Defense Contractors Gird for Fight

By
Thursday, March 05, 2009 at 1:25 pm
The F-22 Raptor is produced by Lockheed Martin, the largest American defense contractor. (Wikimedia)

The F-22 Raptor is produced by Lockheed Martin, the largest American defense contractor. (U.S. Air Force photo)

With President Obama’s announcement Wednesday that he intends to attack wasteful Pentagon spending, one of the most powerful and entrenched interests in Washington — the multi-billion dollar defense lobby — is sure to retaliate. Obama aides insist that they’re prepared for the fight ahead. Defense reformers and lobbyists aren’t yet convinced that they are.

As part of a plan for fiscal responsibility, Obama issued a memorandum to all government agencies and departments informing them that the White House’s Office of Management and Budget will issue new guidelines by July 1 instructing them on what “inherently governmental” jobs cannot be outsourced and what new procedures are to be created to prevent government contracts from spiraling over budget — including “modifying or canceling such contracts.” At a press conference unveiling the memorandum, Obama singled out the defense industry for special opprobrium. “The days of giving defense contractors a blank check are over,” Obama said.

Illustration by: Matt Mahurin

Illustration by: Matt Mahurin

Defense bloat has stunned auditors. A report last year from the Government Accountability Office found that 95 ongoing major defense programs exceeded their budgets, providing an accumulated excess cost of $295 billion to taxpayers. The programs include big-ticket items beloved by the military services, including the Army’s Future Combat System, the Navy’s Littoral Combat Ship and the Air Force’s Joint Strike Fighter, which are built by defense-industry giants like Lockheed Martin Corp., Boeing Co., and Raytheon Company, all of which have aggressive lobbying arms and excellent relationships with defense barons on Capitol Hill. According to the government’s Federal Procurement Database, which tracks federal contracts, the Defense Department reported over $394 billion worth of business with private contractors in fiscal 2008 alone.

Defense contractors and their allies in government will not let that money go without a confrontation, say defense reformers. If he were a lobbyist, “I’d work with the bureaucrats to do what they always do,” said Winslow Wheeler, a three-decade veteran of Senate defense-budget fights who now directs a military-reform project at the Center for Defense Information. “The way the Pentagon wags say it is: ‘I’ll make them into a mushroom: keep ‘em in the dark and feed ‘em [manure].”

Kenneth Baer, a spokesman for the Office of Management and Budget, had a combative tone for the defense lobby. “We have just lived through an era of irresponsibility where taxpayer dollars were wasted and some of the biggest challenges we face were kicked down the road and not dealt with,” he said. “We can keep our people safe and our defense strong without all of this waste and inefficiency.”

Baer pointed to Obama’s YouTube address on his budget from Saturday, in which the president adopted more strident rhetoric than he has used to date to discuss the coming budget fight. “Special interests and lobbyists” are “gearing up for a fight” over his proposals, Obama said. “My message to them is this: So am I.”

Over the past several months, as the economic picture worsened and Defense Secretary Bob Gates publicly warned the defense industry that the financial “spigot that opened on 9/11… is closing,” industry efforts have fought back. A high-profile lobbying campaign to portray the Air Force’s expensive F-22 Raptor fighter jet — which the service and manufacturer Lockheed Martin fear may be a casualty of defense cuts — as a jobs machine has accelerated.  Allies like Sen. Saxby Chambliss (R-Ga.), whose home state features a major F-22 manufacturing plant, reciting the company’s talking point that 95,000 jobs could be lost if the jet gets the budgetary axe. A flurry of op-eds and blog posts from conservative writers have portrayed Obama’s first Pentagon budget request — estimated at $663.7 billion , which represents a four percent increase over the previous year’s budget before the costs of the two wars are factored in — as irresponsibly “sacrific[ing] American primacy,” in the words of a Bush administration Pentagon comptroller.

One Pentagon official expects much more of that as the services and the defense industry push back against reform. Their “ground game,” the official said, will be run from the services’ legislative outreach and public-affairs offices, feeding talking points and strategy information to sympathetic members of Congress — something that “got the services in trouble in 2002″ with Defense Secretary Donald Rumsfeld when the Army resisted his ultimately-successful plan to scrap an archaic artillery system called Crusader. An “air game” will feature “a lot of ominous whispers on background to the press and conservative think tanks and commentators about endangering the American people and costing lives in some future fight.”

Gates, whom Obama tasked with working closely with OMB, has told confidantes that he views a sustainable long-term rebalancing of defense priorities as one of his most important tasks now that Obama has given him the chance to continue on as Pentagon chief. His service under the Bush administration was more about supporting the immediate needs of the Iraq war after Bush fired Rumsfeld in November 2006. “The services are accustomed to reviews that start out with a lot of talk about setting priorities and making tough choices but in reality usually end with leaving everything more or less intact,” the Pentagon official said. “This time they have a secretary who really means it.”

A former Lockheed Martin official who requested anonymity spelled out a substantive scenario for the defense industry to combat the OMB review process. The process would put the blame for cost overruns not on the contractors, but on the military services for failing to be specific about what precisely they want built or delivered. “I would lead with [telling the government], ‘We waste money because you can’t make up your mind,” the ex-official said.

The ex-official explained that there is an inherent dynamic in the procurement process leading to companies undervaluing the true expense of their work in order to win a contract. “I make up a budget with my engineers, ‘OK, this is how much the project will cost.’ One bid will come in low among contractors A, B, C and D.” But in order to offer the low bid and win the contract, a contractor feels an incentive to shade down the project’s true cost. “So I’ll cut [my bid] 10 percent across the board,” the ex-official continued. “The engineers gave an accurate assessment, but you just cut it. When it comes to actually building the ship, everyone says ‘I need more money,’” in line with what the original engineering assessment of cost. Since the Pentagon has few restrictions against paying the increased cost of the contract after it’s been awarded — a practice that the OMB review will study — little prevents the overages from accumulating. Even less prevents the defense industry from low-bidding on a contract.

One solution, the ex-Lockheed official proposed, is called firm fixed-price contracting, whereby the Defense Department informs contractors that it will pay for a contract up to a certain point and any overages must be paid by the contractor. Firm fixed-price contracting is in place for some defense items. “When they do that, contractors are very honest” with their cost estimates, the ex-Lockheed official said. “But then the government tends to say ‘We don’t like that number,’ or it’s too expensive. For decades you’ve been getting low bids, so when you get an honest bid you say it’s way too expensive.”

The Pentagon official said that a smart strategy for the services would be to combat reform “indirectly through industry or military and veterans’ associations rather than directly.” Noting that the Army has already started distributing information about the value of Future Combat Systems, the official added, “The Army doesn’t seem to have figured this out.”

If the ex-Lockheed official’s scenario doesn’t work, Scott Amey, the general counsel of the Project on Government Oversight, a budget watchdog organization, anticipates a different one. “I guarantee you we’re going to hear that the government can’t operate without defense contractors,” Amey said.  “They’re [portrayed as] the driving force behind technology and innovation, and so a reliance on defense contractors is justified. We’re also going to hear some kind of backlash: ‘Many contractors operate efficiently and effectively, don’t allow a few bad defense contractors to spoil the bunch.”

For Wheeler, the author of “The Wastrels of Defense: How Congress Sabotages U.S. Security,” the process will come down to how prepared OMB chief Peter Orzsag, his deputy for defense programs, Steve Kosiak, and Gates are to outmaneuver the defense lobby and its allies. “This is a real test for Gates and Peter Orzsag to write regulations that make it easier to do right thing and harder to do wrong thing and then fight the nasty brutal battles that will make it stick,” he said. “This is the first step in a long journey, if they’re serious.”

Follow Spencer Ackerman on Twitter


Comments

44 Comments

jc
Comment posted March 5, 2009 @ 1:51 pm

The bottom line here is very simple. You either play by the rules or you do not get to play. I am sure that for every contractor out there that does NOT want to play by the rules, there are many that would gladly play by the rules.
This is NOT shrubie's White House and there will be NO MORE free rides.


Posts about Steve Jobs as of March 5, 2009 » The Daily Parr
Pingback posted March 5, 2009 @ 3:42 pm

[...] Jobs Steps Aside… For Now  (January 14, 2009) A Mellow Apple  (January 6, 2009) Macworld Expo Defense Contractors Gird for Fight – washingtonindependent.com 03/05/2009 The F-22 Raptor is produced by Lockheed Martin, the largest [...]


Defense contractors will fight « Later On
Pingback posted March 5, 2009 @ 6:44 pm

[...] Business, Congress, Democrats, Government, Military, Obama administration at 3:44 pm by LeisureGuy Spencer Ackerman in the Washington Independent: With President Obama’s announcement Wednesday that he intends to attack wasteful Pentagon [...]


John I
Comment posted March 5, 2009 @ 7:08 pm

So what would it take to get these companies out of the blowing-people-up industry, and into high speed rail, green power tech, and indusries that actually improve lives? Senator Saxby can keep the jabs, they just won't be building bombs. Funny how those senators rail against federal stimulus dollars, but gladly take military industrial jobs.


jc
Comment posted March 5, 2009 @ 9:51 pm

The bottom line here is very simple. You either play by the rules or you do not get to play. I am sure that for every contractor out there that does NOT want to play by the rules, there are many that would gladly play by the rules.

This is NOT shrubie's White House and there will be NO MORE free rides.


John I
Comment posted March 6, 2009 @ 3:08 am

So what would it take to get these companies out of the blowing-people-up industry, and into high speed rail, green power tech, and indusries that actually improve lives? Senator Saxby can keep the jabs, they just won't be building bombs. Funny how those senators rail against federal stimulus dollars, but gladly take military industrial jobs.


Jason
Comment posted March 6, 2009 @ 6:39 am

Two quick points. First of all and most importantly, Congress holds the purse-strings. The White House can recommend and revise and threaten, but in the end its leadership will only be able to be successful if Congress goes along with it. Count on the Repubs not to support this initiative, no matter how wasteful the programs.

Second comment, re: “…when the Army resisted his ultimately-successful plan to scrap an archaic artillery system called Crusader. ” Let's be very clear. The Crusader was not “archaic.” It was a desperately needed capability when other countries were fielding artillery systems that out-ranged ours, notably the South African howitzers that Iraq had in 1991. Was it expensive? Sure. But the more important issues that killed it was that (1) it was very heavy and would take some effort to deploy into theaters such as Afghanistan and (2) Rumsfeld hated the Army and was determined to cut it to the bone. He was pretty successful in that measure.

When US Army forces were in Afghanistan in 2001-2002, they lacked long-range artillery support and did not have responsive Air Force close-air support. Had the Army been able to field a Crusader-type system, or for that matter any form of heavy artillery, our infantry forces would have had a much better chance of surviving those intense fights going on in the valleys – something that we should have easily been able to figure out. (see
http://fmso.leavenworth.army.mil/documents/arty…)


Obama Socks Unbelieving Defense Contractors « Stephen C. Rose
Pingback posted March 6, 2009 @ 7:39 am

[...] READ THE WHOLE THING HERE With President Obama’s announcement Wednesday that he intends to attack wasteful Pentagon spending, one of the most powerful and entrenched interests in Washington — the multi-billion dollar defense lobby — is sure to retaliate. Obama aides insist that they’re prepared for the fight ahead. Defense reformers and lobbyists aren’t yet convinced that they are. [...]


ThinkingMeat · I got yer pork right here
Pingback posted March 6, 2009 @ 8:23 am

[...] The wingnuts screech about comparatively minuscule sums of money spent to do useful things, such as removing gang tattoos to help keep ex-convicts from sliding back into a life of crime. What do they carefully overlook? Billions wasted on defense contracts: [...]


Spencer Ackerman
Comment posted March 6, 2009 @ 10:17 am

You're right, Jason. I'm was too quick to call the system archaic. I regret the use of the adjective.


Jason
Comment posted March 6, 2009 @ 2:39 pm

Two quick points. First of all and most importantly, Congress holds the purse-strings. The White House can recommend and revise and threaten, but in the end its leadership will only be able to be successful if Congress goes along with it. Count on the Repubs not to support this initiative, no matter how wasteful the programs.

Second comment, re: “…when the Army resisted his ultimately-successful plan to scrap an archaic artillery system called Crusader. ” Let's be very clear. The Crusader was not “archaic.” It was a desperately needed capability when other countries were fielding artillery systems that out-ranged ours, notably the South African howitzers that Iraq had in 1991. Was it expensive? Sure. But the more important issues that killed it was that (1) it was very heavy and would take some effort to deploy into theaters such as Afghanistan and (2) Rumsfeld hated the Army and was determined to cut it to the bone. He was pretty successful in that measure.

When US Army forces were in Afghanistan in 2001-2002, they lacked long-range artillery support and did not have responsive Air Force close-air support. Had the Army been able to field a Crusader-type system, or for that matter any form of heavy artillery, our infantry forces would have had a much better chance of surviving those intense fights going on in the valleys – something that we should have easily been able to figure out. (see

http://fmso.leavenworth.army.mil/documents/arty/arty.htm)


All Our Might » Blog Archive » Defense contractors up for the fight
Pingback posted March 6, 2009 @ 5:21 pm

[...] you have a few minutes, I heartily recommend Spencer Ackerman’s article on the state of play in the Defense Industrial Complex.  President Obama has thrown down the [...]


Spencer Ackerman
Comment posted March 6, 2009 @ 6:17 pm

You're right, Jason. I'm was too quick to call the system archaic. I regret the use of the adjective.


By all means, complain about earmarks … « Blog on the Run: Reloaded
Pingback posted March 6, 2009 @ 10:23 pm

[...] pm Tags: cost overruns, defense programs, earmarks … as long as you also complain about this: Defense bloat has stunned auditors. A report last year from the Government Accountability Office [...]


westmoreland
Comment posted March 7, 2009 @ 10:19 am

Defense spending is the most productive expenditure in the national budget. It is hypocritical to wastefully swallow gargantuan amounts of money at project s that do nothing and then strain at the nat of defense spending. We need the raptor. We don't need ACORN. All your utopian dreams don't mean anything unless you can protect them. American defense contractors are the best in the world and have proven it many times over. The Raptor is a steal when compared to its counterparts in the rest of the world (i.e. Eurofighter, and similar Russian and Chinese projects) that cost about the same but do not come close in capability. If we were being honest about saving money in defense, we would drop the JSF and the unmanned toy aircraft and build Sea-Raptors with unmanned capability.


westmoreland
Comment posted March 7, 2009 @ 6:19 pm

Defense spending is the most productive expenditure in the national budget. It is hypocritical to wastefully swallow gargantuan amounts of money at project s that do nothing and then strain at the nat of defense spending. We need the raptor. We don't need ACORN. All your utopian dreams don't mean anything unless you can protect them. American defense contractors are the best in the world and have proven it many times over. The Raptor is a steal when compared to its counterparts in the rest of the world (i.e. Eurofighter, and similar Russian and Chinese projects) that cost about the same but do not come close in capability. If we were being honest about saving money in defense, we would drop the JSF and the unmanned toy aircraft and build Sea-Raptors with unmanned capability.


EOD
Comment posted March 8, 2009 @ 4:32 am

Having been on all sides of this issue for the last 20 years, it is a bit more complicated…

As a junior engineer at a Defense Contractor, I was taught early that the game was to underbid the contract and make profit on the ECOs. The only way that worked is because 1) the Government really doesn't know what the hell they want to buy, the Staff Officers and Analysts are just following orders, and 2) the budget folks THINK they know what “X” costs, but really don't because their market surveys are crap and no one wants to tell the GO/FO they can't afford something. EVERYONE in the process is incentivized to make any MDAP a cluster-f**k. Just look at the VH-71. Who the hell is going to tell the White House Staff that they are not engineers, and have no clue what they are asking for in a new chopper? It is in Lock-Mart's interest just to say “yes”, and milk the program until either 1) more funding arrives, or 2) the program self-destructs. They still make profit either way, and taking money from stupid people is easy! The Navy makes out good, because NAVAIR's budget goes up, they get more people, and can justify more Flag Officer and SES billets!

I can state without any exaggeration that the program I currently work on pisses away $2B/year, yes, Billion with a “B” with little improvement in combat capability to show for it…

I was a Military Officer with experience in 2 wars. NONE of the programs I work on have made ANY effort to truly quantify the “benefits to the Warfighter”. If they did an intellectually honest appraisal, they wouldn't be able to justify them…

A retired buddy who worked at the Marine Corps Combat Development Center used to make his “cherries” spend their first day watching the Kelsey Grammer movie “The Pentagon Wars”, then quiz them on it. Virtually all the inefficiencies and incompetence depicted in that movie is still true to this day. I have seen OTreports re-written because the Program Executive Office was threatened that their budgets would be cut, and their new “pay for performance” metrics were based upon shipping a product, even if it meant it really didn't function as designed (just change the test!)

The system is so corrupt, it may be more efficient to scrap it all and start over. The original B-52 bomber concept was fleshed out in a hotel room overnight by one AF Officer and some Boeing engineers. No IPTs, no CJCSI 3170, no DoD 5000, no JROC. That airframe will outlast us all, and all our extensive Integrated Product Teams, JCIDS, etc…

Go back and read Eisenhower's comments on the Military-Industrial Complex. He was SPOT ON!


EOD
Comment posted March 8, 2009 @ 11:32 am

Having been on all sides of this issue for the last 20 years, it is a bit more complicated…

As a junior engineer at a Defense Contractor, I was taught early that the game was to underbid the contract and make profit on the ECOs. The only way that worked is because 1) the Government really doesn't know what the hell they want to buy, the Staff Officers and Analysts are just following orders, and 2) the budget folks THINK they know what “X” costs, but really don't because their market surveys are crap and no one wants to tell the GO/FO they can't afford something. EVERYONE in the process is incentivized to make any MDAP a cluster-f**k. Just look at the VH-71. Who the hell is going to tell the White House Staff that they are not engineers, and have no clue what they are asking for in a new chopper? It is in Lock-Mart's interest just to say “yes”, and milk the program until either 1) more funding arrives, or 2) the program self-destructs. They still make profit either way, and taking money from stupid people is easy! The Navy makes out good, because NAVAIR's budget goes up, they get more people, and can justify more Flag Officer and SES billets!

I can state without any exaggeration that the program I currently work on pisses away $2B/year, yes, Billion with a “B” with little improvement in combat capability to show for it…

I was a Military Officer with experience in 2 wars. NONE of the programs I work on have made ANY effort to truly quantify the “benefits to the Warfighter”. If they did an intellectually honest appraisal, they wouldn't be able to justify them…

A retired buddy who worked at the Marine Corps Combat Development Center used to make his “cherries” spend their first day watching the Kelsey Grammer movie “The Pentagon Wars”, then quiz them on it. Virtually all the inefficiencies and incompetence depicted in that movie is still true to this day. I have seen OTreports re-written because the Program Executive Office was threatened that their budgets would be cut, and their new “pay for performance” metrics were based upon shipping a product, even if it meant it really didn't function as designed (just change the test!)

The system is so corrupt, it may be more efficient to scrap it all and start over. The original B-52 bomber concept was fleshed out in a hotel room overnight by one AF Officer and some Boeing engineers. No IPTs, no CJCSI 3170, no DoD 5000, no JROC. That airframe will outlast us all, and all our extensive Integrated Product Teams, JCIDS, etc…

Go back and read Eisenhower's comments on the Military-Industrial Complex. He was SPOT ON!


oldgeek
Comment posted March 8, 2009 @ 12:16 pm

Overstate the military value and capabilities and maturity of the technology and under estimate the time and money it will take.

The cost of failure in R&D is being given more time and money. The longer it takes in R&D the more lucrative the contract is.

The above is no secret and the reason why so few major programs ever make it into production.

If all else fails talk about how good your management programs are streamlining the process, all the savings you have generated, and you are employing best business practices using enterprise management principles, green belt, TQM and the kitchen sink.


oldgeek
Comment posted March 8, 2009 @ 7:16 pm

Overstate the military value and capabilities and maturity of the technology and under estimate the time and money it will take.

The cost of failure in R&D is being given more time and money. The longer it takes in R&D the more lucrative the contract is.

The above is no secret and the reason why so few major programs ever make it into production.

If all else fails talk about how good your management programs are streamlining the process, all the savings you have generated, and you are employing best business practices using enterprise management principles, green belt, TQM and the kitchen sink.


chris
Comment posted March 9, 2009 @ 9:51 am

THE FIVE SIDED BLACK HOLE IS THE BIGGEST WELFARE PROGRAM IN THE VISIBLE UNIVERSE……..PERIOD


Evaluating Security Challenges in the Obama Era | TaylorMarsh.com
Pingback posted March 9, 2009 @ 12:48 pm

[...] to Peter Orzsag’s strength of purpose, because the private defense contractor industry is gearing up for a fight. “This is a real test for Gates and Peter Orzsag to write regulations that make it easier to do [...]


chris
Comment posted March 9, 2009 @ 4:51 pm

THE FIVE SIDED BLACK HOLE IS THE BIGGEST WELFARE PROGRAM IN THE VISIBLE UNIVERSE……..PERIOD


This Month in High Stakes - Communicating Compliance in an Era of Increased Regulatory Enforcement
Pingback posted March 17, 2009 @ 5:01 pm

[...] stage for sweeping reforms in the ways that regulators do business. From the financial services and defense contracting industries, to the manufacturers of everything from helicopters to toys, no company is immune to [...]


Defense Contractors Gird for Fight
Pingback posted March 19, 2009 @ 7:58 am

[...] Defense Contractors Gird for Fight [...]


Buy Viagra
Trackback posted March 23, 2009 @ 9:53 pm

Buy Viagra…

http://url.edna.edu.au/4bbN Buy Viagra…


Defense Contractors
Comment posted June 10, 2009 @ 7:37 am

Just wanted to add a small tip on creating a recession proof career. It would be a good idea to plan out your career or business by considering government contracting. This is a very lucrative financial opportunity that can help you stabilize financially and increase your income flow if it is done the right way.

If this is something that you are interested in to put an end to your financial worries, get yourself registered with the Central Contractor Registry which is a federal clearing house for vendors and small businesses too. Also identify a product or service that you can supply to the government and which the government needs in order to get a contract.

You can win such billion dollar contracts and secure your career or business better even during this phase of recession.


bestcbstore
Comment posted September 11, 2009 @ 1:25 am

The latest Appraisal Management National Company Directory


jimmy conway
Comment posted December 13, 2009 @ 9:38 pm

Cherries? are you kidding me….your all a bunch of welfare working douch bags that need to retire…..


jimmy conway
Comment posted December 14, 2009 @ 2:38 am

Cherries? are you kidding me….your all a bunch of welfare working douch bags that need to retire…..


jimmy conway
Comment posted December 14, 2009 @ 2:38 am

Cherries? are you kidding me….your all a bunch of welfare working douch bags that need to retire…..


louis vuitton handbags
Comment posted August 6, 2010 @ 7:52 am

good


louis vuitton handbags
Comment posted August 6, 2010 @ 7:52 am

good


louis vuitton
Comment posted August 6, 2010 @ 9:23 am

nice job


louis vuitton
Comment posted August 6, 2010 @ 9:23 am

nice job


gucci web
Comment posted September 2, 2010 @ 3:03 pm

is good! I like this!


gucci joy medium boston bag
Comment posted September 2, 2010 @ 3:03 pm

is good! I like this!


exercise to lose weight
Trackback posted November 8, 2010 @ 6:16 am

Thank you……

So cool! Thanks….


22 | Trends Pics
Pingback posted February 26, 2011 @ 12:14 pm

[...] The F-22 Raptor is washingtonindependent.com [...]


F | Trends Pics
Pingback posted March 22, 2011 @ 5:04 pm

[...] The F-22 Raptor is washingtonindependent.com [...]


F-22 Photos | Pafos Photos
Pingback posted April 8, 2011 @ 8:27 pm

[...] The F-22 Raptor is washingtonindependent.com [...]


Us Defense Contracts | More More Pics
Pingback posted April 12, 2011 @ 4:15 pm

[...] (U.S. Air Force photo) washingtonindependent.com [...]


Income Hybrid Review
Trackback posted September 7, 2011 @ 12:33 am

Useful Post Of The Day: 6 Sep 2011…

This article has been rated by our readers to be the most useful post of the day. Here’s the link:…


4399912
Comment posted September 7, 2011 @ 1:01 pm

4399912 beers on the wall. sck was here


RSS feed for comments on this post.

Sorry, the comment form is closed at this time.