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In December 2016, just a few weeks before moving into the White House, President-elect Donald Trump tweeted that once he was in office, “billions of dollars can and will be saved on military (and other) purchases.”

Presidential candidates often campaign for or against defense spending, but Trump was perhaps the first to promise that his business acumen — an image bolstered by his bestselling book “The Art of the Deal” — would enable him to shave billions of dollars off costly weapons, like the F-35 Joint Strike Fighter, estimated to top $1 trillion.

While Trump’s critics were questioning whether he was actually capable of achieving big savings in the military budget, over at the Pentagon the man whose job it was to negotiate those weapons deals welcomed the president’s attention to the issue.

“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,” Shay Assad, the Pentagon’s pricing director, told attendees at a conference held by McAleese and Credit Suisse in March 2017, just two months after Trump’s inauguration.

Assad had already built a reputation as the Department of Defense’s toughest contract negotiator, having spent more than a decade battling defense companies on behalf of taxpayers, trying to get the prices down on skyrocketing weapons costs. Over the course of his career, he has been decorated with a panoply of awards from the Pentagon for his work, and praised for saving the government billions of dollars. A 2016 Politico profile described Assad, known for his dogged campaigns to force defense industry companies to justify their costs, as “the most hated man in the Pentagon.”…

Yet within two years of Trump’s entrance into the White House, Assad would find himself removed from his job, and his efforts to save money and recover hundreds of millions of dollars in potentially fraudulent spending tabled.

His treatment, he contends, was the direct result of his attempts to save the Pentagon money and identify potential contract fraud, which brought him into conflict with the Pentagon’s top weapons buyer. It was a conflict that ended dramatically, he says, when shortly after he emailed senior Pentagon officials about potential fraud, details about his travel records and his demotion were published in the press.

Assad, who is now retired, says the issues he brought up involved potentially billions of dollars in waste and fraud, and still aren’t being addressed. It’s a claim that’s backed up by multiple interviews conducted by Yahoo News with Assad and those who worked with him at the Pentagon, as well as by documents obtained through the Freedom of Information Act.

The Pentagon’s senior leadership, many of whom came directly from the senior leadership of defense companies, are only making the problem worse, Assad argues. “There’s a lot of inappropriate pricing going on by major companies dealing with the Department of Defense, and there is an inherent conflict of interest when you have people coming in from industry,” he said.

While the Pentagon, in response to detailed questions, objected broadly to the notion of any ethics violations, it declined to comment on Assad or his specific allegations, other than to argue over the scale of the potential contract fraud. Documents obtained by Yahoo News showed that the amount of overcharges identified to date by Pentagon auditors, who reviewed a relatively small sampling of contracts, is close to $900 million.

Assad isn’t alone in his concerns. Before his death, John McCain, the Republican senator from Arizona, railed against the defense industry’s influence on the Pentagon and expressed concerns about the appointment of Patrick Shanahan, a Boeing executive, to the No. 2 spot in the Defense Department. More recently, Sen. Elizabeth Warren, a contender for the Democratic presidential nomination, expressed similar concerns when Mark Esper, a former Raytheon lobbyist, was nominated to the top job in the Pentagon.

Assad has his own description of what’s taking place inside the Defense Department. “It’s kind of like the fox is in the chicken coop,” he said…

In January 2018, Lord called Assad to her office to vent her frustration with the inconsistent performance of major defense firms. She said she wanted to find a way to get better results from defense companies — a message that was frequently repeated by the president. “I said, ‘Sure, you impact their cash flow, you’ll get their attention to whatever you think is important,’” Assad recalled telling her. “If you tell companies their cash flow is dependent on it, they will respond.”

Assad’s proposal had to do with what are known as progress payments, or periodic payments made to contractors in order to alleviate their operating costs. The Pentagon hadn’t conducted a comprehensive assessment of its contract financing policies in three decades. Since that time, interest rates had plummeted to a historic low, which meant the Pentagon was perhaps fronting too much money to companies. It was an area, Assad believed, that was ripe for reform.

“We have been mostly overpaying these companies in the program’s payment,” Assad said. “By overpayment, if you went back to the original rule in the mid-1980s, it was based on having an interest rate of about 12.5 percent.”

At a meeting in late February 2018, Assad said he briefed his plan to reform progress payments to Lord as well as to Eric Chewning, head of the Pentagon’s industrial policy office, and Kevin Fahey, assistant secretary for acquisition. Assad explained that his plan would tie progress payments to company performance, rather than stages of production process. The progress payment rate is set at 80 percent of total costs of delivering on a contract, and Assad wanted to reduce that to a base rate of 50 percent.

Assad recalls that Lord approved of the proposal, and they agreed not to discuss it with industry until after Congress was briefed. Over the next few months, Assad held a host of briefings on the rule with representatives of various branches of the armed forces and the White House’s Office of Management and Budget. There were, he said, no objections to the rule.

But by August, though the rule had been approved by the OMB, Assad said he still hadn’t gotten approval from Lord, despite his multiple requests, to speak to Congress. Nonetheless, on Aug. 24, 2018, the proposed rule was published in the Federal Register.

Defense companies were outraged…

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