A report compiled by the Defense Department's Inspector General finds that the 2005 contract for Thunderbirds' publicity wasn't awarded through a fair and open competition. And it will say that improper influence was used to choose a particular bidder who had ties to a retired general, according to several defense and Congressional officials.
The investigation comes amid escalating problems for Air Force leadership, including questions about the service's handling of nuclear and nuclear-related materials, challenges to a recent $35 billion Air Force tanker contract award, and anger over efforts by the Air Force to lobby Congress for additional funding for the F-22 Raptor.
Details of the inspector general's report have not yet been released, but officials familiar with it said that it does not find any criminal conduct. They said Air Force Chief of Staff Gen. Michael Moseley comes under fire, but the report does not find that he was personally involved in the matter. Instead, the criticism largely is over early communications he had with the eventual winning bidders.
Overall, officials said, the investigation found that the contract award to Strategic Message Solutions showed preferential treatment.
The report says the contract awarded to SMS "was tainted with improper influence, irregular procurement practices and preferential treatment," reports CBS News national security correspondent David Martin. It also says SMS "was a skeleton operation without the resources to undertake a contract effort of this magnitude," which was to provide a giant video display at Thunderbird air shows.
The contract was awarded to SMS because its president, Ed Shipley, "had a longstanding relationship with senior Air Force officers and members of the Thunderbirds." He had on his board a retired general who had once head a command which included the Thunderbirds, adds Martin. To help SMS win the contract, one Air Force officer arranged for President Bush to give a testimonial to the Thunderbirds which SMS included in its winning video display. The officer who awarded the contract said he did not believe SMS had submitted the best offer but he had caved in to pressure from above.
Officials, who spoke on condition of anonymity because the report has not yet been released, said the report is most critical of Maj. Gen. Stephen M. Goldfein, who was commander of the Air Warfare Center at Nellis Air Force Base in Nevada and was then responsible for the Thunderbirds.
Goldfein is now the vice director of the Joint Staff. Capt. John Kirby, spokesman for the Joint Staff, said that Goldfein declined to comment.
The investigation goes back to 2005, and began with allegations that Moseley and other Air Force officers tried initially to give the work to Strategic Message Solutions and its president Edward Shipley without going out for bids.
Later, after bids were sought, SMS was awarded the five-year, $49.9 million contract. But two losing bidders complained that the company had an unfair advantage, including its decision to make retired Gen. Hal M. Hornburg a partner.
The Air Force looked into the matter and canceled the contract with SMS in February 2006, and Wynne directed the Pentagon's Inspector General to investigate.
Shipley sued to reinstate the contract, which was to provide "audio, visual and concert quality sound production presentation" on the Thunderbirds. Strategic Message Solutions was paid $1.9 million for work that had already been done when the contract was terminated.
The IG report is another spate of bad news for a military service that has been battered in recent months with criticism and investigations.
Results of the contract probe are surfacing just days after Defense Secretary Robert Gates got a preliminary briefing on an investigation into the mistaken delivery of four ballistic missile fuses to Taiwan.
The fuses were shipped from an Air Force base in Wyoming to a Defense Logistics Agency warehouse at Hill Air Force Base in Utah, and were then shipped to Taiwan officials, who actually had ordered helicopter batteries.
Gates has directed the Air Force, Navy and Defense Logistics Agency to do a full inventory of their nuclear and nuclear-related materials and review control procedures for those items. And he asked Navy Adm. Kirkland H. Donald to do a full investigation of the delivery mistake. He got an initial report from Donald on Tuesday.
In August an Air Force B-52 bomber was mistakenly armed with six nuclear-tipped cruise missiles and flown from Minot Air Force Base, N.D., to Barksdale Air Force Base, La. At the time, the pilot and crew were unaware they had nuclear arms aboard.
The Air Force is also at the center of an ongoing dispute over a $35 billion tanker award to the European Aeronautic Defence and Space Co. and Northrop Grumman Corp.
Boeing Co. has filed a formal protest citing "irregularities" in the competition. And lawmakers on Capitol Hill have complained about the contract, which calls for the replacement of 179 air-to-air refueling tankers.
Air Force and Pentagon leaders have defended the tanker decision as a fair and legal competitive process.