Table of Contents
The United States spends a significant portion of its funds on government contracts (procurements)—$586.2 billion (or ~12%) of $4.4 trillion in total spending in FY 2019. In short, the government invites companies to compete for contracts in order to get the best services for its workers and the public, at the lowest price (assuming bid rigging is not an issue). Procurement contracts span building and maintaining the country’s infrastructure, providing services and facilities for government employees, manufacturing military defenses, and so on.
The government has a history of overspending, leading to the $27 trillion in a national debt that just continues to grow. In FY 2019 alone, the Congressional Budget Office reported that the nation spent $900 billion more than our revenues ($3.5 trillion). In simple terms, individuals who cannot live within their means (when they have the option to) have poor money management skills. Although much more complex and on a huge scale, the government has a track record of overspending that potentially involves a great deal of waste.
Of that $900 billion overspends in one year, how much is coming from wasteful or even illicit spending through government contracts? Think about it. That’s money that could go to eliminating the national debt, money that could go to providing better government services, money that could help pay the rent for a single mother working two jobs just to stay afloat.
In this article, the Zero Theft Movement will provide a background on government contracts and provide some examples to kickstart your investigations into a potential area of rigged economy theft.
A Primer on Government Procurement
The buck stops with Congress. It has full control over spending and should have practices in place to provide proper oversight for the contractors they fund.
Christopher R. Yukins, a law professor at George Washington University, writes: “The Constitution vests Congress with the sole authority to control spending, and to protect that prerogative—often in the wake of profligate misuse of funds by executive offices—Congress has passed laws barring (and sometimes criminalizing unauthorized spending…”
Main Legislation and Statutes
Antideficiency Act (ADA)
The bill provides that no one can compel the Government to pay for anything that has not already been appropriated. The ADA also bars the Government from receiving gratuitous services without explicit statutory authority. In particular, an ADA infringement occurs when a Federal agency uses appropriated funds for something other than the express purpose.
Federal Acquisition Streamlining Act (FASA)
The statute intends to:
- boost government use of commercial goods and services;
- streamline the procurement process for high-volume, low-value acquisitions;
- provide better access for small businesses to compete for government contracting opportunities ;
- improve the bid protest process;
- extend the Truth in Negotiations Act to civilian agencies and raise the threshold for submitting certified cost or pricing data under that Act.
Federal Acquisition Reform Act (FARA)
FARA streamlines the contract award process by enabling contracting officials to reduce the number of contractors with whom they must negotiate. They authorize the use of simplified source selection procedures for commercial item acquisitions up to $5 million.
The infamous Big Dig, one of the biggest public works projects in U.S. history, started in the early 90s and was supposed to finish in 1998, with a total price tag of $2.56 billion ($7.4 billion adjusted for inflation as of 2020). The project ended in 2007, costing $14.8 billion ($25 billion adjusted for inflation as of 2020). That’s more than five times the original estimate. Was this just one big waste of money? Find out what citizens have found out about the Big Dig.
Amount Spent on Procurement Contracts (2001-2019)
|Amount (in billions)||$223.1||$262.1||$304.2||$345.7||$390.9||$432.0|
|$8,119,300,000,000.00 ($ 8.12 trillion)|
2001-2007 source: Center for American Progress
2008-2016 source: Stephen S. Fuller Research Institute
2017-2019 source: Federal News Network
Spending by Agency
Zooming in a bit further, it is important to know who is in charge of the spending. The Department of Defense (DoD) consistently spends much more, sometimes over double the amount, than the civil agencies do collectively. Yukins, in the same publication, comments:
“Important patterns in modern federal procurement can be traced back to the Revolutionary War, when the Continental Congress several times organized, and reorganized, the procurement system to supply the Continental Army. That very intimate relationship between Congress and procurement (especially defense procurement) continues today indeed, many modern procurement reforms are launched through the annual authorizing legislation for the U.S. Department of Defense.”
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Is there Considerable Wasteful Spending with Government Contracts?
Over 19 years, the U.S. has spent $8.12 trillion on government contracts. That’s clearly a colossal number, inconceivable for most.
But could such massive spending be justified? Is there substantial fat to trim, as they say?
Perhaps there isn’t much waste in government contracts to materially reduce the national debt. If the funds are being spent prudently, on essential items (within reason) and with minimal waste, then it would be difficult to argue such a thing. The question is: does this reasonably apply to federal procurement?
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The F-35 Joint Strike Fighter Program
An F-35A in flight
The Lockheed Martin F-35 Lightning II is a state-of-the-art stealth multirole combat aircraft, designed and manufactured by three contractors in partnership: Lockheed Martin (the primary contractor), Northrop Grumman, and BAE Systems. The trio has developed three different versions of the F-35 (A, B, and C) in order to create specialized aircraft for different tasks.
In FY 2019, Lockheed Martin (no.1), Northrop Grumman (no.5), and BAE Systems (no.13) all appeared in the top 15 highest-paid government contractors.
Lockheed Martin: $48,666 million (8.23% total procurement dollars)
Northrop Grumman: $16,101 million (2.72%)
BAE Systems: $6,310 (1.07%)
The DoD granted the $200 billion contract to Lockheed Martin in 2001, for 2,457 warplanes. All three contractors shared the $19 billion initial development award. But a project meant to end in around a decade is closing in on the finish line about ten years late, and coming in over budget by $200 billion, per The Hill.
In 2014, according to a New York Times article, an F-35 exploded before take-off, setting off a slew of controversies and public outrage. Among many problems, the planes ironically had sub-par lightning protections and a dangerous ejection system for individuals under 136 lbs. Despite successful efforts to fix the many issues, DefenseNews has found 13 Category 1 deficiencies still need fixing (as of mid-2019).
In 2016, Senator John McCain said, “[the F-35 project] has been both a scandal and a tragedy with respect to cost, schedule, and performance.”
Iraq & Afghanistan War Contracts
U.S. Airmen in Meade, Iraq, on Jan. 21, 2008.
Congress formed the Commission on Wartime Contracting in Iraq and Afghanistan to assess the efficacy of government spending. The group published a 248-page report documenting the wasteful and/or unethical spending that occurred during the Iraq and Afghanistan wars.
“At least $31 billion, and possibly as much as $60 billion, has been lost to contract waste and fraud in America’s contingency operations in Iraq and Afghanistan. Much more will turn into waste as attention to continuing operations wanes, as U.S. support for projects and programs in Iraq and Afghanistan declines, and as those efforts are revealed as unsustainable.”
One of the biggest government contracts awarded, the Army gave a LOGCAP III contract to Kellogg, Brown, and Root Services (KBR) that ballooned to upwards of $36.3 billion. LOGCAP stands for Logistics Civil Augmentation Program, and it provides funds for civilian logistics support (e.g. food services, transportation, laundry, mail, etc.) during wartime.
The Commission claims in the aforementioned report, “The base contract for LOGCAP III was awarded competitively, but lasted for 10 years without competition on any of its task orders…without the discipline of task-order competition, KBR proposals included large amounts of questioned and unsupported costs identified by the Defense Contract Audit Agency (DCAA). KBR billings also included large amounts subject to challenge for disallowance, such as unjustified dining-facility costs.”
The U.S. has sued KBR twice, accusing the defense contractor of receiving kickbacks and violating the False Claims Act. According to one of the Department of Justice (DOJ) press releases, “KBR allegedly violated the LOGCAP III contract by failing to obtain Army authorization for arming subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Ministry of the Interior.” The cost for the private security and the damages sought by the government remained undisclosed.
The second lawsuit against KBR alleges, per another DOJ press release: “…in 2003 and 2004, KBR employees took kickbacks from La Nouvelle and First Kuwaiti in connection with the award and oversight of subcontracts awarded to these companies. KBR then claimed reimbursement from the government for costs it incurred under the subcontracts that allegedly were inflated, excessive, or for goods and services that were grossly deficient or not provided. For example, KBR allegedly awarded La Nouvelle a subcontract to supply fuel tankers for more than three times the tankers’ value. La Nouvelle later rewarded the KBR employee who awarded the subcontract with a $1 million bank draft. As another example, KBR allegedly continued to make monthly lease payments to First Kuwaiti for trucks KBR had already returned to the subcontractor. KBR billed the government for the costs of both of these subcontracts.”
Is government contracting efficient on the state and local levels? Just think about how much public funds we could be losing due to potential inefficiencies in the government procurement process…
Hurricane Katrina FEMA Trailers
FEMA (Federal Emergency Management Agency) inspector inspects a trailer set for the Gulf Coast
In August 2005, Hurricane Katrina caused 1,800 deaths and $125 billion in damages, razing New Orleans and its surrounding areas in particular. 300,000 houses were rendered uninhabitable, leaving many survivors homeless and stranded. FEMA stepped in and provided temporary housing to displaced persons in the form of mobile homes/trailers. The organization, in Mississippi alone, awarded 15 government contracts to state businesses (10 to maintain and deactivate housing units, 5 to oversee housing compounds).
The Center for American Progress claims “[n]ot only did the government waste $2.4 billion because it bought too many trailers (a planning phase failure), but it ended up paying more than $225 million to store them (a management phase failure).
GAO later investigated these contracts, alleging multiple causes of “wasteful and improper or potentially fraudulent payments”:
“FEMA’s ineffective oversight resulted in an estimated $30 million in wasteful and improper or potentially fraudulent payments to the MD contractors from June 2006 through January 2007 and likely led to millions more in unnecessary spending beyond this period. For example, FEMA wasted as much as $16 million because it did not issue task orders to the contractors with the lowest prices. In addition, GAO estimates that FEMA paid the contractors almost $16 million because it approved improper or potentially fraudulent invoices… In another case, FEMA’s contracting officer awarded a $4 million contract to make the temporary housing units disabled-accessible; the contracting officer allegedly had a previous relationship with the awardee’s subcontractor. GAO licensed engineers estimated that the work should have only cost about $800,000, or one-fifth of what FEMA ultimately paid.”
Sure enough, news reports on FEMA’s overspending started to emerge. NBC News published a short article in 2007, claiming the cost of a FEMA trailer at the Port Bienville site in St. Louis, MI was higher than a three-bedroom house in the area. “Expenses for each FEMA trailer at the Port Bienville site could reach a staggering $229,000…Investigators with the Government Accountability Office (GAO) say the trailers themselves cost only $14,000, but FEMA wasted big money by placing them at a small temporary site built from scratch with huge maintenance costs.”
Streamlining Supply Chains = Huge Potential Savings
Beyond eliminating unethical and/or illegal spending, the government can eliminate wasteful spending by taking advantage of the great wealth of civilian technological innovations. This would enable the streamlining of supply chains, along with clear and transparent transactions records to hold contractors accountable for all their work.
We live in a technologically advanced society, where new innovations appear to be made by the hour. High frequency trading firms make countless trades occur in the matter of milliseconds. Scientists have created nanotube technology where materials are manufactured at the molecular level. To think, it’s been over fifty years since we first landed on the moon! For example, why is the government paying a significant portion of their Information Technology spend ($80 billion annually) to maintain outmoded technology systems?
According to the Center for American Progress, “The federal government can save between $25 billion and $54 billion a year by changing the way it buys goods and services…That’s roughly $400 billion in savings over 10 years on average, or a 7.5 percent annual reduction from current federal procurement spending levels of more than $500 billion a year.”
McKinsey & Co., in a 2009 quarterly report, claimed: “If the US government could achieve the 15 percent or more productivity improvement we typically expect from a major private-sector change program, for instance, the savings to taxpayers would exceed $134 billion annually (more than $445 per citizen) on 2010 federal addressable spending of approximately $900 billion”
The Technology CEO Council, formed by chief executives from major corporations such as Motorola, Dell, and Intel, released a report in October 2010. They estimated the potential savings over ten years could exceed $700 billion, if government supply chains are streamlined and improper payments/fraud is cut out with advanced business analytics.
From the Technology CEO Council
The IBM Center for the Business of Government also identified the potential for savings in government supply chains. Their study states: “The Department of Defense is applying processes such as Lean Six Sigma to extract costs from their supply chain. In our experience, process improvements alone can improve efficiencies by 10–20 percent. If the federal government could achieve similar improvements in supply chain performance, it could save more than $500 billion over the next 10 years.”
The aforementioned McKinsey quarterly report estimated more than $445 savings for taxpayers per year. While other areas of the rigged economy would still need to be addressed to generate truly substantial savings for the public, that extra money alone would create a bit more security for low-income citizens.
Eradicate the Rigged Layer of the Economy with the Zero Theft Movement
From the evidence presented above, there appear to be billions of wasteful and unethical spending being ripped off of the public through government contracts. But you might have evidence proving otherwise, or further proof that government contracts involve a great deal of questionable spending. Either way, we want you to get involved, voice your opinion, so we can expose the truth.
We, the public, must know who are the crony capitalists, where they are stealing from, how much is being ripped off from us every year. Without that information, the rigged economy will remain a constant source of suffering, not just annoyance.
If we continue to allow this kind of profligacy, government contracts and otherwise, we will continue to not only sink deeper and deeper into national debt but allow crony capitalists and corrupt officials to profit off of this potential ‘rigged layer’ of the economy. This rigged layer sits on top of an otherwise ethical economy, and has resulted in half a century of wage stagnation while productivity has steadily increased, anticompetitive markets that have artificially hiked up the prices for old goods (even old antibiotics), and created a revolving door where regulators/legislators exchange places with lobbyists.
We live in a corporatocracy, not a democracy.
By exposing the bad actors, we, the public, will leave the profitable, ethical layer of the economy intact. Only then can we benefit from higher wages across the board, markets that involve genuine competition for our business, and a government that legislates based on our interests. We can achieve this, but we need you to join our movement for an ethical economy.
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The ZeroTheft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. ZeroTheft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.