	Background

In February 2011, Boeing won the competition to develop the Air Force’s  next generation aerial refueling tanker aircraft, the KC-46. The pods  are used for simultaneous refueling of two aircraft. The Air Force is then responsible for certifying the airworthiness of the  KC-46 with a military certification, as well as certifying the KC-46 and  various receiver aircraft, such as F-16 fighters and C-17 cargo planes, for  refueling operations. Boeing was awarded a fixed-price-incentive (firm target) contract for KC- 46 development, which includes the design, manufacture, and delivery of  four test aircraft. The original contract also  required Boeing to deliver 18 fully capable aircraft by August 2017. Previously we reported that  in January 2017, Boeing and the program office updated the schedule to  reflect a 14-month delivery delay due to problems Boeing experienced  wiring the aircraft, design issues discovered with fuel system  components, a fuel contamination event, and test delays (see figure 3). Cost Estimates and Performance Capability Goals Remain Favorable, but a Critical Deficiency Has Not Yet Been Resolved

The KC-46 program’s total acquisition cost estimate remained stable over  the past year at $44.4 billion, which is about $7.3 billion less than the  original estimate. Boeing Is Likely to Experience Additional Delays in Delivering the First 18 Aircraft

Although Boeing schedule documents indicate that the company remains  committed to delivering 18 fully capable aircraft by October 2018, a  program office risk assessment, as well as our own analysis, project that  Boeing will not deliver the aircraft until around May 2019, if risks are not  mitigated. Boeing,  not the government, is responsible for the cost of development delays  based on the terms of the fixed-price contract. A comparison of the original,  updated, and schedule risk assessment delivery schedules are shown in  figure 4. These  key risks and efforts to address them are discussed below. Flight test pace: Boeing plans to complete about 6,550 remaining  developmental flight test points by the end of June 2018 at a pace that  is nearly double its current average. According to program officials, Boeing is required  to have 8 receiver aircraft certified by the first KC-46 delivery. Retrofitting already produced aircraft: Based on the updated schedule,  Boeing will be producing 49 aircraft, or about 27 percent of the total  aircraft the Air Force plans to buy, before developmental testing is  complete. Cost risk to the government is low because the KC-46  development contract specifies that Boeing must correct any  deficiencies and bring development and production aircraft to the final  configuration at no additional cost to the government. Since no KC-46  aircraft have been delivered, the Air Force has had to use KC-135 and  KC-10 aircraft at a higher rate than expected. We are not making any recommendations in this report, but believe the  Under Secretary of Defense for Acquisition, Technology and Logistics  should implement a prior recommendation to closely monitor the cost,  schedule, and performance outcomes of the KC-46 program to identify  positive or negative lessons learned. KC-46 Tanker Aircraft: Challenging Testing and Delivery Schedules Lie  Ahead. GAO-14-190.
Why GAO Did This Study

The KC-46 tanker modernization program, valued at about $44 billion, is among the Air Force's highest acquisition priorities. 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 to replace about a third of its aging KC-135 aerial refueling fleet. Boeing was awarded a fixed-price-incentive contract to develop the aircraft. Among other things, Boeing was contractually required to deliver 18 fully capable aircraft (KC-46 aircraft with 9 sets of wing aerial refueling pods that allow for simultaneous refueling of 2 aircraft) by August 2017. The program plans to eventually field 179 aircraft in total.
GAO was asked to monitor the KC-46 program because of problems Boeing is experiencing developing the aircraft. This is GAO's 7th report on the KC-46 program. This report assesses program progress and challenges toward achieving its cost goals and delivery schedule.
GAO analyzed cost, schedule, development, and test information contained in program documents; and discussed results with officials from the KC-46 program office, other defense offices, the Federal Aviation Administration (responsible for certifying the design of the KC-46), and Boeing.

What GAO Found

The total acquisition cost estimate for the KC-46 refueling tanker aircraft remained stable over the last year at $44.4 billion. As shown in the table below, the estimate has decreased about $7.3 billion, or 14 percent, since the initial estimate. This decrease is due in part to stable requirements.
The program updated its delivery schedule in 2017 to allow Boeing to delay delivery of the first 18 fully capable aircraft from August 2017 to October 2018— 14 months. A schedule risk assessment, as well as GAO's analysis, however projects that deliveries could slip to May 2019, 21 months from the original schedule, if risks are not mitigated. See figure.
Boeing faces the following risks and challenges and is trying to address them:
updating test aircraft to the correct configuration to complete remaining tests;
completing flight tests at a pace that is almost double its monthly average;
updating test plans to reflect a more realistic schedule for certifying aircraft, such as F-16 fighters and C-17 cargo planes, to be refueled by a KC-46;
retrofitting production aircraft to their final configuration for delivery; and
fixing a critical deficiency to keep the boom from contacting receiver aircraft outside the refueling receptacle.
Because of the terms of the contract, Boeing, not the government, is responsible for nearly $1 billion in additional development costs already incurred. Boeing is also providing additional training for KC-46 pilots, among other things, to compensate the Air Force for delivery delays. Meanwhile, the Air Force is continuing to use KC-135 and KC-10 tankers for refueling missions.

What GAO Recommends

GAO believes the Department of Defense should implement a prior recommendation to document lessons learned given the program's challenges.