QUANTICO, Va. -- The investigation of procurement fraud within the Department of the Air Force has been a critical mission since the inception of the Office of Special Investigations on Aug. 1, 1948.
This focus traces back to a significant event that occurred in 1947-1948, involving a general officer in the Army Air Forces who exploited the procurement process for personal gain during World War II. This pivotal case not only shaped the early direction of OSI but also underscored the importance of vigilant oversight in military procurement.
Recently, this ongoing commitment to combat procurement fraud was highlighted as the OSI marked the 10th anniversary of its dedicated Office of Procurement Fraud, which was initially established on Sept. 8, 2013. Although this specific office is a more recent addition, it represents a continuation and strengthening of a long-standing OSI mission.
The following was excerpted from a speech given at an OSI District Commanders Conference in October 1952. The speech was given by Special Agent Jerome M. Braun, Commander of District 5 at Wright-Patterson Air Force Base, Ohio. Braun was a charter member of OSI, having joined the command in 1948.
During the seven-month period from May 19, 1948, to Dec. 31, 1948, Headquarters Air Mobility Command processed 4,929 procurement actions, totaling $1.479 billion. During the six-month period from Jan. 1952 through June 1952, Headquarters Air Mobility Command processed 13,931 procurement actions, totaling $7.327 billion.
Within the period of a few months after the start of the Korean War, the total volume of Air Force procurement rose by 550%. In 1952, it was estimated that there were 1.33 million separate items of procurement in the Air Force supply system.
The Air Force has become the biggest buyer in the world. Recognizing that procurement, by the very nature of its business, and especially of the magnitude just described, attracts those intent upon enriching themselves at public expense, the Procurement Investigations Division of OSI has attempted to keep abreast of the fantastic acceleration in the number and complexity of Air Force procurement problems.
Since the inception of OSI, those of us who have been assigned to procurement work in the field have investigated and reported violations of public trust involving cases of fraud, conspiracy, bribery, collusion, favoritism, kickbacks, serious administrative irregularities, supervisory breakdown, contracts involving unconscionable profit and the solicitation, offering, and acceptance of gratuities.
Some months ago, an AMC employee walked into the OSI office and exhibited a small gadget which he described as a dew point indicator. He stated that the Air Force had purchased 22,000 of these items at a price of around $2.75 each, which he thought was excessive. He could point to no specific evidence of irregularity but advised that the Air Force was presently contracting to purchase around a million of these items.
Starting with this rather nebulous bit of information, our investigation eventually reflected that a certain project engineer had prepared specifications, which in effect, pointed to the specific product of a certain company; namely, the company which received the contract. All efforts of the buyer to get engineering approval of the products of competitors met with failure and were disapproved by the project engineer.
The project engineer was instrumental in having the product of the favored company place on the qualified products list. He even went so far as to obtain an independent chemical analysis prepared by a professor in a nearby university which excluded the competitor’s product.
Likewise, the project engineer made recommendations to the Supply Division, which resulted in the increase in requirements of the Air Force by approximately three times the original requirement, as a result of which the contract awarded to the company thus favored in the total amount of approximately $1.75 million.
Examination of the case reflected that all of the supervisory personnel “rubber stamped” their approval of the recommendations of the project engineer.
Shortly after OSI commenced its investigation, the project engineer resigned his $4,000 per year government positions and assumed a position as General Manager of the favored contractor at approximately $25,000 per year.
The investigation disclosed that the project engineer, who was not a buyer, actually was able to dictate the policy of the Air Force for the items procured, not only as to the company from which they should be procured, but also to the quantity needed. He slanted the specifications in the lab; he influenced the Supply Division in its determinations of requirements, and he was successful in excluding other companies from consideration.
The investigation disclosed that the university professor who made the evaluation of the competitor’s product, which resulted in its disapproval, was at the time receiving a salary of $500 per month from the favored contractor as a research consultant.
Later it was disclosed that the product which the project engineer had so carefully described in the slanted specifications was actually a cheap commercial chemical readily obtainable on the market, that, in fact, the contractor subtracted the deal practically to the extent of 100% and performed only minor operations such as labelling and shipping.
Analysis of the OSI reports submitted to Headquarters Air Mobility Command indicated to that command that there was a lack of planning and supervision in determining requirements, a failure to supervise and correct laboratory specifications to realistic needs, influencing of the qualification of the product, and the fact that the indicators were not considered necessary at all.
As a result of this case, Air Mobility Command cancelled all outstanding contracts held by the company involved. The company was placed on the Ineligible Contractors and Disqualified Bidders List. Certain supervisory personnel received reprimands. The former project engineer was barred from Wright-Patterson Air Force Base.
The Supply Division reexamined its requirements and established procedures whereby additional supervisory attention would be given to the establishment of requirements. The laboratory revised the performance requirements furnished by the Supply Division. Regulations were promulgated requiring additional supervision in the preparation of any specifications which might indicate sole source procurement.
The case was turned over to the Department of Justice for possible criminal prosecution, but insufficient evidence was found upon which to support such prosecution.
Results such as these were not forthcoming immediately in the early days of OSI.
I believe that it has become clear that our purpose and our function is to conduct investigations in such a way as to protect the rights and privileges of the individual and at the same time to detect and bring about correction of irregularities in the public interest. It is clear that our operation has had a marked effect in the field of Air Force procurement.