KB
09-15-2008, 08:55 PM
Forwarded from a friend
Opinion
Military Industrial Complex 2.0: Cubicle Mercenaries, Subcontracting
Warriors, and Other Phenomena of a Privatizing Pentagon
Seven years into George W. Bush's Global War on Terror, the
Pentagon is embroiled in two big wars, a potentially explosive war of
words with Tehran, and numerous smaller conflicts - and it is leaning
ever more heavily on private military contractors to get by.
Once upon a time, soldiers did more than pick up a gun. They
picked up trash. They cut hair and delivered mail. They fixed
airplanes and inflated truck tires.
Not anymore. All of those tasks are now the responsibility of
private military corporations. In the service of the Pentagon, their
employees also man computers, write software code, create integrating
systems, train technicians, manufacture and service high-tech weapons,
market munitions, and interpret satellite images.
People in ties or heels, not berets or fatigues, today translate
documents, collect intelligence, interpret for soldiers and
interrogators, approve contracts, draft reports to Congress, and
provide oversight for other private contractors. They also fill
prescriptions, fit prosthetics, and arrange for physical therapy and
psychiatric care. Top to bottom, the Pentagon's war machine is no
longer just driven by, but staffed by, corporations.
Consider the following: In fiscal year 2005 (the last year for
which full data is available), the Pentagon spent more contracting for
services with private companies than on supplies and equipment -
including major weapons systems. This figure has been steadily rising
over the past 10 years. According to a recent Government
Accountability Office report, in the last decade the amount the
Pentagon has paid out to private companies for services has increased
by 78% in real terms. In fiscal year 2006, those services contracts
totaled more than $151 billion.
Ever more frequently, we hear generals and politicians alike
bemoan the state of the military. Their conclusion: The wear and tear
of the President's Global War on Terror has pushed the military to the
breaking point. But private contractors are playing a different tune.
Think of it this way: While the military cannot stay properly
supplied, its suppliers are racking up contracts in the
multi-billions. For them, it's a matter of letting the good times
roll.
What a Difference a War Makes
As we prepare to close the book on the Bush presidency, it is
worth exploring just how, in the last seven-plus years, the long War
on Terror has actually helped build a new, privatized version of the
Pentagon. Call it Military Industrial Complex 2.0.
Consider fiscal year 2001, which conveniently ended in September
of that year. It serves as a good, pre-War on Terror baseline for
grasping just how the Pentagon expanded ever since - and how much more it is paying out to private contractors today.
Back then, the Pentagon's top 10 suppliers shared $58.7 billion in
Department of Defense (DoD) contracts, out of a total of $144 billion
that went to the top 100 Pentagon contractors. Number 100 on the list
was The Carlyle Group with $145 million in contracts. Keep in mind, of
course, that this was the price of "defense" for a nation with no
superpower rival.
Fast forward to 2007 and the top 10 companies on the Pentagon's
list of private contractors were sharing $125 billion in DoD
contracts, out of a total of $239 billion being shared among the top
100 contractors. The smallest contract among those 100 was awarded to
ARINC and came in at $495 million.
In those seven years, in other words, contracts to the top 10 more
than doubled, the size of the total pay-out pie increased by
two-thirds, and the lowest contract among the top 100 went up almost
four-fold.
Just as revealing, almost half the companies on the Pentagon's Top
100 list in 2007 were not even on it seven years earlier, including
McKesson, which took in a hefty $4.6 billion in contracts and
MacAndrews and Forbes which garnered $3.3 billion.
And here's a fact that makes sense of all of the above: Given the
spectrum of services offered and the level of integration that has
already taken place between the Pentagon and these private companies,
the United States can no longer wage a war or even run payroll without
them.
These have been the good times for defense contractors, if not for
the military itself. Since September 2001, many companies have made a
quantum leap from receiving either no Pentagon contracts or just
contracts in the low hundred millions to awards in the billion-dollar
range. Here are just a few portraits of companies that are booming,
even as the military goes bust.
URS Corporation: This engineering, construction, and technical
services firm based in San Francisco employs more than 50,000 people
in 34 countries. A publicly-held firm, which recently acquired
Washington Group International, it had numerous reconstruction
contracts in Iraq. More than 40% of the company's revenue ($5.4
billion in 2007) comes from the federal government. Between 2001 and
2007, its Pentagon contracts increased more than a thousand fold (by
1,400%) from $169 million to $2.6 billion.
URS began the War on Terror at number 91 on the Pentagon's Top 100
list. It is now number 15.
Electronic Data Systems Corporation: Founded by political maverick
Ross Perot, EDS is a global technology services company headquartered
in Plano, Texas. In March, the Pentagon awarded it a $179 million
contract to provide information technology support services to the
Pentagon's Defense Manpower Data Center, its central archive of all
kinds of data on personnel, manpower and casualties, pay and
entitlements, as well as the whole gamut of financial information. The
company - which employs 139,000 people in 65 countries - boasted $22.1
billion in revenue in 2007. Computer giant HP bought EDS in August
2008.
In 2001 the company occupied slot 71 on the DoD's Top 100 list
with $222 million in contracts. By 2007, it had climbed to number 16
with $2.4 billion in contracts, an increase of almost 1,000%.
Harris Corporation: This communications and information technology
company is headquartered in Melbourne, Florida, and employs 16,000
people. Harris boasted $4.2 billion in revenue in 2007, with more than
one-quarter of that ($1.6 billion) coming from Pentagon purchases of
communications and electronics capabilities like Falcon II
high-frequency radio systems.
When the Global War on Terror began, Harris had a modest $380
million in Pentagon contracts (and was number 43 on that top 100
list); over the last seven years, it has steadily risen in rank and
now is number 30.
KBR: Gaming the System
The United States first heard the phrase "military industrial
complex" during President Dwight David Eisenhower's January 17, 1961
Farewell Address. As he left public office, our last
general-turned-president warned that the "conjunction of an immense
military establishment and a large arms industry is new in the
American experience" and its influence - "economic, political, even
spiritual - is felt in every city, every Statehouse, every office of
the Federal government
"In the councils of government, we must guard against the
acquisition of unwarranted influence, whether sought or unsought, by
the military industrial complex. The potential for the disastrous rise
of misplaced power exists and will persist."
If, in many ways, Ike's comment is still applicable, in the last
47 years the Military Industrial Complex (MIC) he described has
evolved in startling ways - and massively. Today, it does more than
wield influence; it has created unparalleled dependence and unrivaled
profit.
What this means in practice can be illustrated by KBR, a
privately-held company that does not publish quarterly reports.
Nonetheless, its recent history provides an object lesson in what the
MIC 2.0 can do for the profitability of a private contractor.
KBR has shadowed the U.S. military every step of the way through
the invasion and occupation of Iraq: first as Kellogg Brown and Root,
a subsidiary of Halliburton (for which **** Cheney was once CEO), and
then as KBR, an independent company. It has, in fact, made its
corporate fortune on the Pentagon's now infamous "no-bid," "cost-plus
contracts." Since December 2001, KBR has been working for the Pentagon
under the Logistics Civil Augmentation Program (LOGCAP) - a
multi-billion dollar agreement that guarantees the company those
cost-plus profits for fulfilling contracted tasks.
This huge and sweeping contract was awarded without the rigors of
the competitive marketplace. Its "no-bid" nature was a sign that KBR
was anything but a run-of-the-mill Pentagon contractor. A second sign
lay in the Pentagon's acceptance of that cost-plus arrangement. A
rarity in the business world, "cost plus" means that the more a job
costs, the more profit the company pockets. Professor Steve Schooner,
a contract expert at George Washington University Law School,
commented, "Nobody in their right mind would enter into a contract
that basically says, 'come up with creative ways to spend my money and
the more you spend the happier I'll be.'" Under this contract, the
Pentagon has doled out $20 billion to KBR to build and staff
facilities for military personnel in Iraq and provide food and other
necessities to U.S. troops there.
Ironically, the Pentagon isn't even getting what it paid for, not
by a long shot. KBR's fraudulent activities have, according to the
Government Accountability Office, included the failure to adequately
account for more than a billion dollars in contracted funds; the
leasing of vehicles to be used by company personnel for up to $125,000
a year (despite the fact that these vehicles could have been purchased
outright for $40,000 or less); the purchase of unnecessary luxuries
such as monogrammed towels for use in company-run recreation
facilities for military personnel; the overcharging for fuel brought
into Iraq from Kuwait for military use; the charging to the Pentagon's
tab three to four times as many meals as were actually consumed by
U.S. military personnel; and the provision of unclean water for U.S.
troops.
All of these abuses came to light thanks to investigations by
Representative Henry Waxman (D-CA), the Pentagon's own Office of the
Inspector General, and others, but Halliburton and its former
subsidiary got off with little more than such wrist slaps as the
revocation of the fuel supply contract and of KBR'S exclusive LOGCAP
contract for Iraq. That was recently divided into three parts and put
out to bid. KBR was, however, allowed to join the bidding, and is now
sharing the contract with DynCorp and Fluor Corporation. Each company
has received a $5 billion contract that includes nine one-year options
for renewal that could be worth, in total, up to $150 billion,
according to Dana Hedgpeth of the Washington Post.
The most recent of many black marks against KBR came when members
of Congress and investigators charged that substandard electrical work
by company employees in showers at military bases in Iraq had resulted
in the electrocution deaths of 16 American soldiers.
To understand what privatization means in action at the Pentagon,
consider just one modest example of the corruption that infects KBR
and how it was addressed. In 2004, the company submitted requests for
reimbursement on more than one billion dollars in charges that Army
auditors deemed "questionable," in part because they weren't backed up
by reliable records. Charles Smith, the Army official managing
Pentagon contracts, refused to approve the payments and threatened to
levy fines against the company if it did not get a better handle on
its spending. Later, he told James Risen of the New York Times that
KBR had "a gigantic amount of costs they couldn't justify. Ultimately,
the money that was going to KBR was money being taken away from the
troops."
Despite his 31 years with the Army, and without notice, Smith was
transferred from his post, while the requested payments were
subsequently sent to KBR. According to the New York Times, the Army
argued that "blocking the payments to KBR would have eroded basic
services to the troops. They said that KBR had warned that if it was
not paid, it would reduce payments to subcontractors, which in turn
would cut back on services."
In other words, the Pentagon - in charge of hundreds of billions
of dollars and more than a million personnel in and out of uniform -
was essentially held hostage by a company which threatened to withhold
services that (just to be clear) had been pretty shoddy to begin with.
Senator Robert Byrd (D-WV) saw the problem: "We have found
ourselves dependent on profit-oriented companies for even the
day-to-day basics of feeding and housing our troops, [and] for
carrying out a myriad of other functions of the mission, including
security. These kinds of contracts opened the door for every manager
to game the system in order to maximize profits."
And game the system they do. For example, the sort of corruption
that seems endemic to KBR has created a profitable new market for
another kind of private military corporation - one specializing in
oversight and accountability.
After the Army replaced Smith, it hired RCI Holding Corporation to
review KBR's records. Smith says the private company "came up with
estimates, using very weak data from KBR," while ignoring audit
information gathered within the Pentagon. While KBR was subsequently
awarded high performance bonuses and a portion of that new 10-year
contract with the Army, Serco (RCI Holding's parent company) also
received a new contract - to continue to oversee KBR's contracts.
And so dependency begets deeper dependency, while corruption,
incompetence, and callous indifference become ever more ingrained in
the military way of life.
During his first presidential campaign, George W. Bush identified
Christ as his favorite political philosopher. But as the first
American President with a Masters of Business Administration (and from
Harvard, no less), he has done a much better job of applying the
profit-first principles of Donald Trump and Jack Welch than
exemplifying the man from Galilee who promised the rich young man
"treasure in heaven" once he sold all he owned and gave it to the
poor. As president, Bush has brought a corporations-can-do-no-wrong
perspective to the Oval Office and quickly sought to give the private
sector an ever freer rein over a smorgasbord of public works and
services. Today, the military sector leans remarkably heavily on
private corporations to perform what used to be their basic functions,
from war to disaster relief to washing the dishes. KBR is just one
multi-billion dollar example of the MBA presidency's legacy.
Beyond Blackwater: The Pentagon's Cubicle Mercenaries
The new Complex 2.0 regularly employs companies whose job it is to
send armed mercenaries into action beside U.S. soldiers or to guard
U.S. diplomats and high military officers. Fighting wars for hire has
become an essential part of the Pentagon's MO since 2001, and the
Blackwater employee gunning through Baghdad in a Kevlar vest, a
kafiyah, and wrap-around shades is the ultimate symbol of the new
moment.
But there's another dimension of the Bush era's privatization
surge at the Pentagon that has gotten far less coverage: Private
military firms are also doing the paperwork of war. According to a
March 2008 GAO report, Additional Personal Conflict of Interest
Safeguards Needed for Certain DoD Contractor Employees, in offices
throughout the Department of Defense, cubicle mercenaries in startling
numbers are working shoulder-to-shoulder with uniformed military staff
and federal employees.
The Government Accountability Office (GAO) looked at 21 different
Pentagon offices and found that private contractors outnumbered
Department of Defense employees in more than half of them. In the
engineering department of the Missile Defense Agency, for example,
employees from private contractors made up more than 80% of the work
force. The GAO found that contractors were responsible for carrying
out a wide range of tasks and were not subject to federal laws and
regulations designed to prevent conflicts of interest - including the
rules that concern personnel who want to take positions with companies
they had awarded contracts to as federal employees.
Another March 2008 GAO report assessed the Army's Contracting
Center of Excellence where private contractors made up less than 20%
of the workforce. The average hourly cost of an employee from a
private contractor, however, was more than 26% higher than that of a
government employee. Similar disparities in pay can be seen even more
starkly in Iraq, where a soldier is paid little more than minimum
wage, while a private military contractor can earn well above $100,000
a year tax-free.
For perhaps the ultimate contrast in military privatization,
consider this: Testifying at a Congressional hearing in July,
Blackwater CEO Erik Prince offered a ballpark estimate for his annual
salary - "more than a million." He assured Representative Peter Welch
(D-VT) that he would "get back" to him with a more exact figure. Welch
noted at the time that General David Petraeus - then responsible for
more than 160,000 U.S. military personnel in Iraq - earned $180,000 a
year.
Privatization at the Bottom
Once private companies take on military and war-making tasks,
where does the buck stop? It is not uncommon, for example, for a
company hired to perform a service for the Pentagon to subcontract
part of the job to another company, which may then subcontract part of
its task to a third. Who, then, is in charge? When something goes
wrong, who is culpable?
A recent investigation by Craig and Marc Kielburger, Canadian
co-founders of the NGO Free the Children, and Toronto-based journalist
Chris Mallinos found that KBR has subcontracted to more than 200
different firms - many based in Kuwait - to transport materials into
Iraq.
One result of this: The United States has ended up paying
companies that are essentially enslaving Filipinos, Sri Lankans, and
other "third country nationals" who drive supplies into Iraq.
In a recent article in Epoch Times, the trio recount a series of
fact-finding trips to Kuwait to meet with dozens of South Asian and
Filipino men "recruited to the Middle East with the promise of good
jobs, only to be hired by Kuwaiti transport companies driving into
Iraq." A Filipino described how Jassin Transport and Stevedoring
Company - one of KBR's sub-subcontractors - took his passport,
nullified the contract he had signed in the Philippines, and issued
him a new contract written in Arabic. Employees were "given an
ultimatum: sign or be abandoned." Then they were handed the keys to
unarmored tractor-trailer trucks and told to drive fast along roads
known to be dangerous. The authors concluded that these companies
"openly flout U.S. labor laws by using cheap imported labor,
withholding employee passports and housing workers in decrepit
conditions."
Officially, nothing like this is supposed to happen. The
Philippines, Nepal, and other countries bar their citizens from taking
work in Iraq. In 2006, the Defense Department actually issued stricter
regulations forbidding such labor trafficking, and KBR and other
companies pledged that they and their subcontractors would follow
local labor laws. But regulations or no, the truth is that the
Pentagon is no longer really in control of the process, and
sub-sub-subcontracting is how you make the big money in places like
Iraq.
Oh and despite hearings, investigations, and legislation,
Congress isn't in control either. In an attempt to address the
privatization of the military, for example, the Senate's Democratic
Policy Committee has held a total of seventeen hearings on waste,
fraud, and corruption in Iraq. Representative Henry Waxman's Oversight
and Government Reform Committee has made the role of congressional
gadfly respectable. Hearings in both the House and Senate have offered
riveting, sometimes shocking, inside-the-Beltway theater, but
subsequent legislation created to make decent Pentagon reporting and
oversight a reality, close gaping loopholes in accountability,
criminalize fraud, and curb some of the worst abuses of private
contractors has proven well-meaning but hopelessly weak and
ineffective in practice.
Is MIC 3.0 in Our Future?
President Bush will leave office boasting that the United States
has the most powerful and professional military machine in the world.
We have paid dearly for this machine in the past seven-plus years. The
bill for all that might and muscle comes to more than $3.8 trillion
since 2001 - plus another $900 billion plus for actually flexing it in
Iraq, Afghanistan, and elsewhere.
And if the U.S. military machine is now both oversized and
staggeringly expensive, it is also more ****e to breakdown in a more
dangerous and unstable world. So think of George W. Bush's legacy to
us as a Pentagon bloated almost beyond recognition and crippled by its
dependence on private military corporations.
As for Bush's legacy to the Lockheed Martins, the KBRs and the
Pentagon's whole "Top 100" crew, it's been money beyond measure,
enough to leave them all hard at work on Military Industrial Complex
3.0. They naturally want to make sure that the money continues to pour
into their ever upgrading war machine, no matter who takes over the
White House in 2009.
Frida Berrigan is a Senior Program Associate at the New America Foundation's Arms and Security Initiative (http://www.newamerica.net/programs/american_strategy/arms_security). She is a columnist for Foreign Policy in Focus (http://www.fpif.org/) and a contributing editor at In These Times (http://www.inthesetimes.com/). She is the author of reports on the arms trade and human rights, U.S. nuclear weapons policy, and the domestic politics of U.S. missile defense and space weapons. Part one of her series on Bush's Pentagon Legacy at Tomdispatch.com, "Entrenched, Embedded, and Here to Stay," can be read by clicking here (http://www.tomdispatch.com/post/174936). She can be reached at berrigan@newamerica.net.
Opinion
Military Industrial Complex 2.0: Cubicle Mercenaries, Subcontracting
Warriors, and Other Phenomena of a Privatizing Pentagon
Seven years into George W. Bush's Global War on Terror, the
Pentagon is embroiled in two big wars, a potentially explosive war of
words with Tehran, and numerous smaller conflicts - and it is leaning
ever more heavily on private military contractors to get by.
Once upon a time, soldiers did more than pick up a gun. They
picked up trash. They cut hair and delivered mail. They fixed
airplanes and inflated truck tires.
Not anymore. All of those tasks are now the responsibility of
private military corporations. In the service of the Pentagon, their
employees also man computers, write software code, create integrating
systems, train technicians, manufacture and service high-tech weapons,
market munitions, and interpret satellite images.
People in ties or heels, not berets or fatigues, today translate
documents, collect intelligence, interpret for soldiers and
interrogators, approve contracts, draft reports to Congress, and
provide oversight for other private contractors. They also fill
prescriptions, fit prosthetics, and arrange for physical therapy and
psychiatric care. Top to bottom, the Pentagon's war machine is no
longer just driven by, but staffed by, corporations.
Consider the following: In fiscal year 2005 (the last year for
which full data is available), the Pentagon spent more contracting for
services with private companies than on supplies and equipment -
including major weapons systems. This figure has been steadily rising
over the past 10 years. According to a recent Government
Accountability Office report, in the last decade the amount the
Pentagon has paid out to private companies for services has increased
by 78% in real terms. In fiscal year 2006, those services contracts
totaled more than $151 billion.
Ever more frequently, we hear generals and politicians alike
bemoan the state of the military. Their conclusion: The wear and tear
of the President's Global War on Terror has pushed the military to the
breaking point. But private contractors are playing a different tune.
Think of it this way: While the military cannot stay properly
supplied, its suppliers are racking up contracts in the
multi-billions. For them, it's a matter of letting the good times
roll.
What a Difference a War Makes
As we prepare to close the book on the Bush presidency, it is
worth exploring just how, in the last seven-plus years, the long War
on Terror has actually helped build a new, privatized version of the
Pentagon. Call it Military Industrial Complex 2.0.
Consider fiscal year 2001, which conveniently ended in September
of that year. It serves as a good, pre-War on Terror baseline for
grasping just how the Pentagon expanded ever since - and how much more it is paying out to private contractors today.
Back then, the Pentagon's top 10 suppliers shared $58.7 billion in
Department of Defense (DoD) contracts, out of a total of $144 billion
that went to the top 100 Pentagon contractors. Number 100 on the list
was The Carlyle Group with $145 million in contracts. Keep in mind, of
course, that this was the price of "defense" for a nation with no
superpower rival.
Fast forward to 2007 and the top 10 companies on the Pentagon's
list of private contractors were sharing $125 billion in DoD
contracts, out of a total of $239 billion being shared among the top
100 contractors. The smallest contract among those 100 was awarded to
ARINC and came in at $495 million.
In those seven years, in other words, contracts to the top 10 more
than doubled, the size of the total pay-out pie increased by
two-thirds, and the lowest contract among the top 100 went up almost
four-fold.
Just as revealing, almost half the companies on the Pentagon's Top
100 list in 2007 were not even on it seven years earlier, including
McKesson, which took in a hefty $4.6 billion in contracts and
MacAndrews and Forbes which garnered $3.3 billion.
And here's a fact that makes sense of all of the above: Given the
spectrum of services offered and the level of integration that has
already taken place between the Pentagon and these private companies,
the United States can no longer wage a war or even run payroll without
them.
These have been the good times for defense contractors, if not for
the military itself. Since September 2001, many companies have made a
quantum leap from receiving either no Pentagon contracts or just
contracts in the low hundred millions to awards in the billion-dollar
range. Here are just a few portraits of companies that are booming,
even as the military goes bust.
URS Corporation: This engineering, construction, and technical
services firm based in San Francisco employs more than 50,000 people
in 34 countries. A publicly-held firm, which recently acquired
Washington Group International, it had numerous reconstruction
contracts in Iraq. More than 40% of the company's revenue ($5.4
billion in 2007) comes from the federal government. Between 2001 and
2007, its Pentagon contracts increased more than a thousand fold (by
1,400%) from $169 million to $2.6 billion.
URS began the War on Terror at number 91 on the Pentagon's Top 100
list. It is now number 15.
Electronic Data Systems Corporation: Founded by political maverick
Ross Perot, EDS is a global technology services company headquartered
in Plano, Texas. In March, the Pentagon awarded it a $179 million
contract to provide information technology support services to the
Pentagon's Defense Manpower Data Center, its central archive of all
kinds of data on personnel, manpower and casualties, pay and
entitlements, as well as the whole gamut of financial information. The
company - which employs 139,000 people in 65 countries - boasted $22.1
billion in revenue in 2007. Computer giant HP bought EDS in August
2008.
In 2001 the company occupied slot 71 on the DoD's Top 100 list
with $222 million in contracts. By 2007, it had climbed to number 16
with $2.4 billion in contracts, an increase of almost 1,000%.
Harris Corporation: This communications and information technology
company is headquartered in Melbourne, Florida, and employs 16,000
people. Harris boasted $4.2 billion in revenue in 2007, with more than
one-quarter of that ($1.6 billion) coming from Pentagon purchases of
communications and electronics capabilities like Falcon II
high-frequency radio systems.
When the Global War on Terror began, Harris had a modest $380
million in Pentagon contracts (and was number 43 on that top 100
list); over the last seven years, it has steadily risen in rank and
now is number 30.
KBR: Gaming the System
The United States first heard the phrase "military industrial
complex" during President Dwight David Eisenhower's January 17, 1961
Farewell Address. As he left public office, our last
general-turned-president warned that the "conjunction of an immense
military establishment and a large arms industry is new in the
American experience" and its influence - "economic, political, even
spiritual - is felt in every city, every Statehouse, every office of
the Federal government
"In the councils of government, we must guard against the
acquisition of unwarranted influence, whether sought or unsought, by
the military industrial complex. The potential for the disastrous rise
of misplaced power exists and will persist."
If, in many ways, Ike's comment is still applicable, in the last
47 years the Military Industrial Complex (MIC) he described has
evolved in startling ways - and massively. Today, it does more than
wield influence; it has created unparalleled dependence and unrivaled
profit.
What this means in practice can be illustrated by KBR, a
privately-held company that does not publish quarterly reports.
Nonetheless, its recent history provides an object lesson in what the
MIC 2.0 can do for the profitability of a private contractor.
KBR has shadowed the U.S. military every step of the way through
the invasion and occupation of Iraq: first as Kellogg Brown and Root,
a subsidiary of Halliburton (for which **** Cheney was once CEO), and
then as KBR, an independent company. It has, in fact, made its
corporate fortune on the Pentagon's now infamous "no-bid," "cost-plus
contracts." Since December 2001, KBR has been working for the Pentagon
under the Logistics Civil Augmentation Program (LOGCAP) - a
multi-billion dollar agreement that guarantees the company those
cost-plus profits for fulfilling contracted tasks.
This huge and sweeping contract was awarded without the rigors of
the competitive marketplace. Its "no-bid" nature was a sign that KBR
was anything but a run-of-the-mill Pentagon contractor. A second sign
lay in the Pentagon's acceptance of that cost-plus arrangement. A
rarity in the business world, "cost plus" means that the more a job
costs, the more profit the company pockets. Professor Steve Schooner,
a contract expert at George Washington University Law School,
commented, "Nobody in their right mind would enter into a contract
that basically says, 'come up with creative ways to spend my money and
the more you spend the happier I'll be.'" Under this contract, the
Pentagon has doled out $20 billion to KBR to build and staff
facilities for military personnel in Iraq and provide food and other
necessities to U.S. troops there.
Ironically, the Pentagon isn't even getting what it paid for, not
by a long shot. KBR's fraudulent activities have, according to the
Government Accountability Office, included the failure to adequately
account for more than a billion dollars in contracted funds; the
leasing of vehicles to be used by company personnel for up to $125,000
a year (despite the fact that these vehicles could have been purchased
outright for $40,000 or less); the purchase of unnecessary luxuries
such as monogrammed towels for use in company-run recreation
facilities for military personnel; the overcharging for fuel brought
into Iraq from Kuwait for military use; the charging to the Pentagon's
tab three to four times as many meals as were actually consumed by
U.S. military personnel; and the provision of unclean water for U.S.
troops.
All of these abuses came to light thanks to investigations by
Representative Henry Waxman (D-CA), the Pentagon's own Office of the
Inspector General, and others, but Halliburton and its former
subsidiary got off with little more than such wrist slaps as the
revocation of the fuel supply contract and of KBR'S exclusive LOGCAP
contract for Iraq. That was recently divided into three parts and put
out to bid. KBR was, however, allowed to join the bidding, and is now
sharing the contract with DynCorp and Fluor Corporation. Each company
has received a $5 billion contract that includes nine one-year options
for renewal that could be worth, in total, up to $150 billion,
according to Dana Hedgpeth of the Washington Post.
The most recent of many black marks against KBR came when members
of Congress and investigators charged that substandard electrical work
by company employees in showers at military bases in Iraq had resulted
in the electrocution deaths of 16 American soldiers.
To understand what privatization means in action at the Pentagon,
consider just one modest example of the corruption that infects KBR
and how it was addressed. In 2004, the company submitted requests for
reimbursement on more than one billion dollars in charges that Army
auditors deemed "questionable," in part because they weren't backed up
by reliable records. Charles Smith, the Army official managing
Pentagon contracts, refused to approve the payments and threatened to
levy fines against the company if it did not get a better handle on
its spending. Later, he told James Risen of the New York Times that
KBR had "a gigantic amount of costs they couldn't justify. Ultimately,
the money that was going to KBR was money being taken away from the
troops."
Despite his 31 years with the Army, and without notice, Smith was
transferred from his post, while the requested payments were
subsequently sent to KBR. According to the New York Times, the Army
argued that "blocking the payments to KBR would have eroded basic
services to the troops. They said that KBR had warned that if it was
not paid, it would reduce payments to subcontractors, which in turn
would cut back on services."
In other words, the Pentagon - in charge of hundreds of billions
of dollars and more than a million personnel in and out of uniform -
was essentially held hostage by a company which threatened to withhold
services that (just to be clear) had been pretty shoddy to begin with.
Senator Robert Byrd (D-WV) saw the problem: "We have found
ourselves dependent on profit-oriented companies for even the
day-to-day basics of feeding and housing our troops, [and] for
carrying out a myriad of other functions of the mission, including
security. These kinds of contracts opened the door for every manager
to game the system in order to maximize profits."
And game the system they do. For example, the sort of corruption
that seems endemic to KBR has created a profitable new market for
another kind of private military corporation - one specializing in
oversight and accountability.
After the Army replaced Smith, it hired RCI Holding Corporation to
review KBR's records. Smith says the private company "came up with
estimates, using very weak data from KBR," while ignoring audit
information gathered within the Pentagon. While KBR was subsequently
awarded high performance bonuses and a portion of that new 10-year
contract with the Army, Serco (RCI Holding's parent company) also
received a new contract - to continue to oversee KBR's contracts.
And so dependency begets deeper dependency, while corruption,
incompetence, and callous indifference become ever more ingrained in
the military way of life.
During his first presidential campaign, George W. Bush identified
Christ as his favorite political philosopher. But as the first
American President with a Masters of Business Administration (and from
Harvard, no less), he has done a much better job of applying the
profit-first principles of Donald Trump and Jack Welch than
exemplifying the man from Galilee who promised the rich young man
"treasure in heaven" once he sold all he owned and gave it to the
poor. As president, Bush has brought a corporations-can-do-no-wrong
perspective to the Oval Office and quickly sought to give the private
sector an ever freer rein over a smorgasbord of public works and
services. Today, the military sector leans remarkably heavily on
private corporations to perform what used to be their basic functions,
from war to disaster relief to washing the dishes. KBR is just one
multi-billion dollar example of the MBA presidency's legacy.
Beyond Blackwater: The Pentagon's Cubicle Mercenaries
The new Complex 2.0 regularly employs companies whose job it is to
send armed mercenaries into action beside U.S. soldiers or to guard
U.S. diplomats and high military officers. Fighting wars for hire has
become an essential part of the Pentagon's MO since 2001, and the
Blackwater employee gunning through Baghdad in a Kevlar vest, a
kafiyah, and wrap-around shades is the ultimate symbol of the new
moment.
But there's another dimension of the Bush era's privatization
surge at the Pentagon that has gotten far less coverage: Private
military firms are also doing the paperwork of war. According to a
March 2008 GAO report, Additional Personal Conflict of Interest
Safeguards Needed for Certain DoD Contractor Employees, in offices
throughout the Department of Defense, cubicle mercenaries in startling
numbers are working shoulder-to-shoulder with uniformed military staff
and federal employees.
The Government Accountability Office (GAO) looked at 21 different
Pentagon offices and found that private contractors outnumbered
Department of Defense employees in more than half of them. In the
engineering department of the Missile Defense Agency, for example,
employees from private contractors made up more than 80% of the work
force. The GAO found that contractors were responsible for carrying
out a wide range of tasks and were not subject to federal laws and
regulations designed to prevent conflicts of interest - including the
rules that concern personnel who want to take positions with companies
they had awarded contracts to as federal employees.
Another March 2008 GAO report assessed the Army's Contracting
Center of Excellence where private contractors made up less than 20%
of the workforce. The average hourly cost of an employee from a
private contractor, however, was more than 26% higher than that of a
government employee. Similar disparities in pay can be seen even more
starkly in Iraq, where a soldier is paid little more than minimum
wage, while a private military contractor can earn well above $100,000
a year tax-free.
For perhaps the ultimate contrast in military privatization,
consider this: Testifying at a Congressional hearing in July,
Blackwater CEO Erik Prince offered a ballpark estimate for his annual
salary - "more than a million." He assured Representative Peter Welch
(D-VT) that he would "get back" to him with a more exact figure. Welch
noted at the time that General David Petraeus - then responsible for
more than 160,000 U.S. military personnel in Iraq - earned $180,000 a
year.
Privatization at the Bottom
Once private companies take on military and war-making tasks,
where does the buck stop? It is not uncommon, for example, for a
company hired to perform a service for the Pentagon to subcontract
part of the job to another company, which may then subcontract part of
its task to a third. Who, then, is in charge? When something goes
wrong, who is culpable?
A recent investigation by Craig and Marc Kielburger, Canadian
co-founders of the NGO Free the Children, and Toronto-based journalist
Chris Mallinos found that KBR has subcontracted to more than 200
different firms - many based in Kuwait - to transport materials into
Iraq.
One result of this: The United States has ended up paying
companies that are essentially enslaving Filipinos, Sri Lankans, and
other "third country nationals" who drive supplies into Iraq.
In a recent article in Epoch Times, the trio recount a series of
fact-finding trips to Kuwait to meet with dozens of South Asian and
Filipino men "recruited to the Middle East with the promise of good
jobs, only to be hired by Kuwaiti transport companies driving into
Iraq." A Filipino described how Jassin Transport and Stevedoring
Company - one of KBR's sub-subcontractors - took his passport,
nullified the contract he had signed in the Philippines, and issued
him a new contract written in Arabic. Employees were "given an
ultimatum: sign or be abandoned." Then they were handed the keys to
unarmored tractor-trailer trucks and told to drive fast along roads
known to be dangerous. The authors concluded that these companies
"openly flout U.S. labor laws by using cheap imported labor,
withholding employee passports and housing workers in decrepit
conditions."
Officially, nothing like this is supposed to happen. The
Philippines, Nepal, and other countries bar their citizens from taking
work in Iraq. In 2006, the Defense Department actually issued stricter
regulations forbidding such labor trafficking, and KBR and other
companies pledged that they and their subcontractors would follow
local labor laws. But regulations or no, the truth is that the
Pentagon is no longer really in control of the process, and
sub-sub-subcontracting is how you make the big money in places like
Iraq.
Oh and despite hearings, investigations, and legislation,
Congress isn't in control either. In an attempt to address the
privatization of the military, for example, the Senate's Democratic
Policy Committee has held a total of seventeen hearings on waste,
fraud, and corruption in Iraq. Representative Henry Waxman's Oversight
and Government Reform Committee has made the role of congressional
gadfly respectable. Hearings in both the House and Senate have offered
riveting, sometimes shocking, inside-the-Beltway theater, but
subsequent legislation created to make decent Pentagon reporting and
oversight a reality, close gaping loopholes in accountability,
criminalize fraud, and curb some of the worst abuses of private
contractors has proven well-meaning but hopelessly weak and
ineffective in practice.
Is MIC 3.0 in Our Future?
President Bush will leave office boasting that the United States
has the most powerful and professional military machine in the world.
We have paid dearly for this machine in the past seven-plus years. The
bill for all that might and muscle comes to more than $3.8 trillion
since 2001 - plus another $900 billion plus for actually flexing it in
Iraq, Afghanistan, and elsewhere.
And if the U.S. military machine is now both oversized and
staggeringly expensive, it is also more ****e to breakdown in a more
dangerous and unstable world. So think of George W. Bush's legacy to
us as a Pentagon bloated almost beyond recognition and crippled by its
dependence on private military corporations.
As for Bush's legacy to the Lockheed Martins, the KBRs and the
Pentagon's whole "Top 100" crew, it's been money beyond measure,
enough to leave them all hard at work on Military Industrial Complex
3.0. They naturally want to make sure that the money continues to pour
into their ever upgrading war machine, no matter who takes over the
White House in 2009.
Frida Berrigan is a Senior Program Associate at the New America Foundation's Arms and Security Initiative (http://www.newamerica.net/programs/american_strategy/arms_security). She is a columnist for Foreign Policy in Focus (http://www.fpif.org/) and a contributing editor at In These Times (http://www.inthesetimes.com/). She is the author of reports on the arms trade and human rights, U.S. nuclear weapons policy, and the domestic politics of U.S. missile defense and space weapons. Part one of her series on Bush's Pentagon Legacy at Tomdispatch.com, "Entrenched, Embedded, and Here to Stay," can be read by clicking here (http://www.tomdispatch.com/post/174936). She can be reached at berrigan@newamerica.net.