Boeing sees bias in tanker-bid formula

An Air Force computer formula that will help the service pick a new aerial tanker is under fire on Capitol Hill, and Boeing has for some time voiced concerns about it behind closed doors, according to sources and documents. 

Several lawmakers are pushing for a Pentagon investigation of a mix-up in November that sent packets of information about tanker bids being prepared by Boeing and the European Aeronautic Defense and Space Co. (EADS) to one another. Specifically, lawmakers want to know whether the incident gave EADS a leg-up in the 179-plane competition, with some going so far as to suggest the computer model used to help determine the winner be scrapped.

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Defense sources say it is no surprise that pro-Boeing lawmakers are targeting the service’s “Integrated Fleet Aerial Refueling Assessment” (IFARA) model. Boeing has long felt that the Air Force has unfairly altered the criteria used to determine how each plane would perform in real-world situations to keep the larger EADS plane in the competition.

“There is a feeling among Boeing supporters that waivers and preferential treatment granted to EADS have given them artificially higher scores in IFARA,” said Richard Aboulafia, an aviation analyst at the Teal Group.

A set of Boeing briefing slides about the computer model obtained by The Hill bluntly states that it is “biased toward KC-30,” the designation of the proposed EADS plane.

“IFARA would have eliminated [the] KC-30 as a competitor, if not for concessions made to accommodate a larger tanker,” the Boeing briefing states. The “issues biased toward [the] KC-30 tanker unfairly penalize” Boeing’s KC-767 aircraft, it adds.

The Boeing briefing document states that the Air Force altered the criteria to assume the larger EADS plane would use bases not in the original IFARA model because it was too big for those facilities.

“What that has to do with real-world war fighting scenarios is hard to figure out,” said Loren Thompson of the Lexington Institute.

Boeing spokesman Bill Barksdale said the company has “communicated our concerns with the U.S. Air Force” about the IFARA model “and look forward to submitting our final proposal revision.”

Barksdale declined to comment on the company’s stance about a possible Pentagon IG probe of the data mix-up.

The service’s complex computer formula typically factors in several data points about the planes entered into the KC-X competition, including how large bases must be to accommodate the planes, fuel burn, and runway and parking requirements. 

Because the data mix-up involved IFARA data, Boeing’s congressional allies have new ammunition in a big-ticket competition insiders say appears to be favoring EADS. 

“If either side thought they were losing, they would try to change the terms of the process,” Aboulafia said. 

Even though the service is weeks away from announcing a winner, Boeing’s congressional allies aren’t giving up on trying to influence the outcome.

“At a minimum, we know that the IFARA score data was compromised,” Sen. Maria Cantwell (D-Wash.) and seven other senators said in a Jan. 28 letter to Pentagon Inspector General Gordon Heddell. 

The group wants the inspector general (IG) to conduct his own probe of the mix-up and 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.”

The letter also was signed by Sens. Patty Murray (D-Wash.), Jerry Moran (R-Kan.), Charles Schumer (D-N.Y.), Lindsey Graham (R-S.C.), Dick Durbin (D-Ill.), and Pat Roberts (R-Kan.). Boeing would do tanker work in Washington and Kansas, and is headquartered in Chicago.

During a Jan. 27 Senate Armed Services Committee hearing on the incident, Graham said he opposes the EADS bid because the firm receives billions in illegal subsidies from European governments. During that same hearing, Sen. Claire McCaskill (D-Mo.) floated the idea of throwing out the IFARA model.

EADS and its congressional allies want to move toward a contract award with no further delays.

Senate Armed Services Committee Chairman Carl Levin (D-Mich.) said the Air Force has so far been unable to convince him that the mix-up has not given EADS an advantage.

Scrapping the model, which the service uses to adjust each bidder’s proposed price, likely would help Boeing, analysts say.

“A simpler process could make this more of a cost-per-boom comparison, with fewer bells and whistles,” Aboulafia said. “That would help Boeing, which offers a less costly solution.”

But Boeing’s friends may want to be careful — EADS likely will be able to take advantage of the government assistance it receives and take a loss on the Air Force contract just to prevent Boeing from winning it.

“If the Air Force eliminated the war fighting model from its selection process, then the tanker outcome would be determined almost entirely by pricing,” Thompson said. “Theoretically that could help Boeing, which is offering a smaller, cheaper plane, but [EADS] isn’t bound by the same pricing constraints as Boeing due to its government subsidies.”