[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-???
 
  DEPARTMENT OF DEFENSE INSPECTOR GENERAL'S MANAGEMENT ACCOUNTABILITY 
              REVIEW OF THE BOEING KC-767A TANKER PROGRAM

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 7, 2005

                               __________

         Printed for the use of the Committee on Armed Services


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                      COMMITTEE ON ARMED SERVICES

                    JOHN WARNER, Virginia, Chairman

JOHN McCAIN, Arizona                 CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma            EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas                  ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama               JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine              JACK REED, Rhode Island
JOHN ENSIGN, Nevada                  DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri            BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia             E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina    MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina       EVAN BAYH, Indiana
JOHN CORNYN, Texas                   HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota

                    Judith A. Ansley, Staff Director

             Richard D. DeBobes, Democratic Staff Director

                                  (ii)

  
?



                            C O N T E N T S

                               __________

                    CHRONOLOGICAL LIST OF WITNESSES

  Department of Defense Inspector General's Management Accountability 
              Review of the Boeing KC-767A Tanker Program

                              june 7, 2005

                                                                   Page

Schmitz, Hon. Joseph E., Inspector General, Department of 
  Defense, Accompanied by: Thomas F. Gimble, Deputy Inspector 
  General, Department of Defense.................................     9
England, Hon. Gordon R., Acting Deputy Secretary of Defense......   277
Dominguez, Hon. Michael L., Acting Secretary of the Air Force....   280
Jumper, Gen. John P., USAF, Chief of Staff, United States Air 
  Force..........................................................   280
Wynne, Hon. Michael W., Under Secretary of Defense for 
  Acquisition, Technology, and Logistics.........................   303

                                 (iii)


  DEPARTMENT OF DEFENSE INSPECTOR GENERAL'S MANAGEMENT ACCOUNTABILITY 
              REVIEW OF THE BOEING KC-767A TANKER PROGRAM

                              ----------                              


                         TUESDAY, JUNE 7, 2005

                                       U.S. Senate,
                               Committee on Armed Services,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:40 a.m. in room 
SR-325, Russell Senate Office Building, Senator John Warner 
(chairman) presiding.
    Committee members present: Senators Warner, McCain, 
Collins, Talent, Thune, Levin, and Bill Nelson.
    Committee staff members present: Judith A. Ansley, staff 
director; Marie Fabrizio Dickinson, chief clerk; and Leah C. 
Brewer, nominations and hearings clerk.
    Majority staff members present: Regina A. Dubey, research 
assistant; William C. Greenwalt, professional staff member; 
Gregory T. Kiley, professional staff member; Thomas L. 
MacKenzie, professional staff member; Stanley R. O'Connor, Jr., 
professional staff member; Lynn F. Rusten, professional staff 
member; and Scott W. Stucky, general counsel.
    Minority staff members present: Richard D. DeBobes, 
Democratic staff director; Gerald J. Leeling, minority counsel; 
and Peter K. Levine, minority counsel.
    Staff assistants present: Andrew W. Florell, Benjamin L. 
Rubin, and Catherine E. Sendak.
    Committee members' assistants present: Christopher J. Paul 
and Paul C. Hutton IV, assistants to Senator McCain; Mackenzie 
M. Eaglen, assistant to Senator Collins; Lindsey R. Neas, 
assistant to Senator Talent; Clyde A. Taylor IV, assistant to 
Senator Chambliss; and William K. Sutey, assistant to Senator 
Bill Nelson.

       OPENING STATEMENT OF SENATOR JOHN WARNER, CHAIRMAN

    Chairman Warner. Good morning, everyone. This morning the 
committee meets to receive testimony on the ``Management 
Accountability Review of the Boeing KC-767A Tanker Program,'' 
conducted by the Department of Defense (DOD) Inspector General 
(IG). This review was conducted in response to requests made by 
the committee, in particular myself joined by the ranking 
member and Senator McCain.
    Over the past 3 years this committee and indeed my 
colleagues in particular have invested significant time and 
resources reviewing a number of issues surrounding the 
Department's proposed contract to lease the 100 KC-767A tanker 
aircraft. This oversight has included conducting hearings and 
briefings, requesting and receiving numerous studies, and 
examining extensive quantities of material, which took some 
difficulty to obtain from the Department.
    I want at this time to commend my colleagues and members of 
the committee who have invested a great deal of time, and our 
committee staff as well as personal staff for the hours 
expended.
    Early on this committee expressed concerns regarding this 
lease proposal and consequently as chairman I have the 
authority to accept or reject reprogramming and, in 
consultation with members of the committee, I made the decision 
to reject on July 11, 2003, a reprogramming request by the Air 
Force to initiate a new start on the tanker lease. Our action 
on that reprogramming request stopped the tanker lease 
contract. I thank again members of the committee for the 
support that they gave me in making this decision.
    Numerous investigations have revealed that the problems 
associated with the contract lease represent the most 
significant defense procurement mismanagement in contemporary 
history. The implication of these violations of law and 
regulations go well beyond the tanker lease proposal. It is 
imperative that the Secretary of Defense and the Deputy 
Secretary now move to take necessary actions to hold those 
individuals responsible accountable for their actions, to 
restore necessary checks and balances in the aircraft 
acquisition process, and to instruct all defense officials to 
observe henceforth to the letter the law and regulation 
provided by Congress.
    It was with these concerns in mind that on December 2, 
2003, I first wrote then-Deputy Secretary of Defense Wolfowitz 
to request that the DOD IG conduct a thorough investigation of 
the tanker program. I asked that this inquiry, ``This inquiry 
should examine the actions of all members of the DOD and the 
Department of the Air Force, both military and civilian, top to 
bottom, who participated in structuring and negotiating the 
proposed tanker lease contract which was submitted to Congress 
on July 2003.''
    A year went by and I decided I would write now the 
Secretary of Defense, and I was joined at this time by Senators 
Levin and McCain, and we are here today as a consequence after 
that long period of correspondence to receive the replies.
    Our witnesses today who will give their perspectives on 
this issue are: the DOD IG, Joe Schmitz, and his Deputy, Tom 
Gimble, who I understand was the primary author of this report, 
and I commend both of you on the report, and you will give the 
findings of your report. They will be followed by the 
distinguished Acting Deputy Secretary of Defense, Gordon 
England; Acting Secretary of the Air Force, Mike Dominguez; the 
Chief of Staff of the Air Force, General John Jumper; and Mike 
Wynne, Principal Deputy Under Secretary of Defense for 
Acquisition, Technology, and Logistics.
    I have tried to cut down a very long and well prepared 
opening statement, but we have a lot to cover here.
    I am going to leave it to our witnesses to express their 
own views with regard to the involvement of the various 
committees of Congress other than this committee, although you 
can certainly comment on this committee as well, but I am 
specifically referring to the appropriations actions. But, as 
far as this Senator can determine, the appropriations language 
did not, and I repeat, did not waive standard DOD procurement 
procedures designed to protect the taxpayer. I believe the 
Inspector General concurs in that view. He points out Congress 
could have, but did not, give the Air Force the authority to 
``not follow DOD acquisition directives or comply with the five 
statutory provisions of law, the Federal Acquisition 
Regulation, and the DOD acquisition policy.''
    What is troubling is that it took the uncovering of the 
Darlene Druyun case to formally end the tanker lease contract 
and put any tanker replacement program back into the 
traditional acquisition process. The committee still has 
questions about how any one individual could have amassed so 
much power that she was able to perpetuate such a massive 
amount of fraud against the Federal Government and conduct 
other actions that were not in the best interests of the DOD or 
the American taxpayer.
    Ms. Druyun did not operate in a vacuum. In fact, on the 
tanker program she left the government in November 2002, well 
before the contract negotiations were finished between Boeing 
and the Air Force and well before increasing questions raised 
by independent evaluators about the advisability of the lease 
proposal. We are left to wonder, what happened to the oversight 
and checks and balances in this program? At a minimum, it 
appears that the acquisition chain of the Air Force and perhaps 
the DOD was seriously inadequate.
    It is my hope that with this hearing we can begin the 
process of putting this regrettable chapter in the history of 
the DOD behind us. However, we cannot do that if we do not 
learn from this experience, fix the acquisition process, and 
ensure that issues of individual accountability are squarely 
addressed.
    Speaking for myself, I was intrigued with the observation 
in the Inspector General's report that there has to be a change 
in culture. In my humble judgment, it is going to take a lot 
more than a change in culture to correct this so there not be a 
repetition.
    [The prepared statement of Senator Warner follows:]

               Prepared Statement by Senator John Warner

    This morning the committee meets to receive testimony on the 
``Management Accountability Review of the Boeing KC-767A Tanker 
Program'' conducted by the Department of Defense Inspector General. 
This review was conducted in response to requests that I made, together 
with Senator Levin and Senator McCain.
    Over the past 3 years, the Senate Armed Services Committee, and 
Senator McCain in particular, have invested significant time and 
resources reviewing a number of issues surrounding the Department's 
proposed contract to lease 100 KC-767A tanker aircraft. This oversight 
has included conducting hearings and briefings, requesting and 
receiving numerous studies, and examining over 1.5 million executive 
branch e-mails and documents.
    As a result of this committee's concerns with this tanker lease 
proposal, the committee did not approve a July 11, 2003 reprogramming 
request by the Air Force to initiate a new start for the tanker lease. 
Our action on that reprogramming request stopped the tanker lease 
contract dead in its tracks. Subsequent scrutiny--by this committee and 
others--dealt the lease program as originally formulated, a fatal blow.
    Numerous investigations have revealed that the problems associated 
with the contract to lease 100 KC-767A tanker aircraft represent the 
most significant defense procurement scandal since the III Wind bribery 
and fraud cases of the 1980s. The implications of this scandal go well 
beyond the tanker lease proposal. It is imperative that the Department 
now move to take necessary actions to hold those individuals 
responsible, accountable for their actions and to restore necessary 
checks and balances in the acquisition process. Otherwise, the fallout 
from the Air Force procurement scandal could well have disastrous 
effects on the integrity of the entire acquisition system.
    It was with these concerns in mind that on December 2, 2003, I 
first wrote to then Deputy Secretary Wolfowitz to request that the 
Department of Defense Inspector General conduct a thorough 
investigation of the KC-767A tanker aircraft program. I asked that 
``this inquiry should examine the actions of all members of the 
Department of Defense and the Department of the Air Force, both 
military and civilian, top to bottom, who participated in structuring 
and negotiating the proposed tanker lease contract which was submitted 
to Congress in July 2003.'' After almost a year went by with no action 
taken on my initial request, on November 19, 2004, I was joined by 
Senators Levin and McCain in a letter to Secretary Rumsfeld in which we 
reiterated the need for such an accountability review.
    Quite simply, we wanted to know what happened, who was accountable, 
and what actions must be taken to prevent this situation from happening 
again.
    On June 1, 2005, the Department announced the completion of the 
requested management review that is the subject of today's hearing.
    I welcome today's witnesses. The Department of Defense Inspector 
General, Joe Schmitz and his Deputy, Tom Gimble will begin by outlining 
the findings of their report. We will then hear from: Acting Deputy 
Secretary of Defense Gordon England; Acting Secretary of the Air Force 
Mike Dominguez; Chief of Staff of the Air Force, General John Jumper; 
and Mike Wynne, Principal Deputy Under Secretary of Defense for 
Acquisition, Technology and Logistics who will provide the Department's 
comments on the IG report.
    I look forward to our witnesses views on this report, particularly 
as it addresses individual accountability for management decisions and 
executive oversight. I am also interested in what lessons can be 
learned from the KC-767A tanker aircraft program and what needs to be 
done to restore the integrity of the acquisition system in light of 
recent Air Force acquisition scandals.
    The proposed tanker lease was a departure from the traditional 
acquisition process, and the source of considerable debate within the 
administration and Congress. Legislation in an appropriations bill--
section 8159 of the Department of Defense Appropriations Act of 2002--
in effect ``authorized'' the lease. But a critical point that needs to 
be made is that this appropriations language did not require that the 
Department enter into such a lease.
    The appropriations language as drawn was discretionary, not 
mandatory. The language contained some difficult criteria that had to 
be met before any such lease could be executed--such as the requirement 
for the lease to be an operating lease consistent with the requirements 
contained in OMB Circular A-11. But that requirement did not stop the 
Department from attempting to define what was in effect a long-term 
capital lease as an operating lease.
    As far as I can determine, the appropriations language did not 
waive standard DOD procurement procedures designed to protect the 
taxpayer. As the DOD IG points out, Congress could have, but did not, 
give the Air Force the authority to ``not follow DOD acquisition 
directives or comply with five statutory provisions of law, the Federal 
Acquisition Regulation, and the Department of Defense acquisition 
policy.'' It appears from the IG report that officials in OSD and the 
Air Force used the appropriations language as an excuse to not follow 
the Department's own system of checks and balances. The fact that these 
checks and balances were routinely overruled during this process bodes 
ill for the entire acquisition process. There is no excuse for such 
behavior. Individuals who engaged in such behavior must be held 
accountable.
    What is troubling is that it took the uncovering of the Darleen 
Druyun scandal to formally end the tanker lease contract and put any 
tanker replacement program back into the traditional acquisition 
process. The committee still has questions about how anyone individual 
could have amassed so much power that she was able to perpetuate such a 
massive fraud against the Federal Government and conduct other actions 
that were not in the best interest of the Department of Defense or the 
American taxpayer.
    But, Darleen Druyun did not operate in a vacuum. In fact, on the 
tanker program she left the government in November 2002, well before 
contract negotiations were finished between Boeing and the Air Force, 
and well before increasing questions were raised by independent 
evaluators about the advisability of the lease proposal. We are left to 
wonder what happened to the oversight and checks and balances on this 
program. At a minimum it appears that the acquisition chain of the Air 
Force, and perhaps DOD, was woefully inadequate.
    It is my hope that with this hearing we can begin the process of 
putting this chapter behind us. However, we can not do that if we do 
not learn from this experience, fix the acquisition process, and ensure 
that issues of individual accountability are squarely addressed.

    Chairman Warner. Senator Levin.

                STATEMENT OF SENATOR CARL LEVIN

    Senator Levin. Mr. Chairman, thank you. First let me start 
by thanking you, Mr. Chairman, for your leadership in this 
matter and thanking Senator McCain for the critical role that 
he has played in bringing to light the problems with the Air 
Force in their tanker lease program, and we will be hearing 
about those problems today. But, for Senator McCain's tenacity, 
these problems probably would not have come to light.
    The Inspector General's Tanker Accountability Report 
identifies serious deficiencies in the tanker lease program. It 
is no small matter that the report finds a number of senior 
Office of the Secretary of Defense (OSD) and Air Force 
officials responsible for actions that are inconsistent with 
the requirements of law and regulation. Unfortunately, Mr. 
Schmitz, I believe that critical gaps in this report have 
placed a cloud over it, indeed over the Inspector General's 
office.
    In my view, the report fails to discuss critical issues, 
omits critical material, and redacts key portions of the report 
in a manner that raises serious questions about whether this 
report meets applicable requirements for the independence of 
inspectors general. In particular, in a January 19, 2005, 
letter to the Inspector General the former Secretary of the Air 
Force defended his conduct of the tanker lease program in part 
by stating that the White House, Office of Management and 
Budget (OMB), and OSD officials played a significant role in 
moving the program forward and that it is therefore unfair to 
judge the actions of Air Force officials without reference to 
the actions of White House, OMB, and Office of Secretary of 
Defense officials.
    The letter reads in part as follows. This is a letter now 
from the former Secretary of the Air Force: ``Limiting any 
review to the Air Force and not OSD''--the Office of the 
Secretary of Defense--``only contributes to the myth that this, 
the tanker lease, was exclusively an Air Force proposal. It was 
not''--and he emphasized the word ``not''. ``It was a proposal 
of the DOD and the administration, and it consistently was 
supported by three of the four congressional defense 
committees.''
    And he goes on: ``Indeed it would be difficult to preserve 
the credibility of the Inspector General process or the 
investigation results if the investigation is arbitrarily 
limited to Air Force personnel or Air Force processes, or even 
DOD personnel and processes.''
    He continues: ``Members and committees of Congress, as well 
as the White House, the Office of Management and Budget in 
particular, were involved from the earliest days and frequently 
along the way. You simply cannot gain a proper perspective of 
how good and decent people tried to do the right thing by our 
warfighters and the American taxpayer without looking at every 
aspect of how this program developed and evolved. If you are 
going to undertake this investigation, then I believe you 
should in all fairness obtain the full cooperation of the 
Secretary of Defense, the White House, and congressional 
leadership for your inquiry.''
    Mr. Schmitz, the Tanker Accountability Report does not 
contain any response to that point. If in fact you inquired 
about the role played by the Secretary and Deputy Secretary of 
Defense and senior White House officials in the tanker lease 
program, that information is not reflected in the report. The 
extent to which the Secretary, Deputy Secretary, or senior 
White House officials authorized, approved, encouraged, or 
directed the actions of officials who are named in the report 
has a direct bearing on the responsibility of those officials 
and the omission of this information makes the report so 
incomplete as to be misleading.
    Our ability to fully and fairly assess the responsibility 
of senior OSD officials is further undermined by the Inspector 
General's decision to redact references to the role of the 
White House out of the report. In the absence of this material, 
it is not possible for us to assess whether the responsibility 
of the officials named in the report is mitigated by the 
actions of other, unnamed officials who are their superiors. 
These redactions are made not only in e-mails between DOD 
officials, but also in Secretary Roche's letter, in Boeing 
emails, and even in the text of the report itself. There is no 
legal authority that would conceivably justify the redaction of 
this material from the report.
    Equally disturbing is the fact that these omissions and 
redactions in the Inspector General's report appear to have 
been undertaken in consultation with staff in the Office of 
White House Counsel. In an April 29, 2005, letter to the 
committee, the Inspector General stated that in the report 
footnotes some, but not all, of the redactions, by the way, 
with the statement that the material has been omitted, 
``because staff of the White House Counsel has indicated its 
intent to invoke an agreement between Members of Congress and 
the White House.''
    I am told, Mr. Inspector General, that you conducted some 2 
weeks of negotiations with the White House over these 
redactions and omissions.
    Well, the quality standards for Federal offices of 
inspector general require full independence, unbiased and free 
from outside interference reports. Those standards state that 
the inspectors general ``report both to the head of their 
respective agencies and to Congress.'' They also provide that 
``The Inspector General and the Office of the Inspector General 
(OIG) staff must be free both in fact and appearance from 
personal, external, and organizational impairments to 
independence. The Inspector General and the OIG staff should 
avoid situations that could lead reasonable third parties with 
knowledge of the relevant facts and circumstances to conclude 
that the OIG is not able to maintain independence in conducting 
its work.''
    The standards specifically enjoin inspectors general to 
avoid, ``external interference or influence that could 
improperly or imprudently limit or modify the scope of OIG work 
or threaten to do so.''
    Now, regardless of any agreement that may have been reached 
between the White House and some Members of Congress relative 
to the handling of raw documents that were provided to them or 
to a congressional committee--and there was such an agreement 
and that involved the obtaining of documents from the executive 
branch to Members of Congress and to this committee. That is 
one matter which is a separate matter from your report, Mr. 
Inspector General. Your report is governed by the requirements 
of the Inspector General Act and the standards for Federal 
offices of Inspector General. You are required by these laws 
and standards to report your findings to the entire Congress 
independent of interference from any outside party. You are not 
and cannot be absolved of your duties as an Inspector General 
by an agreement between Members of Congress and the White House 
relative to material submitted by the executive branch to some 
Members of Congress or to a congressional committee.
    You are required to issue a thorough and independent 
report, and it appears to me that you have done neither.
    Again, I want to thank our chairman for his determined 
leadership in this matter, and particularly I want to focus on 
Senator McCain's role, again thanking him for his determination 
to bring this entire matter to light.
    Chairman Warner. Senator McCain, I join my colleague and 
indeed all members of the committee in thanking you for the 
extraordinary amount of wisdom and courage that you have 
applied to trying to get to the bottom of this case. Much 
remains to be done.
    Senator McCain.
    Senator McCain. Thank you very much, Mr. Chairman, and I 
want to thank you and Senator Levin for your leadership and 
your steadfast efforts to resolve this issue. I hope at least 
one aspect of this issue can be resolved today as we hear from 
the witnesses, so that we can move forward and address the 
problems that have been brought to light. But, this 
investigation I think should be completed because it makes us 
all very unhappy and uncomfortable to see this kind of 
wrongdoing that has been exposed here. So it is not good for 
morale and it is not good for the military. These are good and 
decent men and women who serve the United States of America and 
I hope that we can move forward.
    I would like to just make a couple of very quick points, 
Mr. Chairman. One is that it is true that this issue was 
initiated in the Congress of the United States, not by the 
Pentagon. Now, there was a very close relationship here. On 
September 25, 2001, there was a meeting of Boeing, Air Force 
officials, and the staff director of the Senate Appropriations 
Committee. It is a fact that this was added as a line item in 
the appropriations bill without a hearing, without scrutiny, 
without any congressional oversight, and was approved by three 
of the four oversight committees. So, there is a failure of 
oversight responsibility by three different congressional 
committees.
    It is disturbing to find so much uniformed involvement in 
this issue. Mr. Chairman, I was brought up that people in 
uniform stayed out of politics and stayed out of policy 
matters, that was a mission to be carried by the civilian 
leadership. When I see some of the things that were said and 
done by uniformed personnel, it is extremely disturbing to me 
as a person who believes in that separation between uniformed 
and civilian authorities.
    I would like to say a word about Mr. Schmitz, who I think 
has steadfastly done an outstanding job, not only on this 
occasion but on other occasions. I appreciate the courage he 
has shown. On one occasion he was called in to then-Secretary 
Roche's office and told to back off the investigation of Ms. 
Druyun, stating, among other things, do you know you can be 
sued for slander? Intense pressures were put on Mr. Schmitz not 
to conduct a thorough and complete investigation. I thank you, 
Mr. Schmitz.
    Finally, Mr. Chairman, we do have a procurement problem. We 
do have to fix this system. I know that Secretary Wynne and 
Secretary England are going to address that in their testimony 
today. In the past couple of months we have had to take a C-
130J that was being designated as a commercial procurement 
item, which bore no relationship to reality. The Army's Future 
Combat System, a $113 billion program, was designated as a 
procurement item which was specifically only for small 
contractors who wanted to get into the defense business.
    Why were both of these designated this way? Because then 
they avoided all of the checks and balances and all of the 
requirements a normal defense contract would undergo. By the 
way, it is not an accident that both of those programs have had 
extraordinary and incredible cost overruns associated with 
them, and we cannot even find out from the contractor of the C-
130J the cost data because it is under a ``commercial 
contract.''
    So, Mr. Chairman, what this means to me is that we have a 
serious problem with the procurement system in the Pentagon 
today and all of us on both sides of the river need to work to 
make sure that we get the best value for the taxpayers' dollar.
    Again, I thank you.
    I thank Secretary England for being here, Secretary Wynne, 
Mr. Schmitz, Mr. Gimble, Secretary Dominguez, and General 
Jumper. I thank you for being here today. I know this is not a 
pleasant experience for any of us, but I hope we can now with 
this hearing get this issue behind us.
    Thank you, Mr. Chairman.
    Chairman Warner. Thank you, Senator McCain. I associate 
myself with your observation with regard to the men and women 
in uniform. Having served in the building myself as Secretary 
of the Navy for a number of years, I know that it is the 
responsibility of the civilian-military team, particularly the 
civilian side, to provide in a timely way the best possible 
equipment for the men and women of our uniformed services. We 
have got to make certain that this procurement process is 
reconstituted and up and running to serve that end.
    Also, Senator McCain, the only word you left out that I 
would like to add, and that is that the taxpayer is bearing the 
brunt of this problem.
    Senator Collins, would you like to say anything?
    Senator Collins. No.
    Chairman Warner. Senator Thune?
    Senator Thune. No.
    Chairman Warner. I want to first point out that we, the 
committee, consistent with practices going back many years of 
this committee and I think other committees of Congress, when 
we receive Inspector General reports we treat them differently 
than other material. There are certain portions of the report 
which have been redacted for the purpose of this hearing, but 
we will at the conclusion of this open hearing proceed to Room 
222 in this building, the Armed Services Committee hearing 
room, to resume in executive session, at which time, Mr. 
Schmitz and Mr. Gimble, you are invited, and other witnesses. 
We hope that you can find the time to join us down there 
likewise.
    If there are no other comments by members here, we will 
proceed to receive the Inspector General's report.
    I would like to remind everyone that in this room the 
acoustics leave a little bit to be desired, and you will have 
to use those microphones, speaking directly into them.
    Mr. Schmitz.

    STATEMENT OF HON. JOSEPH E. SCHMITZ, INSPECTOR GENERAL, 
DEPARTMENT OF DEFENSE, ACCOMPANIED BY: THOMAS F. GIMBLE, DEPUTY 
            INSPECTOR GENERAL, DEPARTMENT OF DEFENSE

    Mr. Schmitz. Thank you, Mr. Chairman. Senator Levin, 
Senator McCain, Senator Collins, Senator Thune: I appreciate 
the opportunity to appear this morning and to answer your 
questions about our recent report, ``Management Accountability 
Review of the KC-767A Tanker Program.'' As the publicly 
releasable version of our report has already been submitted and 
speaks for itself, I would ask that it be admitted as part of 
the record.
    Chairman Warner. Without objection.
    [The information referred to follows:] 

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    Mr. Schmitz. This morning I would like to introduce the 
report's primary author, to my left, Deputy Inspector General 
Thomas Gimble; and I would like to very briefly review the 
report's genesis, its scope and methodology, and its bottom-
line results. Of course, Mr. Gimble and I are prepared to 
answer your questions.
    On December 2, 2003, as you said, Mr. Chairman, you sent a 
letter to the Deputy Secretary of Defense in which you 
suggested that I conduct an independent assessment that would 
``examine the actions of all members of the DOD and the 
Department of the Air Force, both military and civilian, top to 
bottom, who participated in structuring and negotiating the 
proposed tanker lease contract.''
    Subsequently, on November 19, 2004, you and two other 
members of the committee, Senator Levin and Senator McCain, 
sent another letter, as you said, this time addressed to 
Secretary of Defense Donald Rumsfeld, reiterating that I should 
conduct an assessment of accountability along the same lines of 
your prior letter, and requesting that my assessment determine 
``what happened, who is accountable, and what actions must be 
taken to prevent this situation from happening again.''
    To accomplish this objective, our independent review team 
analyzed selected e-mails and memoranda from the DOD, the Air 
Force, and the Boeing Company, and interviewed 88 individuals 
from the Departments of Defense and Air Force who had been 
involved in the Boeing KC-767A Tanker Program to determine what 
happened and who was accountable during the structuring and 
negotiating of the proposed lease contract.
    Our review team did not interview White House officials, 
Members of Congress, or officials of the Boeing Company because 
the objective of the review focused on the accountability of 
members of the Office of the Secretary of Defense and of the 
Air Force who were involved in the Boeing Tanker Program.
    What happened? Although Boeing had submitted a proposal in 
February 2001 to the Chief of Staff of the Air Force to convert 
36 Boeing 767 commercial aircraft into tanker aircraft, it was 
not until after September 11, 2001, that Air Force officials 
began meeting with Boeing Company executives to enter into an 
agreement to lease 100 Boeing KC-767A tanker aircraft. The 
proposed lease agreement generally had support of White House 
officials, Members of Congress, senior officials of both the 
DOD and Air Force, and of the Boeing Company. At that time, 
that is before and immediately after September 11, 2001, the 
Air Force had neither identified nor funded an urgent 
requirement for the replacement of its existing fleet of 
tankers.
    The Department of Defense Appropriations Act for Fiscal 
Year 2002, enacted in January 2002, included section 8159, 
titled ``Multi-Year Aircraft Lease Pilot Program,'' which 
section authorized the Air Force to make payments on a multi-
year pilot program ``to lease not more than a total of 100 
Boeing 767 aircraft.'' That section also provided that the term 
of any individual lease agreement shall not exceed 10 years.
    Without conducting an analysis of alternatives, the Air 
Force used the provisions of section 8159 to justify an 
informal acquisition strategy, the focus and goal of which was 
expeditiously to lease 100 KC-767A tanker aircraft from Boeing 
through a business trust. By not following established 
acquisition procedures contained in DOD directives, the DOD and 
Air Force officials identified in our report neither applied 
best business practices nor adhered to prudent acquisition 
procedures, and failed to comply with five statutory provisions 
relating to commercial items, testing, cost-plus-a-percentage-
of-cost system of contracting, and leases to satisfy the 
warfighter needs.
    Who was accountable? Our report identifies the DOD and Air 
Force officials who were responsible for failing to ensure the 
prescribed acquisition rules and procedures were followed. In 
summary, a number of senior DOD and Air Force officials acted 
as if section 8159 of the Fiscal Year 2002 Appropriations Act 
had waived various legal requirements, statutory checks and 
balances, that that section had not waived.
    Moreover, as our executive summary concludes, the system of 
management internal controls within the Air Force and the 
Office of Secretary of Defense was either not in place or not 
effective, because the existing acquisitions procedures were 
not followed in the proposed lease of the Boeing KC-767A tanker 
aircraft.
    What actions must be taken to prevent this situation from 
happening again? We have four recommendations in our report. 
Briefly summarizing them: The Department must change the 
cultural environment in its acquisition community to ensure 
that the proper internal control environment is reestablished 
and followed for major weapon system acquisitions.
    Number two, the Secretary of Defense should reemphasize the 
need to conduct an analysis of alternatives for all major 
systems before major milestone decision points.
    Number three, DOD 5000 series guidance should emphasize 
that leasing is merely a method for financing the acquisition 
of a program and that lease programs should be treated the same 
as any other acquisition programs of like cost.
    Finally, DOD 5000 series guidance should require, at a 
minimum, that the decision to enter into a contract to lease a 
major system must be subject to the results of a Defense 
Acquisition Board or a System Acquisition Review Council review 
as applicable.
    This concludes my oral statement. Mr. Gimble and I would be 
happy to answer any questions you have.
    Chairman Warner. I judge Mr. Gimble at this time will not 
make an independent opening statement; is that correct?
    Mr. Gimble. No, sir.
    Chairman Warner. Thank you.
    Mr. Secretary.

STATEMENT OF HON. GORDON R. ENGLAND, ACTING DEPUTY SECRETARY OF 
                            DEFENSE

    Mr. England. Mr. Chairman, Senator Levin, members of the 
committee: It is always a pleasure to be with you. I do 
appreciate the great work you do to provide for our men and 
women in uniform, to get them the equipment they need to 
protect our Nation. It is your oversight role, however, that is 
especially critical in ensuring the continued confidence of the 
American people, and I thank you.
    During my last appearance before this committee when 
seeking confirmation as the Deputy Secretary of Defense, I 
commented then that ethical leadership is especially critical 
in the DOD because trust and confidence define the strength of 
the link between a Nation and her citizens and her military. 
While legal adherence is always necessary, ethical behavior is 
absolutely essential, and actions by the DOD must always be 
above reproach. As this committee has properly emphasized, when 
individuals do not meet the standards expected by the American 
people they need to be held accountable.
    It is vitally important that the Department have in place 
the effective processes with appropriate checks and balances to 
ensure that America's warfighters receive the equipment they 
need and when they need it, while at all times providing 
transparency and the greatest value possible for every single 
taxpayer dollar spent. We owe that to our troops who serve us 
so bravely and we owe it to the American people who support us 
so generously.
    Regarding the Inspector General's accountability review of 
the Boeing Tanker Program, many recommendations for corrective 
action and for better checks and balances in acquisition have 
been assembled and proposed, instigated by this committee's 
review. Multiple organizations and interested groups, many 
external to the DOD, have applied their expertise, talents, and 
energies in evaluating the tanker recapitalization issue. As a 
result of these recommendations, many acquisition changes have 
already been instituted within the DOD.
    We have initiated a three-pronged approach: first, 
restoring primacy of the acquisition process through 
cancellation of the leasing panel, conformance to the Defense 
Federal Acquisition Regulation Supplement (DFARS) and 5000 
series, and implementation of the Defense Acquisition 
Guidebook; second, restraint and internal controls to ensure 
conformity to process and integrity; and most importantly, 
restoring primacy of integrity in acquisition.
    Specifically, we have changed DOD Instruction 5000.2 and 
the Defense Acquisition Guidebook, we have changed the FARS and 
DFARS to clarify the contracting officer authority, we have 
restructured the Defense Acquisition University curriculum, we 
have rewritten the Commercial Item Handbook, and many, many 
other changes have already been incorporated.
    I commend the efforts of everyone who has been involved in 
this endeavor. In my judgment, all these changes and proposals 
will be helpful as we go forward.
    Now, that said, on the other hand, and as we discussed 
during my confirmation hearing, the entire acquisition 
structure within the DOD needs to be reexamined and in great 
detail. As highlighted by Senator Lieberman during that 
hearing, there is a growing and deep concern about the 
acquisition process within the DOD here in this committee and I 
share that concern with you.
    While we have recently incorporated many individual 
corrective actions in our acquisition processes, as I have 
noted, the final answer to past problems may lie in a complete 
restructuring of the way the Department accomplishes 
acquisition for all of its goods and services. Senator McCain 
at our earlier hearing stated that we need a comprehensive 
study even going back and looking at the premises of Goldwater-
Nichols, and we will do that and we have started that effort. I 
agree with that recommendation.
    I want to assure this committee that we in DOD value our 
relationship with Congress and with this committee and we will 
consult with you and we will seek your advice and counsel, 
including enabling legislation as appropriate, as we go 
forward. This committee and the DOD share a common goal and 
that is to maintain the trust and the confidence of our 
citizens while protecting and defending this great Nation. Know 
that you have my personal commitment to manage the Department 
ethically and above reproach, to be forthright, honest, and 
direct with everyone and in every circumstance, and to expect 
the same from every DOD employee.
    I will work closely with each of you to restore and retain 
confidence, effectiveness, and efficiency in the DOD 
acquisition process, and I thank you for your continued 
support.
    [The prepared statement of Mr. England follows:]

              Prepared Statement by Hon. Gordon R. England

    Chairman Warner, Senator Levin, members of the committee, thank you 
for the opportunity to appear before you today. This is a committee 
that I greatly admire, with members whom I have come to know and to 
greatly respect after 4 years in Washington. I also thank the committee 
for helping to provide our magnificent men and women in uniform with 
the equipment they need to protect and defend our great Nation. It is 
your oversight role that is critical in ensuring the continued 
confidence of the American people.
    During my last appearance before this committee, when seeking 
confirmation as the Deputy Secretary of Defense, I commented that 
ethical leadership is especially critical in the DOD because trust and 
confidence define the strength of the link between a nation and her 
citizens and her military. While legal adherence is always necessary, 
ethical behavior is absolutely essential. Actions by the DOD must 
always be above reproach and, as this committee has properly 
emphasized, when individuals do not meet the standards expected by the 
American people, they need to be held accountable.
    It is vitally important that the Department have in place the 
effective processes with appropriate checks and balances to ensure that 
America's war fighters receive the equipment they need, when they need 
it, while at all times providing transparency and the greatest value 
possible for every single taxpayer dollar spent. We owe that to our 
troops who serve us so bravely, and we owe it to the American people 
who have entrusted us with this important task and who support us so 
generously.
    Regarding the Inspector General's Accountability Review of the 
Boeing Tanker Program, many recommendations for corrective action and 
for better checks and balances in acquisition have been assembled and 
proposed. Multiple organizations and interested groups including the 
Inspector General, the Defense Science Board, the Defense Acquisition 
University, the Industrial College of the Armed Forces, the Government 
Accountability Office, studies internal to the Department of Defense 
and others have applied their expertise, talents and energies in 
evaluating the Tanker Recapitalization issue.
    As a result of these recommendations, many changes have already 
been instituted within the Department of Defense. We have initiated a 
three-pronged approach:

         Restore primacy of the acquisition process through 
        cancellation of the Leasing Panel, mandate conformance to the 
        Defense Federal Acquisition Regulation (DFAR) and 5000 Series 
        and implementation of the Defense Acquisition Guidebook;
         Strengthen internal controls to assure conformity to 
        the approved process;
         Finally, and most importantly, restore primacy of 
        Integrity in Acquisition.

    Specifically, the Department of Defense has changed DOD Instruction 
5000.2 and the Defense Acquisition Guidebook, changed Federal 
Acquisition Regulations (FARs) and DFARS to clarify the contracting 
officer authority, restructured the Defense Acquisition University 
curriculum, and has rewritten the Commercial Item Handbook and many 
others.
    I commend the efforts of everyone involved in this endeavor. In my 
judgment, all of these changes and proposals will be helpful as we go 
forward.
    On the other hand, as we discussed during my confirmation hearing, 
the entire acquisition structure within the Department of Defense needs 
to be re-examined in great detail. As highlighted by Senator Lieberman 
during that hearing, there is a clearly growing and deep concern about 
the acquisition process within the Department of Defense in this 
committee, and I share that concern. In my judgment, no single proposal 
that I am aware of--no ``tweak,'' no ``silver bullet''--should 
substitute for a comprehensive, end-to-end review and analysis of this 
extremely complex acquisition system. In order to meet our dual 
responsibilities of providing our fighting men and women with the very 
best they require and satisfying our charge as trusted stewards of the 
taxpayer, we can do no less.
    While we have recently incorporated many individual corrective 
actions in our acquisition processes, the final answer to past problems 
may lie in a complete restructuring of the way the Department 
accomplishes acquisition for all of its goods and services. Senator 
McCain earlier stated this needs to be a comprehensive study, even 
going back and looking at the premises of Goldwater-Nichols. We will do 
that. We have started this effort.
    I want to assure this committee that we in DOD value our 
relationship with Congress and with this committee, and we will consult 
with you and will seek your advice and counsel, including enabling 
legislation, as we go forward. This committee and the Department of 
Defense share a common goal, and that is to maintain the confidence and 
trust of our citizens while protecting and defending this great Nation.
    Know that you have my personal commitment to manage the Department 
ethically and above reproach, to be forthright, honest and direct with 
everyone and in every circumstance and to expect the same from every 
DOD employee. I will work closely with you to restore and retain 
confidence, effectiveness and efficiency in the DOD acquisition 
process. Thank you for your support.

    Chairman Warner. Thank you, Mr. Secretary.
    The Acting Secretary of the Air Force, Mr. Dominguez.

STATEMENT OF HON. MICHAEL L. DOMINGUEZ, ACTING SECRETARY OF THE 
                           AIR FORCE

    Mr. Dominguez. Thank you, Mr. Chairman. I want to take this 
opportunity, on behalf of the men and women of the United 
States Air Force, to apologize to the committee and in 
particular to Senator McCain for the unprofessional nature of 
many of our e-mails that are published in the DOD Inspector 
General's report. The tone in those e-mails was certainly 
unwarranted by the motivation of Senator McCain and his staff 
and certainly unwarranted by virtue of his long service to this 
Nation. So, I am deeply sorry for that violation of the 
standards of conduct and professionalism that we owe to this 
committee. It will not happen again, sir.
    Chairman Warner. Do you have any further comment on behalf 
of the Department? Now, I recognize that you were not, I guess, 
in the direct chain of these issues that are before us today; 
would that be correct, in your responsibilities?
    Mr. Dominguez. Excuse me, sir? I did not hear the question.
    Chairman Warner. Well, you do not wish to add any further 
comments with regard to the report at this time?
    Mr. Dominguez. No, sir. I will stand by for your questions, 
sir.
    Chairman Warner. General Jumper.

STATEMENT OF GEN. JOHN P. JUMPER, USAF, CHIEF OF STAFF, UNITED 
                        STATES AIR FORCE

    General Jumper. Sir, let me echo the statement of the 
Secretary of the Air Force in offering my apology to the 
members of the committee and especially to Senator McCain, 
especially for the tone of some of the e-mails that were 
reported in the DOD Inspector General's report. These comments 
were unprofessional and not worthy of a great Air Force that 
has members out there performing, and I require a higher 
standard of them every day than we demonstrated ourselves in 
that report. So, I apologize, sir, and I look forward to your 
questions.
    Chairman Warner. Well, let us turn to questions at this 
time. We will go a 6-minute round and we will take as many 
rounds as required.
    Secretary England, you have had an opportunity to review 
the report of Mr. Schmitz and his colleagues. Do you agree that 
there were violations of law performed by members of the DOD?
    Mr. England. Certainly, Senator, there were violations of 
law by Darlene Druyun. There is no question about that, and of 
course she has already had her case held. Beyond that, there 
are certainly cases of what would appear to be very poor 
judgment. I certainly cannot say there has been anyone breaking 
the law. I mean, there have certainly been some judgments that 
can be questioned along the way, Senator, but I certainly 
cannot speak in terms of people breaking the law other than 
Darlene Druyun herself and obviously some people with the 
Boeing Corporation.
    Chairman Warner. Mr. Schmitz, do you feel that there were 
any in the Department that violated the law, other than Ms. 
Druyun. You will need that microphone.
    Mr. Schmitz. Mr. Chairman, that is a very good question. 
Mr. Chairman, it is important to note that we conducted an 
audit before the lease was signed, in which we identified five 
specific statutes that would be violated were the contract to 
be signed. But, thanks in part, major part, to this committee, 
the contract was never signed. So, the major legal violations 
that we identified in our earlier audit and repeated in this 
report today, those violations did not occur.
    Chairman Warner. Excuse me? Did not occur?
    Mr. Schmitz. They did not occur because the contract was 
never signed. Our recommendation back in our earlier audit was 
before signing any contract that the Department comply with 
these five legal requirements.
    Now, we have I believe 13 other contracts that we are now 
looking at--we are conducting preliminary reviews--that were 
associated with Darleen Druyun. Secretary Wynne referred, I 
believe, eight of those to us and we have identified another 
five. We are looking at those to answer your question, sir.
    So, in fine Naval Academy tradition, I will tell you, 
``I'll find out, sir.'' We are still looking and we will report 
back if we find violations of law.
    [The information referred to follows:]

    We are still reviewing procurement actions and will report back to 
the committee if any violations of the law are found.

    Chairman Warner. Let me return to you, Secretary England. 
Given what Mr. Schmitz said, that there was a progression of 
actions which, had the signatures been affixed, would then have 
consummated a violation of law----
    Mr. England. I am sorry, sir?
    Chairman Warner. If I understand the Inspector General, 
there were a progression of actions taken by various officials 
other than Ms. Druyun that, had a signature been affixed to 
contract, would have then constituted a violation of law. Do 
you concur in that observation?
    Mr. England. Senator, my feeling is if this had proceeded 
there still would have been checks and balances in the system. 
This would not have gone strictly to a contract. There are 
still systems in the DOD before contracts are signed. So I 
would not, frankly, leap to the conclusion that it would have 
just stayed on its current path. There is still a leap before 
contracts are signed and other people would have been involved 
at that point.
    I do not know if you can make that leap. Perhaps that would 
have happened. My own feeling is you would have had other 
people involved before contracts were actually signed, Senator.
    Chairman Warner. Well, I will return to that at another 
time.
    Given that there was at least in one instance, as you say, 
a violation of law, what is it that you and Secretary Rumsfeld 
are going to take by way of steps to impress upon all employees 
of the DOD to adhere carefully to the law of the land?
    Mr. England. Well, as I commented, Mr. Chairman, in my 
opening statement, obviously ethical behavior is very important 
to the DOD. You know my own personal standards in that regard 
and I expect that everyone in the DOD will act not only legally 
but ethically in every single action that they deal with. So, 
we will set very high standards. We do have very high standards 
in the DOD, but we will continuously emphasize that.
    It is critically important. As I commented before, this is 
question of faith between the American people and her military, 
and it is very important that we not weaken those bonds. 
Everything we do in the DOD needs to be completely above 
reproach. It needs to be very transparent.
    My comment to you, to be forthright, honest, and direct 
with everyone in every circumstance, is the way, frankly, I 
have conducted myself for 4 years and I expect everyone in the 
DOD will conduct themselves that way. This is a question about 
ethical behavior and you have my full commitment that that is 
the way we will proceed going forward, sir.
    Chairman Warner. What are the procedures by which you and 
the Secretary will address the issue of accountability 
regarding those persons who have departed the DOD who are 
implicated in this matter?
    Mr. England. Senator, I have to tell you I am not that 
familiar with all the events that transpired in this regard. 
During most of this period I was in the Department of Homeland 
Security. I have read the Inspector General's report, but I 
also know that there are lots of things that do not show up in 
the Inspector General's report in conversations and rationales, 
and I believe in most cases people try to do what is right and 
best for America and they may exercise bad judgment. It is 
going to be very difficult, frankly, for me to go back and try 
to understand this in great detail.
    Frankly, my emphasis will be to go forward, to make sure 
that we run this Department effectively and efficiently and 
above reproach. I am frankly going to emphasize on the future 
and not the past.
    Chairman Warner. Well, I fully appreciate that there have 
been gaps in your distinguished career. We are fortunate you 
offered to return now. Therefore, I presume it would largely be 
left to Secretary Rumsfeld; and have you had an opportunity to 
consult with him with regard to this Inspector General's report 
and what actions and procedures he may wish to take?
    Mr. England. No, sir, I have not had those conversations.
    Chairman Warner. Now, Mr. Schmitz, we will go into 
executive session, but I think it is important here in open 
session to explore the scope and depth of your investigation 
and in the course of which, were there facts which gave rise in 
any way to a decision by you or others in the Department that 
perhaps some of the actions taken by individuals should be 
examined by the United States Attorney because they give rise 
to possible criminal violations?
    We need not mention names at this point, but I just want to 
know, in the course of the investigation did facts come to your 
attention which constituted a basis for this matter to be 
referred to the United States Attorney?
    Mr. Schmitz. Aside from Darleen Druyun, of course?
    Chairman Warner. That is correct.
    Mr. Schmitz. There is at least one matter, and you and 
Senator Levin referred it to me, which we are looking at which 
may in fact lead to that. But, it is an active matter and I 
should not go into it any further here at this point.
    Chairman Warner. Thank you.
    My time is up. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    The report states that the DOD and the Air Force failed to 
follow applicable acquisition procedures. Clearly, I agree with 
that conclusion. I think we all would. It then goes on to name 
a number of officials who are determined to be responsible for 
the failure. I do have some questions about why some of those 
are named.
    For instance, one of the officials is Mike Wynne, who was 
then the acting Under Secretary of Defense for Acquisition, 
Technology, and Logistics. This is what the report says with 
regard to Mr. Wynne: ``Michael Wynne, Acting Under Secretary of 
Defense for Acquisition, was accountable for tacitly accepting 
Mr. Aldridge's decision to go forward with the Boeing KC tanker 
aircraft lease by sending a memorandum discussing the decision 
to an OMB official on May 28, 2003. In the memorandum, Mr. 
Wynne stated that, `After a comprehensive and deliberative 
review by the Leasing Review Panel, the Secretary of Defense 
has approved the Air Force's proposal to enter into a multi-
year pilot program for leasing general purpose Boeing 767 
aircraft.' The memorandum was seeking approval of the proposed 
lease from the Office of Management and Budget (OMB).''
    Now, Mr. Schmitz, this is my question. How do you hold Mr. 
Wynne responsible for misconduct on the basis of a memorandum 
in which he simply transmits to the OMB a determination by the 
Secretary of Defense?
    Mr. Schmitz. Senator, we have identified Secretary Wynne as 
one of those individuals in the chain of events that we 
describe in our report in depth. In our executive summary we 
have also separated Secretary Wynne out from some of the other 
actors because, frankly, his role was less direct. I would say, 
in summary, Mr. Wynne came in after his predecessor. He could 
have reversed decisions of his predecessor. He could have, as 
you say, not passed on others' decisions to OMB. But he did, 
and we think that ultimately his accountability should be 
judged on the facts and circumstances of what he did, when he 
did it.
    Senator Levin. Well, is not the issue here the decision of 
the Secretary, which he just simply forwarded to OMB?
    Mr. Schmitz. It was also the decision of his predecessor, 
Secretary Aldridge.
    Senator Levin. Was he not also, though, following a 
decision of the Secretary of Defense? How can you assess 
responsibility without seeing whether or not the person that 
you are saying is responsible is simply executing the order of 
a superior? How do you make that judgment?
    Mr. Schmitz. Let me defer to my deputy----
    Senator Levin. I do not have time for a long reference. 
Just, can you not answer that question?
    Mr. Schmitz. Generally speaking, Senator, I think what you 
are getting into is the distinction between accountability and 
culpability. My report is a factual report and I give that to 
the Secretary of Defense and he puts my factual findings in 
context of all the other things that he is aware of, including 
the circumstances you are describing now, and then it is up to 
him to determine who is culpable and how to act on it.
    Senator Levin. On page 147 of your report you have a letter 
from the Secretary of the Air Force, Jim Roche, describing 
events leading up to the Secretary of Defense's May 2003 
approval of the lease. It is redacted. Much of it is redacted. 
Much key material is redacted. In subsection C on page 147: 
``Throughout the spring of 2003, BLANK took the lead for the 
White House in developing the administration's tanker 
proposal.'' ``The administration's tanker proposal,'' ``BLANK 
took the lead.''
    Subsection D: ``In this period, the Boeing Company met with 
and discussed the tanker lease with BLANK on at least one 
occasion.''
    Subsection E: ``Mr. Aldridge and Deputy Secretary of 
Defense Wolfowitz negotiated the approval of the proposal with 
BLANK based largely on what the administration believed would 
be an acceptable price for the tankers.''
    First of all, are there any inaccuracies in those 
descriptions that I just read? Did you find any of those 
inaccurate?
    Mr. Schmitz. In Secretary Roche's letter?
    Senator Levin. In C, D, and E.
    Mr. Schmitz. Sir, I am not in a position to assess the 
accuracy of Secretary Roche's letter. I am repeating it 
verbatim here.
    Senator Levin. So, you have not reached a conclusion as to 
whether or not in the spring of 2003 someone, ``BLANK,'' took 
the lead for the White House in developing the administration's 
tanker proposal? You have not reached a conclusion as to 
whether that is accurate or not?
    Mr. Schmitz. Sir, that was not within the scope of what you 
requested in your letter, nor is it within the scope of the 
Inspector General Act.
    Senator Levin. When you hold people responsible for 
implementing decisions, you ought to know whether in fact they 
are implementing other decisions or their own.
    Mr. Schmitz. Of course, of course.
    Senator Levin. You did not do that. You did not do that. 
You do not know whether they were implementing their own 
decisions or other decisions. Is that correct?
    Mr. Schmitz. Sir, we have reported factually what we are 
aware of based on all the data we have, and the questions you 
are asking are legitimate questions that I think the Secretary 
should ask himself when he is making an ultimate determination 
on our factual findings.
    Senator Levin. Do you think it makes a difference as to 
whether decisions which are being implemented are the decisions 
of the people that you hold responsible or their superiors' 
decisions? Do you think that is relevant?
    Mr. Schmitz. Of course, sir, and that is what I was 
explaining. That is why we set Secretary Wynne off from the 
rest, because he was essentially implementing decisions that 
had been made by his predecessor. That is precisely the point 
we--
    Senator Levin. Did his predecessor implement the decision 
of the Secretary of Defense?
    Mr. Schmitz. In that case it was Secretary Aldridge that 
was the decisionmaker.
    Senator Levin. So, he was not implementing the decision of 
the Secretary of Defense? You did make that conclusion? You did 
reach that conclusion?
    Mr. Schmitz. I think we are talking about two decisions 
now, sir.
    Senator Levin. That is correct. Aldridge's decision was his 
own, not the Secretary of Defense's?
    Mr. Schmitz. Yes, sir.
    Senator Levin. You reached that conclusion?
    Mr. Schmitz. Yes, sir.
    Senator Levin. But, you did not reach the conclusion as to 
whether Wynne was implementing his own decision or the 
Secretary of Defense's. Why would you conclude that Aldridge 
had implemented his own, but when it came to Wynne you did not 
look at whether it was the Secretary of Defense's decision or 
the administration's decision or Wynne's decision? Why would 
you not make the same--
    Mr. Schmitz. I believe we did look at that, sir, and we 
interviewed Secretary Rumsfeld and Secretary Wolfowitz.
    Senator Levin. You did?
    Mr. Schmitz. Yes, sir.
    Senator Levin. On the Wynne decision?
    Mr. Schmitz. I do not know. I have to check the transcript, 
sir. I have to get back to you if you would like to know that, 
sir.
    Senator Levin. It was my understanding you did not talk to 
Wolfowitz or Rumsfeld.
    Mr. Schmitz. No, sir, we interviewed both, sir.
    Senator Levin. So, on all these matters you have talked to 
the Secretary of Defense?
    Mr. Schmitz. Yes, sir.
    Senator Levin. But, you did not reach any conclusion as to 
whether they were responsible for making decisions which were 
either in violation of regulations or----
    Mr. Schmitz. I will find out, sir.
    Senator Levin. Pardon?
    Mr. Schmitz. I will find out. I do not recall the specific 
answer to your question. I will find out, sir.
    Senator Levin. Mr. Chairman, thank you.
    Chairman Warner. That is a very important question. It 
requires careful review on your part. But, for the record this 
morning, you interviewed both the Deputy Secretary and the 
Secretary regarding the full breadth of the issues of the scope 
of your examination?
    Mr. Schmitz. Yes, sir.
    Chairman Warner. You will then go back and re-examine the 
transcript and other statements to determine the responses to 
Senator Levin's questions and you will provide that for the 
record?
    Mr. Schmitz. Yes, sir. Let me just clarify. When you say I 
interviewed, my staff interviewed 88 witnesses. Included among 
those 88 were the Secretary and the Deputy Secretary.
    [The information referred to follows:]

    Based on a re-examination of the transcripts of interviews, both 
the Secretary of Defense and the Deputy Secretary of Defense were aware 
of the leasing decision by Pete Aldridge and generally supported it.

    Senator Levin. You interviewed them, but you did not report 
in your report what they told you or what their position was; 
is that correct?
    Mr. Schmitz. Generally speaking, we interviewed them and we 
did not find anything relevant to report to tell the story 
about the Boeing 767 tanker aircraft. What we reported was, our 
independent judgment on that which was relevant.
    Senator Levin. You found nothing in your interviews with 
the Secretary of Defense and the Deputy Secretary of Defense 
that was relevant to this report?
    Mr. Schmitz. Sir, I told you I would go back to the 
transcript, I would look at it and would get back to you, but I 
recall speaking to our interviewers that spoke with both of 
them and asked what material came out of it, and I was told, in 
both cases, there was not much.
    Chairman Warner. I must say I am somewhat perplexed that 
you personally did not conduct or participate in those 
interviews, given that they were your superiors. Is that the 
routine?
    Mr. Schmitz. Absolutely, sir. I have been the IG for 3 
years now. I have not participated in a single interview. I 
review the transcripts, but I have professional investigators, 
inspectors, and auditors and they are paid to do these, and in 
this case I sent my best senior official investigator over to 
interview both Deputy Secretary Wolfowitz and Secretary 
Rumsfeld.
    Senator Levin. If I could just conclude on that line then, 
you do have the responsibility of reading those transcripts?
    Mr. Schmitz. Yes, sir.
    Senator Levin. Did you read the transcripts?
    Mr. Schmitz. I reviewed both transcripts, yes, sir.
    Senator Levin. Was there anything relevant in those 
transcripts to the issues in your report?
    Mr. Schmitz. Sir, I do not recall the specifics you are 
asking about. I will get back to you if you would like to know. 
I just----
    Chairman Warner. We will move on at this time. You will get 
back one way or another in response to those questions. Thank 
you.
    Mr. Schmitz. Yes, sir.
    Chairman Warner. Senator McCain.
    Senator McCain. Thank you very much, and I would like to 
thank General Jumper and Secretary Dominguez for their remarks 
and I appreciate it. As I said earlier, I think following the 
conclusion of this hearing and this issue we should move 
forward. However, I also think we should make sure that 
responsibility is apportioned where it belongs.
    Mr. Schmitz, after it became known that Ms. Druyun had 
committed a crime, for which she was later convicted, the line 
out of the Secretary of the Air Force and the Pentagon was that 
this was an isolated incident, that only Ms. Druyun was 
responsible for all this, and there was no other responsibility 
to be apportioned to any individuals or organization. Do you 
accept that statement?
    Mr. Schmitz. No, sir. There are actually two components of 
my objection to that approach. One was, if you recall, ``the 
line'' was also that up until that point Ms. Druyun had a 
stellar, pristine record. In fact, there were at least five 
prior investigations and she had, in fact, been held 
accountable by my predecessor to acquisition irregularities 
back in the early 1990s and a recommendation of my office to 
hold her accountable had been overruled by the Deputy Secretary 
of Defense at the time. Instead of holding her accountable, she 
was actually promoted into the position where she then 
exercised all of the prerogatives she did, which led ultimately 
to her criminal conviction.
    The other issue is, I would just say generally speaking, 
she did not operate in a vacuum. She had a powerful persona, 
there is no dispute about that. But, there were people both 
above, below, and aside of her that allowed her to continue 
operating without checks and balances that should have been in 
place.
    Senator McCain. Mr. Aldridge did not submit himself to an 
interview by your staff, is that true?
    Mr. Schmitz. That is true, sir.
    Senator McCain. Did he say why not?
    Mr. Schmitz. My staff could not reach him, sir.
    Senator McCain. Could not reach Mr. Aldridge, who is I 
believe now a member of the board of Lockheed Martin; is that 
right? Do you know that?
    Mr. Schmitz. I have heard that. I believe that, sir, is 
right.
    Senator McCain. You could not get a hold of him through 
Lockheed Martin?
    Mr. Schmitz. I do not recall. I recall my staff coming to 
me and saying that they had made repeated attempts to reach him 
and----
    Senator McCain. Since he made a crucial decision, I believe 
the day he left the Pentagon, about the leasing, signing off on 
the Air Force leasing proposal, do you not think it would have 
been important to have his testimony?
    Mr. Schmitz. We would have preferred to have his testimony, 
yes, sir.
    Senator McCain. Well, Mr. Chairman, since Mr. Aldridge has 
refused to cooperate with Mr. Schmitz, I might suggest that we 
subpoena him before this committee. He obviously signed off the 
day he left the Pentagon. He stated that the comprehensive and 
deliberative review by the Leasing Review Panel in support of 
his decision to approve the lease, but the panel never provided 
a recommendation and a co-chairman of the panel's working group 
recommended against the lease. Therefore, Mr. Aldridge's 
reliance on the panel's work in support of approving the 
decision is in fact misleading, is it not, Mr. Schmitz?
    Mr. Schmitz. Can you repeat the last part of your question, 
sir?
    Senator McCain. One of the rationales given by Mr. Aldridge 
approving the leasing deal was that the Leasing Review Panel 
was in support of the Boeing 767 lease, and in fact the panel 
did not approve of it; is that not true?
    Mr. Schmitz. That is true, sir.
    Senator McCain. So, Mr. Aldridge basically lied. Mr. 
Aldridge, we do not know why he made the statement, do we?
    Mr. Schmitz. No, sir. Well, we know generally that he was, 
as I said in my opening statement, that he and others within 
the Air Force and OSD were trying to treat the appropriations 
language as if it had waived a whole bunch of legal 
requirements and were just trying to get to the result of 
leasing 100 aircraft.
    Senator McCain. Well, Mr. Chairman, I recommend we subpoena 
Mr. Aldridge to get his testimony, because key decisions were 
made by him and obviously made his statement of approval of the 
lease on false information. I think we might be able to get a 
hold of him through his board membership of one of the major 
defense contractors.
    Chairman Warner. I should say at this juncture that I have 
given some thought to that. I think we should first accord him 
the opportunity to appear voluntarily.
    Senator McCain. That would be fine.
    Chairman Warner. If he does not, then we will as a 
committee consider the use of the subpoena. But, I think at 
this point, to protect Mr. Aldridge to the extent we should, 
give us some detail as to the efforts you went to find him. I 
mean, he is an American citizen residing in this country. I do 
not think it is a mystery. If in fact he is on the board of a 
major defense contractor, it seems to me he is locatable. Can 
you give us some amplified data on what efforts you took to 
find him?
    Mr. Gimble. Senator, we sent registered letters----
    Chairman Warner. I beg your pardon?
    Mr. Gimble. We sent registered letters. We also left a 
number of voice-mails on his personal home voice-mail. We tried 
to obtain his number through the folks at the Pentagon, and we 
simply just were not able to make arrangements to interview 
him.
    Chairman Warner. Did the Department of the Air Force offer 
to help at all? I mean, he had some affiliations with them in 
years past and so forth.
    Mr. Gimble. We exhausted all the avenues we thought were 
available. We just were not successful.
    Chairman Warner. All right.
    Senator Levin. Would the chairman just yield very quickly 
on that point, though? Or would Senator McCain yield?
    Chairman Warner. I will increase your time.
    Senator McCain. Please.
    Senator Levin. It will be on my next round. Just a 10-
second question. Did you subpoena him?
    Mr. Gimble. We did not subpoena him.
    Senator Levin. Why not?
    Mr. Schmitz. Sir, the----
    Senator Levin. I will save that for my second round. I have 
taken too much time.
    Chairman Warner. That is all right. It is important that 
this juncture of the record be completed.
    Mr. Schmitz. We do not normally exercise our subpoena power 
in a civil matter. We can in a very extraordinary circumstance 
exercise our subpoena authority, but usually it comes up in the 
context of an active criminal investigation. So, the normal 
procedures are not there. We would have truly had to exercise 
an extraordinary measure in that case to subpoena documents 
from Mr. Aldridge.
    Frankly, we interviewed everybody around Secretary 
Aldridge, so the facts of what happened--we were able to tell 
the story to this committee and in our report, I think, in a 
full, objective, independent manner without Secretary 
Aldridge's----
    Chairman Warner. I would take a difference of opinion with 
you on that. I think this is an extraordinary case. It has 
enormous ramifications throughout the whole procurement 
process, impact on the military, and I think you should have 
utilized the subpoena. I will just tell you that.
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    Chairman Warner. Now we want to return and let you finish 
your questioning period.
    Senator McCain. Thank you.
    Mr. Schmitz, just to complete the circle here, Mr. Aldridge 
stated in his decision, which I believe was the day he left 
office--is that correct?
    Mr. Schmitz. I believe that is correct.
    Senator McCain. The day he left office, his decision was, 
he said, a comprehensive and deliberative review by the Leasing 
Review Panel in support of the decision to approve the lease, 
was part of his rationale, right?
    Mr. Schmitz. I believe that is correct, sir.
    Senator McCain. That was false? The Leasing Review Panel 
did not recommend it, is that not true? Mr. Gimble?
    Mr. Schmitz. I would like to doublecheck with my Deputy on 
that.
    Mr. Gimble. The actual work of the leasing panel was not 
complete. There was a program analysis and evaluation (PA&E) 
memorandum, Mr. Kreig, a month later, which was a tasker of the 
leasing panel. So the leasing panel was not complete, the work 
was not.
    Senator McCain. Thank you. I would be interested to know 
what pressures Mr. Aldridge felt that he would make that 
decision on the day that he left office.
    Mr. Schmitz, on January 19, 2005, former Secretary Roche 
sent you a lengthy letter. Near the end of the letter Mr. Roche 
writes, and I quote: ``The Air Force put forward a proposal 
done in conformance with the law and policies in place at the 
time. The Air Force performed a due diligence look into 
potential alternatives, including open competition, even though 
the legislation specified the Boeing 767.''
    Is that statement true, Mr. Schmitz?
    Mr. Schmitz. I disagree with those conclusions, sir.
    Senator McCain. Thank you.
    At the end of the letter Mr. Roche wrote: ``I am 
calling''--why do you disagree with that?
    Mr. Schmitz. I do not think in a real sense there was free 
and open competition. I think that this was simply a result-
oriented effort to lease 100 of the Boeing tankers as quickly 
as they could, as was authorized, but not required, in the 
Appropriations Act for fiscal year 2002.
    Senator McCain. Did Mr. Roche at one point call you into 
his office along with General Jumper and tell you you ought to 
back off this investigation?
    Mr. Schmitz. He did not say, ``back off the 
investigation,'' sir. But, he was critical of the way that I 
had criticized Darleen Druyun's integrity.
    Senator McCain. Did he ask you, do you know that maybe you 
could be liable for slander?
    Mr. Schmitz. In fact he did say that.
    Senator McCain. You might be slandering Ms. Druyun?
    Mr. Schmitz. That was not even an implication. That was the 
direct statement.
    Senator McCain. At the end of that letter, Mr. Roche wrote: 
``I am calling for you to do the courageous thing, not 
contribute to further character assassination of those who 
tried to serve honorably. To continue down the current path 
will dramatically contribute to severe risk aversion on the 
part of senior and junior military leaders. To those Americans 
who must go into harm's way, to put it bluntly, this 
investigation will further stifle innovative procurement for 
years to come. This amounts to coercion in my book.''
    Mr. Schmitz, do you think this was proper? Let me ask, 
General Jumper, do you think that is an accurate depiction of 
the situation that Secretary Roche wrote in his letter, that if 
we continue the investigation that, to put it bluntly, this 
investigation will further stifle innovative procurement for 
years to come?
    General Jumper. Sir, I believe the Secretary believed that 
when he wrote it.
    Senator McCain. Do you believe it?
    General Jumper. No, sir.
    Senator McCain. Do you believe it, Secretary England?
    Mr. England. No, sir, I do not.
    Senator McCain. Mr. Chairman, I have additional questions.
    Chairman Warner. We will have another round.
    Senator McCain. Again, I want to thank the witnesses.
    Thank you, Mr. Chairman.
    Chairman Warner. Senator Nelson.
    Senator Bill Nelson. Thank you, Mr. Chairman.
    Mr. Gimble, did you read the transcripts of the Secretary 
and the Deputy Secretary?
    Mr. Gimble. Yes, sir, I did.
    Senator Bill Nelson. You said you did not?
    Mr. Gimble. I did.
    Senator Bill Nelson. You did read them?
    Mr. Gimble. I did, yes.
    Senator Bill Nelson. From what you read in the transcripts, 
do you have a conclusion about the Secretary or the Deputy 
Secretary of how they would have influenced the decision?
    Mr. Gimble. Let me clarify. The decision that we are 
talking about was a decision of the senior acquisition 
executive, in this case Mr. Aldridge. What was quoted in that 
was that he had the support of the Secretary and the Deputy 
Secretary. We believe that that was the case.
    Now, in the interviews with the Secretary and the Deputy 
Secretary they both indicated that they had delegated that to 
their acquisition people who were making acquisition decisions, 
and it seemed like, based on what they knew, it was a proper 
decision.
    Senator Bill Nelson. So what--if I understand what you just 
said, that you do not have a conclusion that they actually 
influenced the decision?
    Mr. Gimble. I do not believe that they influenced it from 
the standpoint that they said, move forward with it. Also, I do 
not believe they influenced it from the standpoint that they 
said, do not move forward with it. It was just an indication 
that they supported it and they were not stopping it, is the 
way I interpreted it.
    Senator Bill Nelson. Mr. Schmitz, is that your conclusion?
    Mr. Schmitz. Yes, I agree with that and I would also just 
elaborate that it was a decision of, I believe the Deputy 
Secretary to put a halt on it, and I know that the Secretary 
fully supported us when we stopped the process and put a freeze 
on the project going forward. They certainly played an active 
role in that.
    Senator Bill Nelson. Secretary England, the House of 
Representatives has just passed the Defense Authorization Act 
and they have included a provision there that in effect would 
cut out any competition for the awarding of this contract for a 
tanker in the future for any firm that was not an American 
firm. What do you know about that provision?
    Mr. England. I am not familiar at all with the provision, 
but if that is a provision, it is not a provision I would agree 
with, frankly, Senator. I do believe we need to have free and 
open competition, frankly, for many of our goods and services. 
There are exceptions because there are items I think that are 
uniquely important to our military. But, as a matter of policy, 
frankly, we have limited competition in many of our 
acquisitions and, frankly, I think it would be healthy for 
America and healthy for our industrial base to have more 
competition, even international.
    I would not support that amendment, but I am not familiar 
with it and I have not had discussions with members of the 
House.
    Chairman Warner. Senator, I thank you for bringing that up. 
Of course, that is directed against the Airbus possibility of 
working with U.S. firms to participate in that. But, we are 
going to probe that further. It will be a subject of the 
conference once our body acts on our bill, and we will solicit 
views from the Secretary and Deputy Secretary on that question. 
I thank you for bringing it up.
    Senator Bill Nelson. Thank you, Mr. Chairman.
    Mr. England. The Washington Post has reported that 45 
sections were deleted by the White House's counsel's office--
and I am quoting--``to obscure what several sources described 
as references to White House involvement in the lease 
negotiations and its interaction with Boeing.'' Can you tell 
the committee what you know about these deletions in the IG 
report?
    Mr. England. Senator, I actually cannot comment. I do not 
know what has been deleted. I just do not have the background 
in this. Again, this is recent in my background. I just have to 
defer to the IG in terms of what has been redacted in their 
report.
    Senator Bill Nelson. Okay. Mr. IG?
    Mr. Schmitz. It is generally an accurate statement about 
the number of redactions, and this goes back to the protocol 
that was mentioned earlier by Senator Levin and which we--I 
made an independent decision to respect.
    Senator Bill Nelson. Do you think these deletions were 
proper?
    Mr. Schmitz. Were they proper?
    Senator Bill Nelson. Yes.
    Mr. Schmitz. Of course. I did them.
    Senator Bill Nelson. You did them at the request of whom?
    Mr. Schmitz. No, I made an independent decision to delete 
them.
    Senator Bill Nelson. So, this is not a correct statement in 
the Washington Post?
    Mr. Schmitz. What I said was correct was that the number of 
redactions is correct.
    Senator Bill Nelson. Well, the Washington Post says that 
they were deleted by White House counsel's office.
    Mr. Schmitz. That is not correct.
    Senator Bill Nelson. That is not correct?
    Mr. Schmitz. We deleted them. My staff deleted them.
    Senator Bill Nelson. There were 45, and the 45, were they--
the redactions were the 45 in reference to White House 
involvement in the lease negotiations and interaction with 
Boeing?
    Mr. Schmitz. There were redactions for White House names, 
Members of Congress, staff of Congress, and then there were 
also redactions for company proprietary and ``For Official Use 
Only'' material in the report.
    Senator Bill Nelson. Since you made the redactions--and 
thank you for clarifying that--why is the withholding of that 
information beneficial so that this committee or the public 
cannot understand the IG report in its full context?
    Mr. Schmitz. Well, the leadership of this committee entered 
an agreement with White House Counsel to allow White House 
Counsel to withhold certain information, and I made an 
independent determination that I did not need to include that 
information in my report to give the full story, and so that is 
why the redactions are there. In fact, some of these issues 
were raised by Senator Grassley already and I have already 
answered them in writing, and I would be glad to answer--I 
would be glad to submit my answers to the committee for the 
record.
    Chairman Warner. We would like to have them. Without 
objection, they will be part of this record today.
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    Senator Bill Nelson. Mr. Chairman, then am I given to 
believe, since we have had a clarification as to what was 
written in the Washington Post----
    Chairman Warner. I beg your pardon. Yes, go right ahead.
    Senator Bill Nelson. Mr. Chairman, am I given to understand 
then that, since we have now clarified that it was not the 
White House Counsel that caused these deletions, it was the IG, 
is the full IG report available to the members of this 
committee without the deletions?
    Chairman Warner. There is an unredacted version of the 
report in our secure area. It has been available to all members 
of the committee.
    I think some clarification at this point is proper by the 
chairman. I did meet with the senior leadership of the Senate. 
I think you were present. We made the decision, in order to 
facilitate the conveyance from the White House, which was 
supervising the material that Senator McCain and I requested, 
that we would allow certain redaction of names in order to get 
that material.
    There is no reason why we cannot go back in executive 
session with this committee and fully advise all members of the 
committee on that transaction. Is that your recollection of it, 
Senator McCain?
    Senator McCain. Yes, Mr. Chairman. But, unfortunately, the 
DOD General Counsel abused and misinterpreted the agreement 
that we had. He basically is sending over entire volumes of 
pieces of paper that are totally redacted. It was supposed to 
be completed by the middle of February and we still have not 
received all of them, even though we reduced the number of e-
mails requested.
    DOD General Counsel and the White House have obfuscated and 
delayed in a very frustrating manner. I am not in sympathy, 
frankly, with their redacting this information. They have been 
less than forthcoming.
    Chairman Warner. We had the issue of executive privilege, 
which is a doctrine that has existed from the beginning of 
times here in this Republic. Senator McCain and I and others 
tried our very best to get the maximum amount of information 
that we felt was important for this committee to receive, but 
at the same time we had to respect the doctrine of executive 
privilege.
    Senator Levin. Mr. Chairman, if I could just further add on 
this.
    Inspector General, first of all, there are 45 White House 
redactions, as I understand it, which are still redacted; is 
that correct?
    Mr. Schmitz. That is correct.
    Senator Levin. That is different from what you suggested.
    Mr. Schmitz. When you said ``White House redactions''----
    Senator Levin. Yes.
    Mr. Schmitz.--redactions of White House names.
    Senator Levin. Which the White House redacted.
    Mr. Schmitz. Everything in this report was redacted by my 
staff.
    Senator Levin. Well, according to this footnote here on 
page 13, ``The report does not include full verbatim text of 
this e-mail because staff of the White House Counsel has 
indicated its intent to invoke an agreement between members of 
Congress and the White House covering the production of tanker-
related e-mails.'' ``Its intent.'' So it is not your redaction. 
``Its intent to invoke an agreement,'' which is a totally 
separate deal which had to do with documents which this 
committee recommended and does not apply to your responsibility 
under law. I made that clear in my opening statement and I am 
going to stand by it.
    But, whether that is correct or not, let us be real clear, 
the White House, according to this footnote 13 in your report, 
it is the White House counsel indicated an intent to invoke an 
agreement; is that correct? Is your footnote correct?
    Mr. Schmitz. Of course, yes, sir.
    Senator Levin. Well, do not say ``of course.'' It is a real 
question about that.
    Mr. Schmitz. That is my footnote. It is correct, yes, sir.
    Senator Levin. All right. So, it is not just your decision 
to redact; it is the White House's intent to use an agreement 
which had to do with documents which this committee requested.
    Why did you not request unredacted--I am sorry, this is not 
my time. I just have one other question.
    There is also a suggestion--Mr. Chairman, this is for the 
clarification of the committee. What is in a classified version 
or an uncleared version are still redactions; is that correct?
    Mr. Schmitz. Yes, sir.
    Senator Levin. So, we do not have unredacted memos, is that 
correct, anywhere?
    Mr. Schmitz. That is correct, sir.
    Senator Levin. Thank you.
    Senator Bill Nelson. Well then, Mr. Chairman, that is 
opposite of what you were given to believe.
    Senator Levin. It is wrong. This committee has--it seems to 
me you have an obligation to give us your judgment and your 
judgment should be based on unredacted documents unless 
executive privilege is invoked. But, that is not what has been 
invoked here.
    They have not invoked executive privilege, have they?
    Mr. Schmitz. They have not formally invoked executive 
privilege, that is right.
    Chairman Warner. We will look into this matter further. I 
think you raise a very valid point.
    Senator Talent.
    Senator Talent. Thank you, Mr. Chairman.
    Mr. Schmitz and Mr. Gimble, let me just boil this down to 
you and ask you a question that is the most important for me 
here. Let me give you two scenarios and then you give me your 
opinion about which more closely reflects reality as you 
understand it after having conducted this investigation. Did 
the responsible officials really believe, based on their 
experience and understanding of the national military strategy, 
that we needed a new platform to meet our tanker needs and that 
the lease of these aircraft was the most economical and 
efficient way of achieving that, and then they just went on and 
were terribly impatient with all the rules and the requirements 
and so they cut corners in order to get this done, to meet what 
they really believed we needed? That is scenario one.
    Scenario two is they did not think we needed a new 
platform, but in order to do a favor for somebody put this--
were determined to put this lease through and cut all the 
corners to keep Congress and the country from finding out that 
we did not really have the need?
    Which scenario in your view more accurately reflects the 
mind set of the people who were making the decisions?
    Mr. Schmitz. Well, I think with regard to Darleen Druyun 
clearly the second scenario. With regard to the myriad of other 
senior officials that we have identified in our report, it 
depends upon case-by-case which scenario they fit into.
    Senator Talent. Some did and some did not?
    Mr. Schmitz. I think there is a spectrum. I think it is 
actually a nice spectrum you have laid out with the two 
scenarios, and I think that at one end you have Darleen Druyun 
and at the other end I am sure you have honorable people that 
fully believed that we needed a new platform and this was the 
best way to do it. Then in between you have a whole smattering 
of others.
    Senator Talent. General Jumper, you want to comment on that 
for me?
    General Jumper. Sir, I am responsible for the requirement 
part of the Air Force. As the Chief of Staff of the Air Force, 
I came into this job on September 6, 2001. After September 11, 
I saw an instant surge in tanker utilization and I looked at a 
fleet that was more than 40 years old, and if we began 
recapitalizing immediately we would be flying these airplanes 
when they were 70 years old. I honestly thought it was time to 
get on with the recapitalization.
    I was indifferent to how that recapitalization might take 
place. But, I believed, and I still believe that we do need to 
get on with recapitalizing the fleet.
    Senator Talent. Because this seems to me to be very 
important. The first scenario reflects one level of culpability 
as far as I am concerned. The second, to knowingly try and push 
through a program that would cost the government $23.5 billion 
that you did not think we needed to spend, given the other 
needs that are being unmet, that to me indicates a whole 
different level of culpability.
    Thank you, Mr. Chairman.
    Chairman Warner. Thank you, Senator.
    Senator Talent, I want to pursue your line of questions. I 
had intended to do it in my second round, to General Jumper. 
General, we have known each other quite well for a number of 
years and you have had a very long and distinguished career 
serving this Nation as a uniformed officer and you go out, 
whenever that retirement comes, holding your head high. But, I 
think here at this point we should have an amplification of 
your own analysis of the tanker fleet, and what were the 
options or what options exist today? I am not suggesting you 
outline the future of how you think a contract could be drawn, 
but just generally what is the condition?
    You said 70 years old for some of the tankers. That would 
be of what class of tankers and so forth? Some facts should be 
put into this record at this time, and I give you that full 
opportunity to do so.
    General Jumper. Thank you, Mr. Chairman. First, I want to 
open my remarks by saying that I agree with Senator McCain on 
the course that we are taking now, and that is we are on a 
course to an analysis of alternatives, acquisition documents 
that are in full compliance with the oversight that this 
committee and Senator McCain has highlighted, and that we are 
proceeding down a path to replace and recapitalize tankers in 
manner that is suitable to this committee.
    My view when I came on board was that we were looking at a 
tanker fleet--and I was focused at that time from a 
requirements point of view on the oldest KC-135Es, which at the 
time were some 43 years old, and the need to begin 
recapitalization on that oldest tanker fleet. We were looking 
at increased costs of maintenance man-hours per flying hour 
and, as I said, a great surge in activity, and a strategy that 
was a part of the DOD's strategy--that was a new global 
strategy--that would put great demands on these tankers.
    As a matter of fact, within a month of my taking office 
after 9-11 we were at war in Afghanistan, where everything that 
went into that country had to go in by air. Every fighter that 
flew off of an aircraft carrier deck refueled off an Air Force 
tanker on the way in and on the way out.
    Chairman Warner. Sometimes three and four times.
    General Jumper. Yes, sir.
    From Diego Garcia, bombers even today continue to fly 
missions, and the demands on the tanker fleet have been 
enormous, a some 33-percent increase in that fleet.
    So what we saw at the time was, in October, I visited 
Tinker Air Force Base just to confirm what I had been told at 
my own inquiry about the aging of the tanker fleet. What I saw 
there was, quite frankly, of concern to me. There were aging 
aircraft problems that I thought needed to be addressed.
    Chairman Warner. Some of them 70 years old?
    General Jumper. Well, sir, they are 40 years old now, but 
if we begin recapitalizing at what was a reasonable rate--and I 
used the C-17 as an example. We buy about 15 of those a year. 
If we begin recapitalizing this tanker fleet, which is more 
than 400 aircraft, at 15 a year, we are going to be flying some 
of these KC-135s when they are 70 years old.
    Chairman Warner. That clarifies. Nothing today is 70 years 
old.
    General Jumper. Nothing today is 70, 45 years old is the 
average of the KC-135Es today.
    My judgment was and my recommendation was at the time that 
we begin recapitalizing as quickly as we can. I had no method 
in mind when the lease proposal was advanced. As a matter of 
fact, I think I am even on record in the IG report as saying 
that this method may not be acceptable and if it is not we 
still need to get on with a recapitalization effort, especially 
with the oldest tankers.
    I am in the position now, Mr. Chairman, as we look 
forward--and this is again at the suggestion of Senator 
McCain--that we not look at just the oldest KC-135 fleet now, 
the E fleet, the oldest ones, but the entire fleet and, with 
the global demands that we will face in the future, we take a 
look at replacing the entire fleet, and how to recapitalize the 
large airplanes, the KC-10s, as well as the KC-135Rs and the 
KC-135Es, and determine the best way to go forward.
    I think the analysis of alternatives, which comes out in 
August, will give us some insight as to how we might go about 
that.
    That was my thought process at the time, sir. I never had 
it in mind to do anything that was not beneficial to this 
Nation, to the taxpayer, to the United States Air Force.
    Chairman Warner. Knowing you as I do, I am confident of 
that case. But, we should close out your testimony here this 
morning with reference to the men and women who fly these 
aircraft and the crews who service them. There is an inherent 
risk, as you know far better than I, in getting into a cockpit, 
whether it is a brand new airplane or one that has some 40 
years of service. But do you feel today that any of the men and 
women involved in the tanker segment of your Department of the 
Air Force are taking an undue risk, personal risk, as a 
consequence of flying some of these aircraft?
    General Jumper. Mr. Chairman, I will tell you, as has been 
pointed out, that the maintainers we have in the Air Force are 
the Nation's finest maintenance personnel, and they do a 
magnificent job keeping these old airplanes flying as they do. 
But, I must tell you that if I lose sleep over anything, it is 
the condition of our aging fleet in general and of the KC-135Es 
in particular. That does worry me. I do not think that we are 
in any catastrophic risk at this point, but we have a situation 
now where 29 of our oldest KC-135Es are not flying because of 
problems, which we need to address. Senator McCain has pointed 
this out. We are finding ways to address this problem.
    I would not let any of them fly, sir, if I thought they 
were at any catastrophic risk.
    Chairman Warner. That is fine.
    General Jumper. But, I am worried.
    Chairman Warner. I am glad to get that reassurance.
    Secretary Wynne, we would like to give you this 
opportunity, now that you have heard a good deal of testimony, 
to perhaps make some opening observations yourself, and then I 
have a question for you.

STATEMENT OF HON. MICHAEL W. WYNNE, UNDER SECRETARY OF DEFENSE 
           FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS

    Mr. Wynne. Thank you very much, Senator Warner, and thank 
you very much, Senator Levin and Senator McCain, for the 
opportunity to appear before you.
    I would like to start, frankly, by thanking Senator McCain 
for his persistence, because the exposure of wrongdoing inside 
of an acquisition system that is respected by all of us, was 
shocking. We thought we had an employment situation. In fact, 
we were all generating as much as we can for educating our 
people about employment, ethics in employment searching. Then 
suddenly we had yet another issue of wrongdoing, and this was 
so stunning that I partnered with the Inspector General and the 
GAO to try to resolve the issues, and have sent letters on 
ethics to all of the commanders of acquisition personnel to 
restore, as Secretary England said, the acquisition 
professionalism.
    I would tell you that without the persistence and 
doggedness of the investigation Senator McCain put forward I 
just do not think that this would have been discovered. I think 
in that regard we owe him a debt of gratitude.
    Second, it has been indicated that I in fact allowed 
continued debate on the subject of the tankers, and I stand 
ready to accept that as a responsibility. I think the debate 
that has gone on has been painful but healthy. The fact is that 
in the July hearing in front of the House Armed Services 
Committee the GAO in fact stood by their 1996 report that said 
that we needed to address the tanker issue as soon as possible. 
Therefore, I felt like the debate on this particular approach 
to it should continue and should in fact resolve.
    I was fully led to believe and passed on to the OMB my 
belief that the Secretary in fact had made the decision. In 
fact, as I think Senator Levin read in the letter----
    Chairman Warner. You are referring to the ``Secretary.'' Do 
you mean the Secretary of the Air Force or the Secretary of 
Defense?
    Mr. Wynne. Secretary of Defense. When I said the Secretary 
of Defense had made the decision, I guess I was given that aura 
by Secretary Aldridge or I would not have put it in a letter 
like that. I am pretty careful about stuff like that.
    So, I would tell you that the process, if you will, that 
has gone on, though painful, has in fact altered, I would tell 
you, the culture. We have made very significant changes in all 
three services to try to restore cross-checks that I think are 
valuable. I have strengthened internal controls to make sure of 
those cross-checks, and I have gone a long way, I think, to 
restoring the acquisition with integrity that is and has been 
my number one goal.
    I do believe, as General Jumper said, that at some point we 
have to in fact recapitalize this tanker fleet. I also will 
tell you that I commissioned investigation after investigation 
to try to surface the actual fleet condition, and I could not 
get a response from anyone until approximately April 2004, 
which was a Defense Science Board report on the tanker 
condition. Then August 2004 came the Center for Naval Analyses 
report on corrosion, which gave me, if you will, the 
opportunity to speak out about the fact that the conditions for 
urgency were perhaps not as present as they were thought to be 
and that we could go into a full-blown analysis of alternatives 
and attempt to have free and open competition, to include, 
frankly, commercial providers and to include the opportunity 
for redoing.
    I also reviewed the Tinker data, spoke personally to the 
Tinker commander, and frankly the Tinker maintenance people had 
turned a corner in late 2002 and were in fact performing 
magnificently to restore these tankers to a much shorter, if 
you will, expected life--or a much longer expected life than I 
had been previously led to believe.
    So all of those features would tell you that it is the old 
story of, had I known now what I knew then, I might have been a 
little bit more responsive, if you will, to the IGs.
    The other thing that I would like to say to you, sir, is 
that I partnered with the IG early on and in each case had 
tried to get their investigators to help me to understand the 
content and the efficacy of the lease itself. As Secretary 
England pointed out, we were using the Inspector General at 
each step of the way to make sure that we stayed very much 
within the laws of the United States of America, which we are 
all beholden to. In fact, we are all beholden to you all for 
the oversight that you have provided.
    That, sir, concludes my comment.
    Chairman Warner. One final question, then I yield to my 
colleagues here. You said you tried and tried to get a better 
analysis of the aging problems to corroborate the need to move 
forward with this rather dramatic concept as it was in its 
early stages. Did you not ever go in to the Secretary of 
Defense and say, hey, boss, look, I am not getting cooperation 
down here; give me a little leverage?
    That is the way we used to work it when I was there. I 
always had access to the Secretary and the Deputy Secretary and 
I would go down and push other people around and get a job 
done. Why did you not do that?
    Mr. Wynne. It was the quality of the data that was 
collected. In fact, what I tried to do was to institute methods 
of data collection that would give me access to critical 
componentry, because the fear at least that was promulgated to 
me was that the corrosion was not just surface corrosion, but 
in fact depth corrosion. So, I asked and I did not get, if you 
will----
    Chairman Warner. Who were you asking? Who were you asking 
for the information? Department of the Air Force?
    Mr. Wynne. Department of the Air Force, and ultimately I 
asked the Tinker commander.
    Chairman Warner. All right. Well, let us let the record 
stand.
    But let me ask you this, then. You were Mr. Aldridge's 
deputy and you raised concerns about the price of the lease and 
the need to conduct an analysis of the alternatives. However, 
the IG then stated you were accountable because you did not 
overturn your former boss's decision and make the Air Force 
comply with the DOD acquisition directives once you became 
Acting Under Secretary. Do you accept that finding?
    Mr. Wynne. What I would accept is that I chose not to 
overturn the Secretary of Defense's decision, which I was led 
to believe was his decision to make.
    Chairman Warner. Aldridge led you to believe that?
    Mr. Wynne. Yes, sir. That is the way that it was written 
out.
    I would say that the debate was just starting. I was in 
fact convinceable that there was an urgent need. I was just not 
happy with the settlement that had occurred and the price. It 
is quite on the record that I would have preferred a much lower 
valuation. In fact, I was the one who commissioned the 
Institute for Defense Analysis price evaluation to begin with. 
I naturally would stand behind their evaluation.
    That having been said, at the same House Armed Services 
Committee hearing that I was at there was somebody from the 
used airplane business and he said that you can never rely on 
the pricing unless you are intending to buy an airplane. This 
gave me pause as to what I knew or what I should have known. 
But I pushed and prodded for a different configuration. I 
wanted to replace the tanker capability, but the Air Force 
actually wanted to have a multi-mission airplane, which I have 
some respect for that. So, all my attempts at essentially 
changing the configuration to result in a lower price were not 
accepted.
    Chairman Warner. I thank the colleagues for the indulgence. 
I felt this witness is entitled to an opportunity to state his 
case.
    Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    You wrote the Director of OMB on May 28, 2003, that the 
Secretary of Defense had approved the Air Force's proposal to 
enter into the lease and that the Secretary had approved the 
lease proposal contingent on securing a waiver of the 
requirement to fund termination liability and approval from 
your office.
    Mr. Wynne. Yes, sir.
    Senator Levin. That is correct, so that was your 
understanding?
    Mr. Wynne. Yes, sir.
    Senator Levin. And still is your understanding?
    Mr. Wynne. Yes, sir.
    Senator Levin. I want to go back, Mr. Schmitz, now to the 
report. You list General Jumper as being accountable for 
something here and I want to read your report and then I want 
to ask you, General. ``DOD and Air Force acquisition officials 
determined that an urgent and compelling need existed to 
accelerate the recapitalization.'' Then you write: 
``Independent reviews and other testimony on the tanker 
aircraft fleet, such as the Defense Science Board, did not 
support the need to accelerate the recapitalization of the 
tanker fleet. General Jumper, Chief of Staff of the Air Force, 
was accountable for supporting the Air Force sense of urgency 
to initiate the lease.''
    Now, I do not know why we should hold General Jumper 
accountable for disagreeing or reaching a different conclusion 
than the Defense Science Board on the urgency of a tanker lease 
program, unless you believe he did not hold that in good faith. 
Senior military officials like the Air Force Chief of Staff are 
expected to offer their best military judgment on issues of 
this, regardless of what others may think, and that was and is 
an honestly held statement. I think all of us know General 
Jumper and that was his honestly held belief.
    You think he should not pursue his honestly held belief 
because the Defense Science Board reaches a different 
conclusion on the urgency?
    Mr. Schmitz. No, sir.
    Chairman Warner. Your response was not recorded.
    Mr. Schmitz. No, sir.
    Senator Levin. Now, if you'll take a look at page 188 of 
the report. There is a January 30, 2003, e-mail from General 
Jumper to Dr. Roche in which he--in which, according to the IG 
report, ``General Jumper discussed''--redacted, somebody's--
``interest in the tanker aircraft lease.''
    The Inspector General has redacted the text of that e-mail, 
so we do not know who that official was in the White House, 
whether the official directed, approved, condoned, supported, 
or whatever the actions which the report suggests that the 
Office of the Secretary of Defense and Air Force officials 
should be held responsible.
    As I have expressed before, it seems to me obvious that the 
actions and directions of senior officials have a direct 
bearing on the responsibility of their subordinates for actions 
that they have taken. Do you disagree with that, Mr. Schmitz?
    Mr. Schmitz. I agree with that, sir.
    Senator Levin. Now, General Jumper, would you describe for 
us what is totally redacted on that page? Apparently still is 
redacted; is that correct? It still is redacted. We still do 
not have that in the back room or anywhere else. So what was in 
that e-mail?
    General Jumper. Senator Levin, sir, I am not aware of the 
status of redacted material and how I am able to respond to 
material that has been redacted. I have to ask the IG.
    Chairman Warner. These are matters I think we should 
exercise an abundance of care, and so that perhaps we could 
reserve that question for the executive session.
    Senator Levin. I am going to follow the chairman's lead, 
obviously. I do think at a minimum we should get this document. 
Like all the other White House redactions, we have got to have 
that document unless they exercise executive privilege, Mr. 
Chairman, and they have not done that.
    Chairman Warner. Understood very clearly.
    Senator Levin. Mr. Schmitz, since you agree with me that 
whether or not superior, people who are in superior positions 
decisions on matters should be taken into consideration when 
looking at the judgment of people who execute those decisions, 
did you interview White House and OMB officials about the role 
that they played in the tanker lease program?
    Mr. Schmitz. We did not interview OMB and White House 
officials. I think I mentioned that in my opening statement.
    Senator Levin. You did.
    Just one other question, Mr. Schmitz. I believe in response 
to the chairman's question, but in any event in response to a 
question here this morning, you indicated that there is a 
pending review of a possible criminal matter and that you did 
not want to refer to that; is that correct?
    Mr. Schmitz. Yes. You sent it to me, sir.
    Senator Levin. Was that my question?
    Chairman Warner. It was my question.
    Mr. Schmitz. The chairman's question.
    Chairman Warner. We will have clarification in the 
executive session.
    Senator Levin. No, that is understood. I want to set that 
aside. That is not what I am referring to in my next question.
    My next question is whether or not, Mr. Schmitz, you have 
ever declined a recommendation by your senior staff to initiate 
a criminal investigation of DOD officials relative to the 
tanker lease matter other than the one matter you referred to 
in response to the chairman's question?
    Mr. Schmitz. I do not recall ever declining a 
recommendation of my staff in the tanker matter to investigate 
anybody.
    Senator Levin. So, Mr. Gimble, do you have a different 
recollection of that?
    Mr. Gimble. I do not have a different recollection to that.
    Senator Levin. We are talking here now about whether or not 
there was a recommendation by senior staff to initiate a 
criminal investigation of DOD officials; is that correct? That 
is what you are responding to?
    Mr. Schmitz. Yes, sir, in the tanker matter.
    Senator Levin. Yes, relative to the tanker lease.
    That is what you are responding to, Mr. Gimble?
    Mr. Gimble. Yes, sir.
    Senator Levin. Thank you.
    Thank you, Mr. Chairman.
    Chairman Warner. Senator McCain.
    Senator McCain. Secretary Wynne, I would like to thank you 
for your remarks and your assumption of responsibilities. I 
have dealt with you for many years and I have found you to be a 
hardworking, honest, American citizen who has done a fine job, 
and I thank you for your comments.
    Mr. Chairman, I do not want to prolong this part of the 
hearing. I just briefly would like to say, in response to 
Senator Talent's question, I do not think it is black and 
white. I think, as Mr. Schmitz said, there was some obvious 
wrongdoing, as evidenced by Ms. Druyun's conviction. I also 
believe that there was other mistakes made in the zeal to 
acquire this new tanker, which I think all of us agree is 
necessary, which led to a violation of standard practices which 
have been in place for good reasons, such as analysis of 
alternatives. The operational readiness document (ORD) was 
corrupted by removing the requirement for capability, at least 
in the initial phase, for refueling of Navy and Marine Corps 
aircraft. The GAO and Congressional Budget Office estimates 
that it would cost as much as $6 to $7 billion more to lease 
rather than to buy were ignored.
    There was active lobbying here before this committee. A 
general volunteered before this committee without being asked 
his personal opinion about how badly tanker aircraft were 
needed. Documents from Tinker Air Force Base were tailored to 
present different statistics concerning maintenance of the KC-
135.
    The list goes on and on, and it became cumulative into a 
very regrettable experience. I am glad that Secretary England 
and the other witnesses have committed to changing the culture. 
Our job I think is to make sure that that happens. I take them 
at their word. These are honorable citizens who are making this 
commitment, and I look forward to moving forward.
    Thank you, Mr. Chairman.
    Chairman Warner. Thank you, Senator.
    Senator Levin, do you have any more?
    Senator Levin. No.
    Chairman Warner. I think at this point, given the lateness 
of the hour, that we will terminate this open session, and 
hopefully by 11:45 we can resume in room 222 in executive 
session.
    [Whereupon, at 11:30 a.m., the committee adjourned.]

                                 
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