Sparks fly over government subsidies in hearing on Air Force contract

Lawmakers traded barbs over government aid for aircraft makers during a Senate hearing Thursday on the impact of a data mishap on the $25 billion Air Force aerial tanker competition. 

Air Force officials and information provided by Boeing and EADS provided a detailed look into how the service and companies responded after the rival aircraft manufacturers realized they had received information about the other’s bid last year. Air Force officials assured the panel a service investigation of the incident showed the companies acted properly, and described actions taken since to keep a level playing field.

But — as often happens in any setting when the KC-X tanker contract is discussed — senators with a stake in the competition went toe-to-toe over the subsidies that EADS receives from European governments.

“I have heard a lot of lectures” from Republicans during “the last year about socialization,” said panel member Sen. Claire McCaskill (D-Mo.). She questioned “the idea that we can now somehow just ignore it.”

An emotional McCaskill, with voice raised, then forcefully added: “I don’t want to hear any more lectures about government subsidization.”

At issue is whether the subsidies Airbus, the parent company of EADS, has received from European nations will allow it to propose a lower price than Boeing. The World Trade Organization (WTO) ruled last fall that Airbus has received illegal government aid.

Pentagon officials contend there is no U.S. law or internal purchasing rule mandating that the impact of subsidies be a part of a weapon-selection process.

If it wins the 179-plane deal, EADS would assemble its flying gas stations at a facility in Mobile, Ala. That means most of its congressional proponents hail from the Republican Party, which has warned about the growing influence of the federal government. 

Defense analysts say the European subsidies could allow EADS to underbid Boeing and nab the contract in a competition structured to give sufficient weight to each bidder’s final price.

McCaskill said subsidies matter for that very reason. “Having the lowest and best price is very relevant to government subsidies,” she said.

Earlier, Sen. Jeff Sessions (R-Ala.) charged “people with political interests, with local interests” with “trying to destabilize the process” by trumping up potential ramifications of the data mix-up.

“These are not Missouri jobs,” McCaskill shot back minutes later. Boeing’s defense unit is headquartered in Missouri, and is a top employer in the St. Louis area.  

The flap came as legislation was introduced in the Senate that would force the Pentagon to factor in the impact of the subsidies in the tanker race. It is sponsored by Sens. Jerry Moran (R-Kan.), Maria Cantwell (D-Wash.), Pat Roberts (R-Kan.), Roy Blunt (R-Mo.), Lindsey Graham (R-S.C.) and McCaskill. Boeing, if it wins, would perform the KC-X work in Washington and Kansas.

Congressional allies of EADS continue to downplay the incident, arguing the company did not benefit from briefly viewing data about Boeing’s bid and that it handled the incident in accord with government directions.

The data sent to each company contained an Air Force evaluation of its “Integrated Fleet Aerial Refueling Assessment (IFARA). That computer model weighs a number of factors like base size requirements; fuel burn; runway length requirements; and other factors.

While some panel members, including McCaskill, raised the idea of throwing the IFARA model out because of the mishap, Sessions said the competition should proceed as it is structured.

Air Force witnesses told the committee the data is not proprietary, as has been previously reported.

The service officials were unable to tell the panel whether the data viewed by an EADS employee — who the company says was immediately removed from its tanker team — has given the service an edge. 

About 20 days after the mix-up, the service provided Boeing and EADS with the data about each other’s bid that was viewed by the EADS employee.

The idea behind that move was because there was “a perception” that the European firm had gained a leg up, and service brass wanted to “level the playing field,” Air Force Maj. Gen. Wendy Masiello, program executive officer for combat and mission support, told the panel.

The Air Force performed a forensic assessment of the discs, as well as all Boeing and EADS computers used in the incident.

Steven Shirley, executive director of the Pentagon’s Cyber Crime Center, said that probe uncovered the EADS employee had the Boeing file open for about “three minutes” and the laptop he viewed it on powered up for “20 minutes.”

The employee told investigators he only viewed the file for “15 seconds,” according to the Air Force and EADS.

Shirley gave somewhat confusing testimony about whether the service was able to determine just how long the employee looked at Boeing’s information. But Shirley did say there was no evidence on the laptop’s hard drive to show the employee copied — or attempted to copy — the file.

Senate Armed Services Committee Chairman Carl Levin (D-Mich.) told reporters after the session that the question of whether EADS benefited was not answered during the session. “I have to leave the door open” that it was indeed given an advantage, he said.

Levin said he would not ask the Air Force to delay a contract award until lawmakers are able to determine if the data mishap gives EADS an edge.