Friday, December 26, 2008

Suggestion 12: Investigate wartime contracts that were allocated under “emergency” over-rides to bypass competitive bidding rules.

All right, this one is sure to sound even more boring than talking about just in-time industrial practices!  But it is an important way that the Obama Administration might recoup many billions of dollars.  It would also be an ideal topic for a Truth and Reconciliation Commission. (See below)

Earlier, I spoke of how, under normal conditions, the federal government is supposed to offer contracts in ways that maximize opportunities for competition among a wide range of manufacturers or service providers.  Moreover, another goal is to ensure that the field is left with at least several players who can bid for future contracts.  These policies aim at preventing crony-favoritism and spurring creative efficiency.  It is also in keeping with fundamental premise of capitalism.   That competition is the best way to avoid corruption and to get the most out of every tax dollar.

But these same rules allow a president to make exceptions for cases of “national emergency.” As we’ve already mentioned several times, exceptional “emergency” bypasses during the last eight years have amounted to tens of billions, all the way to hundreds of billions of dollars.


Part of a 12/08 series of “unusual suggestions for America and the Obama Administration.”
 


Of course, some of these executive decisions were legitimate, under a perceived dire threat after the 9/11 attacks, or when our troops needed rapid deliveries of protective vests and up-armored vehicles, to safeguard them from new types of urban warfare.

In other cases - e.g. huge field-services contracts to support semi permanent bases in Iraq - were granted directly to Bush-Cheney friends and business partners.  Vice President Dick Cheney’s old firm, Halliburton, benefited so prodigiously that it recently moved its corporate headquarters to Dubai.

However they were first justified, these arrangements should have been converted to normal competitive bidding after the first year or so. Extending “emergency” contracting for six or seven years, far beyond any rational need, created an aroma of cronyism and waste that - at minimum - should be subjected to close scrutiny.

Note to the Obama Administration - watch out for this failure mode, when awarding “emergency recovery” contracts in the coming economic stimulus programs!  When the government offers to pay for grand infrastructure projects, in order to get unemployed men and women working, there is a serious danger  of (1) rushing to accept uncompetitive bids, and (2) having urgency contracts extend far into the future, when the terms won’t seem to be such a good deal, anymore.

One idea is to limit the hurry-contracts to just one year, in order to hire workers and get them started at tasks that don’t need extensive planning (or implementing already existing plans).  It should be required that the one-year contractor cooperate thereupon fully with all possible competitors, eliminating any advantage when it comes to the followup work. (One method: insist that the government own the work site and all equipment bought during the hurry-year, and that employee contracts be easily transferable.  In that case, the first-year contractor would have little long term advantage.)


Is there a general way to ensure that "emergency" clauses are never again abused as a way to reap outrageous profit under some trumped-up pretext? Well, By the very logic of the word "crisis," any company that seeks such a contract ought to be patriotic! Hence, they should be proud to accept terms severely limiting war-time profit -- the way big corporations did during World War II -- to a maximum of 5%, with no bonuses and with executives receiving no more than 10x the lowest paid employee. Not only is this patriotic, but it would ensure there is no lucrative incentive to bend the definition of "emergency" for improper purposes.

But lets get back to the wartime “emergency” contracts set up under the Bush Administration.  However legally binding these deals might appear, on the surface, there ought to be plenty of ways to apply leverage.

These companies might be pressed into renegotiation, rebidding, cancellation and even fee-recovery, if this practice of abusing emergency overrides can be shown to have a stench of collusion.  The possibility of recovering tens of billions of dollars in graft or overcharges should not be overlooked.  Moreover, offers of safety and rewards for whistleblowers may put the US government in an unfamiliar position of actually holding the high cards.

For a change.

Continue to Suggestion #13: Restore independent advisory agencies for science & technology...

3 comments:

David Brin said...

From the latest "Tomorrow's World" --

"Anne Coulter's injury results in jaw wired shut. America's atheists given pause."

I choked and sputtered and fell to the floor.

matthew said...

Can't the Justice Department simply litigate against firms that abused no-bid contracts? In short, can't we just *sue* the suckers into the ground?

"foeyouse": medieval biological weapon

rewinn said...

"...can't we just *sue* the suckers into the ground?..."

I would love to sue, but we'd need two things:

1. A Justice Department willing to sue, and

2. Legal grounds for lawsuit.

#1 was of course a laughable concept under the Bush Administration, but even with an Ideal President (... a title with which I do not wish to burden Obama; let him be himself rather than an Ideal ...) there is a temptation for the President's political requirements to interfere with the Attorney General's duties. I'm not saying it won't be done, but that we have to recognize the political problems. In an Ideal Administration, the AG would be almost completely independent of the President (the "Unitary Executive" has been bad for America) and would sue strictly on the merits of the cases.

2. Legal grounds: If the firms stayed within the purposefully forgiving language of a no-bid contract, it may be hard to find grounds to penalize them just because Congress and the President gave out bad contracts. Certainly, they DESERVE to be penalized, but the best tool may not be lawsuits.

That said, I am heartened by the possibility of investigation for tax evasion. One of the delightful things about the no-bid contractors is their willingness to incorporate abroad to avoid paying taxes on their ill-gotten gains; let us hope they were as sloppy in doing their paperwork as they were in actually fulfilling the terms of the contracts.

Another line of attack might be on the intentional non-fulfillment of the contract terms themselves. No doubt you've heard of the troops killed by sloppy contracting work (electrocuted in showers etc.), the dirty water supplied to our forces, and the buildings started but never finished. If it can be shown that the contractor had reason to believe at the time of contracting that it couldn't perform as it had agreed to, perhaps it could be socked.

If we are very lucky, tapes from CARNIVORE or its successor would have conversations outlining an out-and-out conspiracy between Cheney and his co-workers to defraud the taxpayer; that'd lead to a criminal case using the same civil forfeiture provisions that can cause you to lose your house if your spouse committed a drug crime in it. Now wouldn't that be just?

In an Ideal Administration, the Executive might simply declare an emergency and draft Halliburton, Blackwater et al. into our Armed Forces. Let them all work on an E-6's salary, and subject to discipline if they screw up, and see if they like it.

More realistically, I would hope Congress outlaws awarding no-bid contracts to any corporation outside of the taxing authority of the United States. I would also task the Corp of Engineers with building itself back up so it can do its job in emergencies without recourse to the private sector. It is simply irrational to go into the market place in an emergency, loudly trumpeting "Hey, this is an emergency! What must I pay for a solution to my desperate need?" and expect a decent answer.

In any event, a Truth & Reconciliation Commission is a necessary step, since without information, nothing intelligent can be done.