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Air Force Can’t Use Lockheed Repair Kits, $229 Washer Detailed

March 22, 1989

WASHINGTON (AP) _ The Air Force can’t repair a fire-damaged C-5A aircraft with repair kits it purchased from Lockheed in a $68 million deal marked by conflict of interest allegations and proposed charges of $229.94 for nickel-sized washers, witnesses told a House subcommittee Wednesday.

″This order involves virtually every sorry facet of defense contracting,″ said Rep. John Dingell, D-Mich., whose House Energy and Commerce subcommittee on oversight and investigations presented a tale of possible fraud, revolving door hiring practices and vastly overpriced parts in the deal with Lockheed Aeronautical Systems Co.

Witnesses before the panel said the Air Force failed to conduct an economic analysis on the order and that such analyses are supposed to be standard practice on deals of more than $1 million.

The service also was criticized for how it decided what repair kits to keep on hand for future crashes. Investigators for the congressional General Accounting Office said the decision was based on three incidents: two crashes and a lightning strike.

″The data of three crashes was not enough to predict the number and timing ... of future crashes,″ Harry Finley, director of Air Force issues for the GAO, told the subcommittee.

In fact, a C-5A damaged in a fire at Travis Air Force Base in California on Dec. 30, 1988, cannot be repaired with the kit. The 6,600-part kit is for repair to the underbelly of the aircraft and the damaged C-5A has a hole about 13 feet by 33 feet in the upper fuselage, Finley said.

″How can we know in advance what parts will be destroyed in a crash?″ Dingell said, adding that in the case of the C-5A, ″They obviously guessed wrong.″

The GAO’s investigation found that an Air Force colonel negotiated the Pentagon contract with Lockheed and then later went to work for the company.

Under questioning from Rep. Thomas Bliley, R-Va., Finley said that in April 1986, Air Force Col. Anthony Diferdinando signed a memo which said the Air Force needed the kits, needed the money to purchase them and specified that the contractor should be Lockheed.

One month later, Diferdinando made his first contact with the company about employment.

The GAO said Diferdinando retired from the Air Force on July 1, 1986, and on Dec. 2, 1986, the Air Logistics Center issued its first order for the kits at an estimated value of $44.6 million.

Less than three weeks later, Lockheed offered Diferdinando a job, and on Feb. 2, 1987, he reported for work at a Lockheed marketing division responsible for marketing the C-130 aircraft in the Middle East.

Finley told the subcommittee that Diferdinando ″did not comply with provisions in a conflict of interest law requiring that he report his employment contracts and disqualify himself from procurement functions involving Lockheed.″

″However, we did not find any evidence to indicate that his actions regarding the purchase of the kits were influenced by employment,″ the GAO said.

Dingell said the Air Force Office of Special Investigations notified the subcommittee that it began a criminal investigation of the colonel for conflict of interest last Thursday.

A spokesman for Lockheed, Hugh Burns, said the company ″has complied with all conflict of interest laws and to the best of our knowledge so did Mr. Diferdinando.″ Difendinando remains an employee at Lockheed.

Burns also said the cost of the parts were estimated prices and final amounts will be negotiated.

At the hearing, Dingell questioned Lockheed’s proposed prices of $229.94 for a nickel-size washer and $211.13 for an inch-long aluminum shim that was an excess part from production of the C-5B. It originally was valued at $22.09.

Air Force Major Gen. Richard D. Smith defended the price of the washer, saying, ″it’s not a common washer. It’s critical for the structure of the aircraft.″

Daniel S. Rak, assistant secretary of the Air Force in the Office of Acquisition Management and Policy, also said the prices have not been finalized.

Smith, a deputy chief of staff at the Air Logistics Command at Wright- Patters on Air Force Base in Ohio, said the service concluded ″that the decision to buy the C-5 Crash Damage repair kits and the methodology of the acquisition for these kits is correct and appropriate in the support of the C- 5 aircraft.″

But under persistent questioning from Rep. Gerry Sikorski, D-Minn., Rak conceded that the service ″can’t predict when we may need those.″

″If you can’t predict, what are we doing buying them?″ Sikorski responded.

Rak explained that by purchasing the kits, the Air Force was basically buying insurance.

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