OCTOBER 22, 2014 – Outsourcing has become a very popular business model for agencies on all levels of government since 1980. While some government divisions can operate very effectively with this business model, the U.S. Pentagon faces some significant challenges in utilizing outsourcing on all operations.
National security is a very serious topic at the Pentagon, and secrecy is often absolutely vital in some circumstances. But, with budgetary concerns being what they are in Congress, the sequestration process has caused the Pentagon to reduce its expenditures drastically. However, outsourcing is not one of those expenditures on the chopping block.
Engrained Problems with No End in Sight
Many members of the Pentagon and Congress think the current state of the U.S. military is becoming weaker because of budget reductions. Cuts are being made across the board, but a reduction in the use of outsourcing is apparently not being considered, according to a report recently released by the Pentagon concerning the 2015 budget.
Given that one-sixth of all Pentagon funding is a target for fraud, theft, and abuse, the final result is an automatic loss of over 15% of the allocated budget, which is significant and unacceptable to many lawmakers. However, stopping fraud and abuse is not so easy because of political relationships between the companies and the officials. The military budget is a cash cow for many of these operatives.
All Pentagon outsourcing is done by contract. Sometimes these contacts can be awarded in less-than-fair conditions that often do not allow all companies an opportunity to even bid on the contract. Pentagon officials make the financial decisions and the contracts are essentially assigned in many instances.
And, the list of companies that are assigned tend to be connected companies that are part of the military industrial complex, and often they are directly connected to U.S. public officials. In addition, secrecy is routinely used by these companies who are outsourced for classified operations, so auditing is easily deflected, and the companies want that condition to exist. This provides excellent cover for fraudulent billing and financial transfer.
The instances of conflict-of-interest involving government officials and business associates are common, and the information is regularly ignored by corporate media. News management works to allow the Pentagon to continue it intrinsic waste and abuse. Former U.S. Vice-President George H.W. Bush is on the board of directors for the Carlyle Group and the Vanguard Group, both of which have commonly invested in companies receiving no-bid support contracts.
Halliburton is a perfect example of a no-bid cronyism contract award, as the former CEO is former U.S. Vice-President Dick Cheney. Cheney’s business relationship resulted in Halliburton being awarded a blanket support services contract for practically all military operations during the Iraq War, even though they had primarily been an asbestos removal contractor before the invasion. Halliburton also contracted with the oil industry in putting out fires in the oil fields.
Former Secretary of State George Schultz was also former CEO of the Bechtel Corporation, which also received some large general no-bid contracts. This type of no-bid award process still continues and the maze of individual conflict is massive. Therefore, the Pentagon budget is also massive, with outsourcing apparently rapidly becoming the primary business operation model.
Fewer Taxpayer Options
There are very few options for the American taxpayer when it comes to reducing the military budget. Transparency is severely needed, even with classified outsourcing, but politics involved are enormous. No politician wants to appear weak on defense. On the other hand, another big problem looming is the amount of control China has over both the U.S. national debt and the outsourced work currently being done for the military in China, especially in the semiconductor industry.
The U.S. semiconductor industry is suffering mightily because of this particular problem. The Chinese government could easily install trojan software in outsourced communications devices that can lay dormant until activated by the Chinese government.
VA Does Well with Outsourcing
While it’s puzzling why the military doesn’t have a good handle on outsourcing at present, there are many private sectors and governmental agencies that don’t experience issues and actually thrive after outsourcing. There are many benefits when it’s done with the proper oversight and procedures, chief among these are reduced costs and efficiency savings. Hospitals are one example of a sector that does well with outsourcing because of their incredibly high overhead. They are increasingly outsourcing services, such as call center services, electronic health record management and inpatient services.
Chief among those doing well with this decision are Veterans Affairs (VA) hospitals. The VA has been embroiled in scandals and malpractice suits lately, but one thing they are doing right, according to one study, is the outsourcing of their inpatient services to private sector hospitals. The study findings released by the Harry S. Truman Memorial Veterans Hospital indicate that the VA has more advantages than disadvantages when it comes to outsourcing their inpatient care.
It is mystifying why the military, a long running organization, can’t get a handle on the basics of outsourcing. One reason is because we let them. You can write to your representative and senators in Congress to let them know that you, for one, are tired of the waste of your tax paying money and would like the military stop being wasteful with your tax money and that they be smarter with their spending.
Outsourcing still appears as the direction the Pentagon is going with respect to controlling business expenses, even though a planned reduction in troops is already in place. The process may be more of a shift in accountability than an actual reduction in expenses, and the politics of outsourcing are making for some interesting international bedfellows.
Writer Holly Chavez comes from a military family. She worked several years as an industrial engineer for a logistics company and was involved with several successful outsourcing ventures while she worked there.
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