posted by Damozel |
Here at BN-Politics, this question consistently leaves us shaking our heads in bafflement: why
aren't Americans who obsess about taxes -- I call them "Republicans," which annoys my nonpartisan colleague The Crux -- gathering pitchforks and torches and going after defense and medical contractors who bilk the government?
I actually don't mind paying taxes; there are things I rely on the government to provide, and I realize that the money has to come from somewhere. On the other hand, I'd like to know that my "tax dollars" are purchasing an equivalent in goods or services.
The effort I put toward earning the income from which taxes are extracted represents energy and life expended. To know that any of that money isn't paying for something of advantage to the public makes me feel that part of my life has been stolen. Why aren't other people as het up about this as I am -- or don't they really know?
As the Crux discussed earlier, some elected officials are going through yet another awakening to this inexplicably ongoing indifference to the use of funds gouged out of taxpayers at all income levels. It seems elementary to me: if we could save some of the money that now gets pissed away through irresponsibility and (sometimes) fraud, we'd have more money to allocate elsewhere.
I have to admit that until I met The Crux I had no idea of the sheer magnitude of the waste. She turned me on to the Government Accountability Office (GAO), where you can read reports of Congress's investigations into the doings of federal agencies. They're written in Governmentese, a language deceptively close to English, which it takes a certain amount of experience to construe.
I'm not as good at this as The Crux, but I do have experience with a related language called "Legalese," thus I've been able to work my way through the recent Congressional testimony of Comptroller General David Walker, published by the GAO.
THE PROBLEM. It turns out that a lot of money the federal government -- especially the Department of Defense (DoD) -- spends acquiring goods and services that its various agencies think they need is not actually purchasing an equivalent value in goods and services. The report on which I rely discusses the bad management of a number of government departments, but the DoD (which is responsible for roughly 70% of the "acquisitions" expenditures) gets mentioned much more often than any others.
"The U.S. federal government is the single largest buyer in the world, obligating over $400 billion in fiscal year 2006 for a wide variety of goods and services, including complex projects that often involve unproven technologies. While acquisitions are made throughout government, the majority of them are concentrated in a few agencies, particularly the Department of Defense (DOD)." (GAO)
Apparently, the DOD spends far more to acquire goods/services than a private company could afford to spend on equivalent goods/services. Of course, a private company has to spend its own money, while the DOD spends "tax dollars." For this reason, it doesn't have to worry if money gets pissed away for no meaningful return. That and the American public seems inured to the notion that the government is wasting money.
Certain politicians would have you believe that it's only the proliferation of unnecessary programs (such as insurance for the children of the poor) that is eating up your "tax dollars" and of course it's true that if we want certain services, we have to pay. Wouldn't we be better able to afford some of those programs if there weren't so much waste going on in the ones that we HAVE to have, such as defense?
Neither The Crux nor I question that we must spend money on defense. What we object to is wasted money. I am not the sort who wants to "slash the defense budget." It's just that if the government works out that it needs to buy 100 guns worth $10,000 each in the real world, I think the cost of those guns should be $10,000 for the DoD.
Similarly, I think the DoD should insistently negotiate with private contractors so that DoD gets an equivalent value for its money. On pages 18-19 of the GAO report, the Comptroller General summarizes what he calls "Systemic Acquisition Challenges in the Department of Defense" (what I call "flushing tax dollars down the latrine") with admirable terseness and little of the "governmentese" used elsewhere in the report.
FIRST, DoD doesn't sufficiently analyze its actual needs or coordinate them among the Department's various sub-entities. One consequence is that they may end up with duplicate or inconsistent purchases:
Service budgets are allocated largely according to top line historical percentages rather than Defense-wide strategic assessments and current and likely resource limitations. Capabilities and requirements are based primarily on individual service wants versus collective Defense needs (i.e., based on current and expected future threats) that are both affordable and sustainable over time. (GAO at 18)
For example, in March we reported that DOD does not allocate resources on a strategic basis and that it could improve its acquisition outcomes by adopting an integrated portfolio management approach for allocating weapon system investments. We found that military service allocations as a percentage of the department’s overall investment budget have remained essentially the same for the last 25 years, despite the dramatic changes that have occurred in the strategic environment and warfighting needs during that time. (GAO at 6)
...Successful commercial companies make investment decisions that benefit the organization as a whole within resource constraints. However, DOD continues to allow individual organizational units to assess needs under separate processes, failing to implement a departmental approach to investment decision-making. Consequently, DOD has less assurance that its investment decisions address the right mix of warfighting needs and it starts more programs than current and likely future resources can support.
Operationally, there can be real consequences in agencies’ pursuit of individual over collective interests. For example, in December 2005 we reported that on the basis of its experience with unmanned aircraft systems (UAS) in Persian Gulf Operations, U.S. Central Command believed that communications interoperability and payload commonality problems occurred because the military services’ UAS development programs had been service-specific and insufficiently attentive to joint needs. (GAO at 5)
SECOND, DoD doesn't sufficiently/accurately assess the cost, time, feasibility, or objectives of its programs. It doesn't provide accurate initial estimates, so programs end up underfunded and frequently costing much more than initially represented.
Defense consistently overpromises and underdelivers in connection with major weapons, information, and other systems (i.e., capabilities, costs, quantities, and schedule). Defense often employs a “plug and pray approach” when costs escalate (i.e., divide total funding dollars by cost per copy, plug in the number that can be purchased, then pray that Congress will provide more funding to buy more quantities). DOD tries to develop high-risk technologies after programs start instead of setting up funding, organizations, and processes to conduct high-risk technology development activities in low-cost environments, (i.e., technology development is not separated from product development). Program decisions to move into design and production are made without adequate standards or knowledge. (GAO at 18)
Program requirements are often set at unrealistic levels, then changed frequently as recognition sets in that they cannot be achieved. As a result, too much time passes, threats may change, or members of the user and acquisition communities may simply change their mind. The resulting program instability causes cost escalation, schedule delays, smaller quantities and reduced contractor accountability. (GAO at 18)
In examining defense programs, we have reported that competition for funding had incentivizedprograms to produce optimistic cost and schedule estimates, overpromise on capability, suppress bad news, and forsake the opportunity to identify better alternatives. In addition, because DOD starts more weapons programs than it can afford, it invariably finds itself in the position of having to shift funds to sustain programs—often to the point of undermining well-performing programs to pay for poorly performing ones. I believe that even if more funding were provided, it would not be a solution because wants will usually exceed the funding available. (GAO at 6)
In examining DOD’s operations, we have assessed weapon acquisitions as a high-risk area since 1990. Although U.S. weapon systems are the best in the world, the programs to acquire them often take significantly longer and cost significantly more than promised and often deliver smaller quantities and different capabilities than planned. In fact, it is not unusual for estimates of time and money to be off by 20 to 50 percent. (GAO at 7; emphasis added)
In our review of defense programs, we often see cases where the cost of a system in development grows and where, as a result, the return on the defense dollar is reduced. While such cost growth may be accommodated within an agency’s budget through reductions in the number of units to be acquired or by cutting other programs, it may also put Congress in a position of having to decide to provide additional funding if it finds accepting fewer units undesirable. As a consequence, other needed programs may not be fully funded or overall government spending may be increased, thereby adding to the federal deficit. (GAO at 8)
THIRD, DOD contracts are poorly drafted from the standpoint of the taxpayers (whose money pays for the contracts). The arrangements tend to shift the risk to the taxpayers rather than to the private contractors. Often, the contracts are not effectively negotiated or drafted.
Contracts, especially service contracts, often do not have definitive or realistic requirements at the outset in order to control costs and facilitate accountability. Contracts typically do not accurately reflect the complexity of projects or appropriately allocate risk between the contractors and the taxpayers (e.g., cost plus, cancellation charges). (GAO 18-19)
Once the decision to contract has been made, we have observed challenges in setting contract requirements, using the appropriate contract with the right incentives given the circumstances, and ensuring proper oversight of these arrangements—especially considering the evolving and enlarging role of contractors in federal acquisitions...in January we reported that many reconstruction projects in Iraq have fallen short, in part because DOD had not clearly defined its needs before it entered into contract arrangements. The absence of well-defined requirements and clearly understood objectives complicated efforts to hold DOD and contractors accountable for poor acquisition outcomes in Iraq reconstruction. (GAO 8-9; emphasis mine).
Time-and-materials contracts—agreements where contractors are paid based on the number of labor hours and materials—pose such risk to the government that federal regulations require contracting officers to make a determination and findings in writing that no other contract type is suitable before using such an arrangement. In a recent review of DOD’s use of such contracts, we found that DOD contracting and program officials frequently did not justify why time-and-materials contracts were the only contract type suitable for the procurement. Further, with a few exceptions, we found that little effort had been made to convert follow-on work to a less risky contract type when historical pricing data existed, despite guidance to do so. We also found that oversight of time-and-materials contracts was lacking as contracting officers generally relied on contractor-provided monthly status reports to conduct oversight. (GAO 9; emphasis mine)
DOD’s use of undefinitized contract actions can also carry risk to the government and potentially waste taxpayer dollars. These agreements allow contractors to begin work before reaching final agreement on contract terms and are sometimes used by agencies to rapidly fill urgent needs. In June 2007, we reported that DOD did not meet the definitization time frame requirement of 180 days after award on 60 percent of the 77 undefinitized contract actions we reviewed.
In June 2004, we found that during Iraqi reconstruction efforts, when requirements were not clear, DOD often entered into contract arrangements that introduced risks. We reported that DOD authorized contractors to begin work before key terms and conditions, such as the projected costs of the work to be performed, were fully defined. In September 2006, we reported that, under this approach, DOD contracting officials were less likely to remove costs questioned by the Defense Contract Audit Agency auditors if the contractor had incurred these costs before reaching agreement on the work’s scope and price.
In one case, the Defense Contract Audit Agency questioned $84 million in an audit of a task order for an oil mission. In that case, the contractor did not submit a proposal until a year after the work was authorized, and DOD and the contractor did not negotiate the final terms of the contract until more than a year after the contractor had completed the work. As a result, the DOD contracting officer paid the contractor for all questioned costs but reduced the base used to calculate contractor profit by $45 million. As a result, the contractor was paid about $3 million less in fees.
Some other problems that the GAO found are below (GAO, 18-19):
- DoD and Congress conduct inadequate oversight, which reduces accountability.
- Some decisions made within DoD and by Congress undercut sound policies.
- Key program staff rotate too frequently, thus reducing accountability.
- The acquisition workforce faces serious challenges (e.g., size, skills, knowledge, and succession planning).
- The revolving door between industry and DoD presents potential conflicts of interest.
- Incentive and award fees are often paid based on contractor attitudes/efforts versus positive results (i.e., cost, quality, and schedule).
Though not short, the GAO report is worth reading and it's free. Below are some other pieces worth reading:
* Contractor Fraud: Driving Up Healthcare Costs? (BNPolitics)
* GAO Finds DHS May Have Misled Congress (Washington Post)
* Gov. Contractors: Driving up War's Costs? (BNPolitics)
* Government Short of Contracting Officiers (WaPo)
* Panel Probes Contractors Bechtel & Wackenhut (New York Times)
* DoD Rewarding Naughty Contractors? (BNPolitics)
* Contractor Misconduct database (Project on Govt. Oversight)
* Time to Get Serious About Contractor Fraud (BNPolitics)
* Taxpayers Losing Money to Engorged Contractors (BNPolitics)
* Audit Red-Flags Contractor in Iraq (BNPolitics)
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