Is It A Good Idea To Dual Source The New Tanker?

(MoneyWatch)  There have been several different people promoting the idea that the U.S. Defense Department just go ahead and give a contract for new aerial tankers to both Boeing and the Northrop Grumman EADS team. We have discussed in the past why while there might be cost savings in procuring the aircraft there would be significant cost related to supporting the dual fleet. Secretary Gates did not endorse the idea in his restructuring of the defense budget.

Now Loren Thompson who is considered one of the current leading analysts of the aviation business has endorsed the idea in a recent column. He believes that the savings by retiring the elderly KC-135 more quickly and reducing their support costs would offset the expense of the buying of two separate aircraft for the same mission.

I have argued in the past that the issue is not the procurement cost of two different aircarftbut the cost associated with establishing two separate maintenance systems with associated parts pool. The Air Force would also have two sets of training for both pilots and maintainers that would either have to be cross trained at some expense or just stay in a career with one aircraft. This could be a considerable expense if you consider a thirty year life for the aircraft and based on past history more like forty to fifty.

There is also the concern that if you buy smaller quantities of two systems you won't get the same price breaks as if you would buy one with larger quantities so in theory the procurement costs for the dual fleets would be higher as well. Mr. Thompson believes that a mixed fleet would maximize the best qualities of the two aircraft and this might be true if there are specific missions that exist but right now there is one set of requirements and missions.

Mr. Thompson also believes that the company that performed best on price would get the bulk of the orders. This means you would end up with a small fleet of one aircraft that would require a substantial amount of support and money beyond its' size. In the past the U.S. military has done this type of fleet but normally when funds are not limited as they are today and certainly will be in the future.

As part of any program such as this the U.S. military does an Analysis of Alternatives (AoA) that looks at different options to meet a requirement. Cost is a major consideration in this analysis, and I believe that the U.S. Air Force and DoD has done the necessary work to show that the mixed fleet is not as cost effective as just using one source.