By SCOTT AMEY and SUZANNE DERSHOWITZ
Today, the Senate Armed Services Committee will debate and vote on its version of the National Defense Authorization Act (NDAA). Last week, the House Rules Committee scrapped a number of key amendments to their version of the NDAA that POGO supported for smarter defense spending and greater government accountability. But there were some good contracting provisions in the House version of the NDAA that we noted before the floor vote.
Although we’re glad that Amendment #132—aimed at preventing contractors from using U.S. taxpayer dollars to fund human trafficking—passed the House, we are disappointed that several key amendments that would have helped rein in the growing costs of government contracting got scrapped from the House bill.
While several of the amendments discussed below did not see the light of day on the House floor, we are hopeful that comparable measures will make it into the Senate version of the NDAA.
Ending U.S. Taxpayer-Financed Human Trafficking
POGO applauds the House Armed Services Committee for passing Representative James Lankford (R-OK) and Gerry Connolly’s (D-VA) important bipartisan amendment that would help stop contractors from using U.S. taxpayer dollars to fund human trafficking. We hope the Senate will follow their lead in combatting this pernicious, ongoing problem. Thousands of foreign nationals have ended up in U.S. war zones because they fell victim to human traffickers. Under the aegis of the U.S. government, modern-day slavers have been providing logistical support for U.S. troops.
In March, Rep. Lankford introduced the End Trafficking in Government Contracting Act of 2012, including POGO’s recommendations for ending human trafficking in U.S. war zones. Senator Richard Blumenthal (D-CT) and a number of notable cosponsors introduced the bill in the Senate. The Lankford-Connolly anti-human trafficking amendment would close loopholes in existing regulation and increase enforcement capabilities. It would require companies to closely monitor and report the activities of their subcontractors down the supply chain. It would also expand the definition of “fraudulent recruiting” to apply to laborers who work on U.S. government contracts outside the U.S., mandating responsible labor recruitment practices.
Saving Billions by Shining a Light on the True Cost of Service Contracting
Although it didn’t reach the House floor to be debated or voted on, the service contract inventory provision is worth a more in-depth look. After some political wrangling, Representative Jackie Speier (D-CA) re-offered her amendment to improve service contract inventories and thereby save taxpayer money. As explained in Rep. Speier’s press release:
This amendment would require the Department of Defense to collect additional data about the labor, hours, and costs of contract workers compared to government workers. It would also require the DOD to state the cost differential between a contract worker and government employee in a comparable position.
The release also contained a statement from Speier outlining the potential savings this amendment could yield:
The Army has found that collecting and using this data resulted in savings of 16 to 30 percent. Improved cost analysis helped the Army discover that outsourcing operations research analyst positions increased costs by 30 percent—with the contractor employee receiving an annual salary of $50,243 more. The bipartisan Wartime Contracting Commission also found that for high skill level work, contractor billing rates could be nearly 30 percent higher than the cost of a DoD civilian. Last year, the government spent $320 billion in service contractors. A 30 percent savings would give taxpayers $96 billion. Even the lower estimates still save $51.2 billion.
The fact is, the Department of Defense (DoD) doesn’t have solid data about the number and cost of service contract personnel—and that’s one of the many reasons that government spending has dramatically increased over the years.
Speier isn’t the only Members of Congress getting involved in this issue. Representative Maurice Hinchey (D-NY) and Senator Sherrod Brown (D-OH) have both written letters to Secretary of Defense Leon Panetta inquiring about DoD’s over-reliance on contractors. Senators Claire McCaskill (D-MO) and Rob Portman (R-OH) held a hearing in March at which service contract inventories were a hot topic.
In February, DoD issued a request for public comment about whether it would be useful to collect more contractor workforce information on the number and value of direct labor hours. As expected, the contracting industry opposes the plan.
Additional information about the contractor workforce is needed to determine if contractors are performing work that by law must only be performed by government employees and to better control service contract costs. In order for the government to employ the most cost efficient workforce, it’s essential to have data detailing the actual number of contractors, labor hours, and the differential between the cost of contracting and hiring a public servant to do the same work. Unfortunately, as our Bad Business report highlighted, the government isn’t conducting true cost comparisons and is wasting billions of taxpayer dollars each year as a result.
The Speier amendment would have marked a huge leap forward in reining in federal spending and more effectively overseeing the entire blended workforce, and we hope to see a similar provision pass in the Senate’s version of the NDAA.
Changing the Definition of a "Commercial Item"
Representative Leonard Boswell (D-IA) also offered an amendment aimed at improving contracting decisions that did not make it past the House Rules Committee. For over ten years, POGO has highlighted concerns about the use and proliferation of commercial item procurements. Since the mid-1990s, the government has been buying so-called “commercial” goods and services that are not actually sold in the commercial market. Making matters worse, these purchases are often made without any government review of the cost data that leads to the final price the contractors are proposing. Would you buy a car if the dealer told you that you couldn’t see the window sticker? We doubt it, and the government shouldn’t either.
After numerous studies and findings of abuse, the Department of Defense has offered a legislative proposal that will result in improved oversight of billions of dollars’ worth of so-called “commercial” goods and services. The NDAA amendment Rep. Boswell offered was not considered by the House, but we hope that the Senate will realize the fact that products are often misclassified as commercial and purchased on a sole-source basis, and therefore a change is required that will save money and better protect taxpayer dollars. POGO urges the Senate Armed Services Committee to support the DoD proposal and get a handle on commercial item spending.
Lowering the Amount Contractors Can Bill Taxpayers for Their Salaries
Republican leadership in the House also refused to allow floor debate or a vote on Paul Tonko (D-NY) and Jackie Speier’s (D-CA) measure to limit the amount taxpayers pay in lavish government salaries to defense contractors—lowering the compensation cap from over $763,000 to $400,000. Based on the Stop Excessive Payments to Government Contractors Act of 2011, this provision is part of a bipartisan, bicameral push for reform, and it would have applied to all defense contractors across the board.
This amendment would also have set the cap is set in such a way that it stops the runaway growth rate the current formula has enabled. According to Rep. Tonko’s press release:
The cap on contractor pay is governed by a formula adopted in a 1998 law, enabling private contractor executives, including defense contractors, to more than double their pay in the past twelve years, rising 53% faster than the rate of inflation.
“I am deeply disappointed that for the second time in as many years, Republican leadership in the House has turned their back on America’s taxpayers and stood firm with defense contractors and D.C. lobbyists to continue wasteful spending with no end in sight,” said Congressman Tonko.
This issue has gained traction in both the House and Senate. Senators Barbara Boxer (D-CA) and Charles Grassley (R-IA) proposed similar legislation to reduce taxpayer reimbursement of government contractor compensation in the Senate—the Commonsense Contractor Compensation Act of 2012. We learned from a press release by Senator Claire McCaskill (D-MO) that yesterday the Subcommittee on Military Readiness approved a measure to cap defense contractor pay, which we hope will likewise be adopted by the full Senate Armed Services Committee today or tomorrow.
Contractors should not be able to bill taxpayers more than the President's salary for the salaries of their employees. This provision would have gone a long way toward reining in the costs of the growing shadow government. We hope that this week the Senate won’t miss their opportunity to adopt a similar provision in their version of the defense budget bill.
DoD Revolving Door Should Be Transparent
For years, POGO has supported the idea that the DoD revolving door database should be publicly available. The House took up the issue, and in an amendment (see pg. 187) proposed by Rep. Speier, requested an inspector general review of the Department of Defense’s database and a report to committees with jurisdiction. POGO supports this effort, and hopes that the Senate goes even further to make the report and the database publicly available.
Senate Armed Services subcommittees have already held hearings on the NDAA. In addition to the proposal to lower the cap on contractor pay, Sen. McCaskill’s subcommittee championed landmark wartime contracting legislation, and provisions to bolster whistleblower protections for government contractors. More details on the specifics to come.
Scott Amey is POGO's general counsel. Suzanne Dershowitz is POGO's public policy fellow.