Friday, November 26, 2010

Officials ousted from tanker program for mishandling information

By Megan Scully

The Air Force has conducted an extensive review of the inadvertent distribution of sensitive information to two firms vying for the high-stakes aerial refueling tanker contract and has removed two officials from the program, the service's top officer said Tuesday.

In his first public remarks since news of the mistaken release of information circulated late last week, Air Force Chief of Staff Norton Schwartz said Boeing and EADS each received a one-page document intended for the other firm that contained a summary of an "efficiency analysis" detailing how many of each company's tankers would be required for various operational scenarios.

"Clearly, this was a disappointment -- a profound disappointment -- particularly given the rigor and, I think, the diligence that the program office and the folks on the source selection team have demonstrated to date," Schwartz said during a breakfast with reporters.

The information, called the Integrated Fleet Aerial Refueling Assessment, did not contain any pricing data proposed by the competitors, Schwartz said. And despite claims by some industry officials that the document contained proprietary data, Schwartz stressed that the documents sent to the firms were non-proprietary.

In addition to removing two officials from the program, Schwartz said the Air Force has ensured both companies now have the same information. "There's no difference between Boeing or EADS with respect to what was inadvertently disclosed," he said.

For its part, EADS is giving the Pentagon the benefit of the doubt -- at least for now -- that the data release will not impede the contest for the contract for 179 aircraft, whose worth is estimated at around $40 billion. But after praising the Air Force's handling of the competition on Monday, EADS North America CEO Sean O'Keefe also left the door open that the mistake could lead to a protest of the tanker competition to the Government Accountability Office.

"You never rule out any action," he told reporters.

Boeing has not commented on the matter. But Rep. Todd Tiahrt , R-Kan., one of the aerospace giant's biggest boosters on Capitol Hill, seized on the recent developments, arguing that it amounts to another botched job in the effort to replace the Eisenhower-era tankers the Air Force now flies.

Boeing would build its tanker at its plant in Everett, Wash., with military modifications to be completed in Wichita, Kan. EADS plans to build its tanker at a facility it would build in Mobile, Ala.

In what appears to be recognition of previous problems with the program, the Air Force has decided to postpone the contract award from this fall until early next year to ensure everything is in order before it makes the much-anticipated announcement.

"It is better to do this right than it is to do this fast," Schwartz said.

Schwartz stressed that the information mishap did not factor into the delay. Rather, the Air Force has had more extensive interactions with Boeing and EADS than anticipated to get more information about their offers.

In the rush to acquire new planes in 2003, the Air Force tried to lease Boeing KC-767s before reviewing other options. The $23.5 billion deal collapsed under pressure from congressional critics, led by Senate Armed Services ranking member John McCain, R-Ariz., who exposed Air Force corruption that landed two senior Boeing officials -- one of them a former Air Force acquisition chief -- in prison.

That scandal also forced the Pentagon to consider alternatives to the Boeing aircraft and open future tanker contracts to competition. As a result, the service opened a competition that ended with a contract award in 2008 to a team led by Northrop Grumman and EADS, which offered a modified Airbus A330 aircraft. But Boeing successfully protested the contract to GAO and the Pentagon canceled the deal.

"While I certainly understand that we established expectations by saying we'll have a source selection in the fall, it is evident that it is important that this source selection stand on its own and be able to withstand scrutiny," Schwartz said.

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