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IG says 7 contracts violated acquisition rules

An audit by the Defense Department Inspector General’s office of $57.2 million in contracts to support the Thunderbirds aerial demonstration team found that seven of the eight contracts reviewed violated federal acquisition rules.

The audit, released Tuesday, faults officials at Air Combat Command and the 99th Contracting Squadron at Nellis Air Force Base, Nev., for the contracting violations, which include the appearance of conflicts of interest by senior Air Force officials, awarding contracts without proper competition and failing to determine if favored vendors offered the best value.

“The … violations occurred because contracting officials perceived that senior Air Force military officers and associated contractors had used the powers of their positions to impose their preference on the contracting officers to award the contracts to specific companies,” the report says. “Files for five of the eight contracts contained documentation to support the appearance of a conflict of interest in the government-contractor relationship.”

The Air Force concurred with many of the findings of the recent audit and said it has already taken steps to correct the problems.

“These contracting actions at Nellis do not reflect the high standards [Air Force Secretary Michael W. Wynne] has set for how the Air Force does business, which include commitment to contracting processes that are fair, lawful, and provide the American people the best value for their tax dollar,” said Air Force spokesman Capt. Mike Andrews. “Air Force leaders take seriously the report’s findings and have acted on every recommendation provided by the … Inspector General’s office.”

The audit report says those steps should address the problems.

The report identifies the Air Force officials involved not by name but by the positions they held at the time the contracts were awarded, between June 2003 and December 2005.

The officials are Gen. Hal Hornburg, who served as commander of Air Combat Command from November 2001 through May 2005; Maj. Gen. Stephen Goldfein, who served as commander of the Air Warfare Center at Nellis from October 2004 through October 2006 and is now vice director of the Joint Staff; and Brig. Gen. Gregory Ihde, who was commander of the 57th Wing at Nellis from June 2003 through August 2005.

Goldfein and two other officers were reprimanded in March for their roles in steering a December 2005 Thunderbirds multimedia production contract to Strategic Message Solutions, a firm headed by Ed Shipley, a long-time friend of the Thunderbirds, and Hornburg, who had recently retired as ACC commander.

An initial IG report, released in April, faulted the entire process through which the Air Force chose Strategic Message Solutions for the five-year, $50 million contract, and spawned the broader audit of Thunderbirds contracts.

Goldfein, in interviews with investigators, denied any wrongdoing. He has declined to comment for Air Force Times, as have Hornburg and Ihde.

Numerous problems were found with Thunderbirds contracts awarded by the 99th Contracting Squadron:

* In two cases, contracts were improperly awarded on a sole-source basis without seeking competition.

* In seven contracts, documentation was not provided to show the price was fair and reasonable or offered the best value.

* In one deal, officials eliminated competition for a favored vendor by funneling money to it through an Alaska Native Corporation.

Overall, the audit found “internal control weaknesses” in the contracting processes of the 99th Contracting Squadron and said senior Air Force officers were involved in directing the contracting process, which is a violation of acquisition rules.

The Air Force has not yet heard the end of the Thunderbirds contracting scandal, as more reports are expected in the coming months.

The IG is conducting an investigation — requested April 21 by Sen. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee, and Sen. John McCain, R-Ariz., the committee’s ranking member — into possible ethical violations and failures of leadership by senior Air Force officials in steering the $50 million Thunderbirds contract. A spokesman for the IG could not say when that investigation will be completed.

The office of Sue Payton, assistant secretary of the Air Force for acquisition, and ACC are reviewing procurement practices of the 99th Contracting Squadron, which will be completed by June 15. Those findings will be used to revise internal controls, training, and management policies and guidance, according to the audit report.

The Air Force also is auditing the Heritage Flight Program, which incorporate vintage aircraft into Thunderbirds air shows, to determine whether ACC effectively managed contracting processes for the program. The audit began in April, the report says.

ACC also is reviewing contracts awarded to Alaska Native Corporations to ensure they meet federal contracting regulations.

Finally, ACC will issue guidance by June 15 to strengthen documentation practices and beef up contracting inspections; reemphasize policies and procedures for dealing with conflicts of interest; ensure contracts offer a fair and reasonable price and the best value for the Air Force, and ensure all contracts to Alaska Native Corporations comply with regulations.