I realize that national defense is one of the few legitimate functions of the federal government, but that doesn’t mean the Pentagon budget isn’t riddled with waste, fraud, and abuse.
Here’s a jaw-dropping example reported by Bloomberg.
A U.S. contractor in Iraq overbilled the Pentagon by at least $4.4 million for spare parts and equipment, including $900 for an electronic control switch valued at $7.05, according to a new audit. Based on the questionable costs identified in a $300 million contract with Dubai-based Anham LLC, the U.S. should review all its contracts with the company in Iraq and Afghanistan, which total about $3.9 billion, said Special Inspector General for Iraq Reconstruction Stuart Bowen. “The audit found weak oversight in multiple areas that left the government vulnerable to improper overcharges,” Bowen wrote in the forward to his 30th quarterly report, released today. The contract in question was funded with a combination of money earmarked for Iraqi Security Forces and Army operations and maintenance funds. Among the “egregious examples of overbilling” by Anham were $4,500 for a circuit breaker valued at $183.30, $3,000 for a $94.47 circuit breaker and $80 for a small segment of drain pipe valued at $1.41.
Those mark-ups are absurd, but I wonder whether this example from the story is even worse.
In other cases, Anham used subcontractors to purchase items that could have been bought directly from the manufacturer at lower prices, the report said. When Anham was asked to buy a loudspeaker system to alert warehouse employees of any danger, it chose not to buy the system directly from the manufacturer at the retail price of $44,615, the report said. Instead, Anham sought bids from subcontractors and paid a company called Knowlogy $90,908. That price included $20,000 for installation, even though the system setup meant little more than wheeling it into place and plugging it in.
I think I made a mistake becoming a policy wonk. I could have a great career as a loudspeaker installer.
On a more serious note, it would be nice if governments didn’t squander so much money. Maybe things wouldn’t be so bad if some people went to jail for these rip-offs of taxpayer money.
And let’s not forget that the bigger issue is whether the national security of the United States is advanced or undermined by nation building in the Middle East. Or remaining in alliances such as NATO that lost their raison d’être when the Warsaw Pact disappeared 20 years ago.
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[…] The Pentagon spent $900 on a $7 control switch. […]
UPDATE 10/12/2012: ANHAM feeds our soldiers in Afghanistan. Embroiled in the recent Defense Logistics IG Report scandal wasn’t enough. Now even Afghan officials claim ANHAM IS the ‘LAND MAFIA’. See Link to New article published in a Kabul Newspaper. It’s pretty bad when the Afghans don’t trust their money to the people we seem to give away big dollars in misspending.
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RE: That price included $20,000 for installation, even though the system setup meant little more than wheeling it into place and plugging it in.
This smells of pure media oversimplification. First off, was it really just ‘plugging it in’? When you have the contractors/suppliers do the task for a fee they assume responsibility for making certain it is functional when it is installed as a risk included in the fee. Second, if it really was a simple installation where was it plugged in again? Iraq? Not too many factory installers in-country I’ll bet, and 20K would just about cover a two man team for a couple of days and round trip airfare.
This story is reminiscent of the ‘$800 Toilet Seat story. It was a story (vs the truth), as the truth was that the cost was for a limited production run of a crashworthy composite material base structure FOR an aircraft toilet. One wonders what the ‘real’ story is for the sound system example.
Two points of equal importance.
First: When you hear about Defense contracts gone awry you always hear about it and you usually hear about it because a DoD internal auditor raised the flag. When you hear about other agencies; contractual high jinks it is usually because of an outside agency or whistleblower — if you hear of it at all.
Second: DoD contracts are let and managed according to strict acquisition law. I submit that given the sheer volume of acquisitions per annum and the Byzantine acquisition laws, the % of waste is surprisingly low. Don’t like the processes? Tell Congress to quit micromanaging with stupid laws.
Empowerment for the “greedy” Mr.Patrick. I can personally introduce you to both, retired generals and eggheads in let’s say the mid-east. I was speaking with one of our U.S. primary defense contractors. When one of our Ivy league grads gave me a heads up or tip on the “transportation deal” at that time. Said, we were purchasing our trucks to move freight in and out of “you know where”. Our trucks kept coming up missing in action. Said, we began leasing trucks. Not long afterwards we noticed, we were leasing our own stolen trucks”. So Ms.Jones advised them to place old and new freight on all trucks coming and going in and out of or on suicide alley, with participating drivers “if you know what I mean”. At any rate, I suggested they place something (FOB) free on board and wait till our trucks were “JACKED” and driven back to their camps. Then “Kaboom” (detonate) them. Short term solution for ongoing issue to date. About the filthy rich guys, many of them place their lives directly on the line. The line of duty, hell some of them make $20,000usd a week or month. Just depends if they are an engineer or a friend of a engineer. God bless the corp of engineers. About, entitlement’s I have a Job Creation Plan/Program that can and will offset those payouts. Preparing to “pitch” the HILL. Best regards Patrick, liked your comment and name. Pat is OUT.
Both the military and “entitlement” programs, including welfare, need closer oversight. Anytime you have a lot of loose money laying around, there’s always the potential for waste and corruption. We need both a strong defense and “safety net” services, but we don’t need the inefficiency and theft we’ve seen in defense and domestic programs. While I trust the generals, I don’t necessarily trust the ex-generals who go to work for defense contractors. And i certainly don’t trust the eggheads at Harvard etc who dream up some of these so-called “empowerment” programs. Empowerment for who? Not the needy.
Pat Butler
This is one situation where I think the government needs to be “bigger.” Make it illegal to hire private “defense” contractors and make the military the sole responsible party. At least the military has oversight. If we don’t have enough troops, I guess it is time to come home.
My working theory is that “waste, fraud and abuse” is totally unavoidable. No matter how big the government, it will waste money. The only way to reduce that waste is to reduce government. For the government, it’s not a bug, it’s a feature. Waste serves dual purposes, it rewards friends and supporters at no cost to the politician, and it removes wealth from the people. What do you think would happen if people were allowed to keep their own money?! They would quickly discover that most of what government does is useless and the government would shrink. Government MUST waste money…it’s a matter of survival for them.
I just emailed this column to my congressman. .