Letter to Carl Levin, Chairman, Senate Armed Services Committee
Letter
Cantwell Says Air Force Leak of Tanker Data May Have Jeopardized Bid Process
Air Force decision expected soon, but first Cantwell secures Senate hearing to 'bring all the facts to light'
Today, on the floor of Boeing's Everett plant, U.S. Senator Maria Cantwell (D-WA) announced she had sent a letter to Senate Armed Services Committee Chairman Carl Levin outlining several questions she hopes will be answered at next week's oversight hearing. The hearing, which will occur next week on a day still to be determined by the Committee, will investigate the release of proprietary data by the U.S. Air Force in the $35 billion KC-X tanker competition. Cantwell secured the hearing on December 22, 2010, the day the 111th Congress adjourned, to determine if the data leak gave Airbus an unfair advantage in preparing its bid for the tanker contract. Cantwell visited Boeing's Everett plant today to observe the investments being made in the 767 assembly area in anticipation of the company winning the contract, and to visit with the skilled workers who would be working on the tanker assembly.
"With the Air Force expected to announce a tanker competition winner as early as February, we are hoping this upcoming Senate hearing will prevent them from making a $35 billion mistake," said Senator Cantwell. "Not only is this tanker bid crucial to our national security, it is one of the Defense Department's largest acquisitions ever, so it's crucial we get it right. Between Boeing and its suppliers in 40 states, about 50,000 direct jobs hinge on whether this completion is conducted on a fair and level playing field."
In Cantwell's letter sent today to Chairman Levin, she expresses concern that laws and fair competition regulations may have been violated. Cantwell wrote, "Even if this release was inadvertent, it can have far reaching consequences if not addressed properly, if it ends up violating laws and fair-competition regulations, or if it directly impacts a bidder's strategy for establishing its final price in a competition." In the letter,Cantwell outlines "several gaps in our understanding" that remain of what happened after the release of the proprietary data. She specifically asks Chairman Levin to have the Committee examine several questions to ensure that the Air Force is providing a level playing field for every bidder in the competition, including:
· What steps were taken to ensure EADS did not gain an unfair competitive advantage by having Boeing data for more than a month before the investigation was completed by the Air Force?
· What did the Air Force's forensic analysis show?
· Were each company's actions consistent with ethics rules, standards and practices described in the Air Force's ethics briefing each bidder received?
· Will the data release compromise the part of the bidding process that includes the three adjustments to price?
· If so, what does this means for the competition?
Last November, the U.S. Air Force sent proprietary data to both bidders for the tanker contract, Boeing and the European Aeronautic Defence & Space (EADS) Company, the parent company of Airbus. However, the Air Force mistakenly sent each company its competitor's data. This data contained proprietary information about both planes being submitted for the tanker replacement, the Airbus A330 and the Boeing 767.
The data that was sent revealed each competitor's Integrated Fleet Aerial Refueling Assessment (IFARA) score at the stage in the bidding process when the Air Force allows bidders to adjust their proposed price based on anticipated mission scenarios, fuel burn, and new military construction costs. IFARA is a computer model that determines one of the three measures the Air Force is using to adjust the bid price for each plane.
Both companies notified the Air Force of its mistake. Initially, the Air Force reported that neither company looked at the other's data. Subsequently, through the use of computer forensics, the Air Force confirmed that Airbus looked at Boeing's data related to IFARA, while Boeing did not look at Airbus' data. The Air Force decided that the only fair way to proceed was to openly invite both companies to view the IFARA data on their competitor and themselves. The Air Force has stated that this action brings the bidding process back to a level playing field.
Cantwell said she is working with Chairman Levin to have the hearing produce a full accounting by the Air Force of what exactly happened concerning the data leak, and the actions the Air Force took in response. She said she hopes the hearing will ultimately determine whether or not laws and fair competition regulations have been appropriately followed to maintain a fair and level playing field.
For years, Cantwell has maintained her push for a fair and transparent competition. She has repeatedly said that the European government subsidies to Airbus ruled illegal by the World Trade Organization (WTO) last June create an unfair advantage in the tanker competition. Cantwell has repeatedly called for an end to these illegal subsidies. She has fought for legislation that would have required the Pentagon to consider the unfair advantage provided by illegal subsidies in the tanker competition.
During the last Air Force tanker competition that was awarded February 29, 2008 to Northrop/EADS but later cancelled, Cantwell consistently fought for a fair and transparent process. She worked with her Congressional colleagues to examine the soundness of the Air Force's procurement process. Cantwell urged Chairman Levin in July 2008 to hold a hearing on the Air Force's contract decision to determine whether there were wider problems with defense procurement policies and practices. The Air Force ultimately decided to hold the new competition.
Letter to Levin below:
January 20, 2011
Chairman Carl Levin
Senate Armed Services Committee
Russell Senate Office Building, Room 228
Washington, DC 20510
Dear Chairman Levin,
Thank you for agreeing to hold a Senate Armed Services Committee hearing on the Air Force's troubling release of sensitive proprietary data associated with its long overdue decision on how to best replace our nation's aging aerial refueling tanker fleet. As you are aware, this tanker bid is crucial to our nation's national security, and as one of the largest Defense Department acquisitions ever, I believe there are several questions which must still be answered to ensure that the Air Force is providing a level playing field for every bidder for this $35 billion contract.
As you know, in November 2010, the Air Force announced that a 'clerical error' resulted in some source-selection information being provided to both KC-X bidders concerning their competitor's offer. Even if this release was inadvertent, it can have far reaching consequences if not addressed properly, if it ends up violating laws and fair-competition regulations, or if it directly impacts a bidder's strategy for establishing its final price in a competition. From day one, the Air Force has attempted to gloss over the incident and minimize its potential impact on the cost adjustment phase of the source selection of the KC-X tanker competition. Congress must not be as indifferent as the Air Force when so many taxpayer dollars and domestic jobs are at stake.
There remain a number of gaps in our understanding of what happened after the release of the competitively sensitive information to the bidders, and the decisions and actions the Air Force took in response. At the hearing, I believe it is critical to have the Air Force provide a complete minute-by-minute accounting of exactly what happened. For example, I hope the Committee will ascertain: 1) What were the results of the internal and external review I understand the Air Force Chief of Staff ordered in the aftermath of the incident? 2) Were the actions taken consistent with existing law and the Federal Acquisition Regulations (FAR)? 3) Were any other remedies considered? 4) How long did the Air Force take to come to this decision? And 5) what steps were taken to ensure EADS did not gain an unfair competitive advantage by having Boeing data for more than a month before the investigation was complete by the Air Force?
It is important to know how the Air Force first became aware of the incident and its immediate response when contacted by one of the bidders. What actions did Boeing and EADS/Airbus each take when they discovered the Air Force's mistake? Specifically, 6) what did each company tell the Air Force it did and 7) what did the Air Force's forensic analysis show? 8) Were each company's actions consistent with ethics rules, standards, and practices described in the Air Force's ethics briefing each bidder received?
Finally, the hearing needs to shed light on how the Air Force's handling of its mistake may impact the competition going forward. In particular, 9) will the data release compromise the part of the bidding process that includes the three adjustments to price? If so, 10) what does this mean for the competition?
I look forward to working with you and rest of the Armed Service Committee in getting to the facts. Moving forward on the KC-X tanker is absolutely critical to our nation's workers, to the American taxpayer, and to our war-fighters who depend on and deserve the best equipment available.
Sincerely,
Maria Cantwell
United States Senator
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