Fraud, Waste, and Abuse in the Air Force, Part II

After having more questions and answers last fall, we began researching to try and understand what was happening to the Automatic Test Equpment business. Our research led to some interesting findings and perhaps the most interesting was discovering a huge Obama donor was involved with Teradyne the major supplier of Commercial Off-the-Shelf (COTS) ATE parts to the Warner Robins Depot.

Some answers began appearing in January 2009. There was an article in January 09 on Top Stock Picks – Teradyne” which said: "Teradyne could further boost its market position by buying more competitors or just watching them go out of business. We view Teradyne as a very solid company whose stock should soar when the semiconductor industry begins to rebound. We recommend buying Teradyne up to 6." What was this all about? Did this person prepare the way for an investor to make big bucks by buying Teradyne.

In researching, it was discovered after this article came out, that George Soros bought stock in Teradyne, which immediately brought to question WHY? Then you discover that Teradyne became the company of choice to buy COTS for the depot to build more Versatile Data Automatic Test Systems (VDATS). Even in January 09, the full picture of what was about to happen was not clear. Within months of this article it changed from ‘consider’ VDATS which was not fully operational, to VDATS MUST be used. This left the companies who have been in the Automatic Test Equipment (ATE) business for years asking why. No real answers were forthcoming. In May 2009, Soros purchased more Teradyne stock.

The depot realized they would require more help to assemble these test stations so they put out a solicitation with the statement you had to use Teradyne parts and attached a price list for Teradyne to buy the parts to build these stations. The solicitation was pulled off the street before the holidays in 2009. Then the solicitation came back on the street recently, and it was discovered that Teradyne, who is the majority supplier of parts, had raised their prices. Since the depot released this solicitation, they had to know prices had risen. Was this reason for pulling it back before the holidays?

Essentially what the Robins Depot is doing is asking companies to bid on a contract that will put them out of business? If that isn't rich, nothing is.
There are approximately 67 companies in various parts of Automatic Test Systems from the companies who provide the complete system (hardware and software) to ones providing various parts and software used in the system. Companies in the Automatic Test business spend millions on upgrading their equipment, testing, and ensuring the Air Force weapons systems get the most for their dollar. Today the depot is turning private companies away in favor of their own VDATS which is an erector set and now has to have R&D to make it work.

The ATS for the F-35 was supposed to be this super system by Lockheed LM Star never seen before. The pilot would fly in and the data would be automatically downloaded to the ATE as he landed so they would know what was wrong with circuit cards in the plane. Last we heard there was no money to build this system, as Lockheed aero needed the money for the aero side. Lockheed was looking at VDATS, which makes no sense when their LM Star is one of the four systems on the market along with BAE (IAIS), ATTI (BRAT) and Northrop Grumman (IFTE). We would hope the DoD is not going to buy off on that VDATS boondoggle and instead would require Lockheed to take more money out of hide to give the F-35 program what was promised in the contract.

We think it unlikely that we would have VDATS for the F-35 but then we cannot believe that the F-16 program, which has just completed upgrading their test equipment from BAE,was told they need to go to VDATS and to put VDATS along with R&D in the budget. We are not sure if the F-16 complied or the depot put it in the budget for them.

We have yet to hear about AWACS but since VDATS is not deployable and does little RF, we would expect them to balk at any Robin’s request

Instead of fixing the Global Hawk problem of currently sending everything back to the contractor, which is more expensive to do the testing instead of buying ATS, the depot wants VDATS for Global Hawk as well. Global Hawk currently has contractor support to keep them in the skies over Afghanistan.

Does anyone at Warner Robins or the Pentagon care that they are on the verge of putting 67 companies, a lot of them small businesses, out of business in favor of bringing ATE in house as VDATS along with hundreds of engineers are being put on the Government payroll at Robins? In the process they will be giving the weapons system an inferior product. Are they trying to nationalize this segment of the military contracting business?

Air Force Materiel Command several years ago tried to take money from the Oklahoma City ALC at Tinker AFB, OH, back to Wright-Patterson AFB, Ohio, including on the B-52 when the B-52 had never been at Wright-Patterson, in order to save jobs at Aeronautical Systems Center (ASC) since they lost the ‘Super Systems Program Offices (SPO’s) as there are none of the huge major contracts for new weapons systems left at ASC In the Materiel Command attempt to take the money, they learned they couldn’t touch depot funds. It never should have happened, as it is well known that you cannot mix different colors of money in DoD, but that did not stop them from trying.

One major problem we see is that a lot of moves of programs and people are done to protect bases/assets from the Base Realignment and Closure Commission even when it makes no sense to make the moves. There seems to be a huge void of common sense in the Air Force today. Lessons learned over the years look to be ignored as the Air Force forges ahead trying to build a better mousetrap. Sometimes it pays to look back at what has happened to get the Air Force to this position.

When Bill Clinton came to office, George H.W. Bush had put the mergers in play in the Air Force and merger mania became the name of the game inside and outside the Air Force. We now have everything 'super' in the Air Force to the detriment of the mission. When the F-16 was brought on board, we had many companies who specialized in certain parts of the plane who were given a piece of the contract and worked together along with the Air Force.

Now we have these super companies who build aircraft -- Lockheed Martin, Northrop Grumman, and Boeing. Take a look at these three and you see three giants who merged with other major companies -- Lockheed with Martin Marietta, Northrop with Grumman and Boeing who took over McDonnell Douglas and kept their original name. Their management of these three companies was paid over $20M each for these mergers. What benefit has it gained? Waste of taxpayer dollars for one.

Look at where this 'merger' mentality has gotten us today -- Lockheed bids on a contract and gives part of the contract to their Logistics operation. There is one major flaw -- they share the contract now within their own company instead of being partnered with an independent contractor. When Lockheed Aero needs money for any problem with the plane such as the F-35 being overweight for a carrier, Lockheed takes the money from their own logistics leaving them with little dollars to develop the systems they need to sustain the aircraft. Lockheed could not do that with another company.

L-3 awarded a contract to ADVINT, LLC, a member of the Teradyne Support Network, near the end of the year for work on the F-35 when this work was originally bid to be done in house at Lockheed. Why? Is the answer because they have little money left in the logistics side to do the work? The other ‘Why’ still being asked is Why would Lockhood even consider helping on VDATS to put the LM Star out of business. That effort to help sent a signal to the depot that they were prime to use VDATS on the F-35 and have not been shy about telling people that.

ATE and support equipment are only a small portion of what is wrong on the F-35 but did some Lockheed people look at VDATS as a way to cover up the cost-overrun and behind schedule that Lockheed was facing on the F-35? Where was the Air Force Program Review Office (AFPRO) at the AF Plant at Fort Worth when the plane fell behind and went over budget? It is their responsibility to ensure everything is going smoothly and schedule is being met. Did anyone report the overrun and behind schedule to the Super SPO at the Pentagon. When did the cover-up start and how high did it go? Who knows, but we suspect it went higher than the head of 'Super' SPO who was fired. How much of it is true or rumor? We have double checked our sources but for now would prefer to leave it as substantiated rumors coming out of Texas.

Complicating all of this goes back to the merger of Air Force Logistics and Air Force Systems Commands on July 1, 1992, no thanks to the first Bush Administration. Checks and balances are now gone from the Air Force into one Command -- the 'Super' Air Force Materiel Command where everything is in one big pot now for the weapon systems. One major problem is that Logistics is now considered the same as Systems down to the depots and it is not working as the Command morphed into System Command's 'bright and shiny' mentality. Gone are the days when there were two commands fighting for money to be replaced by one 'Super' Command who calls the shots and when one side goes out of bounds, there is no one to bring them back in bounds like on the F-35.

Before the merger, Logistics people in the SPO would have been making visits to Lockheed to check their progress on a host of items starting with their Automatic Test System (ATS) under development and would have discovered very quickly something was wrong and Lockheed had pulled money from logistics to aero.
Many people questioned establishing the so called ‘Super’ SPOs in the Pentagon to handle the new large weapon systems like the Tanker, F-22, and F-35 that would be coming into the pipeline. For years they had been at Aeronautical Systems Division at Wright-Patterson AFB, Ohio, but now Acquisition of large weapon systems being moved to the Pentagon presented a whole new set of challenges. Some considered the close proximity to DC a problem because of potential political influences but the concerns were brushed aside.

Others thought that the ‘Super SPO’s’ would not have the necessary on-site contact with the manufactures involved in the new weapon system which in a lot of instances has turned out to be the case. Instead of visiting the sites, they have chosen to have the contractors come to the Pentagon to give their briefings, which has given credence to some earlier fears. Ask the Marine Corps General in charge of the F-35 Joint Program Office how well that worked out to receive Pentagon briefings since he was fired from the F-35.

Let’s look at the track record of the Super SPO’s.

Tanker contract still not awarded after years and years but the people in the office keep right on drawing high salaries. The last time they awarded the contract to Northrop Grumman, Boeing protested and they pulled back the award and changed the solicitation. Now Northrop Grumman objects and they do nothing. Air Force is wasting a lot of tax dollars on salaries to get nowhere.

F-22 had all kinds of problems while under development and because of the stealth feature is a maintenance nightmare. Now it has been cancelled and capped at a low number. How about Foreign Military Sales (FMS)? Crickets chirping. One devastating substantiated rumor we heard was that the salesmen for the F-22 were told to push the F-16 overseas as it was a better plane. We have spent billions of dollars and the F-16 is better? Maybe what should have happened is for the F-16 to have been upgraded and forget the F-22.

F-35 problems were ignored as Lockheed continued to fall behind in schedule and cost overrun the program trying to get the plane underweight for the carrier and a host of other problems such as wiring problems in the missile bays. Problems are not unexpected on a new weapon system. However, the fact that the problems on the F-35 were ignored and a rosy picture was painted by Lockheed officials as late as last fall should have been detected long before they were a problem.

The Air Force has an AFPRO at the major Air Force plants like the AF plant at Fort Worth leased by Lockheed from the government. That office is the first line of defense for the Air Force and if they don’t keep close controls, the contract can get out of a hand in a hurry. Being overweight for a carrier has been common knowledge in the defense industry for sometime so there was no excuse for the Super SPO not to know. The AFPRO didn’t do their job but neither did anyone in the chain – looks like the “I know nothing” philosophy was at play.

As for Lockheed, the day they took one dime from logistics to aero, the Air Force should have been told. Now they have the Air Force and the taxpayers over a barrel and look to be milking it for all it is worth. Talk about salaries of Wall Street. How about the President of Lockheed Martin making over $20M (closer to $30) a year? No wonder our planes cost so much with salaries like that.

Is the DoD going to really look into the cost overrun or are they going to turn a blind eye and eventually give Lockheed all the money they want?

Bottom line is the F-16 in the 70's was a great example of a joint operation of then Systems and Logistics Commands, which worked very well in conjunction with General Dynamics at Fort Worth. That model of major weapon system being brought into the inventory was thrown out the window. Was the reason to save jobs at the Pentagon by making Super SPO’s? If it was to keep more control, it failed miserably on the F-35.
It is obvious by what is happening the Air Force has a real problem in the way they are operating today not only on brand, new weapon systems but on the systems that provide support for the aircraft. Sometimes old ways of doing business are better and in the long run will save a lot of money. We know these ideas have been discussed before and today they still have merit:

1. Super SPO's -- return them to ASC at Wright-Patterson AFB where they have the labs and know how to do the job without political pressure. Whatever minor problems they had in the past is nothing compared to what the Super SPO's have done while being in the political arena of the Pentagon.

2. With a return of the SPO's to ASC, then it is time for the Air Force to admit that Logistics and Systems was a bad marriage and need a divorce. They were much better Commands as adversaries instead of together. That would return checks and balances to the operation.

3. Depots are there for a reason to overhaul the aircraft and once they entered into the world of Systems Command, it has been a disaster and translated into a gigantic money pit. They want to be like ASC and that was never intended. Now, an Operating Command has to beg the Robins depot for an upgrade for their ATS, get turned down and told to spend at least ten times as much money for a new system they don't want along with now having to budget for R&D. The depots were only given systems like Automatic Test and Avionics to strengthen the depots to prevent BRAC closure, which obviously didn't work since Kelly AFB was put on the BRAC and closed.

4. Automatic Test Equipment/Systems, Avionics, and any other of the support systems of the aircraft need to go back to ASC who will at least play fair with the weapons systems. The other two depots Tinker and Hill AFBs do not have the same problem and we are not sure why. All we know is that there is not enough money in the Air Force for the WR-ALC at Robins to be wasting money to try and manufacture something in the depot that is already available from a number of companies

NOTE: All information contained in this document came from public sources along with a few individual sources. If anyone would like further information on this, please send an email to

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