Where Has All the Money Gone?

May 18th, 2013

Published on ZNet (first on TomDispatch), by David Vine, May 15, 2013.

Outside the United States, the Pentagon controls a collection of military bases unprecedented in history. With U.S. troops gone from Iraq and the withdrawal from Afghanistan underway, it’s easy to forget that we probably still have about 1,000 military bases in other peoples’ lands. This giant collection of bases receives remarkably little media attention, costs a fortune, and even when cost cutting is the subject du jour, it still seems to get a free ride.  

With so much money pouring into the Pentagon’s base world, the question is: Who’s benefiting?

Some of the money clearly pays for things like salaries, health care, and other benefits for around one million military and Defense Department personnel and their families overseas. But after an extensive examination of government spending data and contracts, I estimate that the Pentagon has dispersed around $385 billion to private companies for work done outside the U.S. since late 2001, mainly in that baseworld. That’s nearly double the entire State Department budget over the same period, and because Pentagon and government accounting practices are
so poor, the true total may be significantly higher … //

… Peeling the Potatoes and Bringing Home the Bacon: … //

… Calculating Costs in a “Dysfunctional” System: … //

… Still, examining the top contractors is illuminating. Let’s start with the top three whose names we know:

1. KBR:

  • Among the companies bringing home billions, the name Kellogg, Brown & Root dominates. It has almost five times the contracts of the next company on the list and is emblematic of broader problems in the contracting system.
  • KBR is the latest incarnation of Brown & Root, the company that started paving roads in Texas in 1919 and grew into the largest engineering and construction firm in the United States. In 1962, Halliburton, an international oil services company, bought Brown & Root. In 1995, Dick Cheney became Halliburton’s president and CEO after helping jump-start the Pentagon’s ever-greater reliance on private contractors when he was President George H.W. Bush’s secretary of defense.
  • Later, while Cheney was vice president, Halliburton and its KBR subsidiary (formed after acquiring Kellogg Industries) won by far the largest wartime contracts in Iraq and Afghanistan. It’s difficult to overstate KBR’s role in the two conflicts. Without its work, there might have been no wars. In a 2005 interview, Paul Cerjan, a former Halliburton vice president, explained that KBR was supporting more than 200,000 coalition forces in Iraq, providing “anything they need to conduct the war.” That meant “base support services, which includes all the billeting, the feeding, water supplies, sewage — anything it would take to run a city.” It also meant Army “logistics functions, which include transportation, movement of POL [petroleum, oil, and lubricants] supplies, gas… spare parts, ammunition.”
  • Most of KBR’s contracts to support bases and troops overseas have come under the multi-billion dollar Logistics Civilian Augmentation Program (LOGCAP). In 2001, KBR won a one-year LOGCAP contract to provide an undefined quantity and an undefined value of “selected services in wartime.” The company subsequently enjoyed nearly eight years of work without facing a competitor’s bid, thanks to a series of one-year contract extensions. By July 2011, KBR had received more than $37 billion in LOGCAP funds. Its experience reflected the near tripling of Pentagon contracts issued without competitive bidding between 2001 and 2010. “It’s like a gigantic monopoly,” a representative from Taxpayers for Common Sense said of LOGCAP.
  • The work KBR performed under LOGCAP also reflected the Pentagon’s frequent use of “cost-plus” contracts. These reimburse a company for its expenses and then add a fee that’s usually fixed contractually or determined by a performance evaluation board. The Congressional Research Service explained that because “increased costs mean increased fees to the contractor,” there is “no incentive for the contractor to limit the government’s costs.” As one Halliburton official told a congressional committee bluntly, the company’s unofficial mantra in Iraq became “Don’t worry about price. It’s ‘cost-plus.’”
  • Not surprisingly, in 2009, the Pentagon’s top auditor testified that KBR accounted for “the vast majority” of wartime fraud. The company has also faced accusations of overcharging for everything from delivering food and fuel and supplying housing for troops to providing base security services.
  • After years of bad publicity, in 2007, Halliburton spun KBR off as an independent company and moved its headquarters from Houston to Dubai. Despite KBR’s track record and a 2009 guilty plea for bribing Nigerian government officials to win gas contracts (for which its former CEO received prison time), the company has continued to receive massive government contracts. Its latest LOGCAP contract, awarded in 2008, could be worth up to $50 billion through 2018.

2. Supreme Group:

  • Next on the list is the company that’s been described as the KBR for the Afghan War. Supreme Group has won more than $9 billion in contracts for transporting and serving meals to troops in Afghanistan and at other bases worldwide. Its growth perfectly symbolizes the soldiers-to-contractors shift in who peels the potatoes.
  • Supreme was founded in 1957 by an Army veteran who saw an opportunity to provide food for the hundreds of U.S. bases in Germany. After expanding over several decades into the Middle East, Africa, and the Balkans, the company won multi-billion-dollar “sole source contracts” that gave it a virtual monopoly over wartime food services in Afghanistan.
  • Today, in a prime example of the revolving door between the Pentagon and its contractors, Supreme’s chief commercial officer is former Lieutenant General Robert Dail. From August 2006 to November 2008, Dail headed the Pentagon’s Defense Logistics Agency (DLA), which awards food contracts. In 2007, Dail presented Supreme with DLA’s “New Contractor of the Year Award.” Four months after leaving the Pentagon, he became the president of Supreme Group USA.
  • Recently, Supreme has faced growing scrutiny over the way it’s won competition-free contracts, with service fees as high as 75% of costs and reportedly for more than three-quarters of a billion dollars in overbilling. Last month, Supreme had the chutzpah to sue the Pentagon for awarding a new $10 billion Afghanistan food contract to a competitor that underbid Supreme’s offer by $1.4 billion.

3. Agility Logistics:

  • Next on the list is Agility Logistics, a Kuwaiti company. It won multi-billion-dollar contracts to transport food to troops in Iraq. When the Pentagon decided against awarding similar contracts in Afghanistan to a single firm, Agility partnered with Supreme in exchange for a 3.5% fee on revenues. In 2009 and 2010, grand juries indicted Agility for massive contracting fraud, and the Pentagon suspended the company and 125 related companies from receiving new contracts. In 2012, a judge issued a default judgment against Agility in a whistleblower suit seeking more than $1 billion for overcharging the government … //

… The Rest of the Top 10: A Pattern of Misconduct: … //

… Spreading the Love: … //

… Shrinking the Baseworld:

Today, there are some signs of baseworld shrinkage. The hundreds of bases built in Iraq are long gone, and many of the hundreds built in Afghanistan are now being shut down as U.S. combat troops prepare to withdraw. The military is downsizing an old base in the Portuguese Azores and studying further base and troop reductions in Europe. While many in Congress are resisting an Obama administration request to reduce “excess capacity” among thousands of domestic bases through two new rounds of the Base Realignment and Closure process, at least some current and former members of Congress are calling for a parallel effort to close bases abroad.

At the same time, however, the military is building (or exploring the possibility of building) new bases from Asia and Africa to the Persian Gulf and Latin America. Small drone bases are on the rise from Niger to Saudi Arabia. Even in Europe, the Pentagon is still building bases while closing others.

Much work remains to be done to figure out who’s been benefiting from the Pentagon’s baseworld. The billions in contracts that sustain our bases, however, are a good reminder that there are immediate savings available by reducing troop deployments and Cold War bases abroad. They are also a reminder of where we should look when we’re told there isn’t enough money for Head Start or hospitals or housing.

For decades, tens of billions of dollars in overseas spending have ended up in the coffers of a select few, with many billions leaking out of the U.S. economy entirely. Stemming those leaks by cutting overseas spending and redirecting precious resources toward long-neglected non-military needs is an important way to help revive an economy that has long benefited the few rather than the many.

Top 25 Recipients of Pentagon Contracts Abroad: … //

… (full long text including many hyper-links).

(David Vine, a Tom Dispatch regular, is assistant professor of anthropology at American University, in Washington, DC. He is the author of Island of Shame: The Secret History of the U.S. Military Base on Diego Garcia. He has written for the New York Times, the Washington Post, the Guardian, and Mother Jones, among other places. He is currently completing a book about the effects of U.S. military bases located outside the United States. For more of his writing, visit him here.
This article first appeared on TomDispatch.com, a weblog of the Nation Institute, which offers a steady flow of alternate sources, news, and opinion from Tom Engelhardt, long time editor in publishing, co-founder of the American Empire Project, author of The End of Victory Culture, as of a novel, The Last Days of Publishing. His latest book is The American Way of War: How Bush’s Wars Became Obama’s, Haymarket Books
).

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