Just behind the cockpit in the world's most sophisticated radar plane, on the leg of a folding blue-and-gray stool, sits the world's most expensive plastic cap.
What distinguishes this particular cap from any other lump of white nylon is that the Air Force paid its government supplier $1,118.26 for it, which is roughly the cost of the plastic, plus $1,118.
In commercial mass production, the stool cap would probably cost less than a dollar. In small quantities ordered irregularly, experts said, the Air Force should pay no more than $10 each.
How one minor spare part grew to cost $1,118.26 and how a staff sergeant in Oklahoma finally put a stop to it is a story of how the $8.6 billion military parts procurement process does and does not work. Defense Department spokesmen said the four-figure item price, which all parties agree was "ludicrous" and "exorbitant," was a fluke. But they also point to the case as a success story, because the Air Force eventually discovered and corrected the bloated charge.
Critics inside and outside the Pentagon said the stool cap case, despite its more or less happy ending, is a classic example of fat in the defense budget, and how it gets there.
The essential facts, according to interviews and an examination of records, are:
In 1979, the Boeing Co. estimated that it would charge $219.19 for a cap made of 26 cents worth of plastic, and no one objected. In 1981, filling its first order, Boeing had "cost growth" to $916.55 per cap, and no one objected. Also in 1981, the Defense Department tacked on a $169.22 surcharge that brought delivery cost to $1,086.17, and still no one objected. Early this year, Staff Sgt. Charles R. Kessler Jr. ordered two caps and was billed $1,118.26 after yet another surcharge for each.
One day in January, Kessler, a crew chief in the 552nd Airborne Warning and Control Wing at Tinker Air Force Base in Oklahoma, noticed that caps were missing from two stools on the planes in his charge.
The stool cap, which weighs under half an ounce, may be the most unimportant piece of the millions of parts on the E3A Airborne Warning and Control System (AWACS) plane, a $91.9 million flying surveillance center on the cutting edge of reconnaissance technology.
Routinely, on Jan. 12, Kessler called Billy Manning in Tinker's directorate of distribution with a replacement order for two caps, setting in motion a procurement request much like the thousands of others handled daily at Tinker.
Manning, a civilian, pulled out an Air Force Form 2005 to make the requisition.
From what Kessler told him, Manning did not know that Kessler was asking for two plastic stool caps. What he did know was that Kessler wanted item 27 from figure 205-03-13A in technical order 1E-3A-25-1. But, in military parts parlance, Manning could not simply put those numbers on his requisition form. His suppliers would not understand them. Instead, Manning had to call the stool cap by its National Stock Number: NSN-5340-01-040-4512.
At the receiving end of Manning's order was the Defense Industrial Supply Center (DISC) in Philadelphia, a central parts purchaser for all three military services. Manning's order got there Feb. 2.
At DISC, a supply officer found the microfiche catalog card for NSN-5340-01-040-4512 and slipped it onto a display screen. The screen did not describe a plastic stool cap.
What it did show, in code, was that NSN-5340-01-040-4512 was a "proprietary item," meaning that, according to the Air Force, the prime contractor owned the rights to its design and was therefore the "sole source" of the item.
This happened not to be true: Boeing had no legal monopoly on the stool cap design. But the code meant that DISC was not authorized to advertise its need for stool caps and order from the lowest bidder.
Many thousands of military parts, according to a recent draft audit report by Defense Department Inspector General Joseph H. Sherick, are unnecessarily listed as "sole source" items.
All the DISC supply officer knew, as he looked at the screen, was that if he wanted an NSN-5340-01-040-4512, he had to go to supplier number 81205, which turned out to be Boeing.
To Boeing, that plastic stool cap is known as a P/N-204-40797-3.
"This is the problem," said a defense auditor who has reviewed the case but asked not to be named. "The buyer doesn't have any idea what he's buying, so it doesn't matter what the vendor wants to charge."
In 1979, long before Kessler met his first stool cap, Boeing had priced the item.
At first glance, Boeing figured it could make the plastic cap for $219.18.
For that, Boeing would acquire little cubes of plastic and grind them into stool caps, making sure to cut the cross-shaped notch in the end where the stool leg fits.
Boeing's cost estimate came in a large "provisioning package" for the AWACS, in which the company priced hundreds of parts that were expected to need replacement or maintenance in the normal course of use.
The Air Force approved that package without dissent.
An internal document reviewing the stool cap case, signed by Air Force Maj. Douglas K. Mang, states, "Minute details of provisioning package not assessed--overall package price appeared reasonable based upon historical precedence."
In other words, no supply officer studied the provisioning package line by line, and therefore no one specifically approved the line item that said that a plastic stool cap would cost $219.18. Air Force officials said it is not unusual for details of a line itemto go uninspected.
From then on, the Air Force and DISC adopted Boeing's cost projection as the cost of the stool cap, even for caps already owned and stored by the Department of Defense. Records show that the cap was ordered twice in 1980 from DISC stockpiles, and each time DISC charged the user more than $200 each.
In 1981, when supplies ran out and DISC for the first time had to order spare stool caps from Boeing, the company had a cost overrun. Or, as the Defense Department prefers to call it, a "cost growth."
Boeing built three stool caps that year, at a cost of $916.55 each.
No one in the Air Force, or at DISC, objected to the quadrupling in price of an item that military officials concede was already overpriced.
And, in fact, no one in the Air Force paid as little as $916.55 for a spare stool cap.
Once DISC slapped on its standard surcharge to cover "such costs as inflation, transportation costs, special packaging, obsolescence, breakage, deterioration, pilferage, etc.," according to a spokesman, the stool cap user in 1981 paid DISC $1,086.17.
Of the three stool caps made in 1981, only one was used. It went to Tinker, where the $1,086.17 was paid without demur. The other two went into storage at the depot in Memphis, where they remained until Kessler's order early this year.
Two days after Kessler requisitioned his stool caps, he checked his "daily document record." He noted with approval that his order had been logged and that the item would be available from storage.
Then he noticed the price: $1,118.26 for each cap. (The DISC surcharge had been raised in 1982.)
Kessler, by all accounts, was shocked and angry. He declined to be interviewed.
According to Manning, Kessler called him and said, "I want my money back."
"Hopefully," Kessler wrote to Manning in a Jan. 14 letter, "this item has never been ordered before. The current exorbitant price for this item is beyond all realistic thought."
This challenge by a noncommissioned officer in the field, with no responsibility for cost control, was the first objection anyone had lodged against the price of the AWACS stool cap.
After that, things began moving pretty fast.
Out of curiosity, Manning asked Kessler to bring him a stool cap.
"I saw it and I thought it was worth maybe 50, 75 cents," Manning said. "I said, 'Look, let's challenge the price on this.' "
Manning passed Kessler's complaint to Barbara Jones, Tinker's "zero overpricing" official, who sent the cap and the complaint to Robert Swartz at DISC. On Jan. 18 Swartz asked Washington for the stool cap's technical drawing and specifications.
The specifications were shipped to Swartz the next day.
By March 24, after "cost engineers" had studied the sample and the drawing, DISC decided that all future purchases of stool caps would be made from competitive bids.
The cost, according to an Air Force memo, "should not exceed $10."
Meanwhile, 19 months after a purchase that had been approved at all levels, the Air Force demanded an explanation from Boeing.
"We felt chagrined about that," said Boeing spokesman Peter Bush. "It's obviously too high a price to pay for something like that."
Boeing's explanation in part blamed the Air Force for ordering its spare parts in small quantities as they were needed, thereby raising the unit cost of production. Boeing News, a house organ, compared this practice to "the guy who tries to save money by ordering a la carte, and finds himself paying five dollars for a second helping of cranberry sauce."
Boeing spokesmen in an interview also talked about the precision machining they said is required to manufacture the stool cap.
In a 1981 cost breakdown routinely prepared for DISC, when DISC first ordered the spares, Boeing said each stool cap began with 26 cents worth of plastic.
To make three caps, according to this document, Boeing required 66.71 labor hours, including 8.01 hours for "inspection," at a cost of $833.49. "Fringe benefits" for those labor hours amounted to $354.23. "Manufacturer's overhead," again on those labor hours, came in at $1,376.83.
After various other charges, Boeing added a "profit fee" of $358.65, or $119.55 per plastic cap.
Final cost, for three caps: $2,749.65, or $916.55 each. Internal Defense Department surcharges brought the unit cost to $1,118.26 for anyone buying the stool cap from DISC.
One Air Force auditor, who asked not to be named, called these figures "a really stupid attempt to explain the thing away," which "only makes them look worse."
But a DISC spokesman, in a prepared statement, defended the company. "Rates contained in the Boeing cost breakdown were consistent with approved rates."
Boeing spokemen refused to answer a reporter's questions about the cost breakdown.
Kessler never got his money back since neither DISC nor the Air Force tried to get a refund from Boeing. But because of his complaint the sergeant has been showered with praise, from his immediate supervisors to Defense Secretary Caspar W. Weinberger.
Lt. Gen. Hans H. Driessnack, then assistant vice chief of staff of the Air Force, sent Kessler a letter in May commending his "professionalism and alertness," saying the sergeant "set an example of what must be done to win our war on cost."
In June, the Air Force sweetened the commendation with a bonus of $1,166.40, under a program that rewards good suggestions made outside the line of duty.
Now military officials are pointing to the stool cap episode as an illustration that spare-parts spending is under control.
"You know, these things are going to happen," said Maj. Joseph Wagovich, an Air Force spokesman. "When we manage a million items a year, you're going to wind up getting flukes like this that sneak through the system. But we do a pretty good job of managing spare parts across the board."
"This is an example of a guy who was working within the Air Force system and it worked," Wagovich said. "Certainly we want to tell that story."
Critics tell it differently.
They said the fluke, if anything, was that a staff sergeant under no obligation to scrutinize parts spending took the time and trouble to challenge the expenditure, and risked making waves with superiors.
For years, would-be reformers of spare parts procurements have criticized the lack of competitive bidding, the emphasis on delivery speed and not cost, and the jargon-filled "nomenclature" that fails to tell purchasing officers what they are paying for.
And for years, military officials have resisted the criticism by asserting that spare parts cannot be left to the free market because sophisticated jets could "fall out of the sky" for lack of even an inexpensive part.
No one makes this case for the stool cap.
The cap was invented to make certain that the AWACS navigator's stool, which spends most of its time folded into a bulkhead, does not wobble when it stands on the deck.
If the navigator wants to check his bearings by looking through a periscope mounted in the top of the plane, he uses the stool because the periscope is so high.
The periscope is attached to a sextant, the last-resort navigational system of the AWACS. It would be used only if all the "high-tech" electronics fizzled out. A sextant is an early 18th-century device for reckoning latitude and longitude by measuring the angular distance of the sun or the stars from the horizon.
"Which, of course, we don't do any more," said one Air Force official who declined to be named.