[A-List] US military-industrial complex: no bids necessary

[Michael Keaney]

Pentagon Spends Without Bids, a Study Finds
By LESLIE WAYNE
New York Times: September 30, 2004

WASHINGTON, Sept. 29 - More than 40 percent of Pentagon business, a total of
$362 billion, has been awarded on a no-bid basis over the last six years,
according to a report issued Wednesday that showed that the biggest
companies won the bulk of their contracts without going through a
competitive process.

The nation's largest military contractor, the Lockheed Martin Corporation,
received the most Pentagon business on a noncompetitive basis. Seventy-four
percent of Lockheed's $94 billion in Pentagon contracts received since
fiscal 1998 was awarded without competition, according to the report, which
was written by the Center for Public Integrity, a Washington nonprofit group
that studied 2.2 million Pentagon contracts worth a collective $900 billion.

"Competitive bidding at the Pentagon happens less often than we think, and
the no-bid controversy surrounding Halliburton in Iraq actually is,
unfortunately, not an aberration," said Charles Lewis, the center's
executive director. Mr. Lewis's organization was one of the first to study
contracts won by Halliburton and other companies in Iraq and Afghanistan,
and today's report grew out of that earlier work.

At Boeing, the nation's second-largest contractor, 60 percent of the $81
billion in Pentagon contracts since 1998 was awarded without competition, as
was 67 percent at the No. 3 contractor, the Raytheon Company, which received
$40 billion in contracts over the same period. Of the nation's top 10
military contractors, 9 won more than half of their Pentagon contract
dollars through noncompetitive awards.

Thomas C. Greer, a Lockheed spokesman, said that because of "the substantial
investment and lengthy development cycles, followed by limited annual
production quantities," competitive bidding for Pentagon contracts is often
not cost effective. Nevertheless, "It is important to note that sole-source
awards still mandate contractor performance," Mr. Greer said.

In addition, the report said that because of military industry
consolidation, 80 percent of all Pentagon contracting dollars were won by
the top 1 percent of all contractors over the six-year period, which ran
from Oct. 1, 1997, to Sept. 30, 2003. The report found that the Pentagon has
become increasingly dependent on military contractors for work that had been
done by soldiers and Pentagon civilian employees.

Currently, for instance, half of the military budget is outsourced to
contractors, while oversight of these contracts has declined, the report
said. The Pentagon has reduced the number of government officials who
supervise contractors, instead hiring contractors to oversee and manage
others, according to the report. The Pentagon hired a contractor to
determine how many contractors it had employed, the report said.

"There is an even more fundamental problem underscoring our entire
investigation: the stunning lack of accountability," said Mr. Lewis. "This
is a Keystone Kop situation where no one is monitoring the monitors. This is
a very serious situation, and the Pentagon is treating it like a hair in the
soup."

Glenn Flood, a Pentagon spokesman, said that the center's "accusations have
been made before." Mr. Flood said that much of the Pentagon's business is so
specialized that it is impossible to find more than one supplier. Industry
consolidation has also accelerated the noncompetitive trend, he said.

"Where do you go if you want or need a sub or a joint-strike fighter?" said
Mr. Flood. "The mergers of the 1980's have taken their toll. You have only
five or six major contractors. Where do you go?"

But the center's report said that the great growth in outsourcing is taking
place in providing services, not in the production of weapon systems. This
includes items like the interrogations at Abu Ghraib prison in Baghdad,
helping to write the Bush administration's military budget and devising
strategic plans. At the same time, military contractors have become skilled
at Washington politics and in providing jobs for Pentagon officials after
they leave the government.

The leading recipient of campaign donations from military contractors has
been President Bush, with $5.4 million from the industry since 1998.
Military contractors, however, began stepping up contributions to Senator
John Kerry after he won the Iowa caucuses, the report said. Before the
caucuses, Senator Kerry had received $332,000 from the industry. He has
received just under $2 million since then. The Republican Party has received
$62 million from the industry since 1998, compared to $24 million for the
Democratic Party, according to the report.

Richard L. Aboulafia, a military industry analyst at the Teal Group, a
consulting firm in Fairfax, Va., said that Pentagon outsourcing is often
neither the cheapest nor the most efficient approach.

"I think it is a time for a comprehensive rethink of this trend," Mr.
Aboulafia said. "A lot of it is done to produce short-term numbers that
reduce the size of government, and that always is pleasing to voters. But
I'm not sure it's the best strategic decision. There's a terrific emphasis
on cutting the numbers, and to do that, you need outsourcing to make the
numbers look good. But how much of that is just window dressing?"