Why we can't keep track of those $400 toilet seats....
May 14, 2013 2:10 PM   Subscribe

Contractors Raked in $385 Billion on Overseas Bases in 12 Years "I began with publicly available government contract data and followed a methodology for tracking funds used by the Commission on Wartime Contracting. This allowed me to compile a list of every Pentagon contract with a "place of performance.... There were 1.7 million of them."
posted by HuronBob (54 comments total) 13 users marked this as a favorite
 
The only solution to this is more austerity.
posted by absalom at 2:20 PM on May 14, 2013 [3 favorites]


I think pigs are unfairly blamed.
posted by infini at 2:20 PM on May 14, 2013 [1 favorite]


I'm not sure I fully grasp the point of this article. I assume that it is obvious to the point of banality that the DoD spends an enormous amount at overseas locations. In fact, this number is ridiculously understated, because tons of work that is disbursed around many foreign locations has a single domestic "place of performance" that corresponds to whatever agency has oversight of their activities. They have documented about $32 billion in expenses against an annual budget of $680 billion. That sounds like a relative bargain, if it was true.

Obviously, defense contractors are excellent uber-villains and lots of them have done shady stuff, but spending 5% of the DoD budget to maintain "1,000 military bases in other peoples' lands" doesn't really sound like $400 toilet seats at first glance.
posted by Lame_username at 2:36 PM on May 14, 2013 [4 favorites]


I wonder if there is a second set of books, or if the Pentagon is genuinely that bad with their budgeting that they really don't know where the money goes. In the midst of austerity, it's a good reminder of how sincere the government's position is to see how carefully they manage the money they do have.
posted by feloniousmonk at 2:46 PM on May 14, 2013


Austerity never applies to the military and its contractors.
posted by Foci for Analysis at 2:49 PM on May 14, 2013


wait, the US is in austerity? I thought greece and maybe england were doing that, but I didn't know we were.
posted by rebent at 2:50 PM on May 14, 2013


Foci for Analysis: Austerity never applies to the military and its contractors.

Pentagon staff have 11 furlough days this year.
posted by troika at 2:56 PM on May 14, 2013 [4 favorites]


War is a racket.
posted by homunculus at 3:06 PM on May 14, 2013 [9 favorites]


Try to get the US to spend $400 billion over a decade building high speed trains and everyone balks and starts talking about the deficit.

But give that money to Halliburton to build military infrastructure in other people's countries and it's all, "oh that's pocket change to the amount we spend on actively killing people and designing new weapons to kill people, who cares!"

This country's national dialog is so fucked.
posted by crayz at 3:08 PM on May 14, 2013 [27 favorites]


Wait, the US is in austerity? I thought greece and maybe england were doing that, but I didn't know we were.

That's what the "Sequester" is, really. The only thing is -- social entitlement programs were excused from those cuts for now. (The DoD is not.)
posted by OnceUponATime at 3:13 PM on May 14, 2013


You know, instead of criticizing, maybe you should come up with your own proposal for how to fund Area 51. Instead of being so negative all the time.
posted by Pope Guilty at 3:15 PM on May 14, 2013




The problem here is obvious: teacher's unions.
posted by DU at 3:23 PM on May 14, 2013 [28 favorites]


Austerity talk, sorry.
posted by feloniousmonk at 3:24 PM on May 14, 2013


(There were no $400 toilet seats; the actual reference (to $600 toilet seats; $400 usually refers to the equally imaginary hammer) was to the fiberglas surround for the bathroom in a P-3.)
posted by ROU_Xenophobe at 3:30 PM on May 14, 2013 [6 favorites]


I used to wonder if the $800 toilet seat was a way to launder black ops money. Then I read an article that explained how you actually can't just slap an American Standard on a B-2 bomber, so people end up making small runs that fit the given space constraints or whatever. This is expensive.
posted by thelonius at 3:31 PM on May 14, 2013


Good lord folks, the $400 toilet seat title was a little joke...

(I'm going back to not putting titles on FPP's)
posted by HuronBob at 3:45 PM on May 14, 2013


If I could buy this toilet for only $400 USD, I'd be supper-happy. (I'd probably be happier to see a good passenger train infrastructure in the US though).
posted by el io at 3:57 PM on May 14, 2013


Good lord folks, the $400 toilet seat title was a little joke...

Real knee-slapper...
posted by Bathtub Bobsled at 3:59 PM on May 14, 2013 [2 favorites]


I wonder if there is a second set of books, or if the Pentagon is genuinely that bad with their budgeting

There was going to be some research into some 2.1 trillion the Pentagon could not account for. This research and the announcement of the problem was back on Sept . 10th 2001.

Does anyone remember how that research all turned out?
posted by rough ashlar at 4:06 PM on May 14, 2013 [5 favorites]


And even when the Pentagon does want to cut spending, they can't.
posted by DreamerFi at 4:49 PM on May 14, 2013


Try to get the US to spend $400 billion over a decade building high speed trains and everyone balks and starts talking about the deficit.

But give that money to Halliburton to build military infrastructure in other people's countries and it's all, "oh that's pocket change to the amount we spend on actively killing people and designing new weapons to kill people, who cares!"


The obvious solution is to make high speed trains a DoD project. You know, to transport troops and military cargo around the country at high speed.. because the US might get invaded any time!
posted by vidur at 4:54 PM on May 14, 2013 [2 favorites]


The obvious solution is to make high speed trains a DoD project. You know, to transport troops and military cargo around the country at high speed.. because the US might get invaded any time!

That's how we got our high-speed Interstate highway system, more formally the Dwight D. Eisenhower National System of Interstate and Defense Highways.
posted by grouse at 4:57 PM on May 14, 2013 [4 favorites]


I heard the DoD's ARPA once pissed away a wad of cash on some R&D folly involving a resilient network of far-flung computers.

I wonder what ever became of that.
posted by ZenMasterThis at 5:13 PM on May 14, 2013 [3 favorites]


Thou I agree there is much wasted spending in government, the article on the Littoral is just a hack piece.

"But the report obtained by Bloomberg reveals that while a 96-hour module exchange is technically possible, it requires a nearby dock, with all the components for the next module already on hand."

What do people expect, this to be a transformer? Of course it takes time and of course the components need to be available, and it only makes sense it needs to be done at a dock.

"The Littoral Combat Ship is also a far cry from durable. A more recent report says the ship is not expected to remain capable after taking a hit from an opponent, which is a significant problem for a naval vessel."

I am not a naval warfare expert, but is it expected that a small combat ship take a hit from a cruise missile and not have a significant problem? This is not the freaking Bismark!
posted by batou_ at 5:59 PM on May 14, 2013 [3 favorites]


Good lord folks, the $400 toilet seat title was a little joke...

Well, what was that about hats again? I mean hat sales have increased but not pari passu, as our research shows.

It's a quite simple thesis: the massive spending by the Pentagon (and implicitly the military-industry, defense contractors, and incestuous political relations) benefits a very small group of private interests who have been plainly, and time and again by honorable hat wearing journalists, whistleblowers and the otherwise well designed - and often genuinely earnest about proper governance - system of government itself, shown to be engaging in illegal activity, millinery, and war profiteering.

I am surprised the author didn't delve into the collusion of foreign policy with the same group of players' interests forming a kind of hat oligarchy.

But I am shocked! (Shocked!) that businessmen giving up their time and energy to provide material for "teh troops"are maligned and slandered so badly alongside the politicians who enter public service to better serve the public - good and hard - even avoiding the honor of military service of their own in order to provide water to shower in (why would it need to be clean if you're not going to drink it?) at a cut rate and food you can't serve to American prisoners (you're not implying teh troops are prisoners, are you?) writing policy in line with our long tradition of Western Civilization, back even to the Romans, when a veteran could come home to his farm wearing a hat.

Sure his land lay intentionally fallow for years. Sure he'd be systematically undercut by wealthy landowners who could underbid his produce production with their estates and slaves, perhaps the very hat wearing slaves he captured.

But you couldn't let that stop the will of the Senate and People of Rome anymore than you can let it stop the Will of the People of the U.S.A. and their desire to pay taxes for hat protection from whatever extremely elusive enemy du jour the media scares the hell out of them every five minutes such that they're so indoctrinated by sound bite culture and diverted they can't see the massive fraud and privation going on under their hats.

And when laws are passed to help the poor veterans, broken and mentally deranged as they are, and the impoverished rendered intellectually impotent by an abandoned educational system, hatless and jobless by an economy depending on a far more subtle kind of chainless, and hatless, but systemic slavery, the greater part of our own citizens will be, as the Romans, professional beggars who depend on witticisms over meaningless trifles of the day and, as they have no idea who to blame, have only themselves to turn on.

on preview: no profanity. Vile mood. But I must be in a more goddamn vile mood than I thought.
posted by Smedleyman at 6:13 PM on May 14, 2013 [3 favorites]


Chaos isn't a pit. Chaos is a ladder.
posted by phaedon at 6:26 PM on May 14, 2013 [4 favorites]


The great thing about modern technology is we don't even need to leave our homes to see the circuses!
posted by seanmpuckett at 6:26 PM on May 14, 2013


> I'm not sure I fully grasp the point of this article. I assume that it is obvious to the point of banality that the DoD spends an enormous amount at overseas locations.

Gosh, it frustrates me when people just don't bother to Read The Fascinating Article!

You're basically talking about the first few paragraphs, where they identify how much money goes out and to whom. Then the fun starts - when they go through each of the top contractors and detail, with links for each one, their malfeasance, their ineptitude, their dishonesty.

A part on the first page that always makes me extremely angry goes like this:
By July 2011, KBR had received more than $37 billion in LOGCAP funds. Its experience reflected the near tripling of Pentagon contracts issued without competitive bidding between 2001 and 2010. "It's like a gigantic monopoly," a representative from Taxpayers for Common Sense said of LOGCAP.

The work KBR performed under LOGCAP also reflected the Pentagon's frequent use of "cost-plus" contracts. These reimburse a company for its expenses and then add a fee that's usually fixed contractually or determined by a performance evaluation board.
To refresh your memory, KBR is a wholly-owned subsidiary of Halliburton, which is controlled and partly owned by Dick Cheney, former criminal Vice-President of the United States.

Now, the term "cost-plus" might not sound as ridiculous, as stinking obscene to you as it does to me - but think it through.

Imagine you hire me to complete a job for you and I say, "I'm going to hire a bunch of people at whatever salary I care to pay, and purchase materials at any price I feel like, perhaps even from my own subsidiary. You won't get any control over any of this process at all. At the end, I'll total whatever I spent, and you'll pay me that plus a fixed percent on top of that."

This is a system which gives me no incentive whatsoever to cut costs - quite the reverse!

That ANY such contract is EVER written on my tax dollars makes me incredibly angry. That such contracts are written to the VP's own company makes me incredulous. How do Americans put up with this shit?

Let's go to the #2 contractor, Supreme Group. As the article documents, they overcharged the taxpayer by $760 million and were ordered to repay it. (They also had the nerve to sue the US government for using a contractor who underbid them - really, you can't make this shit up.)

There's more, a lot more - heavily documented through links in the article.

Again, if all you got from this article is, "Gee, warfare is expensive, what's their beef?", you "didn't grasp the point of this article" because you simply didn't bother to read it.
posted by lupus_yonderboy at 8:23 PM on May 14, 2013 [12 favorites]


Pentagon staff have 11 furlough days this year.

All DOD civilians are looking at 11 unpaid furlough days this year. But the brass will no doubt fill this gap with staff augmentation contractors to keep their offices humming when the feds take our days off. No sense letting a good crisis go to waste...

There's a lot of shit that goes wrong in federal procurements, but I'm compelled to try to clarify some things:

Now, the term "cost-plus" might not sound as ridiculous, as stinking obscene to you as it does to me - but think it through.

Imagine you hire me to complete a job for you and I say, "I'm going to hire a bunch of people at whatever salary I care to pay, and purchase materials at any price I feel like, perhaps even from my own subsidiary. You won't get any control over any of this process at all. At the end, I'll total whatever I spent, and you'll pay me that plus a fixed percent on top of that."


You don't get to pay them whatever you care to pay and you don't get to buy stuff at whatever price you feel like. You've got to substantiate all your costs with a FAR-compliant proposal (typically with three quotes from potential suppliers) showing that you're paying fair and reasonable prices prior to getting approval to begin a task/delivery. Your labor rates also need to be substantiated. In many of the contracts being performed in Iraq/Afghanistan (including much of LOGCAP) those rates and material costs will have been competed at the beginning of the contract and submitted as essentially a catalog of labor and material over the course of five years (likely timespan to begin with). I have no inside knowledge but if I were presented a situation where I needed to award a short term contract to the incumbent ("sole source") I'd take that catalog and negotiate a percentage increase (or maybe decrease, but who are we kidding) based on changes in inflation, program risk, physical risk, etc. You still extract some of the juices from the original competition. And these systems the contractors put into place fit many of the definitions of natural monopolies. The supply lines they manage are wondrous. Their rate increases and award fees are treated a lot like those of a water company. It's not ideal, but it is a war zone.

Also if you buy stuff from a subsidiary, you only get one crack at profits (excessive pass through is the term you'd google for more on this) and you've got to establish that your prices are within line with industry standards. So you don't get to sell to yourself at full profit and then sell it to the government with more profit piled on.

This is a system which gives me no incentive whatsoever to cut costs - quite the reverse!

This is also inaccurate. The cost plus award fee contracts will have cost-management as a portion of the award fee determination. The award fee is the profit the company makes off of its efforts (the pool of available funds is established at award). All "costs" are nominally spent completing program objectives (contractors almost certainly wring profits out of costs in some circumstances). Cost plus fixed fee means they get, say $50,000 to complete a task that is estimated to cost a million. If it costs two million, they still get $50,000 in profit. Their margin takes a hit. Not perfect, but there's some incentive there. Cost plus incentive fee means a baseline should-cost is established at award, a fee is set, and the contractor gets a percentage of savings or loses a percentage of overruns to include the possibility of getting no profit.

Of course there are crooks and liars as demonstrated by TFA. But I don't think it helps to ignore the safeguards in place. They need to be strengthened, there needs to be more resources dedicated to oversight and administration, and there needs to be more transparency in this whole process. The problem with all that stuff is that none of that gets anyone's mission fulfilled. At least no one with a budget. So it takes a backseat to getting shit done. And we get what we've got. I could write for days on this but need to go to bed.
posted by the christopher hundreds at 9:48 PM on May 14, 2013 [7 favorites]


the christopher hundreds: interesting material, thanks.

The question is the following: how does it benefit the taxpayer, to give out no-bid contracts? And how does it benefit the taxpayer to give out cost-plus contracts?

Do note that these companies aren't just making profits - they're making massive, windfall profits. And yet in a cost-plus operation, all the risks are on the taxpayer, none on the companies. Why is this? How does this benefit the taxpayers?

I've searched online, and the main argument appears to be that no one would bid if the government didn't absorb all that risk. This baffles me - there are literally tens billions of dollars to be made, why would companies refuse to bid? If there's risk, why wouldn't they price it into the contract? It seems impossible to believe that in a huge capitalist you could offer jobs that could net contractors billions of dollars and yet all of them will refuse to bid.

We also have the endless malfeasance; the huge overcharges; the conflicts of interest; and all the things that, as you say, are in the article.

And when it comes to "So it takes a backseat to getting shit done" - well, I would not say the US military has got shit done.

Look at the Iraq War - costing somewhere some 40 times its initial estimates, costing more US soldiers than 9/11, lasting eight years instead of six months, and setting Iraq back a generation or more. Or the War in Afghanistan, still going 11 years later (and note even with the recent withdrawal there are as many troops there today as when Mr. Obama took office...)
posted by lupus_yonderboy at 10:19 PM on May 14, 2013 [2 favorites]


lupus_yonderboy, I have to take issue with your characterization of Cheney as “Dick Cheney, former criminal Vice-President of the United States.” While he is no longer the sitting Veep, he is still a criminal.
posted by Gringos Without Borders at 10:34 PM on May 14, 2013 [4 favorites]


the christopher hundreds: interesting material, thanks.

Indeed! This sounds like someone who knows a bit about the process and will help us to understand some of the subtleties inherent in the very complicated and unique logistics of equipping a military.

Yes, lupus_yonderboy, there are subtleties.
posted by MoTLD at 10:55 PM on May 14, 2013


the very complicated and unique logistics of equipping a military.

Traditionally, you just point them at some land you don't own yet, and they go forage, right?
posted by mikelieman at 11:25 PM on May 14, 2013 [2 favorites]


War is definitely a racket. That said, defense spending has only grown at a rate of 2% since 1972, while the overall GDP grew at 2.7%. Ideally, defense should've contracted after then end of the cold war, but relative to GDP defense has contracted slightly.

Law enforcement has contributed 12.2% to the total federal budget growth as a share of GDP since 1972. Indeed, law enforcement is the only area of discretionary spending that grew! We've made law enforcement into the racket war once provided because we've stopped fighting such large wars.

We've gained absolutely nothing as a society from the increase in spending on law enforcement since 1972. Yes, forensic technology has improved considerably, but technology improvement basically never increase prices, they simply improve results. In addition, all that increased spending on law enforcement dose literally nothing for the economy or worse actively discourages economic activity.
posted by jeffburdges at 2:53 AM on May 15, 2013 [1 favorite]


Gosh, it frustrates me when people just don't bother to Read The Fascinating Article
The rest of the article was a mish-mash of recycled allegations against randomly selected contractors, some valid, some not, but nothing new. Just a summary of whatever they could google about each company.
Imagine you hire me to complete a job for you and I say, "I'm going to hire a bunch of people at whatever salary I care to pay, and purchase materials at any price I feel like, perhaps even from my own subsidiary. You won't get any control over any of this process at all. At the end, I'll total whatever I spent, and you'll pay me that plus a fixed percent on top of that."
That simply isn't how cost plus contracts work. There is significant oversight over costs, including not only volumes of regulations, but meticulous audits to ensure that the items procured complied with the volume of regulation. Furthermore, the decision to use a cost-plus vehicle is entirely the government's and is selected by people whose careers are entirely focused on procurement and have decided that this particular method is the most effective for this requirement. In fact, because of the stringent cost containment controls in cost-plus contracts, they are generally less profitable than most other contract types.
(They also had the nerve to sue the US government for using a contractor who underbid them - really, you can't make this shit up.)
This also reflects a significant lack of understanding about how procurement works. In order to form the basis of a successful protest action, you have to allege something more than "we got underbid." This particular action is sealed, but normally these kind of suits allege that the winning vendor did not meet the terms of the contract (is proposing to deliver apples instead of oranges) or that there is some other problem with their proposal that will ultimately result in a higher cost to the government or that the government didn't follow their own rules in making the award. Moreover, many contracts assign cost a lower value than technical merit, which opens up a lot of debate as to who should actually be the highest ranked bidder. Supreme might really be a bad actor, I'm not familiar with them at all, but the fact that they protested a contract where they were not the low bidder is meaningless. I'd bet that every single contractor has protested an award where they lost a contract and weren't the low bidder. Its not remotely a thing that anyone should find outrageous -- it is how the system works.
posted by Lame_username at 5:28 AM on May 15, 2013 [2 favorites]


The question is the following: how does it benefit the taxpayer, to give out no-bid contracts? And how does it benefit the taxpayer to give out cost-plus contracts?

Do note that these companies aren't just making profits - they're making massive, windfall profits. And yet in a cost-plus operation, all the risks are on the taxpayer, none on the companies. Why is this? How does this benefit the taxpayers?

I've searched online, and the main argument appears to be that no one would bid if the government didn't absorb all that risk. This baffles me - there are literally tens billions of dollars to be made, why would companies refuse to bid? If there's risk, why wouldn't they price it into the contract? It seems impossible to believe that in a huge capitalist you could offer jobs that could net contractors billions of dollars and yet all of them will refuse to bid.
An excellent set of questions. In fact, cost-plus contracts mostly reflect an attempt to reign in profits on contracts with highly uncertain costs. In the case of the contract discussed in the article, the contract is supply food to soldiers in war zones. If the government bid this as a firm fixed price contract (which is how normal food delivery contracts would be issued), the vendors would have to make assumptions about the potential risks and costs associated with making these deliveries and build those risks (along with projected profits) into their estimates. Being profit-oriented enterprises, they would make conservative estimates about the potential costs of this contract and bid extremely high rates so that in case costs dramatically increased, they didn't get stuck providing the goods at money-losing rates. In the worst case, there might be only one vendor with the required capabilities to provide this service and they could charge almost anything. Their rates have certain constraints about the reasonable basis of the risks being factored into the price, but it is pretty easy to imagine how making routine deliveries in a war zone might get very, very expensive. If these risks don't turn out to be realized, the company might end up making truly massive profit margins on the job. In fact, assuming that the people putting bids together know what they are doing (we're pretty good at it), it is a near certainty that the companies will make big profits. Its kind of like insurance -- the vendors are going to come up with a price that will, on average, make them a lot of money because they want to price it so that they don't lose their shirts when things go very badly.

The solution for the government to prevent really outrageous profits on these risky ventures is to assume the risk themselves. Establish tight controls on costs, carefully define the procurement rules so that companies can't do stupid things and select vendors for either low profits (or in some cases, base their award fee on how effectively they cut costs). When it works, it is actually a pretty effective approach to managing risk. It depends on effective cost containment oversight by the contracting agency and good-faith efforts to control costs by the contractor. For most contractors, increasing costs isn't an effective business model. The costs have to be documented to go to other vendors or to employees as wages (and are very closely audited) -- you don't get profits on costs unless you are doing something illegal and damaging your relationship with an agency by running up costs is a penny-wise pound-foolish kind of thing to do.

If you dig deeper into the Supreme dispute, you can see how cost-plus might be better for the government. As Supreme points out in BusinessWeek: "Although the military agency’s original solicitation said that only ‘remnants’ of the Taliban were still active, Supreme had to build this network in an active war zone,” he said. More than 300 subcontractors for Supreme have been killed while delivering food to troops in the country, he said." So, it appears that this contract was a lot more expensive than everyone predicted and now they are trying to assign blame. Furthermore, I can't make much sense of some of the things quoted about the case including this beauty: "Michael Schuster, a managing director at Supreme, told the lawmakers today that the defense department’s audits of the company were “fundamentally flawed,” operating as if the contract was cost-plus, rather than fixed-price. Schuster said the “heart” of the dispute with the Pentagon came from this discrepancy. " I'm struggling to understand how there can be a question whether the contract was FFP or cost plus. We also have this: "Pentagon Inspector General Gordon Heddell said at a Dec. 7, 2011, hearing that the original Supreme contract was “an example of just how bad it can get. The contract wasn’t well designed or “well-thought out,” Heddell said. " At the least it sounds like Supreme thinks they can charge a fixed cost and the government thinks they are cost-plus and that they would save a bunch of money with cost-plus.
posted by Lame_username at 5:57 AM on May 15, 2013 [4 favorites]


I can't talk specifically about what I do at work, can't think of anything I'd enjoy less than hashing out my line of employ on MetaFilter, and truly love Mother Jones with all my heart, but I just had to roll my eyes at TFA, which is a fairly overgeneralized hit piece whose basic gist is Bad Contractors Are Bad and Wasteful Spenders Are Wasteful. (And hey, I completely agree with that premise!)
The most egregious example of shock value overshadowing information clarity is that per the article, the #1 recipient of Pentagon contracts sent abroad, the folks who walked away with $47 billion of the article's stated $385 billion? They are listed simply as "miscellaneous foreign contractors." No further detail is given. Instead, the list of verifiable outrages just begins with "Let's start with the top three whose names we know." So why were "miscellaneous foreign contractors" even included in the total, except to increase the amount of money that could be shown as having been "raked in" by contractors overseas, and thus increase the anger and malcontent felt by the reader? (If I missed something, please let me know, but I read both pages of the article 3-4 times and couldn't find any information on the "miscellaneous" tip.)
I'm way, way, way on your side, MJ, but that is some lazy journalism. And I will not touch the PopSci article about the LCS-1 with a 10-foot pole.

I'm going to partially out myself as a freaky liberal socialist who happens to work in the federal procurement industry just to give tons of props to the christopher hundreds and Lame_username for laying down some sweet (and, IMO, easy to understand) procurement facts. I tend to get wrapped up in jargon because I'm surrounded by it every day. I'm rather weary of hearing how profligate waste simply rules the day in my industry, period -- like we're not even trying, like we don't deserve jobs, like nothing much is being done in order to manage or mitigate risk or compliance on the ground level and no one is really even trying. Trust me: We're trying. And everyone knows that we're affected by sequestration, right? I could lose my job any day now -- they've been preparing us for our upcoming massive layoffs for months. It's gonna be rad.

Anyway! If you would like to read more about cost-reimbursement contracts, you can consult Federal Acquisitions Regulations (FAR) Subpart 16.3. All types of incentive fee contracts are explained in Subpart 16.4. CPFF (Subpart 16.306) and CPIF (Subpart 16.405-1) contracts are, in my experience, exceedingly rare; the government does not often use them, and as Lame_username notes above, they do so exclusively at their own discretion. We don't like using them either because for obvious reasons, bidding one feels like running a frigging gauntlet, or playing an endless game of pingpong, and the chance for a tidy profit is rather low.

Overall, it drives me a bit mad to note the proliferation of the general "procurements are bad/overpriced/overrun/stealing taxpayer money" attitude, so here are some very basic explanations of a couple of the additional regulations by which procurement officials and contractors must abide, in addition to the FAR and DFARS (DoD supplement to the FAR). Please note that FAR cost standards do indeed apply to foreign contracts.
* CAS - Cost Accounting Standards - a set of rules and standards enforced by the Defense Contract Accounting Agency (DCAA). The enactment of CAS means that contractors must report costs, pricing, and administration data for all negotiated prime (direct to government) and sub (direct to prime) contracts worth over $700,000.
* TINA - Truth in Negotiations Act/10 USC § 2306a - requires submission of all cost, pricing, and management data for all contracts worth over $700,000. And yes, as a contractor, you can still be requested to comply with CAS and TINA even if your contract is under the $700k threshold.
* Sarbox - Sarbanes-Oxley Act of 2002 - federal law created in response to Enron, etc., basically meant to ascertain management accountability for financial data. Really complex. Compliance is rough!

Also, I was recently very tangentially involved in an underbid protest. I literally can't discuss it even a quarter-inch past that, but I will say that really digging in to learn about and investigate the process was extremely edifying and wildly interesting. I definitely came around to believing that sometimes, underbid protests aren't just OK, they're absolutely the right thing to do -- for example, sometimes you have clear evidence that the company who underbid you isn't capable of performing up to, say, MILSPEC, so it's likely that they will encounter cost overruns trying to come into compliance, while your company already has the ability to comply and has priced it into the bid.
The research I did around the issue of bid protests really lifted the veil from all the milquetoast "well, that certainly sounds bad!" liberal feels I was having. Here's the GAO site on bid protests -- not where I did most of my learning, but a good place to start!

There is so much more, but I've ranted way too long already, and now I have to go to work and get paid with blood money. I keed, I keed!
posted by divined by radio at 6:41 AM on May 15, 2013 [8 favorites]


But the brass will no doubt fill this gap with staff augmentation contractors to keep their offices humming when the feds take our days off.

But that’s because they’re looking at when they retire and become “consultants” for the companies they’re currently covering for general officers.

It's not ideal, but it is a war zone.

It’s funny how leadership will demand trailers and write blank checks for them even though there’s no plan on how to get those to people in the field or move them from the field when the lines change, but getting body armor is something that has to be laid off on charities.

a fee is set, and the contractor gets a percentage of savings or loses a percentage of overruns to include the possibility of getting no profit.

Outsourcing is a mistake in the first place. You immediately limit oversight and transparency. It’s a simple matter of reducing the number of contracting officers on site so no matter how well written the laws are, there’s no oversight.
Same song and dance is pulled with FEMA or OSHA or the EPA, whatever. You can play with the safeguards however you wish – not to say they shouldn't be there or - I agree - strengthened but that seems to be the gimmick of distraction – then just cut personnel who do the inspection, overseeing, reporting, etc.

Combat support (and indeed, combat) work shouldn’t be outsourced in the first place.

As a fr’instance, the GAO studied and contrasted 250-odd items subject to depot level maintenance in public and private sectors – that is, private after being outsourced.
The annual net increase was over $6 million. For the Navy, $204 million when they outsourced depot level repair on one of its engines. That’s $204 million MORE than doing it in-house at the depot.
All this on top of not getting equipment to spec or getting less than asked for at 10xs the price (again, body armor, but also gloves, goggles, pads, etc.) - I'm nowhere near familiar with bidding, etc. but I have seen results from the other end.

The problem with the family is not just dysfunction, but downright incest.

Take Fluor (#6 on the list) they made $3 ½ million in campaign contributions before the Iraq war. They got $500 million in contracts. Their stock price went up by 50 percent.
They've blatantly violated the False Claims Act time and again. Fraud is the cost of doing business.

Phil Carroll, was CEO going into the Iraq war (former Shell oil CEO and also former head of the U.S. Dept. of energy conservation). His VP of strategy was Kenneth Oscar.
Ken Oscar was asst. secretary of the Army and directed the Army’s $35 billion procurement budget.
Fluor board member Bobby Ray Inman (former Admiral) was also deputy director of the CIA (and former director – allegedly - of the NSA).
Inman was also on the board of SAIC. With David Kay the VP of SAIC. Whom y’all might remember looked for WMDs in Iraq. Along with Gen. Downing, who also sat on the SAIC board, was a member of the Committee for the Liberation of Iraq (with George Shultz who’s name hopefully rings a bell). $2.6 billion in business with the DoD in 2003. In 2001 they helpfully fucked up the FBIs computer software for them. Know what they were doing with your money before that? SAIC dealt with special ops. Not in a real, concrete way. But rather, Project Stargate. Goat staring.
I shit you not.

but I just had to roll my eyes at TFA, which is a fairly overgeneralized hit piece whose basic gist is Bad Contractors Are Bad and Wasteful Spenders Are Wasteful.
Yeah, agreed. SAIC isn’t even on there.


So it takes a backseat to getting shit done.
There is no “done.” That’s the big lie. It doesn’t matter how one packages the procurement when the need for it, the policy, has been manufactured from the outset. The statutes are written by and for people who evade it at the highest levels, who have no need to be concerned with compliance. Outsourcing is a scam to begin with. That’s on top of creating a need for defense contracts to be written in the first place.
The particulars of procurement – and genuine thanks to everyone delineating it – aren’t what’s wrong.

Here, two links. Should serve most anyone. center for public integrity and the federal contractor misconduct database.

But again - misconduct is a bit misleading. You can play by the rules and still be a war profiteer. Indeed, they're often the ones making the rules and creating the need for the business.
That's what's appalling.

My only update to Smedley Butler:
War isn’t a racket. It’s an institution.
posted by Smedleyman at 11:35 AM on May 15, 2013 [1 favorite]


To add: I think SAIC is the best illustration of the war and policy metaphor as flawed from foundation.
They delivered on Stargate perfectly. No cost overruns. No games with procurement. No "stealing from the taxpayer" in the sense that they cut corners or shaved on the paperwork.
Just, y'know, remote viewing, bending spoons, killing goats with your mind, etc.
posted by Smedleyman at 11:44 AM on May 15, 2013


It doesn’t matter how one packages the procurement when the need for it, the policy, has been manufactured from the outset.

This statement is telling of your true motives here, which I will not address. But the FPP is about procurement, and we have several experts on the subject here.
posted by MoTLD at 12:28 PM on May 15, 2013


To expand a bit further on the types of oversight that procurement and contracting folks are subject to, at least theoretically, we have two major players in the DoD game: DCAA (Defense Contract Accounting Audit Agency - auditors for the federal government) and DCMA (Defense Contract Management Agency - contract administrators for the federal government). I remain somewhat confused as to why TFA exclusively references reports from GAO rather than the more procurement-specific DCAA/DCMA.
I've been on the vendor side for about a decade, and throughout that time, I've watched government auditor staffing levels get cut every time the DoD seems to feel like trimming some perceived fat, while the auditors themselves get relentlessly dissed from all sides.

So many studies have shown that DCAA/DCMA understaffing clearly contributes to an increase of failures in oversight and scrutinization. Even Congress agrees that these agencies are understaffed, and those motherfuckers can barely agree on anything these days.
As an example of what happens when you perpetually understaff your compliance agencies, any contractor that receives flexibly-priced contracts (cost-reimbursement, time & material, etc.) is subject to annual DCAA incurred cost audits, but actually achieving anything close to that goal appears to be impossible with their current staffing levels. They've consistently been performing less than half (~44%) of the annual ICE audits that they've been assigned. Congress wants more DCAA/DCMA, contractors want more DCAA/DCMA, DCAA/DCMA wants more DCAA/DCMA... and yet here we are.

I've personally encountered a number of instances in which my company was asked to gather a whole bunch of disparate information from disparate branches/departments in order to support a regularly-scheduled annual DCAA audit; after having done so, we get a letter in the mail a week before the audit was supposed to happen saying that they're too understaffed right now, so our audit has been pushed back another [7/30/90/365] days. So we wait, and wait, and wait (along with the rest of the world, apparently) just so we can get our regularly scheduled reviews done and over with already. Seriously, we just wrapped up our 2006 ICE audit. 2006!

If you would like to learn more about the contractors that are allowed to bid for government contracts, you can check out the System for Award Management, which recently replaced the Central Contractor Registry (you do have to register, but it's free and open to civilians -- here's how to do a business/entity search [PDF]).
SAM will show you a contractor's total annual receipts, number of employees, NAICS codes that will show you the type of business they normally do, and PSCs that will show you the type of products/services the contractor normally sells, in addition to their certs and reps (FAR requirements that are necessary to meet/verify before you are allowed to bid on federal contracts) as well as their relevant points of contact/staff.
Visual Compliance is another great tool to use when you're screening for restricted parties, probably at least a bit like the federal contractor misconduct database linked above, although I am not sure if VC is available to civilians.

Contrary to popular belief, the consistent understaffing of auditory agencies is pretty maddening to contractors, too; having our work double-checked by The Powers That Be is very useful to our business, no matter how much us procurement and compliance folks may moan about the thousands of copies and PDFs and binders of information that need to be painstakingly collected and assembled in support of the audits, or how adversarial or unseasoned a given assigned DCAA/DCMA rep may seem at first blush.
Oversight is good! We like knowing when we're doing a good job, and finding out how we can improve! I'm just one person, so I certainly won't attempt to speak for even a fraction of the federal procurement industry, but many (most! nearly all!) of us are not just trying to pull a fast one on y'all. Promise.
posted by divined by radio at 1:11 PM on May 15, 2013 [1 favorite]


A few things:

I feel the need to clarify what I meant by "getting shit done." I'm not talking about vanquishing evil for all time. I'm talking about getting soldiers fed with decent food, getting vehicles fueled, getting IT services to a FOB, etc. There are commanders who are given budgets to get these things done. Some commanders genuinely care that the rules are followed and that the taxpayer gets a good deal. But even these guys are much more concerned with accomplishing their mission to feed, fuel, wire, whatever. There are a much smaller number of commanders with much smaller budgets with the mission to oversee contracting, audits, administration and so on. Guess which ones have been unable to find funding for their crews to travel during the sequester? Everyone eats whether the inspections happen or not...

The case for the war in Iraq, what war is good for and all that are really separate issues that will totally consume any discussion about how to make DoD acquisitions better. And I think there may have been a thread or two about all that a couple weeks ago.

Lame username and divined by radio did a good job answering many of the questions that have come up, but I didn't see anything about sole source contracts (as an aside, if you hear the term "no-bid contract" you can safely assume the speaker does not know anything about federal contracting). To make a sole source award, you've got to justify it under FAR 6.3. I've seen "Only one responsible party" and "Urgency" used, but I'm just this guy. The others might get used more. Urgency is used when you've got a requirement that has to be done now and there's a guy ready to do it in the right place. But he still gives you a bid. You might have him start before you're done negotiating if you're in a big hurry (via an undefinitized contract action) but you're still getting a bid and reviewing the pricing.

Only one responsible party is used when you've got what amounts to a natural monopoly. If we spent the last five years paying $100M for a company to build a supply chain through the central Asian states do we want to pay someone else to build that chain all over again or do we want to keep using the one we've paid for? In this case, the taxpayer is better off using the same company again. They still give you a bid/proposal and it's run through the wringer discussed elsewhere in the thread.
posted by the christopher hundreds at 1:17 PM on May 15, 2013 [5 favorites]


The detailed explanations in this thread are a million times better than the weak article. Can we sidebar five comments together? Really interesting (not sarcastic!).
posted by kiltedtaco at 1:59 PM on May 15, 2013 [2 favorites]




Outsourcing is a mistake in the first place. You immediately limit oversight and transparency. It’s a simple matter of reducing the number of contracting officers on site so no matter how well written the laws are, there’s no oversight.
By and large, contractors provide capabilities that are simply not remotely available to perform in-house. Enlisted men and women are highly unlikely to possess the requisite skills to perform cyberwar services or even build networks in the field. In some cases, there is a political calculus. Ordinarily no military would outsource their food supply chain. But convoys were one of the most dangerous aspects of this way -- perhaps outsourcing 30 casualties was part of their calculus?
As a fr’instance, the GAO studied and contrasted 250-odd items subject to depot level maintenance in public and private sectors – that is, private after being outsourced.
The annual net increase was over $6 million. For the Navy, $204 million when they outsourced depot level repair on one of its engines. That’s $204 million MORE than doing it in-house at the depot.
I actually know something about depot level maintenance. Section 2464 of Title 10 of the U.S. Code requires DOD to maintain a core maintenance capability—-a combination of personnel, facilities, equipment, processes, and technology (expressed in direct labor hours) that is government-owned and government-operated—-needed to meet contingency and emergency requirements. In fact, the government has struggled significantly to provide this capability in-house and the expense has greatly exceeded the cost of outsourcing. I'd refer you to The GAO's review of Air Force depot maintenance or more broadly, the recent 'Depot Maintenance: Additional Information Needed to Meet DOD's Core Capability Reporting Requirements' released earlier this year.
The problem with the family is not just dysfunction, but downright incest.
I would very much agree that the cozy relationship between contractors hiring retired four stars and providing a endless cycle of managers becoming rich in private industry is a serious problem, both potential and actual. But it defies easy solutions. Retired leaders often do have particularly good understandings of the missions and challenges. It seems unwise to keep them out of the business. I'm struggling to find a proper set of controls to prevent abuses.
There is no “done.” That’s the big lie. It doesn’t matter how one packages the procurement when the need for it, the policy, has been manufactured from the outset.
I'm unclear what you are saying in its entirety. Its pretty indisputable that the US military is head and shoulders over any other nation in terms of its ability to monitor other states, detect their actions blow shit up with precision. Clearly, there is a strong case to be made that we as a society should be spending our money on different things. I'd sign that petition any time. But the money we spend to get a military that pretty much does what it wants where it wants has delivered what we asked for. We ought to be asking for something else, sure. But we are getting what we seek.
posted by Lame_username at 5:01 PM on May 15, 2013 [2 favorites]


So many studies have shown that DCAA/DCMA understaffing clearly contributes to an increase of failures in oversight and scrutinization. Even Congress agrees that these agencies are understaffed, and those motherfuckers can barely agree on anything these days.
Great analysis. Much more on point that the original article. In my view, part of the problem is that a strong DCAA/DCMA just results in embarrassing articles that create misinformed debate. For this reason, I think many in the military-industrial-political complex don't really want strong audit teams -- they don't want to air any dirty laundry. This is, quite obviously, a terrible thing.
I'm just one person, so I certainly won't attempt to speak for even a fraction of the federal procurement industry, but many (most! nearly all!) of us are not just trying to pull a fast one on y'all. Promise.
I think this is very much true in the business generally. When something is being done that harms the government (or even appears to), you always have people who are very concerned with changing it or reporting it to auditors. There are a very high percentage of people who are natural whistleblowers, because ultimately the customer is us. The one thing that I find myself consistently in agreement with amongst my fellow war-mongers (I'm known as the token liberal) is that we all want to do things in the best way we can.
posted by Lame_username at 5:09 PM on May 15, 2013


Now, the term "cost-plus" might not sound as ridiculous, as stinking obscene to you as it does to me - but think it through.

Would that be like the $8-$9 thousand in LP gas delivered in Iraq costing 100's of thousands? (2.7 million or 27 million comes to my mind)

Cost plus gives no reason to keep costs down and in fact increase them because 5% of $9,000 isn't as nice as 5% of $900,000.
posted by rough ashlar at 7:47 PM on May 15, 2013


the christopher hundreds, divined by radio, and Lame_username, the peanut gallery notwithstanding, this is fascinating stuff.

Thank you!
posted by MoTLD at 9:11 PM on May 15, 2013


Cost plus gives no reason to keep costs down and in fact increase them because 5% of $9,000 isn't as nice as 5% of $900,000.

Cost plus a percentage of cost is illegal for exactly the reason you state. Cost plus never means that. Always ask "Cost plus what?" A fixed fee? An award fee? I went over some of the varieties above.
posted by the christopher hundreds at 3:18 AM on May 16, 2013 [2 favorites]


This statement is telling of your true motives here,
I don't think I've made my position at all unclear.

But the FPP is about procurement, and we have several experts on the subject here.

I'm not debating the experts on procurement. The thread has taken a turn into procurement, certainly from the introduction of "cost plus."

But I dispute the that the FPP is about procurement. It seems to me the FPP concerns the vast amount of money being spent on building and maintaining a bloated military presence while Pentagon contractors "and a select group of politicians, lobbyists, and other friends have benefited mightily."

The procurement issue concerns the system of contracting and the laws and statutes involved, etc. I'm addressing the latter bit, the politicians, lobbyists et.al. who benefit.

Is there some dispute that politicians and lobbyists and industry players aren't engaging in cronyism, socialization of risk, corruption, bribes (outright or in the form of political contributions), gross mismanagement, obfuscation, and outright theft?

Take the Basra children's hospital project by Bechtel. There are any number of units in the military that can build hospitals. Seebees, Army corp of engineers, etc. etc.
But it was outsourced.

Well, we can keep an eye on them, no? Well, no. Bechtel subcontracted the work to a Jordanian company. Which subcontracted the work to several Iraqi companies.
Which means not only no oversight, but more overhead and more cost.
Indeed, they were $90 million over budget and more than a year and half behind schedule.


I'm talking about getting soldiers fed with decent food, getting vehicles fueled, getting IT services to a FOB, etc.
No contention there. My point is that corruption in the industry and policymakers makes all that much harder.

By and large, contractors provide capabilities that are simply not remotely available to perform in-house.

But there's no real reason not to develop the training programs in order to do this. We're sort of stuck between a professional military cadre and a revolving door system.
We should have more incentives to retain experienced and trained people so we don't lose them to the private sector.
As it is, much like teaching, military service is given less respect and less money and support, etc. than similar private sector positions.

Perhaps contractors do provide things not possible to perform in house, but when the DoD gives a depot to a private contractor, typically they use former DoD employees.
We lose so many people to the private sector. Why? Why should our military bleed talent?
Same thing with teachers. If education is so important, why is that system constantly in a chokehold?
I'm addressing the why. Not the structure as it is or cost plus, or that.

One reason why - and nothing exactly nefarious about it, is the pork thing. Joe Senator hears that there are military cuts being made, we don't need "X" anymore the brass says.
Well, that means the government employees working at the depot are going to lose their jobs.
So Joe Senator pushes to get the place outsourced. Even though the work doesn't need to be done anymore, or the product isn't needed, or it's too expensive to make or whatever.

Now the Joe Senator's backyard keeps the outfit and the people keep their jobs - working for Lockheed or whatever instead of the government - and on paper it all looks swell and cheaper and good for the community and Joe Senator is a big hero.
Except we didn't need the thing to be made anymore.



a combination of personnel, facilities, equipment, processes, and technology (expressed in direct labor hours) that is government-owned and government-operated—-needed to meet contingency and emergency requirements.

Conflicting reports on costs. I'll cede that argument to your superior knowledge. But there are some disagreements, even within the same agencies (GAO, Defense Science Board, etc).
There was a depot run by Boeing that the IG said cost in the neighborhood of $18 million more a year than when the government ran it. Same deal with a center in Ohio. Same with the Navy Crane Facility ($60 million more a year).
Whereas there are other reports - including those you cited - that say there are cost savings of 20% or more.

Again, I'm no expert. But I think there are variables there that help make it appear cheaper. Limiting competition for example (because who's going to have the capital to start up their own outfit when the government hands one over all the infrastructure in place?) and the difference between labor levels.
But I'm sure you know far more about A-76 studies than me.

We can debate though whether when privatizing the work the government gives up control and investment in the assets and activity - but my point is more that even when it's cheaper, when privatizing the function the government gives up the motivation and impetus to do something.
So the cart pulls the mule, sort of thing. No matter how efficient a company might be in doing something, they're interest lay in profit. So their interest is in delivering whatever it is they can deliver - whether it's necessary in getting things done or not.

Personally I think the entire defense industry should be nationalized. Even if it costs more money. That would remove profit from war and the interest in doing anything beyond what's necessary for a successful foreign policy.

But it defies easy solutions. Retired leaders often do have particularly good understandings of the missions and challenges. It seems unwise to keep them out of the business. I'm struggling to find a proper set of controls to prevent abuses.


Yeah, no argument there.

But the money we spend to get a military that pretty much does what it wants where it wants has delivered what we asked for. We ought to be asking for something else, sure. But we are getting what we seek.

I'm not attacking the professionalism of the military. Rather, yeah, the vested interests stage managing what we see and think so that we seek what they want us to seek.

There's no question the vast majority of people in the service, in the government, even in business are doing their jobs to the best of their ability. But there is corruption at the highest levels which makes almost any oversight and correction problematic. Dick Cheney and Halliburton as one of a plethora of potential examples.

Taking the profit out of the equation, oversimple as it sounds, would eliminate the motive.

It may, or may not cost us more to make war in the end without outsourcing. But hell, I see that as an upside. If we're not willing to pay for it, why should we fight for it?

As it is now, a very very few benefit. A very few pay the highest cost with their lives. And the vast majority are blind to it all. Not the least of which because it looks like "jobs" or "growth" to them.

At the very least maybe they'd pay attention to our wars if they got a big "war tax" hit on their tax bill.
posted by Smedleyman at 9:34 AM on May 16, 2013


Is there some dispute that politicians and lobbyists and industry players aren't engaging in cronyism, socialization of risk, corruption, bribes (outright or in the form of political contributions), gross mismanagement, obfuscation, and outright theft?
This covers a lot of ground. The stuff at the far illegal end like theft and bribery is fairly aggressively pursued when detected. The role of political contributions and cronyism is undoubtedly a problem, but it goes pretty far past outsourcing and money spend and more into the underlying nature of representative democracy, at least as we practice the sport in the US.
But I'm sure you know far more about A-76 studies than me.
Sad, but true. The whole A-76 process was pretty much a complete disaster, with cheating and bogus bookkeeping on either side. The idea was a good one (and it appears that just by conducting the competition, costs go way down -- the government magically finds far more efficient approaches whenever they conduct an A-76 study), but the implementation was not good. It also raised all sort of questions about what functions really should be reserved for the government. Valerie Grasso wrote a truly brilliant breakdown of the A-76 process for the Congressional Research Service that I think was quite balanced and an excellent read for someone as interested in this topic as you appear to be.

To some of your more general points, I just don't know if all functions are suitable to be part of the DoD. Certain technological talents involved in aeronautics or technology are not the province of young men and women -- many require advanced degrees and significant experience in the field. Short of a draft on top level talent, I can't see how many functions could be performed in house. However, it is certainly true that many functions that were once the exclusive province of the military are now outsourced. Many of them, especially logistic and repair functions could easily be returned to the services as a matter of policy. Neither the military or political leadership have shown much interest in doing so, however.

Your argument for far bigger government is, to say the least, a minority position these days.

I'm glad you took the time to explain yourself more fully, I found it an interesting perspective and that I broadly agreed with you in many respects. I think you might be surprised to learn that most of us in the DoD community would agree with the general notion that war should be both more expensive and more uncommon.
posted by Lame_username at 12:18 PM on May 16, 2013 [4 favorites]


I think you might be surprised to learn that most of us in the DoD community would agree with the general notion that war should be both more expensive and more uncommon.
I've found most people who do the actual work to be pretty level headed.
Once someone gets into the rarefied air it's tough to keep one's head, but it's doable. But there are those who are more interested in advancement and wealth than actually serving.

And those people are about as easy to spot as a beat cop driving a Mercedes. Stymies me how anyone gets away with it. Because it does hurt getting things done. It even gets troops killed and there's little justice done. I think in part because we're so divorced from the actuality and realities of war. We think, just one life, one more, so far away, and however we feel about it, typically we don't personally engage.

One of the reasons I love Smed Butler is because of the story of his men suffering, getting sick and dying in the mud in WWI because the quartermasters wouldn't release duckboard to him (long wooden slats) even though they had stockpiles of the stuff.

So Butler took almost a full division of his men, pushed passed the sentries guarding the warehouses, broke into the place and took the slats along with tools and soup kettles for the injured. He helped haul and carry the stuff himself.
posted by Smedleyman at 10:42 AM on May 17, 2013




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