[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
           PIONEER UAV INVESTIGATION: SHOOTING THE MESSENGER

                                 ______


                          HON. NORMAN SISISKY

                              of virginia

                    in the house of representatives

                        Thursday, March 24, 1994

  Mr. SISISKY. Mr. Speaker, I wish to address the House tonight about 
an investigation my subcommittee has underway. Normally, I do not like 
to speak publicly about an investigation until it has been finished and 
we have all our ducks lined up. In this case, however, I think a public 
airing is essential. The Armed Services Subcommittee on Oversight and 
Investigations has been looking for several weeks into allegations 
regarding the Pioneer Unmanned Aerial Vehicle [UAV] Program. These 
allegations were brought to my attention by a group of government 
employees who saw a waste of taxpayer money and wanted something done 
about it. When their efforts to solve the problem through Navy channels 
got nowhere, they came to the committee. Part of our investigative 
effort involved talking to officials in the UAV Program. Soon 
afterward, we discovered that some people in the Navy decided that, 
rather than investigate the allegations, they would investigate the 
allegators. In other words, this could become another case where 
dedicated public servants are made into dead whistleblowers. When this 
happened, I quickly telephoned Nora Slatkin, who used to work on our 
committee staff and is now the Navy assistant secretary for 
acquisition. I am confident Ms. Slatkin will see to an effective 
cleanup of this program. In the meantime, I want to air what the 
subcommittee has learned up to this point in order to underscore that 
our subcommittee will not tolerate reprisal actions against 
whistleblowers.
  Before I list the allegations, let me briefly outline what the 
Pioneer is. It is an unmanned aerial vehicle; that means it's a 
pilotless drone. It can be used, for example, to take television 
pictures of the battlefield and let commanders down below know what's 
ahead of them. The Pioneer, in fact, is our only fully deployed system 
designed to provide real time surveillance and intelligence gathering 
capability on the battlefield. Pioneer proved invaluable to our troops 
in the field during Operation Desert Storm. In one instance you may 
have heard about, Iraqi troops actually attempted to surrender to a 
Pioneer circling over their position. Let me make clear that what I am 
about to say is not a criticism of the Pioneer, which is a sterling 
piece of hardware. It is not a criticism of UAVs in general. It is a 
criticism of management. The Pioneer Program, and the follow-on UAV 
efforts have been solidly supported by the Congress and are expected to 
play increasingly critical roles in future conflicts. But we cannot 
turn a blind eye to mismanagement of this or any other program.
  Let me turn now to the allegations. As I said earlier, we have not 
finished our investigation yet and so I cannot lay out everything with 
certainty. But at this juncture, we see indications of five central 
problems. In summary, they are as follows:
  Credible evidence suggests the government has paid exorbitant and 
excessive prices for commonly available spare parts.
  There are serious questions about overhead costs charged to the 
program being pyramided.
  Pioneer readiness levels are unacceptably low.
  Proper stewardship has been lacking, with credible allegations having 
gone uninvestigated for more than 2 years.
  Program officials may have attempted a reprisal against personnel 
cooperating with the subcommittee's investigation.
  Now let me detail these points one-by-one.
  First, spare parts overpricing. The whistleblowers first showed the 
subcommittee evidence of excessive prices being paid by the Navy for 
spare parts to support the Pioneer system. Our investigation so far has 
revealed significant overpricing of some parts. What I cannot say at 
this juncture is exactly how extensive the overpricing was. Nor can I 
put any dollar sum on the total funds lost to such overpricing. I can, 
however, document some examples. One of the most notorious is in the 
same league as the $600 hammer and the $2,000 toilet seat. The 
subcommittee examined a spark plug connector. The contractor price 
quoted to the government to supply the replacement spark plug 
connectors was $544.09 and required a five-month delivery time. The 
subcommittee obtained one of the connectors from our whistleblowers in 
the Navy supply system. Stamped on it was the name of the manufacturer 
and the commercial part number. Let me emphasize that this is a 
commercial product, not some unique and special component. The engine 
of the Pioneer is not exotic; it's basically a snowmobile engine. One 
phone call to the original manufacturer of the part provided us the 
name of a Washington area retailer. There, the staff bought the 
identical part for $10.77 including tax--and without 5 months delivery 
time. The staff has examined other equally egregious examples with 
similar results.
  The second issue is overhead costs. While investigating the spare 
parts charges, we discovered that the overhead rates billed by the 
contractor were under question. The subcommittee discovered that a 
relatively new contracting official in the Navy believed overhead costs 
were being pyramided between various subcontractors. To understand 
this, you need to understand the complex structure of the contractors. 
Israeli Aircraft Industries is the originator of the Pioneer and is 
itself a true pioneer in UAV work. As is common for foreign 
contractors, it has an American partner, Aircraft Armament Inc. In 
order to service the Pioneer contract, IAI and AAI created a new and 
jointly owned firm called Pioneer UAV Inc. All this makes perfect 
sense. The problem comes when a part is sold by IAI to AAI to PUI to 
the Navy. If no value is added but overhead charges are tacked on at 
each step, then the taxpayer is losing money. This new Navy contracting 
official wrote a memo last year stating that in his opinion these 
charges constitute pyramiding, thus violating the Federal Acquisition 
Regulations (FAR), and should be disallowed. The Armed Services 
Committee sought to halt this practice when it passed the Defense 
Procurement Reform Act of 1984, but unfortunately this practice may 
still be continuing. This allegation requires further investigation.

  The third issue is readiness. The program's readiness status could 
hardly be worse. The Pioneer Program has a readiness goal of 85 
percent, meaning that percentage of the Pioneer drones should always be 
available for use by our troops on any one day. The actual Pioneer 
combat readiness figure is an appalling 27 percent. Let me note that 
the Pioneer Program office is very aware of this problem. In fact, of 
the five problems I am outlining for you today, this is the only one 
that the program office agrees is a problem. The Pioneer Program office 
is devoting considerable effort to raising the readiness percentage. I 
would not be surprised, however, to discover later in our investigation 
that the unacceptable readiness levels are related to the contractual 
and financial problems I just cited.
  The fourth issue is stewardship. Government officials are charged 
with stewardship of the taxpayers' money in their management of 
programs. This appears to be lacking when it comes to this program. 
Officials responsible for oversight of the program--including 
contracting officers, auditors, investigators and managers--failed to 
respond properly or effectively to substantive allegations of flagrant 
overpricing--potentially exposing the Government to millions of dollars 
in excessive payments. I am not prepared to charge or even hint here 
today that these officials are corrupt and are pocketing some ill-
gotten gains. What appears to be emerging at this point is a case of 
overworked officials getting sloppy and neglectful and failing to 
followup on evidence of excessive charges. In other words, somebody--
many bodies, in fact--were asleep at the wheel. At this point, it would 
be unfair of me to suggest anything more. As I mentioned earlier, 
whistleblowers tried to use Navy channels to clear up the overpricing 
problems they saw. The allegations were not merely verbal accusations 
without substance. The subcommittee discovered that extensive technical 
analysis was done to demonstrate to skeptical program officials what 
many already knew--that the Pioneer system was a non-developmental, 
off-the-shelf system without a need for highly specialized technology 
or expensive support. Logistics personnel collected numerous examples 
of commonly available parts used to support the Pioneer system, which 
were egregiously overpriced. The staff has examined documents that 
dismiss the allegations and those who made them rather than properly 
investigate the charges. Staff even discovered an internal Navy 
investigation--done by Navy contracts officials, not investigators or 
auditors--that concluded there was no basis to the allegations. 
However, buried in the same report is the following statement: ``The 
consensus of the interviewees including the Procuring Contracting 
Officer [PCO] is that the Navy is paying an excessive price for repair 
parts to support the Pioneer system.'' This same investigation failed 
to interview the personnel making the allegations because they were 
outside the Naval Air Systems Command span of management control. 
Finally, this same investigation probed the issue of excessive overhead 
by relying on a Defense Contract Audit Agency [DCAA] audit report which 
raised no objection to the contractor's overhead. However, DCAA 
officials interviewed by the subcommittee admitted that the report in 
question was not an audit report and did not conform to government 
auditing standards, and did not challenge the reasonableness of the 
overhead rates charged by the contractor. This test of reasonableness 
is a crucial element in determining the acceptability of both overhead 
costs and the prices for parts. The FAR is very clear on the issue of 
reasonableness. It states:

       A cost is reasonable if, in its nature and amount, it does 
     not exceed that which would be incurred by a prudent person 
     in the conduct of competitive business. No presumption of 
     reasonableness shall be attached to the incurrence of costs 
     by a contractor. * * * The burden of proof shall be upon the 
     contractor to establish that such cost is reasonable.

  Obviously, this is a very common sense approach intended to prevent 
the kind of procurement disaster we seem to have found in the Pioneer 
system.
  After these other channels proved fruitless, the Naval Criminal 
Investigative Service was alerted by the whistleblowers to the 
allegations. NCIS went back to the Naval Air Systems Command and saw 
the dubious investigation cited above. Relying on that questionable 
work as definitive, NCIS decided to do nothing further.
  Now I come to my fifth and final point. When it became clear that the 
program was the subject of a congressional probe, an investigation was 
launched from within the Navy. I can only describe this so-
called investigation as a bald attempt at a reprisal against those 
dedicated officials who first brought their concerns to the attention 
of the Subcommittee on Oversight and Investigations. The memorandum 
launching this counter-investigation is dated March 2 of this year, 
just a few days after the subcommittee staff met with program 
officials. This memorandum says there have been a number of allegations 
involving the conduct of the Pioneer Program at the Point Mugu Naval 
Air Warfare Center Weapons Division. You may have noticed I have said 
nothing about the problems being at Point Mugu. I will tell you that 
the whistleblowers are at Point Mugu, however. I would be happy to make 
the full text of this memo available to any interested Members. Let me 
just quote a key part, the section outlining the allegations about 
program misconduct:

       These reports include allegations concerning payment of 
     excessive or unreasonable prices for Pioneer spare parts, 
     acceptance of defective parts, inappropriate splitting of 
     procurements to remain under small purchase thresholds, 
     failure to safeguard contractor proprietary information, 
     failure to preserve government rights under warranty 
     provisions, and inappropriate procurements from Original 
     Equipment Manufacturers [OEMs] as opposed to requisitioning 
     through normal defense supply activities.

  Please note that these instructions direct this fact-finding review 
to look for evidence that the personnel at Point Mugu had paid 
excessive prices for parts, which they undoubtedly did although they 
were objecting to the prices, and that they didn't safeguard contractor 
proprietary information, which could be applied to the documents 
clandestinely supplied to this subcommittee. Needless to say, the 
subcommittee will not tolerate acts of reprisal against government 
employees attempting to protect scarce taxpayer dollars or informing 
Congress about longstanding and significant problems on key programs.
  To reiterate, logistics personnel documented as early as mid-1992 
substantial evidence of overpricing, but a comprehensive audit was not 
even requested until after the subcommittee began its investigation in 
February 1994. In conclusion, I plan to ask the Department of Defense 
Inspector General to conduct a full inquiry into the matters we have 
uncovered, including:
  Credible evidence suggests the Government has paid exorbitant and 
excessive prices for commonly available spare parts.
  There are serious questions about overhead costs charged to the 
program being pyramided.
  Pioneer readiness levels are unacceptably low.
  Proper stewardship has been lacking, with credible allegations having 
gone uninvestigated for more than 2 years.
  Program officials may have attempted a reprisal against personnel 
cooperating with the subcommittee's investigation.
  As I said at the beginning, it is not my policy to speak up about an 
investigation before it has been completed. I don't like airing 
allegations before they have been thoroughly and exhaustively looked 
into. Otherwise, you always run the risk of dealing with half-baked 
charges, misplaced facts and numerous other errors, misunderstandings 
and mistakes. I'm breaking with my normal policy this time simply 
because I smell the poison of a reprisal against whistleblowers. I will 
not tolerate that. The Congress cannot exercise its constitutional role 
in oversight if government employees who come here to share information 
are subject to reprisal. It doesn't matter if their allegations pan out 
or not; they must be free to contact the Congress. I put the Department 
of Defense on notice that regardless of how this investigation 
concludes with regard to the allegations of parts overpricing and 
overhead pyramiding, I will not stand still and tolerate any reprisal 
against any of the public employees with whom we have been dealing.
  The Pioneer UAV is an essential ingredient in the ability of our 
fighting forces to collect real time intelligence on the battlefield. 
We cannot allow this capability to be mismanaged and neglected, or the 
consequences to our fighting forces in the field will be dire indeed.

                          ____________________