The Plane Truth

Air Force leaders tried to clip his wings, but Kenneth Krieg is flying high in the wake of the discredited Boeing deal.

In what passes for political theater in Washington, the Pentagon executed perfect timing in its June 6 announcement that Kenneth Krieg, director of the program analysis and evaluation office, had become the Defense Department's acquisition chief-one of the most powerful positions in the agency. Hours later, Defense Inspector General Joseph Schmitz released a report detailing the role of Krieg and others in what lawmakers have described as the biggest procurement scandal in 20 years-a multibillion-dollar deal to lease aerial refueling tankers from Boeing.

The scandal already has cut short the careers of several federal officials and sent to jail former top Air Force contract negotiator and later Boeing executive Darleen Druyun as well as former Boeing Chief Financial Officer Michael Sears. But while the Air Force and Pentagon have tried to portray Druyun as a lone bad apple, Schmitz's report makes it clear that someone ought to re-examine the barrel. Without naming names, Schmitz told members of the Senate Armed Services Committee that his office might refer "at least" one other potential criminal violation to the U.S. attorney's office.

Despite heavy redactions, Schmitz's report vividly shows that both Boeing and senior Air Force officials badly wanted the deal. The Air Force wanted to lease the planes to conceal the full cost of the program in its long-term budget plans, thereby avoiding cuts in more cherished programs. Boeing, which was going through its own economic crisis, needed a cash infusion.

Krieg was one of a handful of people at the Pentagon and the Office of Management and Budget who concluded that the plan was a bad deal for taxpayers. On June 20, 2003, he sent a memo to senior Defense and Air Force officials detailing the evaluation office's opposition to the tanker lease program on the grounds that it did not make economic sense and violated contracting regulations.

The subsequent flurry of angry e-mails among senior Air Force and Defense officials who backed the program offers a rare and sometimes astonishing glimpse into the high-stakes world of Defense contracting. They also illuminate the tremendous institutional challenges Krieg faces as he assumes stewardship of Defense acquisition programs.

The e-mails, which Schmitz documents in the report, "Management Accountability Review of the Boeing KC-767A Tanker Program" (OIG-2004-171), show senior federal officials trying to quash information that could impugn the deal; Air Force generals gaming the politics of the deal; and officials, both uniformed and civilian, far more interested in helping Boeing than in responding to concerns raised by Krieg's staff, budget officials at the White House, and members of the Senate Armed Services Committee, whose Airland Subcommittee chairman, Sen. John McCain, R-Ariz., questioned the deal's necessity and legality.

James Roche, who was then secretary of the Air Force and a supporter of the Boeing deal, excoriated Krieg for his memo in an e-mail to Michael Wynne, acting undersecretary of Defense for acquisition, and Marvin Sambur, assistant secretary of the Air Force for acquisition. He told Wynne that Krieg was out of line and a threat to Wynne's authority, and that the memo would find its way into the hands of "enemies" on Capitol Hill: "It was a process foul. And Ken needs to be made aware of that BY YOU! I can't control the corporate staff on acquisition issues. Mike, this is their way of asserting dominance over you. I know this sounds wild, but animals are animals. Pete [Aldridge, former Defense acquisition chief] had beaten them down. Now, they are taking you on . . . it's your job to get the corporate staff under control."

It's hard to square Roche's impassioned assault on Krieg and his staff with Krieg's straightforward memo on the tanker program, but Wynne agreed with Roche and attempted to bring Krieg in line. In an e-mail to Krieg the next day, Wynne wrote, "KEN: If the purpose of your note is to run acquisition from PA&E, we have a problem that needs immediate resolution. I have plenty of problems but being 'fragged' didn't seem to be one of them, now I worry."

Krieg apologized. Sort of. He responded to Wynne: "MIKE: That's not what I intended and I may have used the wrong instrument to communicate my concerns. I just want to get together with you and Jim to make sure you understand what we are worried about." And then to Roche: "JIM: Understand from Doc that you are as mad as Mike. I am not trying to walk back anything. I am trying to get the strategy to drive the deal; the deal and contract to set the numbers; the numbers to be reopened in the report without a lot of hype. Probably should have called you but I will explain later. Want to get together with you and Mike to clear the air."

Roche, after denigrating Krieg to others, sent this response: "Kenny, I love you, and you know that. I think you have been had by some members of the famous PA&E staff. You never should have put what you put in writing. It will now be used against me and Don Rumsfeld."

That Krieg has been elevated to the top Defense acquisition post-and that Roche and Wynne resigned under a cloud earlier this year-is perhaps a testament to the subpoena powers of McCain more than anything else. Still, there's a morality tale here for anyone who wants to read it.