Report | Sept. 19, 2013

Air Force and Army Corps of Engineers ImproperlyManaged the Award of Contracts for the Blue Devil Block 2 Persistent Surveillance System

DODIG-2013-128

Objective

Our audit objective was to determine whether Army Corps of Engineers and Air Force personnel properly awarded and administered contracts for the acquisition of the Blue Devil Block 2 surveillance system.

Findings

Air Force personnel did not properly manage the award of contracts for the urgently needed Blue Devil Block 2 persistent surveillance system. Specifically, Air Force Intelligence, Surveillance, and Reconnaissance (Air Force A2) personnel improperly offloaded the award of the first Blue Devil Block 2 contract in August 2010, to the Army Corps of Engineers Engineer Research and Development Center (ERDC), instead of using Air Force program and contracting personnel. This occurred because Air Force A2 personnel inappropriately acted in a program management capacity by disregarding Air Force Research Laboratory (AFRL) personnel’s assessments that did not support the 24-month development schedule used to obtain approval and funding for Blue Devil Block 2.

In addition, 645th Aeronautical Systems Group (645th AESG) contracting personnel awarded the second Blue Devil Block 2 contract in March 2011, to develop and field Blue Devil Block 2 in an unachievable time frame. This occurred because the Director of Information Dominance Programs, Assistant Secretary of the Air Force for Acquisition (Director, SAF/AQI) inappropriately directed 645th AESG personnel in November 2010 to expedite fielding of Blue Devil Block 2 despite AFRL and 645th AESG assessments that determined the delivery time frame was unachievable and Blue Devil Block 2 was not suited for rapid fielding. As a result, the warfighter did not receive an urgently needed capability, and about $149 million was wasted on a system the contractor did not complete.

ERDC personnel improperly awarded a contract for Wide Area Surveillance Platform (WASP) on August 11, 2010. Specifically, ERDC personnel inappropriately awarded a level of effort research and development contract for a known Air Force and Joint Improvised Explosive Device Defeat Organization (JIEDDO) requirement. This occurred because ERDC personnel misused the broad agency announcement process. In addition, ERDC personnel did not properly administer the WASP contract. As a result, ERDC personnel initiated development of an Air Force system that included the development of a large airship without adequately assessing technical feasibility and cost, which contributed to the failure to fulfill an urgent operational need. Further, ERDC personnel charged about $1.1 million in questioned costs that were not commensurate with the amount of work performed.

Recommendations

We recommend the Air Force determine whether Air Force A2 should be assigned a program or contracting office and only use the capabilities of the 645th Aeronautical Systems Group for systems appropriate for quick reaction contracting that can be accomplished in an achievable time frame.

We recommend the Army Corps of Engineers provide training to identify initiatives inappropriate for ERDC; develop stricter guidance for contract review; and review performance of the contracting officer who awarded the Blue Devil Block 2 contract; and refund the Air Force $1,137,000 in administrative fees unless an independent review substantiates that questioned costs were valid expenses.

Management Comments and Our Response

The Principal Deputy Assistant Secretary of the Air Force for Financial Management and Comptroller provided generally responsive comments to the draft report and agreed future acquisition initiatives will be assigned to and managed by the appropriate Air Force Program Office. Additionally, she concurred the 645th Aeronautical Systems group should only be used for efforts appropriate for quick reaction contracting.

Comments from the Principal Deputy Assistant Secretary of the Air Force for Financial Management and Comptroller, responding on behalf of the Chief of Staff of the Air Force, were not responsive to our recommendation to assess whether an Air Force program and contracting organization should be designated for quick reaction capability development and fielding of Intelligence, Surveillance, and Reconnaissance initiatives.

The Army Corps of Engineers Principal Assistant Responsible for Contracting–Winchester, provided responsive comments that included enhanced training as well as an incurred cost review of contract W912HZ-10-C-0085 by the Defense Contract Audit Agency. The Director, ERDC provided responsive comments that included enhanced oversight and guidance on proper use of the broad agency announcement and administrative action for personnel responsible for contract W912HZ-10-C-0085.

We request the Air Force provide comments in response to this report.