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How Not to Audit the Pentagon

From spending [1] $150 million on private villas for a handful of personnel in Afghanistan to blowing [2] $2.7 billion on an air surveillance balloon that doesn’t work, the latest revelations of waste at the Pentagon are just the most recent howlers in a long line of similar stories stretching back at least five decades. Other hot-off-the-presses examples would include the Army’s purchase [3] of helicopter gears worth $500 each for $8,000 each and the accumulation [4] of billions of dollars’ worth of weapons components that will never be used. And then there’s the one that would have to be everyone’s favorite Pentagon waste story: the spending of $50,000 to investigate [5] the bomb-detecting capabilities of African elephants. (And here’s a shock: they didn’t turn out to be that great!) The elephant research, of course, represents chump change in the Pentagon’s wastage sweepstakes and in the context of its $600-billion-plus budget, but think of it as indicative of the absurd lengths the Department of Defense will go to when what’s at stake is throwing away taxpayer dollars.

Keep in mind that the above examples are just the tip of the tip of a titanic iceberg of military waste. In a recent report I did for the Center for International Policy, I identified [6] 27 recent examples of such wasteful spending totaling over $33 billion. And that was no more than a sampling of everyday life in the 21st-century world of the Pentagon.

The staggering persistence and profusion of such cases suggests that it’s time to rethink what exactly they represent. Far from being aberrations in need of correction to make the Pentagon run more efficiently, wasting vast sums of taxpayer dollars should be seen as a way of life for the Department of Defense. And with that in mind, let’s take a little tour through the highlights of Pentagon waste from the 1960s to the present.

How Many States Can You Lose Jobs In?

The first person to bring widespread public attention to the size and scope of the problem of Pentagon waste was Ernest Fitzgerald, an Air Force deputy for management systems. In the late 1960s, he battled that service to bring to light massive cost overruns on Lockheed’s C-5A transport plane. He risked his job, and was ultimately fired [7], for uncovering [8] $2 billion in excess expenditures on a plane that was supposed to make the rapid deployment of large quantities of military equipment to Vietnam and other distant conflicts a reality.

The cost increase on the C-5A was twice the price Lockheed had initially promised, and at the time one of the largest cost overruns ever exposed. It was also an episode of special interest then, because Secretary of Defense Robert McNamara had been pledging to bring the efficient business methods he had learned [9] as Ford Motors’ president to bear on the Pentagon’s budgeting process.

No such luck, as it turned out, but Fitzgerald’s revelations did, at least, spark a decade of media and congressional scrutiny of the business practices of the weapons industry. The C-5A fiasco [10], combined with Lockheed’s financial troubles with its L-1011 airliner project, led the company to approach Congress, hat in hand, for a $250 million government bailout [11]. Wisconsin Senator William Proxmire, who had helped bring attention to the C-5A overruns, vigorously opposed [12] the measure, and came within one vote of defeating it in the Senate.

In a time-tested lobbying technique that has been used by weapons makers ever since, Lockheed claimed [13] that denying it loan guarantees would cost 34,000 jobs in 35 states, while undermining the Pentagon’s ability to prepare for the next war, whatever it might be. The tactic worked like a charm. Montana Senator Lee Metcalf, who cast the deciding vote in favor of the bailout, said [14], “I’m not going to be the one to put those thousands of people out of work.” An analysis by the New York Times found that every senator with a Lockheed-related plant in his or her state voted for the deal.

By rewarding Lockheed Martin for its wasteful practices, Congress set a precedent that has never been superseded. A present-day case in point is—speak of the devil—Lockheed Martin’s F-35 combat aircraft. At $1.4 trillion [15] in procurement and operating costs over its lifetime, it will be the most expensive weapons program ever undertaken by the Pentagon (or anyone else on Planet Earth), and the warning signs are already in: tens of billions of dollars in projected cost overruns and myriad performance problems before the F-35 is even out of its testing phase. Now the Pentagon wants to rush the plane into production by making a “block buy [16]” of more than 400 planes that will involve little or no accountability [17] regarding the quality and cost of the final product.

Predictably, almost five decades after the C-5A contretemps, Lockheed Martin has deployed an inflationary version of the jobs argument in defense of the F-35, making the wildly exaggerated claim [18] that the plane will produce 125,000 jobs in 46 states. The company has even created a handy interactive map [19] to show how many jobs the program will allegedly create state by state. Never mind the fact that weapons spending is the least efficient way to create jobs [20], lagging far behind investment in housing, education, or infrastructure. 

The Classic $640 Toilet Seat

Despite the tens of billions being wasted on a project like the F-35, the examples that tend to draw the most attention from the media and the most outrage among taxpayers involve overspending on routine items. This may be because the average person doesn’t have a sense of what a fighter plane should cost, but can more easily grasp that spending [21] $640 for a toilet seat or $7,600 for a coffee pot is outrageous. These kinds of examples—first exposed through work done in the 1980s by Dina Rasor [22] of the Project on Military Procurement—undermined the position taken by President Ronald Reagan’s administration that not a penny could be cut from its then-record peacetime Pentagon budgets.

The media ate such stories up. Pentagon overpayments for everyday items generated [21] hundreds of articles in newspapers and magazines, including front-page coverage in the Washington Post. Two whistleblowers were even interviewed on the Today Show, and Johnny Carson joked about such scandals in his introductory monologues on the Tonight Show. Perhaps the most memorable depiction of the problem was a cartoon [23] by the Washington Post’s Herblock that showed Reagan Secretary of Defense Caspar Weinberger wearing a $640 toilet seat around his neck. This outburst of truth-telling, whistleblowing, investigative journalism, and mockery helped put a cap on the Reagan military buildup, but—you won’t be surprised to learn—didn’t keep the Pentagon from finding ever more innovative ways to misspend tax dollars.

The most outrageous spending choice of the 1990s was undoubtedly the Clinton administration’s decision to subsidize the mergers [24] of major defense firms. As Lockheed (yet again!) and Martin Marietta merged, Northrop teamed with Grumman, and Boeing bought McDonnell Douglas, the Pentagon provided funding to pay for everything from closing down factories to subsidizing golden parachutes for displaced executives and board members. At the time, Vermont Congressman Bernie Sanders aptly dubbed the process “payoffs for layoffs [25],” as executives of defense firms received healthy payouts while laid-off workers were largely left to fend for themselves.

The Pentagon’s rationale for giving hundreds of millions of dollars to these emerging defense behemoths was laughable. The claim—absurd on the face of it—was that the new, larger companies would provide the Pentagon with lower prices once they had eliminated unnecessary overhead. Former Pentagon official Lawrence Korb, who opposed the subsidies at the time, noted [26] the obvious: there was no evidence that weapons programs grew any cheaper, cost overruns any less, or wastage any smaller thanks to government subsidized mergers. As in fact became clear in the world of the weapons giants that followed, the increased bargaining power of companies like Lockheed Martin in a significantly less competitive market undoubtedly resulted in higher weapons costs.

It Took $6 Billion Not to Audit the Pentagon

The poster child for waste in the first decade of the 21st century was certainly the billions of dollars a privatizing Pentagon handed out to up-armored companies like Halliburton [27] that accompanied the U.S. military into its war zones and engaged in Pentagon-funded base-building and “reconstruction” (aka “nation building”) projects in Iraq and Afghanistan. The Special Inspector General for Afghan Reconstruction (SIGAR [28]) alone seems to come out with new examples of waste, fraud, and abuse on practically a weekly basis. Among Afghan projects that stood out over the years was a multimillion-dollar “highway to nowhere [29],” a $43 million gas station [30] in nowhere, a $25 million [31] “state of the art” headquarters for the U.S. military in Helmand Province, with all the usual cost overruns, that no one ever used, and the payment of actual salaries to countless thousands of no ones aptly labeled “ghost soldiers [32].” And that’s just to begin enumerating a long, long list [33]. Last year, Pro Publica created [34] an invaluable interactive graphic detailing $17 billion in wasteful spending uncovered by SIGAR, complete with information on what that money could have purchased if it had been used productively.

One reason the Pentagon has been able to get away with all this is that it has proven strangely incapable of doing [35] a simple audit of itself, despite a Congressionally mandated requirement dating back to 1990 that it do so. Conveniently enough, this means that the Department of Defense can’t tell us how much equipment it has purchased, or how often it has been overcharged, or even how many contractors it employs. This may be spectacularly bad bookkeeping, but it’s great for defense firms, which profit all the more in an environment of minimal accountability. Call it irony or call it symptomatic of a successful way of life, but a recent analysis by the Project on Government Oversight notes [36] that the Pentagon has so far spent roughly $6 billion on “fixing” the audit problem—with no solution in sight.

If anything, in recent years the Pentagon’s accounting practices have been getting worse. Among the many offenses to any reasonable accounting sensibility, perhaps the most striking has been the way the war budget—known in Pentagonese as the Overseas Contingency Operations account—has been used as a slush fund [37] to pay for tens of billions of dollars of items that have nothing to do with fighting wars. This evasive maneuver has been used to get around the caps that were placed on the Pentagon’s regular budget by Congress in the Budget Control Act of 2011.

If the Pentagon has its way, nuclear weapons will get their very own slush fund as well. For years, the submarine lobby floated the idea of a separate Sea-Based Deterrence Fund [38] (outside of the Navy’s regular shipbuilding budget) to pay for ballistic missile-firing submarines. Congress has signed off on this idea, and now there are calls [39] for a nuclear deterrent fund that would give special budgetary treatment to bombers and intercontinental ballistic missiles as well. If implemented, this change would throw the minimalist budget discipline that now exists at the Pentagon decisively out the nearest window and increase pressures to raise the department’s overall budget, which already exceeds [40] the levels reached during the Reagan buildup.

Why has waste at the Pentagon been so hard to rein in? The answer is, in a sense, not complicated: the military-industrial complex profits from waste. Closer scrutiny of waste could mean not just cheaper spare parts, but serious questions about whether cash cows like the F-35 are needed at all. An accurate head count of the hundreds of thousands of private contractors employed by the Pentagon would reveal that a large proportion of them are doing work that is either duplicative or unnecessary. In other words, an effective audit of the Pentagon or any form of serious oversight of its wasteful way of life would pose a financial threat to a sector that is doing just fine under current arrangements.

Who knows? If the Department of Defense’s wasteful ways were ever brought under genuine scrutiny and control, people might start to question, for example, whether a country that already has the capability to destroy the world many times over needs to spend [41] $1 trillion over the next three decades on a new generation of ballistic missiles, bombers, and nuclear-armed submarines. None of this would be good news for the contractors or for their allies in the Pentagon and Congress.

Undoubtedly, from time to time, you’ll continue to hear outrageous media stories about waste at the Pentagon and bomb-detecting elephants gone astray. Without a concerted campaign of public pressure of a sort we haven’t seen in recent years, however, the Pentagon’s runaway budget will never be reined in, that audit will never happen, and the weapons makers will whistle a happy tune on their way to the bank with our cash.

William D. Hartung, a TomDispatch regular [42], is the director of the Arms and Security Project at the Center for International Policy. He is the author, among other books, of Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex [43].

Copyright 2016 William D. Hartung

15 Comments (Open | Close)

15 Comments To "How Not to Audit the Pentagon"

#1 Comment By LMIDF On April 11, 2016 @ 12:28 am

A present-day case in point is—speak of the devil—Lockheed Martin’s F-35 combat aircraft.

Here we go again

At $1.4 trillion in procurement and operating costs over its lifetime, it will be the most expensive weapons program ever undertaken by the Pentagon (or anyone else on Planet Earth)

While factually correct, the passive aggressive buzzwords already tip your hand to a party that does not already buy into your nice-sounding premise. But hey, I’ll give you props for contextualizing the lifetime claim.

Let me contextualize it some more. $1.5-trillion is the expected cost of everything (maintenance, fuel, etc) for fleet of some 1700-1800 planes over 50 years. This is an ambitious estimate, and nothing similar has been done in the past. It might mean more, keeping aside the speculative inaccuracies inherent in estimating the costs of everything over $50 years, if it weren’t for the fact this $1.5-trillion number is the only one of its kind. There is no reference to my knowledge of similar estimate of lifetime costs for the F-18, F-16, and AV-8 Harrier which it will replace.

and the warning signs are already in: tens of billions of dollars in projected cost overruns and myriad performance problems before the F-35 is even out of its testing phase.

This is again correct, but a normal deflection of you detractors. The program has been delivering on schedule since its restructuring. Furthermore, you suggest that government projects having initially optimistic cost estimates is par for the course.

And with regards to its deficiencies, which performance problems are you referring to? But without any specifics, since these might very well be things that have been fixed, you ought to note or note for the benefit of your less defense/procurement-literate audience that the GAO report (to which I believe you are referring) has always been extraordinarily harsh on such projects — go check out their notes on the F-18. They serve as a valuable REDFOR and document every problem; without contextualizing it in comparison to other programs, you might as well be lying by omission.

Now the Pentagon wants to rush the plane into production by making a “block buy” of more than 400 planes that will involve little or no accountability regarding the quality and cost of the final product.

The plane is already in production with several LRIP Blocks. What metrics of quality and cost are you referring that the F-35 might or already has failed to meet?

I’d be happy to debate you on this.

#2 Comment By Chris Chuba On April 11, 2016 @ 9:09 am

Our military budget is able to look smaller than it is because it is compared to the total budget including social security and medicare. However, the latter programs are funded by a dedicated payroll tax while the military budget is funded with the part of the budget funded by deficit spending.
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Apologists claim that military spending is only 15% of the budget but in reality it is closer to 50% if you subtract SS / Medicare and factor in legacy costs, such as its portion of the deficit, military pensions, and VA Administration. I have nothing against the latter programs, I am just saying that they have to be counted as a military expense.

To put things into perspective, our overseas contingency budget of $80B is larger than Russia’s entire annual defense budget. In this environment, it is considered by Ted Cruz and most Republicans woefully underfunded.

#3 Comment By Johann On April 11, 2016 @ 9:18 am

If defense spending is really needed to protect our sovereignty, it is warranted.

The argument for defense spending to create or preserve jobs is bankrupt. It is the worst kind of government stimulus, that is, it hurts the economy the most. Defense spending takes some of our best, brightest, and most productive people and other scarce resources out of the real economy. They spend their careers developing and producing weapons systems that we hope are never used, and are a dead end in the economic cycle. So in that sense, its worse than welfare because these people and the other resources that go into defense would greatly benefit the real economy. Most of these people would fill existing high skilled jobs or start their own businesses.

#4 Comment By FL Transplant On April 11, 2016 @ 10:31 am

You are conflating and confusing two completely different concepts–defense spending with auditing the Pentagon’s accounts. Not a single one of the examples of water you cite would have been corrected or avoided if the Pentagon had airtight accounting. And everyone of the items you cite was a separate line item the Pentagon’s budget, identified as to purpose and cost.

Not disputing the overspending–but tying it to the military’s inability to produce audible financial records is completely fallacious. I hope you know better than that.

And, the DoD is not really any different than any other federal agency. Federal budgeting and accounting is an arcane and mysterious process, developed for completely different purposes than budgeting and accounting in the commercial sector. If the government applied commercial standards there would be a hue and cry on the part of those who had to deal with those records and standards as well as to how imperfect they were.

#5 Comment By Audit @ will On April 11, 2016 @ 10:40 am

Did I get my money’s worth? Did I spend my hours, days and weeks wisely?

We ask ourselves these questions every day. These questions are just as important to projects and programs as they are to us as individuals. This is the reason that Earned Value Management (EVM) has been used for over four decades.

** The waste, fraud, and abuse in Washington will continue until program management practices such as Earned Value are used outside of just a ‘check-in-the-box.’

#6 Comment By SteveM On April 11, 2016 @ 11:23 am

Re: LMIDF, “I’d be happy to debate you on this.”

Just google “F-35” AND “boondoggle” to get plenty of arguments about the program wreck that is the F-35.

In fact, google almost any DoD acquisition program and “boondoggle” to surface decades of Pentagon screw-ups and malfeasance.

About Lockheed specifically

F-35: hyper-busted cost and schedule
F-22: hyper-busted cost and schedule, program cancelled
Littoral Combat Ship (LCS), hyper-busted cost, schedule and performance
FBI Sentinel case management system, hyper-busted on cost and schedule
Coast Guard Deepwater program, Lockheed lead systems integrator, fired for poor performance.

There are plenty of other acquisition fiascoes to go around:

Jitters: The Army can’t even build a radio
Army Future Combat System (FCS), another cancelled catastrophe
Navy Zumwalt class destroyer: production terminated by cost overruns.

The thing is, no matter how much the Crony defense contractors screw up, they are always allowed back to the trough to screw up some more.

And running in parallel with the hardware wrecks is the huge archipelago if DoD support contractors. Which is really just a massive jobs program for retired uniformed military that flushes Billions down the toilet doing low-value/no-value Powerpoint engineering. I’ve been there. 90% of the analyses had shelf lives of maybe 10 minutes. Almost all of them were gamed to report a predetermined recommendation. But nobody cared.

BTW, a key enabler of Pentagon pathology is the sanctification of the military. Capitol Hill and the MSM are bedazzled by anyone with stars on their shoulders so give the Brass a lot more deference than they deserve.

The Pentagon is totally messed up no what its apologists claim.

#7 Comment By TZX4 On April 11, 2016 @ 11:25 am

A few months ago I saw a B-2 Stealth Bomber flying over Denver. The initial brief moment of awe was supplanted by anger. There, overhead, was 2 billion dollars of the nation’s wealth tied up in a relatively useless machine.
We can’t have infrastructure, we can’t care for the less fortunate among us, but we can have B-2 bombers.

#8 Comment By LMIDF On April 11, 2016 @ 11:37 am

What are your arguments, Steve?

It should be pretty obvious that I’ve read a fair amount on the subject and come to different conclusion. You might want to respect that instead of telling me to google things I’ve probably already read.

#9 Comment By Uncle Billy On April 11, 2016 @ 12:56 pm

125,000 jobs in 46 states. Yes, 46 states means that 92 Senators are on board. The more Senators and Congressmen you involve, the bigger the program can be. Lockheed Martin knows how to play the game, and the game is to basically “buy” Congress, which is what they have done.

The jury is still out on how good the F-35 actually is. It will take time and several wars to determine that. I doubt that using the same airframe for a conventional Air Force version, a STOL Marine version, and a carrier based Navy version is a good idea. In theory, it might save money, but the engineering required for “one size fits all” is difficult and expensive.

Lockheed Martin is smart enough to buy enough Congressmen to keep the program going, no matter what.

#10 Comment By roo_ster On April 11, 2016 @ 1:37 pm

There is plenty wrong with DOD procurement. BTDT. Mr. Hartung, while getting some things right, manages to get enough wrong that he jeopardizes the cause of fixing DOD procurement.

One example is the “$650 toilet seat” baloney. Likely DOD (and taxpayers) never paid $650 for a toilet seat for an aircraft. That is but one example of how the DOD (and other agencies) mask their black budget. Some LTC with a $50million program to run is told to stuff another $15million in his books. He’s bought what he’s bought, so he has to inflate the dollars he spent per item or for labor or whatnot. This is done to obscure the nature and quantity of black budget programs. Everybody involved knows it. The LTC, his superiors, the congresscritter going apey at the $650 toilet seat. And likely Mr Hartung, too.

#11 Comment By Michael Price On April 11, 2016 @ 11:12 pm

This won’t change until there’s a culture of firing people who waste money. It’s all a matter of incentives, nobody in te DoD or it’s supplires has any incentive to do their job well. The DoD employees have an incentive to increase payments to the people who might later employ them or their boss. Suppliers have an incentive to increase costs because they know there will be no cost/benefit evaluation, or at least none that affects purchases.

Fire people. It’s the only way.

#12 Comment By Johann On April 12, 2016 @ 1:26 pm

Audit @ will

Most of my career was in heavy industrial engineering and construction. My experience with government work was that the government and MIC contractors like to erase variances with contingency, thus making the EVM variance analysis useless. When they run out of contingency, they just get more contingency. Like you say, they just want to be able to check the box that they are using EVM.

#13 Comment By LMIDF On April 12, 2016 @ 2:11 pm

It’s nice to see you again Uncle Billy. I’m glad to see that you’ve learned a little bit more about weapon system capabilities since the last time we talked about this.

However, I must point out that this “jack of all trades, master of none” is not an analogy that fits particularly well for military aviation since the many of the best multiroles have all started out as high-performance fighters (F-16, F-15E Strike Eagle, F-4 Phantom, F-4U Corsair, P-47 Thunderbolt).

While there is a good deal of commonality between versions, the wings (which are enormously important to the flying characteristics of an aircraft) vary quite a bit between variations, something most notable when you compare the -A and -C equipped for catapult launches and arrested recoveries. One may reasonably conclude that subtle differences indicate that they did tweak the wing towards desired characteristics of each variant.

Additionally, if you examine cutaways between the -A and -B, as I believe I have mentioned before, you will notice that the lift fan is in the same location as a dorsal fuel tank. This is not a coincidence; this is to give the two variants a close center-of-gravity. This would tend to indicate that the lift-fan did not negatively effect the B vis-a-vis the As beyond limiting its range. Without access to classifiedd data that neither of us has, I think your conclusions are less founded than mine.

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And I believe I have asked in the past, and will do so again, on what grounds do you think that three separate 5th Gen programs would be more affordable? My grounds for thinking otherwise consists of the program costs of the Eurofighter Typhoon and Dassault Rafale. Admittedly, this is not a one-to-one comparison, but bear with me in that the analogy follows at least to the extent that the Rafale and Eurofighter Typhoon are two incompatible airframes.

#14 Comment By mike ziethlow On April 14, 2016 @ 2:01 pm

Simplistic analysis and some of the comments… I work in military procurement and a large part of the problem are LRP’s – laws, regulations, and policies which govern how and what can be done. A further problem is the stovepipes of military “commands” even within the same branch of service – folks who worry about their “rice bowls” and won’t cooperate or work across teams. Having spent 30 years in industry, most of what I do now, easily 90-95% is overhead and the only a minimal percentage considered “value added”. There are any number of ways to fix these problems – but we’ll never see them in our lifetimes.

#15 Comment By Lee On April 15, 2016 @ 9:00 pm

Seems I recall Rumsfeld mentioning billions the Pentagon could not account for just days before 911…

The topic never came up again.