Shock and Audit: Mission Impossible

Is defense reform a lost cause?

This is Part V in a Mother Jones special report on the defense budget. Click the links for Parts I, II, III, and IV.             

Is defense reform a lost cause? To answer that question, MoJo talked to defense experts, mined years of GAO reports and congressional testimony, and found that the same themes crop up again and again. Here are the main problems that defense reforms almost always fail to truly address:

  • The Pentagon doesn't know where its money goes. In fact, its accounting systems are so spectacularly busted that it's impossible to even conduct an audit of the agency, which has been on the Government Accountability Office's high-risk list since 1995. Its computer programs are prehistoric and don't connect the money that comes in with the money that goes out. There is no reliable way to detect when contractors are overbilling. DOD's various agencies and services maintain 2,480 different systems to manage procurement, finances, and logistics, many of which aren't interlinked.  Often, reams of vital data must be entered by hand. All of this creates myriad possibilities for fraud and abuse. Over the past few decades, the government has spent billions to modernize the DOD's bookkeeping, but to no avail. Consequently, no one really knows for sure how much the Pentagon has spent, is spending, or should spend on weapons. Instead, the government essentially relies on information from private contractors to make budget decisions.
  • A report by the Defense Science Board Task Force on Developmental Test and Evaluation found that between 1997 and 2006, 67 percent of Army systems flunked testing requirements, yet many were put into development anyway. The notion that the Pentagon should "try before it buys" has been on the books since at least the 1970s, but DOD officials and Congress have never properly enforced it. For all Robert Gates' encouraging talk about reform, he is set to make the same mistake by fast-tracking production of the F-35.
  • Military brass often order up futuristic equipment that is fantastically complicated—"exquisite," in Pentagon parlance—but scientifically unproven.
  • The Pentagon routinely enters into contracts based on hopelessly unrealistic cost and schedule estimates. This isn't just the contractor's fault. Military officials have a powerful incentive to sign off on lowball estimates, because if they revealed the true cost at the outset, they'd never get their dream toys.  Every once in a while Congress or the White House will demand a new office to produce independent cost estimates, but it's extremely difficult to make such initiatives genuinely independent because of the cozy relationship between Pentagon officials and the defense industry. And in recent years, this relationship got a lot cozier as the department has relaxed conflict of interest rules for Pentagon officials who move on to the private sector. In 2006, 2,435 former DOD officials, generals, and contract staff were employed by defense contractors, and at least 400 of those may have worked on contracts directly related to their former agencies.
  • There are no consequences for screwing up. When contractors run years behind schedule and billions over budget, they still get paid. By law, Congress must be notified about programs that run 30 percent over budget, and programs costing more than 50 percent must be recertified or terminated, but lawmakers grant exceptions as a matter of routine.
     

The best way to get a sense of the monumental task facing President Obama and Defense Secretary Robert M. Gates is to look at the special commissions, reform initiatives, and tough new laws that Washington has been churning out ever since the Pentagon was created. Some of these measures did more harm than good, others never got off the ground, and still others remain on the books but are rarely, if ever, enforced. Here’s a brief but sorry history of DOD “reform”: 

1949: The landmark Hoover Commission exposes rampant waste at the Pentagon. 

1961: President Dwight D. Eisenhower warns of the growing might of the “military industrial complex” in his last speech as commander in chief. He originally wanted to say "military industrial congressional complex," but aides talked him out of it.

1971: The Fitzhugh Commission enlists Pentagon official David Packard to help fix the contracting process. He offers the groundbreaking conclusion that the services should "fly before you buy." The DOD establishes a testing office to make sure that weapons are fully developed before they are purchased. The office is later found to be ineffective, because industry interests were allowed to help design the tests.

1980s: Some good news: Congress overhauls government contracting, requiring competitive bidding, accurate cost assessments, and accounting oversight. The bad news: Over the next two decades these reforms get watered down by numerous loopholes.

1981: No. 2 at the DOD, Frank Carlucci, introduces 32 initiatives to encourage more realistic cost estimates and increased competition among contractors. Carlucci also wants Congress to pay more for big programs up front rather than putting off the bulk of the expense for future years. (Any of this sound familiar?) However, his suggestions have their own shortcomings, the most glaring of which is that the Pentagon relies on contractors for estimates rather than producing its own.

1982: Nunn-McCurdy Amendment orders termination of programs whose total costs have grown by more than 25 percent over original estimates. However, Congress routinely makes exceptions at the secretary of defense’s request. Today nearly half of the DOD's big weapons programs are in breach of the law.

1985: David Packard put in charge of another commission, discovers that nothing has changed at the Pentagon since the first one. After measures to "streamline" acquisitions are introduced, cost overruns on Air Force and development contracts more than triple. 

1990s-2000s: Numerous "innovations" are made to Pentagon purchasing. See: the Federal Acquisition Streamlining Act, the Federal Acquisition Improvement Act, the Acquisition Streamlining Task Force, Total System Performance Responsibility, and the spiral development and capabilities-based acquisition initiatives. But don't worry about keeping all the names straight. The salient fact to remember about this spurt of reform is that the number of acquisitions staffers, who oversee big, complex contracts, gets drastically reduced and the budget for their operations slashed. Much of this valuable work is outsourced to the private sector. At the Missile Defense Agency, for instance, private contractors now comprise 49 percent of the workforce charged with monitoring private contracts.

The late 1990s and Bush administration years also see the increasing use of "lead systems integrator" deals. That's the technical term for an arrangement in which private industry teams not only design and build lucrative weapons systems, but also oversee all the contracting. Unsurprisingly, this setup produces some spectacular cases of waste and abuse, including Future Combat Systems.

2009: The White House promises to employ 20,000 more staffers over the next five years to keep track of contracts and spending—a welcome move, although it will be several years before it bears fruit. In addition, Armed Services Committee members Carl Levin and John McCain sponsor the Weapon Systems Acquisition Reform Act of 2009. The legislation initially looks promising, but some critical measures get weakened by the time it reaches Obama's desk. For instance, although the law now promises to terminate any programs that violate the Nunn-McCurdy requirement, it doesn't outlaw exemptions for national security purposes. You can guess what's going to happen to that provision. The law also establishes an office of Independent Cost Assessment—but it doesn't cover all weapons programs. The first director of the new office, by the way, is William Lynn, a former lobbyist for defense-supplier Raytheon.

Special Report: Shock & Audit