Report Finds Air Force Officers Steered Contract

By Josh White
Washington Post Staff Writer
Friday, April 18, 2008

Sitting at the head of the table, Air Force Maj. Gen. Stephen Goldfein, the highest-ranking officer in the room, leaned forward and told the officers and others assembled before him that they should steer a multimillion-dollar Air Force contract to a company named Strategic Message Solutions.

"I don't pick the winner, but if I did, I'd pick SMS," Goldfein said to the seven-person group that was selecting a contractor to jazz up the Air Force's Thunderbirds air show with giant video boards, according to a lengthy report by Defense Department's inspector general. The head of the selection team almost immediately "caved," giving in to what he believed was a fixed process, while another member of the team called it "the dirtiest thing" he had ever experienced.

It was during that meeting in November 2005, according to the 251-page report, obtained by The Washington Post, that a controversial $50 million contract was awarded to a company that barely existed in an effort to reward a recently retired four-star general and a millionaire civilian pilot who had grown close to senior Air Force officials and the Thunderbirds.

In a probe that lasted more than two years, investigators concluded that Goldfein and others worked inside the Air Force contracting system to favor SMS and its owners, despite an offer by the company that was more than twice as expensive as a competing bid.

Goldfein, who is now vice director of the Pentagon's Joint Staff, was found to have gone to great lengths to see the contract awarded to SMS, while senior Air Force leaders socialized with the company's partners. According to the report, Goldfein even arranged for President Bush to record a video testimonial in the White House Map Room that was included in the SMS contract proposal, demonstrating the company's credibility and access.

The report offers a blow-by-blow account of how a small Air Force contract spun out of control, highlighting conflicts of interest in the selection process, officers stacking the deck in favor of friends, and others influencing a system designed to eliminate such favoritism in spending taxpayer dollars.

"The investigation found that the December 2005 award to SMS was tainted with improper influence, irregular procurement practices, and preferential treatment," according to a redacted copy of the report. "Lower priced offers from qualified vendors and capabilities in-house were bypassed in an apparent effort to obtain services from [redacted], president of SMS, who had a longstanding relationship with senior Air Force officers and members of the Thunderbirds."

Goldfein and four unidentified officers have received administrative punishments, and investigators are scrutinizing the 99th Contracting Squadron at Nellis Air Force Base in Nevada in light of "irregularities" and "systemic weaknesses" that appear to plague the unit.

Goldfein declined to comment, but he told investigators that he "never interfered with the evaluation or selection process and never directed anyone to do or not do anything." But other members of the selection team said the process seemed "fixed" from the beginning.

"I am deeply disappointed that our high standards were not adhered to," Air Force Secretary Michael W. Wynne said yesterday.

The inspector general's report comes during a stretch of difficult news for the Air Force, including recent problems with the handling of nuclear weapons and nuclear missile technologies and the discovery of significant flaws in older F-15 fighter jets. While the Thunderbirds show contract was $50 million -- minor compared with billion-dollar aircraft contracts -- the inappropriate actions came just a year after former Air Force contracting official Darleen A. Druyun pleaded guilty to favoring Boeing in a tanker deal and was sent to prison.

Pentagon press secretary Geoff Morrell said Defense Secretary Robert M. Gates is aware of the findings. "He is satisfied the matter has been thoroughly investigated and the Air Force is taking appropriate disciplinary action and corrective measures," Morrell said.

The idea behind the Thunderbirds contract emerged in 2005, when Ed Shipley, a close friend of the Thunderbirds who regularly flies aircraft in Air Force shows, suggested ways to keep audiences entertained while the aircraft circle around to do stunts. Shipley, who made millions in direct television marketing videos, came up with an idea for "Thundervision," and his new company, SMS, pitched a $50 million, five-year plan.

Gen. John Jumper, then the Air Force chief of staff, asked his vice chief at the time, Gen. T. Michael "Buzz" Moseley, to see if he could make it happen. Moseley met with Goldfein and Shipley in April 2005 and made money available for the project, ordering subordinates and contracting teams to look into it.

Contracting officials dismissed the idea of giving the contract outright to SMS and set up a team to investigate bids. But a majority of people on the selection team were members of the Thunderbirds -- officers who knew Shipley as a friend and Goldfein as the commanding general of the Air Warfare Center. The Thunderbirds commander at one point said, according to the report: "If it's not SMS, we don't want it."

Investigators also found Gen. Hal Hornburg, who retired in December 2004, was a "silent partner" of Shipley's who joined SMS in early 2005. Moseley is a friend of Hornburg's and knew Shipley. Neither Shipley nor Hornburg returned calls.

Investigators detail how Moseley -- now the Air Force's chief of staff -- socialized with Shipley and Hornburg in the months after the contract process started. Moseley and his wife, along with Hornburg and his wife, gathered at Shipley's home in Pennsylvania in July 2005, and they shared informal e-mails.

Moseley was not accused of wrongdoing but said in an interview this week that he probably should have backed away from Shipley and Hornburg as the contract progressed. But he emphasized the need for personal relationships to cultivate ideas and said that he knew there were strict boundaries regarding such contracts and that he never crossed them. He said he instructed subordinates to "do the right thing."

His account is supported by e-mail records in the report. "In perfect hindsight, there are some things that the U.S. Air Force could have done differently," he said. "There are some things that people along the way, me included, could have done differently."

Moseley said he wishes that officers who noticed problems in the process had simply said "stop." The contract was canceled in early 2006 after an Arizona company lodged complaints. The U.S. attorney's office in Nevada declined to prosecute the case in May 2007.

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