Secretary of Defense Robert Gates ordered a 10 percent spending cut on private contractors who provide support services to the military last August. While much of the discussion has focused on weapons systems, a report by the House Armed Services Defense Acquisition Reform Panel showed that the majority of the Department of Defense's programs guilty of wasteful spending are service contractors. Through their abuse of the military contractor system, outside contractors have become the lead drivers of Pentagon waste.
The food services company Sodexho, stands out as a particularly egregious offender. Sodexho currently holds a $1 billion dollar contract to provide food services to all of the Marine Corps' 17 bases in the United States. The cost of their contract was nearly 70% over initial expected costs. In documents obtained by this reporter, two separate companies filed complaints that the initial cost estimate Sodexho provided the Department of Defense was artificially low. Even the Government Accountability Office, as far back as 2000, characterized the Sodexho bids as using "highly exaggerated cost savings."
Likewise, the Marine Corps protested giving its contract for food services to Sodexho because it would rob the Marines of the opportunity to train troops for food services overseas where Marine Corps food services are not outsourced. The Marine Corps saw Sodexho's bid to feed stateside-based troops as an attempt to eventually feed USMC troops overseas.
However, with Sodexho spending $5.6 million to lobby Congress with powerful lobbyists like former Minority Leader Dick Gephardt (D-MO), it was able to overcome the objections of experienced food service contractors, the GAO, and the United States Marine Corps and win the contract. Since then, the contract has run twice over budget and Sodexho has provided the Marines with unsafe food.
The "cook and chill" food production facility Sodexho uses to prepare the food before sending it to Marine Bases was cited several times by the United States Department of Agriculture (USDA) and the state of Tennessee for food safety violations. In 2007, the USDA issued a recall of several tons of chicken, forcing Sodexho to permanently close its main food processing plant located in Tennessee and dramatically raise the cost of its services to the Marine Corps.
Sodexho knew from the get-go that the cost would possibly be greater than the estimate they initially gave the Department of Defense, but the company knew it could bilk the Pentagon for more funds later in the process. According to those familiar with the modification process, a contractor basically says it needs more money than it initially asked for and the modification is approved without much oversight of the request. In the case of the Marine Corps Contract, Sodexho asked for over 100 modifications in 8 years.
Since a contractor can get as many modifications as it wants, there is no need to control costs. A company has every incentive to break the law and lie to the government did about how much it will cost in order to undercut its competitors--as Sodexho did.
As a result, Sodexho's food servicing operation is costing the Marine Corps $1.4 billion for what was intended to be only an $880 million contract. That amounts to a cost overrun of $551 million.
A recent study by a bipartisan commission showed that $1 trillion could easily be cut from the defense budget. If you include the spending for two wars, defense spending makes up almost half of our federal budget.
While much of the discussion has focused on weapons systems, a report by the House Armed Services Defense Acquisition Reform Panel showed that the majority of the Department of Defense's spending is in service contracting. The report by the House Armed Services Defense Acquisition Reform Panel this spring showed that the military contract process has so little oversight and is so wasteful that it's actually harmful to our national security.
As a result, The House passed a measure called the IMPROVE Acquisition Act by a vote of 413-3, last April. The IMPROVE Act focuses on improving the standards of how the military buys services. It mandates the use of metrics with specific goals and standards for evaluating service contractor performances. The bill identifies weaknesses in DOD's processes for procurement of services, and would require the Pentagon to establish a formal system for identifying, assessing and approving requirements for the acquisition of services, similar to the process now in place for acquisition of weapon systems. Most importantly, the bill would establish a tough independent watchdog inside the Department of Defense to see that the money is spent effectively.
Cutting out government waste in the military is so popular that the measure passed the House with only three dissenting votes. It's an issue that united both left and right. The left likes it because it wants greater corporate accountability; the right likes it because it wants greater governmental accountability. Unfortunately, the bill now looks like it might die tragically in the Senate. If the bill ever does the pass the Senate, it still has to be implemented, which is the toughest process.
These defense contractors won't go down without a fight; companies like Sodexho spend $5.6 million to lobby for such contracts every year. Cozy relationships with contractors are as embedded in Department of Defense culture as buzz cuts and bizarre obsessions with Confederate military history.
Defense contractors have even gotten one of their own placed on their own - Honeywell CEO David Cote - placed on the President's Deficit Commission. Cote has lobbied successfully. Cote has instead pushed back against calls by Senator Tom Coburn (R-OK) to cut waste in the military by suggesting instead that the military cut the pay of its troops overseas (many of whom are already relying on food stamps) and make them pay for their own health care.
Cote has also supported cutting Social Security benefits, which would drastically hurt our economic security over the long run. The families of the 52 million Social Security beneficiaries, whose benefits would be cut, would be forced to take money out of the economy and financially provide for their loved ones.
As we look at how to cut our deficit, we should be looking at reforming defense spending practices with poor oversight that endanger the security of our troops, not cutting Social Security which is vital to everyone's economic security.