GAO sustains Boeing tanker protest

For my commentary on today’s news, I will invoke the sage words of (soon-to-be-former) Secretary of the Air Force Michael Wynne.

On November 1, 2003, DOD’s then-undersecretary for acquisition, technology and logistics wrote his aides an email. The subject of that email was never disclosed. Only a single, non-redacted line from Wynne’s email was released into the public record, courtesy of Senator John McCain.

The email reads, and I quote:

“Tankers – aaaaarrrrgggghhh!!! enough said.”

I think that pretty well sums it all up.

If you’d like to read the full story I wrote in 2004, click on the link below.

US tanker deal: digital damnation

Former US Department of Defense (DoD) comptroller Dov Zakheim saidhe had a “simple” question: “Where is the [US Air Force] money to fundthis lease?”

 It is not known how Zakheim’s private query to Marvin Sambur,assistant secretary of the air force for acquisition, in an email dated25 November 2002, was answered. But his direct request is one of themilder examples of the internal scepticism – if not hostility – thatgreeted the air force’s single-minded pursuit of a now-discreditedscheme to lease 100 Boeing 767 tankers.

 Zakheim’s email was among several dozen private communicationsbetween top White House, DoD and air force officials released on 18November by Senator John McCain. The Arizona Republican is seeking tobuild a case that Secretary of the Air Force James Roche and Samburlied to Congress and displayed conflict-of-interest in acquisitiondecisions by mocking Boeing’s competitor – Europe’s EADS.

 ”Fools in Paris”

 Roche wrote to a friend at Raytheon that the “fools in Paris andBerlin” made a mistake in hiring Ralph Crosby, who with Roche hadshared two of the three sector vice-president positions at NorthropGrumman in the late 1990s.

 ”The AF has problems with EADS on a number of levels,” Roche wroteon 8 August 2002. “The widespread feelings about Crosby in the AirStaff [Chief of Staff General John] Jumper especially, will only maketheir life more difficult. Smiles.” Nine months later, Roche lobbied anaide to Secretary of Defense Donald Rumsfeld to call off a scheduledlunch with Crosby, saying Crosby “has lots of baggage, as does Airbus.We won’t be happy with your doing this!”


But the 50-plus pages of emails now in the public domain indicatethat neither Crosby nor McCain were the strongest obstacles to theBoeing lease plan, which first emerged as a Congressional proposal inNovember 2001. Roche personally led a fierce – and often personal -fight to defend the proposal inside the administration for nearly ayear until it was forwarded to Congress in July 2003.


Opposition in the White House first appeared in early August 2002.Mitch Daniels, then-director, Office of Management and Budget (OMB),sent a letter to McCain criticising the deal. The alarm sounded in theair force. “Mr Daniels went out of his way to slam the 767 lease, eventhough he does not really know much about it yet,” a USAF acquisitionstaffer wrote to Sambur on 3 August 2002. “Looks like an interestingfight shaping up.”


Writer Bill Essex proved to be prescient, foreseeing a bureaucratictussle lasting nearly a year which rivalled in intensity the airforce’s fight against McCain. “OMB will fight us to the death on thelease,” Sambur warned to Roche and the air force’s No 2 acquisitionofficial, Darleen Druyun about two months later, in October 2002. “Theydo not believe our numbers and their analysis shows that it is betterto purchase.”


The OMB had pegged the actual cost of the deal at $26 billion, whichsurpassed the air force’s still-evolving projections by $8 billion to$10 billion. Sambur acknowledged in an email to Roche in September 2002the lease “is going to be a tough sell” and the “economic justificationis not a slam dunk for either position (purchase or lease)”.


In mid-2003, OMB’s Robin Cleveland, who supervised all defence andaerospace issues, agreed to allow the lease deal to proceed, but notbefore asking Roche for a personal favour that is now the subject of aninvestigation by the US Department of Justice.


“Jim: This is my brother’s stuff,” says a Cleveland email dated 9May 2003. Attached to the email were the cover letter and resume ofsibling Peter Cleveland, who was applying for a legal job at Roche’sformer employer. “I would appreciate anything you can do to help withNG [Northrop Grumman]. É I would be grateful.”


Roche quickly complied with her request, then replied to the WhiteHouse official: “Be well. Smile. Give tankers now (oops, did I saythat? My new deal is terrific.) :) Jim.”


Actions dismissed


Air Force officials have dismissed Roche’s comments as a joke andhis actions as performing a routine favour for a friend and colleaguein government. Investigators, however, will probably focus on an emailwritten six days later by Robin Cleveland to her brother, entitled “NGinterview.” “Great. Hope it works before the tanker leasing issue getsfouled up.”


The Roche-Cleveland exchange arose as negotiations between the OMBand the Pentagon would enter an intense, final phase. Inside thePentagon, however, Roche was still struggling to solidify support amongkey officials outside the air force.


On 7 May, an aide emailed Roche to warn that Sambur was “gettingbeat up” on a cost-per-aircraft estimate of $125 million. Theantagonist this time was not OMB, but Michael Wynne, undersecretary ofdefence for acquisition, technology and logistics. Outside experts hadtold McCain’s commerce committee in the Senate the air force deserved amuch lower price under normal leasing practices. Watchdogs werecriticising Boeing for “capping” potential profits for the air forcelease at 15%, or three times more than it makes in commercial deals.


Boeing, the aide wrote to Roche, was willing to call in the “big guns” against Wynne if Roche gave the word.


“It’s time for the big guns to quash Wynne!” Roche replied on 7 May2003. “Boeing won’t accept such a dumb contract form and price, andWynne needs to ‘pay’ the appropriate price!”


The feuding reached what appeared to be a climax almost two monthslater. By 7 July 2003, a joint OMB and Pentagon report to Congress onthe 767 lease plan was nearly finished.


The 20-page document asserting that leasing would be $150 millionmore expensive than purchase would clear the way for the deal’ssupporters in Congress to make a final push.


The OMB was ready to relax its concerns, even though the reportlisted a total cost estimate of $21 billion, or $5 billion less thanits initial projections.


But there was still one major issue to negotiate. Cleveland andWynne wanted to insert a footnote in the report. It would say a leaseis actually $1.9 billion more expensive than a purchase if the airforce used a special contracting mechanism called a multi-yearprocurement (MYP).


The air force, however, was in no mood to compromise.


“What they are forcing us to say is that IF congress gave uspermission to PURCHASE under the same MYP terms as the lease, then thelease is DUMB financially,” Sambur informed Roche on 8 July 2003.”Wynne has tossed the bomb back to us in a take it or leave it terms.”


Large IQ


Roche took the argument to Wynne with an email on the same day:”Last time I checked, you have an IQ greater than room temperature -and, so do I. É OMB can kill the deal and make [Wynne's predecessor]Pete Aldridge [defence secretary] Don Rumsfeld look like dopes. But, weshouldn’t help them!”


Wynne refused to budge. “Jim: I am hoping this is about unity ofcommand,” Wynne wrote. “Negotiations with OMB are down to a footnote.”


Roche persisted: “Mike, it’s not that easy for you. You don’t wantto be put in a position of embarrassing Don; nor do I. We shouldpresent DoD’s position and let OMB add the bogus point not us. Bogusbecause we DON’T HAVE THE $$$ NOT WITHOUT GIVING UP COMBAT CAPABILITY!É We turned to a lease because of this reality. The footnote to whichyou agreed? NEVER mentions this point! That’s just not wise. Don’t youagree?”


The debate continued one more day. On 9 July, Wynne tried to reasonwith Roche, saying the footnote “takes the teeth” out of critics whosay the administration was whitewashing the economics of the deal.


“My advice to you is to take the deal as written, sign it out ofthis building,” Wynne inveighed. “I think you have a major victory, andare letting a minor math point get in front of a major policy win.”


Here, Roche seemed to back off his demand to kill the footnote fromthe report. Instead, he presented a compromise. “Mike, thanks for yourcandour,” Roche wrote. “I will only add to the footnote of the letter Isign that ‘the funds to execute such an alternative could not be madeavailable without harming combat capability.’ Then no one can accuseDon of ‘wasting’ $1.9 billion of taxpayer money.”


History has shown that Wynne’s promise of a “major victory” wouldprove to be accurate, but only for about eight weeks. The leasingreport was sent to congress on 11 July 2003. Three of the fourreviewing committees – armed services and appropriations in the Houseand appropriations in the Senate – quickly approved the deal as part ofthe annual legislation package to authorise defence funding.


One last chance


Conventional wisdom held that the Senate Armed Services Committee(SASC) would allow McCain one last chance to flog the leasing deal in apublic hearing, then approve it with an easy majority.


Instead, SASC chairman John Warner and ranking member Carl Levinjoined McCain to stop the deal in its tracks in early September 2003.Warner and Levin proposed a compromise scheme allowing the air force tobuy the first 20 tankers and lease the last 80. McCain warmly hailedthe proposal as a “four-fifths” victory.


Negotiations for pricing terms on such a deal were still ongoing on6 October 2003, the day conservative watchdog group the National Legaland Policy Center filed a complaint with the Pentagon’s office ofinspector general. The complaint disclosed improper links betweenBoeing and Druyun before she was hired by Boeing in October 2002.


Boeing launched an internal investigation even as the Pentagonapproved a new lease-buy deal on 6 November. But the air force nevergot to sign the contract. The deal was off after Boeing fired Druyunand chief financial officer Michael Sears on 24 November 2003. Boeingchief executive Phil Condit was forced to resign one week later underpressure from the company’s board.


What Wynne knew on 1 November 2003 about the Druyun-Sears debacle isnot publicly known, but an email he sent to several aides on that dayis revealing. It reads: “Tankers – aaaaarrrrgggghhh!!! enough said.”




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