Thursday, January 19, 2006

Paying billions for BS

As you start to think about tax day in a few months, chew on what Tony Capaccio is telling you (go to page 15).
The U.S. Defense Department paid contractors $8 billion over five years in bonuses on weapons programs that were often dogged by severe cost overruns, performance problems and delays, the Government Accountability Office said.
Lockheed Martin Corp. and Boeing Co., for example, received $1.7 billion, or about 91 percent of $1.847 billion available on four major programs, including the Joint Strike Fighter, even as these programs “experienced significant cost increases, technical problems and development delays,” the draft said. Other major programs the agency cited included the Boeing-United Technologies Corp. RAH-66 Comanche helicopter, canceled in April 2004, and two other Lockheed programs: the F/A-22 fighter and a satellite system to detect enemy missile launches. Bonuses paid on these troubled programs ranged from 74 percent to 100 percent of the potential award, the agency said.
And the understatement of the month....
“These practices undermine the effectiveness of fees as a motivational tool and marginalize their use in holding contractors accountable,” the audit agency said. “They also serve to waste taxpayer funds.”
How about theft? Wonder why we can't buy enough of what we need?
Most U.S. military contracts pay companies a base fee of no more than four percent of the contract's original projected cost plus either “award fees” that are paid periodically or an “incentive fee” calculated at the contract's end that's based on whether the cost is over or under projection. The bonuses can total as much as 23 percent of the contract's projected cost. They are recommended by a board of service officials who work on the program and the final decision is made by a higher-level program official not connected with day-to-day oversight. Contractors can appeal the decision.
Here is the nasty secret. When these guys retire, they often go to work in the same industry they were once paid to watch over. Program to program, they know each other. Want a reputation of not being a "team player." Human nature as it is.....

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