EADS had Boeing data for a month, Sen. Cantwell charges; EADS denies it

  • Side note: While EADS and Boeing fight over the USAF tanker contract, and neither one is capable of delivering their respective tankers on time, IAI Bedek of Israel completed conversion of the Boeing 767-200ER (the same airplane Boeing is using) into a tanker in short time and it is now offering the the airplane for lease to other countries. See this Flight Global article.

In a press conference January 20 in Everett (WA) at the Boeing factory, Sen. Maria Cantwell (D-Boeing/WA) leveled a charge against EADS which, if true, would cast a huge question over the handling of proprietary data mistakenly provided by the USAF to EADS and Boeing.

EADS January 21 denied Cantwell’s allegation that EADS had the data for more than a month. The allegation, if it were true, has all sorts of implications, and all of them bad for EADS. Here is Cantwell’s allegation:

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?

We talked with Cantwell’s press secretary, Janeen Heath, January 22 to ask the basis on the allegation that EADS had the information for more than a month. Heath said, “We received that information from a reliable source, and that’s a question to be answered at the [January 27] hearing.” We asked if the information came from the Air Force or from Boeing, and Heath said she did not have this information.

Here is EADS’ denial, with respect to the charge EADS had the Boeing data for more than a month:

Responsible members of the defense industry understand that when someone becomes aware that they’re in possession of competition sensitive information they must immediately secure it, protect it, and return it to the customer.   This was done by us, and according to the USAF,  apparently by Boeing as well.

The assertion that EADS held competition sensitive information for over a month is simply untrue and flatly contradicted by the Air Force’s forensic investigation and analysis.

This latest event reinforces our previously stated view that a hearing by Sen. Carl Levin (referred to in the press release below) is appropriate. The Air Force, EADS and Boeing say they each handled the situation according to federal law and Air Force rules, but in the absence of a clear, detailed and full disclosure of the timeline of events and procedures followed, the cloud that hangs over this procurement is dark and threatens the entire process. We believe that all three parties must testify before Levin’s committee to get all the facts and information out in the open. Once this is done, let the chips fall where they may–if there is any reason for any to fall at all.

Below is Cantwell’s full press release. The bold facing is hers. The Levin hearing is January 27 at 9:30 AM EST.

Press Release of Senator Cantwell

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’

Thursday, January 20,2011

EVERETT, WA – 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.

7 Comments on “EADS had Boeing data for a month, Sen. Cantwell charges; EADS denies it

  1. I am wondering how Senator Cantwell determined the time line she is accusing the USAF and EADS of. This is the first I have heard of EADS having the Boeing IFARA scoring information for a month. IIRC, the time line of he events publicly released wa a lot less than a month. That means the ‘inadvertent’ release of the info to each competitor occured earlier than what we have been told. The Senator says EADS viewed the data more than a month before the USAF forensic computer investigation was completed. IIRC, publicly the USAF only took a few days to a week to complete that portion of the ‘investigation’.

    The EADS denial statement is intersting, and factually wrong. “Responsible members of the defense industry understand that when someone becomes aware that they’re in possession of competition sensitive information they must immediately secure it, protect it, and return it to the customer. This was done by us, and according to the USAF, apparently by Boeing as well.”

    We know that statement is not true. According to the USAF, EADS did in fact open and view the data before the USAF decided to release that data to each OEM. Is EADS saying they are not a ‘responsible member of the defense industry’, yet Boeing is?

    I’ll admit that when I first read the Leeham headline, before reading the story, I thought this was just another unfounded political statement. But, upon reading the story, Senator Cantwell does raise some valid points, if her allagations are true.

    Perhaps the best way for the Senate Committee to proceed with their hearing this coming Thursday is after the testominey is taken, Senator Levin should request the GAO do an investigation of the USAF, EADS, and Boeing into who did what, what happened, when it happened, and why it happened? Any evidence of violation of the laws should then be handed to the FBI and in coordination with the USAF OSI to determine any criminal activity. This should include any intentionally false statements given to Sen. Levin’s Senate Committee, by anyone.

    A GAO investigation takes about 100 days, so all that the USAF needs to do is to stop all activity of evaluating each offer and delay the contract award until after the the GAO findings are released. IIRC, the ‘new’ contract award date is sometime in March 2011, so there won’t be much of a delay anyway.

    Sen. Cantwell is right about at least one thing, the USAF must be prevented from making a $35B-$40B mistake.

    • Come on TopBoom –
      We both know neither Boeing or EADS/Airbus deserve the “Responsible members of the defense industry” label.
      And I do believe both parties “immediately secure[d] it, protect[ed] it, and return[ed] it to the customer” once they were aware. It seems EADS took longer to recognize the error than Boeing. Probably because Boeing has much more experience with competitive contract awards involving the USAF, a rookie mistake one might say.

      If we do proceed with the GAO investigation, do we also investigate the good senator from Boeing’s home state? Without basis, her comments could be deemed slander against both EADS and the USAF.

      If at all possible, everyone should be prevented form making $35B-$40B mistakes. I don’t think that’s the reason the good senator is giving a “press conference” on the Boeing factory accusing EADS of foul play and the USAF of incompetence.

      • Well, unfortunately the GAO cannot audit or investigate members of the Congress.

        If EADS took longer to recongnize the error on what page do you think they finally realized they were looking at the data for the KC-767NG and not the A-330MRTT?

  2. Depending on P.1 headings, wouldn’t you need to read it before realization that it was not the document expected

    • Is there any information around that details the
      information exchange processes involved in a technical way?

      My understanding currently is that the endpoint is a standalone
      (laptop/pc) that can be used for reading of incoming messages
      but any further transfer would have to be by “Addidas Network” ?

  3. All that was publicly released was the USAF mailed unmarked CDs to each OEM to be viewed on USAF owned stand alone computers.

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