$50 million to promote Thunderbirds questioned

WASHINGTON -- Sitting at the head of the table, Air Force Maj. Gen. Stephen Goldfein, the highest-ranking officer in the room, leaned forward and told the officers and others assembled before him that they should steer a multi-million dollar Air Force contract to a company named Strategic Message Solutions.

"I don't pick the winner, but if I did, I'd pick SMS," Goldfein said, according to a Defense Department Inspector General report, to the seven-person group selecting a contractor to jazz up the Air Force's Thunderbirds air show with massive Jumbotron video boards. The head of the selection team almost immediately "caved," giving in to what he believed was a fixed process. Another member of the team called it "the dirtiest thing" he had ever experienced.

It was during that meeting in November 2005, according to a 251-page IG report obtained by The Washington Post, that a controversial $50 million contract was awarded to a company that barely existed in an effort to reward a recently retired four-star general and a millionaire civilian pilot who had grown close to senior Air Force officials and the Thunderbirds.

In a probe that lasted more than two years, investigators concluded that Goldfein and others worked inside the Air Force contracting system to favor SMS and its owners, despite an offer by the company that was more than twice as expensive as another bid.

Goldfein, at the time commander of the Air Warfare Center at Nellis Air Force Base and now the vice director of the Pentagon's Joint Staff, was found to have gone to great lengths to see the contract awarded to SMS, while senior Air Force leaders socialized with the company's partners. According to the report, Goldfein even arranged for President Bush to videotape a testimonial that was included in the SMS contract proposal.

The report offers a searing, blow-by-blow account of how a relatively mundane Air Force contract spun out of control, highlighting conflicts of interest in the selection process, officers stacking the deck in favor of friends, and others influencing a system designed to eliminate such favoritism in spending taxpayer dollars.

"The investigation found that the December 2005 award to SMS was tainted with improper influence, irregular procurement practices, and preferential treatment," according to a redacted copy of the report, which is scheduled for release this week. "Lower priced offers from qualified vendors and capabilities in-house were bypassed in an apparent effort to obtain services from (redacted), president of SMS, who had a long-standing relationship with senior Air Force officers and members of the Thunderbirds."

Goldfein and four other officers whose names have not been released have received administrative punishments for the episode, and investigators are continuing to look at the contracting processes at Nellis Air Force Base amid "irregularities" and "systemic weaknesses" that plagued the unit.

Goldfein declined to comment, and a Nellis spokeswoman said Thursday that base officials aren't commenting. Similarly, an e-mail from the Review-Journal seeking reaction from a Thunderbirds spokeswoman went unanswered. The crack aerial team is scheduled to perform this weekend in Wilmington, N.C.

Goldfein told investigators he "never interfered with the evaluation or selection process and never directed anyone to do or not do anything." Other members of the selection team said the process was "fixed" from the beginning.

In a statement Thursday, Air Force Secretary Michael Wynne said, "I am deeply disappointed that our high standards were not adhered to in this case. This is not how the Air Force does business and we are taking steps to ensure this doesn't happen again."

While the Thunderbirds show contract was just $50 million, a minor deal compared with massive aircraft contracts in the billions, the report comes a year after Air Force contracting official Darleen Druyan pleaded guilty to favoring Boeing in a tanker deal and was sent to prison.

Defense officials said Thursday that they have just recently received the IG report, which is expected to be released this week, and could not comment on its conclusions.

The idea behind the Thunderbirds contract emerged in 2005, when Ed Shipley, a close friend of the Thunderbirds who regularly flies aircraft in Air Force shows, suggested that the Air Force come up with ways to keep audiences entertained while the aircraft circle around to do stunts. Shipley, who made millions in direct television marketing videos before he retired in 1998, came up with the idea for "Thundervision" and his newly formed company, SMS, pitched a $50 million plan over five years.

Gen. John Jumper, then the Air Force chief of staff, liked the idea and asked his vice chief at the time, Gen. T. Michael "Buzz" Moseley, to see whether he could make it happen. Moseley met with Goldfein and Shipley in his office in April 2005 and made money available for the project. Both Jumper and Moseley are former Nellis wing commanders.

Contracting officials dismissed the idea of giving the contract outright to SMS and set up a team to investigate bids. But the seven-person selection team included a majority who were members of the Thunderbirds, officers who knew Shipley as a friend and Goldfein as the commanding general of the Air Warfare Center. The Thunderbirds commander at one point in the process said, according to the report: "If it's not SMS, we don't want it."

The warfare center is where pilots come to train and where the nation's state-of-the-art aircraft and ground equipment are tested over the Nellis range. It amounts to the heart of the Air Force that's constantly trying to envision the next adversary, Goldfein said of his job in a January 2005 interview with the Review-Journal.

Investigators also found that Gen. Hal Hornburg, who led Air Combat Command until he retired in December 2004, was a "silent partner" of Shipley's who joined SMS in early 2005, right as the company began bidding for the Air Force contract. Moseley was a longtime friend of Hornburg's and was acquainted with Shipley. Both Shipley and Hornburg did not return calls seeking comment, and Hornburg did not speak to investigators, the report said. Hornburg is on the advisory board of the Speedway Children's Charities, a Southern Nevada organization.

Investigators detail how Moseley, now Air Force chief of staff, socialized with Shipley and Hornburg in the months after the contract process started, raising conflict of interest questions.

Moseley was not accused of wrongdoing in the report but acknowledged in an interview this week that he probably should have backed away from Shipley and Hornburg as the contract was progressing.

Moseley said he wished that officers who noticed problems in the process had said "stop." The contract was canceled in early 2006 after an Arizona company lodged complaints. The U.S. attorney's office in Nevada declined to prosecute the case in May 2007.

Review-Journal writer Keith Rogers contributed to this report.