Patrick Shanahan: Can Boeing's Favorite Defense Secretary Hang On?
He has quickly attracted the wrong kind of attention, seeming to follow in the footsteps of Trump cabinet officials alleged to have mixed personal and government business.
Donald Trump's acting Defense Secretary Patrick Shanahan has come under scrutiny for appearing to favor his former employer Boeing as the Pentagon doles out contracts worth tens of billions of dollars.
Shanahan’s camp categorically rejects accusations of bias.
Shanahan, a former top executive in Boeing's commercial airplane division, served as deputy under former Defense Secretary James Mattis. The U.S. Senate confirmed Shanahan to his lower position with a bipartisan 92-to-seven vote in July 2017.
When Mattis stepped down on Jan. 1, citing Trump's impulsive decisions regarding Syria and the president's disregard for the United States' alliances, Shanahan became the acting head of the Defense Department.
He quickly attracted the wrong kind of attention, seeming to follow in the footsteps of Trump Cabinet officials who allegedly have mixed personal and government business.
Former head of the Environmental Protection Agency Scott Pruitt and former Secretary of the Interior Ryan Zinke both resigned amid multiple investigations into their close ties to the industries they were supposed to regulate.
Shanahan reportedly leaned on the Pentagon to request funding for new F-15 fighter jets that Boeing builds at its factory in St. Louis. The acting defense secretary reportedly also criticized Boeing's main competitor Lockheed Martin, allegedly saying during a meeting that Boeing is better at developing sophisticated aircraft than Lockheed is.
Trump has described the 56-year-old Shanahan as a “good man” and a “good buyer.“ But as the top “buyer” for a department with a $700-billion annual budget, Shanahan's apparent favor could benefit Boeing over other companies.
The Trump administration’s ethics rules require Shanahan to recuse himself from decisions involving Boeing, but if Pruitt and Zinke proved anything, it's that rules don't always stop Trump's cabinet officials from pursuing their own agendas.
Sen. Tammy Duckworth, an Illinois Democrat, was one of just seven senators to oppose Shanahan’s 2017 nomination as deputy defense secretary. “I opposed the nomination of Acting Secretary Shanahan to be deputy secretary of defense because of serious concerns over his experience and expertise,” Duckworth told The Daily Beast.
“I doubted that the acting secretary’s promise to fully divest his holdings in Boeing would be sufficient to avoid the reality, or simply the appearance, of a conflict of interest,” Duckworth continued. “Furthermore, confirming a chief operating officer who would be forced to recuse himself from all matters relating to the department’s second largest vendor was never a good idea. The troubling reports of the acting secretary either praising his former employer or criticizing its competitors simply confirms this fact.”
The first indication that Shanahan favored Boeing came in late December, when Bloomberg broke the news that the Pentagon intended to spend $1.2 billion in 2020 buying a new version of Boeing's venerable F-15 fighter.
The twin-engine, twin-tail F-15 first flew in 1972 and quickly earned a reputation as one of the world's best air-to-air fighters. But with its big, square-ish wings and fuselage, the F-15 is anything but stealthy. As the Pentagon developed new radar-evading aircraft including Lockheed’s F-22, it lost interest in older, non-stealthy planes such as the F-15.
The Air Force bought its last F-15 in 2001 in order to free up resources for new F-22s. But the F-15 remained a hot commodity on the export market. Israel, Saudi Arabia, Japan, South Korea, Singapore and Qatar all have bought versions of the plane.
The F-22 proved expensive at around $300 million per aircraft. In 2009 then-defense secretary Robert Gates canceled further production of the stealthy plane. The Air Force received just 187 F-22s—half as many as it said it needed. To complement the newer plane, the flying branch held on to around 250 older F-15s.
Boeing saw an opportunity. It developed a new version of the fighter it called the F-15X. The X-model fighter boasts better sensors, a greater weapons capacity and a new, more efficient wing. And at just $100 million per copy, the F-15X is priced to move.
But for years the Air Force rebuffed Boeing's offers to sell it the “fourth-generation” F-15s. The flying branch instead preferred to spend its money buying new, “fifth-generation” F-35 Joint Strike Fighters from Lockheed.
In military parlance, a fifth-generation warplane is stealthy. A fourth-generation plane is not. The F-15 first appeared years before radar-evading technology was ready for front-line use.
“We are currently 80 percent fourth-gen aircraft and 20 percent fifth-generation aircraft,” Air Force Secretary Heather Wilson said as recently as September. “In any of the fights that we have been asked to plan for, more fifth-gen aircraft make a huge difference. We think that getting to 50-50 means not buying new fourth-gen aircraft. It means continuing to increase the fifth generation."
The military annually spends around $10 billion on the F-35 program as it aims to acquire around 2,300 of the stealthy fighters over the next 15 years.
But the $100-million-per-copy F-35, which in 2001 edged out a Boeing-designed plane to become the U.S. military's main new fighter, has suffered multiple delays, technical setbacks and program cost overruns. Critics accuse the F-35 of being too sluggish, too lightly armed and inadequately stealthy to survive in combat with the latest Chinese and Russian jets.
Still, for a decade after F-22 production ended, the F-35 was the only new fighter the Air Force wanted. Despite Boeing's best efforts, Lockheed enjoyed a near-monopoly on the Air Force fighter market.
Then the Pentagon's consistent rejection of Boeing's entreaties abruptly changed in late 2018 with the news that the Air Force would request the dozen F-15Xs. In all likelihood, if the military buys 12 F-15Xs, it eventually will buy scores more in order to build up a common fleet. Nine Air Force squadrons each fly around 20 old F-15s.
It's unclear whether the Pentagon will free up money for F-15s by buying slightly fewer F-35s than it planned, or if officials are hoping Congress will approve a bigger defense budget that can accommodate both the F-35 and the F-15X.
In any event, the fighter reversal struck some experts as strange. “The Air Force will never buy this jet,” veteran aviation reporter Dave Majumdar predicted when the Boeing first revealed the F-15X design in the summer of 2018. Majumdar, like other observers, believed the Air Force when it said it only wanted stealthy warplanes from now on.
Bloomberg offered an explanation for the Defense Department's change of heart regarding Boeing. “The initial decision to buy the newest kind of F-15 aircraft, so far only sold to U.S. allies, comes from the Pentagon’s top leadership, including with some prodding from Deputy Secretary of Defense Pat Shanahan, and not the Air Force, which would be flying the planes.”
U.S. Army lieutenant colonel Joe Buccino, Shanahan's spokesperson, rejected Tiron's characterization. “Mr. Shanahan is recused from any [Defense Department] decisions impacting Boeing, and the department’s legal advisors have a screening process to ensure that Boeing-related issues are not routed to Mr. Shanahan."
“While the details of the Department’s [fiscal year] 2020 budget request remain pre-decisional, the screening process was in place throughout the budget review to ensure that any [Defense Department] programmatic decisions impacting Boeing were neither made nor influenced by Mr. Shanahan,” Buccino added.
Besides, Buccino said, picking contract winners isn’t really Shanahan’s job. “Secretary Shanahan’s recusal from Boeing matters has no practical impact on the adjudication of his responsibilities. The role of secretary of defense is primarily a policy making one and therefore, while he may receive information concerning various matters, it is rare that a particular matter involving specific parties, such as an acquisition, would be brought to the acting secretary for action.”
Still, the plot thickened in January when Politico reported that Shanahan criticized Lockheed during official meetings and unfavorably compared the Maryland-based company to the Chicago-based Boeing.
Shanahan reportedly derided Lockheed's F-35 as “fucked up” and claimed Lockheed "doesn’t know how to run a program." "If it had gone to Boeing, it would be done much better," Shanahan reportedly said of the Joint Strike Fighter program.
A source close to Shanahan told The Daily Beast that, in criticizing Lockheed, the acting defense secretary was speaking in general terms about Lockheed's performance relative to Shanahan's own expectations, which are based on his experience working on commercial aircraft programs for Boeing. The source requested anonymity, as they weren't authorized to speak on the subject.
Criticizing Lockheed doesn't necessarily amount to favoring Lockheed in competitive bidding for government contracts. Arnold Punaro, the CEO of a Washington, D.C. consultancy and a member of a Pentagon business advisory group, told The Daily Beast that Shanahan's recusal is more comprehensive than the law requires it to be.
"Pat Shanahan has no continuing financial interest in Boeing or any defense company but under the administration rules and his confirmation he is recused from any decisions involving his former company," Punaro said. "Under the law he actually does not have to be recused but has taken this step to avoid any concerns."
But that doesn't mean Shanahan's anti-Lockheed comments and apparent pro-Boeing bias don't influence officials under him in the Pentagon hierarchy. "It is difficult to see how anyone with such deep [industry] ties can serve in such a position like this without at least giving the appearance of a professional conflict," Dan Grazier, a policy expert at the Project on Government Oversight in Washington, D.C., told The Daily Beast.
It's unclear what happens next. It's possible that the F-15Xs disappear from the 2020 budget request as the Pentagon weighs its spending priorities. It's also possible that, as acting defense secretary, Shanahan steps down before Congress gets around to voting on the budget, kicking off a back-and-forth negotiation over line items that could give military officials another chance to dump the Boeing plane.
It's equally possible that Shanahan is here to stay, possible bias and all.
With such high turnover in Trump's cabinet—12 cabinet-level officials have been fired or quit just two years into Trump's presidency, versus just 21 during Barack Obama's own eight years as president—temporary acting secretaries have become more common.
Six of Trump's cabinet officials and his chief of staff are in their positions on a temporary basis. The law requires limits agency heads to seek Senate confirmation within 210 days. If Trump decides to keep Shanahan, he could go before the Senate for confirmation around the same time the Congress takes up the 2020 defense budget.