Case Study: Slick Deal

merica was facing another energy crisis. The promises of limitless supplies of foreign oil and gas and revived domestic production had proved as illusory as stability in the Persian Gulf or honesty and efficiency in the emerging Caspian Sea oil republics. As in the 1970s, Americans were suddenly confronted with rising fuel prices and threats of rationing. The fact that Matt Kennan and his colleagues had been among the Cassandras in the energy community proclaiming the inevitability of future shortages provided little comfort as the latest crisis unfolded. It was now their top priority to close the gap and make America warm and mobile again--at reasonable prices.

A career manager and executive who had been honored for his work in regulating the expanding energy sector of the economy, Kennan was the logical choice to head production oversight at the new Emergency Office of Energy Supplies. The President signaled his seriousness about the agency's mission by naming as its chief one of his favorite troubleshooters, Al Martin, his White House chief of staff and former sub-Cabinet member with excellent Capitol Hill connections.

Martin's charge to Kennan and his peers was simple and direct: "The President and my friends in Congress want to see immediate and visible progress in the flow of oil and gas. They don't want to hear about lines at gas stations or cold homes this winter. We will be as supportive and accommodating to anyone who can help as the law allows. That means creativity in sourcing, cutting red tape and expediting certifications, permits and anything else that wastes time or frustrates potential suppliers. I hope I'm clear."

So when the proposal for a pipeline from Canada to the soon-to-be-shivering northeastern states came up, Kennan and his staff sprang into action. A swift but comprehensive feasibility analysis yielded a positive recommendation, and a solicitation for bids was on the street in record time.

Martin was extremely pleased. He agreed to preside over a meeting for all potential pipeline builders to both underline the importance to the nation of a fast and successful project and to be sure that there was clear and common understanding of the requirements. He concluded the meeting by urging interested bidders to consult Kennan and his staff for any clarification or information they needed to comply with the accelerated competition timeline.

Willis Montgomery, a vice president of James Bay Pipeline, one of the leading companies in the field, took Martin's advice, requesting a meeting with Kennan prior to the bid-filing deadline. Meeting with Kennan and his deputy, Jill Foster, Montgomery and two members of his staff asked for clarification on a number of the environmental and financing factors contained in the solicitation and expressed apprehension about likely opposition from owners of property likely to be traversed by pipeline routes.

Kennan was mindful of the open and positive atmosphere that his agency wanted to foster with respect to the pipeline project and endeavored to go as far as he could in clarifying terms without offering inside information that could give James Bay Pipeline an advantage. He declined to speculate on potential opposition other than to agree that it had been common in the past.

No other companies requested meetings before the deadline to submit bids. Just as his office was about to start the bid-evaluation process, Kennan received an unsigned, typewritten note in a plain envelope:

"I guess you thought that the Canada pipeline would be another sweetheart deal," it read. "Guess again. Enclosed are copies of the notes of your private meeting with the James Bay executives at which you helped them with their bid. If you don't cancel the solicitation or disqualify James Bay by Friday night, I will give the originals of these notes to the House Energy Subcommittee."

The envelope was postmarked Washington, D.C., and there was, of course, no return address. The notes were substantially accurate, suggesting a presence or source at the meeting, but went just enough beyond Kennan's recollection of his responses to paint a picture of collusion. Had he said anything that could have been construed as the notes indicated? Should he ask Jill Foster if her memory coincided with his--or would that be taken to be coaching a potential witness? Was this a misunderstanding, or was one of Montgomery's assistants in the pay of a competitor? Had a public interest group or muckraker of some kind gotten to someone at the meeting?

Before he could possibly find the answers to all of those questions, Kennan had to deal promptly with the anonymous note. Martin would certainly not be happy about a monkey wrench in a high-visibility project so early in his tenure. And it was doubtful he would see this as an unfortunate outgrowth of the "full-speed-ahead" atmosphere he himself had created around the project. It was Thursday morning. Kennan had two work days to save the pipeline project--and vindicate himself.

Editor's Note: Government Executive asked the three commentators whether Kennan should immediately report the note to Martin or first gather information to help his boss respond to the charges; whether he went too far in his contact with James Bay; whether he should ask Jill Foster about her recollection of the meeting; and how such problems could be prevented in the future.

David Hornestay, a Washington-area consultant, served in government for more than 30 years, primarily in human resources and institutional management.