This morning, the Senate Appropriations Committee, chaired by West Virginia Democrat Robert Byrd, heard testimony from Pentagon officials about their efforts to counter waste and fraud in federal contracts related to the ongoing wars in Iraq and Afghanistan. Byrd expressed outrage at the "appalling" mismanagement of funds. "Tens of billions of taxpayer dollars are lost, ... gone!" he cried, his outrage visibly building as he spoke. "How many minutes have passed since Jesus Christ was born? A billion! So, that's a lot of money! ... This is a failure of leadership. Individuals think they can get away with bilking—they're not just milking—bilking the U.S. and Iraqi governments... taking bribes, substituting inferior workmanship, or plain, old-fashioned stealing! Stealing!" he exclaimed.
Byrd cited a April 2007 GAO report (.pdf) that concluded, among other things, that the Pentagon "lacks clear and comprehensive guidance and leadership for managing and overseeing contractors" and "does not have a sufficient number of oversight personnel to ensure that contracts that are in place are carried out efficiently and according to contract requirements." To illustrate the scale of the waste and fraud, the report estimates that the Army Material Command loses about $43 million each year solely on the provision of free meals to contractors who also get per diem food allowances. Another GAO report (.pdf), released in May 2007, found that the amount of money obligated in DOD contracts for support services "exceeded the amount the department spent on supplies and equipment, including major weapons systems." [Emphasis added.] And with all this money being spent, often under cost-plus arrangements (the more a contractor spends on expenses, the more it collects in fees), the scale of abuse, fraud, and "plain, old-fashioned stealing" has been historic. We still do not know exactly how much money has been lost, and we may never know. But last year, the Defense Contract Audit Agency identified $4.9 billion wasted on overcharging or fraud, and an additional $5.1 billion spent without any documentation. Since only a sampling of contracts have yet been audited, the murky waters of corruption remain largely undisturbed.