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Chapter 6

Defense Contracting Rip-Off

Before I proceed to inform the American people about the dastardly way in which the defense contracting business rips off the government and the taxpayer, let me explain my credentials for this critical evaluation. I spent over 17 years in the defense contracting business as a draftsman, design engineer, supervisor, systems engineer, a manager for a major aerospace firm, and as the Assistant Program Manager/Proposal Manager on a multi-billion dollar U. S. Navy shipbuilding contract.

 

I have the unique perspective that I have spent one-half of my professional life in defense contracting work and one-half in the private sector. It most certainly opens your eyes as to how projects and taxpayer versus consumer dollars should and should not be managed.

 

Defense contracting is just one aspect of Congress’ total disregard for taxpayer dollars. The situation can be summed up in one brief phrase, “The government and Congress is not accountable to the American people.”  If the defense contractors had to sit before an audience of a few hundred average American taxpayers to justify the costs of one of these obscenely inflated programs, the defense contractor management would be lucky if they left the room with their skin intact.

My First Encounter With the Aerospace Industry

I accepted employment for a major defense contractor in the early 1970s after I had been discharged from the Army. I moved to California to take a job with the hope of starting a new career. Working in California was a complete revelation to me as I had previously worked in a boiler room type operation in New York City. Our drawing boards were made from old doors. There were no frills, no air conditioning, and no “break” rooms; not even a coffee maker. If you had a friendly conversation that lasted more than 5 minutes, you were severely chastised. The environment was all work and no play. We quietly made jokes about the head slave master who beat a constant rhythm on his kettledrums to the tune of “draw, draw, draw!” In contrast, the “enlightened” California environment was so friendly and laid back. It was a refreshing change from my worker bee’s viewpoint but I could not envision how any work was accomplished. The sparkling new buildings we worked in, plus the seemingly endless flow of money, was initially refreshing until I examined the culture more closely.

 

Before I cut any deeper, let me offer the obligatory apologies to the small percentage of defense workers I have had the pleasure to work with who actually exhibited superior work habits.

 

After I had worked in California for a few months at a job in which chaos reigned supreme, my manager asked me if I would be interested in working in a new group that would attempt to automate the ship’s drawings via computer, since I was one of the few employees with a computer education. I was thrilled and accepted immediately. My company had hired McDonnell Douglas Automation in Long Beach, California to get the ball rolling. Today Computer-Aided Design (CAD) is a household word in the engineering community, but in those days it was non-existent.  I visualized myself working on the cutting edge of technology.

 

Another employee and I were sent to McDonnell-Douglas Automation on a fact-finding mission. We were greeted by a manager and escorted through the main engineering room to a conference room. This massive room must have held 200 drawing boards. I could not help but notice that only one board was occupied by an engineer who was actually working. The rest of the employees were standing around the coffee machine or just chatting away in the hallways. I asked the manager if we had interrupted the engineers while they were on coffee break. He gave me a quizzical look and stated that “No, it was just the normal workday.”  This was my introduction to the California defense contracting business. I should note that when I left the facility, I believe I saw three people with their noses down on the drawing board – a vast improvement.

 

Now I know that the California work environment has been dubbed “manana” (tomorrow) in Spanish, but I could not believe that this work attitude I was witnessing was the norm. I would be proven wrong. The defense aerospace industry has degenerated into the largest Works Progress Administration (WPA) program in American history rife with inefficiency usurping any of the programs initiated by Franklin Delano Roosevelt, which I’m sure were a model of efficiency in comparison. The sloppy work habits all started during World War II when the government threw its entire resources into building fighter aircraft.  Cost was not the issue – just get the planes built – which leads to unacceptable inefficiencies in personnel and processes.

Don’t Work Too Hard

I can recall a conversation I had with an associate who was literally in fear for his life. He was a very aggressive worker who was raised to believe that hard work found it’s own rewards, whether that was in the form of monetary remuneration or the satisfaction of a job well done. He had been on the job only a few months when he was approached by a vigilante committee of fellow workers,  who subtly let him know that he was causing problems in the workforce. They informed him that he was working too hard making them look bad to management, and that he should adjust his schedule and work habits “to slow down a bit.”  They did not threaten him with any physical violence but the pure intimidation of the group of highly educated “thugs” put fear in his heart. He soon discovered he had little choice as he felt that Ali Baba and the Forty Thieves were now watching his every action. As I recall, he soon found other employment outside of defense work.

Make A Living on the Taxpayers

One of the most startling discoveries I made in my first few years was that many of my associates all seemed to run businesses on the side during our normal 9 to 5 work day. One friend was buying up old houses, accomplishing a few necessary repairs, and then renting the houses out to tenants. This was all before the California real estate boom of the 1970s when real estate could still be purchased for a song. I’m sure he’s a millionaire today, by employing the tried and true spirit of applying American enterprise at taxpayer’s expense. Where did these employees find the time to spend on all of the phone calls and visits, you might ask? Since the organization was terribly fragmented (with thousands of employees working on a single project) and most of the managers incompetent, I would estimate that the average low-level employee worked 2 hours per day for 8 hours of pay. Now I know that aerospace managers who read this book will retort, “That attitude was in the old days,” but I still have friends in the industry who confirm for me that the situation is still as bad or even worse today. The sad part of this situation is that the average defense worker does not understand how the “real world” functions, believing that they put in an honest day’s work, as many of these employees have never worked outside of that industry.

Cost Plus Contracts

Often, the government negotiates “cost plus” contracts with defense contractors instead of fixed price contracts, as the costs of some projects cannot reasonably be determined at the start of a complex project. Government representatives negotiate a set of predetermined costs for all efforts reflecting the acceptable labor rate for engineers or managers, the overhead rate, etc., and then include a profit of let’s say 7%. Then the contractor simply collects the hours worked, adds all of the fudge factors including the profit and bills the government. It would seem that you can’t get rich on a profit of 7%, but defense contracting firms quickly realized that they could make the bottom line much juicier when they could justify 10,000 employees on a project instead of the 1,000 employees that were necessary to realistically complete the job with a lot less communication problems, I might add.

 

During the process of developing a new design, when various options existed in materials or equipment, I don’t think I ever heard the term “cost effective” used in conversation. Money was no matter. Only the best for the government, even if numerous lower cost options were available that would accomplish the mission equally as well, but were never investigated.

Escaping To the Private Sector

When I finally left the defense business in disgust after 17 years to accept a job as a Director of Data Processing for a major food processing company in California, I was not prepared for the reality that awaited me. After watching huge outlays of money for seemingly idiotic expenses in defense work, I can recall being called on the carpet by the quintessential “old man” who ran the company because he took issue with a $15 subscription I had approved for a computer trade journal, even though my budget was a few million dollars per year. I quickly altered all of my attitudes about money just to survive in the commercial sector. The people in my department worked their tails off, too. It was not unusual for everyone to work 18-hour days just to get the job done – something I had rarely witnessed in defense work. In addition, I was running a small computer department of less than 30 people, but I had complete control of the efforts of this Fortune 1000 company as opposed to being some small cog trying to fight an uphill battle on a meaningless project consisting of 10,000 or 20,000 people who often worked against each other to achieve political gain. My small group was the essence of America. The environment was challenging and invigorating. I enjoyed working 18 hours per day as opposed to being one of the clock-watchers in the defense business who counted the seconds until it was Miller Time. True incentive is squelched in defense work, as your role is so insignificant that your achievements can only be measured in tiny incremental steps.

 

Let’s move on to a few of the thousands of outrageous examples of the waste of our tax dollars.

The Bradley Death Trap

Many of us have probably watched the made-for-TV movie, “The Pentagon Wars”, in which the costs (over $14 billion) of developing the Bradley Fighting Vehicle for the U. S. Army skyrocketed totally out of control. Air Force Lt. Col. John Burton was assigned to evaluate the usefulness of the Bradley Infantry Fighting Vehicle, an Army troop carrier/scout vehicle that was in reality a deathtrap for its crew. Burton kept trying to prove whether it was an effective weapon and safe for its crew, but he was constantly harassed by his temporary commanding officer, an Army General, so this individual could get the Bradley into production and then into the field after years of foot dragging by all involved. Through chicanery and backdoor politics, the Colonel was finally able to demonstrate the problems with the design, to no avail. When the Israeli Army purchased the vehicle, they made all of the changes recommended by the Colonel. Unfortunately, this is not an isolated incidence. In blunt terms, there is no accountability for taxpayer’s money – there is only accountability through the political chain of command. To spend $14 billion to continuously STUDY one weapons system is outrageous. On top of that, the vehicle has the complexity of a can opener. With that huge expenditure of money, they should have had thousands of the vehicles in the field plus they should have found the cure for cancer. Do you think this stupidity would have been permitted in the private (commercial) sector?  More heads would have rolled then in the French Revolution. Oh, yes, I believe the Army General responsible for this fiasco was promoted immediately after this incident. Makes sense to me.

 

Still worried about tax cuts?

The $700 Toilet Seat

As a much smaller example of typical government procurement costs, most of us have heard about the government spending $700 to purchase a toilet seat. In actuality, it was not a toilet seat; the item was a molded fiberglass cover for the sanitary tank on a P-3 aircraft with a toilet seat molded into the cover. In this one case, the price is not quite as preposterous as we first thought, so it was not a good example of failings of the bureaucracy.

 

But let’s understand a few basic principles of military procurement. Government rarely has the opportunity to purchase their hardware and equipment from Joe’s Hardware Store. In the first place, many of the equipment items are only used on missiles, aircraft or ships or by the armed forces in the field. Military equipment, whether it is a jet engine or only small screws, has to pass certain tests that would never be necessary in the commercial sector. For example, even little screws must be shock tested so if a rocket explodes near an aircraft the equipment held by these screws doesn’t come flying off of the bulkhead decapitating a crewmember.

 

Under procurement regulations, a Request For Quote (RFQ) is submitted to three qualified bidders before the purchase is awarded. The concept of three bidders is designed to avoid nepotism wherein their pals get rich from fulfilling all of the contracts. A package is prepared containing the description and quantity desired for the item, the applicable military specification that defines the requirements for the item in excruciating detail, delivery schedule, and any software requirements (material composition, shock testing, etc.) that define the paper work that must be submitted with the hardware.  Now the time required of the prime contractor plus the labor and material costs for the subcontractor to fulfill the order leaps astronomically just to procure a few screws. Let’s be honest. Some of this meticulous preparation is necessary to ensure a weapons system that will perform as designed. However, innumerable changes can be made in this process to drastically lower the costs of procurement. For example, eliminate the requirement for multiple bidders on purchases less than $1,000. When Al Gore was Vice-President, he elected to tackle the procurement bureaucracy to effect change. The last thing I remember was Al Gore putting his tail between his legs and running for cover.

 

When you examine the contracts given to Halliburton in Iraq, this multiple-bidding process was bypassed. Many of Halliburton’s contracts are classified as sole-source procurement. I can just imagine what the justification is for this flagrant violation (see Halliburton – It’s Nice To Have Friends below).

 

The procurement organization is simply one of the cogs in the government’s gigantic bureaucracy.

The Contract Award Process

When I was the Assistant Program Manager, one of my primary responsibilities was to act as liaison with the U.S. Navy, which required that I interface with virtually every department within the shipyard consisting of over 5,000 employees. These departments included estimating, engineering, material control, procurement, accounting and contracts administration. I had a very unique situation rarely enjoyed by the vast majority of defense contracting employees, as I had a ringside seat to the circus that was unfolding.

 

The majority of large-scale defense procurement items go through a competitive bidding process often involving two or more prime contractors. The government sends out Requests for Proposals (RFPs) stipulating the requirements for a new weapons system to multiple bidders. Generally, these requirements are in the form of a “performance” specification to avoid specific details that are better placed at the discretion of the contractor, if for no other reason to avoid cost extras at a later date if any changes are necessary. By performance specification, this term means that the government stipulates the parameters by which the new system must function, such as it must fly at the speed of Mach 2 at 50,000 feet, carry a bomb load of 10,000 pounds, and have at least one toilet seat. The potential bidders then submit a truckload of documents justifying their proposal. The process in actuality is really quite simple in concept. By soliciting multiple bids, hopefully the government will get the most bang for its buck. Generally, the low bidder is awarded the contract assuming they can theoretically guarantee the government that they will satisfy the performance specifications, unless of course political considerations impact the decision process, as in “My brother-in-law Bernie needs the work.”

 

Now that the defense contractor has won the award, where do they get the tens of thousands of employees they supposedly need to fulfill the contract?  Assuming that Wingless Aviation lost the bid, half of their staff then updates their resumes, spit shine their shoes and go galloping off for an interview with the winner, Politically Connected Aviation. This is how it works in the defense business, with worker bees moving from one defense contractor to another just to survive. And often the winning and losing companies may be thousands of miles apart, forcing these pathetic souls to move their families lock, stock and barrel within a few weeks. The concept of loyalty is destroyed forever.

 

Find Those Costly Errors! - I was a part of the proposal team for a new class of Amphibious Assault or helicopter assault ships (LHA). After Litton Industries was awarded the contract to build the ships, I can vividly recall that 30 or so people I worked with were yanked from the primary jobs and merged into a new group that you might assume was created to refine the design or start the process of ordering equipment.  No, the purpose was far more sinister. Their function was to immediately start the process of finding the gaffes in the drawings and design specifications, so they could nail the government for more money. Normally, in most morally bound commercial environments in which I have worked, when problems were discovered and no work around could be found, then and only then was the customer asked for more money. But not in defense work – stick it to Joe and Mary Taxpayer within days after contract award.

 

At about the same time, I’m sure purely coincidentally, Senator John Stennis, Chairman, House Armed Services Committee, was actually able to get the government to pay for a spanking new state-of-the-art shipyard in Pascagoula, Mississippi to build these ships. I assume he played that familiar old song and dance, “it was necessary for the national defense,” or some equally ludicrous hogwash.

 

We have probably all heard the jokes regaling, “Would you want to fly in a plane built by the low bidder?”  By the time the downtrodden defense contractor has finished the contract, plenty of money has been allocated over and above the original bid, resulting in far more money becoming available then will ever be needed, with stacks of gold bars left over.

 

The Engineering Change Proposal – When defects were found in the drawings or specifications (and they ALWAYS were), it was the responsibility of the contractor to prepare an Engineering Change Proposal (ECP) justifying the necessary change including precise definition of the wheelbarrows of money that would be required to correct the omission.

 

The most insignificant defect was pumped up to make the proposal read as if the moon would crash into the earth unless the four screws that were missing from a drawing were not added to the design at a cost of thousands and thousands of dollars. These ECPs often ran into hundreds of pages to support insignificant changes in order to justify the expense.

 

At this point, you are probably asking the question, “Well, didn’t the government see through this charade?”  The answer is not in your lifetime. We have to remember that in government bureaucracy the main arbiters of the money are auditors who knew nothing of the technical scope of the proposal. Without getting too in-depth into how these proposals were priced, it isn’t a simple matter of just telling the government that the screws cost $500 and the labor (because so many departments were affected by the change) was another $50,000. No, no, it deliberately gets much more involved then that. You have to add in factors such as the burden rate and the overhead, formally known as General and Administrative (G & A). Overhead, which includes company-wide costs such as security services and printing costs that are evenly distributed throughout the company, is then calculated as a uniform percentage and added onto the bottom line of every proposed change. This proposal is submitted to a technical government representative who says “yes” or “no” as to the validity of the change.

 

I can recall a specific incident wherein the government auditors were challenging the company on the pricing of a number of proposals. Since the auditors were not engineers and therefore not technically competent, when they reviewed the proposals they rarely could challenge the need for 4 screws, 2 widgets and 17 gotchas – all very complicated stuff. So human nature dictates that they would find their comfort zone and challenge the percentages used for the contractual labor rate or the overhead rate. Numbers they could understand – for after all, they were accountants. Many hours were spent debating whether the overhead rate was .07654 or .07655 percent. Rarely was the basic premise challenged about the screws costing $50,000, so if you multiply .07654 or .07655 times $50,000 instead of the contractor charging the government the actual cost of a few thousand dollars, the resulting difference between these rates was a trifle. But it made the government auditors pound their chests in triumph for they believed they had won the battle. The axiom about the forest and the trees immediately comes to mind.

 

Still worried about tax cuts?

The B-2 Bomber – The Ultimate Boondoggle

Once again the government lets defense contractors dictate the price of weapons systems at any cost to the taxpayer. The relatively new B-2 Bomber has a price tag of about $2 billion per copy. Original estimates projected a cost of $270 million per plane. According to the Bulletin of Atomic Scientists, “the plane is currently worth five times its weight in gold.” Are we crazy to let this ridiculous pricing happen without screaming and shouting?  Naturally, the head of the U.S. Air Force responded with the typical quote to justify outlandish expenditures, “Its worth every penny if we save one American life.”  Saving American lives is not the issue – this is typical military subterfuge - the issue is why do we need to waste incredible sums of money on very questionable, or in some cases, very badly conceived and wasteful projects. Oh yes, we were force fed the propaganda about its infinitesimally small radar signature due to its revolutionary shape, which of course is really just an advancement on the “Flying Wing” invented by Northrup Corporation in the 1950’s. The reason for the B-2 bomber was to avoid the radar systems so we could bomb the hell out of our archenemy, the Soviet Union, which no longer exists. Now I guess we can use these planes to bomb the border with Mexico to stifle illegal immigration.

 

After spending gazillions of dollars to develop this state-of-the-art aircraft, the designers have the gall to tell us that because of the very expensive materials used to deflect the enemy’s radar, the plane must be housed in climate-controlled hangars and have become a maintenance nightmare. This pathetic solution would only be permitted in defense work. In private industry, the manager would soon be sweeping floors if he had the audacity to suggest that design even in jest. On top of that, rumors were flying that the B-2 melted in water. The Air Force actually flew a busload of newsmen to its base in Missouri so these people could watch Air Force personnel wash the planes. Under actual battle conditions, of course, the enemy would never realize that simply bombing the aircraft hangars immobilizes the entire fleet. It becomes painfully obvious that’s why the Air Force stationed the B-2 in Missouri, the geographical heartland of the country. I can just see it now - all of the air conditioning technicians will need secret clearances just to adjust the thermostat in the hangar. You would not believe the justification that the Air Force uses for continuation of the B-2 program. It’s so preposterous that you would need to wash my mouth out with soap if I repeated their claims.

 

As unbelievable as it may seem, over the last 5 to 10 years on occasion Congress has still been trying to get 9 more of these behemoths built for $27 billion – that’s $3 billion per plane! The excuse, as always, is they are needed to defend our national security. How? By bombing Al-Qaeda terrorists on their camels on the Pakistani border? We all know it has nothing to do with payback – paying back the large political contributions of the aerospace industry and Northrup Corporation in particular. Congress killed the last authorization attempt, but I have no doubt it will raise its ugly head again in the near future.

 

Anyone who has ever worked in the manufacturing business, especially defense manufacturing, should be rolling on the floor in hysterical laughter at the $2 billion price tag per plane, and then choking on the fact that Northrup has the unmitigated gall to try and charge $3 billion per plane for most likely newer versions that may have changed by 1/10th of 1%. But wait a minute. Maybe the newer versions have a stick shift or perhaps two toilet seats?  The reality of weapons system development is that buckets of money are spent during the development stage to ensure the product performs as required and to debug the product. New materials must be investigated and incorporated into the design, engineering drawings developed, jigs and fixtures prepared, castings and molds developed, new equipment fabricated, computer software designed, and then the entire kit and caboodle is tested and re-tested. Let’s look at this rationally by removing all of the hype. Once the Air Force takes possession of the first stallion of any new weapon system, the hard work is done. Thereafter, any subsequent follow on orders should be much cheaper as the bulk of the design work; drawings, manufacturing processes, software development and debugging and testing have been completed. Talk about pulling the wool over the government’s eyes.

 

To make a reasonable comparison, one B-2 bomber costs the same as a sparkling new aircraft carrier, a small city on water, over 3 football fields in length, 13 stories high, and home to 5,000 men and women.

 

Let’s put this one unnecessary expenditure in perspective as far as you and I are concerned. The United States has about 100 million people who pay taxes. The savings to the taxpayer from eliminating just this one B-2 boondoggle would theoretically put $270 back into each taxpayer’s pocket. Give me the defense budget for 30 days and I’ll cut it so much it will enable the tax collector to eliminate everyone’s tax liability.

 

Still worried about tax cuts?

The F/A-22 Fighter – the Raptor

Another overly hyped program, that has been under development since the cold war with Russia, is the F/A-22 Raptor jet fighter.  Par for the course, the Raptor costs six times what the F-15 costs, the plane it is designed to replace at an astronomical cost of $351 million per plane (over a quarter billion dollars per plane – what lunacy!). Even the recent versions of the Russian MIG fighter, which few countries possess, is the only plane that can stand up to the F-15, the supposed antiquated fighter. And of course, the original estimates were that the F/A-22 would cost about $70 million per copy, even at that number an outrageous amount of money. Republicans in Congress tried to kill the program in 1999, to no avail.

 

No country has an air force even vaguely approaching the power of the U. S. Air Force. The Air Force’s command of the skies is unchallenged. Just like the B-2 Bomber, the Raptor is designed to avoid enemy radar and to shoot down Russian fighters. The plane has the ability to not only drop smart bombs but it also can capture enemy intelligence as it flies at well over 1,000 miles per hour. I wonder if it performs well in the rain?

 

The F/A-22 project was conceived as a “cost plus” contract, which roughly translated means “milk the taxpayers,” because Joe and Mary Taxpayer pay for all cost overruns. Why is this contract still roaring ahead full bore? That’s because the prime contractor, Lockheed Martin, managed to find 1,000 different contractors to provide parts in 43 different states to share in the kill. The Congressmen and Congresswomen who approve a contract of this magnitude are all too eager to claim they were responsible for bringing the work to their district.

 

The plan is to procure 277 planes at a total cost of $71.8 billion. Twenty years ago, the Air Force planned to build 760 Raptors at a cost of $35 million per plane. Ten years ago, the proposal changed to 438, then 339 and eventually to the 277 planes at $351 million each today.

 

One of the reasons cited for the huge increase in cost is because the plane’s avionics, designed to sight an enemy aircraft far beyond the pilot’s field of vision, “did not work as planned and it took us a while to figure out,” according to Lockheed-Martin. For the costs of the program to escalate so phenomenally, Lockheed-Martin must have 10,000 people working 24 hours a day to figure out that little problem.

 

In March 2004, the Government Accountability Office stated that flight tests indicated that the Raptor was not meeting its requirements for a reliable aircraft.

 

Still worried about tax cuts?

The C-17 – Another Bomber Fiasco

The C-17 AirLifter is the latest addition to the U. S. Air Forces global airlift capability. The C-17 was preceded by the C5A, one of the most scandalous programs in government procurement history. But I won’t delve into that program, as it would take another book to explain that ultimate mismanagement. The C-17 is a four-engine cargo jet that can land on short landing strips in remote parts of the world and drop airborne troops. Since the day the contract was originally awarded to McDonnell-Douglas, it was plagued by technical ineptness and cost overruns. In 1994, the Pentagon put McDonnell-Douglas on probation due to flaws in the design and postponed the program. In fact, McDonnell-Douglas performed so badly (that’s saying something for a defense contractor) that they were taken over by Boeing.

 

The C-17 program has so many perverted twists that it’s virtually impossible to list them all in this limited space. In many ways, it almost makes the B-2 Bomber look like the picture of management perfection. One item stands out like a sore thumb. The former top Air Force acquisition official, Darleen Druyun, who is often referred to as the “Godmother of the C-17,” accepted an executive position with Boeing after she was instrumental in redirecting the Pentagon’s acquisition of the C-17 aircraft. It should be mentioned that Boeing hired two of her relatives during the negotiation period. She was convicted in April 2004 of a Federal conspiracy charge when she told Boeing that their prime competitor, Airbus, underbid them by billions of dollars for the refueling tanker lease-purchaser agreement, offering the company an opportunity to resubmit their bid.

 

If you thought there isn’t some grand collusion between the government and its contractors, according to the Project On Government Oversight, from 1999-2002, there have been 36 instances of misconduct or alleged misconduct by Boeing resulting in approximately $358 million in fines or penalties, restitution, and settlements. How do they afford these huge fines?  Excessive profit, my friends, simply excessive profit.

 

Here are some of the more pertinent facts about the C-17 program:

·          The General Accounting Office (GAO) says that the Air Force has enough C-17s to thwart the Air Forces’ effort to keep adding these “Spruce Gooses” to the defense appropriations bill.

·          An illegal proposal has been kicking around that puts the government in the business pf subsidizing a commercial version of the plane that Boeing can then sell to private air haul companies. The theory being that this “sharing arrangement” will reduce the purchase price of future acquisitions. And if you believe that costs will be lowered, I have a bridge I want to sell you. As a part of this deal, Boeing wants an exclusion from certain laws that requires them to provide financial data related to the program. Excuse me, can I hear that one again?

·          Russia’s equivalent to the C-17, the An-124, can carry 85 percent more payload than the C-17X.

·          The major advantage of this aircraft over military versions of the Boeing 747 or other competitors is that the plane can land and takeoff on a 3,000 runway. Excuse me - that’s 3,000 feet on a dry runway. It’s 6,300 feet when it rains which kind of negates the very purpose. Here we are talking about the rain again. You might think that these are the same people who designed the B-2 Bomber, or maybe it’s just a plaque that affects all defense contractors.

·          In 2003, the Air Force restricted one-third of the fleet to only fly within the continental United States due to continual technical problems.

Still worried about tax cuts?

Marines Deploy Disastrous V-22 Osprey Hybrid Aircraft to Iraq

When Marines start dying in Iraq because of the aforementioned problems, we’ll hear lots of flimsy excuses for their deaths, but the reality is the program should be cancelled.

 

Still worried about tax cuts?

Boeing Strikes Again

As a part of Homeland Security, the Transportation Security Agency (TSA) awarded a contract in 2003 to Boeing Corp. to install 7,000 explosive detection devices at 429 commercial airports in a 7-month time frame around the country. The original contract was for $508 million but TSA made 54 changes (probably relatively minor at that) to the contract that raised the final price to $1.2 billion with 18 months to accomplish the work – par for the course in government work. Remember my previous references about how contractors milk those changes.

 

The Homeland Inspector General investigated the Boeing charges on the contract and found that Boeing had billed $82 million as project manager for actual costs of $39 million. Of course, Boeing responded with the standard canned line that Boeing did a job that people said could not be done. Was he referring to the simple installation of a black box at over 400 airports for over a billion bucks?

 

The Homeland Inspector General was also critical of TSA’s expenses, including one lavish affair at  a posh Washington, D.C hotel in November 2003 to celebrate its 2-year anniversary that cost the taxpayers $461,745, including $85,000 for a party planner. It obviously was much more elaborate than your typical Tupperware party.

 

Still worried about tax cuts?

Shoveling Wheelbarrows of Money At Contractors

The way government shovels out money to these inept organizations is the same as if you came home from work and said to your spouse, “Hi honey, I got paid today and I’m going to take part of my paycheck and use the $20 bills to light the backyard barbecue.”  I’m sure your better half might contemplate having you committed.

 

The key here that people just don’t seem to understand is that the bureaucrats could care less about how they squander the “government’s” money (not your money). It doesn’t come out of their pocket. As far as they are concerned, the government’s budget is measured in trillions of dollars – it makes little difference if Joe Contract Official blows a few million or a few billion bucks. It’s all just a drop in the bottomless bucket to the mindless government officials.

Whistle-blowers Recover Some Monies

About 20 years ago, Congress recognized to some degree that private firms were ripping off the government for virtually all services offered to the government including defense contractors. A whistle-blower law was passed that allows concerned citizens the opportunity to expose the contractors and to receive up to 25% of the monies recovered by the government.

 

Since its inception, the False Claims Act has been instrumental in recovering nearly $12 billion for the government from such industry giants as Tenet Hospital, Lockheed-Martin, TAP Pharmaceutical Products, Boeing and KPMG-Peat Marwick.

 

To protect the consumer after the corporate frauds of 2002, the Sarbanes-Oxley Act was passed covering fraud against publicly traded companies. The law targets those companies that destroy records, commit securities fraud or fail to report fraud to investors.

Do You Want More Information?

If you would like more information on those weapon systems that experienced overwhelming technical problems, cost overruns, or plain just don’t work, use the Internet to research information on the following programs:

 

A-10 Warthog Aircraft

B-1 Bomber

Ballistic Missile Defense

Black Hawk Helicopter

C-130J Transport Aircraft

Comanche Helicopter

Crusader Howitzer

Stryker Interim Armored Vehicle

Joint Strike Fighter Aircraft

Predator Unmanned Aerial Vehicle

Defense Programs Worth Investigating

The Project On Government Oversight (POGO) and Citizens Against Government Waste web sites contain very well documented insight into all of these programs:

http://www.pogo.org/

www.cagw.org/

I suspect I have offered enough evidence about defense aerospace procurement mismanagement. It’s time to fry bigger fish, the National Aeronautics and Space Administration (NASA).

NASA – Incompetence Par Excellence

If you think my previous statements about the work habits and culture of government-funded work in aerospace were blasphemous, now I’ll scrutinize the government-funded National Aeronautics and Space Administration (NASA) culture that in many ways is even more sickening than the typical aerospace work environment.

 

NASA is a prime example of a government entity that received too much money, which I’m sure every NASA official will dispute to his or her dying days. NASA spent over $1 million to develop an instrument that would write in space, I assume something akin to a ballpoint type pen. The Russians, who in comparison have a pittance to spend on space, use a pencil at a cost of $.04.

 

A little history is in order. When the Russians orbited the first satellite, Sputnik, in 1957, it rattled the very core of our defense establishment. How could the Russians have achieved this breakthrough over the Americans? When John F. Kennedy assumed the office of President in 1960, he stated we would land on the moon before the decade was out – we’ll show those pesky Russians a thing or two. Our pride was wounded, so now it was time to let out all of the stops. Was there any real concern of national security to engage in a hastily prepared contest with the Russians to get to the moon? Not really. The major peripheral benefit was scientific in nature so we could learn how to fly in space to gain knowledge about our solar system, but more importantly to salvage our pride. Knowledge is always beneficial, but to throw billions of dollars at the problem was insane, especially when you consider the problems we still have on the earth with poverty, illiteracy and disease. What happened to our priorities in society?

 

Eventually, in 1969, we made it to the moon to great cheers from the peoples of the world. We went back a few more times, found out the moon was NOT made of cheese, and that was the end of those trips. It was time to go after bigger targets like Venus and Mars. We of course learned much about space travel during that time that would make it so much easier for deeper ventures into the solar system in the future. Well, at least that’s what we thought.

 

Four programs that NASA has completely bungled are

1.      The Space Shuttle

2.      Mars Climate Orbiter

3.      Mars Spirit Rover

4.      Genesis Space Capsule

Let’s examine these stellar NASA programs.

 

The Space Shuttle – The Space Shuttle has been an unmitigated disaster since its inception. Two shuttles, Challenger and Columbia, have blown up with the tragic loss of two crews of 14 highly trained people.

 

Columbia accident investigators attributed the disaster to the NASA work environment and a lax safety culture, and they recommended 15 reforms that must be carried out before the shuttle can fly again. To-date, NASA claims to have implemented changes to satisfy 5 of those recommendations. I assume we should not hold our breath waiting for the rest of the changes.

 

Keeping par with the defense industry, each shuttle costs about $2 billion. Is this a magic number the defense contractors use to price B-2 bombers, space shuttles and aircraft carriers? The space shuttle program, which began in 1972, was supposed to cost between $10 and $12 million for each shuttle launch, which somehow escalated to over $450 million. And the turnaround time between flights, which was supposed to be days, somehow became months, if launches were attempted at all.

 

At least someone is solving the problem but not in government. In September 2004, a bunch of comparatively rank amateurs launched SpaceShipOne, a vehicle that can orbit the planet. Each launch is realistically predicted to cost between $25 and $30 million. At about the same time, the president’s space commission recommended that NASA get out of the business of hauling cargo into space and leave it to private enterprise. Within a few years no doubt, hopefully the same commission will recommend that private enterprise handle interplanetary exploration as well.

 

Isn’t it ironic that we are totally reliant on the “dirt cheap” Russian Mir spacecraft to shuttle American astronauts back and forth to the Space Station until such time as NASA gets their act together?

 

Mars Climate Orbiter    In 1999, as the Mars Climate Orbiter neared the red planet, after traveling 121 million miles for over 9 months, it received instructions from earth to fire its main engine to begin the process of orbiting around the planet. It executed the software command, fired its engines and fell into an orbit around the planet. But it never came around from the backside of the planet.

 

$230 million was spent to build and launch the spacecraft that was designed to orbit the planet and collect data on the daily weather and atmospheric conditions, and then transmit that data to the Mars Polar Lander. I guess we should be overjoyed to know that the Mars Polar Lander wound up on the scrap heap of history, too.

 

Why did this happen?  NASA, after intensive investigation, concluded that a catastrophic error had occurred in the software that placed the spacecraft much too close to the surface of Mars. Instead of orbiting at 125 miles above the planet, the vehicle dropped down to 35 miles. Computer simulations verified that the spacecraft likely wound up as fireball lighting up the Martian atmosphere, but we couldn’t see it – it was on the other side of the planet. The $230 million investment was now a junkyard sale all over the Martian landscape.

 

NASA stated that it was embarking on a program of management improvement to avoid a repeat of that disaster. Let’s see how well they fared.

 

Mars Spirit Rover – In 2004, the Mars Spirit Rover landed on the planet, moved off its landing pad, began transmitting data to the earth, and then went silent. Another software problem was found to be the culprit. During the flight to Mars, NASA decided to upload a spanking new operating system (just like in a Personal Computer) to fix vulnerable shortcomings in the original operating system. But they made a primitive error that left some of the old programming code still active.

 

Once NASA engineers realized the problem, they worked frantically to revive the dormant spacecraft until finally they were able to make the probe operational.

 

I know its silly of me to ask the question, but “why was the spacecraft launched if it was known that there were major problems with the software?”  Is it possible that the political chain of command would not tolerate another delay?

 

Genesis Space Capsule – In 2004, the Genesis Space Capsule, which had orbited the sun for more than three years in an attempt to gather clues to the origin of the solar system, crashed to Earth after its parachute failed to deploy.

 

This $260 million project was designed to collect space particles on a series of very sensitive disks, which by the way many people doubted would work at all.

 

Here’s the nail in the coffin for this outrageous project. They could not have the capsule accomplish a conventional parachute landing, as the fragile disks would be damaged beyond repair due to the force of the impact upon landing. So what did the geniuses at NASA decide?  They opted to have some Hollywood stunt men fly helicopters to snatch the capsule out of the air with hooks assuring a soft recovery. The pilots had participated in dozens of practice runs but – whoops - the spacecraft was tumbling to earth instead of the smooth descent if the parachute had opened as planned. They were unable to retrieve the capsule resulting in a smorgasbord of metal buried in the ground. NASA has stated that they were able to recover some material from the now obliterated disks, but scientists had planned to study the material for 5 years. Most likely, they now have about a week’s work. Instead of using hooks to snag the capsule, the American public would have been better off if the stunt men had used butterfly nets to snag the NASA managers.

Final Thoughts on NASA

According to General Chuck Yeager when he was asked about the problems at NASA back in the 1990s, he responded:

“Basically, the bureaucracy. It’s a civil service organization. It’s difficult to get dead wood out of it, it has a tendency not to let loose of operational programs and keep on doing research and development. The shuttle is a good example. We could probably run the shuttle program for about one-tenth of what it is costing today with a good civilian organization that’s in it to make a profit.”

Note General Yeager’s comment about a “good civilian organization,” and I don’t believe he was referring to one of the prime defense contractors who milk the taxpayers, either.

 

Has there been a shake-up of managers at NASA?  No, of course not. The NASA budget for fiscal year 2005 has just been increased to $16.4 billion as I complete this book. I strongly suggest that they give us that money back in tax cuts until NASA cleans its house and gets rid of the incompetent management team and makes every effort to change it’s culture. Perhaps we could follow the Russian practice and put a few of these rogues into Lubyanka Prison in Moscow for 10 to 20 years. Maybe that drastic approach would shake up the snake pit.

 

As a final thought on NASA, we were been glued to the TV set when the Hubble Spacecraft was launched to provide us with a vision of the outer reaches of the Universe, of course at a cost of over $8 billion.

 

Previously, we built gigantic complexes of telescopes in obscure locations to view the heavens. Large sums of money were expended in the process. Then how is it that amateur astronomers have been able to find previously undiscovered Jupiter-sized planets using telescopes that can be purchased in a typical Wal-Mart for a few hundred dollars?  What have the astronomers been doing with all of the money we’ve given them to design and build telescopes with mirrors 30 feet in diameter compared to the Wal-Mart telescopes which use optics 4 inches wide?

Halliburton – It’s Nice to Have Friends

Let’s move on to Halliburton, Dick Cheney’s former firm, and we’ll see how they have performed for the government.

 

My intent was not to attack a specific government contractor, as Halliburton has been beaten to death in the press. In my experience many of these companies are all equally guilty of inept management, gigantic cost overruns and unjustifiable expenses. However, Halliburton has constantly been in the news because of their exceptional greed and incompetence, so they are a good whipping boy to illustrate my point.

 

Most of the contracts Halliburton has obtained from the government have been sole source procurement, without a competitive bidding process. Since the invasion of Iraq, Halliburton has seen their share of the pie increase from $468 million to $3.92 billion (the government authorized $30 billion in emergency money to fight terrorism), no doubt because of certain influences in the White House.  Oh boy, the fox is in the hen house again.

 

Obviously, Halliburton is not the only scoundrel making off with tidy profits but isn’t someone watching over the hen house?  That’s the job of the Defense Contracts Audit Agency (DCAA), which rarely invokes its power to disbar a contractor from doing business with the government. But DCAA did recommend in a confidential memo that Halliburton should be suspended or debarred from future government contracts. DCAA showed that one of Halliburton’s subsidiaries, Kellogg, Brown & Root (KBR) could not account for $1.8 billion in charges out of a total of $4.3 billion spent on the LOGCAP (Logistics Civil Augmentation Program) III contract for the U. S. Army to provide logistical support for our troops in Iraq and Afghanistan.

 

$1.8 billion lost in the paper work?  We’re not talking about losing track of $3.14. Can you imagine running any business when you really don’t know why or with whom you spent that kind of money?  It’s obvious that none of these clowns have ever worked in the private sector. This is pure, unadulterated nonsense. When they spend that kind of money there must be a paper trail in the form on invoices and checks, unless the money was handed out in the form of cash. But that’s another issue worthy of an in-depth investigation.

 

In 1997, KBR billed the government for sheets of plywood at $85.98 that actually cost $14.06 for work they did in the Balkans, plus they billed to have their offices cleaned 4 times a day. The DCAA has charged Halliburton for overcharging for fuel, food and other services they have provided in Iraq, while the Justice Department is investigating business activities they had in Nigeria and Iran. The Army paid KBR $750,000 for work at a Fort Ord in California that cost about $125,000. What other mastodon skeletons are hidden in the closet?

 

Supposedly, the government is considering withholding payments until Halliburton gets its act together. Considering withholding payments? If this were the commercial sector, these guys would have been kicked out the door a long time ago.

 

So it doesn’t seem that I’m kicking only one subcontractor in the teeth, how about Custer Battles, another contractor which provides services in Iraq?  Two managers inside the company wrote memos exposing fraudulent billing practices, including charges for nonexistent services or services provided at grossly inflated prices. On top of that, former employees of the company are suing the company for charging the Iraqi Coalition Authority $157,000 for a $95,000 helicopter landing pad. Even better then that, they repainted a few forklifts, which had been abandoned by Iraqi Airlines, and then charged the authority thousands of dollars a month to lease those same forklifts. But the Pentagon has shown it has some backbone and is withholding $10 million in payments. They actually have barred the company from future contracts. I hope we can say with confidence that this is Custer’s Last Stand.

 

I wish to point out that it makes no difference which political party controls the White House or Congress. The defense procurement apparatus just keeps rolling along.

Incestuous Relationships

One of the most malignant situations that occur in the incestuous relationship between the government and contractors is that many retired military officers and contracting authorizing personnel immediately take high-level positions with contractors upon retirement. There is some merit in this approach as who knows better about the workings of the government then former officers, but the question must be asked, “What benefit did these people provide to their new company while they were still on active duty?”

 

Why in reality one of these contractors would want to hire the people who are equally guilty of the mismanagement of taxpayer dollars is beyond my comprehension.  But this hiring occurs for no other reason then to exploit their contacts and knowledge of government bureaucracy.

Rarely Do Systems Work

Do you remember that during the first Gulf War, the outlandish claims about the kill ratio of the Patriot Missile System, when the generals were claiming that it had nearly a 100% kill ratio?  After the war, it was proven that the system was a dismal failure. How can this be?

 

As another example, take the Antimissile System, which has been under development while a number of administrations have changed hands. According to the systems developer, the Missile Defense Agency (MDA), the system may be capable of hitting targets up to 80% of the time. The system is designed to send interceptors into space to KO enemy warheads. It’s just another drop in the proverbial bucket, but the government has spent over $130 billion on this latest venture into the Twilight Zone.

 

Flight tests, to determine if the thing actually works, have been delayed several times. It doesn’t take a brain trust to know with each passing day more and more is being spent with each delay because the government pays for these delays – not the contractor. These tests started in 1999 (5 years ago) with the accustomed failures that led to months of delay until the failure point could be determined. Five hits were recorded in these tests, but under very “controlled conditions.” As a final blow, the Operational Test and Evaluation Office has had prolonged arguments with the developer, MDA, over the likely effectiveness of the missile system.  I’ll bet the kill rate will be great as long as it doesn’t rain.

 

The most ironic part of this total incompetence is the fact that I have often heard company management officials use the empty line, “If you want it to work the first time, it’s going to cost a lot of money.” Since systems rarely work the first time out of the barn, then obviously we, the taxpayers, are wasting our money. I wonder, “Can we ask for a refund?”

Re-Thinking Weapon Systems

It has been my observation that these systems are far too complicated. Some bureaucrat sits in an office in Washington and says, “Gee, wouldn’t it be great if the XYZ Missile could do loop-de-loops while in flight to confuse the enemy. Let’s add it to the contract.” By my experience, the official makes this decision without the slightest concept of how difficult that afterthought will be to implement or how much money that unnecessary extra may cost. For after all, the money isn’t coming out of his or her pocket. The military uses the standard byline, “We need it to defend the country,” to justify any outrageous expense. My response to that is “malarkey.”  There is no analysis of Return on Investment (ROI) as is regularly practiced in the commercial world, but a reasonable approach would be to design ten relatively simple weapon systems with slightly less capability than one weapon system they can’t get to work. In conjunction with that revised design philosophy we should demand accountability for our monies and an honest days work from the defense contractors.

Keeping Track of Inventory

Over the years, the government has procured billions of items that are spread throughout the world. Supply Sergeants are responsible to keep track of the inventory when an item is moved from point A to point B, but sometimes an item becomes lost in transit. We can’t expect the Pentagon to keep track of every little item, but somehow the Pentagon has lost track of over $1 trillion (that’s trillion, not billion) dollars worth of inventory, and we’re not talking about socks and razor blades either. We’re talking about large ticket items like tanks, missiles and planes. The U. S. Army alone can’t find 56 planes, 32 tanks and 36 Javelin missile command launch units. I wonder if the Navy is missing any ships? But there is a degree of continuity. The Defense Department has failed its annual audit for seven years running.

 

With just a little expeditious application of practical management principles to scrutinize the pricing offered by these defense contractors, and limiting the features that are integrated into the designs, the Army, Air Force and Marines could have two or three times as many of each weapon system to defend the country.

 

In the limited space I allocated to digest the defense contracting business, I was only able to whet your appetite as to the gigantic waste of taxpayer dollars. I can assure you there’s plenty more in Housing, Education and Welfare, Agriculture, and other departments, as well.

 

 

 

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