Pentagon Paid Boeing $20 Billion and Bonuses for Shoddy Missile Defense System
Policy + Politics

Pentagon Paid Boeing $20 Billion and Bonuses for Shoddy Missile Defense System

iStockphoto/The Fiscal Times

The Pentagon spent $40 billion over a decade on a ground-based domestic missile defense system that has repeatedly failed the most rudimentary tests of its effectiveness in shooting enemy nuclear missiles out of the sky.

The so-called Ground-based Midcourse Defense system (GMD), the brainchild of the administration of former President George W. Bush, was designed to launch missiles from underground silos to counter potential nuclear attacks by North Korea, Iran and other hostile countries. In six of 11 tests between 2002 and early last year – all carefully choreographed and timed to try to maximize the success rate -- the U.S. anti-missile system missed destroying mock enemy warheads high above the Pacific Ocean.

Related: Pentagon’s Sloppy Bookkeeping Means $6.5 Trillion Can’t Pass an Audit

Boeing, the Chicago-based defense contracting behemoth, received $20 billion over more than a decade for developing and managing the costly, star-crossed nuclear defense system. It was never once penalized for the missile defense system’s disappointing performance that some defense experts and the Government Accountability Office (GAO) have deemed alarming.

Late last week, the Los Angeles Times revealed that the Defense Department showered Boeing with nearly $2 billion in performance bonuses throughout the testing period, despite the system’s disappointing performance. The newspaper obtained details of the bonus payments through a lawsuit it filed against the Pentagon under the Freedom of Information Act.

Equally disturbing, Los Angeles Times Washington correspondent David Willman wrote, is that the criteria for the annual bonuses “were changed at some point to de-emphasize the importance of test results that demonstrate the system’s ability to intercept and destroy incoming warheads.”

When Boeing and the Pentagon signed the first prime contract in January 2001, the contract stated that “the primary performance criteria” was whether the interceptor actually destroyed its target during the test – an “HTK” or “hit to kill” success.  The maximum award fee for a given year was 15 percent of the contract’s value, according to the newspaper report. Throughout the first phase of the contract, as much as 60 percent of the award fee pool was based on the “HTK success criteria.”

Related: Why the Pentagon Budget Is Out of Control

However, a subsequent contract dated August 2011 cited a revised list of criteria related to the next scheduled flight tests. Boeing would be entitled to 30 percent of the hefty award fee pool for a successful “mission execution,” but the “hit to kill” requirement was no longer specified.

The Fiscal Times was unable to obtain a comment from the company. Boeing referred other news organizations’ questions about the bonus and contract to the Missile Defense Agency, an arm of the Defense Department that oversees the GMD. Chris Johnson, a spokesman for the missile agency, told the Los Angeles Times that despite the GMD system’s erratic record in flight tests, the company had earned its bonuses “based on the criteria specified in the contract.” He said that the payments “complied with all appropriate acquisition regulations.”

“These types of contracts allow regular and consistent evaluation by the government, and fees are paid only when companies meet clearly defined targets,” Johnson said. He added that the words “hit-to-kill” were deleted in more recent contract terms to support “more detailed documented objectives of each respective flight test,” although a “successful intercept” remains a key performance objective.

Related: North Korea Makes Progress on Missiles, But No Evidence of Nuclear Weapons Yet

The GMD system became operational in 2004 and was designed to intercept a “limited” nuclear strike by a belligerent country other than a superpower like Russia. Boeing was granted two main contracts to develop and manage the ground-based anti-missile system and sensors. The company has been reimbursed for its direct costs in building and overseeing the anti-missile system and indirect costs, including executive salaries and corporate overhead.

A Feb. 17 GAO report concluded that while the program has had some recent successes, it “has not demonstrated through flight testing that it can defend the U.S. homeland against the current missile defense threat.” 

According to critics, the test failures are even more discouraging given their careful orchestration. Technicians and other personnel are told in advance approximately when the mock enemy targets will be launched and from where – including their estimated speed and trajectory. If the system were working correctly, it would be hard to miss given so much advance warning.

Related: How the Pentagon Cooks the Books to Hide Massive Waste 

The program dates back to 2002 when then President Bush ordered the first installment of a ballistic missile defense program to be in place within two years. In order to speed up the deployment, then-Defense Secretary Donald Rumsfeld exempted the missile agency from the DoD’s standard procurement rules and testing standards, according to the Los Angeles Times’ report.

That approach to circumventing the contract bidding process continues to be prevalent at the Pentagon. According to the DoD’s Office of Procurement and Acquisition Policy, the Pentagon continues to spend more than half its contracting dollars without legitimate competition between vendors. For example, of the $205 billion awarded in contract spending throughout DoD in the third quarter of fiscal 2016, only $101 billion was put out for bid, according to NextGov.