Hard-Nosed Pentagon Negotiator Removed From Job; Racked Up Huge Travel Costs

Shay Assad, the Pentagon's Director of Defense Pricing, speaks to the audience at the SMC’s 2017 Space Contracting Executive Forum at Los Angeles Air Force Base in El Segundo, Calif., Aug. 23, 2017.

U.S. Air Force / Sarah Corrice

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Shay Assad, the Pentagon's Director of Defense Pricing, speaks to the audience at the SMC’s 2017 Space Contracting Executive Forum at Los Angeles Air Force Base in El Segundo, Calif., Aug. 23, 2017.

Shay Assad also backed a controversial plan to slow payments to defense contractors.

Trump administration officials are removing the Pentagon’s top weapon buying negotiator, who racked up hundreds of thousands of dollars in travel costs and pushed a controversial plan to slow payments to defense contractors, Defense One has learned.

Shay Assad, a senior Defense Department bureaucrat, is being reassigned to a post in Massachusetts, one unconnected to the contract negotiating team he has led for seven years, according to current and former defense officials familiar with the decision.

In the coming weeks, Assad will be moved from his position as director of defense pricing and contracting initiatives to a lateral position within the Defense Contract Management Agency in the Boston area, current and former officials said.

The move comes after Assad championed a plan to change how the Pentagon pays defense firms, by tying contractor payments to their performance instead of to production milestones. Top Pentagon officials say they were not fully clued into the details of the plan, to which defense firms and lawmakers vocally objected.

Related: Lockheed: Pentagon Negotiators Are Becoming More Unpredictable

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Assad had a special arrangement that allowed him to live in the Boston area and commute regularly to Washington, current and former defense officials said. Neither Ash Carter, then the Pentagon’s acquisition chief, nor his successor Frank Kendall objected to this arrangement, because they viewed Assad as unusually good at saving taxpayers’ money.

But the Defense Department spent $502,758 between 2012 and 2019 on Assad’s “transportation costs,” Lt. Col. Mike Andrews, a Pentagon spokesman, said in an email. Over that time, Assad came to Washington 377 times, spending a total of 1,333 days in city. Between 2012 and 2018 Assad averaged one trip per week.

Some officials equated it to the arrangement former Defense Secretary Leon Panetta made with President Obama that allowed him to regularly fly home to California where his wife lived and the couple had their permanent home.

But Ellen Lord, the current undersecretary for acquisition and sustainment, has stopped paying for Assad’s travel between Boston and Washington, officials said.

Officials also say Assad’s reassignment is, in part, due to a sweeping reorganization of the Defense Department’s acquisition directorate in which leaders determined they wanted the head of pricing to be located inside the Pentagon.

“The Department does not comment on personnel matters,” Andrews, the Pentagon spokesman, said in an email.

Assad, in an email, said the Pentagon would not allow him to comment on the record.

Current and former Pentagon officials describe Assad as a shrewd negotiator who has saved taxpayers hundreds of millions of dollars by getting better deals with major defense contractors. He is credited with getting the Pentagon lower prices on F-35 fighter jets and with allowing SpaceX to compete for government rocket launches, lowering the cost of putting satellites in space.

In 2015, Assad won a Presidential Rank Award, which honors “senior career employees with a sustained record of exceptional professional, technical, and/or scientific achievement recognized on a national or international level.” In 2016, the Pentagon credited Assad with saving taxpayers $500 million in his negotiating deals for C-17 transport planes, Apache attack helicopters and F/A-18 fighter jets.

But some current and former officials also describe him as a bully who needed to be monitored by his superiors out of fear he would overstep his authorities.

A Naval Academy graduate who spent 22 years with defense contractor Raytheon, Assad has been the Pentagon’s top contract negotiator for much of this decade. His office was created in 2011 under the Better Buying Power reforms created by Carter, the Pentagon acquisition chief who went on to become defense secretary. Assad became known as a hard-nosed negotiator; within five years, Politico dubbed him him “the most hated man in the Pentagon.”

In March 2017, Assad praised President Trump, who in just two months in office had drawn attention to the high cost of the military’s weapons and began personally negotiating aircraft prices with the CEOs of Boeing and Lockheed Martin.

“When you get somebody who is the president of the United States who understands precisely what you do for a living and understands how it’s actually done, it becomes a pretty rewarding thing to do, especially when someone at the top is world-class himself in terms of negotiating,” Assad said last year at a conference sponsored by McAleese and Associates and Credit Suisse. “From my point of view, this is terrific.”

Much of the defense industry loathes negotiating with Assad, thanks in part to his demands for detailed documentation of the costs incurred while building weapons, several sources said. In March, Lockheed Martin’s CFO Bruce Tanner said that in recent years that negotiating with the Pentagon had become increasingly unpredictable — though he did not specifically mention Assad in his comments.

Then came the proposed rule that would have slowed payments to contractors, which sent defense firms into a frenzy. The three trade associations that represent aerospace and defense companies openly voiced their opposition — as shown by presentations at a September public meeting about the rule changes.

“The proposed rule will limit investment in more lethal and technologically superior capabilities,” the Aerospace Industries Association’s Steve Trautwein wrote in a PowerPoint brief. “The proposed rule undermines Secretary Mattis’s vision of ‘performance’ and will make defense products more expensive.”

At the same meeting, officials with the National Defense Industrial Association said the proposed rule “is duplicative and unnecessarily increases bureaucracy and oversight” and “disrupts cashflow and drives prices higher.”

And Alan Chvotkin, executive vice president and counsel for the Professional Services Council, said that “We do not believe the rules changes will improve contractor performance or distinguish and meaningfully recognize high performance segments of companies or entire companies.”

When Wall Street caught wind of the rule change, shares of defense firms slid, including those of Lockheed Martin, Raytheon, Northrop Grumman, and General Dynamics.

Then Congress got involved. Sen. James Inhofe, R-Okla., and Rep. Mac Thornberry, R-Texas, chairmen of the Senate and House Armed Services committees, wrote to Deputy Defense Secretary Patrick Shanahan saying they had “significant reservations” about the proposed change in payments to contractors, calling the rule “fundamentally flawed.”

A second public meeting, scheduled for Oct. 10, was canceled after Shanahan said on Oct. 1 that the Pentagon would rescind the proposed rule change.

Two days later, Shanahan told reporters he got involved after getting the letter from Inhofe and Thornberry about the issue. He said he met with Lord, Assad’s boss.

“I’m not down managing the details of all those rules and regulations, Ellen does,” Shanahan said. “We encourage employees to go as fast as possible and make as many changes as is feasible. When there’s a failure in the process, we correct it.”

Shanahan said the proposed payment changes “never reached me. I don’t know if it reached Ellen either.”

But despite that, the rule change made it into the Federal Register in August and a public meeting was held in September.

On Monday, Lord told reporters at the Pentagon that steps were being taken to make sure senior officials are involved earlier in the rulemaking process.

“I take responsibility for any failure in [Acquisition and Sustainment],” Lord said. “I don’t think we had done all of our homework before we went into the rulemaking process. I hold myself accountable and I’m very involved with a wider team to make sure that we take everything into account.”

Lord also said the Pentagon is looking to “get all stakeholder input before we come up with a proposed rule and go into the formal rulemaking process.”

Last week, the Pentagon scheduled a series of public meetings in January and February “to obtain views of experts and interested parties in Government and the private sector regarding revising policies and procedures for contract financing, performance incentives, and associated regulations for DoD contracts.”


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