Military-Contracting Waste, Fraud, and Abuse—Just What the Government Wants
By Robert Higgs on Jun 7, 2009 in American History, Budget and Tax Policy, Business, Economics, Fascism, Iraq, Military, Politics, The State, War, corruption
According to a June 7, 2009, Associated Press report,
In its first report to Congress, the Wartime Contracting Commission presents a bleak assessment of how tens of billions of dollars have been spent since 2001. The 111-page report, obtained by The Associated Press, documents poor management, weak oversight, and a failure to learn from past mistakes as recurring themes in wartime contracting.
. . .
The commission cites concerns with [inter alia] a massive support contract known as “LOGCAP” that provides troops with essential services, including housing, meals, mail delivery and laundry. . . . KBR Inc., the primary LOGCAP contractor in Iraq, has been paid nearly $32 billion since 2001. The commission says billions of dollars of that amount ended up wasted due to poorly defined work orders, inadequate oversight and contractor inefficiencies.
KBR’s chairman William P. Utt responded to the allegations by saying, more or less, “Liar, liar, pants on fire.” According to the AP report, his exact words were: “As we look back on what we’ve done, we’re real proud . . . .” You can bank on his pride in what the company has accomplished, all right. Raking in $32 billion in less than a decade for providing workaday services to the U.S. troops in Iraq is no mean achievement, as contractor rip-offs go.
Many readers will interpret this latest news item as evidence of the government’s “failed policies” for managing the Iraq war, but this interpretation is completely wrong. There are no failed government policies — at least, none that last very long. The government is accomplishing exactly what it seeks to accomplish. If it were not doing so, it would soon change the policies to bring them into accord with its aims.
If you doubt my claim, you may wish to consider that these very “failed policies” in military contracting have remained business as usual ever since World War II, when the modern military-industrial-congressional complex (the MICC) came into being. They have been the subject of countless investigations and several major studies throughout that span of nearly seventy-years. Each study finds basically the same thing; each makes similar proposals to fix the system; but the government never alters the system’s basic workings.
In Arms, Politics, and the Economy, a book edited by me and published by Holmes & Meier in cooperation with The Independent Institute in 1990, William E. Kovacic presents a detailed account of three “blue-ribbon commissions” created to study military contracting and related matters: the 1955 Hoover Commission Task Force, the 1970 Fitzhugh Commission, and the 1986 Packard Commission. Kovacic concludes: “As judged by most who have studied postwar movements to reform the weapons acquisition process, blue ribbon commissions have elicited little basic change in the way the United States buys armaments. . . . Experience with the postwar blue ribbon commissions demonstrates that the inspiration to reform without the commitment to persevere yields little change.”
I am willing to say bluntly what Kovacic never quite concludes in plain language: Nothing changes fundamentally because the investigations are all for show, to give the public the impression that the government is not simply shoveling the taxpayers’ money heedlessly into the contractors’ bank accounts, but none of the leading actors in the MICC—not the military services or the Department of Defense, not the private contractors, not the congressional appropriations and oversight committees—really wants to change the system because, as it now stands, it is serving their interests magnificently.
As the legendary defense analyst Ernest Fitzgerald once said to me, “A defense contract is just a license to steal.” And who wouldn’t want to have such a license? You can bet that KBR enjoys having one, as do Lockheed Martin, Boeing, Northrop Grumman, General Dynamics, Raytheon, and the rest of the major licensees. Indeed, it appears that the U.S. military-contracting system constitutes one of the most successful organized-crime rackets in the history of the world.
As you tell it, one might describe the establishment of these blue-ribbon commissions as nothing more than political theater. One will occasionally hear partisans use that term to deride actions taken by members of an opposition party, yet the more I learn, the more that term seems to describe a great deal of what supposedly constitutes public service.
D. Saul Weiner | Jun 8, 2009 | Reply
Hi Mr H.
I love your political analysis, although I sometimes disagree with your solutions. I wouldn’t see the markets as the solution to everything.
However, I can’t help but feel your preaching to the converted. Most of the masses don’t want to be exposed to reality so you will never change the overall picture.
I think you would do better to look for some sort of power share where people can, as with cell phone contracts (at least here in the UK), either pay a monthly fee to, in this case, the government, while others can choose to access the services on a pay-as-you-go-basis.
At least then those who are willing to think and act for themselves could do so.
Mike | Jun 8, 2009 | Reply
Government contracting follows the fascist model explicitly. It is private industry carrying out government wishes with the government bearing all of the risk. Look at the way current-day contracts are structured. The government provides a specification for what it wants, then reimburses the “winning” contractor (that being the contractor that tells the government the exact lies they want to hear) for every hour they spend developing this product the government wishes to have and they pay a nominally 10% profit on top of that reimbursement.
Now tell me, who of you would contract with a builder to work that way? Would you tell a builder, “go off and design a new bathroom for my house and I’ll reimburse you for your costs for every day it takes to design this new bathroom and I’ll pay you a profit on every dime you get reimbursed”? Hell no you wouldn’t. What’s the obvious problem? The builder has an incentive to drag out this “development” for as long as possible, right? What’s the down side to dragging it out when you’re paying for their time plus profit for every hour the spend on this boondoggle?
Even though no one is stupid enough individually to put this kind of contract in place, collectively we are just that stupid because that’s exactly how our government contracts everything they buy.
As for window dressing, I’ve heard all of our procurement problems blamed on middle management, new engineers, specifications that were too rigid, specifications that were not rigid enough, engineers without enough imagination, engineers who want to turn everything into a science project. They’ll blame anyone and anything to keep you from seeing the real problem which is paying profit on development.
Often contractors will work at developing an airplane or tank or whatever for years and not produce anything. Sometimes like the F-22 and B-2 they’ll produce a few airplanes and then lobby to get the government to cancel the program so they can make some more of that free development money. There’s no risk in building paper airplanes, but plenty of capital costs and development risk in building real airplanes. Sometimes they go for years developing things and don’t even build a single weapon. You don’t even get an expensive toilet seat to hang on your wall after they’ve spent billions of dollars.
You morons must enjoy being screwed like this, because I never hear anyone complain. No one even noticed when they started doing this.
Dfens | Jun 9, 2009 | Reply
You are suitably jaded about our government. Only someone very out of touch and naive would presume to believe everything is on the up and up in anybody’s administration at this point.
I do not believe based on what I know the the WHOLE government is willingly committing acts of waste fraud and abuse because it is what they (every last one of them) want. There is a very dirty layer ranging in strength from agency to agency. (Best advice to figure out where most of it is, is “follow the money.”) I really do see it as following what is perhaps best described as a bell curve.
There are some at the top, of agencies, higher government levels, Pentagon, etc., who are quite corrupted and or compromised.
There were/are a large number of managers, many once appointed, now ensconced in permanent civil service service jobs in order to protect their own interests and that of those who once appointed them into these agencies.
And there are some at the worker bee, civil-service-career employee level who either have been swayed by the siren song, feel they must be a loyal team player, or are playing their own game. Many worker bees however have been trying to do their jobs and complete the missions they were hired to do. They are however, being pounded into the pavement, harassed, set up, fired, and hounded by the corrupt ones around and above them. Many find their entire lives disintegrating around them, and often cannot muster the wherewithal to continue fighting for what is right.
Many however, still keep standing up to the crap and corruption. They desperately need the help of all of us who look on and criticize. Action in this case would indeed speak much louder than words.
G. F. Scott | Jun 9, 2009 | Reply
The amount of waste, fraud and abuse of the federal government is so vast and appears unending one wonders who this benefits. It does not benefit the American people, although it appears they believe it does or they are just apathetic. We have become a democracy with a foundation of apathy and complacency.
Henry Pelifian | Jun 15, 2009 | Reply
Dear Dr. Higgs,
As usual, your article is absolutely correct. Unfortunately, I am afraid that the average American is too busy scurrying around trying to make ends meet to read it.
shill | Jun 19, 2009 | Reply