The relationship between the military and the private sector always exists within a political context. Encouragement and suspicion of contracting waxes and wanes with the times. To understand today’s contracting environment, it is particularly important to recognize a few key events and trends from recent decades.
The rapid influx of money into the defense industry during the Cold War military buildup resulted in a series of scandals. These included Operation Ill Wind, in which acquisition officials sold bidding information to competitors (New York Times story collection), and cost overruns such as the infamous $640 dollar toilet seat. The scandals led to reforms including the Competition in Contracting Act (PDF) and reestablishment of the Cost Accounting Board.
When defense spending slowed down in the 1990s, industry pushed back on the changes of the previous decade. The Federal Acquisition Reform Act of 1996 rolled back many reforms. Meanwhile, President Bill Clinton’s National Performance Review — also known as “Reinventing Government ” —encouraged agencies to outsource as many functions as possible to the private sector. Unfortunately, contract managers were not hired at the same pace, leading to a net decrease in oversight.
The pump was primed for massive waste when defense spending spiked again after the Sept. 11, 2001 attacks. The War on Terror and invasion of Iraq give rise to emergency wartime contracting practices that used risky contracting vehicles. Contracts flew out the door, often with undefined deliverables that allowed contractors to bill the government as they went along. This led to a wealth of stories on contracting waste, fraud and abuse that grabbed public attention and made Houston-based oilfield services company Halliburton the poster child for wartime waste.
President Barack Obama made contracting reform part of his campaign platform, issuing a Presidential Memorandum on Government Contracting soon after coming into office. Within the Pentagon, then-Defense Secretary Robert Gates in 2010 introduced a series of “efficiency” reforms that promisef to reduce contractor services by 10 percent and eliminate some 30,000 contractor positions by 2015, but do not specify how or where.
The cycle of scandal and reform is based in the same fundamental problems, so understanding history can help you spot tomorrow’s scandals.