Obama Looks to Ax Contracting Waste
The President today released an important memo outlining plans to try to reduce the amount of money lost on the wasteful and abusive government contracting industry that conservatives love:
Since 2001, spending on Government contracts has more than doubled, reaching over $500 billion in 2008. During this same period, there has been a significant increase in the dollars awarded without full and open competition and an increase in the dollars obligated through cost-reimbursement contracts. Between fiscal years 2000 and 2008, for example, dollars obligated under cost-reimbursement contracts nearly doubled, from $71 billion in 2000 to $135 billion in 2008. Reversing these trends away from full and open competition and toward cost-reimbursement contracts could result in savings of billions of dollars each year for the American taxpayer. [...]
However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined. As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate. [...]
I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner. Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy.
Barack Obama doesn’t like to talk in broad ideological terms. But to provide some background for this, the very same right-wing politicians who like to complain about government spending actually love increasing spending in a variety of circumstances. Any time you can make something less efficient, more costly, and more wasteful by laundering public funds through a private, for-profit firm, they’re for that. That’s why they love subsidies for private student loans and hate cheaper, direct lending. They also like to deal with “out of control entitlement costs” by overpaying private insurance companies to handle Medicare patients rather than the cheaper option of doing it themselves. And of course, they have an enormous love of spending money on defense projects.
Thus, as Spencer Ackerman observes, defense waste may be unusually hard-hit by these new directives:
Clearly this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. 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 OMB review.
Beyond the Defense Department and the special cases of student loans and Medicare that are being tackled separately, my understanding is that the mother lode in terms of privatization of core government functions is in the Department of Homeland Security. Since this agency was born, raised, and weaned under the administration of George W. Bush, it’s tended to exhibit all the pathologies of Bushian governance in unusually strong ways (hence Katrina). At any rate, the total amount of savings you can get from clamping down on contracting abuse is more than small change, but less than gargantuan. The main virtue of it is that you’re really not doing any harm to any important public purpose by doing it. It’s important at this time of stimulus bills and new investments to show some seriousness about fiscal discipline, and the right way to do that is by going after this kind of waste rather than arbitrary measures.
24 Responses to “Obama Looks to Ax Contracting Waste”
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March 4th, 2009 at 1:56 pm
My company exists pretty much entirely because of wasteful defense contractor spending, so I might be out of a job if it actually changed. But this really is the most unnecessary item in the budget, by far.
And, no surprise, the executives are all staunch Republicans who spend half their time in Washington with our Republican representatives making sure all this wasteful spending stays in the budget. What utter hypocrites.
March 4th, 2009 at 2:05 pm
Perhaps the OMB could also step up efforts to prosecute fraud and abuse. See the contractor who charged $998,798 to send two 19-cent washers to an Army base in Texas.
March 4th, 2009 at 2:17 pm
Of course we all know that a lot of the logic of contracting govt. functions to privat industry is about laundering the transfer of money from taxpayers to political parties. Govt buys service from private industry, industry profits, industry makes campaign contribution. Done this way it’s perfectly legal so long as you can’t prove direct quid-pro-quo. The rethugs oppose public financing of campaigns, and yet this is exactly that (albeit only the side in government gets the public financing). Obama is right to want to kill this, but does he understand the beast he is taking on?
March 4th, 2009 at 2:21 pm
My big fear( and growing bigger every day) is that President Obama is making so many enemies that there will be moves to have him..you know what..can’t bring myself to say it.
I wouldn’t want to be a part of his security detail.
March 4th, 2009 at 2:27 pm
“My big fear( and growing bigger every day) is that President Obama is making so many enemies”
It’s even scarier when you consider that many of the enemies he’s making are well armed and have advanced military training. He might be wise not to go after Blackwater.
March 4th, 2009 at 2:49 pm
I agree with your overall point; I’ve seen some examples first hand how the ‘outsourcing’ started under Clinton is often more trouble than it’s worth.
But like I said in the student loan post, what is your opinion then of CAP’s (et al) Clean Energy Corp which will consist of:
How is this not a potential boondoggle for politically connected businesses?
March 4th, 2009 at 2:53 pm
#5 & #6 -
Y’all watch too many movies.
And Obama is not even cutting the DoD budget until FY 2011 iirc. And doing so far less than Clinton or even Bush I did.
March 4th, 2009 at 3:01 pm
The contracts are mostly for 1) R&D (this is most of the earmark stuff) 2) really shiny toys (like the oft cited F-22) and 3) to provide three hots and a cot (and potable water, showers etc) in theater. Very little as a % is directly spent on the security mercs (the state dept uses proportionally more of these anyway).
Can all of these be reformed? Sure, and they should be. But the need – esp for #3 with an additional 15-30K troops going to afghanistan and another 90 someodd K marines and soldiers overall added to end strength, the need for most of the functions is not going away.
March 4th, 2009 at 3:05 pm
Spencer Ackerman includes ” Joint Strike Fighter in the Air Force” as one of the “massively over budget” projects. Is this in fact so?
James Fallow’s article on the JSF in 2002 (which points out, among other things, that the whole point of the Joint in JSF is that this is not simply an Air Force project, it is also a Navy/Marine project) went on and on about how this was being budgeted for under new rules, and that, as of 2002, the rules were working well.
So what has happened between 2002 and 2009? Of course one obvious answer is that the Bush kleptocracy gutted the rules and procedures that were in place, and switched to simply funneling money in MD’s mouth. Is the story as simple as that, or does it turn out that, even with the best will in the world and no corruption in sight, the project simply wasn’t feasible as envisaged and budgeted?
March 4th, 2009 at 3:24 pm
DTM Says:
March 4th, 2009 at 2:13 pm
It should be fun watching the GOP have to explicitly defend crony capitalism.
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Actually most of this follows from Al Gore’s Reinventing Government initiative during the halcyon Clinton years. Which of course M Yglesias neglects to point out
http://www.govexec.com/reinvent/downsize/0695s1.htm
When Vice President Gore launched the second phase of the Clinton
Administration’s reinventing government initiative last December, he dusted off a term that hadn’t been heard much since the Reagan Administration, and which Democrats have almost never dared speak; privatization.
REGO I, said Gore at a press conference, had set out to make government work better and cost less. Now, he said, “we are going to make government work better and do less.”
Cabinet departments like Transportation and Energy, said Gore, would at least partially privatize huge functions like air traffic control and electric power marketing. Every agency, large or small, would comb its budget looking for other programs to sell off. For example, Gore told reporters, Office of Personnel Management director Jim King “will tell you how we are phasing out old-fashioned, centralized management of the government, turning commercial functions like training . . . to the private sector where they belong.”
http://findarticles.com/p/articles/mi_m1282/is_n19_v45/ai_14667421
Weeding government’s garden – Al Gore’s National Performance Review report
The report traces much of the government’s inefficiency to the stultifying oversight and control by which it is administered. “In Washington’s highly politicized world,” it says, “the greatest risk is not that a program will perform poorly, but that scandal will erupt. Scandals are frontpage news, while routine failure is ignored. Hence control system after control system is piled up to minimize the risk of scandal… Indeed the Federal Government spends billions paying people who control, check up on, or investigate others–supervisors, headquarters staffs, budget officers, personnel officers, procurement officers, and staffs of the General Accounting Office (GAO) and the inspectors general.”
And, the report notes, “What the staff agencies don’t control, Congress does.” The Interior Department, for example, found that Congress had included in various conference-committee reports last year more than two thousand specific directives, instrnctions, and earmarks. The Forest Service, for example, was barred from closing any field offices. Another agency was forbidden even to study the idea of contracting out guard duties. Small wonder, then, that there are nine pages of specifications for a government-purchased ashtray (”a minimum of four cigarette rests, spaced equidistant around the periphery”). Mr. Gore had fun smashing a specimen on the David Letterman show. “Cool,” said Letterman.
The report proposes to do away with many of the government overseers and many of the rules—especially those governing procurement and personnel. There are 100,000 pages of personnel rules–resulting, the report notes, from the desire to keep the government from being staffed by the friends and relatives of politicians. Drastically slashing the rules and their enforcers is how Mr. Gore proposes to cut the federal payroll by 252,000 jobs over five years. This is the principal source of the $108 billion the report’s proposals would allegedly save over the same period.
March 4th, 2009 at 3:32 pm
I really like this one:
At one time, federal agencies constructed buildings, built machines and cleaned offices themselves, or found another agency to do it. Today, the U.S. government spends some $200 billion a year buying everything from information technology services to pencils to advanced weapons systems from the private sector.
The Defense Department alone accounts for 75 percent of that spending. Following a series of scandals in the 1980s, where the Pentagon was revealed to have paid outrageous sums for commercially available products, Congress decided to overhaul government procurement. The result was the Federal Acquisition Streamlining Act of 1994, which simplified the maze of procurement regulations to make it easier for federal agencies to buy products from the private sector.
The new law dovetailed with former Vice President Al Gore’s “Reinventing Government” initiative, which aimed to trim the federal workforce, and matched the realities of the Pentagon’s shrinking budget. As a result, where the federal workforce has shrunk, the contractor workforce has grown.
Matthew Yglesias makes a similar point:
By and large, the Bush administration is following the law and using all the procedures the law lays out. The trouble is that the laws are bad.
March 4th, 2009 at 3:43 pm
my understanding is that the mother lode in terms of privatization of core government functions is in the Department of Homeland Security. Since this agency was born, raised, and weaned under the administration of George W. Bush, it’s tended to exhibit all the pathologies of Bushian governance in unusually strong ways (hence Katrina)
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How quickly they forget:
http://archives.cnn.com/2002/ALLPOLITICS/11/25/homeland.security/index.html
Bush initially resisted the idea of a new department, which had been championed primarily by Democrats in the wake of the attacks.
March 4th, 2009 at 4:01 pm
I remember slinging a few of these at Greg Anrig over at TPM Cafe a while back. He was on his high horse on Democratic virtue on government contracts and couldn’t answer any of these. This is one of my faves
Pentagon Parts Prices Balloon Under Reinventing Government
September 2, 1999
Defense contractors are taking advantage of new opportunities to rip-off the federal government under policy reforms instituted by Clinton/Gore’s Reinventing Government campaign and an industry-chummy Congress. Spare parts prices have ballooned by up to fifteen times (or 1,532%) by contractors like Boeing and AlliedSignal taking advantage of lax accounting and oversight under federal policy changes.
The agencies successful at reining in industry fraud have been the target of these changes. New research shows that they have experienced some of the most severe cutbacks and disabling reforms including:
19% cut in staff positions at the Defense Contract Audit Agency (DCAA) which “saves almost $10 for each dollar invested”;
21% cut in the Department of Defense Inspector General’s (IG) office which recovered $466 million in FY 1996-97 fraud investigations; and
1/3 cut in staff at the General Accounting Office (GAO), which played a central role in saving $1.7 billion from the troubled F-22 program.
“Reinventing Government was supposed to streamline and get rid of wasteful jobs. In reality, the fraud-busting pocket-protector crowd has become an endangered species thanks to the defense industry’s political maneuvering,” according to Marcus Corbin, defense analyst.
http://www.pogo.org/pogo-files/alerts/national-security/co-sp-19990902.html
March 4th, 2009 at 4:13 pm
Thank you, Campesino, for your non-sequiturs and outright dishonesty about Bush and DHS. Now go back into your hole until the next time you can scream “look! over there! Clinton!” the next time Obama lays some smackdown against the corruption of the past 8 years which you immorally supported.
This isn’t about attacking clinton, Campesino, it’s about repudiating malefactors like yourself who’ve enabled the Republican destructive behavior over the past 8 years with your fanatical support. And now we’re rooting out all of this immoral jerks who collaborated with the GOP.
It’s a bit rich for you to get all self-righteous now when you have a record of Bush support. Who are you to make any moral and political judgments, you dumb jackass? You were the silent coward when it counted.
March 4th, 2009 at 4:28 pm
Contracting out government services is not, in and of itself, a bad idea. My own agency belongs to a system of not-for-profit entities created by the California legislature specifically to administer its budget outlays for developmental services (federal Early Start, federal Home and Community Based Services (Medicaid) Waiver, and state outlays, including the state developmental hospitals (most of which are now closing)). Our operations budget as a whole comprises only 10% of the cost of the system; the rest of that significant amount of money goes straight to non-profit and for-profit agencies that then deliver the services. And it’s worked fairly well for 40 years and is immensely popular with those it serves. Granted, as it stands it’s just about the most unfair way a state could run a business — we’re line-items in the state budget, but those of us who work here aren’t state employees and so do not receive state employee-level wages and benefits), but it’s a great deal for the state.
It’s all about how you go about doing it.
March 4th, 2009 at 4:32 pm
DTM Says:
March 4th, 2009 at 2:42 pm
Obama is right to want to kill this, but does he understand the beast he is taking on?
I suspect so. Note, for example, that he created a system of campaign financing for himself that doesn’t depend on crony capitalism as a means of encouraging campaign donations.
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Oh, you bet – complete transparency
Obama’s ‘Good Will’ Hunting
By Michael Isikoff | NEWSWEEK
Published Oct 4, 2008
The Obama campaign has shattered all fund-raising records, raking in $458 million so far, with about half the bounty coming from donors who contribute $200 or less. Aides say that’s an illustration of a truly democratic campaign. To critics, though, it can be an invitation for fraud and illegal foreign cash because donors giving individual sums of $200 or less don’t have to be publicly reported. Consider the cases of Obama donors “Doodad Pro” of Nunda, N.Y., who gave $17,130, and “Good Will” of Austin, Texas, who gave more than $11,000—both in excess of the $2,300-per-person federal limit. In two recent letters to the Obama campaign, Federal Election Commission auditors flagged those (and other) donors and informed the campaign that the sums had to be returned. Neither name had ever been publicly reported because both individuals made online donations in $10 and $25 increments. “Good Will” listed his employer as “Loving” and his occupation as “You,” while supplying as his address 1015 Norwood Park Boulevard, which is shared by the Austin nonprofit Goodwill Industries. Suzanha Burmeister, marketing director for Goodwill, said the group had “no clue” who the donor was. She added, however, that the group had received five puzzling thank-you letters from the Obama campaign this year, prompting it to send the campaign an e-mail in September pointing out the apparent fraudulent use of its name.
“Doodad Pro” listed no occupation or employer; the contributor’s listed address is shared by Lloyd and Lynn’s Liquor Store in Nunda. “I have never heard of such an individual,” says Diane Beardsley, who works at the store and is the mother of one of the owners. “Nobody at this store has that much money to contribute.” (She added that a Doodad’s Boutique, located next door, had closed a year ago, before the donations were made.)
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I went to the Obama campaign website and entered the following:
Name: John Galt
Address: 1957 Ayn Rand Lane
City: Galts Gulch
State: CO
Zip: 99999
Then I checked the box next to $15 and entered my actual credit card number and expiration date (it didn’t ask for the 3-didgit code on the back of the card) and it took me to the next page and… “Your donation has been processed. Thank you for your generous gift.”
This simply should not, and could not, happen in any business or any campaign that is honestly trying to vet it’s donors. Also, I don’t see how this could possibly happen without the collusion of the credit card companies. They simply wouldn’t allow any business to process, potentially, hundreds of millions in credit card transactions where the name on the card doesn’t match the purchasers name.
In short, with the system set up as it is by the Obama camp, an individual could donate unlimited amounts of money by simply making up fake names and addresses. And Obama is doing his best to facilitate this fraud. This is truly scandalous.
A friend e-mails to ask if anyone’s tried this with a foreign credit card to see if there’s any difference. Anyone got one?
Update: Commenter “Bombast” says his foreign credit card worked like a charm:
I have a credit card issued by a bank in Hong Kong.
I’ve just made 5 donations of $5 each using the card. I listed fake addresses in North Korea, Iran, Gaza, Venezuela and Kenya. The names and addresses were made up, each was different, I listed real Yahoo email addresses that forward to me.
Fake Name
Not A. Realperson
Finance Violation
Fraudulent Charge
Over Donation Limit
All 5 went through without a problem. I’m already being solicited
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We don’t need no stinking crony capitalism!
March 4th, 2009 at 4:32 pm
One of the benefits, typically, of a recession is that it forces bloated governments (state, local and federal) to trim payrolls, cut expenses and make better use of declining tax dollars. Now however, between the post 9-11 paranoid industrial complex and ’second great depression’ fears, it’s considered of national importance that we keep government hacks on the payroll. After all, we need those f-22 fighters to defend ourselves from Al Quada. Please Obama, take a goddamn hatchet to this budget and restore some sanity quick.
March 4th, 2009 at 4:36 pm
I am a government contractor currently (as in right this second) sitting in a meeting full of contractors doing inherently governmental work. Half of us are doing work for the government. The other people in the room are other contractors who are approving (or not) our work. I’m not sure anybody who actually works for the government is anywhere in this room. It’s really unbelievable.
March 4th, 2009 at 4:44 pm
Matt, couldn’t you have found a photo of, you know, an actual ax instead of the meat cleaver on a cutting board? You city boy, you.
March 4th, 2009 at 6:21 pm
Actually, privatization of government functions started under the Reagan administration under what is known as the A76 program. The attitude of the political appointees to the various federal government departments was that government employees are scum and drones whose work could be carried out with greater efficiency and at less expense to the taxpayers by contractors. I worked for an agency that was threatened with an A76 study that was only averted under pressure from the highway lobby.
A guy I know works for a private contractor who is responsible for computer security at the State Department who tells me that that he rarely meets an employee of that department in his capacity as the principal investigator of that contract with some 60 contract employees under him. They inhabit an entire government leased office building in Greenbelt, Md. and there is not a single government employee in the building.
March 5th, 2009 at 11:48 am
Will Obama do away with minority and gender based contracting preferential treatment in US Government contracts? Otherwise, this is just more rhetoric. Either CLEAN IT ALL UP and make the entire field level for competitive bids, or stop pretending that much of the contracting is SOCIAL AGENDA pandering.