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The Outsourcing Problem

Corporate Contractors’ Heavy Burdens on Taxpayers

by RALPH NADER

Next time you hear federal officials say that there is no money to repair or build necessary public facilities in your community, ask them why there always seems to be money to greatly overpay for government projects that are routinely outsourced to corporate contractors.

It is important to understand why incomplete projects such as the proposed campus-like Department of Homeland Security in Washington, D.C., the “cleanup” of the biggest repository of radioactive waste in the U.S. at the Hanford Nuclear Reservation in Southeastern Washington State, the ballistic missile defense program and the pie-in-the-sky fusion reactors have gone way over budget. They are either behind schedule, or without any clue for completion or cessation.

First the dismal scenes: According to the Washington Post,

“The construction of a massive new headquarters for the Department of Homeland Security (DHS) … is running more than $1.5 billion over budget, is 11 years behind schedule and may never be completed, according to planning documents and federal officials… The entire complex was to be finished as early as this year, at a cost of less than $3 billion.”

Only one of the buildings for the Coast Guard has opened.

Second, at Hanford, more than $30 billion has already been spent for the “cleanup,” under a Tri-Party Agreement between the U.S. Department of Energy, the U.S. EPA and the Washington State Department of Ecology. Started in 1989, the effort had a proposed 30 year timetable. Instead, Hanford officials say they are decades and tens of billions of dollars from completion of this admittedly sprawling brew of atomic weapons waste in 177 giant underground storage tanks and nine nuclear reactors.

Third, the much ballyhooed Department of Energy’s Fusion Energy Science program has been receiving federal funding since 1951 (declassified in 1957) and has not yet had a replicable successful discovery from which to generate affordable energy. It is a boondoggle annuity for contracting university physicists and companies who once in a while issue a news release announcing a presumed partial step forward as to keep hope alive for awe-struck science writers.

As the late physicist, Norman Milleron, a critic, who worked at the Lawrence Livermore Lab, was wont to say: “why not focus on the best fusion reactor we’ll ever have – the Sun?

Fourth, for thirty-years the ballistic missile defense pork barrel has fed the likes of Raytheon and the insatiable corporate lobby that has grown up to feed off the tens of billions of dollars already spent (over $9 billion this year almost as much as the EPA’s budget). Unfortunately the test results show ballistic missile defense systems don’t work. Nor will it likely ever have substantial success. The proposed weapon is too easy to decoy and even if it did function 100%, it is easy to bypass with other more lethal weapons through our ports and other modes.

So dubious is this endless program, that years ago the American Physical Society delivered the ultimate denunciation, they declared the mission unworkable. The leading opponent, Prof. Theodore Postol of MIT continues to dissect its stumbling, deceptive history and how Congress continues its annual deceptions as it writes gigantic taxpayer checks.

The aforementioned cannot compare to the tens of billions of dollars in ‘cost-overuns’ on the F-35 and F-22 fighter planes whose Pentagon orders from Lockheed-Martin keep being reduced because of the sky-rocketing cost of each plane – (the F-35 is now at $115 million each, the F-22’s last plane in 2009 cost $137 million – which is equivalent to $151 million in 2014 dollars). The F-35 is still in early production after decades of trouble.

What gives here? How could the remarkable P-38 of World War II come in at $1.3 million a plane, inflation-adjusted, and be produced so quickly in 1944? How could Bechtel Co. sign a contract in March, 1942 with the Navy, drain a swampy area and construct major buildings before the end of the year? By October 27, 1945, with a workforce of 75,000 people at its peak, the company built 93 ships!

Well, of course, there are lots of reasons and excuses. Different urgencies. Unforeseen situations emerged. Or Congress didn’t appropriate enough money each year to keep these projects on schedule which has led to an increase in costs. Or the planning was unrealistic from the outset. Or corporations knowingly submitted unrealistic budgets (“lowballing”) to win federal contracts and funding of these projects instead of opting for adequate, more feasible and frugal alternatives.

There is self-censorship by officials and others who were skeptical of the necessity of these projects, as the deferential Government Services Administration (GSA) people were regarding the site for the DHS. And of course, the dysfunctional Congress enacted perpetuating pork barreling.

Least noticed are the detailed terms of the contracts themselves. Tighter contracts could have held the government and contractors’ feet to the fire in a variety of ways that could be culled from the history of past successful projects that came in on time and budget. Contract terms could include: putting named compliance officers on the hot seat.

Automatic disclosure to the public of the full texts of the contracts including their observance over time; more breaking points to penalize and/or jettison contractors; and better oversight of the early planning process by Congressional Committees are roads to good performances.

Referring to the DHS construction, Rep. Jeff Duncan (R-SC) said: “Sometimes you just have to drop back and punt…At what point in time does the government just cut its losses and look for a better way of doing things?” Apparently this will only happen when when there is no powerful special interest lobby pushing for sweetheart deals. That is why the only one of the above projects that is likely to be scrapped for alternatives is the DHS project. It has no constituency, according to former DHS Chief, Michael Chertoff. The other aforementioned projects will continue to waste taxpayers’ dollars. This crony capitalism is disgraceful.

Maybe in all the miasma, there is one clarifying principle, which if observed can greatly correct these chronic, vastly over-budget delays, screw-ups and incompletions. Nassim Talib elaborated on this topic in inimitable ways – historical and otherwise – within his under-appreciated recent book –Antifragile (2012) – which is actually six books in one. He writes about the importance of having “skin in the game,” noting that Roman engineers had “to spend some time under the bridge they built – something that should be required of financial engineers today.”

From all pertinent directions regarding a project, the supposedly responsible people need to have skin in the game. It does wonders for focusing attention. It starts with the people who conceive, plan and find projects. And it doesn’t leave out the lawyers who draft those porous contracts filled with escape clauses.

Ralph Nader’s latest book is: Unstoppable: the Emerging Left-Right Alliance to Dismantle the Corporate State.