Department of the Report to Congressional Committees

CRR-FY20 CONTRACTOR-OPERATED

April 2020

Cost to Draft Report: $84,200

House Report 116-120

SECRETARY OF THE AIR FORCE WASHINGTON

APR 2 2 2020

FY20 NDAA CONTRACTOR-OPERATED AERIAL REFUELING AIRCRAFT

This report is a collaborative effort between the U.S. Air Force and U.S. Transportation Command. It assesses the feasibility, affordability, and advisability for the U.S. Air Force to contract commercial air refueling services to augment the Air Force's current tanker fleet.

The first section of this report reviews the prior history of studies conducted related to the initiation of commercial aerial refueling services for the U.S. Air Force, and then goes on to identify four key criteria for use in assessing potential commercial aerial refueling service options. The second section of this report considers five potential solutions for utilizing contractor-operated air refueling, as determined by a combined working group. The merits and challenges associated with these potential solutions are presented, with the primary finding being each potential contract solution has significant regulatory, legal, contractual, and policy issues that must be addressed.

Further detailed study of the potential use of commercial aerial refueling services to meet U.S. Air Force requirements is required before moving further forward towards initiating any contractual arrangements with service providers. In addition, the U.S. Air Force will need to identify specific processes and sources for funding these aerial refueling services, which could include additional appropriations provided by the Congress to facilitate this effort. Within 60 days of the release of this report, AMC will provide the parameters of this additional study, to include specific solutions to be examined, participants, and timelines for completion to inform a decision on whether to proceed with solicitation of offers for provision of commercial aerial refueling services. Upon conclusion of this further study, a decision can be made on the utility of commercial aerial refueling services to the overall readiness and capacity of the U.S. Air Force aerial refueling force.

Sincerely,

Barbara Barrett

CRR-FY20 CONTRACTOR-OPERATED AERIAL REFUELING AIRCRAFT

Introduction

This report is provided to the congressional defense committees as directed on page 94 of the Report of the Committee on Armed Services, House of Representative, on H.R. 2500, Report 116-120 to accompany the National Defense Authorization Act for Fiscal Year 2020.

Contracted Aerial Refueling Aircraft The committee is aware that the Department of the Navy utilizes the contracted air services program to provide contractor-owned, contractor-operated aerial refueling in support of Navy pilot initial qualification, recurring pilot training, operational test and evaluation, and cross-country and overwater refueling services. The Commander of U.S. Transportation Command testified that the Air Force's aerial refueling fleet is ''the most stressed capability in terms of sufficiency.'' The committee is also aware that as many as 30,000 hours of aerial refueling missions are not being supported annually. Given the current demands placed on the Air Force's aerial refueling fleet, as well as the readiness rates associated with those aircraft, the committee believes the options to complement the Air Force's current and planned organic aerial refueling fleet should be assessed.

Therefore, the committee directs the Secretary of the Air Force, in coordination with the Commander of U.S. Transportation Command, to provide a report to the House Committee on Armed Services not later than April 15, 2020, assessing the feasibility, affordability, and advisability of expanding the use of contractor-operated aerial refueling aircraft to support Air Force receiver requirements. The assessment should consider the types of refueling missions that would be appropriate for support by a contractor-operated aircraft.

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Executive Summary

The House Committee on Armed Services (HASC) tasked the Secretary of the Air Force (SECAF), in coordination with the Commander of U.S. Transportation Command (CDRUSTRANSCOM), to report on the feasibility, affordability, and advisability of initiating use of contractor-operated aerial refueling aircraft to support U.S. Air Force (USAF) receiver requirements. Currently, no commercial outlet to provide USAF­ compatible service exists.

Air refueling is a critical capability which sustains Joint force readiness and enables global power projection in support of all National Defense Strategy mission areas. Recent testimony by the Commander, USTRANSCOM indicates the aerial refueling fleet is their most-stressed capability and number one readiness concern. Degraded readiness of the existing aerial refueling force, delays in delivery of capable KC-46s, planned force structure reductions of KC-l0s and KC-135s, and forecasted increases in aerial refueling demand indicate a critical and deepening shortfall in taskable aerial refueling aircraft and aircrews, especially over the next 5-7 years.

In 2018, USTRANSCOM Acquisition (AQ) conducted initial market research on commercial air refueling capabilities with industry and released the first request for information (RFI). The research led to discussions with (AMC) on the viability of a potential commercial air refueling program. In early 2019, USTRANSCOM formed a Commercial Air Refueling Working Group, with members from AMC, to look at current (and historical) air refueling demands exceeding tanker air refueling capacity. In June-July 2019, USTRANSCOM and AMC released a second RFI and sponsored an Industry Day to discuss commercial solutions to the estimated air refueling shortfalls. This resulted in the conceptualization of five potential commercial contract air refueling solutions. The five potential solutions are: (1) Government Furnished Equipment to a contractor; (2) Government sale or lease of surplus aircraft to a contractor; (3) Foreign government surplus tankers purchased and used for contract air refueling; (4) Modifying existing commercial aircraft to perform contracted boom air refueling support; and (5) the use of a commercial off-the-shelf tanker for contract air refueling support.

On 17 Dec 2019, AMC sponsored another Industry Day to determine the viability of each of these options from industry's perspective. The commercial contract companies showed an interest in solutions 1, 3, 4, and 5. The cost per flying hour for these solutions ranged from $15,000 to $27,000, but could drop to between $12,000 and $15,000 once the contract capability was established. Commercial contractors desire a long-term contract structure, of possibly up to 10 years, in order to obtain the necessary return on investment. The group did not consider any organic solutions due to the report's task to assess commercial contract air refueling.

The combined working group expanded to include Headquarters Air Force (HAF) members. The group found the data required to assess the five contract solutions lacked substantive information to warrant the additional air refueling capability; specifically a validated requirement as well as the operational/readiness impact of the

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unfulfilled/unsupported air refuelings. It was determined contractor-operated aerial refueling services for boom-type tankers have legal, regulatory, and financial challenges to overcome in order to proceed.

The combined working group determined further in-depth study is required to analyze the effect of adding commercial aerial refueling capacity on tanker and receiver crew readiness, the legal, regulatory and financial challenges, and potential variations on contract solutions. In addition, per 10 U.S.C. §§ 129a and 2463, before a contract solution can be adopted that outsources a function currently performed organically, a comparison must be made with the cost of providing the same service. The additional study will provide this comparative analysis while also noting prior attempts to meet steady-state requirements by increasing organic capacity beyond the programmed fleet of 479 aircraft have not been possible due to fiscal constraints and higher priorities elsewhere in the Department. Within 60 days of the release of this report, AMC will provide for SECAF (or designated representative) approval of the parameters of this additional study, to include specific solutions to be examined, participants, a draft Requirements Approval Document (RAD), and timelines for completion to inform a decision on whether to proceed with solicitation of offers for provision of commercial aerial refueling services. Until this further study is complete, the USAF should not move further forward towards initiating any contractual arrangements with service providers. Lastly, commercial contract air refueling is not intended to replace current or future tanker aircraft acquisition programs.

Report

Previous Reports on Contractor-operated aerial refueling aircraft. There have been four studies/reports completed on the concept of commercial contract air refueling:

1. Concept Development Report on Contracted Aerial Refueling, USTRANSCOM, 1997. Report focused on using contract tankers to complete probe and drogue-only air refueling. Result: There were legal concerns regarding commercial tankers' integration into combat operations, as well as concerns over reduced training opportunities for USAF crews. The Joint Staff, USTRANSCOM, and AMC rejected the idea.

2. Report to Congress on Private Sourcing of Airlift of Military Personnel and Cargo, 1997. In the report, the Office of the Secretary of Defense (OSD) clearly articulated its position on Commercial Aerial Refueling by highlighting the combat integration, training, and full range of mission sets make "private-sector sources" for aerial refueling unsuitable. Result: No action taken.

3. Analysis of Alternatives (AOA) for KC-135 Recapitalization, 2006 RAND Project. The idea of commercial tankers was rejected primarily on the assumption all tankers "must be capable of carrying out wartime missions" and; therefore, commercial tankers were considered cost prohibitive due to required defensive equipment that would allow them to fly into combat. Result: Increased investment into the organic aerial refueling fleet.

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4. Section 1081, Public Law 110-181, signed by the President on 28 January 2008. Required the USAF to conduct a pilot program to assess the feasibility and advisability of utilizing commercial fee-for-service air refueling tanker aircraft for Air Force operations. The findings of the report estimated the cost of the pilot program to be $450M-$500M for one contractor with two aircraft, providing 2,400 hours per year for five years. The pilot program cost for two contractors with two aircraft each was $850M-$900M, providing 4,800 hours per year for five years. In contrast, the (ANG) could provide 4,800 hours for $43M per year. The active duty Air Force could increase flying hours by more than 8,500 hours per year for five years for a $400M investment in organic tankers. Result: USAF Reserve and ANG volunteered to provide an equivalent capacity. The pilot program was not completed.

Navy Contract Air Refueling

In 2001, the Department of Defense directed the U.S. Navy (USN) to conduct a pilot program for commercial air refueling. The majority of USN receiver aircraft use a probe and drogue refueling system. At the time, Omega Air Refueling Services, Inc., was the only company with a drogue-equipped aircraft, so the USN contracted with Omega Air Refueling Services, Inc. for a limited objective air refueling experiment. Later that year, the USN released a Request for Proposal (RFP) for commercial air refueling. Omega Air Refueling Services, Inc., was the only available commercial air refueling vendor, and was placed on contract to provide air refueling service to the USN.

A study completed in 2003 by the Center for Naval Analysis cited availability, flexibility, and responsiveness as reasons to continue commercial air refueling. The USN's air refueling service contract is receiver-oriented, and Omega Air Refueling Services, Inc., is dedicated to meeting a portion of the USN's peacetime air refueling training needs.

USTRANSCOM Working Group

In 2018, USTRANSCOM reinvigorated the concept of contractor-operated aerial refueling services in an effort to address shortfalls involving non-supported aerial refueling requests. USTRANSCOM and AMC leadership formed a Commercial Air Refueling Working Group to further research contractor-operated aerial refueling. This report is a collaboration between the working group and HAF.

Solutions Analysis

Over the last two years, USTRANSCOM released two RFIs and both USTRANSCOM and AMC held Industry Days to examine commercial air refueling. Research from this effort identified five potential solutions involving commercial support to targeted USAF air refueling requirements. The five contractor-operated solutions provide air refueling support using boom-equipped air refueling tankers. Air refueling with boom­ equipped tankers is different than probe and drogue refueling operations as the flies the boom to the receiver aircraft while the receiver aircraft pilot maintains close position behind the tanker in accordance with procedures and boom operator directives.

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USAF aerial refueling receivers require boom-type tanker aircraft. Currently, there is no commercial outlet to provide this service. Each of the five presented solutions for contractor-operated aerial refueling services for boom-type tankers have legal, regulatory, and financial challenges to overcome in order to proceed. Once these challenges are addressed, commercial contract air refueling could augment current organic aerial fueling operations. The creation of a domestic industry to provide this service, as well as future growth and support, will likely require resourcing over and above the USAF's current air refueling fleet capacity; therefore, additional funding will likely be required to ensure operational acceptability.

The feasibility, affordability, and advisability of potential contract solutions were evaluated as follows:

Feasibility: Each of the five potential contract solutions described below could provide additional aerial refueling capacity, but have implementation (legal/regulatory) challenges that must be addressed through an approval or waiver process or changed through legislation, as further described in detail in each alternative solution. For some solutions, it could take years for commercial contractors to begin providing this service, in part due to normal acquisition procedures and extensive challenges involving the creation and certification of a commercial market offering boom-equipped tankers. Other solutions using existing tanker aircraft may be more readily available. The USAF has written airworthiness certification policy to best ensure safety and minimize liabilities to the government for all contracted services. The current civil aviation regime (airworthiness approval, type certification, crew qualification, maintenance standards, mishap investigation, etc.) is not set up to accommodate contractor aerial refueling as a viable path forward. As a result, senior USAF leaders will need to engage with civil aviation authorities to facilitate waivers, deviations, exceptions, and legislative changes; or, in the alternative, determine in advance the willingness of the USAF to accept the responsibilities and potential liabilities associated with designating a contracted aircraft to operate as a Public Aircraft' within the boundaries of U.S. territorial airspace or as a State Aircraft2 if intended for use beyond U.S. territorial airspace. Finally, because there are no commercial sources or standards for training, qualifying, and certifying boom operators, the USAF in coordination with industry, will need to develop the standards and evaluation methods for training, qualifying and certifying boom operators, as

1 When the Air Force tasks contractors to perform Public Aircraft operations or designates contractor aircraft to be State Aircraft, responsibility shifts from the FAA to the USAF for airworthiness approval, oversight of the operation, and oversight of maintenance procedures. Responsibility for aircrew qualifications and training and for safety and mishap investigations may also shift to the USAF (see, Title 49, Code). 2 In accordance with long-standing U.S. Government (USG) policy, civil aircraft under contract to DoD retain their civil status unless specifically designated to be State Aircraft, and it is the policy of the USG to not make such designations unless there is a compelling reason to do so. State aircraft have a unique status under international law and are seen as extensions of the sovereign, thus raising potential diplomatic, liability, and safety oversight concerns. Further, such aircraft may be viewed as , a subset of state aircraft. It is not yet clear how contractor aircraft operations might fulfill international expectations regarding military aircraft markings, operations, and crew. Contract aircraft supporting aerial refueling of US Navy aircraft outside US airspace are typically designated as State aircraft; whether the particular circumstances under which this designation might also apply to commercial support of USAF aircraft outside US airspace remains to be determined.

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well as refueling operations. Utilizing FAR 42.302/DCMA 8210.1 in the writing of the contract, the government, through a Government Flight Representative (GFR)/Government Ground Representative (GGR), can easily maintain oversight and ensure procedures are appropriate. Depending on where the aircraft are based, the GFR/GGR might be personnel from the Air Force, Navy, Army or Defense Contract Management Agency (DCMA). Inclusion of contractual language addressing Government Flight Representative (GFR)/Government Ground Representative (GGR) oversight is a necessary action to enable any of the solutions examined in this report.

Affordability: Each solution has unique cost considerations resulting from the contractor selected, aircraft modifications required, operations, airworthiness, and USAF receiver air refueling testing. Based on initial feedback from industry (summer 2019), the estimated price per flying hour for commercial contract air refueling ranged from $15K­ $27K, which includes operations and maintenance and does not include the cost of fuel. For a comparison, in 2019 the Ownership Cost per flying hour (which includes the cost of the fuel) of the KC-10 was approximately $23K per flying hour and the KC-135 was approximately $26K. The Ownership Cost of the KC-46 was $98K per flying hour for the first year of operations (cost per flying hour projections for KC-46 will decrease as the program progresses to steady state). The cost of ownership for each airframe does not consider the cost of military personnel training that is comparatively included within industry's cost per hour. Subject to insurance and contractor malfeasance, the USAF may be responsible for all or most of the liability to third parties, loss of or damage to contractor­ provided aircraft ("hull" liability) and loss of or damage to USAF property. In order to fully understand all components of cost, liability, and affordability, further analysis is required before initiating any contractual arrangements with service providers.

Advisability: Safety of flight operations will be paramount in any contractor-operated air refueling, and will frame the advisability of going forward. Advisability of a solution is based on the respective risks to the U.S. Government and commercial industry. Risk to government could include: inability of contractors to demonstrate airworthiness and safety; long-term viability; and any unique risks associated with the solution(s) selected. Industry's concern is the financial risk associated with recouping initial investment over the duration of the contract as well as liability concerns and the potential need for government indemnification. The Commercial Working Group did take into account the USN has executed a successful commercial air refueling program for over twenty years (probe and drogue).

Timelines: The timeline to contract award would include time to more specifically define amount of additional commercial aerial refueling services to be solicited, negotiate and coordinate with non-Defense agencies, confirm funding processes and sources, obtain legislation (if needed), write contract specifications and a work statement, solicit offers, and select an offer. Due to the significant study effort remaining and uncertainty associated with the outcomes of further study, a firm timeline to get to contract award remains undetermined.

The Working Group considered the following commercial air refueling options:

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1. Government Furnished Eguipment (GFE) (Timeline: estimated 12-18 months from contract award) This potential solution provides USAF aircraft as GFE under Federal Acquisition Regulation (FAR) Part 45 to the contractors in a government-owned/contractor-operated (GO/CO) model. Under a standard contract for services with GFE, all offerors are solicited for offers on the basis if they win the competition for the requisite services, they will receive the GFE as part of the contract.

In addition to the general feasibility issues noted above (applicable to all of the proposed contract solutions), the primary obstacle to this alternative is that the USAF does not have, at this time, any excess tanker aircraft available to provide to a contractor under a contract for services. Additionally, because of service life issues identified with legacy tanker airframes, further study is needed to determine whether these aircraft would be viable for contract air refueling service. Compared to other alternatives, there are fewer legal and regulatory challenges to overcome in order to provide aircraft as GFE on a services contract. Under a contract for services, Government property can be provided directly to a contractor at no cost to the contractor under standard GFE clauses in the Federal Acquisition Regulation.

Contractor employees are typically compensated at rates that exceed military member and DoD civilian employee compensation. Assuming contractor employee compensation is similar to or less than organic personnel compensation, the GFE option on a services contract could, in the short term (relative to the other contract options discussed in this report) represent the lowest expected cost per flying hour rate, because legacy USAF-owned aircraft may not require immediate modification and would already possess airworthiness approval, USAF receiver qualification, and other necessary military safety-related certifications. Contractors would charge USAF for the contractor's services, including direct employee labor and indirect costs associated with routine operations, maintenance, fuel, insurance, overhead, profit, and so forth. As required by law, a formal cost comparison study is required to determine whether the cost of contractor personnel's direct compensation and benefits and all the other costs of contract performance are affordable compared with organic performance, even when the government has demonstrated no intent to retain the organic capacity. However, even if personnel costs can be contained, the cost to continue operation of USAF aircraft could be substantial due to potential deferred depot maintenance, modifications, and airworthiness updates prior to commercial use. Therefore, the cost of extending legacy aircraft would have to be revisited before programmed retirement plans are changed for any of the legacy aircraft.

This option may be the quickest way to support USAF air refueling shortfalls, and may provide the fastest way to put tankers into the hands of contractors. This assumes excess legacy aircraft are available, the cost and feasibility hurdles to extending the life of legacy aircraft, and commercial sources of qualified personnel can be overcome. The solution presents itself as a short-term solution and could provide industry the time to solve a long-term solution should there be a need for continued contractor air refueling.

2. Government Sale or Lease of Surplus Aircraft (Timeline: estimated 2-5 years)

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Government sale or lease of surplus aircraft could be a viable option if numerous laws, DoD directives, and Air Force instructions are changed to authorize this option. The General Services Administration (GSA) is responsible for disposal of surplus Government property, including aircraft, under 40 (U.S.C.), §§ 541 - 559, and implementing regulations. Specifically, under 40 U.S.C. § 543, the GSA or an agency authorized by the GSA, may "dispose" of surplus property by sale, exchange, lease, permit or transfer, for cash, credit or other property, with or without warranty, on terms acceptable to the GSA. There are several challenges to the sale or lease of former USAF aircraft. First, DoDM 4160.28v2, Defense Demilitarization: Demilitarization Coding, requires that inherently military equipment be demilitarized before disposal. The demilitarization guidance governs the DoD's requirements to demilitarize key military components, to include the aerial refueling systems, which would void the current airworthiness and receiver aircraft air refueling certifications. Second, even if current policy and guidance to sell demilitarized aircraft were waived, the only avenue to sell or lease aircraft is through GSA public-auction. Selling or leasing of demilitarized former USAF tanker aircraft through a GSA public auction requires opportunities be open to the public and sold/leased to the highest bidder without obligation to support ongoing or future U.S. contracts. Third, USAF regulations (e.g., Air Force Instruction (AFI) 64-103, Leasing Non-Excess USAF Aircraft, Aircraft-Related Equipment, and Other Personal Property to Non-Governmental Organizations, para 1.2.7) prohibit the lease of excess property, which means any leased aircraft must be maintained in the active inventory. The USAF is currently leasing some aircraft to contractors; however, legal restrictions on leasing USAF aircraft limit lease terms to one year, requiring an annual renewal. Finally, 40 U.S.C. § 559 requires an executive agency shall not dispose (e,g., through sale or lease) of property with an estimated fair market value in excess of$3,000,000 to a private interest until the agency has received the advice of the Attorney General on whether the disposal to a private interest would tend to create or maintain a situation inconsistent with antitrust law. GSA regulations explain that this review must ensure the buyer(s) or lessee(s) cannot obtain competitive advantage for Government contracts.

The commercial contractors' primary costs associated with pursuing this solution would entail the purchase of demilitarized aircraft, modification to restore military capability, any required maintenance prior to initial operations, submittal of sufficient documentation to obtain airworthiness approvals, and subsequent routine operations costs. If a waiver was obtained to sell or lease a previously certified USAF aircraft without demilitarization, it might not require an immediate aircraft modification, USAF receiver air refueling testing, or lengthy technical airworthiness assessment/approval.

This solution represents potential risk in the loss of control over key military components by providing military aircraft to a civilian entity that has not entered into a contract with the government or through the lack of control over these components once the contract term has expired. This option would require suitable risk mitigation to maintain necessary control over key military components as a contingency of the sale. These aircraft may have the same service life considerations as the GFE solution presented above. With appropriate legislative support, this option is comparable to the GFE solution and could provide a short-term solution while industry solves a long time solution (if required) with

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either a modified or a new aircraft.

3. Foreign Government Surplus Tankers (Timeline: Estimated as short as 12-18 months and as long as 5-7 years)

Foreign government surplus tankers are aircraft previously sold by the U.S. through Foreign Military Sales (FMS) to another country.

FMS aircraft have been used throughout the world as aerial refueling aircraft and are already certified with many receivers, but not necessarily USAF receivers. With Air Force Materiel Command (AFMC) approval, these aircraft could be allowed to conduct tanker aerial refueling with a portion or all USAF receiver aircraft. Those tanker aircraft, if not approved by AFMC, would require flight-testing for airworthiness and certification for each applicable USAF receiver aircraft. Aircraft without type certification, or with type certification not recognized by the National Airworthiness Council may need to be modified to gain an approved type certification to meet contract' requirements. Purchased aircraft may have similar service life issues (unknown usage history) driving an increased risk. Access to design/modification details would be a requirement. Any FMS aircraft purchased by a commercial contractor will require U.S. Department of State International Traffic in Arms Regulation {ITAR) authorization to allow the aircraft to enter sovereign U.S. territory and be used as an air refueling tanker.

FMS surplus aircraft have a lower amortization cost compared to the purchase of a Commercial Off-the-Shelf (COTS) or modified airframes. It is assumed contractors would also incur the cost of purchasing an accompanying spare parts inventory to support operation and maintenance over the same contract period as each of the other contract solutions. FMS aircraft use what is called a FMS Boom ( proprietary), which is about 75% compatible with the USAF High Speed Boom. FMS countries did a "one-time" buy of spare parts as they took control of the aircraft and part supplies. Unfortunately, there are no current providers for the remaining 25% of the uncommon parts.

Other than the GFE solution (which has no upfront purchase price), this solution could have the lowest projected upfront purchase cost. It is possible timelines would be substantially reduced to provide a boom-type capability into the commercial marketplace. This solution would most likely be part of a hybrid solution because of limited FMS tanker aircraft available for sale. Currently, at least one, and possibly two, commercial air refueling operators are in the process of acquiring used boom-equipped air refueling aircraft from a foreign government that could accelerate the potential feasibility and timeline of this option. Similar to the GFE solution described above, this approach could be the quickest to execution and least costly alternative. However, the uncertain status ofFMS type certifications may drive airworthiness risks.

4. Modification of Existing Commercial Aircraft with a Boom and Associated Air Refueling Systems (Timeline: estimated 7-10 years)

The primary limitation to modifying a commercial aircraft is the requirement to

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obtain an FAA Supplemental Type Certificate (STC) to maintain airworthiness certification. Aerial refueling operations cannot be certified under an FAA STC and will require military certification. Any deviation from an existing certified tanker platform will require an Aerial Refueling Certification Agency (ARCA) determination of additional certification testing requirements. The modification of the aircraft with a boom, fuel delivery, and vision systems ·for tanker air refueling, airworthiness, and other certifications could take seven to ten years for full implementation.

The primary cost associated with pursuing this solution includes the purchase of the aircraft, necessary modifications (if required), airworthiness certification, USAF receiver air refueling certification, and routine operations costs. It is anticipated newer aircraft will have lower operating costs than divested military aircraft.

This solution potentially requires the longest timeline to initial operation due to aircraft worthiness and receiver certification. Depending on the condition of the aircraft modified, the aircraft could have a longer service life than aerial refueling aircraft acquired from the U.S. or a foreign government.

5. Commercial Off-the-Shelf {COTS) Tanker {Timeline: estimated 2+ years) This solution envisions commercial contractors purchasing new tanker aircraft designed and built by aircraft manufacturers.

It is anticipated there will be long production lead times associated with aerial refueling aircraft. Aircraft will require USAF receiver aircraft certification for each applicable receiver. Each aircraft will also require an airworthiness assessment in order to obtain airworthiness approval. Because aerial refueling systems and equipment are listed on the ITAR, the USAF will need to ascertain whether Department of State approval is required before private entities can purchase military capable tanker aircraft and whether the ITAR restrictions would apply only to operation outside of the U.S. territorial airspace or only to refueling of non-USAF receivers.

A new air refueling tanker aircraft would have high upfront purchase costs that could exceed $300M per aircraft. Amortization of the cost of these aircraft could result in a higher flying hour cost for aerial refueling services.

These aircraft could meet the anticipated long-term need for contractor-operated aerial refueling services.

Mission sets appropriate for contractor-operated aircraft

In preparation for this report, AF/A3 tasked all USAF Major Commands (MAJCOMs) to answer questions related to the need for additional tanker sorties as well as the commercial air refueling applicability/compatibility for MAJCOM receiver missions. From the responses, 8,151 sorties were identified as necessary to meet all MAJCOM desired training objectives annually. Of the 8,151 sorties, 6,174 requested air refueling support. From these requests, only 50% (3,092 sorties) actually received the requested aerial refueling

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support based on current air refueling capacity. The effect on unit readiness and operational impact due to the loss of this air refueling is unknown at this time.

The MAJCOMs identified the following types of missions as compatible for contractor-operated aerial refueling services. These mission sets would be in support of CONUS and OCONUS non-combat missions:

• CORONETs - Fighter movements, CONUS and OCONUS (commercial contract tankers will not be used for combat missions). • Test and Evaluation • Pre-deployment spin ups • Intelligence, Surveillance, and Reconnaissance - high-end threat readiness missions based on notional major plan tasking • Fighters - all training missions • - all training missions • Mobility - all training sorties • AC-130/MC-130 - 100% of the Flying Training Unit (FTU) and continuation training

Assuming a commercial aerial refueling service for the USAF is established to meet these types of requirements, the contracted capacity of such a service to address unmet receiver requirements must be balanced with the need to ensure that current and future USAF tanker units continue to execute taskings sufficient to maintain the readiness and proficiency of tanker crews for wartime tasks.

Conclusion

In addition to existing readiness challenges in the USAF aerial refueling force, recent USTRANSCOM testimony indicates there is a shortfall in tanker capacity and capability that will significantly increase in the coming years. The SECAF believes commercial contract air refueling could become feasible if all legal, policy, and budgetary concerns can be overcome. Whether or not such an option is affordable will depend on the costs associated to overcome current legal, policy, and availability obstacles and the extent to which commercial contract air refueling is advisable for USAF will depend on further analysis.

Further detailed study of the potential use of commercial aerial refueling services to meet USAF requirements is required before moving further towards initiating any contractual arrangements with service providers. To that end, SECAF directs AMC to conduct further study of the viability of commercial contract air refueling options. Within 60 days of the release of this report, AMC will provide for SECAF (or designated representative) approval of the parameters of this additional study, to include specific solutions to be examined, participants, a draft Requirements Approval Document (RAD), and timelines for completion to inform a decision on whether to proceed with solicitation of offers for provision of commercial aerial refueling services. Further study will take into account 10 U.S.C. §§ 129a and 2463 and ensure the required analysis and cost comparison among organic and contract alternatives is fully explored.

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Distribution

The Honorable James Inhofe The Honorable Adam Smith Chairman Chairman Committee on Armed Services Committee on Armed Services United States Senate U.S. House of Representatives Washington, DC 20510 Washington, DC 20515

The Honorable Jack Reed The Honorable Mac Thornberry Ranking Member Ranking Member Committee on Armed Services Committee on Armed Services United States Senate U.S. House of Representatives Washington, DC 20510 Washington, DC 20515

The Honorable Richard Shelby The Honorable Nita Lowey Chairman Chairwoman Committee on Appropriations Committee on Appropriations United States Senate U.S. House of Representatives Washington, DC 20510 Washington, DC 20515

The Honorable Patrick Leahy The Honorable Kay Granger Vice Chairman Committee on Appropriations Committee on Appropriations U.S. House of Representatives United States Senate Washington, DC 20515 Washington, DC 20510 The Honorable Peter Visclosky The Honorable Richard Shelby Chairman Chairman Subcommittee on Defense Subcommittee on Defense Committee on Appropriations Committee on Appropriations U.S. House of Representatives United States Senate Washington, DC 20515 Washington, DC 20510 The Honorable Ken Calvert The Honorable Richard Durbin Ranking Member Ranking Member Subcommittee on Defense Subcommittee on Defense Committee on Appropriations Committee on Appropriations U.S. House of Representatives United States Senate Washington, DC 20515 Washington, DC 20510

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