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» July 29, 2006
Journalists Spinning for Both Sides
Listening to the public radio business show "Marketplace" early this week, I heard host Tess Vigeland finish up her introduction to a story touting the success of private contracting for military logistics with this statement:
We've heard a lot about the failings of the contracting system in Iraq. But in the latest issue of Business Week magazine, reporter Dawn Kopecki says the system actually works.Kopecki went on to describe that the couple of dozen people she'd spoken to -- "experts in military procurement, outsourcing in general, and defense" -- said every war has fraud, but that, in Iraq, contracting out support services was saving money.
Vigeland and Kopecki discussed a Congressional Budget Office study comparing cost estimates for supplies provided by the military itself and by contractors that claimed a nearly 50% savings (on $80 billion) associated with logistical support over a 20-year period. They talked about how people always blame the contractors but mentioned a specific case where several Army reserve officers were siphoning off money.
Vigeland's final statement makes it all sound as if everything's hunky-dory, though:
Yeah, but I guess then the real bottom line here is that, even with these kinds of problems with waste, fraud and abuse, the Pentagon is getting more bang for its buck by outsourcing.Guess so. But something was nagging at me. I mean, wasn't there something about a couple hundred million in overcharges from Halliburton for fuel delivery to the troops? Didn't Kellogg Brown & Root (a Halliburton subsidiary) get more than seventy million in bonuses last year even though the Pentagon had caught them cheating the American taxpayer? Even the case of Army officers stealing money from the Coalition Provisional Authority involved a contractor paying bribes to the officers in order to secure contracts. Building bribes to get contracts into the contract totals is not cost-effective from the government perspective.
I went to Business Week to look for the article. The most recent piece by Kopecki -- and the only one I saw online that discussed military contracting -- was titled "When Outsourcing Turns Outrageous". The subhed reads: "Contractors may be saving the Army money. But fraud changes the equation".
The BW article is practically the antithesis of the marketplace interview. The article says "some experts on the topic aren't convinced" that outsourcing pays off "even with a lot of fraud and waste". Kopecki's article quotes a former CIA lawyer as saying "What has happened in Iraq is just disgraceful".
The article mentions the case of a company that collected $190 million on an original contract amount of $160 million after building only 6 of the 150 health centers the contract called for. It mentions 80 open investigations and 20 cases referred to the Department of Justice, but none of this came up in the Marketplace piece. The BW article mentions that $60 billion has been paid to contractors for services in less than four years. That's half again as much as the CBO's estimate of the cost of logistical services for 20 years (the figure also includes contracts for reconstruction costs). The Pentagon has paid KBR alone $15 billion since 2001.
Unlike the happy, shiny Marketplace piece, the Business Week article concludes:
Smith, the former CIA general counsel who now represents contractors at Washington law firm Arnold & Porter, predicts that without more oversight, military outsourcing will saddle the government with the wrong kind of business partners. "Iraq has attracted patriots and crooks -- and there were probably some crooked patriots," he says. "We're going to be cleaning that up for years to come, I fear."That comes just after a statement that "the military expects to further reduce its procurement oversight corps."
To me there seems to be some major disconnect. On the one hand is an article on military contracting where the author puts forth some facts and figures, mentions potential serious problems and concerns by experts and starts out with the words: "The U.S. Military has lost billions to fraud and mismanagement by private contractors in Iraq who do everything from cooking soldiers' meals to building hospitals to providing security."
On the other hand is the same author, interviewed by a radio host who gives the impression that the experts who agree on the fact that there is waste and fraud in military contracting also believe that money is being miraculously saved.