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The Bunker: The Contractors’ Pie Keeps Growing

The Bunker, delivered to our subscribers Wednesdays at 7 a.m., is a newsletter from the desk of National Security Analyst Mark Thompson. Sign up here to receive it first thing, or check back Wednesday afternoon for the online version.


WAR, INC. 1.0

Commerce is booming, just like bombs

Last year, there were 53,000 U.S. contractors working for the Pentagon in the Middle East, 50% more than the 35,000 U.S. troops they were there to support. That shift to contractors—there was a 1-to-1 ratio in Iraq at the height of that war in 2008—highlights the growing commercialization of combat, and other military duties, according to a new study from the Costs of War project at Boston and Brown universities. “In 2019, the Pentagon spent $370 billion on contracting–more than half the total defense budget of $676 billion and a whopping 164% higher than its spending on contractors in 2001,” Heidi Peltier writes.

Why should taxpayers care? Basically, because contracting out war doesn’t lead to lower costs. That’s despite contrary claims from the military-industrial-complex of how much money is being saved by “privatizing” much of the U.S. military. “This is because contractors lack competitive pressures to reduce the prices they charge to the government,” Peltier says. Not only were 45% of Pentagon contracts classified as “non-competitive” last year, many so-called “competitive” contracts were of the “cost-plus” variety, which removes incentives to keep costs down. “Between 2008 and 2019, the Department of Defense spent over $1.2 trillion on such cost-type contracts, none of which were subject to the cost-reducing pressures of private markets,” the study adds. “Other contracts include lifetime service agreements and sole-supplier contracts, which effectively create monopolies.”

This military machine keeps humming because it pays its workers “from 20 to 166% above the national average” for similar civilian jobs, the report notes. When cuts are proposed, the predictable cries come from defense workers/voters and their representatives in Washington, D.C. The rest of us don’t care enough to do much about it, so this zany form of socialism continues.

There’s another benefit to this ruse. Contractors, especially those on the front lines performing simple tasks like laundry and lunch for the troops, help the U.S. military keep troop numbers down in dangerous places. It’s another way—like doing away with the draft, and congressional disdain for actually declaring war—that lets the U.S. wage war at arms-length.

WAR, INC. 2.0

Why the contractors’ pie keeps growing

The traditional relationship between buyer and seller has broken down at the Pentagon, and elsewhere in the federal government. “Like so many other areas of the economy, government contracting has been entirely transformed over the past 25 years, and almost exclusively to the benefit of corporate interests,” argues Richard Loeb, a law professor at the University of Baltimore and lawyer with the American Federation of Government Employees.

In a report for the American Economic Liberties Project, Loeb highlights the stiff prices the Pentagon paid defense contractor TransDigm that generated outrage last year. The company got bipartisan “tongue-lashings” at a congressional hearing for selling a $1,700 cable assembly for $7,800, a $300 connector for $1,100, and a $650 motor rotor for $5,500. (Mandy Smithberger and Scott Amey, my colleagues at the Project On Government Oversight, took a deep dive into this). The company refunded $16 million to the federal government, but that was basically it.

“TransDigm had not violated any laws, regulations, or other government contracting policies,” Loeb notes. “Every major defense contractor follows the same pricing laws, regulations, and government policies as TransDigm to boost their own profits at taxpayers’ expense.” Loeb blames the Clinton administration for relaxing contracting rules that have given the private sector the upper hand. His argument is pretty complicated and technical for us average taxpayers, but seems, if you’ll pardon the expression, right on the money.

WAR, INC. 3.0

The tightening vise

As contractors suck more money out of the defense budget, generals and admirals keep looking for magical pots of gold at the end of their fiscal rainbows. Some of that lusted-after leprechaun loot is the military services’ recurring call to create a special fund—separate and apart from their own budgets, of course—dedicated to nuclear weapons. While atomic warheads are funded through the Department of Energy, the platforms needed to deliver that doomsday cargo (bombers, submarines and missiles) are paid for by the services.

But it’s going to cost the Pentagon an estimated $432 billion to keep its nuclear triad up and running for the next decade. Roughly half of that will go to replacing its aging fleets of subs, bombers and ICBMs. If the Air Force and Navy have to foot that bill, it’s going to mean less money for weapons they actually use, along with beans and boots. “There are either going to be some significant trades [i.e. cuts] made, or we’re going to have to find a fund for strategic nuclear deterrence, that we can use to modernize,” General Dave Goldfein, the outgoing Air Force chief of staff, said July 1. What’s interesting is that nuclear weapons account for a relatively small slice of total Pentagon spending. It’s about 5% this year, slated to rise to 6% in 2021 under President Trump’s proposed budget (a 20% hike), and to 6.8% in 2024.

The Air Force and Navy would be very happy to shift the cost of rebuilding the nation’s nuclear triad off of their books. Unfortunately, you and The Bunker would still be on the hook for a Pentagon now spending, annually, more than the Cold War average. This purported dwindling ability to pay for what the Pentagon says it needs is due in no small part to the tightening grip of defense contractors, as detailed in The Bunker’s first two items, above.

WHAT WE'RE READING

Here’s what has caught The Bunker's eye recently

Mothballoney

The Navy is mothballing its first four Littoral Combat Ships before they’re teenagers. That’s raising some eyebrows, given their youth: the oldest, the USS Freedom, was commissioned in 2008, followed by the USS Independence (2010), the USS Fort Worth (2012) and the USS Coronado (2012). So why is the Navy retiring these pint-size warships after less than half of their expected 25-year lifespan? “The Navy decided to cut the ships to save money on modernization efforts as it faces a mountain of shipbuilding bills and upgrade costs,” Defense News reported July 2. Sounds like the brass ought to take advantage of the Navy's Personal Financial Management Program. “For some, the lack of basic consumer skills and training in how to prudently manage finances sets the stage for financial difficulty,” the Navy says. The program is designed for sailors, but apparently admirals would benefit, too.

Fox, Meet Henhouse

The Senate Armed Services Committee wants to shift budgetary power for the nation’s nuclear arsenal from the Department of Energy to the Department of Defense. The proposal would give the Pentagon’s Nuclear Weapons Council the final say before proposed A-budgets are sent to the White House for a final OK. Currently, DOE’s National Nuclear Security Administration handles that task. Critics fear the change would mean a bigger push to build new fleets of bombers, ICBMs and submarines, according to a June 30 Defense Newsreport. CQ reported the Senate quietly passed a provision to weaken the proposal, though it still gives allows the Council to review and critique the Energy Department’s proposal.

Whirlybird-Brained

There’s both good and bad news in the Pentagon’s latest semi-annual report, released July 1, on how our near-20-year-war in Afghanistan is going. The bad news is that while Afghans are doing 95% of the maintenance on their Russian Mi-17 helicopters, they’re only doing 0% on their replacements, the more complicated U.S. UH-60s. The Bunker warned two years ago the Afghans wouldn’t be able to keep their UH-60s flying without substantial outside help. That’s good news for U.S. defense contractors!

National (on) Guard

There were no active-duty troops arrayed against protesters following the death of George Floyd in police custody in late May. Some 41,500 National Guard troops, typically under the command of state governors, pulled such duty. But even that is a mission too far for Air Force General Joe Lengyel, who as chief of the National Guard Bureau is a member of the Joint Chiefs of Staff. “In my opinion, [military] uniforms, I don’t care what flavor they are—Title 10, Active-duty, National Guard, Reserve—uniforms being out there in law-enforcement situations is not optimal,” he told a Brookings Institution audience July 2. “We should do as little of it as we can,” Air Force Magazine reported the same day. One month earlier, President Trump publicly declared that he had “strongly recommended” the nation’s governors “deploy the National Guard in sufficient numbers that we dominate the streets.” Good thing General Lengyel isn’t looking for a promotion.

Shotgun Taser

Speaking of protests, the Marines are developing an electroshock weapon that can stun people a football field away, Stars and Stripes reported June 29. This way, protesters could be cleared from Lafayette Park without the shooters ever having to leave the White House grounds.

Let’s make a steal…

NATO member Turkey has been booted from the F-35 jet-fighter program because it had the temerity to buy Russian S-400 Triumf anti-aircraft missiles. Senator John Thune of South Dakota, the GOP whip, says Turkey can rejoin the program if it sells those S-400s to the U.S. Turkey paid about $2.5 billion for them, Air Force Magazine reported June 30, but lost $9 billion in potential F-35 work when it decided to buy the S-400s from Moscow. The U.S. and its F-35 partners feared Russia would learn too much about how to shoot down F-35s if Turkey flew them near the S-400. (Turkey had planned to buy 100 F-35s, before being kicked out of the program last year.) The U.S. would dearly love to dissect S-400s to learn how to defeat them. Of course, China bought a pair of S-400s in 2018 and is now building its own version.

The cursed platoon

An Army officer was convicted of murder, and then pardoned by President Trump after becoming a Fox News cause célèbre. The men he led became collateral damage. Powerful reporting by Greg Jaffe in the July 2 Washington Post.

Bailing from Boeing

The aerospace giant’s communications chief quit July 2 after an employee complained about an article he had written in 1987 saying women should not serve in combat.

Are all Confederate memorials equal?

Elliot Ackerman writes in the July 7 New York Times that 500 rebel graves in Arlington National Cemetery should rest in peace, as statues honoring their generals are torn down across the country. There is an important distinction, he argues, between demolishing glorification and erasing history.


Well, that’s it for this week from The Bunker. If you enjoy reading it, please consider forwarding it on to your allies. And if you hate it, feel free to deploy it as a non-lethal weapon against those who tick you off.