defense Acquisitions: Assessments of Selected Weapon Programs,

GAO-11-233SP (Washington, D.C.: Mar. 29, 2011).
 

Page 18 GAO-12-366 KC-46 Tanker Aircraft 

integrating such a receiver on a large commercial airframe can be 

challenging. Integration requires a unique antenna design and certain 

provisions for installation to maximize performance. Any late changes 

to the location of the receiver’s antennae or software could drive cost 

and schedule impacts to the program.

• Wing Aerial Refueling Pod instability. Based on lessons learned 

from another Boeing refueling aircraft, a new aerial refueling pod 

design was introduced for the KC-46 to reduce buffeting, or instability, 

of the aircraft’s wing. The new design also made changes to the way 

the refueling hose exits the pod, so now there is concern about the 

hose not being stable. If the new wing pod design has technical 

shortcomings and introduces hose stability issues, this would not 

meet program requirements.

• Aircraft Weight. The current aircraft weight forecast is near the 

aircraft’s weight limit and, historically, weight continues to increase 

during a weapon system program development phase. Not achieving 

the target weight will make the aircraft unable to carry the required 

amount of fuel for its aerial refueling mission.

The KC-46 program’s acquisition strategy and business case generally 

meet GAO’s knowledge-based acquisition approach and best acquisition 

practices, including those in legislation to improve the weapon system 

acquisition process. Also, the contents of the program’s requirements 

documentation generally comply with DOD guidance. However, the 

program did not conform to best practices in a few instances. The 

program did not conduct a technology development phase and instead 

proceeded directly to the system development phase, and our prior work 

has shown that programs proceeding directly to a development phase 

typically have more problems. The program also received a waiver from

having to conduct a preliminary design review, considered important to 

initially solidifying the aircraft’s design, before beginning development.

Instead, the design review is planned for March 2012, about a year after 

the start of development.

With Some 

Exceptions, the 

Program’s 

Development Strategy 

Generally Adheres to 

Best Practices, 

Acquisition Reform 

Legislation, and DOD 

Policy
 

Page 19 GAO-12-366 KC-46 Tanker Aircraft 

For the most part, the KC-46 program’s acquisition framework and plans 

compare favorably with the standards and requirements in GAO’s best 

practices work on weapon system acquisition development. The 

program’s Acquisition Strategy18 establishes the decision points and 

acquisition phases planned for the program. It also covers development, 

testing, production, and life-cycle support and establishes the 

requirements for each phase, and also identifies critical management 

events and risks including integration of military hardware and software 

on the KC-46 airframe. The program’s Integrated Baseline Review (IBR)19

The program is also starting to establish a knowledge-based acquisition 

approach, in which knowledge of various components of the process is 

acquired at key decision points before proceeding. Our best practices 

model helps decision makers to be reasonably certain about their 

products at critical junctures during development and to make informed 

investment decisions. This knowledge-based process can be broken 

down into three cumulative knowledge points.

resulted in a mutual understanding between the KC-46 program office 

and Boeing ensuring all system capabilities are understood and program 

requirements are flowed down to the contractor and suppliers. A 

comprehensive risk assessment also identified all program risks, and 

assigned moderate risk to the program’s development schedule.

• Knowledge point 1: A match must be made between the customer’s 

needs and the developer’s available resources—technology, 

engineering knowledge, time, and funding—before a program starts.

• Knowledge point 2: The product’s design must be stable and must 

meet performance requirements before initial manufacturing begins.

• Knowledge point 3: The product must be able to be produced within 

cost, schedule, and quality targets and demonstrated to be reliable 

before production begins.

 

18The Acquisition Strategy is a comprehensive, integrated plan that identifies the 

acquisition approach, and describes the business, technical, and support strategies that 

management will follow to manage program risks and meet program objectives. 

19Integrated Baseline Review is a formal review conducted by the government program 

manager and technical staff, jointly with their contractor counterparts, following contract

award to verify the technical content of the performance measurement baseline and the 

accuracy of the related resource (budgets) and schedules.

Program Is Generally 

Implementing Acquisition 

Best Practices
 

Page 20 GAO-12-366 KC-46 Tanker Aircraft 

Figure 4 depicts how the KC-46 program office is incorporating a best 

practices approach into its acquisition framework including the planned 

dates key events are scheduled and how the plan compares to GAO’s 

knowledge-based process for development. As the program progresses, 

we will continue to assess its performance against acquisition best 

practices, using figure 4 as a template.
 

Page 21 GAO-12-366 KC-46 Tanker Aircraft 

Figure 4: KC-46 Planned Program Events Compared to GAO Best Practices
 

Page 22 GAO-12-366 KC-46 Tanker Aircraft 

Although the program is implementing many acquisition best practices, 

the program office did not conduct a technology development phase and 

instead proceeded directly to the engineering and manufacturing 

development phase. As discussed earlier, the program’s three critical 

technologies were assessed as approaching maturity and meeting 

internal defense policy, but below the fully mature level in best practices. 

Our prior work consistently shows that programs going directly into 

development before fully maturing all critical technologies typically incur 

additional costs and take longer to complete. Additionally, DOD granted a 

waiver to the program from having to conduct a preliminary design 

review—a major step initially solidifying the aircraft’s design—before 

starting system development. Instead, the program office has plans to 

conduct this review over a year after the start of development in March 

2012 due to their assessment that integrating KC-46 unique military 

requirements onto a commercial aircraft is low to moderate risk. We have 

previously reported that holding a preliminary design review prior to 

development start can help ensure requirements are well-defined and 

feasible.20 Nonetheless, the program did complete its system functional 

review in November 2011 and made no significant changes to program 

requirements. The program plans to demonstrate the system’s design is 

stable and have 90 percent of KC-46 design drawings released by its 

projected July 2013 critical design review.

The Weapon Systems Acquisition Reform Act of 2009 (Reform Act)21

 

20GAO, Defense Acquisitions: Application of Lessons Learned and Best Practices in the 

Presidential Helicopter Program, 

requires DOD and the military services to place more emphasis on 

activities that should occur early in weapon systems development, 

including those related to systems engineering and developmental 

testing, to establish a solid program foundation when development 

begins. To comply with this legislation, the KC-46 program office is 

tracking key program events to the relevant section of the Reform Act.

For example, the program office held an independent Technology 

Readiness Assessment (TRA) which reviewed 36 technologies, identified 

3 as critical technologies, and assessed the maturity of all the 

GAO-11-380R (Washington, D.C.: Mar. 25, 2011).

21Pub. L. No. 111-23. 

Program Did Not Have a 

Technology Development 

Phase and Waived 

Preliminary Design Review

KC-46 Program is 

Incorporating Recent 

Acquisition Reform 

Legislation in 

Development
 

Page 23 GAO-12-366 KC-46 Tanker Aircraft 

technologies.22 In addition, the KC-46 program is using a time-defined 

acquisition strategy based on cost, schedule, and performance trades 

with a 78-month development cycle and is using an incremental strategy 

to replace the tanker fleet of KC-135s and KC-10s with the KC-46, and 

potentially the KC-Y and KC-Z programs. The Reform Act requires DOD 

to periodically review and assess the technology maturity and the risk of 

integrating critical technologies of weapon system programs, and requires 

officials responsible for acquisition, budget, and cost estimating functions 

to develop estimates and raise cost and schedule matters before 

performance objectives are established. Appendix III provides a 

comparison of the Reform Act requirements and program compliance.

The KC-46 key program documentation completed prior to development 

start compares favorably with requirements in DOD policy for defining 

program capabilities and system requirements as outlined in the Joint 

Capabilities Integration and Development System (JCIDS)23

• The Initial Capabilities Document (ICD)

manual.

Appendix IV provides a detailed assessment of this compliance, but some 

examples include:

24

• The KC-46 Capability Development Document (CDD)

identifies capability gaps 

with the KC-135 fleet in the areas of night-time refueling systems, 

defensive systems, and communication capabilities. It defines what 

capabilities will be required in a new tanker aircraft.

25

 

22A TRA is a formal, systematic, metrics-based process and accompanying report that 

assesses the maturity of technologies called Critical Technology Elements (CTEs) to be 

used in systems. CTEs can be hardware or software. DOD Technology Readiness 

Assessment Deskbook, section 1.1.

describes how 

capability gaps identified in the ICD will be addressed by developing 

23JCIDS plays a key role in identifying the capabilities required by the warfighters to 

support the National Defense Strategy, the National Military Strategy, and the National 

Strategy for Homeland Defense. Successful delivery of those capabilities relies on the 

JCIDS process working in concert with other joint and DOD decision processes. 

24The ICD defines a capability gap or other deficiency in terms of the functional area, the 

relevant range of military operations, and the timeframe. It also describes the evaluation of 

Doctrine, Organization, Training, Materiel, Leadership and education, Personnel, and

Facilities (DOTMLPF) approaches.

25The CDD is a document that captures the information necessary to develop a proposed 

program(s), normally using an evolutionary acquisition strategy. It outlines an affordable 

increment of militarily useful, logistically supportable, and technically mature capability.

Key Program 

Documentation Complies 

with DOD Policy
 

Page 24 GAO-12-366 KC-46 Tanker Aircraft 

KPPs, system characteristics that are considered to be critical to 

delivering a military capability, and Key System Attributes, lower 

priority characteristics which are nevertheless essential for effective 

military capability. The KC-46 CDD defines how each KPP will be 

addressed in areas including aerial refueling and threats, and how 

classified information is to be collected and stored.

• The KC-46 System Requirements Document (SRD)26 discusses the 

scope of program requirements and presents the technical 

performance required for the replacement tanker. The SRD also 

defines how some minimum performance requirements are 

mandatory, and how other requirements identified as non-mandatory 

are part of the Air Force’s trade space.27 System requirements 

discussed in the KC-46 SRD included aerial refueling, airlift, 

information management, and survivability.

The KC-46 acquisition is a high-priority/high-profile program essential to 

ensuring continued delivery of aerial refueling capabilities to future U.S. 

military operations. Its fixed-price incentive (firm target) development 

contract is designed to limit the government’s liability for increased costs. 

Because senior defense officials are encouraging acquisition programs 

across the department to adopt similar arrangements, when appropriate,

it will be both illustrative for the policy and important for future programs 

to monitor the KC-46’s progress and its degree of success. Some would 

argue that a degree of program success has already been demonstrated 

because the government’s cost liability, assuming no system 

requirements changes, has been capped and the contractor is still 

required to provide full performance of the contract. However, even with 

these safeguards, it is important to note that 1 year into development, Air 

Force and contractor development cost estimates exceed the 

development contract amount and significant schedule risks have been 

identified. Although the KC-46 program is still in its early stages, similar 

cost and schedule pressures have dogged many past and present 

 

26A SRD establishes the basis for an acquisition program functional baseline. It 

documents acquisition requirements translated from a warfighter Capability Based 

Requirements document into an acquisition format used as a baseline for a system or 

subsystem specification typically prepared by a contractor. 

27Trade space can be defined as the set of program and system parameters, attributes, 

and characteristics required to satisfy performance standards. Decision makers define and 

refine the developing system by making tradeoffs with regard to cost, schedule, risk, and 

performance; all of which fall within the system’s trade space.

Conclusions
 

Page 25 GAO-12-366 KC-46 Tanker Aircraft 

defense acquisition programs. With 5 years of development remaining on 

an aggressive schedule with substantial concurrency among 

development, test, and production activities, prudence and strong 

management attention is warranted. Should costs continue to increase, or 

schedule or performance measurement lag, there could be increased 

pressure to reopen or renegotiate aspects of the contract. This would 

probably not be advantageous to the Air Force.

As one of only a few major acquisition programs to award a fixed-price 

incentive (firm target) development contract in recent years, evaluating 

performance and identifying lessons learned will be very illustrative and 

important to inform decision-makers and help guide and improve future 

defense acquisition programs. Therefore, we recommend that the Under

Secretary of Defense for Acquisition, Technology and Logistics closely 

monitor the cost, schedule, and performance outcomes of the KC-46 

program to identify positive or negative lessons learned. 

To help ensure that progress toward achievement of the program’s key 

performance parameters can be appropriately measured as development 

progresses toward production, we recommend the KC-46 program 

manager, as soon as possible, fully implement sound metrics for each 

parameter.

DOD provided us with written comments on a draft of this report which 

are reprinted in appendix V. DOD concurred with our two 

recommendations. In written comments, DOD provided additional 

information on its plans to manage schedule risk and mature 

technologies. We also incorporated technical comments as appropriate.

We are sending copies of this report to appropriate congressional 

committees; the Secretary of Defense; the Secretary of the Air Force; and 

the Director of the Office of Management and Budget. The report also is 

available at no charge on the GAO Web site at http://www.gao.gov. 

Recommendations for 

Executive Action

Agency Comments
 

Page 26 GAO-12-366 KC-46 Tanker Aircraft 

If you or your staff has any questions concerning this report, please 

contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff contributing to this report are 

listed in appendix VI.

Michael J. Sullivan

Director

Acquisition and Sourcing Management
 

Page 27 GAO-12-366 KC-46 Tanker Aircraft 

List of Committees

The Honorable Carl Levin 

Chairman 

The Honorable John McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Daniel K. Inouye 

Chairman 

The Honorable Thad Cochran 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

United States Senate

The Honorable Howard P. McKeon 

Chairman 

The Honorable Adam Smith 

Ranking Member 

Committee on Armed Services 

House of Representatives 

The Honorable C.W. Bill Young 

Chairman 

The Honorable Norman D. Dicks 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives
Appendix I: Scope and Methodology

Page 28 GAO-12-366 KC-46 Tanker Aircraft 

We interviewed officials from the KC-46 program, Air Force, and Office of 

the Secretary of Defense (OSD) to obtain their views on progress, 

ongoing concerns and actions taken to address them, and future plans to 

complete KC-46 development. We also reviewed key program 

documentation for compliance with current Department of Defense (DOD)

policy, acquisition reform legislation, and GAO best practices for weapon 

system development.

To determine the program’s acquisition strategy, including its contracting 

approach, we reviewed briefings by program and contractor officials, 

budget documents, the Acquisition Program Baseline (APB), the Selected 

Acquisition Report (SAR), monthly activity reports, performance 

indicators, risk assessments and other data. We identified changes in 

cost and schedule, and obtained officials’ reasons for these changes, and 

reviewed the KC-46 acquisition strategy in order to identify the program’s 

Key Performance Parameters and what measures the program office has 

taken to develop metrics and track contractor performance in these areas. 

We also examined the acquisition strategy for aircraft development and

production, but we could not assess the contractor’s manufacturing 

processes because the program is only one year into development and it 

is too early for this assessment. To assess the development contract 

structure, we reviewed and analyzed the factors used to determine the 

contract geometry: target cost, target profit, ceiling amount, and profit 

adjustment formula for the current contract and also compared this 

against current DOD policy for contract geometry, the Federal Acquisition 

Regulation, and the Fiscal Year 2007 National Defense Authorization Act. 

To determine program costs, we reviewed the OSD Cost Assessment 

and Program Evaluation Independent Cost Estimate and the Air Force’s 

Service Cost Position, the estimate which is used by the KC-46 program 

to plan its expected costs. We reviewed each estimate’s underlying 

assumptions including how the estimate was developed and the 

confidence level used. We also requested information from the program 

office on whether the SCP cost estimate followed guidelines in GAO’s 

2009 Cost Estimating Guide.

In order to evaluate the major schedule and technical risks faced by the 

program, we reviewed the KC-46 Integrated Master Schedule and 

compared it to the program’s APB and SAR in order to identify potential 

concurrency in the program’s design reviews, flight testing, and low rate 

production. We also asked program officials how they are monitoring 

planned schedule events. To identify potential program risks, we 

reviewed the program’s Technology Readiness Assessment which 

identifies critical technology elements and the plan for maturation of these 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 29 GAO-12-366 KC-46 Tanker Aircraft 

technologies. During interviews with program officials we discussed what 

actions are currently being taken in the areas of earned value 

management and contractor performance in order to identify problems 

early in the engineering and manufacturing development phase and ways 

they planned to mitigate these risks.

To assess the extent the program is complying with acquisition policy, 

legislation, and best practices, we also compared key program 

documentation and execution with current DOD policy, GAO best 

practices, and recent acquisition reform legislation to determine areas of 

compliance and areas for further review as the program continues 

forward. We compared the KC-46 Initial Capabilities Document, the 

Capability Development Document, and the System Requirements 

Document against DOD policy and guidance. We also reviewed program 

office documentation pertaining to implementing relevant portions of the 

Weapon Systems Acquisition Reform Act of 2009 and compared program 

actions back to the legislation to determine whether requirements in the 

Reform Act are being incorporated into program decisions. We also 

examined and compared program office schedule documentation, such 

as the Integrated Baseline Review against GAO’s best practices 

acquisition framework to identify areas in which the program office is 

utilizing a knowledge-based approach in KC-46 development.

In performing our work, we obtained information or interviewed officials 

from Air Mobility Command and the KC-46 program office, WrightPatterson Air Force Base, OH; Defense Contract Management Agency, 

Seattle, WA; and Federal Aviation Administration, Wichita, KS. We also 

met with and obtained information from the Office of the Under Secretary 

of Defense for Acquisition, Technology, and Logistics, in Washington, 

D.C. 

We conducted this performance audit from September 2011 to March

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: KC-135 Fleet Capabilities 

Compared to KC-46 Planned Capabilities for 

Aerial Refueling 

Page 30 GAO-12-366 KC-46 Tanker Aircraft 

Appendix II: KC-135 Fleet Capabilities 

Compared to KC-46 Planned Capabilities for 

Aerial Refueling
Appendix III: DOD and KC-46 Program Office 

Implementation of Applicable Sections of the 

2009 WSARA 

Page 31 GAO-12-366 KC-46 Tanker Aircraft 

WSARA Section Requirement

DOD and KC-46 Program Office 

Implementation

Title I: Acquisition Organization

Section 104: Assessment of 

Technological Maturity of 

Critical Technologies of Major 

Defense Acquisition Programs 

by the Director of Defense 

Research and Engineering

Requires Director, Defense Research & Engineering 

(DDR&E) to periodically review and assess the technology 

maturity and integration risk of critical technologies of 

Major Defense Acquisition Programs (MDAP). Requires 

DDR&E to develop knowledge-based standards to 

measure technology maturity and integration risk.

• An independent Technology 

Readiness Assessment (TRA), 

approved by DDR&E

• The assessment reviewed 36 

technologies, identified 3 critical 

technologies elements, and 

assessed them as mostly mature

Title II: Acquisition Policy

Section 201: Consideration of 

Trade-Offs among Cost, 

Schedule & Performance

Objectives in DOD Acquisition 

Programs 

The Secretary of Defense shall ensure consideration of 

trade-offs among cost, schedule, and performance 

objectives as part of the process for developing 

requirements for DOD acquisition programs. DOD officials 

responsible for acquisition, budget, and cost estimating 

functions shall provide appropriate opportunity to develop 

estimates and raise cost and schedule matters before 

performance objectives are established. The process for 

developing requirements is structured to enable 

incremental, evolutionary, or spiral acquisition 

approaches.

• KC-46 System Requirements 

Document reduced requirements to 

372 mandatory and 93 nonmandatory that represented 

capability trade space

• Time-defined acquisition strategy 

based on cost, schedule, 

performance trades (78 month 

development cycle)

• Employing incremental KC-46, KCY, and KC-Z strategy

Section 202: Acquisition 

Strategies to Ensure 

Competition Throughout the

Lifecycle of Major Defense 

Acquisition Programs

Requires DOD to implement recommendations to ensure 

competition at the MDAP contract and subcontract level. 

Highlights several measures to ensure competition, where 

cost-effective.

• Contractor must support design, 

certification, approval and 

installation of future third party 

contractor modifications at best 

commercially available terms and 

conditions

• Employing incremental KC-46, KCY and KC-Z strategy

Section 203: Prototyping 

Requirements for Major 

Defense Acquisition Programs 

Requires the acquisition strategy for each MDAP provide 

for competitive prototypes before Milestone B approval, 

unless the milestone decision authority (MDA) for that 

MDAP waives such requirement. Allows the MDA to waive 

the requirement only on the basis that: (1) the cost of 

producing competitive prototypes exceeds the expected 

life-cycle benefits of producing the prototypes; or (2) but 

for such waiver, DOD would be unable to meet critical 

national security objectives. 

• Waiver from competitive prototype 

was not required for KC-46 

because the program entered the 

acquisition system directly at MS B 

with no prior Technology 

Development Phase

Title III: Additional Acquisition Provisions

Section 302: Earned Value 

Management

Modifies the 2009 National Defense Authorization Act, 

Section 887, requires report to Congress on 

implementation of Earned Valued Management (EVM) in 

DOD.

• KC-46 has successfully 

implemented all EVM and 

Integrated Baseline Review (IBR) 

requirements according to statute 

and regulation

Appendix III: DOD and KC-46 Program Office 

Implementation of Applicable Sections of the 

2009 WSARA 
Appendix III: DOD and KC-46 Program Office 

Implementation of Applicable Sections of the 

2009 WSARA 

Page 32 GAO-12-366 KC-46 Tanker Aircraft 

WSARA Section Requirement

DOD and KC-46 Program Office 

Implementation

Section 304: Comptroller 

General of the United States 

Reports on Costs and Financial 

Information Regarding Major 

Defense Acquisition Programs

Requires reports on growth in operating and support 

(O&S) costs and requires review of weaknesses in 

operations affecting the reliability of financial information 

for MDAPs.

• KC-46 program measuring and 

reporting on O&S costs

Source: GAO presentation of 2009 Weapon System Acquisition Reform Act (WSARA) legislation and KC-46 Program Office information

provided to show compliance with WSARA. 
Appendix IV: KC-46 Program Compliance with 

Key Requirements Documents

Page 33 GAO-12-366 KC-46 Tanker Aircraft 

Requirements Document Specific Requirement Program Compliance

Initial Capabilities Document • Description of Concept of 

Operations

• Aerial refueling aircraft will be rapidly deployable, employable, 

and sustainable throughout global battlespace and 

environments

• Capability Gap • Continued successful accomplishment of the crucial aerial 

refueling mission is at risk due to increasing demands (already 

exceeding capability and decreasing availability) as a result of 

aircraft aging

• Operational Environment 

Threat

• Mission requirements dictate aerial refueling aircraft must be 

capable of operating from worldwide locations day and night, 

under most operational atmospheric conditions and contain 

appropriate command, control, communications, and 

intelligence interfaces and capability for inter-aircraft situational 

awareness

Capability Development 

Document

• Capability Discussion • Provide worldwide, day/night, adverse weather aerial refueling 

on the same sortie to receiver capable US, allied, and coalition 

aircraft 

• Concept of Operations 

Summary 

• Aerial refueling is integral to all Air Force core competencies 

and is used throughout the full spectrum of operations from 

combat to humanitarian support, including strategic attack, 

counterair, special operations, counterland, countersea, 

combat search and rescue, and airlift mission areas

• Threat Summary • Tanker aircraft must be able to operate in chemical, biological, 

and radiological environments as potential adversaries 

continue to enhance these capabilities

System Requirements 

Document

• Scope • Presents the technical performance required for the 

replacement tanker aircraft

• Purpose • Tanker and Boom Aerial Refueling

• Computer Resources

• FAA Certification and Air Worthiness

• Description • Verification Factors/Methods

• Testing and Analysis

• Inspection

Source: GAO presentation of DOD and Air Force information. 

Appendix IV: KC-46 Program Compliance 

with Key Requirements Documents
Appendix V: Comment from the Department of 

Defense 

Page 34 GAO-12-366 KC-46 Tanker Aircraft 

Appendix V: Comment from the Department 

of Defense
Appendix V: Comment from the Department of 

Defense 

Page 35 GAO-12-366 KC-46 Tanker Aircraft 
Appendix V: Comment from the Department of 

Defense 

Page 36 GAO-12-366 KC-46 Tanker Aircraft 
Appendix V: Comment from the Department of 

Defense 

Page 37 GAO-12-366 KC-46 Tanker Aircraft 
Appendix V: Comment from the Department of 

Defense 

Page 38 GAO-12-366 KC-46 Tanker Aircraft 
Appendix VI: GAO Contacts and 

Acknowledgments

Page 39 GAO-12-366 KC-46 Tanker Aircraft 

Michael Sullivan (202) 512-4841 or sullivanm@gao.gov

In addition to the contact name above, the following staff members made 

key contributions to this report: Bruce Fairbairn, Assistant Director; Keith 

Hudson; John Krump; Mary Jo Lewnard; Don Springman; Roxanna Sun; 

and Robert Swierczek. 

Appendix VI: GAO Contacts and 

Acknowledgments 

GAO Contact

Acknowledgments

(121016)
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