Citizens Against Government Waste and Payola?

The world of Defense procurement is tough, if you’ve ever served as a program officer inside the Pentagon you know that funding projects is a bloodsport. Services and program officers compete relentlessly for resources and contractors, usually with a wink and a nod from inside the Pentagon, carry on the fight with the various appropriators when battles are lost in the Pentagon. Bismarck’s aphorism about laws and sausages can be just as aptly applied to the purchase of weapons systems.

Sometimes, however, things give the appearance of having gone just too far.

Such is the case with the tussling on Capitol Hill over whether or not the F-35 Joint Strike Fighter (JSF) should be fielded with the engine manufactured only by one company or whether there should be an alternative engine available for the JSF. This is the type of struggle that goes on everyday on Capitol Hill and naturally the single producer, in this case the estimable firm of Pratt & Whitney, would prefer a monopoly while the competing team of G-E/Rolls Royce, also great engine manufacturers in their own right, would prefer that they had a piece of the pie. Both motivations are perfectly understandable.

What follows is a cautionary tale which illustrates the damage that can be done the reputation of a group which either actually sells its brand or casually dismisses the dangers of perceptions of conflicts of interest. This story is about a high stakes Defense procurement, the engine maker Pratt & Whitney and the watchdog group, Citizens Against Government Waste.

I’m a big fan of the F-35 JSF. It looks like Lockheed Martin has produced yet another winner in the tradition the F-35’s namesake, the P-38 Lightning. Unfortunately, with the election of Barack Obama a decidedly Defense-unfriendly environment has settled in on Washington. Large procurements have been slashed and smaller procurements have been canceled while astronomical sums of public money have been force fed into industries and jurisdictions that supported the Obama’s candidacy.

The F-35 is probably the most profitable new aircraft in production. Unlike the F-22 Raptor, there are no legal barriers to export sales and foreign buyers are lining up to replace aging F-16, and similar, fleets. The real money maker in the project will be the engine. Engine repairs, overhauls, and replacements will guarantee a hundred billion dollar income stream over the decades the F-35 will be in service.

Personally I am agnostic on the virtues of the Pratt & Whitney engine versus the G-E/Rolls Royce competitor. Pratt has delivered their engine on time while the G-E team is a little ahead of schedule in developing theirs (if you have an objection to a company press release as a source, the same info can be found in this Congressional report). On the other hand, the history of Pratt rushing to production with an inferior engine in the F-16 is pretty well documented and the current failures occurring in their F-135 engine leaves one wondering. I don’t make enough money to own stock in either of these companies and am merely pointing out that you have two high-end engine manufacturers competing for a crapload of money and claims on both sides need to be examined critically.

Back on March 23, 2009, Pratt & Whitney hired the advertising agency of Sullivan Higdon & Sink (SHS) as its “integrated brand experience agency of record.” According to the agency release:

SHS will begin work immediately on a series of branding efforts for Pratt & Whitney. The agency’s work will focus on the company’s space propulsion, commercial engine, military engine and power generation businesses.

On July 15, 2009, CAGW announced it was undertaking an ad campaign to kill the alternative engine and weighed into the fray with this YouTube video:

Nice ad. Or rather, nice production values.

But then something untoward happened. Intake Studio, the production house contracted by Sullivan Higdon & Sink to produce some fluff videos about the F-35 and Pratt & Whitney’s involvement updated their YouTube channel with the CAGW video. It shows the client for the CAGW as Pratt & Whitney.

Not cool.

Even by the rather malleable ethics one finds in advertising agencies (full disclosure, I was a senior VP in an agency for seven years), this leaves the salty tang of sleaze heavily in the air. It gives the impression that CAGW is participating in the advocacy equivalent of payola where a corporate donation can result in your opponent’s product or service being highlighted as waste.

And of course there is past history.

Back in 2006, the St. Petersburg Times Washington bureau chief, Bill Adair, ran a series of fairly harsh articles contending that Citizens Against Government Waste, among other groups, routinely took money from client groups, e.g. tobacco companies, Mexican avocado growers, etc., and then lobbied on their behalf under the guise of fighting government waste (the images are available at the St. Petersburg Times archives, search string “Citizens Against Government Waste”). The series is heavy on post hoc ergo propter hoc fallacies and guilt by association with every third word seemingly “Abramoff”, but still it does ask some unpleasant questions.

Anyway, Bloomberg reported on the faux pas or mistake concerning the parentage of the CAGW ad and Intake Studios immediately tossed the obligatory intern under the bus.

All of this could be a series of egregious, though innocent blunders. Or not. On June 29, Pratt & Whitney issued a press release patting itself on the back for hiring SHS and puffing up their new slogan, “It’s in our power.” (Yawn.) Typical though benign corporate propaganda with little to interest anyone except for this one paragraph:

The next phase of the campaign will break in July. It will be a multimedia effort addressing a key issue in one of Pratt & Whitney’s business units, Bertels said. This phase is still in development, and Bertels was unable to provide further details.

July is when the CAGW ad was released, July is when CAGW launched its ad campaign, and not a lot of other activity is apparent on the part of SHS in July. Larger questions, however, remain hanging.

The history of the F-35 program is crystal clear. The original contract called for there to be two competing engines for the airframe. The idea was that a competition between manufacturers would drive down the cost of engine procurement and provide a more reliable and cost effective source of engines than giving one manufacturer a sole source. Some of this was probably based on the unhappy experience the Air Force had with the original Pratt & Whitney engine in the F-16. The former director of the Joint Strike Fighter program, Lieutenant General Michael Hough, and the Heritage Foundation both support the idea of a competition for the JSF engine. Given the support for this competition in the development of the JSF contract, from the program director, and from a well respected conservative think tank it is difficult to see how this has fallen into the category of “government waste” much less having risen to the level of a poster child for the practice.

To be clear, I like CAGW and the last thing I want to be accused of is producing an unfair hit piece so I contacted their Vice President for Policy, David Williams for comment.

In my view, the issues are 1) how did the development of the alternative engine for the JSF become the top priority for CAGW, 2) when and how did SHS, a smallish midwestern ad agency, become the agency of record for CAGW and 3) has Pratt & Whitney contributed money to CAGW through its corporate philanthropy program. I don’t find really adequate answers to any of the questions.

According to Mr. Williams the alternative engine program first came to the attention of CAGW in 2004 with two appropriations for the F-136, or alternative, engine program. (See the 2004 Pig Book database, select Defense, keyword F-136). It made it’s appearance again in 2008 with a $240M appropriation (See the 2008 Pig Book database, select Defense, keywords Joint Strike Fighter). While the 2004 amounts are miniscule on the scale of Defense appropriations, a concern is raised in my mind, anyway, as to why a $240M appropriation did not make the highlights in the 2008 Pig Book when it would have been the largest project listed by an order of magnitude.

Williams says that CAGW met with representatives of Pratt & Whitney and G-E/Rolls a “couple of months” after the 2009 Pig Book came out to ensure they were accurately portraying the controversy. A look at the timeline, though, shows that by June CAGW was already heavily invested in its campaign against the F-136 engine. The Pig Book was released on April 14. On April 30, CAGW issued its first press release on the controversy. By that time the ad in question would have been well on the way to completion and a decision would have already have been reached on launching the ad campaign. Any conversation between CAGW and GE at that juncture has much more the feel of a pro-forma-going-through-the-motions exercise than a real inquiry.

The reasoning behind choosing the F-136 program as an example of government waste can certainly be argued either way. As I understand their rationale, the Obama Administration and Secretary of Defense Gates have asked that the program be killed and if ever a Defense appropriation could be killed this one looked very vulnerable. While this project may put CAGW uncomfortably close to the Administration, Jack Murtha is on the other side of the argument so a lengthy shower is going to be necessary regardless of which position you support. One should also point out the fact that Secretary Gates advocates killing the alternative engine does not mean that it isn’t needed. In fact, it looks like the program director for the JSF, Marine Corps Major General David Heinz,  has been told by Gates to shut up about the perfomance of the Pratt & Whitney engine.

CAGW’s choice of a rather smallish midwestern based ad agency for their flagship advocacy campaign strikes me as strange. One thing that Washington, DC is awash in is ad and PR agencies who know lobbying and advocacy. I asked Williams about this choice and he said that CAGW had asked around and SHS was recommended to them. They were, he said, cognizant of the potential for the appearance of a conflict of interest as SHS was already the agency of record for Pratt & Whitney but they felt they SHS’s familiarity with the F-136 issue would enable them to get more for their money. Certainly getting value for your dollar is on the mind of anyone who hires an ad agency and the most expensive part of the process is getting the agency up to speed on your product or issue. Having said that, signing on with Pratt & Whitney’s agency opens the door, as this case proves, to making your own credibility and veracity the issue.

The real question, of course, concerns CAGW’s financial links, if any, to Pratt & Whitney. In that regards we have no answers. Pratt & Whitney has issued a blanket “we don’t comment on our donations to advocacy groups” statement and when I asked Williams about donations from Pratt he said that CAGW respects the privacy of their donors and will not disclose them. While CAGW’s position is understandable, except arguably there is a difference between disclosing the identity of a donor and the identity of a non-donor, Pratt & Whitney’s, as a publicly traded company, is less so. I contacted GE and they have stated that GE has not made contributions to CAGW other than observing their corporate policy of matching employee contributions to valid non-profits.

The issue here is much larger than the fate of the F-136 engine program. Our movement is in crisis. We need everyone in the fight and we don’t need excess baggage weighing us down. CAGW does yeoman’s work in reporting on the misuse of our tax dollars but this particular case calls into question their strategic thinking, their priorities, and, unfortunately, their candor.

This tendency towards self-immolation by conservative groups is troubling. Some weeks back Erick reported on an pay-to-play allegation against David Keene of the American Conservative Union, and the response to Erick’s post, if I were to take it seriously, would have made me a member of the Flat Earth Society.

We paid a huge price in 2006 and 2008 for the venality of our politicians. We simply can’t afford a repeat of this in 2010. Groups who look to the conservative movement for monetary and political support must not make themselves liabilities through their own actions.