Why the Pentagon’s many campaigns to clean up its accounts are failing
reuters.com
reuters.com
However I will posit an additional layer to this...and it lies with the American people themselves. We just cant handle gov't officials and contractors making a ton of money. The real root of the complexity in govt contracting is FAR (Federal Acquisition Regulations) Which create the complexity to avoid egregious corruption and profits in the federal space. While on paper it sounds great...lets make rules that limit what corporations can make off of the government... what you actually get is tremendous waste. Redundancy, arcane billing practices and auditing, and huge bureaucratic RFP bidding systems that limit competition. A classic case in not doing a complete cost-benefit analysis.
The solution is not palatable to the general American public. Put up with some fraud and corruption in the federal government which would be offset by increased competition from the private sector (thus better products and prices). And dont kid yourself if you think fraud and corruption doesnt still go on...it's just more sophisticated.
Companies reputation is a fuzzy number too. As the stock market adage goes "past performance does not guarantee future success". Sure brand reputation means something but how do you measure that and create equal comparison...across hugely disparate government contracts. Comparing the US Census contract (yes this is contracted out almost entirely) to the F35 contract would be absurd.
I do not necessarily have the end all solution. I tend to favor smaller government because I am not sure our current political system scales to be able to execute large projects (I tend to think the ideas behind many large scale projects are correct but fail when you consider the costs of implementation within our political constraints).
If the government is able to do something internally for $500m, and the disadvantaged private sector is going to cost $750m, then let the government do it themselves. (On the government's books, this is a net win.) If the government costs it at $500m, but a private company can do it for $400m... Why let the government do it? Contract it out and save money.
Ambitious people leave in droves, because an organization run entirely on "other people's money" always steers towards complacency and lack of accountability, translating to ambitious people who care about delivering on-time being surrounded by people whose kid's softball game takes precedence over leaving customers out in the cold.
Anyone who has EVER dealt with the federal government in any fucking way knows that what you are saying would never work. The laziest people I have ever encountered in my life are in the Federal government. I'm a huge advocate for the environment, and my first dealings with the EPA made me want to cry. They are horrifically lazy at a cultural level. The DoD is fucking awful. Go to a military base at 3:00 PM on a Friday afternoon and watch as a traffic line builds up at the exit gates as the civillian workers go home 2 hours early, EVERY weekend.
The military is some of the hardest working but criminally underpaid.
The whole contracting system is broken - the amount of money government leaks there is criminal.
When you get out, you have access to federally subsidized loans that nobody else gets, as well as the ability to have Tricare (ultra cheap health insurance) for the rest of your life. When you consider that less than 10% of active duty military will ever see combat, this is a bargain.
Yes, that competitor provided you a solution for 10% less, however it's horribly bloated and inefficient and will have double the on-going hardware costs, and the solution itself is a fucking mess that is going to increase the cost of any changes or maintenance ten-fold.
Problem is, they don't know the difference. The people who will best know the difference are going to be the people who work with/in the same area - the supplier's competitors. Far from impartial.
So maybe we set up some sort of oversight agency, but then we either have them make snap judgements without the appropriate understanding and penalizing what may be more difficult/complicated projects (meaning no one will want to bid on them), or we create such a huge overhead in documentation that we're pretty much back where we are now - no one but the largest of players can even afford the overhead to participate.
Really, I don't see that many private sector companies competing on the big contracts no matter what you do. But for the smaller profit and more general purpose projects, the problem is that their purchasers interfere with the process to get what they want/need as the buyer. For example, they needed our systems and we didn't much care about learning their processes, so an Aerospace seemed to take the bulk of the profits by making a package that depended on us.
If the system were equally complex yet more transparent/published and tamper resistant then I don't think corruption would be so rampant and cost may at least be allocated to regular companies that choose to navigate them alone. But with no system at all, I think the Aerospace that took most of the profits would have taken even more and delivered still less.
For example, the posted article states:
"while an impenetrable tangle of logistics and personnel systems
can hinder commanders’ ability to know who and what are
available for deployment."
I would posit that the contracting approach does nothing to prevent scope creep since most contractors participating in this system are glad to let things keep snowballing because it means more billable hours.
I used to work at a company that did DOD contracts (in the wireless sector). In that area, what the DOD was playing with in the early 2000's is what VC-funded companies are playing with just in the last few years. For the work we did, there were no detailed specs because nobody really knew what was within reach. In response to the question: "what do you want?" the DOD's response is often: "what could we have?" Pointing at how much more efficient private industry is makes no sense. Take an example like Space X. They're a shining example of private industry, and are doing very innovative stuff, but they're treading a lot of the same ground NASA and DOD contractors did in the 1960's. Of course they're getting it done for a lot less money! They know what's possible, they have a general idea of what works. The contractors doing this stuff in the 1960's had none of that to work with.
Obviously the time is due for modernizing the accounting system. But it's important to realize that a lot of the mess dates from the Cold War, where keeping up with the Soviet Union was the priority, not satisfying the bean counters.
Why does the DoD need to run a project like this as if they're creating the next stealth weapon?
It is not clear to me how a custom system will solve any of the problems of the process. I'm not close enough to know, but the primary problem is probably entrenched bureaucracy that has been given no reason to change and perceives major threats-to-power if they change. A custom system seems more likely to exacerbate the problem than solve it by giving the entrenched bureaucracy even more knobs to demand they can twiddle (and knobs on the knobs, and knobs on those knobs....), though admittedly the fail is flowing so thickly here it would probably be impossible to distinguish the additional fail from the already stratospheric baseline.
An ancient and creaky administrative regime like what the military has is nearly impossible to manage financially. The GAO has tried and essentially given up on trying to audit.
The problem with Oracle and SAP is that they aren't "home builders" they are parts and tools salesmen. They don't know ANYTHING about BUILDING HOUSES... they just sell the tools. even their own businesses aren't actually GOOD businesses with huge amounts of nepotism and politics. The first thing when you sign up with them (or any of the big named software vendors) is that you have to find yourself a "contractor" just like building a house. The "big famous software company" disavow any actual results, your mileage may vary, etc.... They're like the "Music Man" selling boy's bands.
If you want to audit the military, that's where North Korea has the correct idea. Generals don't "retire" until the leader says they do. Start enforcing Sun Tzu style discipline to get this done... knock off a few 5 star general's heads. That'll get things done. At a minimum, strip them of private residences, and put them in boot camp barracks (complete with scrubbing their own floors) till they get this thing done.
The root of the problem is the government keep hiring consultants they pay by the hour. They they act surprised when the consultants respond rationally to the incentives.
Or they agree to a fixed price contract where everyone knows the government will pay you more if you say you can't deliver and threaten to go bankrupt. Then they act surprised when the contractors respond rationally to the incentives.
The government needs to break projects down into smaller chunks, to mitigate the losses if a supplier doesn't deliver, you don't pay them, and they go bankrupt. Then they need to establish and enforce an incentive system where suppliers are punished, not rewarded, for failing to get the job done.
that means government getting an expertise (at least at the PM level) in that specific domain. While it wouldn't be a bad thing (and actually a very positive shift vs. current state of affairs), it would immediately hit the typical "government shouldn't be in the <insert specific domain> business".
Anyway, just to cheer you up - compare US Gov / DOD corruption & waste to the cost (i.e basically plunder) of Sochi Olympics in Russia. While making great strides, USG has still long way to go before making into top corruption league :)
If the big companies were allowed to fail, that would develop a market for others to enter who could succeed.
With gov't contracting, it is unrealistic to leave aside the political connections the companies have. It is simply unacceptable to the political crony class to allow one of their own to fail.
If the big companies were allowed to fail, maybe they'd stop underbidding on contracts to get them based on their reputation and smallest bid (knowing that there's no risk), and instead bid actual costing.
When they passed Sarbane-Oxley they gave corporate executives just a few years to implement it. Don't implement it and we DELIST your stock. Implement it WRONG and go to jail. Needless to say, public traded companies worked VERY QUICKLY to get it done and fired people at will if they were in the way.
when the military needed to PAY people.... they got the job done well. that system celebrated 50 years of service getting checks out. So it's just a matter of getting all those disparate systems in line with the check writing system. Just nobody has the political will to accomplish it.
This is where the commander in chief not being able to summarily execute people in the military has it's drawbacks.. cause that's how Sun Tzu got the palace maids to properly military drill... do it right or get killed. Oldie but goodie.
>"The Pentagon alone has never been audited, leaving roughly $8.5 trillion in taxpayer dollars unaccounted for since 1996, the first year it was supposed to be audited."
Wow - that means an average of $500 billion per year of taxpayer money unaccounted since then!
From reading the article, one distinct impression is that the real reason for failed accounting may be simpler and more troubling than all the other obvious ones : because it is so much easier to hide inefficiency, incompetence, and gross abuse/misuse of funds if there are no proper accounting systems in place. The freedom from oversight can be addicting. While there may be no grand conspiracy in place at the top to achieve this - the will to fix what is broken could certainly be weaker if it gives you the freedom to do as you please.
We need a revolution, there I said it. Go ahead NSA and add me to the watch-list. Nobody here doubts that you scan this site daily.
Edit: This attitude by a US general doesn't exactly come across well:
Q: "But the fact is billions of dollars have disappeared without trace."
Oliver: "Of their money. Billions of dollars of their money, yeah I understand. I'm saying what difference does it make?"
No tinfoil hat stuff needed, merely look at history, opening the books of the Manhattan project or area 51 in the stealth fighter years would not have been very wise. I suspect as a former .mil guy that a lot more money disappears into stuff like that, than is officially admitted, or is lost to corruption.
If you think a simple IT project is expensive when .mil does it, doing anything secretly insta-quadruples the cost if not more.
That and the higher level people who started it, bought into it, put their name on it, are the last people who ever back down and are damn near not approachable by those in the trenches.
Seen it far too many times. Backing down cost reputation which is more expensive than money from someone else