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EADS Welcomes IG Investigation Into KC-X Mix Up

In case you didn't see it, yesterday a bipartisan group of senators signed on to a letter by Sen. Maria Cantwell (D-Wash.) calling for the Pentagon's Inspector General to investigate the incident where the Air Force and sent rivals EADS and Boeing information on each others bids in the $35 billion KC-X contest.

Now, EADS is welcoming such an investigation, with EADS North America Chairman Ralph Crosby releasing the following statement this morning:

“We would welcome an investigation by the DoD Inspector General—if such an investigation does not delay the decision on acquisition of new tankers. Scandal and protest have kept this badly needed system out of the hands of our service men and women long enough.  We are interested in illuminating unambiguous facts, not in a tactic for delaying the decision process.”
The fact that EADS is so welcoming of an investigation, albeit one that doesn't interfere with the contest, may suggest it feels the Air Force's remedy was fair and that all involved in the incident played by the rules and want to move on with the competition.

We'll see what happens. So far, the Air Force has maintained that it's on track to award a contract soon-ish. Many expect this to come in February.

I asked Teal Group analyst Richard Aboulafia if he thinks an investigation could hold up the award.

Here's his take:

Possibly, but it's more likely that politicians on the losing side of the KC-X award would use an IG investigation to hold up the program
Cantwell penned the letter following yesterday's much anticipated Senate Armed Services Committee hearing into the mix-up. The pro-Boeing senator didn't get the answers she was looking for from the Air Force on the matter.

Here's a statement Cantwell's office released with the letter:

Today’s hearing did not get at the core of the problem. The tanker competition is a price competition, and EADS saw Boeing’s proprietary data. What happened here is that EADS looked at Boeing’s IFARA score, which is used by the Air Force to adjust a bidder’s initially proposed price. EADS now has an unfair competitive advantage to adjust its bid to undercut Boeing. The Air Force’s so-called remedy to level the playing field took 21 days to implement. I am calling on the Defense Department Inspector General to do a full review of what exactly happened in and around the data leak, and how it has influenced the competition. With the Air Force expected to announce the tanker competition winner as early as February, I urge the IG to move forward expeditiously in conducting this review. America’s taxpayers deserve to have this $35 billion decision done right.
It went on to say:
The two witnesses present could not even tell the Committee how the leaked IFARA score may impact the overall Air Force competition.
IFARA stands for Integrated Fleet Aerial Refueling Assessment; it's basically a model to show how much dollar value each tanker's air refueling ability brings to the contest. It's one of three factors -- along with fuel burn and military construction needed to accommodate the jets -- that the air force is using to calculate the overall value of the planes. Oh, and that's in addition to the actual price tag of the airplanes.

Here's a more detailed breakdown of the evaluation process if you really want to get into it.

Anyway, the Senators went on to insist that the IG needs to determine "whether the data breach creates an unfair competitive advantage for the bidder that looked at the other bidder’s" info. Apparently EADS briefly saw Boeing's data while Boeing didn't look at EADS info when they received it accidentally. However, both parties were give access to each other's IFARA score after the Air Force realized its error.

The note was signed by Cantwell, Patty Murray (D-Wash.), Jerry Moran (R-Kansas), Charles Schumer (D-NY), Lindsey Graham (R-SC), Richard Durbin (D-Ill.), and Pat Roberts (R-Kansas) signed the letter.

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