Security

Obama vs. Pentagon Bureaucracy, Round 1 (Updated Again)

Everybody in D.C. knows that the way the federal government — and the Pentagon especially — handles contracts is beyond screwed-up. Sweetheart deals, busted budgets, and lax oversight, and missed deadlines are pretty much the norm, on every major deal. Yesterday, President Barack Obama sent a message to the federal paper-pushers: the days of contract […]

Obama_budget Everybody in D.C. knows that the way the federal government -- and the Pentagon especially -- handles contracts is beyond screwed-up. Sweetheart deals, busted budgets, and lax oversight, and missed deadlines are pretty much the norm, on every major deal. Yesterday, President Barack Obama sent a message to the federal paper-pushers: the days of contract shenanigans are over. But can anything -- even a direct order from the Oval Office -- change one of the planet's most disfunctional bureaucracies?

Obama signed a memorandum yesterday that gives the Office of Management and Budget until July 1 to issue new guidelines for identifying government contracts "wasteful, inefficient, or not otherwise likely to meet the agency's needs, and to formulate appropriate corrective action in a timely manner." This move would give agencies the potential authority to cancel contracts outright, if deemed necessary. Interpreted liberally, this could include most of the big weapons development deals that the Pentagon has on the books today.

It's part of a larger push to rein in government spending. In a speech yesterday, Obama said government contracting practices needed to be overhauled to cut back on waste, fraud and abuse.

"Over the last eight years, government spending on contracts has doubled to over $500 billion," he said. "Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability."

Lest their be any ambiguity about where the real problem lies, the president took particular aim at defense contracting:

*Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat: That's $295 billion in wasteful spending. ... In Iraq, too much money has been paid out for services that were never performed, buildings that were never completed, companies that skimmed off the top. At home, too many contractors have been allowed to get away with delay after delay after delay in developing unproven weapons systems. *

"If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming Office of Management and Budget review," writes Spencer Ackerman.

But can Obama really save the Pentagon from itself? Color me skeptical.

An overhaul may be desperately needed in government contracting, but it's instructive to look back at ex-Secretary of Defense Donald Rumsfeld's speech on Sept. 10, 2001.

"Every dollar we spend was entrusted to us by a taxpayer who earned it by creating something of value with sweat and skill -- a cashier in Chicago, a waitress in San Francisco," he said. "An average American family works an entire year to generate $6,000 in income taxes. Here we spill many times that amount every hour by duplication and by inattention."

While Rumsfeld was talking about reforming Pentagon business practices, the larger intent was also the same: to cut down on wasteful and duplicative spending. The next day, that effort basically went out the window. Whether the Obama administration will have better luck remains to be seen.

UPDATE: This entertaining little slideshow reviews some of the Pentagon's more notable attempts at reform, since 1971. As InsideDefense.com notes, there have been "more than 100
blue-ribbon panels over the last three decades, none of which to date have managed to address the underlying challenges associated with excessive cost growth in weapons programs."

UPDATE 2: Sepncer Ackerman speaks with a former Lockheed Martin official, who lays out how the defense contractors will spin the reform fight.

The process would put the blame for cost overruns not on the contractors, but on the military services for failing to be specific about what precisely they want built or delivered. "I would lead with [telling the government], 'We waste money because you can’t make up your mind,'" the ex-official said.

... In order to offer the low bid and win the contract, a contractor feels an incentive to shade down the project’s true cost. "So I’ll cut [my bid] 10 percent across the board," the ex-official continued. "The engineers gave an accurate assessment, but you just cut it. When it comes to actually building the ship, everyone says 'I need more money,'" in line with what the original engineering assessment of cost. Since the Pentagon has few restrictions against paying the increased cost of the contract after it’s been awarded — a practice that the OMB review will study — little prevents the overages from accumulating. Even less prevents the defense industry from low-bidding on a contract.

There's a lot of truth to the argument, actually. But the requirement-creep in military contracting is just another argument in favor of reform -- not for keeping the process as it is.

UPDATE 3: "Time and again you hear program managers across the services justify their costly programs by saying it fills a Joint Capabilities and Integration Development System identified 'need,'" Greg Grant notes. Too bad "the whole requirements process is pretty close to a sham."

As [GAO's Michael] Sullivan points out... JCIDS "validates almost all of the capability proposals that are submitted." GAO found that 70 percent of new "capability proposals" came from the services with little or no input from either combatant commanders, the warfighting end users, or the joint community.

This line in Sullivan’s testimony really takes the cake: "The vast majority of capability proposals that enter the JCIDS process are validated or approved without accounting for the resources or technologies that will be needed to acquire the desired capabilities." So, basically JCIDS gives the go ahead on any weapons program without even considering whether it’s within the realm of "doable" from either a technology or money perspective. Is it really too much to ask that DOD’s weapons oversight actually do oversight?

[PHOTO: Whitehouse.gov]

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