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Tuesday, November 16, 2010

Private Contractors Failing Just as Spectacularly in Afghanistan

Let's talk about how superior the private sector is to the public sector for a bit. We're going to hear a lot from Republicans about how government is evil and corrupt and incompetent, and how the private sector is the only entity that can really get things done -- and does it cheaper. The first problem here is that the math doesn't work at all. Let's say a project will cost X when all is said and done. You look at materials, labor, equipment you may need, gas, etc. and that's what you wind up with. A private contractor would need X + profit to get the job done. Government can do it for X, because it doesn't have to turn a profit. Last time I checked, X + anything is more than just X, so the idea that a private company can do the same thing for less doesn't really pan out, arithmetically. The only way you can pull this off is to subtract from X -- and that means skimping on something somewhere and winding up with a cheap piece of crap. Doubt it? Then explain why military personnel were being electrocuted in showers in Iraq or why they were served rotten meat.

In 2006, Business Week reported, "The losses to fraud and waste in Iraq are almost certainly in the billions, current and former government officials agree. The Special IG for Iraq Reconstruction says it has more than 80 open investigations and has referred 20 more cases to the Justice Dept. for prosecution. A spokesman for the criminal investigative arm of the Defense Dept. says that office expects a 'rise in referrals of potential fraud or corruption cases' because of the recent deployment to Iraq of additional Pentagon investigators and FBI agents."

Billions in waste and fraud, often covered by unfinished and unusable projects, doesn't really strike me as big savings. It strikes me as waste and fraud. The military used to do a lot of this stuff themselves -- do we really need to outsource mess halls and laundry duty, for example? -- but now it has, for reasons nobody seems to be very good at explaining, become completely impossible. The military can fire a long range missile straight down the chimney of some terrorist hide out with pin-point accuracy, but they couldn't possibly cook a damned hamburger.

If you think anything's changed since the bad old days of 2006, you'd be wrong. We're making the same mistake in Afghanistan that we did in Iraq -- that of assuming that contractors want to do anything other than wring every last dime out of projects. McClatchy has published a bunch of information on contractors in Afghanistan and the stories are far, far too familiar. There are some stories of Afghan corruption and mismanagement, while some of the stories involve the American variety. The results are the same regardless of the nationality of the contractor. Projects go unfinished -- money pits peppered all over Afghanistan.

Worse, we knew many of the contractors were shady, but we hired them anyway.

-Louis Berger continues to jointly hold a $1.4 billion contract for rebuilding Afghanistan, despite settling with the Justice Department this month in an overbilling investigation. As the settlement talks proceeded, the U.S. military awarded a portion of a $490 million contract to the company as well. As part of the settlement, the company will be permitted to continue bidding for future contracts.

-A subsidiary of Xe Services, formerly known as Blackwater, was awarded a quarter of all contracts issued in Afghanistan by the Army Space and Missile Defense Command from 2007 to 2009, according to government records. McClatchy reported earlier this year that the Obama administration decided not to bring criminal charges against the security contractor after a nearly four-year investigation found sanctions violations, illegal exports and bribery.

-ITT Corp. was awarded $800 million in contracts for building maintenance and training in Afghanistan this year, despite violating export laws. The firm admitted in 2007 to sending classified materials to foreign nations, including China.

-Northrop Grumman, which paid millions to resolve allegations of improperly testing military parts, is also a leading firm in Afghanistan.

-A subsidiary of Agility was tapped along with two partners to oversee a one-year, $643.5 million contract that could eventually total almost $6 billion. At that point, Agility, formerly known as Public Warehousing Co., was being investigated for overbilling the military for food services. Five months later, in November 2009, the company was indicted for what federal agents described as "major fraud." DynCorp, one of the partners, then removed Agility from the contract, citing the indictment.

We hired a company that sold classified materials to China? If corporations really were people, this corporate person would be in prison right now. It's always amazing what corporate gangsters can get away with.

None of this is to say that private industry has no place in the military. Historically speaking, private industry has always played a role. We've always bought weapons, uniforms, vehicles, furniture, fixtures, etc. from manufacturers, for example, and that's almost certain to continue.

But services? That's something new and that's not working out too awfully well. Maybe we should rethink that. But, with the new Republican House majority coming in, there doesn't seem to be much hope of any rethinking any time soon.


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