[Congressional Record Volume 140, Number 146 (Saturday, October 8, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 8, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
   NOMINATION OF COL. CLAUDE M. BOLTON, JR., TO BE BRIGADIER GENERAL

  The Senate continued with the consideration of the nomination.
  Mr. GRASSLEY. Mr. President, I laid out my case on the Bolton 
nomination. And, of course, that is only relative in the sense that it 
is the issues surrounding the mismanagement of the advanced cruise 
missile program. I have done this on seven different occasions over the 
past 18 months.
  This is a story about misuse of taxpayers' money and mismanagement.
  Colonel Bolton was nominated last year by the President for 
advancement to the rank of brigadier general in the regular Air Force. 
The Bolton nomination was recently approved by the Armed Services 
Committee.
  Over the past year, I have expressed several reservations, and 
serious reservations, about the nomination. My reservations about 
Colonel Bolton's promotion result from the way he managed the advanced 
cruise missile and the ACM Program.
  Colonel Bolton was ACM Program Manager from September 1, 1989, to 
September 20, 1992. He was at the wheel when many fateful decisions 
were taken. Those decisions are the source of my concern.
  I have spoken on the floor of the Senate on at least seven different 
occasions: On April 30, 1993; May 28, 1993; July 22, 1993; July 23, 
1993; July 26, 1993; and July 29, 1993.
  I will not give references, but there are references that will be in 
the Record for today for all of those speeches if anybody is interested 
in the background on this.
  Eventually, the last time I spoke on this issue was June 14 this 
year.
  I believe I am able to support each concern with adequate 
documentation. The audit trail of Colonel Bolton's management of the 
Advanced Cruise Missile Program is a mile long, and it is all in the 
Congressional Record. I have placed all the pertinent documents in the 
Congressional Record.
  I believe my concerns about Colonel Bolton's promotion rest on solid 
ground. My concerns flow directly from information presented in records 
prepared by the independent inspector general at the Department of 
Defense and also by the General Accounting Office.
  The inspector general's assessment is buttressed by much damaging 
evidence. The Armed Services Committee gave the ACM Program a thumbs 
down for poor performance and mismanagement. The committee's assessment 
is contained in Senate Report No. 102-357, pages 55 and 57. That report 
is dated July 23, 1992.
  The conference committee on the fiscal year 1993 defense 
authorization bill also gave the ACM Program thumbs down for poor 
performance and management. That assessment is presented in House 
Report No. 102-966, on page 538, dated October 1, 1992.
  If I were a teacher and had to evaluate Colonel Bolton's ACM 
management skills based on these reports alone, I would have to give 
him a D-minus or F. While there are still some loose ends, some 
unanswered questions hanging, I feel, based upon all the evidence, the 
information, that the Senate should not have had to consider this 
nomination.
  I have two main reasons for arriving at that conclusion. First, I 
believe the ACM plan was poorly managed under Colonel Bolton's 
leadership. Second, I believe that while Colonel Bolton was in charge, 
money was obligated and expended to buy ACM's in ways that were 
inconsistent with the laws of the land.
  I would now like to review the facts bearing on that nomination and 
his management of the program. The facts I am about to discuss were 
derived principally from a report prepared by the DOD inspector general 
entitled, ``Missile Procurement Appropriations, Air Force,'' Audit 
Report No. 93-053, dated February 12, 1993.
  I ask unanimous consent to have pages 21 through 24 printed in the 
Record at this point.
  There being no objection, the material was ordered to be printed in 
the Record as follows:

      Audit Report of the Inspector General--Missile Procurement 
                       Appropriations, Air Force

            B. Reprocurement of the Advanced Cruise Missile

       To avoid declaring a violation of the Antideficiency Act, 
     Air Force officials terminated contracts for the Advanced 
     Cruise Missile (ACM) and initiated reprocurement actions the 
     following day using current year funds. They did this because 
     insufficient funds were available in the FYs 1987 and 1988 
     MPAAFs. Because of their Air Force's actions, the Government 
     may have to assume an additional $24 million to $49 million 
     in contractor liabilities. Furthermore, the Air Force's 
     actions did not prevent a violation of the Antideficiency 
     Act.


                         discussion of details

                               Background

       The Air Force was short of funds for the FYs 1987 and 1988 
     ACM contracts. These shortages resulted partly from problems 
     in missile production that required engineering changes. Only 
     $24.2 million remained in the FY 1987 MPAAF, and $31.1 
     million in the FY 1988 MPAAF, to cover unpaid cost overruns. 
     Therefore, on March 25, 1992, the Secretary of the Air Force 
     approved a plan to terminate the ACM procurements at 520 
     missiles and finance the $121 million in cost overruns with 
     FY 1992 funds. On March 31, 1992, the DoD Comptroller denied 
     the Air Force's request to use FY 1992 funds to cover cost 
     overruns. The Air Force then chose another option, discussed 
     below, to pay these costs.

                   Air Force ACM Procurement Actions

       Three options considered. In July 1991, Air Force program 
     officials determined that the cost of the FYs 1987 and 1988 
     ACM contracts would exceed budgeted targets and would 
     approach or exceed ceiling costs. They also learned that the 
     Air Force's FYs 1987 and 1988 MPAAFs did not contain enough 
     funds to cover these adjustments. Air Staff officials were 
     aware of the shortage, which was reported in the Defense 
     Acquisition Executive Summary for August 1991 but was not 
     resolved. Air Force officials considered three options:
       To declare an Antideficiency Act violation in the MPAAF, 
     notify Congress of the MPAAF shortages, and either request a 
     supplemental appropriation or include the ACM requirements in 
     the next budget submission;
       To initiate a ``stop work order'' before depleting budgeted 
     funds, and reprogram funds from other projects or fiscal 
     years to pay for obligations on the ACM; or
       To partially terminate the FYs 1987 and 1988 ACM contracts, 
     reprocure the unexecuted portions with FY 1992 funds, and not 
     report an Antideficiency Act violation.
       The third option was selected, and in March 1992, the 
     Assistant Secretary of the Air Force (Financial Management 
     and Comptroller), with the concurrence of the Assistant 
     Secretary of the Air Force (Acquisition), approved the use of 
     FY 1992 funds to meet requirements that could amount to 
     $111.5 million from FY 1987 and $54.7 million from FY 1988. 
     The Air Force then partially terminated the ACM contracts and 
     used FY 1992 funds to reprocure the remainder of the ACM 
     requirements. Senior Air Force officials gave the following 
     reasons for their actions.
       Chapter 25 of the ``DoD Accounting Manual'' required 
     budgeting to target when funding major procurements.
       No requirement existed to record upward adjustments as 
     obligations until they were incurred.
       It was legal to cancel a contract one day, create a new 
     contract the next day, and fund FYs 1987 and 1988 
     requirements with FY 1992 dollars, although the prior year 
     contracts had been terminated to avoid Antideficiency Act 
     violations in prior year accounts.
       The Antideficiency Act had not been violated, since 
     contractual obligations had not been recorded or executed.
       Their actions prevented additional costs from being 
     incurred on the FYs 1987 and 1988 contracts, for which 
     expired year funds were not available; minimized the costs of 
     terminating contracts; and sustained current production to 
     meet operational requirements.
       In April 1992, the Air Force informed Congress of the 
     decision to terminate and reprocure the FYs 1987 and 1988 
     requirements for the ACM, and provided Congress with a 
     closeout plan explaining the actions taken (see Appendix C).
       Potential for increased liability. In our opinion, the Air 
     Force's procurement actions were improper because the cost 
     growth on the ACM contract did not result from out-of-scope 
     changes or new work. The costs of within-scope changes and 
     cost growth not related to new work were properly chargeable 
     only to FYs 1987 and 1988 funds. Because of the new ACM 
     contracts, the Air Force may have to pay an additional $49 
     million in contract termination costs and liabilities that 
     would have been absorbed by the contractor under the original 
     contracts. The following table shows the additional 
     reprocurement costs that the Air Force may have to pay.

                       ACM REPROCUREMENT LIABILITY                      
                          [Dollars in millions]                         
------------------------------------------------------------------------
                                                         Fiscal year--  
                      Liability                        -----------------
                                                         1987      1988 
------------------------------------------------------------------------
Target-to-ceiling cost................................    $20.0    $24.0
Termination cost......................................      5.0        0
                                                       -----------------
      Total liabilities...............................     25.0     24.0
------------------------------------------------------------------------

       Funding deficiencies. The Air Force's use of FY 1992 funds 
     to fund obligations and obligational adjustments properly 
     chargeable to the MPAAFs for FYs 1987 and 1988, and its delay 
     in recording the obligations, did not relieve the Air Force 
     of its responsibility to investigate and report violations of 
     the Antideficiency Act. In August 1991, Air Force officials 
     recognized that the ACM program had funding problems; 
     however, they said that they did not ask Congress for a 
     supplemental appropriation because the June 13, 1991, 
     guidance from the DoD Comptroller required the use of current 
     year funds in such cases.
       Disclosure to Congress. The Air Force also did not 
     specifically disclose to Congress the increased costs that 
     may have been incurred by terminating and reprocuring ACM 
     requirements. In addition to incurring termination costs and 
     penalties, the Government will have to pay the contractor's 
     share (30 percent) of the liability for cost growth over 
     target. Although program officials said that the contractor 
     would not be allowed to use the new contract to recoup 
     previous losses, the increased costs are estimated at $24 
     million to $49 million. Officials said that the contractor 
     will absorb $25 million in FY 1987 liabilities; however, they 
     expect at least a $24 million loss to the Government. Based 
     on the closeout plan that the Air Force provided to Congress 
     (Appendix C), we computed that the Government's liabilities 
     resulting from contract termination could total $79.7 
     million. However, neither this figure nor the estimated 
     liability of $24 million to $49 million was included in the 
     plan. The full impact of the Air Force's actions cannot be 
     determined until the new letter contracts are definitized. 
     After contracts were terminated, Congress rescinded the FY 
     1992 MPAAF funds that the Air Force intended to use for the 
     reprocurement. As a result, the Air Force has incurred 
     additional costs by entering into a new procurement, and must 
     use another source of funds for the new ACM contracts.

                               Conclusion

       The Air Force breached its fiduciary responsibility by 
     incurring additional costs in an attempt to avoid reporting a 
     violation of the Antideficiency Act. The decision of the 
     Assistant Secretary of the Air Force (Financial Management 
     and Comptroller) to finance a plan that would terminate parts 
     of the FYs 1987 and 1988 ACM contracts and reprocure with new 
     contracts was fiscally imprudent. We believe that the 
     termination for convenience and the reprocurement will 
     cost an additional $24 million to $49 million and do not 
     relieve the Air Force of its responsibility to report a 
     violation of the Antideficiency Act. Since Congress 
     rescinded the FY 1992 funds that the Air Force planned to 
     use for this reprocurement, the Air Force must find a 
     legally available source of funds for the new contracts. 
     Termination and reprocurement costs must also be charged 
     to a supplemental appropriation unless sufficient funds 
     remain in the original appropriations to cover these 
     costs, because these costs are not chargeable to current 
     appropriation accounts. The full impact of the Air Force's 
     actions will not be known until the new contracts are 
     definitized and Congress determines the number of missiles 
     to be purchased. The Air Force tried unsuccessfully to use 
     FY 1992 funds to pay for cost increases in the ACM because 
     FYs 1987 and 1988 funds were insufficient. The 
     Antideficiency Act was violated when the Air Force 
     recognized that the cost to complete the ACM had exceeded 
     amounts available for obligations, but permitted work to 
     continue. Deficiencies in the FYs 1987 and 1988 MPAAFs are 
     unresolved, the Antideficiency Act has been violated, and 
     the Air Force has incurred additional costs by not 
     reporting Antideficiency Act violations and requesting 
     Congressional relief.


                 recommendations for corrective action

       See Finding A for our recommendations to correct problems 
     with the procurement and funding of the ACM. Actions to 
     correct the problems noted in this finding will be the same 
     as actions for Finding A.

  Mr. GRASSLEY. The problem Colonel Bolton had to wrestle with was a 
burgeoning cost overrun on two fixed-price contracts to procure 251 ACM 
missiles. These contracts covered the fiscal years 1987 and 1988 
buyings in ACM missiles. General Dynamics' Convair Division was the 
contractor. These contracts were signed on September 25, 1989, and 
January 30, 1990. At the time, the Air Force low-balled it and budgeted 
it to the target price.
  By budgeting to the target price, the Air Force left itself no 
cushion. Yet the Government was obligated by the ACM contracts to cover 
70 percent of all costs between target and ceiling. The troubled 
contracts were for fiscal years 1987 and 1988. Technical problems with 
the missile itself led to delays. Delays in turn generated a need for 
more money. The GAO claims the Air Force knew about the funding 
shortfalls even before the contracts were signed, but was planning to 
tap into M accounts to bail out the program down the road.
  As the Presiding Officer and I know, the days of the M accounts, 
those were the real old days. They could cover cost overruns with the M 
accounts, and they could do it out of sight, beyond even the purview of 
Congress. The doors to that magic vault were slammed shut by law 
changes before that happened.
  The inspector general's reports provides two very important facts. It 
tells us, first, in July 1991, program officials knew that the costs to 
complete the fiscal years 1987 and 1988 contracts would exceed the 
target price. And that target price is the amount authorized and 
appropriated. Second, the amounts remaining for the fiscal years 1987 
and 1988 missile procurement accounts were insufficient to cover cost 
overruns.
  That piece of information tells us that in June 1991, ACM program 
officials knew that the Government's obligations exceeded the amounts 
remaining in the fiscal years 1987 and 1988 missile procurement 
appropriations accounts. This is a very serious problem, indeed. It is 
a very serious problem. If ACM program officials were aware of the 
problem, then I think it is reasonable to assume that the program 
manager, Colonel Bolton, knew about it as well. Money is the lifeblood 
of any program, and as the supply starts to get low, surely the program 
manager would be one of the first to know. As program manager, he had 
to know how much money he had and what he owed. He must have known that 
he was at least $100 million short, and the shortage was increasing 
each day.
  In late October 1991, a request for more money began working its way 
up through the chain of command. The amount needed to cover the cost 
overrun totaled $98.6 million; $71.5 million for fiscal year 1987, 
$27.1 million for fiscal year 1988. En route, this request even 
expanded to $112.2 million. The request went to Air Force headquarters 
in Washington, DC, and eventually ended up on the desk of the 
appropriations account manager.
  It did not take the account manager long to figure out that these 
accounts were overdrawn. Obligations exceeded available appropriations. 
The official word went back to the field on November 26, 1991, 
entitled, ``Funding of this magnitude is not presently available.'' 
That is what they said. There is just no money. And the official report 
said so.
  So what does it really mean? It means there is not enough money in 
the bank to cover Colonel Bolton's bills. Colonel Bolton was now in hot 
water. He had to pay money but no money to pay it with. He had to pay 
the bills--no money. His program was overobligated. He had a potential 
Anti-Deficiency Act violation.
  Who had knowledge and awareness of this potential Anti-Deficiency Act 
violation within Air Force headquarters? I have documents to prove that 
a Mr. Michael B. Donley did. He was Assistant Secretary of Air Force 
for Financial Management and Comptroller at the time. I have documents 
to prove that a Mr. John W. Beach did. He is the principal Deputy 
Assistant Secretary of Air Force for Financial Management. I have 
documents to prove that several others knew it as well. The inspector 
general said the law had been violated at this point. The inspector 
general concluded that the Anti-Deficiency Act was violated when the 
Air Force recognized that the costs to complete the ACM had exceeded 
amounts available for obligations but permitted work to continue.
  At this point let me say, earlier today the distinguished chairman of 
the Armed Services Committee said that his committee had looked into it 
and come to the conclusion that the Anti-Deficiency Act had not been 
violated. But we still have the independent inspector general 
concluding that the Anti-Deficiency Act was violated. And that is why 
we put those inspectors general there, to be independent of the 
political power in Washington, to make an independent judgment if there 
is a waste or illegal use of the taxpayers' money.
  The independent inspector general concluded in this case that the 
Anti-Deficiency Act was violated.
  Funding in fiscal years 1987 and 1988 missile procurement accounts 
had been depleted, in other words. When that happened, the inspector 
general said the ACM program was in violation of the act.
  Under the law, Colonel Bolton's options were severely limited at that 
point. Once he realized that outstanding obligations exceeded available 
appropriations, he was staring down the throat of a potential violation 
of the Anti-Deficiency Act, and that is section 1341, title 31 of the 
United States Code.
  First, he should have issued a stop order, but he did not. Next, he 
was required by law, section 1351, title 31, to investigate and report 
potential violations of the law. As a responsible head of an 
organizational unit involved, that is what Bolton was supposed to have 
done.
  He was supposed to investigate the circumstances surrounding the 
violation and to do it immediately. He was supposed to report the 
violations up through official channels, describing the circumstances 
of the violation and naming those responsible for the violation. Those 
orders are spelled out in DOD Directive 7200.1, the directive that 
controls such matters.
  A violation of the Anti-Deficiency Act, as we know, is a very serious 
matter. It means that congressional funding limits have been exceeded. 
Violations carry criminal penalties. It is a felony. Those who 
knowingly or willfully violate the law can be sent to prison or fined. 
Few have been prosecuted for it, but many a fine career has been ruined 
by Anti-Deficiency Act violations.
  Colonel Bolton was required by law to report and investigate a 
potential violation of the Anti-Deficiency Act. Others above him who 
were further up the chain of command also had a responsibility to do 
the same. They are supposed to report the violation to the President 
and report it to Congress, along with all the relevant facts and a 
statement of actions taken. That is what the law says.
  They also had a responsibility to report the problem to Congress and 
to request a deficiency appropriation to complete the program in an 
orderly way.
  When you run out of money, as Colonel Bolton did, then you are 
supposed to come to the Congress--maybe hat in hand, but what 
difference does it make; that is what the law requires--and to request 
legislative relief. That is the way to do it if you are going to follow 
the law. Unfortunately, none of these things were done. Instead, the 
Air Force chose to pursue a devious, a destructive, and a wasteful plan 
to avoid reporting a violation of law.
  So this is the infamous advanced cruise missile--ACM--reprocurement 
scheme. I think the reprocurement scheme was an attempt to hide or to 
conceal a violation of law. I hope that the ACM procurement action is 
not a prototype approach for covering cost overruns for the post M 
account era.
  The Presiding Officer is going to want to observe this. We did away 
with the M accounts. Are they now having another scheme to set up some 
other way of covering these violations of law and these cost overruns 
without having to come to Congress? I hope not. But I think we ought to 
be aware of the possibility that that could happen.
  Let me say, there has been nobody who has been a better watchdog of 
the Pentagon than the distinguished Senator from Arkansas, who is now 
presiding over this body.
  Clearly, the scheme plan was designed to use contracts to overturn 
and circumvent the law and to generate cash outside the law. The plan 
was approved by Mr. Michael B. Donley, the Air Force's chief financial 
officer and comptroller, and the reprocurement plan was disapproved, 
however, by the DOD comptroller, Mr. Sean O'Keefe. Mr. O'Keefe 
disapproved the plan because it was illegal to use current-year 
appropriations to cover cost overruns on prior-year contracts. On March 
31, 1992, Mr. O'Keefe specifically ordered Mr. Donley not to carry out 
the plan.
  I ask unanimous consent to print Mr. O'Keefe's order in the Record.
  There being no objection, the memorandum was ordered to be printed in 
the Record, as follows:

                                                Comptroller of the


                                        Department of Defense,

                                   Washington, DC, March 31, 1992.
     Memorandum for the Assistant Secretary of the Air Force 
         (Financial Management and Comptroller).
     Subject: Advanced Cruise Missile Program Funding.
       It is evident from your memorandum of March 27, 1992, that 
     you have not been kept informed of the ongoing staff level 
     discussions relative to the appropriate use of prior and 
     current year funds. In these discussions it has been clear 
     that prior year contract adjustments to cover target to 
     ceiling cost adjustments are chargeable only to the fiscal 
     year appropriation of the contract.
       Your staff has been asked, on several occasions, to develop 
     a paper supporting the position that the FY 1992 ACM program 
     funds could be appropriately charged to cover the cost of the 
     prior year programs. Until such time as a legal 
     determination, based on the facts peculiar to this program, 
     is approved by Counsel, you should not proceed to charge 
     current year funds as proposed.
                                                     Sean O'Keefe.

  Mr. GRASSLEY. Mr. President, the Air Force ignored the DOD 
comptroller's order. Can you believe that? The DOD said, ``Don't pay 
for it that way.'' The Air Force ignored it and went ahead with the 
plan anyway.
  In May 1992, the Air Force began terminating contracts, and they did 
this to generate cash to pay the contractor for the cost overruns for 
the fiscal years 1987 and 1988.
  The balance in the missile procurement appropriations account on 
March 31, 1992, on the eve of the ACM reprocurement action, was minus 
$118.9 million for fiscal year 1987, and minus $183 million for fiscal 
year 1988.
  Mr. President, it is hard to pay bills from a bank account that has 
such negative balances. Those figures are drawn from the inspector 
general's audit report. The Air Force's own figures for the same date, 
March 31, 1992, shows that the ACM contract was in trouble. The ACM 
contract fund status report shows that contract work authorized totaled 
$616,218,000, while the funding authorized totaled only $569,869,000. 
So comparing those figures, the contract was overobligated.
  No matter how you slice it, the ACM program was in violation of the 
Anti-Deficiency Act in March 1992. The Air Force had bills to pay but 
no money to pay them. Obligations exceeded available appropriations. 
That should be a show stopper for most program managers anyplace else 
in operations in the Defense Department. But it was not, and it 
probably will not be in the future.
  The Air Force terminated the fiscal year 1990, fiscal year 1991, and 
fiscal year 1992 contracts to pay back bills. The fiscal year 1990 
through 1992 missiles were sacrificed to save the fiscal year 1987 and 
1988 missiles, and perhaps Colonel Bolton's career and the careers of 
others higher up.
  Since the law forbids the use of fiscal years 1990 to 1992 money to 
cover cost overruns for fiscal years 1987 and 1988, the Air Force had 
to devise a clever money laundering scheme, and they did. It got 
blessed all the way up the line, even by the Secretary at the time, Mr. 
Rice.
  First, the Air Force terminated fiscal years 1988 and 1987 contracts 
one day for the convenience of the Government and then immediately, 
within a few days, went right out and reawarded new contracts to the 
same company.
  That is called reprocurement. I call it simply a laundry operation. 
It is a way of trying to make old work look like new work. You douse 
the old work with a little perfume and, presto, it smells and looks 
just like new work. It is all white, it is all starched, it is like 
sending your dirty shirts to the blanchery. The Air Force even gave the 
contractor $587,000 to relabel the missiles. This was another futile 
attempt to make the work and money match up. But even half a million 
dollars' worth of new labels did not quite do it.
  Mr. President, I ask unanimous consent to print an Air Force 
information paper on the ACM relabeling operation in the Record.
  There being no objection, the paper was ordered to be printed in the 
Record, as follows:

                              [Memorandum]

                                      Department of the Air Force,


                            Office of the assistant Secretary,

                                                  August 11, 1993.
     Mr. Charlie Murphy,
     Senator Grassley's Office.
       Charlie, Attached our response to your question on the Re-
     labeling. I should have answers to your other questions next 
     week. Call if you need more information.

                                               Gary M. Rusnak,

         Assistant for Congressional Matters, Office of Budget & 
           Appropriations Liaison.
                                  ____


                Department of Defense Information Paper

                                                  August 11, 1993.
     Service/Agency: Department of the Air Force.
     Appropriation Account: Procurement, AF.
     Budget Activity: 0101120F.
     Subject: ACM Program Status Report.
       1. Question; Why did the Air Force spend $600,000 to ``re-
     label'' 120 FY 1987 and FY 1988 ACM missiles?
       2. Response: The Air Force did not spend $600,000 to ``re-
     label'' 120 FY87 and 1988 ACM missiles. The Air Force did 
     spend $586,702 for a variety of tasks that the contractor 
     would not have performed had the original contracts continued 
     without termination. These tasks were captured under the 
     activity entitled ``Administrative Restructure Costs.'' The 
     effort to change tail number documentation is just one 
     example of the type of tasks included in ``Administrative 
     Restructure Costs'' and was never intended to be interpreted 
     as the only task involved. Since the actual nameplates were 
     not yet installed on any of the missiles involved when the 
     Air Force bill was paid, the Government did pay for any 
     hardware changes. The Air Force paid approximately 2.8% of 
     the total settled amount (or approximately $16,500) to change 
     the nameplate documentation for the tail numbers. The tasks 
     in the settled amount of $586,702 not only included those 
     required to change the tail number documents, but the 
     following efforts as well:
       a. Establish accounts for the new FY92 contract and 
     allocate costs to the appropriate contracts.
       b. Sort all tasks on the FY87 and FY88 contracts into those 
     that are completed and those requiring completion and the 
     subsequent development of contract line items.
       c. Prepare proposals, fact, find, and negotiate the entire 
     restructure of the program. This activity included writing 
     and negotiating special contract provisions for an extremely 
     complicated restructure which required many resources and 
     stretched over a twelve month period. This activity also 
     included the Administrative Restructure proposal and 
     negotiations.
       d. Develop the FY90/91 residual material lists.
       e. Change the Government Furnished Property (GFP) Documents 
     and system for accounting for GFP.
       f. Change the configuration status accounting system and 
     other documentation including Air Force technical orders and 
     all other contract data requirements to reflect the changed 
     tail numbers.
       3. Please provide a line-by-line comparison of the 
     information on the new labels versus the information on the 
     original labels. Were the serial numbers changed? Were the 
     contract numbers changed? Were the fiscal years changed? If 
     changed, what information was placed on the new labels? 
     Exactly how did the information on the labels change?
       4. Response: The following table shows the old tail 
     numbers/old contracts and new tail numbers/new contracts to 
     which they were changed. The term ``tail number'' is 
     synonymous with the term ``serial number.'' The contract 
     numbers were also changed along with the Fiscal Years as 
     reflected in the table. The Fiscal Year is reflected in the 
     first part of the tail/serial number.

                                                  TAIL NUMBERS                                                  
----------------------------------------------------------------------------------------------------------------
                                           Contract number/Fiscal year                                          
-----------------------------------------------------------------------------------------------------------------
  F33657-88-C-0103      F33657-88-C-0103      F33657-89-C-0082     F33657-89-C-0082     F33657-91-C-0032 Fiscal 
   Fiscal year 87        Fiscal year 88        Fiscal year 90       Fiscal year 91              year 92         
----------------------------------------------------------------------------------------------------------------
87-0803.............  ....................  ...................  ...................  92-13000                  
87-0804.............  ....................  ...................  ...................  92-13001                  
87-0843.............  ....................  ...................  ...................  92-13002                  
87-0845.............  ....................  ...................  ...................  92-13003                  
87-0846.............  ....................  ...................  ...................  92-13004                  
87-0856.............  ....................  ...................  ...................  92-13005                  
87-0857.............  ....................  ...................  ...................  92-13006                  
87-0860.............  ....................  ...................  ...................  92-13007                  
87-0861.............  ....................  ...................  ...................  92-13008                  
87-0865.............  ....................  ...................  ...................  92-13009                  
87-0867.............  ....................  ...................  ...................  92-13010                  
thru 87-0952........                                                                  thru 92-13095             
                      88-1362 thru 88-1376  90-0061 thru 90-     ...................  ..........................
                                             0075.                                                              
                      88-1377 thru 88-1385  ...................  91-0180 thru 91-     ..........................
                                                                  0188.                                         
                      88-1386 thru 88-1408  ...................  ...................  92-13097                  
                                                                                      thru 92-13119             
                      88-1423.............  ...................  ...................  92-13096                  
----------------------------------------------------------------------------------------------------------------
The numbers in italics are the new tail/serial numbers. The regular type numbers are the old tail/serial        
  numbers.                                                                                                      

                               Memorandum

     To: Major Gary Rusnak, Budget Liaison Office.
     From: Charlie Murphy, Office of Senator Grassley.
     Date: July 26, 1993.
     Subj: ACM Reprocurement.
       I have several questions regarding the ACM reprocurement 
     scheme.
       Why did the Air Force spend $600,000 to ``re-label'' 120 FY 
     1987 and 1988 ACM missiles?
       Please provide a line-by-line comparison of the information 
     on the new labels versus the information on the original 
     labels. Were the serial numbers changed? Were the contract 
     numbers changed? Were the fiscal years changed? If changed, 
     what information was placed on the new labels. Exactly how 
     did the information on the labels change.
       A response is requested by August 9, 1993.
  Mr. GRASSLEY. Thank you, Mr. President. The fact is, you can put a 
new label on an old missile, but it is still an old missile.
  What was the job that had to be done? What was the work at hand? Why 
was the extra money needed? The answer is simple: Finish 144 incomplete 
fiscal years 1987 and 1988 missiles; fiscal years 1990 through 1992 
dollars were used to finish those 144 missiles. This is a possible 
violation of sections 1301 and 1502, title 31, United States Code.
  The net result of this illegal maneuvering was a loss of 60 missiles. 
Those 60 missiles were partially complete when their contracts were 
terminated to regenerate the cash. None of the terminated fiscal years 
1990 through 1992 missiles were ever completed. Those 66 missiles were 
left for scrap on the factory floor. They remain in bonded storage at 
the Hughes plant in San Diego, CA.
  The Air Force has tried to assure me that--and these are their 
words--``residual ACM materials are,'' in their words, ``adequately 
controlled.''
  Control of residual material is not my concern. It is the very 
existence of the ACM residual material that bothers me and the cute 
laundering that went on to cover cost overruns of contracts for 1987 
and 1988 and we got 60 missiles that are probably nothing but scrap on 
the floor there in San Diego.
  Now, the Air Force will tell you these are spare parts. Let me tell 
you they have plenty of spare parts. They do not need any more spare 
parts. That is just an excuse.
  The General Accounting Office recently examined all the contracts 
issued surrounding what I have just described here, this reprocurement 
scheme. The result of that work is laid out in a report entitled, 
``Strategic Missiles: Issues Regarding Advanced Cruise Missile Program 
Restructuring, NSIAD-94-145'' dated May 1994. And that is recent. I 
have quoted some older documents, but this as recent as 4 months ago.
  The General Accounting Office looked at this. Now, the General 
Accounting Office estimates that the stored material is worth $227 
million but suggests that some portion of this material could be used 
for spare parts.
  I do not buy that argument. It does not make sense. Those spare parts 
should be excess to requirements. The Air Force should have bought 
enough spare parts to support all operational ACM missiles. More spares 
are redundant and unnecessary. Having unneeded spares so no way to 
lessen waste and mismanagement in this ACM program. The excess spares 
are nothing more than an ACM missile that was never assembled and 
delivered--60 of them.
  The Air Force paid General Dynamics top dollar for all-up missiles 
but got nothing of value. That is the bottom line, nothing. They threw 
the missiles on the scrap heap to conceal a very blatant violation of 
law. This is destructive, this is wasteful, and it amounts to lost 
military capability. At $5 million a shot--and that is the figure--that 
amounts to at least $300 million poured down the rathole, trashed. When 
termination cost and everything else is included, total losses on ACM 
contracts would easily approach $400 million or more.
  My discussion to this point has been based mainly on the fine work 
done by the inspector general and the General Accounting Office.
  I would like now to shift gears and examine the problems through the 
eyes of the Armed Services Committee. Its appraisal appears on pages 55 
to 57 of report No. 102-352. The committee's appraisal is very honest, 
but it is also very damaging. The committee--and this is their word--is 
``distressed'' by what happened in the ACM program.
  The committee took a dim view of the ACM reprocurement scheme. While 
the committee never mentions Colonel Bolton by name, the mismanagement 
described in the committee's report clearly happened on Colonel 
Bolton's watch. The committee said, ``By terminating the contracts for 
convenience, the Air Force both gave up its negotiated ceiling cost cap 
and jeopardized the warranties on practically completed ACM's.''
  The committee criticized the Air Force for doing this, and these are 
their words, ``without prior consultation with the Congressional 
defense committees.''
  The Air Force should have come then, in other words, to Congress and 
should have asked for relief. That is what the antideficiency law 
requires. The Air Force should have submitted requests to cover these 
shortfalls. The money should have been reviewed by Congress. The money 
should have been appropriated by Congress if it was needed. You should 
not have had this money laundering, canceling of contracts to cover 
cost overruns of 1987 and 1988 and then issue new contracts almost the 
next day. The committee had this to say:

       Had new contracts been completed, the Air Force would have 
     had to pay both more profit to the contractor than would have 
     been provided under the original contracts and more than the 
     ceiling amounts in the original contracts.

  The words of the Armed Services report.
  Well, we do not know exactly how all of this played out, but it sure 
does not sound very good. Here is some more from the committee report. 
The Armed Services Committee of the Senate said this:

       The Air Force has dug itself into a deep hole on the ACM 
     program . . . and the Committee does not intend to extricate 
     the Air Force from its current predicament. . . . The 
     Committee does not intend to solve this Air Force problem.

  So I think it is very clear that the committee was angry about the 
way the Air Force was running the ACM program. The committee feared 
their program would ``end in expensive and wasteful disarray.'' That is 
a quote.
  Well, it seems like the committee fears came about. The same concerns 
were echoed in a conference report in the fiscal year 1993 defense 
authorization bill, House report 102-966, page 538. The conference 
committee gave the ACM a thumbs down appraisal. The conferees expressed 
frustration and serious concern over the possibility of repetitions of 
the ``ACM fiasco.''
  Those words, ``ACM fiasco'' are in the House report. The committee 
feared that the Air Force had no plan to avoid such fiascoes other than 
to ask congressional defense committees for a bailout.
  That is what the House report said--the conferees looked on the ACM 
program as a fiasco. That is kind of like saying it is a total failure. 
Those responsible for such mismanagement and waste must be identified 
and must be removed from office. They must be held accountable in some 
way.
  So that is how I got to where I am on Colonel Bolton's nomination. 
Obviously, almost nobody in this body agrees. There are people here who 
know that the ACM program is wrong, but they do not see Bolton, as 
program manager, as the one who ought to have his head chopped off as a 
result of it.
  That would not be so bad in and of itself, Mr. President, but 
somewhere in the management of this program, from program manager up 
the chain someplace, somebody ought to pay a price for this.
  In a similar program I am going to talk about, the C-17 program, the 
program manager, a guy by the name of Butchko, his head was chopped 
off. He was removed from that position. But somehow when it comes to 
the ACM and Colonel Bolton, it is not his fault; it is somebody else's 
fault higher up.
  OK with me. I do not care. But how are you ever going to get 
accountability of the taxpayers' dollars; how are you going to see that 
the law is followed; how are you going to make sure that the 
antideficiency law is not violated; and, if it is violated, somebody is 
going to be punished if there is not accountability?
  It seems to me the title program manager makes you accountable. And, 
remember, as I said to Senator Nunn earlier--he said, well, Colonel 
Bolton reported this. He should be praised for reporting it.
  But remember, he came on this job in 1989. We have a 1991 DOD IG 
report that said there is possible violation of the Antideficiency Act. 
That was on Colonel Bolton's watch. And that is by the independent DOD 
IG.
  I think I have to take the judgment of an independent person whose 
job is to see that the taxpayers' money is spent wisely and honestly 
and legally and that that person is not subject to political pressure. 
And the IG's are set up to be independent. In other words, not subject 
to political pressure Colonel Bolton was program manager September 1989 
through September 1992.
  The inspector general's findings are unambiguous and conclusive. 
Under law, the inspector general is authorized to investigate and 
report violations of the law and to fix responsibility when necessary. 
I also believe that Colonel Bolton is responsible for the reprocurement 
plan and its wasteful aftermath. While the reprocurement plan was 
developed, approved and directed from Air Force headquarters, Colonel 
Bolton as program manager was responsible for carrying out that plan, 
and he did carry it out. That plan was destructive.
  What is wrong with that is that the plan was destructive. It was 
wasteful and it was illegal.
  For 50 years our society has not accepted the excuse of militaries 
anywhere in the world that carrying out orders and violating law is an 
excuse. Remember one of our principal adversaries this century. A lot 
of the people in the officer corps tried to avoid responsibility for 
the murder of a lot of innocent citizens in Europe during World War II 
because they were just carrying out orders.
  It is the ethic within the military to not tolerate cheating, 
stealing, or put up with nobody that does the same. That has to be true 
of anybody who takes an oath to uphold the laws of their country, and 
our military people do. It seems to me that just because it was higher 
up, a program manager cannot allow the violation of law.
  As I said before, if Colonel Bolton is not responsible as program 
manager, whereas Butchko was, on the C-17, then somebody is 
responsible. Because if you do not hold somebody responsible, how are 
you ever going to get any accountability in Government?
  If it is as bad as has been referred to, that there is something 
wrong with the system, you cannot always be blaming the system because 
that is like blaming no one. You never have responsibility in that sort 
of environment.
  I know that when it comes to procurement the Armed Services Committee 
of this body has taken a great deal of time over the last few years to 
get changes in law and changes in regulations and procedures to make 
sure that we get a better system. I compliment them on that. It does 
not matter how good the system is. If you do not hold people 
responsible and accountable when they do something wrong, particularly 
if they violate the Anti-Deficiency Act, how are you going to ever get 
accounting?
  In view of the Air Force's challenge, the inspector general asked the 
General Accounting Office to resolve the conflict and to render a final 
opinion. The General Accounting Office's opinion is expected to be 
issued sometime this fall.
  Mr. President, I want to bring this unresolved issue to the attention 
of my colleagues. I would hope that we would not have proceeded with 
the nomination of Colonel Bolton until all of these facts were in. The 
committee decided to.
  The distinguished chairman of the committee has in a colloquy here on 
the floor of this body consented to writing to the Department of 
Defense, specifically including the independent DOD Inspector General 
to look at this whole program. The program itself has been looked at, 
but look at it from the standpoint of who is responsible. Somebody has 
to be responsible when you have $300 million worth of scrap in the 
Hughes warehouse in San Diego of uncompleted ACM missile.


 concluding remarks on the nomination of col. claude bolton, u.s. air 
               force, for promotion to brigadier general

  Mr. NUNN. Mr. President, I urge the Senate to support the nomination 
of Col. Claude Bolton, U.S. Air Force, for promotion to the grade of 
brigadier general.
  Colonel Bolton is a Vietnam combat veteran, where he flew over 200 
combat missions, including 40 missions over North Vietnam. Following 
his service in Vietnam, he served as a test pilot for the F-4, the F-
111, and F-15 aircraft. More recently, he was the first program manager 
for Advanced Tactical Fighter Technologies Program, which evolved into 
the F-22. He then served as the program manager for the Advanced Cruise 
Missile Program. According to Deputy Secretary of Defense Deutch, 
Colonel Bolton ``turned around a troubled program and produced 
technically sound missiles meeting the requirements of the Air Force.''
  Since March 1993, he has served as the commandant of the Defense 
Systems Management College. Deputy Secretary Deutch has advised the 
committee that he has ``had the opportunity to personally observe 
Colonel Bolton's performance over the last 18 months in his capacity as 
the commander of the Defense Systems Management College. His service in 
that capacity, as in his earlier assignment, has been outstanding.''
  Colonel Bolton was selected for promotion by a duly authorized 
selection board. He was nominated for promotion by the Senate. He 
deserves this promotion.
  Senator Grassley has spoken in detail about the funding problems for 
the advanced cruise missile. Our committee is well aware of those 
problems. What is important here, however, is that Colonel Bolton did 
not cause those problems, and he acted promptly to address them. He 
brought the problems to the attention of his superiors, and they 
designed a funding plan.
  On September 30, 1994, Deputy Secretary Deutch provided the committee 
with his views on the issues concerning Colonel Bolton and the advanced 
cruise missile:

       I have personally reviewed the issues that have been raised 
     about his management of the ACM program as a result of a DOD 
     Inspector General Report on Air Force missile procurement. 
     The report, which did not allege any misconduct or other 
     deficiency by Colonel Bolton, recommended that the Air Force 
     review and report on violations of the Anti-Deficiency Act. 
     The Air Force conducted the review, and determined that the 
     actions taken to fund the program did not violate the Anti-
     Deficiency Act. The Department of Defense General Counsel and 
     the DOD Comptroller both have concurred in this 
     determination.

  Secretary Deutch added:

       It is important to note that the funding decisions at issue 
     were not made by Colonel Bolton; rather, they were made by 
     the Secretary of the Air Force, with the advice and 
     concurrence of the senior leadership of the service. Colonel 
     Bolton reasonably and properly relied on their decisions and 
     direction in his implementation of the program.

  In summary, Mr. President, Colonel Bolton is a combat veteran and an 
acquisition specialist whose record has been characterized by the 
leaders of the Department of Defense as outstanding. With respect to 
the ACM program, the Deputy Secretary has noted that there is ``no 
basis * * * for concluding that there was any significant deficiency in 
Colonel Bolton's management of the program. On the contrary, * * * he 
acted with professionalism and integrity to identify problems and 
implement the decisions made by authorized superior officials.''
  Secretary Deutch concluded:

       Colonel Bolton has served his Nation with skill and 
     dignity. I am confident that he has much more to offer our 
     Nation.* * *

  Mr. President, whatever disagreements may exist between the IG and 
the Air Force on the funding of the advanced cruise missile, they 
involve decisions that were made above Colonel Bolton's level by the 
Secretary of the Air Force in the last administration. He has an 
outstanding record and he should be confirmed.


       the nomination of air force Lt. gen. edward p. barry, jr.

  Mr. GRASSLEY. Mr. President, I would now like to give my reasons for 
opposing the pending nomination of Air Force Lt. Gen. Edward P. Barry, 
Jr.
  General Barry is currently serving as the commander, Space and 
Missile Center, Air Force Material Command, Los Angeles Air Force 
Station, CA.
  He applied for retirement on May 4, 1993.
  His decision to retire came after he was disciplined by the Secretary 
of Defense for his involvement in a scheme to make illegal progress 
payment to McDonnell Douglas on the C-17 aircraft program.
  On October 28, 1993, the President nominated General Barry for 
advancement on the retired list in the grade of lieutenant general, 
effective December 1, 1993.
  Since the Senate did not act on his nomination, General Barry did not 
retire as planned.
  And we will be acting on it this year before we adjourn now. But I 
want to state my opposition to the Barry nomination.
  My opposition to the Barry nomination stems from his activities while 
program executive officer for tactical and airlift programs.
  He occupied that position from February 1990, until July 1991.
  During that period of time, he was responsible for program planning 
and execution of the advanced tactical fighter, F-15, F-16, T-1A, and 
C-17 aircraft programs.
  His decisions on the C-17 aircraft are the primary source of my 
concern.
  Once again, Mr. President, my objection to a nominee rests squarely 
on the work of the inspector general at the Department of Defense.
  In January 1993, the inspector general concluded an indepth 
investigation into Air Force payments to McDonnell Douglas on C-17 
contracts.
  The results of that investigation are contained in a report entitled 
``Government Actions Concerning McDonnell Douglas Corporation Financial 
Condition During 1990.''
  The inspector general found that a group of five senior Air Force 
officials acted in concert to carry out a scheme--based on ``false 
information and improper cost charging practices''--to make illegal 
progress payments to McDonnell Douglas.
  Mr. President, in simple terms, this was a backdoor bailout operation 
to help McDonnell Douglas out of a financial tight spot.
  The investigation focused on transactions that occurred between July 
1, 1990, and December 31, 1990.
  The inspector general recommended that disciplinary action be taken 
against five senior Air Force officials, including the C-17 program 
executive officer, Lieutenant General Barry.
  The other four officials recommended for disciplinary action were as 
follows: former Deputy Chief of Staff for contracting at the Air Force 
Systems Command, Ms. Darleen A. Druyan; former C-17 system program 
director, Maj. Gen. Michael J. Butchko, Jr.; former deputy comptroller 
for the Air Force Systems Command, Brig. Gen. John M. Nauseef; and C-17 
deputy director of contracting, Mr. A. Allen Hixenbaugh.
  According to the inspector general, General Barry and his accomplices 
behaved in very dishonest and improper ways. They knowingly provided 
senior acquisition officials with incomplete, misleading, and even 
false information.
  They used deception.
  They ``abused their position of responsibility and authority.''
  And worst of all, they used intimidation to force subordinates to 
acquiese in their illegal plan.
  The inspector general concludes that their actions, taken together, 
``impaired established Government oversight and internal management 
control processes.''
  Their actions resulted in numerous violations of Federal statutory 
law and acquisition regulations.
  Mr. President, this is not what the Senator from Iowa said they did.
  This is what the inspector general at the Department of Defense said 
General Barry and his accomplices did.
  Mr. President, this is a devastating report. It suggests a total 
disregard for the laws that govern the use of the taxpayers' money.
  As the C-17 Program Executive Officer, General Barry was right in the 
middle of the scheme.
  General Barry was in a critical acquisition management position.
  His job was to supervise the work of the program manager, General 
Butchko--to review and approve his decisions.
  One of his main responsibilities under DOD regulation 5000.1, was to 
``review and assess the significance of problems reported'' by Butchko.
  His main responsibility was to determine the level of risk associated 
with the problems identified by General Butchko.
  No matter how you slice, General Barry was in a key position. He was 
up to his ears in this scheme.
  Mr. President, last evening, the Senator from Georgia, the chairman 
of the committee, suggested that General Barry had made one small 
misstep.
  I assume that the incident he mentioned is the one described on page 
23 of the IG report.
  Mr. President, that is just the tip of the iceberg.
  The IG has reams of material that clearly demonstrates that General 
Barry engaged in misconduct with the others.
  I do not have that material, but it exists. I can assure you of that.
  That material is the foundation for the IG's recommendation and the 
Secretary of Defense's decision.
  If the committee thinks the October 25, 1990, document is the only 
incident involving General Barry, then the committee needs to examine 
the IG's extensive files.
  So, Mr. President, if illegal C-17 progress payments were made to 
McDonnell Douglas between July and December 1990--and DOD inspector 
general has documented the fact that illegal payments were indeed made, 
then General Barry is, at least, in part, responsible for what 
happened.
  The DOD inspector general says Barry was responsible.
  The Secretary of Defense at the time, Secretary Aspin, said General 
Barry was responsible and should be held accountable.
  Now, what was the problem that General Barry and the others were 
wrestling with?
  McDonnell Douglas was facing a $1.5 to $2 billion cost overrun on C-
17 fixed-price contracts. That loss came on top of other major 
financial losses--mainly the losses on the Navy's A-12 stealth bomber.
  To soften the blow, General Barry and his accomplices devised a 
clever scheme to cover up mounting schedule delays and a burgeoning 
cost overrun in order to maintain a steady flow of cash to McDonnell 
Douglas.
  When all the R&D money was exhausted and there were still $235 
million outstanding bills against the R&D contract, these officials 
arbitrarily shifted the cost overrun to the production contract that 
was fat on cash.
  This procedure, known as the infamous Journal Voucher Operation, 
violated several statutes, including the antideficiency act.
  The antideficiency act violation is still under investigation. It 
still has not been resolved. The DOD inspector general is still 
wrestling with it.
  Mr. President, the journal voucher transfer operation was a crooked 
scheme.
  They also authorized progress payments that were not commensurate 
with the work performed. They were premature progress payments. 
McDonnell Douglas had not earned the money yet but got paid anyway. 
They needed the money and got it.
  This was contractor nourishment at its worst.
  That term ``contractor nourishment'' is something used every day over 
at the Pentagon to talk about these sorts of schemes--only you are not 
supposed to know what contract nourishment is.
  In all, illegal progress payments on C-17 contracts totaled about 
$350 million, according to the inspector general.
  The $350 million in premature progress payments was for one, brief 6-
month period--July through December 1990. That is the period of time 
examined by the inspector general's investigation.
  Other illegal payments may have occurred before or after those dates. 
We do not know.
  Premature C-17 progress payments violated section 2307 of title 10 of 
the U.S. Code.
  The C-17 program management team showed contempt for this law.
  They ignored it, making payments to McDonnell Douglas according to 
their own standards and the contractor's needs. There was no effort to 
protect the taxpayers' interests.
  I am disgusted by the way the money was shoveled around on C-17 
contracts. I spoke about this problem on the floor of the Senate on 
numerous occasions.
  I was so angry about it that I offered an amendment to the fiscal 
year 1994 defense appropriations bill to address the problem--to ensure 
that future C-17 progress payments conform with the law. That order was 
given on February 19, 1993.
  The ``Air Force Review of the January 14, 1993, DOD IG Report on the 
C-17'' was completed in April 1993.
  This report is known as the Nordquist report--after the Air Force 
deputy general counsel, who directed the effort.
  This was another typical Air Force reinvestigation of a DOD inspector 
general investigation.
  It was a whitewash.
  In a nutshell, the Air Force concluded that there was no factual 
basis or evidence to support the suggestion that the five officials may 
have engaged in criminal conduct.
  The inspector general never charged General Barry and the others with 
criminal conduct. The inspector general never called for criminal 
prosecution.
  This was not a criminal investigation. It was an administrative 
inquiry from day one.
  Clearly, the IG report raised questions about the possibility of 
criminal conduct.
  The Inspector General suggested that General Butchko and the others 
knowingly made false statements and that all of them together ``acted 
in concert to develop and implement a plan which was based on false and 
misleading information.''
  Making false statements and engaging in a conspiracy constitute 
potential criminal conduct and potential court martial offenses under 
the Uniform Code of Military Justice, Articles 87 and 107.
  But the IG never attempted to pursue those charges.
  The amendment was accepted and is now law: section 8145 of Public Law 
103-139, signed by the President on November 11, 1993.
  All the facts that support these findings are carefully and 
thoroughly documented in the inspector general's report.
  This report was then submitted to the Secretary of Defense for 
further review.
  The Secretary of Defense at that time was Mr. Les Aspin.
  After reviewing the inspector general's report, Secretary Aspin 
ordered the Air Force to respond to the allegations with 60 days.
  So the question of criminal conduct was really a red herring.
  But the Nordquist report also suggested that there was no evidence 
that would warrant the need for disciplinary action.
  Former Secretary of Defense Aspin disagreed with that judgment.
  Secretary of Defense Aspin's final decision on the need for 
disciplinary action is outlined in a memo dated April 29, 1993. The 
memo is directed to the Acting Secretary of the Air Force.
  The memo bears Mr. Aspin's signature.
  Mr. President, I would like to read the memo in its entirety. It 
says:

       In January, the Deputy Inspector General released a report 
     on the C-17 program and the financial condition of the 
     McDonnell-Douglas Corporation. The report raised questions 
     about the management and financial integrity of the C-17 
     program, and specifically about Air Force actions to provide 
     financial assistance to the Douglas Aircraft Company in late 
     1990.
       After reviewing the Inspector General's report, I directed 
     the Air Force to respond to the allegations. This instruction 
     was issued in my memorandum of February 19.
       Last week, the Air Force forwarded its response. I have now 
     reviewed the report and the Air Force comments concerning 
     allegations about five key Air Force personnel involved in 
     the C-17 acquisition program.
       In its examination of the allegations, the Air Force found 
     no basis to believe that criminal conduct was involved in the 
     management of the program. The facts presented to date by the 
     Deputy Inspector General and the Air Force suggest that this 
     finding is correct.
       The Air Force also found that some management actions, 
     while questionable, were within a range of normal management 
     discretion. I disagree with this judgment.
       The defense acquisition system operates on the principle of 
     centralized policymaking and decentralized execution. At the 
     heart of the system is the need for accountability at all 
     levels. If the system is to work, then those charged with the 
     responsibility for the management of billion dollar systems 
     must perform to the highest standard.
       The story of the C-17 program reflects an unwillingness on 
     the part of some high-ranking acquisition professionals to 
     acknowledge program difficulties and to take decisive action.

  I hope I made that clear:

       The story of the C-17 program reflects an unwillingness on 
     the part of some high ranking acquisition professionals to 
     acknowledge program difficulties and to take decisive action.

  Let me comment here because it fits into some other things. Even the 
Secretary of Defense says that it is difficult to get people to hold 
other people who ought to be responsible and accountable for what they 
do.
  I am continuing to quote:

       Without questioning the motivation of Air Force personnel, 
     I must insist that program leaders understand their 
     responsibilities to identify, early and forthrightly, 
     significant program difficulties. Clearly, this was not done 
     in the case of the C-17.

  This is what Secretary Aspin orders:

       Consequently, I direct that you take the following actions:
       First, because the former program manager has not 
     demonstrated the judgment necessary for senior leadership 
     positions, he should be relieved of his current duties.

  That is General Butchko, and that did happen.

       Second, the lack of judgment of four of the five 
     individuals should be made part of their permanent record.

  So the Secretary of Defense is saying that what four individuals, 
including Barry, did is so significant or their shortcomings, we will 
say were so significant that it should be made a part of their 
permanent record:

       Third, because I have lost confidence that four of the five 
     individuals identified in the Deputy Inspector General's 
     report can be effective in acquisition, they should not be 
     assigned to work in the acquisition management area.

  One of those, Barry, is who the President and the committee wants to 
advance to lieutenant general rank for retirement.
  Should we give the stamp of approval of the Senate to a person who 
has been so cited by the Secretary of Defense?
  And the final two paragraphs by the Secretary say:

       Knowing that both civilian and military Air Force personnel 
     in the acquisition system are dedicated, capable 
     professionals, I trust that this community will recognize 
     that the motivation for my actions is to strengthen the 
     acquisition system and to encourage its efficient operation.

  It sounds to me like the Secretary is saying that if people did 
something wrong, you have to cite them for their wrongdoing, someone's 
head has to roll, and by doing that you are going to strengthen the 
system by holding people accountable.

       Finally, it is apparent that allegations of misconduct in 
     an Inspector General report also present difficult issues of 
     fairness for the rights of those who work in the Department 
     of Defense. Therefore, I am asking the DoD General Counsel to 
     develop procedures with the Inspector General for dealing 
     fairly with individuals who are the subject of such reports.

  Now, does Secretary's decision clear General Barry?
  Does it tell us that General Barry distinguished himself as C-17 
Program executive officer?
  Does it say that General Barry did a good job?
  Does it tell us that General Barry is affirmatively qualified for 
confirmation by the Senate?
  Mr. President, I believe the answer is ``No.'' Obviously, the 
committee believes otherwise.
  Mr. Aspin's memo tells us that General Barry is, in part, responsible 
for what happened.
  He is responsible and must be held accountable.
  The Secretary of Defense said he had ``lost confidence'' in General 
Barry, and he ``should not be assigned to work in the acquisition 
management area.''
  A formal letter of reprimand was placed in his permanent record.
  Secretary Aspin's decision had the practical effect of relieving 
Barry of most of his command.
  As Commander of the Space and Missile Systems Center, he is 
responsible for managing the acquisition of space launch, command and 
control, and satellite systems.
  If General Barry cannot make acquisition management decisions, I 
might ask and I am questioning Secretary Aspin, why has he been allowed 
to remain at that important post for the past 18 months?
  Why?
  I have some suspicions but no hard evidence. These are my suspicions.
  General Barry and the Air Force figured if they waited long enough, 
the C-17 scandal would blow over and everyone would forget about it. 
Then they could sneak his nomination through under the cover of 
darkness.
  It was not done under the cover of darkness, but it was done the very 
last business before we adjourned.
  Also, I know the Air Force holds the inspector general in low regard.
  The Air Force likes to thumb its nose at the inspector general. The 
Air Force does it and gets away with it.
  I would like to try to put that assertion into better perspective.
  Consider the current Chief of Staff McPeak's comments before the 
House Armed Services Committee on April 1, 1993.
  McPeak's remarks were directed at the inspector general's report on 
the C-17 and all the controversy it created.
  All that criticism, he testified, ``presupposes that a lot of the 
charges that have been made by, you know, newspaper people and 
adolescent auditors and so forth are true,'' but ``many of these 
charges will turn out not to be true in the long run.''
  That's Chief of Staff McPeak referring to the inspector general as 
``adolescent auditors.'' That's how the Air Force views the inspector 
general--``Adolescent auditors.'' That does not show a lot of respect 
by the Air Force Chief of Staff of the inspector general and the people 
who work there.
  This cavalier attitude is reflected in the way the Air Force carried 
out the disciplinary action dished up by the Secretary of Defense.
  It was rendered down to not much more than political fluff.
  Let us look at what happened after Secretary Aspin's decision of 
April 29, 1993.
  What happened to the five persons who were identified as being 
responsible for abusive practices and mismanagement on C-17 contracts.
  What happened to these people? Were they held accountable as 
Secretary Aspin promised?
  First, General Butchko:
  General Butchko got hammered for sure, but that decision was made by 
the Secretary of Defense.
  He was relieved of command and retired immediately.
  Butchko was held accountable.
  General Butchko's boss--the man who presumably reviewed and approved 
all of Butchko's actions--and I am talking about General Barry--he has 
been allowed to wait in the wings for a fat nomination.
  But I will return to Barry in a moment.
  Next, there is Brigadier General Nauseef.
  Following the inspector general's uncovering of wrongdoing and the 
Secretary of Defense's decision to discipline him for it, the Air Force 
recommended that Nauseef be promoted.
  Nauseef's nomination for promotion to the rank of major general was 
submitted to the Senate for approval on January 20, 1993--after the 
inspector general's report was issued on January 14.
  Now, if that is not contempt for an inspector general's report, what 
is?
  Keep in mind that the inspector general's investigation began in 
February 1992.
  That Nauseef was a principal target should have been a well known 
fact within the Air Force long before January 1993.
  The inspector general and the Secretary of Defense call for 
disciplinary action and the Air Force responds with a call for 
promotion.
  That defies reason and understanding.
  Well, after considerable criticism and complaint, the President did 
withdraw the Nauseef nomination on July 23, 1993.
  Then came the Barry nomination.
  On October 28, 1993, the President nominated Barry for advancement on 
the retirement list in the grade of lieutenant general.
  Here is another request for Senate confirmation in the face of calls 
for disciplinary action.
  How do you square a call for disciplinary action with a request for 
Senate confirmation?
  Senate confirmation and disciplinary action seem to be incompatible.
  There is an additional factor bearing on the pending Barry 
nomination.
  Barry was promoted from the rank of major general to his current rank 
of lieutenant general after engaging in the alleged abuses and 
mismanagement procedures reported by the inspector general.
  The misconduct by General Barry occurred between July and December 
1990.
  His promotion to lieutenant general was approved by the Senate on May 
15, 1991. His date of rank is June 1, 1991.
  Had the misconduct been verified and documented by the inspector 
general prior to June 1, 1991, General Barry's advancement to the rank 
of lieutenant general might never have approved.
  After General Barry comes Ms. Darleen Druyan.
  After looking at all the evidence, Dr. Deutch ``concluded that 
punishment of Mrs. Druyan was not appropriate and she would continue to 
hold her present position.'' He said her ``involvement was too 
limited'' to warrant disciplinary action.
  She only did one bank robbery, in a sense. She got in and out quick. 
So that is evidentially OK.
  Ms. Druyan currently occupies a key position in the acquisition 
management area. She is the Deputy Assistant Secretary of the Air Force 
for Acquisition.
  She moved into this position in February 1993--that is about 1 month 
after the Inspector General recommended that she be discipline for her 
involvement in the scheme to funnel illegal payments to McDonnell 
Douglas.
  Mr. President, it sounds like Ms. Druyan received an award for her 
role in the C-17 caper. It sounds like a reward. It sounds like another 
promotion.
  And Ms. Druyan has been promoted up again--just recently--to the 
Principal Deputy Secretary of the Air Force for Acquisition.
  I have to confess that the fate of Mr. Hixenbaugh the last one of the 
five is unknown.
  He is still on the job, as far as I know.
  On April 29, 1993, Secretary of Defense Aspin took decisive action 
against four senior Air Force officials for misconduct on the C-17 
program.
  Aspin sent out a clear, unambiguous signal: Zero tolerance toward 
dishonesty and abusive practices in the acquisition community.
  It was meant to be a stern lesson in accountability.
  But Aspin's lesson in accountability was turned upside down by the 
Air Force.
  I would like to revisit the Secretary of Defense's decision of April 
29, 1993.
  I would like to go over the main points one more time.
  I think they contain a powerful message about Barry's suitability for 
Senate confirmation.
  The Secretary of Defense said there is a need for accountability at 
all levels.
  The Secretary of Defense said that those who are charged with the 
responsibility of managing billion dollar systems must perform to the 
highest standards.
  Those who fail must be held accountable.
  The Secretary of Defense said:

       The story of the C-17 program reflects an unwillingness on 
     the part of some high-ranking acquisition professionals to 
     acknowledge program difficulties and to take decisive 
     action.''

  That is a very kind way of explaining what really happened.
  These high officials acted in concert to funnel illegal payments to 
McDonnell Douglas.
  The Secretary of Defense said General Barry and three others had 
demonstrated a lack of judgement.
  For that, he placed formal letters of reprimand in their permanent 
records.
  The Secretary of Defense said that he had lost confidence in General 
Barry and three others.
  The Secretary of Defense said he believed that those four individuals 
could no longer be effective in acquisition and that they should be 
removed or bannished from the acquisition management area.
  The Secretary of Defense said: I have ``lost confidence'' in General 
Barry; I will place a formal letter of reprimand in his permanent 
record for misconduct; I do not trust his judgement; I will banish him 
from the acquisition management area.
  The Secretary's decision had the practical effect of relieving 
General Barry of his present command.
  As commander of the Space and Missile System Center, General Barry is 
responsible for managing the acquisition of space launch, command and 
control, and satellite systems.
  Under Secretary Aspin's directive of April 29, 1993, General Barry is 
not authorized to carry out his primary responsibility.
  In sum, Mr. President, Secretary Aspin's decision regarding General 
Barry's misconduct is not compatible with Senate confirmation.
  Senate confirmation and strict disciplinary action just do not go 
together. They do not mesh.
  Mr. President, now, there is new, damaging allegations against 
General Barry.
  These new allegations against General Barry are contained in a recent 
report prepared by the Inspector General.
  The report is entitled ``Air Force Merged Account Obligations,'' 
Audit Report No. 94-139, dated June 17, 1994.
  I have a copy of that document. I am not going to read from it, but I 
will hold it up so that you know that this document contains new 
allegations against General Barry as recently as June 14, 1994, written 
up by an independent person, the Inspector General.
  One again, the Inspector General caught General Barry making illegal 
payments to contractors--progress payments for work that had not been 
performed--just like on the C-17 contracts.
  General Barry approved a policy that authorized illegal payments of 
$9.9 million to General Electric and TRW on two satellite contracts.
  On August 17, 1993, I wrote to the Secretary of the Air Force, asking 
if the illegal authority granted by General Barry had been rescinded 
and if the money had been recovered.
  Mr. President, I ask unanimous consent to have that letter printed in 
the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                  U.S. Senate,

                                  Washington, DC, August 17, 1994.
     Hon. Sheila E. Widnall,
     Secretary of the Air Force,
     Pentagon, Washington, DC.
       Dear Secretary Widnall: I am writing to raise questions 
     about a finding in a recent Department of Defense Inspector 
     General's (IG) report that the Air Force made illegal advance 
     payments on two satellite contracts.
       The IG report in question is entitled ``Air Force Merged 
     Account Obligations,'' Audit Report No. 94-139. It was issued 
     on June 17, 1994.
       The IG charges that the Air Force paid two contractors--
     General Electric and TRW--at least $9.9 million for unearned 
     ``on-orbit incentive fees'' for satellite systems. The money 
     was taken from the M accounts.
       These payments violated Section 3324 of Title 31 of the 
     U.S. Code. Section 3324 allows advance payments but only if 
     authorized by a specific appropriation or other law or by the 
     President. No such authorization existed.
       These payments also failed to comply with Section 2307 of 
     Title 10 of the U.S. Code and a host of related federal and 
     departmental regulations, including the Federal Acquisition 
     Regulation (Subpart 32.402; Paragraph 32.409-1), the Defense 
     Federal Acquisition Regulation Supplement (Subpart 232.4; 
     Paragraph 232.409-1), and DOD Manual 7220.9M (Chapters 25 and 
     35 of the Accounting Manual).
       Instead of obeying the law, the IG charges that the Air 
     Force used a ``local'' policy issued by the Space and Missile 
     Systems Center in Los Angeles, California, in an unsuccessful 
     attempt to legalize the payments and circumvent the law.
       Secretary Widnall, the IG report states that the policy 
     document, which was used to authorize illegal payments of 
     $9.9 million to General Electric and TRW, was signed by the 
     current Commander of the Space and Missile Systems Center, 
     Lieutenant General Edward P. Barry, Jr. Is that correct? Has 
     the authority granted in the policy document signed by 
     General Barry been rescinded? Have the illegal payments been 
     recovered by the government? Was the Antideficiency Act 
     violated in either case? Who approved the advance payments? 
     And are there any indications that General Barry is 
     continuing to exercise ``acquisition management'' 
     responsibilities in violation of former Secretary Aspin's 
     directive of April 29, 1993?
       I respectfully request answers to these six questions by 
     August 30, 1994.
       Your cooperation in this matter would be appreciated.
           Sincerely,
                                              Charles E. Grassley.
  Mr. GRASSLEY. That letter was sent out on August 17. Almost 2 months 
have passed, but I have yet to receive an answer.
  Mr. President, there is just too much unfavorable information on 
General Barry. The Senate should not confirm him for advancement on the 
retired list in grade of lieutenant general.
  These nominations will be subject to a voice vote. I want the Record 
to show that if there were a recorded vote, I would vote against these 
two nominations.
  Mr. President, I am going to yield the floor just in a moment. For 
this Congress, I believe that this is all I have to say on these 
nominations.
  But I hope, first of all, that all the reform that has been suggested 
to be made to correct these situations materializes. If they 
materialize, if they are as good as the chairman of the committee 
suggests, then perhaps that takes care of a big part of the problem. I 
am dubious that that is going to be the case. It is doubtful in my mind 
that that is going to be the case. I have seen too many other times 
where we passed reforms and they are just not carried out the way we 
intended them.
  I hope also that maybe the debate yesterday and today on these three 
nominations and the 30 votes against the Glosson nomination and the 
votes that we had against Admiral Kelso, several votes against him, and 
the outstanding work done by some of the Members on that nomination, 
send a signal that Senate confirmation of military promotions is not 
going to be taken lightly by a lot of us in this Chamber, and that you 
can expect that I am going to continue to review these nominations next 
year.
  It would be very helpful if, when they send them up, they would 
stagger the controversial ones so that we do not have to tackle them 
all at once. It would be a little easier.
  But, however they do it, we are going to continue to read inspectors 
general reports, and we are going to make sure that people who are not 
qualified for promotion do not get the promotion.
  I hope this will cause people in the Department of Defense to be much 
more careful and responsible as they approach this process of promoting 
people, and not promote people--do not send us your problems. Do not 
promote people who have bad records. I hope, too, that we do not say it 
is all right to do something illegal and get away with it just because 
you had a distinguished military career. That does not send a very good 
signal to other people serving in the military.
  We need to set an example for those people who are at academies, who 
are taught through the honor code to do what is ethical and moral and 
legal. And when you have this illegality that goes on in the higher 
ranks, how can you expect people at the lower ranks to feel morally 
bound by that code?
  Most important, I think we in this Senate are trying to create an 
environment of a new Senate. It seems to me that integrity is the most 
important facet of the new Senate. So a new Senate cannot in any way 
set a good example if it is going to ratify the same old stuff, the 
same old attitude of the Defense Department, to ``go along to get 
along.'' That is a ratification of an environment where there is a 
great deal of peer pressure to conform. That is the sort of environment 
we are going to rubber stamp when we approve these nominations where 
there is questionable conduct by the people involved.
  So, on January 3 we start over again. On October 1996 when we are 
adjourning, I hope we are not presented with a bunch of nominations 
that have been nothing but trouble since they have come out of the 
Defense Department. Because, as I said, some of these nominations could 
have been considered months ago. And whatever I had to say about these 
nominations I could have said months ago. But they were not before the 
Senate.
  We took up these questionable nominations at a time when we were 
starting debate on an unfunded mandates bill, and on a bill to give 
coverage of some of our laws to congressional employees. In other 
words, the laws we have exempted ourselves from over the last several 
years. I have been a proponent of congressional coverage, applying 
those laws to us. Those bills just could not come up the last minute 
but we find plenty of time to bring up these controversial nominations. 
Whoever is in charge of the Senate in October 1996, I hope they will 
understand that right now: If I have to fight these things in the 
midnight hours of the closing day of the session 2 years from now, like 
I did this time, I will do it. That will put my colleagues on notice: 
Do not come around crying on my shoulder that you have an airplane to 
catch. Because I did not make this bed. I did not set the agenda. The 
agenda was set by others. The best way to handle this stuff is to 
handle it timely. Do more work during January, February, or March so we 
do not have to play catch-up during October.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Akaka). The Senator from Iowa yields the 
floor.
  The Senator from Nebraska [Mr. Exon] is recognized.
  Mr. EXON. Mr. President, inquiry of the Chair. We have been 
discussing for some time three nominations. The Senator from Nebraska 
believes that the Glosson nomination was previously approved by the 
Senate. Is that correct?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. EXON. There are two remaining matters to be disposed of with two 
other officers.
  I have listened with great interest to my friend and colleague from 
Iowa. I congratulate him again for his expertise and remarks on these 
matters. However, I think the time is now the Senate should move on 
these.
  Mr. President, I urge the Senate proceed to approving the two other 
officers who remain to be considered.
  I ask unanimous consent, if the approval is confirmed by the Senate, 
that automatically the motion to lay on the table be agreed to and the 
matter would be, therefore, disposed of.


 concluding remarks--nomination of lt. gen. edward p. barry, u.s. air 
                       force, to retire in grade

  Mr. President, I would like to briefly summarize the remarks I made 
yesterday concerning the nomination of Lt. Gen. Edward P. Barry, U.S. 
Air Force, to retire in grade. His nomination received the unanimous 
support of the Committee on Armed Services.
  In a September 30, 1994, letter to the committee, Deputy Secretary of 
Defense John Deutch outlined the highlights of Lt. Gen. Barry's 
military record:

       LTG Barry has had a 33-year distinguished career serving 
     our country. His accomplishments have directly impacted our 
     national security. For example, in 1982 he received the Air 
     Force Association's National Award for Program Management as 
     Program Director for the Defense Support Program. The 
     system's detection of Iraqi-launched SCUD missiles during 
     Desert Storm provided crucial advance notice of attack, which 
     saved lives and enabled our air defense system to react. As 
     Commander of the Ballistic Missile Division, he successfully 
     fielded 50 Peacekeeper ICBMs, on schedule and under cost, 
     while sustaining Minuteman II/III operational requirements.

  Other highlights of his career include service as the program 
director for the NAVSTAR Global Positioning Satellite at its inception 
in 1978, vice commander of the Aeronautical Systems Division, and 
commander of the Air Force Space and Missiles Systems Director.
  Senator Grassley has raised many points about the problems in the C-
17 program. I agree that has been a troubled program. In fact, I 
supported Senator Grassley's amendment to disapprove the C-17 
settlement agreement--but the Senate chose to approve that agreement.
  It is one thing to describe a program as being troubled. It is 
something very different to deny retirement in grade to an officer with 
33 years of distinguished service--particularly when that officer did 
not have direct responsibility for the troubled program. Lt. Gen. Barry 
was not the program manager. He was the Air Force's Program Executive 
Officer for Tactical and Airlift Systems, for a 2-year period, in which 
he had general oversight for some of the most significant programs in 
the Air Force including the F-22, the F-15, the F-16, and the C-17.
  The C-17 program has been investigated, reviewed, and examined in 
great detail. In all those reviews, there has been no finding that Lt. 
Gen. Barry was involved in any misconduct. In the voluminous IG report 
on the C-17, the only mention of Lt. Gen. Barry involved one document, 
in which he described the program risks as ``moderate to high.'' The IG 
felt that his warning should have been stronger. Subsequent reviews by 
the Air Force have indicated that his description was accurate.

  Even if his warning could have been stronger--a matter that is 
clearly subject to interpretation--it would represent a single blemish 
on an otherwise outstanding career. There was no fraud, no abuse, no 
misconduct. Just one question about a subjective analysis.
  On September 30, 1994, Deputy Secretary Deutch advised the committee 
that he had personally reviewed Lieutenant General Barry's role in the 
C-17 program. He concluded that ``if Lieutenant General Barry had not 
elected to retire, I would have returned him to acquisition duties.'' 
He added that his ``performance in his current position as the 
commander of the Space and Missile Systems Center in Los Angeles has 
further demonstrated his professionalism and dedication to duty.''
  Mr. President, it is important to remember that the C-17 program was 
a troubled program long before Lieutenant General Barry became program 
executive officer, and that the decisions regarding cost, schedule, and 
performance of the program were not his. They were made at the highest 
level of the Air Force.
  It is certainly possible, with hindsight, to suggest that Lieutenant 
General Barry could have done more to address the problems in the C-17 
program. I do not believe, however, that it is wise or desirable to 
insist that military officers achieve a standard of perfection in order 
to retire in grade. There has been no showing that he acted or failed 
to act in any manner that would cast doubt upon his professionalism or 
integrity.
  Lieutenant General Barry has served his Nation with distinction, and 
has had many successful tours of duty. He has contributed to the 
strength of our Armed Forces, and to our national security, through the 
development of sound and successful acquisition programs. In view of 
his overall career, and in view of the high degree of confidence that 
the current leadership of the Department of Defense has expressed in 
his abilities, I strongly endorse his nomination to be retired in 
grade.
  The PRESIDING OFFICER. If the Senator will withhold for a moment.
  The question is on agreeing to the nomination of Col. Claude M. 
Bolton, Jr. for appointment to the grade of brigadier general on the 
retired list.
  The nomination was confirmed.
  The PRESIDING OFFICER. The clerk will report the Barry nomination.

                          ____________________