The Project On Government Oversight (POGO) Blog

Pentagon Single-Bid Contracting Hurting Taxpayers

By SCOTT AMEY

Last week, the Department of Defense (DoD) Inspector General released a report finding that single-bid guidance isn’t being followed and, as a result, “the Services have not realized potential cost savings associated with increased competition and re-competing $390.9 million in contract modifications. DoD also cannot accurately assess the percent of improvements in DoD achieving effective competition.” Specifically, the DoD IG found:

The Services did not follow DoD single-bid guidance when awarding 31 contracts, valued at approximately $656.1 million, out of the sample of 78 contracts awarded as competitive, valued at approximately $1 billion, that we reviewed. Specifically, contracting offices:

• issued 16 of 31 single-bid contracts, valued at $165.3 million, without advertising solicitations for 30 days;
• issued 8 of 31 single-bid contracts, valued at $471.0 million, without adequately determining price reasonableness; and
• issued 7 of 31 single-bid contracts, valued at $19.8 million, without advertising solicitations for 30 days and adequately determining price reasonableness.

In addition, the IG found that DoD did not “develop specific steps to prevent 39 of 47 contract modifications, valued at $390.9 million, from exceeding the 3-year limitation on awarding contract modifications without first recompeting.”

This news is startling because, according to FPDS-NG (it’s not my number, so don’t shoot the messenger), single-bid offers accounted for $185 billion spent in base contracts and exercised options by DoD in FY 2011, and rules were violated in 31 of the 78 contracts sampled by the IG.

SIGAR Saves Money and Lives

U.S. Marines detonate an improvised explosive device in Sangin, Afghanistan.

How important are federal inspectors general (IGs)? Sometimes, they can be a matter of life and death.

On Wednesday, the Special Inspector General for Afghanistan Reconstruction (SIGAR) issued a safety alert letter warning U.S. commanders in Afghanistan of a heightened IED (improvised explosive device) threat due to the lack of culvert denial systems on roads around the country.

As described on this Army website, culvert denial systems are devices used to block unauthorized access to culverts, which are structures that channel water beneath roads, railways, and embankments. Culverts can also be used for more nefarious purposes, such as hiding IEDs.

In the one-page letter, Special Inspector General John F. Sopko warned of “potentially significant contract fraud in the installation and inspection of culvert denial systems” that poses a threat to the safety of U.S. forces:

Through our preliminary investigative work, we estimate that a large number of culvert denial systems might have been falsely reported by Afghan contractors as complete when, in fact, the denial systems were not installed or were installed in a defective manner, rendering them ineffective and susceptible to compromise by insurgents seeking to emplace IEDs.

SEC Watchdog Finds Recordkeeping in Disarray

By MICHAEL SMALLBERG

The Securities and Exchange Commission (SEC)—a federal regulator that polices recordkeeping on Wall Street, among other things—has failed to properly handle its own records, according to a recent audit by the agency's inspector general.

The audit report, issued a year after the SEC came under fire for improperly purging investigative files, describes a records system in disarray.

Many SEC staffers are still unsure about when to preserve records and when to dispose of them, the inspector general found. As a result, some SEC offices may have improperly destroyed documents, while others are sitting on piles of records that could have been safely discarded.

In December 2011, President Obama issued a memo calling proper records management the "backbone of open Government." If agencies fail to update their records policies, "the surge in information could overwhelm agency systems," the memo states.

It appears the SEC does not always practice what the President preached.

Victory for National Security and Intelligence Community Whistleblowers

By ANDRE FRANCISCO

On Wednesday, President Obama issued a Presidential Policy Directive expanding whistleblower protections to national security and intelligence community (IC) whistleblowers.

The directive is a huge step towards accountability in the intelligence community and is welcome protection for national security whistleblowers who are too often punished for reporting fraud, waste, and abuse.

POGO’s Director of Public Policy, Angela Canterbury, praised the directive in a statement:

The President deserves tremendous credit for going above and beyond his commitments to support legislation and explore ways to better protect whistleblowers. When implemented properly, this policy should provide for more balance between guarding precious rights and legitimate secrets while ensuring more disclosures of wrongdoing necessary for a more accountable IC. Today, President Obama delivered on protections for whistleblowers and taxpayers. 

The Affordability of Defense Contractor CEOs

There has been a lot of talk about what America will be able to afford in the coming years. And yet for the last decade, the Pentagon has received a blank check for all kinds of pricey, and often ineffective, weapons systems too often designed to fight enemies we don't have.

Secretary of Defense Leon Panetta and many top defense contractor CEOs have said we can't afford the 10 percent budget cut to the Pentagon that would come with sequestration. Some defense contractor CEOs are arguing that sequestration will cause massive job losses, even though history doesn't support that conclusion.

On October 1, Wes Bush, CEO of top defense contractor Northrop Grumman, sent an email to Northrop employees asking them to oppose the sequestration cuts and to personally contact their representatives.

Bush closed the email by saying, "In this time of tremendous uncertainty, our customers will need to make difficult decisions—decisions influenced by how they view those who are producing the capabilities and services they seek and require. Ultimately, program performance and affordability are the drivers of these customer perspectives."

Since the U.S. taxpayer is Northrop's largest customer, it's worth noting that as Bush talks of affordability, he received $26.2 million in total compensation in 2011. That's more than the CEOs of Lockheed Martin, Boeing, or Raytheon, though the crown for highest compensated defense CEO goes to David Cote of Honeywell, who raked in $35.7 million last year.

Video: POGO Pops Up in Y-12 Hearing

By ANDRE FRANCISCO

POGO got a friendly mention last month during a hearing of the House Energy and Commerce Subcommittee on Oversight and Investigations. The hearing focused on nuclear stockpile security and specifically the break-in at the Y-12 National Security Complex by three anti-nuclear weapons activists, including an 82-year-old nun. 

Pentagon Contractors Defend Their Own Interests

By ANDRE FRANCISCO

The dominant voices in the debate over Pentagon spending have been the major contractors who receive an ever-growing share of what the government spends on the military. But their arguments have not been focused on the needs of the U.S. military, but instead on their own interests to keep profits up and CEO salaries high.

POGO's Ben Freeman had a new piece in Politico yesterday arguing that the need to have a real debate about the future of the U.S. military has been supplanted by hyperbole from the defense industry giants over potential job losses.

...the big Pentagon contractors have an overwhelming self-interest in keeping Pentagon spending artificially high. They’re pulling out all the stops to protect their profits — launching advertising campaigns, sending their congressional proxies on speaking tours and indulging in fear-mongering rhetoric — all designed to scare the public into thinking that any reductions in Pentagon spending whatsoever would be catastrophic.

More than anything, they manipulatively claim that any reshaping of our military would mean job losses — an argument primarily aimed at making members of Congress who are running for reelection afraid to make responsible decisions.

Infographic: Myth of Pentagon Spending as Job Creator

By ANDRE FRANCISCO

Major defense contractors have been going around saying the sequestration cuts to Pentagon spending will cause widespread job losses, but history tells a different story.

Over a five year period, the five largest defense contractors received 10 percent more in federal contracts, but at the same time they fired three percent of their workforce. Now they are arguing a 10 percent reduction in Pentagon spending will be devastating to jobs, even though the Pentagon already has a bloated budget worthy of reductions.

POGO is fighting against the myth of Pentagon spending as a job creator, but we need your support to do so. Consider donating to POGO today to show your support for sensible defense policy. Then share our new infographic with your friends to spread the word.

Andre Francisco is an online producer with the Project On Government Oversight.

Follow @andrefrancisco

One Year Later: Assessing Progress on National Action Plan

September 20 marked the one-year anniversary of the Open Government Partnership (OGP), an international initiative bringing government and civil society together to promote greater openness in (currently 57) countries around the world. But in the words of Rakesh Rajani, head of one of OGP’s active civil society partners, at a recent anniversary celebration, “the mark of success for OGP is not how many countries sign on, but how many commitments they deliver.” A number of countries have made commitments to openness in the past year, and now comes the task of holding them to their word and ensuring that each commitment is translated into action. Several commitments in the U.S. National Action Plan (NAP) are of great interest to the Project On Government Oversight and OpenTheGovernment.org, a coalition in which POGO is a partner.

The Obama Administration released a National Action Plan for the OGP detailing 26 specific commitments to make the U.S. government more open, transparent, and accountable to the public. These commitments are categorized under three broad challenges—increasing public integrity, managing public resources more effectively, and improving public services. Some of the wide-ranging commitments focus on the Freedom of Information Act (FOIA), declassification of national security information, improving whistleblower protections, and enhancing transparency in extractive industries and federal spending.

POGO and our allies in the transparency community had offered recommendations to the Administration to ensure a robust plan, and we were glad to see that the commitments largely incorporated many of our recommendations for reform. Now, a year later, is a good time to take stock of developments. OpenTheGovernment.org recently published a Civil Society Progress Report about the Administration’s headway since the NAP was released. (POGO’s Executive Director Danielle Brian chairs OpenTheGovernment.org’s Steering Committee, and POGO’s Director of Public Policy Angela Canterbury contributed to the progress report.)

So what are some highlights from OpenTheGovernment.org’s Progress Report, and what do they mean for the American people?

Navy's Littoral Combat Ship: "Big Bucks, Little Bang"

By BEN FREEMAN

The Navy’s newest ship, the Littoral Combat Ship (LCS), is woefully inferior to comparable ships, according to an article written by John Sayen for Time magazine’s Battleland blog.

Sayen, a Marine Corps veteran who has written extensively on the military, says that the LCS “cannot match the combat power of similar sized foreign warships costing only a fraction as much.” Even with its mission modules, which won’t be fully finished or tested for years, it compares poorly with similar ships in foreign navies. Sayen provides several examples (excerpted below with permission of Time):

The new Russian Steregushchy-class frigate, for example, is (at 2,200 tons) about 30% smaller than an LCS and cost only 20-25% as much. Yet, it carries a 100mm automatic gun, 14.5-mm machineguns, close-in defense “Gatling gun” systems (AK-630), medium range surface to air missiles (S400 series), SS-N-25 anti-ship missiles (sub-sonic and shorter ranged than the US Harpoon but far more capable than the Griffin), 533-mm (21”) torpedoes, 324mm anti-submarine torpedoes and a helicopter. The ship is not only in production for the Russian Navy but also for the navies of Algeria and Indonesia. A version is also being built for China.

The Swedish Visby-class corvette was one of the models on which LCS was based. It carries the same 57mm gun plus antisubmarine rockets and torpedoes, anti-ship missiles, a radar-deflecting hull, and a helicopter pad (but no hangar, apparently). It can also reach 35 knots but it is only a fifth as large.

The Chinese have more than 80 Houbei-class fast-attack boats in service. Each costs only $40 million to build and displaces only 220 tons (one-fifteenth as much as an LCS). Yet they carry C-801 series anti-ship missiles that greatly outrange any weapon the LCS has.

About the only threat the LCS might handle is the “swarms” of Iranian machinegun and RPG-carrying speedboats in the Persian Gulf. Apart from the fact that the Iranian crisis will have been resolved for better or worse before most of the LCS fleet can be built, these Iranian small craft lack weapons big enough to menace any serious warship.

Senate Report Silent on Fusion Center Reliance on Contractors

The Senate released an investigative report on Wednesday sharply criticizing anti-terrorism facilities set up throughout the country after the September 11, 2001, terrorist attacks to coordinate federal, state, and local intelligence. As the Project On Government Oversight detailed yesterday, the report found that these “fusion centers,” which have cost the federal government anywhere from $289 million to $1.4 billion total (incredibly, the government does not have a more exact figure), are producing very little useful terrorism-related intelligence and are committing widespread violations of citizens’ civil liberties.

But there’s another potential problem with fusion centers that the report did not address.

The centers rely on private contractors, and it isn’t clear that contractors should be playing such a big role in this sensitive work. 

Federal contracting law  lists “the direction and control of intelligence and counter-intelligence operations” as an inherently governmental function—in other words, a function that must be performed by a government employee.

The Senate report says that certain aspects of the program rely on contractors to the extent that contractor employees sometimes outnumber government employees and that some contractor employees are “under-trained or poor performers.”

Executive Order Focuses on Prohibiting Human Trafficking

By SCOTT AMEY

Last week, President Obama signed an Executive Order (EO) strengthening the government’s zero-tolerance policy rules governing trafficking in persons (TIP). The EO lays out detailed guidance for a new anti-trafficking rule that will prohibit U.S.-facilitated trafficking occurring abroad. The EO states:

More than 20 million men, women, and children throughout the world are victims of severe forms of trafficking in persons….

***

The United States has long had a zero-tolerance policy regarding Government employees and contractor personnel engaging in any form of this criminal behavior. As the largest single purchaser of goods and services in the world, the United States Government bears a responsibility to ensure that taxpayer dollars do not contribute to trafficking in persons. By providing our Government workforce with additional tools and training to apply and enforce existing policy, and by providing additional clarity to Government contractors and subcontractors on the steps necessary to fully comply with that policy, this order will help to protect vulnerable individuals as contractors and subcontractors perform vital services and manufacture the goods procured by the United States.

The added protections include expanding the current definition of human trafficking and the contract clause to include the following trafficking-related activities:

• Use of misleading or fraudulent recruiting practices
• Charging employees recruitment fees
• Destroying, concealing, confiscating, or denying access to employee personal identity documents
• Failing to pay return transportation costs for third country nationals (TCNs)