Pentagon Still Can’t Account for Billions Spent on Contractors
Policy + Politics

Pentagon Still Can’t Account for Billions Spent on Contractors

When the Pentagon bought a refrigerator for its C-5 transport aircraft in 2002, it cost just under $14,000. Two years later, it paid over $32,000 for the same fridge. Perhaps more disturbing, critics say the military is no more able to explain such leaps in cost than it was in 2005, when the refrigerator spending first came to light as part of an investigation that also uncovered $20 ice-cube trays and $81 coffee makers. 

Pentagon accounting today is still below the curve. For example, though the department has spent $80 billion over the past five years on contractors for security, transportation and maintenance in Iraq and Afghanistan, no one has a complete view of all contracting activity there, or the numbers and locations of the contractors. That's according to Michael Thibault, chairman of the congressionally appointed Commission on Wartime Contracting.

In all, the Pentagon spends more than $200 billion each year on such contracts for services, more than double the amount a decade ago. But according to Thibault and other critics, the Defense Department does little to ensure those contracts and purchases of goods like refrigerators are made with quality, efficiency or budgeting in mind.

"The department has not made [this] a top priority consistently across the years," said Rep. Mike Conaway, R-Texas, who helped lead another panel on the subject. "Perhaps every dime is being well spent, but we can't prove it and they can't prove it."

Conaway's defense acquisition panel set out last year to examine the value the United States gets from the Defense Department's purchases of goods and services. It recently concluded: "For the most part … there is currently no objective way to answer this question. For most categories of acquisition, only anecdotal information exists about instances where the system either performed well, or poorly." Requirements for services, the panel wrote, are determined "almost entirely ad hoc," and metrics to take into account issues like cost, quality, and performance "are almost entirely lacking."

On Wednesday, the House Armed Services Committee began formal work on an overhaul of the department's acquisition process for everything outside of weapons. It's an exercise that lawmakers take up almost every year with little to show for it, but supporters of this year's legislation say it will be different. That’s because this time, if the bill becomes law, the department would have to provide clear, specific details on the equipment or services to be acquired, such as the maximum amount that can be spent for the purchases.

The Defense Department spends more than a third of its total annual budget on contractor services, but operates in an environment with few incentives to promote efficiency, value or competition, according to the final report of the Defense Acquisition Panel, the group of members of Congress who studied the issue and drafted this year's bill.

Like many government agencies, the Defense Department's books are such a mess as to be unauditable, according to the Government Accountabilty Office (GAO). The department faces a legal requirement to fix that situation by 2017. The DOD is by far the largest government department, and owns 86 percent of the government's assets. But its contract management performance has been on a government high-risk list since 1992.

"If that designation were a person, it would be old enough to vote," said Thibault, whose commission is conducting its own investigation of the issue. At a hearing Monday, Thibault and his commission laid out attempts at pushing similar requirements onto the Defense Department in the past with little success. (The Pentagon said it plans to improve that oversight in coming years.)

Along with cutting some major programs, last year Congress did enact some changes to the weapons-buying process aimed at cutting cost overruns, increasing competition and eliminating conflicts of interest, though it's too soon to tell how those are working. A 2009 study showed that major weapons development costs were running 42 percent above their original estimates — to a total of $296 billion.

The new bill would require performance management goals for purchasing, provide incentives for defense agencies to get their books in order, and require descriptions for what a given purchase should accomplish. "We ought to know why we're buying something before we buy it," Rep. Rob Andrews, D-N.J., who headed the defense acquisition panel with Conaway, said Wednesday.

Those incentives, along with clear, objective measurements, would help this legislation succeed where others have not, Andrews said. He said his bill could squeeze out $135 billion in waste over a five-year period, but acknowledged that number to be "an estimate and an aspiration."

The House Armed Services Committee approved the bill 56-0 on Wednesday, and it may be on the House floor as soon as next week. Still, even some committee members pointed out that the problem is a hardy perennial.

"I think every year pretty much since I've been on this committee there's been some sort of acquisition reform," said Rep. Mac Thornberry, R-Texas, calling it "an area where we've notoriously overpromised and underperformed."

Conaway said that consistent congressional oversight would be key to making sure any new requirements get followed, but he conceded it also would depend on factors outside of Congress' control.

"The secretary of Defense has got to make this one of — among a lot of competing priorities, this has to be one of those things that he insists gets done," he said. 

The Pentagon declined to comment beyond an e-mailed statement: "Secretary [Robert] Gates has made acquisition reform a top priority.  He and the Department are committed to continuing to work with Members of Congress to provide the best equipment and services to the war fighter while making the best and most efficient use of the taxpayer's dollars.  Successful process reform reflects and is the result of the need and willingness to make trade-offs and hard decisions."