Editor’s note: This article was first published by the Alaska Beacon.
A Fairbanks man who defrauded the U.S. Government for a Ford Explorer, cash and other kickbacks agreed to a plea deal on Monday.
Kevin Mahler pleaded guilty for his part in a conspiracy to inflate project costs and take illegal payments on contracts for commercial flooring services at a U.S. Army facility in Fairbanks, Alaska. Over five years, he received more than $100,000 in kickbacks from the owner of a commercial flooring company, according to documents filed by federal prosecutors.
Mahler and flooring company owner Benjamin McCulloch inflated the costs of flooring subcontracts administered by Fort Wainwright. Then McCulloch paid roughly half the proceeds to Mahler. Between 2016 and 2021, Mahler received cash, a 1997 Ford Explorer, Apple watches, TVs, workout equipment, cash and an all-terrain vehicle from McCulloch. Mahler did not report this income to the Internal Revenue Service. McCulloch already pleaded guilty to his role in the crimes.
“Taking advantage of U.S. taxpayers by defrauding U.S. Army facilities is a crime and will not be tolerated,” said Deputy Assistant Attorney General Manish Kumar of the Justice Department’s Antitrust Division in a news release. “The Justice Department’s Procurement Collusion Strike Force will hold accountable individuals who conspire to illegally profit — through kickbacks or otherwise — at the expense of the public.”
Multiple agencies, including the Antitrust Division’s San Francisco office, the U.S. attorney’s office for Alaska, the FBI Anchorage field office, and the IRS Criminal Investigation’s Seattle office, are investigating the case.
Mahler could be sentenced to up to 10 years in prison and a fine of $250,000.
Editor’s note: This story has been updated to include information from Pentagon officials.
WASHINGTON — America’s defense industry needs “generational” change to keep pace with competitors like Russia and China.
This is the Pentagon’s assessment in its first-ever National Defense Industrial Strategy, arriving at a moment of extreme demand. The U.S. is supporting partners threatened abroad — including Ukraine, Israel and Taiwan — forcing careful management of American aid and readiness.
“This strategy is about balancing the tension points,” said Halimah Najieb-Locke, the Pentagon’s acting deputy for industrial base policy, in a briefing with reporters.
The document is a self-described “call to action,” with almost 50 pages of recommendations to build a “fully capable 21st century” defense sector. It features the Pentagon’s most up to datethinking on the health of its suppliers, stretched thin after Russia’s invasion of Ukraine and the disruptive COVID-19 pandemic. America still builds the best weapons in the world, the strategy says, but that alone isn’t enough in a more competitive world.
The U.S. “must have the capacity to produce those capabilities at speed and scale to maximize our advantage,” it says.
That advantage may be narrowing in part because of America’s main competitor. In the last 30 years, the document says, China “became the global industrial powerhouse in many key areas — from shipbuilding to critical minerals to microelectronics.” China’s capacity, the document says, in some cases surpasses that of America and its allies in Asia and Europe.
Still, Cynthia Cook, a defense industry expert at the Center for Strategic and International Studies think tank, says China’s advances are only part of what’s motivating this work.
“I would not say that that’s the entire purpose … behind the strategy,” she said.
Instead, Cook said, the document is meant to be the summit of more than six years of Pentagon work. Former President Donald Trump ordered the Defense Department to review its industrial base early in his term, leading to a report issued in 2018. Since then, more reviews have followed, including one on supplier competitiveness.
“All of these factors together make it fairly clear that it’s time for a rethink of how the department manages industry,” said Cook. “Without a strategy, it’s going to be one-offs here and there.”
The document is split into four sections, focusing on supply chains, workforce, Pentagon acquisition and the American economy overall. There are more than two dozen recommendations, which include diversifying the Defense Department’s suppliers, training more workers for industry-related careers, increasing commercial acquisitions and sharing more technology with U.S. partners.
Neither the problems nor the remedies listed are new. They aren’t meant to be, said Cook. The value of the strategy, she said, is its ability to coordinate industrial base work across the Pentagon, including in the services.
“Part of this strategy is really marshaling a lot of what we’ve already been doing within the department,” said Assistant Secretary of Defense for Industrial Base Policy Laura D. Taylor-Kale, also speaking at the briefing.
Specifically, she referenced a map of the supply chains for 110 different weapons systems the Pentagon has been developing since November. This map, added Najieb-Locke, will help find links further down the supply chain that are particularly brittle — whether due to approaching obsolescence or being a single point of failure.
Speaking at the Reagan National Defense Forum in December, Undersecretary of Defense for Acquisition and Sustainment Bill LaPlante said the document is also meant to be a broader signal to industry.
Najieb-Locke elaborated on that point Thursday. On one end, the strategy is meant to signal longer-term commitment to its current suppliers by putting the department’s goals in writing. On the other, it affirms that the Pentagon needs to work more with non-traditional companies, particularly those in the innovation space.
“We’re answering the industry’s call for consistent demand signal by organizing ourselves and targeting our efforts,” she said.
Despite that, some former defense officials and analysts who spoke with Defense News were skeptical of the strategy’s value. Heidi Peters, a defense industry expert at the RAND Corporation think tank, questioned why there needed to be a new strategy when the Pentagon already publishes so much literature on industry.
David Berteau, president of the Professional Services Council, which represents government contractors, said the strategy was a good “first step,” but he wants to see more attention paid to sustaining systems rather than just buying them.
Even more, Berteau said he was focused on how the strategy would be implemented, something he said is “more important than the strategy itself.”
While reshaping the defense industry may take a generation, the document said, it has shorter-term goals for the next three to five years. The Pentagon expects to publish an unclassified implementation plan in February — and a classified one later in March, said the officials briefing Thursday.
The classified plan will focus on many of the existing authorities the Pentagon has, such as the Defense Production Act, which Taylor-Kale said are “underutilized.”
The implementation plan will feature a list of priorities and metrics to gauge the strategy’s success, said Najieb-Locke. One of those priorities in the next five years is to create a faster and more stable supply of “long lead items,” which slow production, she said. To do so, she added, the department will have to better track its lower-tier suppliers, who sometimes don’t even know their work is supporting the Pentagon.
That need makes it more important for the Defense Department to continue speaking with partners across the government and in industry, Taylor-Kale said.
“We’re not going to come out of our our offices, so to speak, talk to people in and then go back in and shut the door,” she said. “We’re continuing the conversation.”
Noah Robertson is the Pentagon reporter at Defense News. He previously covered national security for the Christian Science Monitor. He holds a bachelor’s degree in English and government from the College of William & Mary in his hometown of Williamsburg, Virginia.
WASHINGTON — The U.S. Air Force’s next-generation tanker was supposed to be the ideal candidate for a fixed-price development program.
Indeed, when Boeing first won the deal to build what’s now known as the KC-46, the defense contractor said it would use a “low-risk approach,” basing its design on the existing Boeing 767 commercial airplane. The contract was firm-fixed-price, meaning Boeing was on the hook if costs ran higher than expected.
Nearly 13 years later, Boeing has absorbed $7 billion in cost overruns, far more than the contract value of $4.9 billion. For years, the tanker, designed to refuel aircraft in flight, has been plagued by delays, production errors and a faulty vision system that required a complete redesign.
While Boeing has paid the financial price, the company and the Air Force have spent years trying to make the program work. The initial contract award called for the combat-ready tankers to arrive in August 2017; the first arrived in January 2019.
In the years that followed, the KC-46 program was beset by further delays, including production line problems that regularly stalled deliveries and an underperforming vision system. That system is years behind schedule and expected to come in October 2025.
Boeing’s experience with the KC-46 and other programs in recent years has turned into a “cautionary tale” on the risks of entering into fixed-price development contracts, said Steven Grundman, a former Pentagon industrial base chief who now works as a senior fellow at the Atlantic Council think tank.
The KC-46 story “makes both sides of the market — the Pentagon and the contractors — sharpen their pencils,” Grundman said. “The Pentagon will be more cautious about programs that it thinks [lend themselves to] an efficient and effective fixed-price contract type. And contractors will be more discerning about the readiness of their engineering chops and the ability of their balance sheets to absorb risk.”
While analysts don’t expect the Pentagon to entirely shy away from fixed-price contracts, they said the military and businesses will think long and hard about which future deals make sense for such a contract structure — and when another path might better serve a program.
Air Force Secretary Frank Kendall, who was the Pentagon’s deputy acquisition chief when the original tanker contract was awarded, has said the service didn’t look closely enough at some design elements and wasn’t skeptical enough of the rosy picture Boeing painted.
And he has acknowledged a cost-plus contract, meaning one that covers a company’s expenses as well as some profit, might have been a better choice — for both sides.
“In a fixed-price, you’ve got to let the contractor kind of do what it wants because he’s taking the risk associated with the cost,” Kendall said.
L3Harris Technologies’ chief executive told investors in an April earnings call that concerns over the risk of fixed-price contracts prompted the company to pass on two opportunities it otherwise found “exciting.”
“It’s very hard to commit to a fixed-price development program when you don’t know the spec,” Chris Kubasik said. “We all look back at all the write-offs and losses, and more times than not they’re tied to that. So we will not be playing that game.”
‘No quarter’ for fixed-price mistakes
Under firm-fixed-price contracts of the kind Boeing received to build the KC-46, the contractor agrees to deliver a product or service for a hard-and-fast price, and shoulders the cost of any overruns or changes that weren’t originally agreed upon with the government.
But while the contractor bears the brunt of the risk under a fixed-price deal, it can also pay off considerably if the company plays its cards right. While other forms of contracts limit profit margins to between 5% and 12%, under a fixed-price contract, companies can keep any leftover money. If they come in under cost, they reap all the benefits.
Bryan Clark, the director of the Center for Defense Concepts and Technology at the Hudson Institute think tank, said there will always be a place in the Pentagon for fixed-price contracts.
“The idea of fixed-price contracts is still very popular within the [Department of Defense] because contracting officers like it; it’s a good way to show that you’re holding the line” against cost overruns, Clark said.
A KC-46 Pegasus refuels an F-16 at night, as seen through the updated version of the Remote Vision System, or RVS 2.0. (Boeing)
Some contracting experts said fixed-price deals can make sense for straightforward projects, but more complicated development programs are not necessarily an ideal fit.
Defense industry analyst Loren Thompson said if a company can’t turn a profit on a program — or worse, starts bleeding cash as it spirals — the company might start looking for places to cut corners to save. That, he explained, can lead to moves detrimental to the program over the long run — and perhaps years of delays and headaches for the client, even if they’re not financially on the hook.
“If you’re not breaking even on a program, then you start thinking: What don’t I have to do that was in my original plan?” Thompson said. “And it can lead to trouble.”
(Thompson previously consulted for Lockheed Martin, though he no longer does so. Lockheed and Boeing contribute to the Lexington Institute think tank, where Thompson is chief operating officer.)
Boeing’s KC-46 experience shows companies can’t expect the Pentagon to bail them out if things start to go sideways on a fixed-price contract, Grundman told Defense News. During the Cold War, he said, the Pentagon was more willing to help when such a contract started to balloon out of control and endanger a company. But those days are gone, he noted, ever since the wave of industry consolidations led to mega-firms with multibillion-dollar revenues.
“The Pentagon is going to give no quarter to companies that make mistakes in how they bid on these things,” Grundman said. “These [primes] are big boy companies, [with] big balance sheets that the Pentagon can ask to bear more risk.”
In recent years, Boeing has made more than one big bet on a fixed-price program. In 2018, the company won deals for the T-7A Red Hawk trainer, MQ-25A Stingray tanker drone and VC-25B Air Force One programs, all fixed-price efforts that have contributed to billions of dollars in charges for Boeing.
“Boeing wanted to win the work, so they went for these fixed-price [research and development] contracts and lowballed it, and now they’re suffering,” Clark said.
Lockheed Martin lost three major contracts to Boeing in 2018, including the T-7 and MQ-25. Lockheed’s chief executive at the time, Marillyn Hewson, told investors that if the company had matched Boeing’s price, then Lockheed would have lost more than $5 billion.
The Trump administration’s hardball renegotiating of the VC-25B contract with Boeing — which CEO Dave Calhoun has publicly lamented — also ratcheted up the company’s risk.
“There was a lot of risk in that [Air Force One project] because it’s not easy to convert a plane that already exists to perform a different function,” Clark said. “The government squeezed them pretty hard to give them a fixed price, and [Boeing] had to lowball it, and now they’re having to take those losses.”
Boeing, still smarting from the contracting licks it took — and, for now, will continue taking — is going to great lengths to show its investors it learned lessons.
“Rest assured, we haven’t signed any fixed-price development contracts, nor [do we] intend to,” Boeing’s chief financial officer, Brian West, said in the company’s October earnings call.
And on Dec. 4, a Boeing spokesperson confirmed the company is no longer competing to provide the Air Force with a successor to the E-4B Nightwatch, a so-called doomsday plane meant to serve as a survivable command, control and communications center during nuclear war.
“We are approaching all new contract opportunities with added discipline to ensure we can meet our commitments and support the long-term health of our business,” the spokesperson told Defense News.
Boeing CEO Dave Calhoun is recognized during a ceremony to sign a trade agreement between the U.S. and China at the White House on Jan. 15, 2020. (Mandel Ngan/AFP via Getty Images)
Reuters reported the service’s insistence on using a fixed-price structure for the contract, which Boeing has sworn off, was an insurmountable disagreement.
Boeing declined to confirm whether a fixed-price dispute was a factor, and the Air Force declined to comment on the ongoing competition.
Clark said Boeing’s experience has prompted firms to be more wary of fixed-price contracts and more reluctant to accept those kinds of deals during the higher-risk research and development phase.
“There’s definitely been a new openness on the part of DoD contracting officers to accept cost-plus [contracts] on the R&D side,” he said. Companies now say they “want R&D to be a cost-plus endeavor, where we’re getting covered in terms of our overruns. Because the government always asks for something pretty ambitious, therefore, it makes sense that the government helps to pay for or cover the risk associated with those ambitious goals.”
No ‘vanilla Wedgetail’
For its B-21 Raider bomber, the Air Force has applied both a cost-plus and fixed-price approach. The service used a cost-plus approach for the 2015 contract it awarded Northrop to develop the Raider, and the soon-expected low-rate initial production contract will use a fixed-price structure.
That cost-plus structure raised eyebrows at the time, particularly from the late Sen. John McCain, R-Ariz., who worried it would lead to cost overruns and schedule slips. But after the Raider’s on-time and on-budget rollout in December 2022, former Air Force Secretary Deborah Lee James said it was clear the cost-plus structure and the way the Air Force had managed Northrop Grumman’s incentives worked.
Clark also praised the Air Force’s contracting approach.
“That’s obviously partly a function of Northrop Grumman’s superior execution, but it’s also a function of the contracting in a way that’s sustainable for the company,” he said.
But Thompson, the defense analyst, said rockier roads could lie ahead for Northrop in the production phase. Several times last year, the contractor’s chief executive, Kathy Warden, cautioned investors it’s unlikely the B-21 will initially turn a profit, and that Northrop could lose up to $1.2 billion on the low-rate initial production contract.
In January 2023, Warden attributed the rising cost estimates for the low-rate initial production contract to “unprecedented” inflation, supply chain disruptions and labor issues. However, she expressed confidence the B-21 would keep driving future growth for Northrop.
But Thompson said inflation isn’t the entire story here, as Northrop had bid aggressively to win the coveted and highly advanced bomber contract.
Northrop “actually underbid an aggressive proposal from Boeing and Lockheed,” Thompson said. Now “they’re concerned about how little money they may make on production. The way they presented this publicly is, ‘Oh, we forgot to put an inflation clause in the contract.’ And maybe that’s close to it, but when you have a very challenging concept for a future program and you bid fixed price, it’s a crapshoot.”
The Air Force’s $1.2 billion deal in March for Boeing to start rapid prototyping of the E-7A battle management aircraft took a different approach. That deal uses the cost-plus structure, the Air Force said.
An artist’s rendering shows the U.S. Defense Department’s planned E-7A battle management aircraft. (Staff Sgt. Nicolas Erwin/U.S. Air Force)
In a statement to Defense News, the Air Force said it chose that approach to balance the risk between the service and Boeing, and because of modifications the American version of the E-7 will require.
The Air Force’s E-7 will be based on the configuration Boeing is already making for the United Kingdom, the service said, but its design will be tweaked to meet the United States’ standards for satellite communication, military GPS, and cybersecurity and program protection requirements.
The Air Force’s use of a cost-plus contract for E-7s, which will replace its aging and retiring E-3 Sentry fleet, makes sense because of the modifications, Clark and Thompson said. Australia also flies the E-7, which it dubbed Wedgetail, but its version too differs in several ways from the American one.
“This is not going to be a vanilla Wedgetail,” Thompson said. “Wedgetail has been flying a long time, and it’s a sole source for Boeing. From the Air Force’s point of view, those two facts make … going fixed price sound more reasonable. But I think that underestimates how much uncertainty there is in the integration and future evolution of the airframe.”
If the Air Force conducts rigorous oversight on the E-7′s prototyping, Thompson said, the cost-plus structure could give Boeing the flexibility it needs to meet the cost requirements while netting a decent return. And in return, he said, the Air Force could get a better product out of Boeing.
“Wedgetail presents an opportunity to rigorously balance the concerns of the customer with those of the contractor,” Thompson said. “As long as that [government oversight] happens, giving the contractors a little more flexibility can pay big dividends.”
Boeing had a stronger hand with which to negotiate, Clark said, since there wasn’t another ideal candidate to replace the older airborne warning and control system aircraft. Boeing was “in a good position and felt like they didn’t need to underbid everyone else,” he added.
But Thompson said the Air Force’s move to a cost-plus structure for the E-7 may be a sign of lessons learned about the risks that can come with fixed-price contracts.
“Kendall understands acquisition better than anybody else in the [Pentagon’s] E ring,” Thompson said, referring to the building’s outer ring of hallways where many of the military’s most senior leaders have their offices. “And I think he has relearned an old lesson: You get what you pay for. You can either pay for it up front or you can pay for it down the road, but at the end, you get what you pay for.”
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.
With 2024 on the horizon, federal agencies are on the cusp of a transformative era in which AI-powered automation and Generative AI are set to revolutionize compliance and public service delivery.
The integration of AI with automation is a practical solution already being implemented across the public sector to enhance the efficiency and effectiveness of government operations.
In 2024, the proven capability of AI-powered automation will also enable agencies to meet the rising need for quick and efficient public services, such as federal aid programs, unemployment benefits, and tax filings.
Generative AI, when combined with AI-powered automation, will make rapid improvements in responsiveness of government processes and improving public service delivery. Together, these emerging technologies will help agency leaders meet the requirements outlined in recent White House and OMB mandates.
Embracing AI-powered automation
AI-powered automation uses AI to tackle complex processes, reducing manual effort and human errors. It is particularly beneficial in a complex technological environment, where it can launch immediately and scale infinitely, allowing powerful automation to be created right from workers’ browsers. Suh automation can also securely pull relevant data from structured and unstructured documents, allowing agencies to process and generate reports efficiently, and curate new datasets for emerging analysis needs.
To comply with recent federal digital transformation mandates, agencies must adopt AI-powered automation tools to securely and transparently process data, boost operations, and empower government workers in their careers. Additionally, software automation will also continually monitor cloud environments, improving agencies’ security postures while reducing workloads for IT and security teams.
Yet, automation tools in government must be compliant with government security requirements and provide core management, governance, analytics, and self-hosted automations on-premises or in the cloud. FedRAMP is currently undergoing an overhaul to meet updated compliance requirements and address cloud service demand. In 2024, AI-powered automation will become an integral part of how agencies rely on FedRAMP and other security compliant solutions to modernize.
Incorporating Generative AI
Generative AI and AI enabled intelligent digital assistants are at the forefront of transforming government employees’ abilities to serve citizens. AI assistants can act as a companion that helps individuals tackle their daily tasks. This technology can help federal agencies boost productivity by drastically reducing manual tasks, increasing accessibility and government efficiency. Workers can even use simple natural language prompts to create automations without the need for technical or coding knowledge.
Gen AI can interpret human instructions and carry out complex tasks by breaking them down into subtasks and chaining together sequences of actions and reasoning stages. This level of sophistication is likely to affect a wide range of vocations and create new careers, driving service delivery innovation.
However, to prevent Generative AI from making poor decisions or putting personal data at risk, agencies and their employees need strong data governance policies, AI literacy programs and training. Agency leaders should establish clear guidelines and governance structures to ensure the responsible use of Gen AI and other AI solutions. The use of automation with AI can help agencies more effectively put guardrails in place and enable higher levels of trust as they incorporate these newer technologies into their operations.
New toolsfor mission success
The federal government and defense agencies are already making gains in digital transformation and IT modernization using AI-powered automation. For instance, the Air Force, the Departments of Labor, Homeland Security, and Human and Health Services have streamlined operations and saved hundreds of thousands of hours using AI-powered automation in acquisition, finance, logistics, disaster relief, and other government functions.
By pursuing a strategic approach to automation, agencies can achieve dramatic gains in efficiency, productivity, security, and mission outcomes in the coming years.
The digital age has also ushered in an era where data management has become a cornerstone of government operations. With the daily generation of vast amounts of data, AI-powered automation will emerge in 2024 as a critical tool for enhancing data management, governance, and compliance. Automations do this by streamlining the modeling, sharing, and storage of data, thereby reducing the manual governance workload and improving query performance and accuracy.
In the realm of government compliance, AI-powered automation offers significant advantages. This tool can manage and govern data effectively, ensuring adherence to regulatory standards without the need for extensive human oversight. This not only improves accuracy but also reduces the likelihood of human error, which is crucial in maintaining compliance.
Moreover, AI-powered automation democratizes data access, allowing employees without technical expertise to work with high-quality data, fostering a data-driven culture within federal agencies. This shift is crucial for improving public services, reducing fraud, waste, and abuse, and automating time-consuming tasks.
When combined with machine learning, AI-powered automation can increase employee engagement and fight fraud by constantly mining content to find new patterns and trends. This capacity also gives agency leaders the accurate data they need to make crucial decisions for mission delivery.
Agencies will also notably expand the implementation of personalized assistance for citizens through chatbots and virtual agents. These advanced technologies, powered by machine learning and natural language processing, will be able to address inquiries 24 hours a day, seven days a week, effectively minimizing wait times and ensuring greater responsiveness.
Implementing AI-powered automation and tools like Gen AI are likely to significantly change the nature of work within federal agencies. The convergence of these cutting-edge technologies represents a significant opportunity for leaders at all levels to enhance operations, compliance, mission performance, citizen experiences, and public service delivery in the year ahead.
Mike Daniels is senior vice president of public sector at UiPath.
Changes are coming in Tricare, but not until the contract dispute is settled. Pictured here, Hospital Corpsman 3rd Class Nikita Stroud checks vitals on a young patient during a well-child checkup in June. (Navy)
New Tricare contracts designed to improve care for the 9.6 million Tricare beneficiaries will be delayed from a planned start date of August 2024.
The actual start date remains up in the air, as a protest involving the West Region’s $65.1 billion contract continues in the United States Court of Federal Claims. A 12-month transition period is needed before the policies begin. Defense officials, however, halted work on the contracts pending the decision of the court.
Defense Health Agency officials have said there will be no disruption to patient care, but the ongoing dispute could delay some of the improvements beneficiaries were expecting. The new contracts, for example, would allow patients to transfer specialty care referrals to a new doctor when they move, even if their new duty station is not in their current Tricare region.
New contracts for the Tricare East and West regions have a potential combined value of $136 billion over nine years. Once the dispute is settled, an additional 1.5 million Tricare beneficiaries will be transferred to the West Region from six states in the East Region.
In court filings, West Health Net Federal Services contends that errors in the Defense Health Agency’s evaluation of proposals resulted in “the illogical conclusion that TriWest — an entity that has not performed a Tricare [Managed Care Support] contract in nearly a decade and that has no existing Tricare network — had equally relevant and more favorable past performance than the successfully performing West Region incumbent who has received glowing performance assessments for years.”
In August, the Government Accountability Office denied a second protest by West Health Net Federal Services and affirmed defense health officials’ selection of the Phoenix-based TriWest Healthcare Alliance Corp. as the new managed care support contractor for the Tricare West Region.
In a court document filed in November, the government responded that the Defense Health Agency “had rationally evaluated TriWest’s proposal to use its existing accredited federal network to help populate” its network.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book “A Battle Plan for Supporting Military Families.” She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
While these measures were evidence of increased scrutiny over military aid, and a growing ability to track and monitor donated gear as the war wears on, an obtained early report illustrates the severe limitations of early accountability measures, and how much Americans officials trust their Ukrainian counterparts to self-police.
A redacted version of the IG’s first accountability report, released to Military Times in response to a public records request, paints a picture of just how little was known in the early days of the war, which began with Russia’s February 2022 invasion.
Dated Oct. 6, 2022, the 21-page report assesses “The DoD’s Accountability of Equipment Provided to Ukraine,” purchased out of what was then $23 billion in regular and supplemental appropriations for security assistance.
The evaluation covers the start of the war through September 2022.
“During the evaluation, we found that the DoD was unable to provide end-use monitoring (EUM} in accordance with DoD policy because of limited U.S. presence in Ukraine,” the report states. “Therefore, we are issuing this report identifying the challenges faced by DoD personnel responsible for conducting EUM and Enhanced EUM when there are limited or no U.S. personnel present in the area the equipment is being used.”
EUM, according to 1996 federal law, requires regular in-person visits to partner-nation installations, while Enhanced EUM, for sensitive defense items, includes serial-number inventories of all items, as well as in-person assessments of storage facilities.
Unable to perform those measures due to a closed U.S. Embassy in Kyiv and a cap on the number of U.S. personnel allowed in country, U.S. European Command attempted to monitor gear by requesting and storing physical “hand receipts” for gear, using automated tracking where possible, asking the Ukrainian government for information about gear accountability and tracking intelligence reporting on where gear ended up.
Even these secondary measures were incomplete: the inspector general got reports about a U.S. diplomatic note issued to the Ukrainian armed forces asking for copies of the receipts but was unable to obtain a copy of the note or the receipts. The report stated it would pursue the matter in a later report focused on chain-of-custody records for gear.
“[EUCOM] J-5 personnel stated that Ukraine is making a good-faith effort to provide equipment hand receipts and updates on the status and location of provided equipment,” the report stated.
A member of the nonprofit Special Operations Association of America who made multiple trips to Ukraine in 2022, spending months on the ground helping to deliver and distribute aid as a civilian, said he found that statement to be true, adding that Ukrainian officials’ awareness of the country’s reputation for corruption drove an internal push to demonstrate accountability and trustworthiness.
That said, he added, smaller items, not as easily identified as U.S. military donations, often did go astray.
“What I found was a bifurcated system of accountability that favored end items, or things that could publicly come back and look really negative,” the SOAA member, who asked not to be identified by name, told Military Times.
He mentioned Stinger and Javelin missiles and artillery components as examples of gear for which he received accounts of a painstaking accountability process. That process, he said, included tracking serial numbers and taking pictures of empty missile tubes and doing one-for-one swaps with resupply.
“With Javelins and Stingers, it was so cumbersome that it almost negatively impacted combat operations,” he said.
The Ukrainian forces he encountered, he said, were keenly aware that having one of these weapons end up in the hands of a nefarious actor could create “catastrophic effects,” harming public perception and the flow of aid from the United States.
“That is very different from what I saw with lower-end items,” he said, citing gear like first-aid pouches, boots and small arms.
With those items smaller in size and value, he said, concerns over the consequences of loss or pilfering were much lower and therefore more likely to go astray at checkpoints on their way to the front.
While Defense Department officials have emphasized their intensified efforts to track gear, with Undersecretary of Defense for Policy Colin Kahl telling the House Armed Services Committee in February they were employing mechanisms “that go above and beyond our standard practices,” these methods still rely heavily on Ukrainian forces.
Kahl said at the hearing that the U.S. has given the Ukrainians scanners and tracking software but added that American officials do conduct remote site visits as they’re able. While congressional scrutiny over the growing tally of military support to Ukraine remains high, the reports of malfeasance that have surfaced have largely come from the country’s own intelligence service, the SBU.
The report cites a handful of events in June 2022 and August 2022, all of which had been featured in prior news stories about criminal heists involving the theft of small arms, ammunition and ballistic vests. SBU dismantled, disrupted and reported each of the schemes.
Many inspector general accountability probes have yet to publish results, and calls for greater accountability measures remain strident from within Congress and from critics of government waste.
The DoD IG’s announcement was for an evaluation to determine whether DoD elements were “effectively accounting for defense materials being provided to Ukraine from their points of origin to seaports of embarkation within the continental United States.”
That evaluation will be completed through interviews and site visits to U.S. Transportation Command and U.S.-based sea ports, assessing the integrity of supply lines to Ukraine before gear even leaves the country.
The office announced an “evaluation of land-based security controls” earlier that month for equipment being transported to Ukraine by cargo train. That followed a project announcement regarding DoD’s accountability processes for tracking equipment lost or destroyed after being delivered to Ukraine ― and an April one regarding “Security Assistance Group-Ukraine’s management, tracking, and coordination of the movement of U.S. defense articles to Ukraine.”
Released projects include a June evaluation of accountability controls transferred to Ukraine via air, which found that incomplete manifests diminished confidence in gear inventories for items flown out of Jasionka, Poland.
The SOAA member suggested the Defense Department could invest more deeply in public-private partnerships with American nonprofit organizations with International Traffic in Arms Regulations certifications to help ensure equipment makes the final mile and reaches the intended end user.
“There’s a huge past performance in some of these organizations,” he said, citing SOAA and Save Our Allies, another veteran-run organization that has had a presence on the ground in Ukraine since the invasion began. “They’re here. They’re able to transport these things and work with the Ukrainians.”
Hope Hodge Seck is an award-winning investigative and enterprise reporter covering the U.S. military and national defense. The former managing editor of Military.com, her work has also appeared in the Washington Post, Politico Magazine, USA Today and Popular Mechanics.
Under a newly published interim final rule—or IFR—quantum computing items, advanced semiconductor manufacturing equipment manufacturing, gate all-around field-effect transistor technology and additive manufacturing items are subject to worldwide export controls to ensure the products are not used for purposes contrary to U.S. national security or foreign policy, the BIS said Thursday.
The agency implemented the controls as a result of a broad technical agreement with international partners.
“Aligning our controls on quantum and other advanced technologies makes it significantly more difficult for our adversaries to develop and deploy these technologies in ways that threaten our collective security,” said Alan Estevez, Commerce under secretary for industry and security.
The bureau has included exceptions in the IFR to eliminate the need for partners to submit export license applications for collaborations focused on advancing critical technologies.
Under the License Exception Implemented Export Controls, countries that have implemented equivalent technical controls are authorized to export and reexport the newly added products.
Eligible destinations identified by BIS include Italy, the United Kingdom, Australia and France.
Global technology trade association ITI said Thursday it had made this recommendation in response to the AISI’s consultation regarding a draft document it had released on the management of risks to dual-use foundation models, a type of AI technology underpinning a variety of common applications like internet search but also possessing the potential for advanced benefits like accelerated research.
ITI also proposed that the guidance tackle the roles, responsibilities and capabilities of various actors in the AI value chain and identify where responsibility-taking can occur.
Concerning transparency and disclosure, the guidance should also list the information to be disclosed by organizations and to whom they should be disclosed.
According to ITI Vice President of Policy Courtney Lang, having “a consistent understanding of misuse risks and ways to address them” is key to AI safety.
“By incorporating the tech industry’s feedback, NIST can strengthen its guidance document and provide a playbook for stakeholders, ensuring consistency, bolstering accountability, and mitigating risks for consumers and businesses,” Lang added.
The Post-Quantum Cryptography Coalition has released a comparison of PQC standards from international government regulatory bodies, with contributions from over 125 cyber researchers.
The coalition is working with the National Institute of Standards and Technology and the National Cybersecurity Center of Excellence to provide the cyber community with comprehensive guidance for the post-quantum transition, MITRE said.
Led by MITRE and SandboxAQ, the coalition intends to accelerate the implementation of quantum-resistant methods to address the anticipated cyberthreats posed by quantum technology.
According to Matt Mickelson, lead coordinator of the coalition and senior cyber principal for science and technology at MITRE, national and international PQC standards establish a common framework for addressing the upcoming risks to personal, commercial, military and intelligence data.
He noted that the threats also target “the digital signatures that identify trusted entities and contracts.”
Established in September 2023, the global coalition of experts, technologists and researchers seeks to enhance the public understanding and adoption of PQC.
At present, coalition participants are collaborating on workstreams regarding standards, education, implementation and agility to help countries around the world prepare for the post-quantum transition.
The flight test delivered critical information on airflow physics at hypersonic speeds, the laboratory added.
According to Brad Wheaton, chief scientist at Johns Hopkins APL, the experiment will inform efforts to improve the design of future hypersonic vehicles.
The collected data will be used to reduce modeling uncertainties for hypersonic vehicles and optimize their performance, he added.
Johns Hopkins noted that BOLT-1B aims to better understand the airflow around a hypersonic vehicle’s skin, called boundary layer transition, which increases vehicle drag and aerodynamic heating.
During the flight experiment, BOLT-1B’s advanced instruments performed over 400 measurements and recorded the scientific data before hitting the ocean. Researchers will use the data to validate more accurate modeling and prediction methods for engineering hypersonic vehicles.
