Husbanding Your Naval

I’ve blogged about how the U.S. military seems to run a cost-plus, continuing demand for change orders, system of getting new state-of-the-art planes, ships, drones, missiles, tracking and land-based weapon systems. The consistent unseen stealth factor on these systems seems to be the final cost. The government argues that at the edge of new technology is the difficultly of specifying costs when you’ve never actually built the system you think you are designing. How can you define a cost for the unknown? Kind of like building a modern house with a $500,000 budget, and paying $2 million for the finished product. And when your old “state of the art” weapons reach the end-of-days, you often look to replace them rather than questioning the entire strategic mission.

But that’s not the only hidden cost in our system. With the most expensive military budget in the world, hundreds of billions at stake as we take up over 40% of the entire planet’s military expenditures, that kind of money simply attracts folks who interpret contracts to maximize revenues every time… and more than a few who have figured out how to milk the system, often crossing the line and committing out-and-out fraud with a dash of bribery. A statement from Navy Secretary Ray Mabus at a recent Pentagon briefing says it all: ““Any time you’ve got this kind of money, there are going to be people trying to steal, people trying to defraud the government.”

Even the legitimate system is flawed. “The Navy usually awards regional contracts to the company that bids the lowest on a series of items — everything from tugboat services to trash removal — that are assigned fixed prices. But once a contract is in motion, if a supplier says that, for instance, a crane with a fixed rental price is not available, the supply officer on board has little choice but to pay a higher — or nonfixed — price for other equipment. So even if an original bid is low, costs can quickly escalate.” New York Times, December 20^th. Nonfixed costs can make up more than half the bill. But wait, there’s more.

It seems too damned delicious that even the most established suppliers seem to be participating in the heinous feast. “The serial problems with the ship-supply, or husbanding, companies have turned into one of the Navy’s most embarrassing scandals in years. The issue burst into public view in September when the owner of the Navy’s main ship supply company in the Pacific, Leonard Glenn Francis, was arrested on charges that he bribed Navy officials to help him overcharge.

“[In November], the service suspended one of its main supply firms in the Middle East and Africa, Inchcape Shipping Services, from winning new contracts because of a civil fraud investigation by the Justice Department into allegations that the company repeatedly overbilled the Navy.

“And [in mid-December,] the Navy’s largest ship supply firm, Multinational Logistic Services, which has received $346 million for port services in Africa, the Mediterranean, Central America and the Pacific, placed one of its senior executives on leave while looking into his handling of contracts at his former employer, Inchcape.” NY Times.

Having such a huge military is virtually unmanageable. We are tempted to use our power, starting too many shooting wars that are not won or lost based on military bigness… just on a willingness to stay in these theaters of action for endless decades of frustrating failure, drain our life-blood slowly but massively over time. We gain unpopularity, increasing our need to go-it-alone diplomatically because fewer nations are willing to align with our goals, as we use that bigness to get our way. The bully factor. As our drones descend on enemies who didn’t even know we existed a few decades ago, we make fresh enemies and create recruiting posters for new extremists. Our intrusive eavesdropping technologies have even alienated our traditional allies. Still our heroin-like addiction to military spending continues virtually unabated.

The Navy is taking steps: “Mr. Mabus listed several actions he had ordered to prevent and weed out fraud in the ship-supply industry. Those included collecting data about what provisions and equipment should cost at foreign ports, so the Navy will be able to fix the costs of more items in contracts. He also said the Navy was setting up a more centralized system for dealing with suppliers and would provide more support to commanding officers overseas.

“‘We’ve got to have a more centralized, more standard procedure so that we don’t put commanding officers, supply officers on ships in the position of having to make these decisions on the fly,’ he said… Mr. Mabus added that he plans to create a special Navy board, headed by a four-star admiral, to review cases of people tied to Mr. Francis’ company, Glenn Defense Marine Asia, even if they are not prosecuted, to ensure that they ‘will be held appropriately accountable.’” NY Times. The issues with our military will not go away; it’s a whack-a-mole litany of rolling and roiling invitations to engage financial shenanigans. Size does matter when you are trying to get rogue expenditures under control.

I’m Peter Dekom, and I am wondering how much worse (better?) off we would be if we only had 25-30% of the world’s military budget.