Obama's Serious About Taking an Axe to Corruption and Waste at the Pentagon

Of all Barack Obama’s promises of reform, perhaps the most audacious is his pledge to “restore honesty, openness, and commonsense to Pentagon contracting and procurement.” Washington is littered with the open-jawed skeletons of such efforts, and given the historic length of the White House to-do list, some might say taking on the defense establishment smacks of hubris. But a raft of recent statements, directives, and appointments indicate the administration fully intends to chaperone Pentagon shopping trips and hold defense contractors accountable in a way they never have been before.

For good reason, the president doesn’t specify exactly which golden-age standards he has in mind for the restoration of honesty and openness. In the half-century since Dwight Eisenhower’s farewell warning about an unaccountable “military-industrial complex,” not much has changed. Countless blue-ribbon commissions, white papers, and special hearings on the Hill have been set up to reform the system. Yet most defense analysts agree the problem is worse than ever. The Government Accountability Office estimates that 40 percent of Pentagon acquisitions come in over cost, the most since records began. Five percent of the military’s current base budget of $533 billion is thought to be lost through corruption every year. Other billions are simply unaccounted for in the Pentagon’s books, larger versions of those missing unmarked bricks of reconstruction cash we sent to Iraq by the hockey bag.

“We’re spending more than ever before for less and less,” says Winslow Wheeler, a lion among Washington’s defense reformers and director of the Straus Military Reform Project at the Center for Defense Information. “It’s a meltdown.”

Fulfilling a campaign pledge, the president has moved swiftly to address the problem. The White House has put an end to no-bid contracts and instructed the Justice Department to sniff out and prosecute cases of contractor waste and theft. Most important, on March 4, the White House ordered the Office of Management and Budget (OMB) to craft strict new guidelines for overseeing contracts government-wide. In announcing this directive, the president singled out the Department of Defense, putting the Pentagon and its practically in-house contractors on notice that the days of “blank checks” are over.

Echoes of the president’s frustration can be heard in Congress, where Carl Levin and John McCain have introduced legislation to increase competition and make it easier to pull the plug on weapons programs that overshoot advertised cost. Meanwhile, at the Defense Department, Robert Gates has been making his own noises about the dawn of a more sober era in what the Pentagon buys and how. 

If Gates proves the primary engine of reform at the Pentagon, he won’t be alone. Running the Pentagon’s acquisition’s office will be Ashton Carter, a reform-minded policy scholar and physicist who worked in Clinton’s Pentagon on non-proliferation issues. As the department’s weapons czar, Carter will preside over all meetings between Pentagon officials and contractors. He will decide, in consultation with the Defense Secretary and the White House, which weapons to buy, cut back, and kill. While some defense watchers say Carter lacks the acquisition experience and bureaucratic dog-fighting skills necessary to face down the defense executives, lobbyists, and generals who will be defending some $400 billion in business for contracted goods and services -- “They’ll view him as a plaything,” says one former employee of a major defense contractor -- others say he may prove a tiger.

“It’s true Ash Carter doesn't have a lot of acquisition experience, but there are those who think he can be pretty tough,” says Barry Watts, a senior fellow at the Center for Strategic and Budgetary Assessment. “We'll have to see how successful he can be in changing the system rather than being run over by it.”

“Carter had great ideas during his Clinton-era Pentagon tour, but he was widely regarded as bureaucratically weak,” says Travis Sharp, an analyst at the Center for Arms Control and Non-Proliferation. “This time around he still has great ideas and a clear view of where the Pentagon needs to go strategically. I think he is up to it, but he’ll be pitted against powerful interests in the private sector and on Capitol Hill. He needs allies.”

Not all the faces at Obama’s Pentagon are so fresh, of course. Many defense watchers and reform advocates remain confused and disappointed that Obama tapped William Lynn, a former Raytheon lobbyist, for number two at the Pentagon. Democrats are willing to trust the president, however, and within the Progressive Caucus only Claire McCaskill (D-MO) opposed the nomination.

Then there is Steve Kosiak, who holds the national security portfolio at OMB. Before joining the government, Kosiak directed budget studies at the Center for Strategic and Budgetary Assessment (CBSA), an independent think tank that frequently produces reports critical of Pentagon planning and 10 and 11-digit weapons programs. Kosiak is known as a liberal and a reformer who cut his teeth under CSBA founder Gordon Adams, another liberal critic of excessive defense spending who served under Clinton in the same role at OMB. Kosiak has been especially critical of futuristic space-weapons programs. In a 2007 report he authored for CSBA, he threw cold water on industry claims that space-weapons were necessary for the country’s defense. Kosiak also urged decisions on such weapons be weighed carefully against their potential arms race implications.

“It’s becoming clear that Obama intends to use [Kosiak and others at] OMB as his primary agents for change,” says Wheeler, of the Center for Defense Information. “The Pentagon cannot reform itself on its own.”

But the White House appears have an ally in Defense Secretary Robert Gates, a career public servant on his last go-around. Last month, Gates told Defense News that the military budget to be released in April will “realize cost efficiencies [and] reassess all weapons programs -- especially those with serious execution issues.” In the January/February issue of Foreign Affairs, Gates criticized “ever more baroque” big-ticket weapons systems “that as have become ever more costly, are taking longer to build and are being fielded in ever dwindling quantities.”

Next month’s budget will see cuts to at least a few of the “baroque” weapons systems that have experienced epic cost overruns in recent years. Among the programs being watched closely are the F-22 Raptor fighter jet, the DDG-1000 destroyer, the Expeditionary Fighting Vehicle, mid-course missile defense, and the services-wide modernization program known as Future Combat Systems. Some combination of these will likely suffer from the “hard choices” Gates says will define Obama’s defense budget in 2010 and beyond.

These “hard choices” alluded to by Gates aren’t just a result of Congressional or White House outrage over cost overruns and corruption. They are being forced by a quiet and growing tension in the military between people and machines. The main driver of defense budget growth isn’t new fighter jets or bloated boondoggles like missile defense. Rather, it’s the growing costs of training, equipping, paying, and insuring increasing numbers of U.S. servicemen and women. Nearly sixty percent of the defense budget currently goes to costs related to basic personnel, operations, and maintenance. In ten years, the number is expected to touch 70 percent. “It is an accurate statement that our personnel costs are rising every year and consume a larger percentage of the budget,” Gates recently told Defense News. Health care costs in particular, he said, are “increasing at what I would call almost an alarming rate.”

Obama has no intention of cutting defense spending in this area. The president’s first military budget provides a 2.9 percent pay raise for soldiers and accelerates planned increases in the size of the Army and Marine Corps. “These personnel costs will consume much more than the $9 billion inflation-adjusted budget growth the administration is seeking,” notes Travis Sharp, of the Center for Arms Control and Non-Proliferation. “It is inevitable that the procurement and R&D accounts will be cut, because cutting the personnel account is political suicide and cutting the operations and maintenance account is impossible when there are two wars going on.”

The question, then, is how best to rationalize procurement and reign in weapons system costs. There are two main schools of thought. One focuses on the process of how we buy weapons; the other on what we buy.

The first theory holds that if strict guidelines and timetables are enforced, boondoggles will be avoided and corruption eliminated. This approach is reflected in the Levin-McCain legislation, forthcoming OMB guidelines, and Obama’s pledge to expand the officer contracting corps.

“How we buy it is key,” says Rudy deLeon, senior vice president of national security and international policy at the Center for American Progress. “The contracting side of the process needs to be greatly strengthened.  The technology folks tell us what is possible, but the contracting guys actually obligate what we have to pay for. During the last eight years, the Bush Administration budgets reduced the career civilian workforce that possess essential contracting expertise. That was a huge loss going out the door.”