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 McCain, a key member of the Senate Armed Services Committee, said
he had long been troubled by the Pentagon's payment of 85-percent or
higher award fees to Lockheed on the F-35 program despite cost
increases and schedule delays, adding the background to those
decisions was "disturbing."
Former Deputy Defense Secretary Ashton Carter last month said the
Pentagon's F-35 program manager told him he had kept the fees high
because he liked the Lockheed executive in charge, and the company
official had said he would be fired if the fees fell below 85
percent.
Carter, who was the Pentagon's chief weapons buyer at the time, made
the remarks at a university event on May 16 and they were reported
by InsideDefense.com on May 30.
“This is, of course, totally unacceptable. It is the kind of
cronyism that should make us all vigilant against, as President
Eisenhower warned us over 50 years ago, the military-industrial
complex," McCain said in a speech on the Senate floor on Monday.
 Carter did not name the people involved but said the F-35 program
manager was fired. Then-Defense Secretary Robert Gates fired
Brigadier General David Heinz, the two-star Marine Corps general who
was running the F-35 program at the time, in February 2010 and
elevated the job to the three-star level.
Lockheed later announced the departure of Dan Crowley, who was the
company's F-35 program manager at the time. Lockheed declined
comment on Monday.
McCain said the incident raised questions about why award fees were
included in the initial F-35 contract in 2001, and why senior
officials overseeing the program had not questioned the level of the
fees given cost and schedule problems.
He said it also highlighted the importance of giving federal
acquisition officials the tools they needed to avert the
"unwarranted influence" of contractors on government programs.
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McCain said the F-35, the Pentagon's largest weapons program,
continued to face major challenges despite a recent report from the
Government Accountability Office, which said it was "moving in the
right direction."
"This is clearly a program that has had and continues to have major
problems," McCain said, citing mandatory inspections ordered last
week of all F-35 jets after an oil leak caused an in-flight
emergency at a Marine Corps based in Arizona.
Frank Kendall, the Pentagon's current acquisition chief, last week
highlighted the importance of incentive fees in structuring
contracts, but rejected the use of "one size fits all" policies on
contracts since each deal was unique. He said training acquisition
workers was critical.
McCain also said was skeptical about letting acquisition officials
decide which contract structure was "appropriate" in the absence of
effective guidance and training.
(Reporting by Andrea Shalal; Editing by Ken Wills)
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