Letter to the Honorable Gordon Heddell, Inspector General of the US Department of Defense - Data Breach Gave Airbus Unlawful Advantage, IG Should Investigate

Letter

Dear Inspector General Heddell,

In November 2010, the Air Force announced that a "clerical error' resulted in some source-selection sensitive information being provided to both KC-X bidders concerning their competitor's offer. We are requesting an official investigation into the circumstances surrounding this breach of proprietary data, the circumstances by which Air Force become aware of the breach, and the actions the Air Force took in response to the breach.

From the beginning, we believe the Air Force has attempted to minimize its mistake. The Air Force first claimed that both bidders took identical actions upon discovering that it had its competitor's information. Soon thereafter, the Air Force had to backtrack and admit that was incorrect, as one company did see the Integrated Fleet Aerial Refueling Assessment (IFARA) results of the other bidder. One company took the ethically responsible action and did not look at its competitor's information, while the other company did go beyond the cover page and viewed its competitor's sensitive data. Even more concerning, it turned out that after a period of time subsequent to becoming aware of the breach, the Air Force decided to share source-selection information between the two bidders in an attempt to paper over the unethical conduct by one of the bidders.

While we appreciate the testimony of the Department of Defense (DOD) officials that went before the Senate Armed Services Committee on January 27th, we believe DOD did not choose the appropriate witnesses as these officials were extremely limited in their knowledge. It is essential that we have the non-redacted version of the internal Air Force investigation that was conducted after the data breach as well as all relevant documents. Given the importance of the KC-X competition, we really do need to get down to the bottom of what happened.

We are requesting an investigation because we want to make sure the Procurement Integrity Act, Federal Acquisition Regulations (FAR), and ethics rules have not been violated. The aerial refueling tanker program is crucial to national security and costing $35 billion, is one of the largest Pentagon acquisitions in history.

As you know, if the Air Force determines both bidders "mission capabilities" to be acceptable, then it comes down to the net present value of the Total Evaluated Price (TEP). The TEP, in turn, consists of the Total Proposed Price (TPP) and three adjustments to the TPP -- Integrated Fuel Usage Rate Assessment (IFARA), Fuel Usage Rate Assessment (FURA), and Military Construction (MILCOM). At a minimum, we know that the IFARA score data was compromised. That is why it is critical that your investigation determine whether the data breach compromises the IFARA adjustment to price, and more broadly, whether the data breach creates an unfair competitive advantage for the bidder that looked at the other bidder's proprietary data.

Our understanding from Major General Masiello's testimony is that the Air Force KC-X Program Office considers the IFARA summary score an interim one and not the final score that will be used in the evaluation. Additionally, she stated that both offerers will have the opportunity to provide a Final Proposal Revision. With each bidder knowing its own interim IFARA score and that of its competitor, it is hard to believe that it will not affect each bidder's Final Proposal Revision, if they choose to submit one.

It is imperative that the bidding process is conducted on a completely level playing field, and that all potential issues that could unfairly impact the competition have been thoroughly investigated. We look forward to working with you and your office on this investigation and look forward to your report. The KC-X tanker project is an integral part of our national security, and should therefore be conducted with complete transparency. We look forward to moving forward with this as soon as possible.

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