Air Force mixes up bidding data sent to tanker rivals

The Air Force needs to replace its fleet of KC-135 refueling tankers but mixed up two rivals' bidding data.
The Air Force needs to replace its fleet of KC-135 refueling tankers but mixed up two rivals' bidding data. (Pablo Martinez Monsivais)
By H. Josef Hebert
Sunday, November 21, 2010

The Air Force mistakenly gave rival companies sensitive information that contained each other's confidential bids in a long-standing, multibillion dollar competition to build a new refueling tanker.

Chicago-based Boeing and Airbus parent European Aeronautic Defence and Space are in an intense competition for a $35 billion contract to build 179 new Air Force tankers based either on the Boeing 767 jetliner or the Airbus A330.

Boeing received detailed proprietary information about the EADS bid; corresponding information was given to EADS North America concerning the Boeing bid.

"It was a clerical error and involved a limited amount of source selection information," Air Force spokesman Col. Les Kodlick said late Friday in a telephone interview with the Associated Press. Kodlick declined to be more specific about what data had been transmitted.

Source selection information is data critical to the Air Force's making a decision on which bid to select and could include technical data about the competing aircraft as well as financial information. The Seattle Times, which first reported Friday on the Air Force's mistake, said the data included crucial pricing information on the competing bids.

Kodlick said the incident "will not delay" the awarding of the contract, which had been expected before year's end but was recently postponed until early next year. Kodlick said the postponement was not related to the disclosure of proprietary data.

It was not clear what use - if any - the two companies made of the information they received, reportedly on a computer disk.

"As soon as it happened and they received [the information] they recognized the errors and contacted the Air Force contracting officers," Kodlick said. He said the Air Force has taken steps "to make sure both companies have access to the same information."

But if the information included price data, it could have an impact on each company's final bid proposal. Pricing has been a key issue in the competition. Last summer, Boeing chief executive Jim McNerney expressed concern in a meeting with securities analysts that his company might be underbid by its European competitor.

The Air Force is reviewing how the disclosures occurred and was "taking steps that it doesn't happen again," Kodlick said.

Sen. Maria Cantwell (D-Wash.), who was briefed Friday on the incident, said it was "an inexcusable mishandling by the Air Force of very sensitive, proprietary data." Sen. Patty Murray (D-Wash.) said in a statement that she is "deeply concerned by the Air Force's mishandling of proprietary information" about the tanker bids.

"This is a critical contract with serious consequences for our military and economy, and this mistake will further delay an award that has already been pushed back to allow an illegally subsidized company to compete," Murray said.

Boeing did not immediately return calls for comment.

The Air Force needs to replace its KC-135 refueling tankers, which date from the 1950s. It has been trying to pick someone to make the new tanker since 2003. While the initial contract award was expected to be $35 billion, replacing the entire fleet of old tankers could be worth up to $100 billion.

The competition had been intense between Boeing, the premier U.S. aircraft manufacturer, and EADS, the heavily subsidized European aircraft consortium.

The Pentagon had hoped to award the contract by August after having extended the bidding deadline so that EADS could submit its revised bid.

- Associated Press

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