Page 1 of 2 DISPATCHES FROM AMERICA The Pentagon's cubicle mercenaries
By Frida Berrigan
Seven years into George W Bush's global "war on terror", the Pentagon is
embroiled in two big wars, a potentially explosive war of words with Tehran,
and numerous smaller conflicts - and it is leaning ever more heavily on private
military contractors to get by.
Once upon a time, soldiers did more than pick up a gun. They picked up trash.
They cut hair and delivered mail. They fixed airplanes and inflated truck
tires.
Not anymore. All of those tasks are now the responsibility of private military
corporations. In the service of the Pentagon, their employees also man
computers, write software code, create
integrating systems, train technicians, manufacture and service high-tech
weapons, market munitions, and interpret satellite images.
People in ties or heels, not berets or fatigues, today translate documents,
collect intelligence, interpret for soldiers and interrogators, approve
contracts, draft reports to Congress, and provide oversight for other private
contractors. They also fill prescriptions, fit prosthetics, and arrange for
physical therapy and psychiatric care. Top to bottom, the Pentagon's war
machine is no longer just driven by, but staffed by, corporations.
Consider the following: In fiscal year 2005 (the last year for which full data
is available), the Pentagon spent more contracting for services with private
companies than on supplies and equipment - including major weapons systems.
This figure has been steadily rising over the past 10 years. According to a
recent Government Accountability Office report, in the last decade the amount
the Pentagon has paid out to private companies for services has increased by
78% in real terms. In fiscal year 2006, those services contracts totaled more
than $151 billion.
Ever more frequently, we hear generals and politicians alike bemoan the state
of the military. Their conclusion: The wear and tear of the president's war on
terror has pushed the military to the breaking point. But private contractors
are playing a different tune. Think of it this way: while the military cannot
stay properly supplied, its suppliers are racking up contracts in the
multi-billions. For them, it's a matter of letting the good times roll.
What a difference a war makes As we prepare to close the book on the
Bush presidency, it is worth exploring just how, in the last seven-plus years,
the long war on terror has actually helped build a new, privatized version of
the Pentagon. Call it Military Industrial Complex 2.0.
Consider fiscal year 2001, which conveniently ended in September of that year.
It serves as a good, pre-war on terror baseline for grasping just how the
Pentagon expanded ever since - and how much more it is paying out to private
contractors today.
Back then, the Pentagon's top 10 suppliers shared $58.7 billion in Department
of Defense (DoD) contracts, out of a total of $144 billion that went to the top
100 Pentagon contractors. Number 100 on the list was The Carlyle Group with
$145 million in contracts. Keep in mind, of course, that this was the price of
"defense" for a nation with no superpower rival.
Fast forward to 2007 and the top 10 companies on the Pentagon's list of private
contractors were sharing $125 billion in DoD contracts, out of a total of $239
billion being shared among the top 100 contractors. The smallest contract among
those 100 was awarded to ARINC and came in at $495 million.
In those seven years, in other words, contracts to the top 10 more than
doubled, the size of the total pay-out pie increased by two-thirds, and the
lowest contract among the top 100 went up almost four-fold.
Just as revealing, almost half the companies on the Pentagon's Top 100 list in
2007 were not even on it seven years earlier, including McKesson, which took in
a hefty $4.6 billion in contracts and MacAndrews and Forbes which garnered $3.3
billion.
And here's a fact that makes sense of all of the above: given the spectrum of
services offered and the level of integration that has already taken place
between the Pentagon and these private companies, the US can no longer wage a
war or even run payroll without them.
These have been the good times for defense contractors, if not for the military
itself. Since September 2001, many companies have made a quantum leap from
receiving either no Pentagon contracts or just contracts in the low hundred
millions to awards in the billion-dollar range. Here are just a few portraits
of companies that are booming, even as the military goes bust.
URS Corporation: This engineering, construction, and technical services
firm based in San Francisco employs more than 50,000 people in 34 countries. A
publicly held firm, which recently acquired Washington Group International, it
had numerous reconstruction contracts in Iraq. More than 40% of the company's
revenue ($5.4 billion in 2007) comes from the federal government. Between 2001
and 2007, its Pentagon contracts increased more than a thousand fold (by
1,400%) from $169 million to $2.6 billion.
URS began the "war on terror" at number 91 on the Pentagon's Top 100 list. It
is now number 15.
Electronic Data Systems Corporation: Founded by political maverick Ross
Perot, EDS is a global technology services company headquartered in Plano,
Texas. In March, the Pentagon awarded it a $179 million contract to provide
information technology support services to the Pentagon's Defense Manpower Data
Center, its central archive of all kinds of data on personnel, manpower and
casualties, pay and entitlements, as well as the whole gamut of financial
information. The company - which employs 139,000 people in 65 countries -
boasted $22.1 billion in revenue in 2007. Computer giant Hewlett-Packard bought
EDS in August 2008.
In 2001 the company occupied slot 71 on the DoD's Top 100 list with $222
million in contracts. By 2007, it had climbed to number 16 with $2.4 billion in
contracts, an increase of almost 1,000%.
Harris Corporation: This communications and information technology
company is headquartered in Melbourne, Florida, and employs 16,000 people.
Harris boasted $4.2 billion in revenue in 2007, with more than one-quarter of
that ($1.6 billion) coming from Pentagon purchases of communications and
electronics capabilities like Falcon II high-frequency radio systems.
When the "war on terror" began, Harris had a modest $380 million in Pentagon
contracts (and was number 43 on that top 100 list); over the last seven years,
it has steadily risen in rank and now is number 30.
KBR: Gaming the system
The United States first heard the phrase "military industrial complex" during
president Dwight David Eisenhower's January 17, 1961, farewell address. As he
left public office, our last general-turned-president warned that the
"conjunction of an immense military establishment and a large arms industry is
new in the American experience" and its influence - "economic, political, even
spiritual - is felt in every city, every Statehouse, every office of the
Federal government ...
"In the councils of government, we must guard against the acquisition of
unwarranted influence, whether sought or unsought, by the military industrial
complex. The potential for the disastrous rise of misplaced power exists and
will persist."
If, in many ways, Ike's comment is still applicable, in the last 47 years the
Military Industrial Complex (MIC) he described has evolved in startling ways -
and massively. Today, it does more than wield influence; it has created
unparalleled dependence and unrivaled profit.
What this means in practice can be illustrated by KBR, a privately-held company
that does not publish quarterly reports. Nonetheless, its recent history
provides an object lesson in what the MIC 2.0 can do for the profitability of a
private contractor.
KBR has shadowed the US military every step of the way through the invasion and
occupation of Iraq: first as Kellogg Brown and Root, a subsidiary of
Halliburton (for which Dick Cheney was once CEO), and then as KBR, an
independent company. It has, in fact, made its corporate fortune on the
Pentagon's now infamous "no-bid," "cost-plus contracts". Since December 2001,
KBR has been working for the Pentagon under the Logistics Civil Augmentation
Program (LOGCAP) - a multi-billion dollar agreement that guarantees the company
those cost-plus profits for fulfilling contracted tasks.
This huge and sweeping contract was awarded without the rigors of the
competitive marketplace. Its "no-bid" nature was a sign that KBR was anything
but a run-of-the-mill Pentagon contractor. A second sign lay in the Pentagon's
acceptance of that cost-plus arrangement. A rarity in the business world, "cost
plus" means that the more a job costs, the more profit the company pockets.
Professor Steve Schooner, a contract expert at George Washington University Law
School, commented, "Nobody in their right mind would enter into a contract that
basically says, 'come up with creative ways to spend my money and the more you
spend the happier I'll be.'" Under this contract, the Pentagon has doled out
$20 billion to KBR to build and staff facilities for military personnel in Iraq
and provide food and other necessities to US troops there.
Ironically, the Pentagon isn't even getting what it paid for ... not by a long
shot. KBR's fraudulent activities have, according to the Government
Accountability Office, included the failure to adequately account for more than
a billion dollars in contracted funds; the leasing of vehicles to be used by
company personnel for up to $125,000 a year (despite the fact that these
vehicles could have been purchased outright for $40,000 or less); the purchase
of unnecessary luxuries such as monogrammed towels for use in company-run
recreation facilities for military personnel; the overcharging for fuel brought
into Iraq from Kuwait for military use; the charging to the Pentagon's tab
three to four times as many meals as were actually consumed by US military
personnel; and the provision of unclean water for US troops.
All of these abuses came to light thanks to investigations by Representative
Henry Waxman, the Pentagon's own Office of the Inspector General, and others,
but Halliburton and its former subsidiary got off with little more than such
wrist slaps as the revocation of the fuel supply contract and of KBR'S
exclusive LOGCAP contract for Iraq. That was recently divided into three parts
and put out to bid. KBR was, however, allowed to join the bidding, and is now
sharing the contract with DynCorp and Fluor Corporation. Each company has
received a $5 billion contract that includes nine one-year options for renewal
that could be worth, in total, up to $150 billion, according to Dana Hedgpeth
of the Washington Post.
The most recent of many black marks against KBR came when members of Congress
and investigators charged that substandard electrical work by company employees
in showers at military bases in Iraq had resulted in the electrocution deaths
of 16 American soldiers.
To understand what privatization means in action at the Pentagon, consider just
one modest example of the corruption that infects KBR and how it was addressed.
In 2004, the company submitted requests for reimbursement on more than one
billion dollars in charges that Army auditors deemed "questionable," in part
because they weren't backed up by reliable records. Charles Smith, the Army
official managing Pentagon contracts, refused to
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