How the Pentagon Spent $1.6 Billion in a Day
Policy + Politics

How the Pentagon Spent $1.6 Billion in a Day

iStockphoto/The Fiscal Times

There is nearly universal agreement in Washington that after a decade of war, defense spending it out of control. In an effort to rein it in, the DOD is expected to eliminate $600 billion from its budget over the next decade, the biggest military drawdown since the end of the Cold War.

But dismantling the Pentagon’s budget is not a matter of simple budget cutting. DOD has guaranteed payments to contractors for work yet to be done and some of these commitments stretch years into the future.

 “You’re talking about an agency that is spending more than the GDP of most countries in the world, employing more than 3 million people and conducting 15 to 20 million transactions per year,” said Gordon Adams, a defense budget expert and American University professor.

The big-ticket projects are typically the ones that draw the most criticism from Pentagon budget watchdogs. Much of this condemnation is warranted, as the anticipated $1.5 trillion cost of the F-35 fight plane is already bigger than the GDP of Australia.

But smaller projects often escape scrutiny, despite costing the Pentagon hundreds of millions of dollars. To illustrate just how the Pentagon spends money each day, The Fiscal Times picked a random day – March 4, 2013 – and reviewed what contracts the Pentagon awarded on that day. From weapons systems to prescription drugs, the daily cost of running the Pentagon added up quickly: 10 days ago, the Pentagon spent $1,614,108,656.

The majority of the $1.6 billion went to three large contractors for work on major weapons systems. The Navy paid each of the contracts below:

  • Lockheed Martin was awarded a contract of $696 million to pay for the construction of two littoral combat ships, the boat the Navy uses for combat close to shores.
  • Austal USA, the American spinoff of the Australian boat manufacturer Austal, was also awarded a contract $681 million for two littoral combat ships.
  • Lockheed was given a $100 million contract to develop combat management systems used on Navy ships.

These three contracts, making up close to $1.5 billion of the March 4 total, will be paid out over a period of years: for instance, Lockheed’s contract for the combat management systems is spread over five years.

But it’s also important to keep in mind that contracts this large are being awarded daily: yesterday, the Pentagon gave Taylor-Dunn Manufacturing in California $633 million to provide "commercial type material handling equipment."  On Feb. 28, Lockheed got a $333 million contract to provide parts for the F-35, despite lingering questions about the plane’s performance. And Feb. 20, Lockheed received a contract to modernize F-22 plans that could be worth as much as $6.9 billion.

The smaller contracts seem like a pittance compared to the ones awarded to the large contractors. But the smaller amounts generally went to smaller companies, so the tens of millions promised by the Pentagon could make each company’s year. These contracts include:

  • Bath Iron Works, based in Maine, received a $12.3 million to provide maintenance on the USS Coronado.
  • Marine Hydraulics International in Norfolk received $7 billion to maintain the USS Cole.

But the majority of the money in the small contracts paid for fuel. Shell Energy North America, Tiger Natural Gas Inc. and CIMA Energy Ltd. All receive contracts to provide natural gas ($35 million, $19 million and $11 million respectively).

Buried in the March 4 contracting report is a reminder that while the Pentagon is a government department, it is run like a private corporation. It must provide healthcare for its workers. It also has to make sure its most important employees have the office support they need.

That’s why U.S. Worldmeds LLC, a company based in Kentucky, was given $30 million to provide pharmaceuticals to all branches of the military. And the Logistics Management Institute, based in northern Virginia, was given $6.7 million to support office operations at the Pentagon.