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Gates’ plan for acquisitions is seen as a start

By KEVIN BARON | STARS AND STRIPES Published: April 10, 2009

ARLINGTON, Va. — The foundations of the defense industry rumbled on Monday when Secretary of Defense Robert Gates proposed expanding the department’s own acquisition workforce by 39,000 jobs through a combination of hiring 9,000 new workers and converting 30,000 more from private defense contractor employees into civil servants.

Already, analysts say Gates’ plan may mark the first time since World War II that the federal government will try to regain control of some of its long-privatized military capabilities and supporting elements.

But until more details emerge about who the new and converted employees will be, how skilled they are, and which contractor jobs they will bring in-house, many say this seems to be only a good first step rather than a fundamental shift.

The plan is an element of the military’s fiscal 2010 budget proposal and a pillar of Gates’ attempt to expand the Pentagon’s ability to rein in a government procurement system that President Barack Obama said has lost control of spending and is overmatched by industry giants.

According to the Pentagon, 11,000 of the converted positions mostly will be in the areas of program management, engineering, logistics and business management, and will include “2,500 contract overseers at the Defense Contract Management Agency, 800 pricing and cost estimating specialists, 250 attorneys,” a spokesman said in an e-mail.

Additionally, 9,000 new oversight hires, including 600 new auditors, will go to the Defense Contracting Management Agency among other offices to handle estimating, pricing, and legal tasks.

And many support service contracts to be converted to federal employees will cover “a very broad spectrum”, including intelligence analysis, computer systems, public affairs, and training.

After 50 years of expansion, the defense industry and the military are so intertwined as to be indistinguishable in many job areas. Federal and private workers from Washington to Baghdad often sit side by side on a variety of jobs including intelligence operations, advance weapons development, logistics and human resource management.

Last year, the General Accountability Office tallied in one 18-month period “at least $33.9 billion on almost 57,000 contracts” spent in Iraq and Afghanistan from the Defense and State departments and the U.S. Agency for International Development, and the Pentagon held about 90 percent of those. Contractors did everything from construction to private security to logistic services.

A Pentagon quarterly census found that as of last April there were 197,718 contractor employees working in those theaters. But the GAO said that figure was not reliable, likely undercounted local national employees, and USAID and the State Department kept no such records of its contractors.

Skeptical contracting analysts say the government has tried to gain control of contracting before with little success. And cost overruns are only one symptom of a larger problem.

“What’s new? I mean everybody has known since the 1950s, the 1960s, 1970s, we’ve had cost overruns,” said Dan Guttman, a lawyer, professor and co-author of the 1976 book “The Shadow Government: The Government’s Multibillion Dollar Giveaway of its Decisionmaking Powers to Private Management Consultants, “Experts,” and Think Tanks.”

“[Wisconsin Senator William] Proxmire had hearings after hearings on these things. In the ‘80s, when people ran for president they talked about the $600 hammer,” Guttman said.

“The real problem is that the military might not have control over vital systems because too much of them, the operation and planning and the maintenance, may be outside of the federal and military workforces.”

Instead, Guttman says, the government must tackle the structure of the defense contracting system, in which the Pentagon is perpetually funding big ticket items to relatively few large firms that it cannot cut them loose.

“If you have few competitors, and you really believe in competition, you can’t let any of them really go bankrupt. You have to keep on feeding them,” he said.

The Pentagon also must find a way to keep talented contract mangers from fleeing public service to higher-paying private firms, he said. Forty years ago there were more government mangers overseeing a wider variety of contracted companies that diversified the military’s need to rely too heavily on any one of them.

Lastly, he argued, Congress must correct the dual and unequal laws and ethics standards that govern public and private workers who do the same jobs.

“What is it that’s going to make a difference now?” Guttman asked of Gates’ plan. “Unless you’re saying we are eliminating contractors, which nobody is near saying, you’re going to have some continued profound reliance on contractors. This is what I don’t quite understand.”

Few reformers, including the defense secretary, think contracting is inherently problematic. But nearly everyone seems to agree the pendulum needs to swing back toward the Pentagon.

“I think that when it comes to acquisition, I think, above all, the oversight of the process is inherently governmental,” Gates told reporters Tuesday. “How far down the chain you go beyond that, I think, is a judgment call.”

“Sometimes it is more effective to have outside contractors and sometimes it’s more effective to have government contractors,” said Bill Allison of the Sunlight Foundation, a nonprofit investigative journalism organization that is a watchdog for public disclosure of government information.

“Historically, you’ll see that they shift from own extreme to another. There was a time where the U.S. government manufactured all of its own desks and all of its owned office equipment and all of this own filing cabinets,” he said.

After World War II, many elite circles wanted to grow government and keep the expertise and resources it had enjoyed from private sector. Instead, companies were enlisted on contract.

“It wasn’t an efficiency question; it was an expertise and resource question,” Guttman explained.

One example was the birth of NASA. “It was all government contractors building the Saturn rockets. If you’ve seen Apollo 13, there’s a Northrop Grumman guy talking about what the Lunar LEM can do and what it can’t do,” said Allison.

As time passed, contracting grew to provide more services and goods, and companies began to rely more and more on steady government revenue.

“What you have today is many or even most of your big contractors work pretty close to 100 percent for the government. Take Lockheed [Martin]. Lockheed is almost [exclusively] a government contractor. If the government doesn’t need it, Lockheed has got a problem,” Guttman said.

The Washington Post reported that roughly 7.5 percent of metropolitan Washington’s labor force — about 291,000 jobs — is tied to Pentagon contracting. Among those jobs are more than 2,000 contractors the Pentagon funds to oversee other contractors.

Ninety-five percent of the revenue of CACI, a military and intelligence services firm, comes from federal contracts supporting approximately 6,000 local employees, the post reported.

A recent Northrop-Grumman promo video brags the company’s Technical Services division is so ubiquitous that it is involved in 65 cents of every defense dollar spent.

“I don’t mean every contract is not in control, but no longer can we presume that the government knows what its contractors are doing,” Guttman said.

Last summer a federal court found on 77 counts that defense giant SAIC failed to disclose that while acting as a contracted advisor to the Nuclear Regulatory Commission tasked with writing rules on recycling radioactive material in the 1990s the company also worked on a nuclear recycling contract for the Department of Energy while advocating for favorable recycling rules and planning to launch its own recycling company.

By now, it may be hard to build a federal oversight workforce without recruiting some workers from private industry.

“Given the consolidation of the defense industry, I think it’s going to be really hard to find people that have never bumped across Lockheed Martin or Northrop Grumman or some of the other big firms,” Allison said.

Guttman was more direct: “There is a basic black hole; the government does not have any oversight that anybody can say, with confidence, from the conflict of interest situation of the contractors.”

Allison is more hopeful: “I think the net result of that will be a little bit more accountability.”


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