News Releases

Murray Calls for Pentagon Explanation, Congressional Oversight over Defense Department Participation in NATO’s Largest Award in History

Jun 18 2004

Senator says AGS contract was awarded without competition, lacks commitments from allies, will undermine U.S. aerospace industry

Senator Patty Murray today expressed concern about the Department of Defense’s handling of the Alliance Ground Surveillance System (AGS) program at the North Atlantic Treaty Organization (NATO). The AGS program is the largest single NATO contract in history. With American taxpayers primed to contribute up to 45 percent of the funding for the new program, Senator Murray called on the Department of Defense to follow their established policy of pursuing more interoperable, more coordinated weapons systems and to consider the consequences to the U.S. aerospace industry of militarizing the Airbus aircraft for the AGS and future NATO requirements.



In an unprecedented and unusual process, the contract for the Alliance Ground Surveillance System (AGS) program, NATO’s next-generation intelligence, surveillance and reconnaissance system, was recently awarded to the France-based EADS/Northrup Grumman group despite a lower bid from Raytheon/BAE. In addition to NATO's failure to use a full and open competition and the inconsistency with Department of Defense Transformation, Murray expressed her concern about the U.S. funding the militarization of an Airbus aircraft for the first time.



"NATO has endorsed a recommendation based on inaccurate and incomplete information. The lack of rigor in requirements development and formal pricing resulted in the endorsement of the Airbus aircraft. The manner in which this contract was awarded by NATO leads me to believe a united Europe has targeted the AGS Program as part of its larger aerospace strategy which has resulted in thousands of high-skill, high wage jobs migrating to Europe. I am concerned the Department of Defense yielded to Europe’s agenda and political pressure without fully considering the consequences of this unprecedented action to U.S. aerospace companies and workers throughout our country," Murray wrote in a letter to Michael W. Wynne, Acting Undersecretary of Defense, Acquisition, Technology and Logistics.



In early May 2004, the AGS Steering Committee announced a down-select to the European Aeronautic Defence and Space (EADS) consortium which will include Airbus 321 manned aircraft and Global Hawk unmanned aerial vehicles. They are now in a two year design and development phase. The AGS program is creating new technology in Europe and could lead to future decisions on an AWACS replacement. This is the most expensive single NATO procurement in history and the U.S. contribution could be as high as $2 billion.



Great Britain has opted out of paying for the program, and France and Germany may opt out as well. “Our allies haven’t committed to paying for the AGS program but that hasn’t stopped them from convincing the DoD to fund the largest contract in NATO’s history and new jobs at Airbus. Why would we agree to pay up to $2 billion dollars to militarize an Airbus aircraft for the first time at NATO when the Europeans themselves have not agreed to fund the AGS program,” Senator Murray said.



"This contract was awarded without a true competition and before the program was even developed. The process was unprecedented and unusual to say the least," Murray said. "NATO just committed itself to the largest program in its history without knowing what its ultimately buying and at what cost. If the Department of Defense tried to do business like that in this country there would be congressional and criminal investigations. NATO may have different procurement process but they are still talking about using the American taxpayer to bankroll European aerospace jobs."



The text of the letter is included below:



June 17, 2004



Michael W. Wynne
Acting Undersecretary of Defense, Acquisition, Technology and Logistics
3010 Defense Pentagon
Room 3E1006
Washington, DC 20301-3010


Dear Secretary Wynne:



I am writing to draw your attention to a number of serious concerns I have with the North Atlantic Treaty Organization’s (NATO) Alliance Ground Surveillance (AGS) program, the selection process used for this program, and the Department of Defense’s involvement with this program.



The AGS program represents the largest single NATO award in history. As such, the utmost care should be given to management of the acquisition process. I am troubled, however, by evidence that the Department of Defense has committed U.S. taxpayer dollars to the AGS program without a full and fair competition. The AGS contract was awarded before the program concept has been fully defined, before alternatives had been fully explored, and before all factors, including cost and risk, have been rigorously analyzed. After two concept studies were both deemed compliant, the lower cost approach – representing reported saving of almost $2 billion - was eliminated without satisfactory justification. By any standard, the process surrounding the AGS award is unusual and unprecedented as far as I know.



I am also troubled to learn that NATO has apparently refused to provide the customary post-selection debriefing as requested by the Cooperative Transatlantic AGS System consortium. This is unacceptable, as transparency is one of the hallmarks of our system. With the lack of oversight and questionable precedent, the American people and Congress would not accept a government contract awarded under these circumstances in the United States, and we shouldn’t here.



As NATO’s most expensive one-time NATO procurement program in history, it has been estimated that the AGS Program will cost up to $5 billion. With the U.S.’s participation at between 25 and 45 percent of the total program, costs to the U.S. may come to more than $2 billion. This financial commitment of U.S. taxpayer dollars stands in stark contrast to our European allies who, while ready to benefit from the economics of the program, have either opted out of or remain non-committal to funding its acquisition. While this acquisition holds potentially profound consequences for the U.S. aerospace industry because of its extensive militarization of an Airbus aircraft for the first time, it appears as though the United States has agreed to fund the largest share of the AGS Program without a full and open competition and without a financial commitment of our European partners.



NATO has now sanctioned a recommendation based on inaccurate and incomplete information, while the lack of rigor in requirements development and formal pricing allowed, for the first time, the endorsement of an Airbus aircraft.



Perhaps more serious, though, is the concern I have over the Department of Defense’s apparent willingness to abandon the transformation initiative with regard to NATO AGS. The Administration and Congress have both placed a high priority on organizing the armed services in a way that best meets the needs of the U.S. in defending our nation. As recently as March 2004, Director Anthony Tether from the Defense Advanced Research Projects Agency reiterated DoD’s ongoing commitment to transformation in testimony before the House Armed Services Committee. Dr. Tether stated, as a matter of department policy, that, “The Department of Defense is in the middle of a transformation to what is often termed Network Centric Operations. In simplest terms, the promise of network centric operations is to transform information superiority into combat power. The U.S. and coalition allies will have better information to collaborate, share knowledge, and synchronize joint operations far more quickly and effectively than our adversaries.”



In direct conflict with stated U.S. policy, the NATO AGS program, as now proposed, would appear to stand up a new platform and new infrastructure that will have limited inter-operability with existing resources at NATO and among our allies. This would make the NATO AGS program inconsistent with Department of Defense’s transformation initiative as well as the recent testimony by Dr. Tether and other Pentagon officials regarding the importance of Network Centric Warfare. Given the DoD’s aggressive promotion of transformation and Network Centric Warfare, I ask you to re-examine the appropriateness of committing additional taxpayer dollars to the NATO AGS program in its current form.



The manner in which NATO awarded this contract leads me to believe a united Europe has targeted the AGS Program as part of its larger strategy to target aerospace jobs. The European campaign to win aerospace jobs from the U.S. has resulted in thousands of high-skill, high wage American jobs migrating to Europe. I am concerned the Department of Defense yielded to Europe’s broader agenda and political pressure without fully considering the consequences of this unprecedented acquisition.



In addition, NATO has indicated that the current AGS program will lead to future decisions on replacing NATO AWACS. This could have hugely detrimental impacts on U.S. aerospace companies and workers. Clearly, Airbus and its European backers believe the AGS Program is the first victory in its campaign to standardize NATO’s aircraft fleet with Airbus aircraft.



At this time, I question whether further U.S. taxpayer support of the NATO AGS Program is warranted until all outstanding concerns are adequately addressed.



Finally, I request that the appropriate Department of Defense representatives brief my staff on the AGS program and the issues raised in this letter by Friday, June 25, 2004. Your prompt attention to this matter will aid the Congress as it considers the AGS program during the appropriations process for the coming fiscal year.



Thank you in advance for your attention in this matter. I look forward to your prompt response.



Sincerely,

Patty Murray
United States Senator


cc: Chairman Ted Stevens
Senator Daniel Inouye
Chairman John Warner
Senator Carl Levin
Chairman Duncan Hunter
Secretary of Defense Donald Rumsfeld
VADM Arthur K. Cebrowski, Director, Force Transformation,
Office of Secretary of Defense