Payton tries to clean up Air Force procurement

Sue Payton, the senior acquisition official in the Air Force, is an unlikely military reformer. She has spent a career in the defense industry and recently completed a long stint under former Defense Secretary Donald Rumsfeld.

When Air Force Secretary Michael Wynne swore her in 17 months ago as the service’s top weapons buyer, he said her charge was to infuse “integrity and transparency” into the acquisition process after a procurement scandal.
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That episode, based on the Air Force’s drive to update its aging fleet of aerial tankers, resulted in prison terms for a senior Air Force official and an executive with the Boeing Co., and the resignation of Boeing’s chief executive. Boeing also had to pay a record $615 million fine for that and other infractions.

Arizona Sen. John McCain, the senior Republican on the Senate Armed Services Committee and a candidate for the presidency, called the Air Force’s attempt at buying tankers “the worst, sleaziest rip-off of the taxpayers that I have ever seen in my 21 years” in Congress.

Now the Air Force is trying to buy tankers once again - they are at the top of the service’s wish-list - and this time Payton has the job of ensuring that the competition goes off without a hitch.

Payton, 57, says she is following the transparency mandate as she weighs competing bids from Boeing and a team of Airbus builder European Aeronautic Defense and Space Co. and Northrop Grumman Corp. to build the new KC-X tanker, a project valued upwards of $100 billion.

Payton, whose husband Gary was an Air Force pilot for 23 years, a space shuttle astronaut and now also is an senior Air Force civilian, has a big portfolio. She directs an annual budget of $30 billion, runs a weapons acquisition workforce of 24,183 people and manages 127 ongoing major weapons procurements, including the F-22 and F-35 fighter jets and the C-17 transport plane.

The new tanker contract is emerging as the showcase test for whether Payton has helped the Air Force turn the page on the tanker scandal.

The center of that scandal, Darleen Druyun, was the second highest acquisition executive in the Air Force at the time. In 2004, she admitted steering huge, multi-billion dollar contracts to Boeing in return for employment for herself, her daughter and a son-in-law. One of those contracts was a $20 billion program to lease 100 tanker jets from Chicago-based Boeing. She served nine months in prison.

In the run up to the KC-X contract award, which Payton expects to make in late February, the Air Force says that transparency is a main theme.

As an example, Payton points to regular contacts that the Air Force has had with the Boeing and Airbus/Northrop Grumman teams over the details of their competing bids.

She has assigned 150 people from her staff to scour the bids and communicate back to the contractors where they are not up to snuff, and then allow them time to amend their bids.

The message that Payton is imparting to the two competitors is that the Air Force is being as open as possible and that there is no favoritism. The idea is that the more open the Air Force is with the competitors up front, the less likely it is that the losing team will lodge a formal protest afterwards, thereby freezing the project in its tracks.

“We are giving (Boeing and Airbus/Northrop Grumman) every opportunity to substantiate how they are going to improve their weaknesses and mitigate risk,” Payton recently told reporters. Boeing and Airbus Northrop Grumman “will know exactly where they stand relative to their capabilities and their cost,” Payton said. “We are putting in many more continuous dialogue opportunities.”

Terry Marlow, a vice president at the Aerospace Industries Association, a trade group that represents aerospace manufacturers, praised Payton’s approach.

“They are doing everything they can to be transparent” on the KC-X, he said, adding that Payton must weigh the demand for increasing transparency against providing too much transparency “or transmitting of the other guy’s bid” to a competitor.

Air Force regulations require a service advisory panel to make a recommendation to Payton about which tanker manufacturer to select. But ultimately, the decision about which tanker to chose will rest with Payton.

She says that the selection will come down to which tanker proposal best meets five broad criteria: mission capability, proposal risk, cost and price, past performance and aircraft design characteristics such as tanker fuel capacity, takeoff performance and fuel consumption. She added that the lowest cost design won’t necessarily win the contract. That’s because the history of military procurements is littered with companies that offer a low price up front only to sock the government later with huge overruns.

While Payton works to distance the service from the crimes of Druyun, the Air Force can’t seem to escape scandal within its procurement headquarters at the Pentagon. Druyun’s replacement, Charles Riechers, committed suicide in October after the Senate Armed Services Committee raised questions about an arrangement in which he received a salary from a private contractor while awaiting approval from the White House to assume the job.

Prior to taking her current post as the Air Force’s assistant secretary for acquisition, Payton worked for nearly five years under Rumsfeld as a deputy undersecretary for advanced systems and concepts, where she selected promising research projects for development. Before that, she worked as a defense industry executive at Martin Marietta and Lockheed Martin.

During her time in the Defense Department, Payton has written checks totaling $2,300 to GOP causes, including the Republican National Committee and former Rep. Joe Scarborough, R-Fla., according to Federal Election Commission records.

You can email Eric at eric@muckety.com.

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