The Pentagon inspector general’s report on how the Air Force’s tanker lease went wrong is likely to have a chilling effect on Defense Department leaders, discouraging them from trying innovative methods of acquiring new equipment at a time when funds sufficient to the task are simply not available.
The report, seven months in the making, was delivered to the Senate Armed Services Committee in May and released to the public in June. It blamed four top Pentagon leaders—two in the Office of the Secretary of Defense and two in the Air Force—for failing to go through normal acquisition routines for a tanker replacement, even though they had been specifically ordered by Congress to lease Boeing KC-767s.
The officials, according to the IG, should have conducted the usual analysis of alternatives (AOA), even though the “solution” had already been specified in the legislation. Furthermore, no other boom-type tanker was available.
In short, the defense officials were in a bind—either follow existing regulations as specified by law, or pursue the lease, also specified by law. The officials proceeded toward the lease, assuming the new law ordering it superseded the need to follow the previous regulations.
They assumed wrong, Pentagon IG Joseph E. Schmitz told the Senate Armed Services Committee.
“A number of senior DOD and Air Force officials acted as if Section 8159 of the Fiscal Year 2002 appropriations act had waived various legal requirements—statutory checks and balances—[which] that section had not waived,” he said. “We identified five specific statutes that would be violated were the contract to be signed.”
Back to Basics
The IG’s conclusion—endorsed by the Senate panel—was that the Pentagon should get back to basics and re-emphasize strict compliance with federal acquisition regulations and the “5000 series” of acquisition rules.
Air Force officials agreed, as well. Gen. T. Michael Moseley, at a June 29 SASC hearing on his nomination to be USAF Chief of Staff, allowed that the service “made some mistakes” in pursuit of the tanker lease.
“The traditional process has served us well,” Moseley said. “We should have conducted an AOA. Out of an analysis of alternatives would have come a wider range of discussions about opportunities on existing airplanes and new airplanes.”
He also said the Air Force has unwisely pulled people out of the acquisition career field over the years and pledged to start “putting people back into the acquisition process” to afford more oversight.
Moseley also pledged to see that, in the words of Sen. John McCain (R-Ariz.), the lease’s leading opponent, “this doesn’t happen again.”
The four officials deemed by the IG to be “accountable” for the lease situation were Edward C. Aldridge Jr., former undersecretary of defense for acquisition, technology, and logistics; Aldridge’s deputy, Michael W. Wynne; former Air Force Secretary James G. Roche; and Marvin R. Sambur, former USAF assistant secretary for acquisition.
Aldridge left the Pentagon shortly after approving the lease. Wynne, who became the acting undersecretary after Aldridge’s departure, left his job this past spring. Roche and Sambur both resigned last November. At the time, Sambur warned there would be a “long line” of acquisition professionals leaving military service because of the witch-hunt to assign blame for the tanker mess.
The tanker lease exploded in 2004, when Darleen A. Druyun, the senior civilian acquisition official for the Air Force, admitted to unfairly favoring the Boeing company for USAF contracts. Druyun had negotiated an early version of the lease agreement with Boeing. She left the Air Force well before the conclusion of the final deal, whose terms were much more advantageous to the Air Force. Druyun had retired and gone to work for Boeing at twice her government salary.
After the Druyun revelations, McCain said he refused to believe that the kind of corruption perpetrated by her could be the work of an individual, “acting alone.” McCain persuaded Sen. John W. Warner (R-Va.), the Senate Armed Services Committee chairman, and Sen. Carl Levin (D-Mich.), the ranking Democrat, to join him in demanding the IG inquiry on who in the Pentagon was “accountable” for the unraveling of the tanker lease.
McCain also complained that the lease was unnecessary because the KC-135s, despite being 40 years old, could, according to various reports, last decades longer, and because the lease would have cost up to $7 billion more than an outright purchase of the aircraft.
The IG reported that Aldridge, Wynne, Roche, Sambur, and of course Druyun were accountable for the “inappropriate” lease, but that, given the confusion over which laws to follow, they were not “culpable” for their actions. (See “Washington Watch: IG Calls Four ‘Accountable’ for Tanker Deal,” August, p. 8.) Also weighing in the officials’ favor was the fact that the lease had the express support and backing of three of the four Congressional committees overseeing defense spending, as well as the White House.
The lease agreement would have been signed, and Boeing would have built and supplied 100 of the tankers, but Druyun’s revelations in court caused Defense Secretary Donald H. Rumsfeld to order a “pause” in the awarding of the contract until various investigations could assess the propriety of the deal. The June IG report was the last of several inquiries launched by Rumsfeld and the Air Force itself.
The delivery of the IG report seemed to mark a turning point in the debate over tankers. McCain, who long maintained that no new tankers were needed, or that merely upgrading the oldest ones with new engines would satisfy requirements, asserted in the June hearing that mistakes were made “in zeal to acquire this new tanker, which I think all of us agree is necessary.” The comment seemed to indicate that McCain will no longer oppose the pursuit of a replacement for the KC-135.
Indeed, McCain had, by the time of the hearing, begun lifting “blocks” on promotions of various Air Force flag officers, a tactic available to members of the Senate panel.
He used the power to coerce the Air Force and DOD to turn over e-mails and other documents related to the tanker lease. The service and the department had resisted turning over some of the documents on the basis of executive privilege, a concept by which private communications must remain private if advisors to the Secretary of Defense and the President are to feel free in offering honest opinions on policies.
Acting Air Force Secretary Michael L. Dominguez said in June that he expected it would take until Fiscal Year 2008 to get funding in the budget to begin an outright purchase of tankers and that it would most likely be a competitive program. If the plan is approved, the first tanker money would begin to flow in 2009. By then, the Air Force would have had more than 70 new tankers under the leasing plan.
According to the IG report, the senior acquisition officials failed in a number of respects.
The report argued that the officials declined to order the analysis of alternatives to determine what other methods of obtaining tanking capability might exist. This was done, in part, because, at the time, Boeing was the sole company offering a boom-type aerial tanker aircraft, the type used by the Air Force.
The officials were also faulted for treating the aircraft as a commercial, off-the-shelf item, when in fact the KC-767 was so heavily modified from its civilian configuration that it should have been deemed a military product. As such, it should have been subjected to a raft of tests, evaluations, and oversight of its construction—procedures the officials hoped to skip because they were expensive, time consuming, and, they believed, unnecessary. The 767, they reasoned, was a proven design, and even the tanker version was being acquired by foreign countries.
Finally, the IG said, the Air Force had not identified any “urgent need” to acquire the tankers prior to the 9/11 terrorist attacks and thereafter actually found, in an initial evaluation of its KC-135s, that these aircraft could last for several decades longer, so long as they had assiduous care. USAF subsequently determined that corrosion was causing far more damage to the oldest KC-135E aircraft than had previously been judged and that they could not safely continue without a massive remanufacturing effort.
Since then, 37 KC-135Es have been taken out of service due to age-related problems, including corrosion.
Schmitz added that a lease was an inappropriate vehicle for financing what was essentially a procurement, especially since the Air Force hadn’t made its case that time was of the essence.
The IG noted another controversial aspect of the deal, one that McCain found particularly objectionable. While the lease arrangement certainly was intended to address a piece of the force structure that had reached geriatric status, it also was aimed in part at rescuing Boeing from a long decline in aircraft orders followed by a steep plunge after the 9/11 attacks. Roche believed that the deal was comparable to the Air Force buy of about 60 KC-10 tanker versions of the DC-10 during an earlier airline slump. That purchase had provided a useful capability with the added benefit of offsetting the risk of a problem that might ground the whole KC-135 fleet. It also had helped the domestic airline industry through a tough economic time, thus preserving part of the defense industrial base.
McCain consistently attacked the KC-767 lease as a government “bailout” for Boeing. However, the IG merely noted the motive to assist the industry as a factor in the genesis of the lease and didn’t comment on whether that motive was appropriate.
In requesting the report, the SASC specified that it wanted to know who was accountable for the abortive lease deal within the Defense Department. It did not ask for an analysis of involvement from elsewhere in the government.
The IG report included hundreds of e-mails and other communications involving the White House, Office of Management and Budget, and other federal agencies. Many of these communications were redacted in the version sent to the Senate, which received sections that were blacked out in part or whole. This irked Levin, who said the redactions were “critical gaps in this report” that have “placed a cloud over it.”
Levin Wants More
Deleting or ignoring the role played by other agencies “omits critical material,” Levin continued, and raised questions over whether the IG was allowed to take an independent view of the affair. He read out loud a section of regulations that requires inspectors to avoid “external interference or influence that could improperly or imprudently limit or modify the scope of OIG work or threaten to do so.”
Levin quoted a letter from Roche to the IG, in which Roche said, “Limiting any review to the Air Force and not OSD … only contributes to the myth that this was exclusively an Air Force proposal. It was not. It was a proposal of the Department of Defense and the Administration. And it consistently was supported by three of the four Congressional defense committees.”
Roche added that arbitrarily omitting the role of other agencies, especially the White House, would make it “difficult to preserve the credibility of the inspector general process.” Such omissions, Roche said, prevent the IG from presenting “a proper perspective of how good and decent people tried to do the right thing by our warfighters and the American taxpayer.”
The IG faulted Roche, too, for encouraging Boeing officials to put pressure on Wynne’s office to stifle dissent about the propriety of the tanker lease, specifically, the program analysis and evaluation shop, led by Kenneth J. Krieg. Krieg has since been confirmed to replace Aldridge as the USD/ATL.
Warner admitted that Congress was complicit in the matter.
“It is true that this issue was initiated in the Congress, … not by the Pentagon. … There was a very close relationship here.” The law requiring the lease “was added as a line item in the appropriations bill without a hearing, without scrutiny, without any Congressional oversight and was approved by three of the four oversight committees. So there is a failure of oversight” on the part of the Congress, Warner said.
In his official response to the IG’s report, Wynne said it is an “imperative” that the Pentagon develop methods to “shorten acquisition time in order to get the right equipment to the warfighter more quickly.”He went on, “Meeting this demand requires innovation and the improvement of business practices. Flexibility is absolutely necessary if we are ever to be capable of responding appropriately to an immediate requirement for a major end item.”
Wynne said the IG’s report, in seeking to assign blame for what went wrong with the tanker lease, “implies that the mere consideration of an alternative to standard major systems acquisition practices is somehow wrongful—even if Congressionally permitted. That is not the right conclusion.”
Wynne said he worries that the loud and clear message to the acquisition community is that it “should not seek to innovate, improve, and change.” The Pentagon, Wynne asserted, must be willing to consider “bold alternatives, even if they are ultimately rejected.”
He noted that “critics and supporters of leasing never saw the same risks and benefits to the Air Force” and that a “lesson” learned from the whole affair might be that there should be “more effort in the early stages of an innovative acquisition to ensuring a common appreciation of the transaction.” In other words, Wynne thinks all the players should have the same set of data on which to make their judgments. In the case of the tanker lease, they clearly did not.
In his written response to the report, Dominguez said it bears noting that, throughout the debate over the tanker lease, the Air Force was “sustaining a continuous global air bridge, refueling countless hundreds of combat sorties” in Southwest Asia, while also sustaining Noble Eagle alerts across the US.
“Operational leaders were—and are—legitimately concerned about the future viability of the entire KC-135 fleet and understandably anxious about a number of age-related problems,” Dominguez wrote.
He went on to say that, even though these leaders did not “successfully make the case for urgency” in replacing the KC-135Es, “it is their job to raise the alarm, and, under different circumstances, one could imagine finding fault with them for NOT raising the alarm.”
Did the release of the report clear the decks, finally, for a program to replace the KC-135s
By late summer, all interested parties were awaiting the results of the Joint Staff’s Mobility Capabilities Study, as well as the Air Force’s own tanker analysis of alternatives study, both due, after long delay, in August. The studies were to assess the tanker needs of what will be a smaller Air Force in the future, as well as how tankers fit in with national strategy and the true age and condition of the existing fleet.
At a Senate Armed Services Committee hearing, the Air Force Chief of Staff, Gen. John P. Jumper, said, “If I lose sleep over anything, it’s the condition of our aging fleet in general and of the KC-135Es in particular. That does worry me.”
As Dominguez reported, with another year of analysis, a tanker program might get launched in Fiscal 2008. (See “Washington Watch: New Tanker Plan Could Appear in 2008 Budget,” August, p. 8.) McCain seems to have relaxed his opposition to a new tanker, and while Levin seems likely to press for more light on the role of the White House and other players in the lease, he has not expressed any intention to block the purchase of the aircraft.
Nevertheless, having absorbed $16 billion worth of procurement cuts late in the last budget cycle, the Air Force is back to square one, with no clear funding source identified as the bill-payer for new tankers.
Jumper noted that, at a replacement rate of 15 aircraft a year—at a cost of up to $3 billion a year—“we’re going to be flying some of these KC-135s when they’re 70 years old.”