7 March 2006

Cost plus = "plus" with a capitol P

With a wink and a nod, we're supposed to accept the use of cost-plus contracts as the normal modus operandi of U.S. operations within the Empire. The practice has created a lucrative field for corrupt politicians and government bureaucrats, who retire from their government jobs to walk across the hall to the sub-contractor--bringing with them all their contacts and skills at covering up corruption. I'm convinced that the extreme secrecy involved with virtually everything the government does nowadays is largely motivated by the need to keep the workings of the kleptocracy hidden from the prying eyes of the public.

Moshe Adler, of the L.A. Times, has an excellent piece that calls into question not just the current war-profiteering but the very practice of contracting everything out to private firms. Adler points out that government agencies actually do things more cheaply. The example he uses (Halliburton's hiring of the Kuwaiti government who then overcharged) is hilarious--and leaves little room for argument. Either:

the government firm was efficient ==> ergo Halliburton was right in hiring it ==> ergo government firms do a better job

or

the government firm gouged the U.S. tax-payer (creating higher profits for Halliburton) ==> ergo Halliburton can't be trusted with tax-payer's money

The short of all this is that the tax-payers are forking over nearly a 50% mark-up on services rendered--all in the name of greater efficiency. The only efficiency I can see is a more efficient process for taking the wealth from the hands of those who create it and giving it to those who sit around in an office once a month when they aren't being paid to fly to Hawaii.

The Adler article (my highlighting) is to be praised for its straightforward conclusion:

Even though the contractor's job is to serve the American taxpayer on such contracts, whenever it can inflate its costs, it will. The paycheck of a government employee, however, is the same no matter what he does. Therefore there is no conflict between his personal interest and his duty to the taxpayer. If Halliburton had been denied reimbursement for overcharging the American taxpayer, the story would have had a happy ending. But it didn't. The Army decided to reimburse Halliburton nearly $204 million out of the $208-million overcharge. However, the last thing that needs to come from this fiasco is another investigation into how to make government contracting more efficient. Government contracting worked as well as it possibly could here. All the bells and whistles were in place, and they did what they were supposed to do. And although this was a cost-plus contract, that in and of itself wasn't the problem. The government did discover the overcharge, and it could have denied reimbursement for it.

WHAT DID BREAK down is what normally breaks down when the work of the government is outsourced. All too often there is someone in the government who has both the power to decide on the contracts and a personal stake in the well-being of the contractor he supervises.When the Army brass ignored the audit, were they doing what they thought Vice President Dick Cheney — who once headed Halliburton — expected of them, or were they currying favor with Halliburton because they would perhaps like to work for the contractor after retiring from the military? Whenever a government employee supervises a private contractor, the inclination to do an honest job may come into conflict with his personal interests.

And this is why, as the Defense Department audit so clearly shows, the taxpayer is better off when the government fulfills its function with government employees instead of private contractors who are supervised by government employees.

1 comment:

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