Tag Archives: Government Waste

Veterans Administration Has $1 Billion Unexpected Funding Shortfall

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Image: delmarvapublicradio.net

“THE ARIZONA REPUBLIC”

“Under repeated questioning, VA Secretary David Shulkin acknowledged the department may need emergency funds.

The Department of Veterans Affairs was scolded by both parties over its budget Wednesday as lawmakers scurried to find a fix to an unexpected shortfall of more than $1 billion that would threaten medical care for thousands of veterans in the coming months.

“We would like to work with you,” Shulkin told a Senate appropriations panel. “We need to do this quickly.”

At the hearing, lawmakers pressed Shulkin about the department’s financial management after it significantly underestimated costs for its Choice program, which offers veterans federally paid medical care outside the VA. Several questioned Shulkin’s claim that the VA can fill the budget gap simply by shifting funds — without an emergency infusion of new money — without hurting veterans’ care.

“The department’s stewardship of funds is the real issue at hand,” said Sen. Jerry Moran, R-Kan., chair of the Appropriations panel overseeing the VA. He faulted VA for a “precarious situation” requiring a congressional bailout.

Shulkin cited unexpectedly high demand for Choice and defended President Donald Trump’s 2018 budget request as adequate, but allowed that more money may be needed.

“On financial projections, we have to do better,” he said. “We do not want to see veterans impacted at all by our inability to manage budgets.”

Shulkin made the surprise revelation last week, urgently asking Congress for help. He said VA needed legal authority to shift money from other VA programs.

His disclosure came just weeks after lawmakers were still being assured that Choice was under budget, with $1.1 billion estimated to be left over on Aug. 7. Shulkin now says that money will dry up by mid-August. He cited excessive use of Choice beyond its original intent of using private doctors only when veterans must wait more than 30 days for a VA appointment or drive more than 40 miles to a facility.

Skeptical senators on Wednesday signaled they may need to move forward on a financial bailout.

In a letter Wednesday to the VA, Moran joined three other GOP senators, including John McCain, in demanding more detailed information from VA on what fix is needed.

“Unless Congress appropriates emergency funding to continue the Veterans Choice Program, hundreds of thousands of veterans who now rely on the Choice Card will be sent back to a VA that cannot effectively manage or coordinate their care,” the senators said. “We cannot send our veterans back to the pre-scandal days in which veterans were subjected to unacceptable wait-times.”

VA is already instructing its medical centers to limit the number of veterans sent to private doctors. Some veterans were being sent to Defense Department hospitals, VA facilities located farther away, or other alternative locations “when care is not offered in VA.” It also was asking field offices to hold off on spending for certain medical equipment to help cover costs.

Congressional Democrats on VA oversight committees have also sharply criticized the proposed 2018 budget. Shulkin, for instance, says he intends to tap other parts of the VA budget to cover the shortfall, including $620 million in carryover money that had been designated for use in the next fiscal year beginning Oct. 1.

The budget proposal also seeks to cover rising costs of Choice in part by reducing disability benefits for thousands of veterans once they reach retirement age, drawing an outcry from major veterans’ organizations who said veterans heavily rely on the payments.

Shulkin has since backed off the plan to reduce disability benefits but has not indicated what other areas may be cut.

Sen. Patty Murray, D-Wash., told Shulkin that it sure sounded like VA needed money.

“You’re defending this budget, but your job is to defend veterans,” she said. “It seems to me if the administration makes the request, it will be better served.”

The VA’s faulty budget estimates were a primary reason that Congress passed legislation in March to extend the Choice program beyond its Aug. 7 expiration date until the money ran out, which VA said would happen early next year. At the bill-signing ceremony with veterans’ groups, Trump said the legislation would ensure veterans will continue to be able to see “the doctor of their choice.”

The department is now more closely restricting use of Choice to its 30-day, 40-mile requirements.

The unexpectedly high Choice costs are also raising questions about the amount of money needed in future years as VA seeks to expand the program.

Earlier this month, Shulkin described the outlines of an overhaul, dubbed Veterans CARE, which would replace Choice and its 30-day, 40-mile restrictions to give veterans even wider access to private doctors. He is asking Congress to approve that plan by this fall.”

http://www.azcentral.com/story/news/nation/2017/06/22/veterans-affairs-facing-1-billion-shortfall-because-unexpected-choice-program-costs/418787001/

 

Army Colonel, Wife and Defense Contractor Accused – $20 Million Bribery and Kickback Scheme

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(Photo Credit: BrianAJackson/Getty Images via iStockphoto)

“ARMY TIMES”
“Col. Anthony Roper conspired with his wife and others to seek and accept bribes in exchange for rigging more than $20 million in Army contracts to individuals and companies, prosecutors said Thursday.

The scheme began in 2008 and lasted nearly a decade, prosecutors said.

Roper was stationed at Fort Gordon near Augusta, Georgia. His duties included oversight of the Army’s efforts to build and modernize its information and communication networks, an indictment said.

Roper, 55, is charged with conspiracy, bribery, obstruction and making false statements. He faces up to 85 years in prison if convicted.

The colonel’s wife, Audra Roper, 49, is charged with conspiracy, false statements and obstruction.
Dwayne Oswald Fulton, 58, is charged with conspiracy and obstruction. Fulton was an officer for “a large defense contracting company.” The firm is not named in the court records.

Audra Roper operated Quadar Group, which prosecutors said was a shell company used to funnel bribe payments to her husband, the indictment states. It was one of multiple shell companies used to defraud the government, prosecutors said.

Court records filed this week do not list any attorneys for the defendants.

A spokesman at Fort Gordon did not immediately respond Thursday.”

First-ever Audit At The Department of Defense

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First Ever Audit at the Pentagon

“DEFENSE ONE”

“The Department of Defense is preparing for its first-ever audit.

The nation’s most sprawling and expensive bureaucracy and the world’s largest employer—has yet to undergo a formal, legally mandated review of its finances.

[It] has become a preoccupation for members of Congress intent on demonstrating their fiscal prudence even as they appropriate more than $600 billion annually to the Pentagon.

“Like Waiting for Godot,” one Democratic senator, Jack Reed of Rhode Island, quipped about the absent audit at a recent hearing. The lack of formal accountability has left unanswered basic questions about how the military spends taxpayer money, like the precise number of employees and contractors its various branches have hired. Cost overruns have become legendary, none more so than the F-35 fighter-jet program that has drawn the ire of President Trump. And partial reports suggest that the department has misspent or not accounted for anywhere from hundreds of billions to several trillion dollars.

After years of missed deadlines, the mounting political pressure and a renewed commitment from the Trump administration might finally result in an audit. For the first time last year, both major political parties called for auditing the Pentagon in their campaign platforms. That unites everyone from Hillary Clinton and Elizabeth Warren to Ted Cruz and the House Freedom Caucus. And last week, Trump’s nominee to serve as comptroller for the Pentagon, David Norquist, testified at his Senate confirmation hearing that he would insist on one whether the department could pass it or not. “It is time to audit the Pentagon,” Norquist told members of the Senate Armed Services Committee in his opening statement.

As comptroller for the Homeland Security Department a decade ago, Norquist, the brother of the anti-tax advocate Grover Norquist, undertook the first successful audits of that much younger federal agency. The Defense Department is unlikely to meet a statutory deadline to be “audit-ready” by the end of September. But Norquist said he would begin the process even if the Pentagon’s financial statements were not fully in order, and he committed to having the report completed by March 2019.

What has prevented the Pentagon from being examined this way before? The answer lies somewhere “between lethargy and complexity,” said Gordon Adams, a distinguished fellow at the Stimson Center who was the top budget official for national security in the Clinton White House. “It hasn’t been done ever,” he told me, “partly because it’s incredibly complicated to do and also because there’s not a great, powerful will in the building to do it.”

The complexity of the project dates back to the Civil War, Adams said, when the Army and the Navy set up their own separate accounting systems. The Air Force also went its own way after its creation following World War II, and the military build-ups of the last four decades scrambled the department’s financial records many times over. The explosion of military contractors since 9/11 has made scrubbing the books harder still. Adams estimated that an audit would have to account for 15 million to 20 million contracting transactions each year. The Pentagon has spent several billion dollars over the last seven years just trying to consolidate its accounting systems in preparation for a potential audit.

Despite the ramp-up costs, the project has never risen to be a top priority; the Pentagon has simply been too busy fighting wars. “The military has repeatedly argued that they need to focus on the war effort and accountability can come later,” said Kori Schake, a fellow at the Hoover Institution who previously served in a variety of national-security positions in the government. That excuse carried more weight with lawmakers in the years when the United States had hundreds of thousands of troops fighting in Iraq and Afghanistan.

Now, top Republicans like Senator John McCain of Arizona, chairman of the Armed Services Committee, are pressing for an audit with more urgency. “This has been a very public continuing failure for the Department of Defense, in large part due to the failure of senior management to make this a priority for the department and invest the necessary time and will to get it done,” McCain said at the outset of Norquist’s hearing. “This must end with you,” he told the president’s nominee.

Yet those fiscal hawks hoping that the long-awaited report will spur substantial reforms to defense spending are just as likely to be disappointed. An audit by itself won’t dismantle the “military industrial complex” that former President Dwight Eisenhower famously warned about, nor will it lead members of Congress to stop fighting to protect the bases and weapons systems that are manufactured in their districts—and the jobs that come with them. Several times in recent years, it has been congressional lobbying that has kept up production of weapons and equipment that the military no longer considers necessary.

“An audit does not raise the big issues,” Adams said. “It doesn’t tell you that we’re not getting the right bang for the buck. It doesn’t tell you anything about whether we’re getting the right forces for the threat. It doesn’t tell you how well the forces perform. It doesn’t tell you where we are wasting capability that we don’t need.”

“What it allows a member of Congress to do,” he continued, “is to look tough on defense and spend a lot on defense at the same time.”

Spending a lot on defense is what the Trump administration wants to do, even as it pledges its support for a Pentagon audit. The White House has asked Congress for a $54 billion increase in the military budget over the next year and secured about $15 billion of that in the recent spending deal. “It’s harder when there’s a big inflow of cash to focus on something like the audit,” said William Hartung, director of the arms and security project at the Center for International Policy. “There’s still that incentive to just push the money out the door.”

There’s some hope among audit advocates that the administration’s demand for more money will give congressional spending hawks leverage to insist on progress toward the accounting milestone in exchange for a budget increase. But they also don’t believe leverage should be necessary to demand that a department with a workforce pegged at more than 3 million people commit, at long last, to some basic bookkeeping. “We would never accept the argument that the Department of Education is too big and too complicated to be accountable,” Schake argued. “Why do we accept that for Defense?”

http://www.defenseone.com/politics/2017/05/white-house-vows-audit-pentagon-which-would-be-first/137928/?oref=d-channeltop

 

We Need to Audit the Pentagon

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“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

“In 1994 Congress passed legislation requiring every federal agency to be auditable.

Since then every agency has complied—except for the Department of Defense.

“We have known for many years that the Department’s business practices are archaic and wasteful, and its inability to pass a clean audit is a longstanding travesty,” Chairs John McCain (R-AZ) and Mac Thornberry (R-TX) of the Senate and House Armed Services Committees said recently in a joint statement. “The reason these problems persist is simple: a failure of leadership and a lack of accountability.”

The Department’s… inability to pass a clean audit is a longstanding travesty

Increasing Pentagon spending under these circumstances is the opposite of fiscal responsibility. In fact, giving the Pentagon $54 billion and finding out why later is bad budgeting.

Both the Republican and Democratic party platforms included the need to audit the Pentagon, and Congress should resist calls to give more money to an agency they know to be irresponsible with taxpayer dollars.

You can learn more about the seemingly endless saga surrounding the Pentagon’s utter failure to get a clean audit opinion here.”

http://www.pogo.org/straus/issues/defense-budget/2017/pentagon-audit-needed-oversight.html

 

 

 

 

 

Budget Control Act and the Pentagon – The Elephant in the Room

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Image:  Vestedway.com

“NATIONAL DEFENSE MAGAZINE”`

“The Elephant in the room is the Budget Control Act [BCA] that imposes strict limits to federal discretionary spending.

Mattis’ budget guidance goes out the window if the BCA is not repealed.

Defense pundits and industry watchers were surprised this week when the Pentagon released extensive new “budget guidance” from Secretary James Mattis that spells out the process for how the Pentagon will justify its upcoming funding request to Congress. The proposed budgets will seek to plug immediate funding holes but also set in motion the military buildup that President Trump promised.

Photo: Defense Secretary Jim Mattis meets with the Joint Chiefs of Staff at the Pentagon (DEFENSE DEPARTMENT)

“It’s our hope and intent that we can operate in a budget environment outside of sequestration,” said Defense Department spokesman Navy Capt. Jeff Davis. “We’ll continue to work these budget submissions very closely with the Office of Management and Budget.”

Mattis has held private discussions with members of Congress on the issue but Davis would not comment on whether the secretary is confident that the BCA caps will be lifted any time soon.

The restrictions in the Budget Control Act are in effect until fiscal year 2021. “We have not seen any plan to lift or strike the BCA and foresee difficulty getting a major hike through fiscal conservatives and Senate Democrats,” noted industry analyst Roman Schweizer, of Cowen Washington Research Group. “OMB’s budget blueprint is expected this month and the reaction to it will be the first indicators of likelihood.”

It is noteworthy that the Pentagon is putting out documents on its budget “sausage-making” when there are no top-line targets yet from OMB, Schweizer observed.

Davis said Mattis intends to build the budget request from the ground up, based on legitimate needs rather than artificial targets. “We don’t just pick a number and fill it in with capabilities,” he said. “We’ll come up with very real capabilities we need to restore readiness and balance programs. Then we’ll work to get the appropriate price tag for it.”

This will not be a free-for-all, Davis said. “Secretary Mattis has said he wants to be a faithful steward and get maximum value for the taxpayer dollar. That’s what this process is designed to do.”

According to the three-phase plan, the Pentagon will request by March 1 an emergency budget amendment for fiscal year 2017 to fund immediate needs like precision-guided munitions and pilot flying hours. The fiscal year 2018 budget proposal due May 1 would seek longer-term investments to increase the size and capability of U.S. forces. The foundation for the 2019-2023 five-year budget would be a new National Defense Strategy that the Pentagon is now drafting. The Trump administration also has ordered a nuclear posture review and a missile defense review, both of which could add significant new expenditures.

The Pentagon’s budget not only faces huge political and fiscal pressures but also practical constraints such as a narrow window of time on the congressional calendar.

“There is lots to do, and not much time,” said Bloomberg Government analyst Rob Levinson. A deadline to increase the national debt limit looms March 16. Federal funding for fiscal year 2017 runs out April 28, when the current continuing resolution expires and action will be needed to prevent a government shutdown.

There are larger variables at play, too, Levinson said during a Bloomberg webinar. “Trade-off decisions could be affected by changes in relations with Russia,” he said. The Pentagon’s ambitious “third offset” strategy is predicated on the need to counter rising powers like China and Russia. “Trump appears to feel differently about Russia than many in Washington, but is concerned about China, which could steer more money to the Navy and Air Force at the expense of the Army.”

Trump, like every president, will be forced to make tradeoffs between spending plans, tax cuts and deficits, said Levinson. “A most likely outcome is increases — not necessarily equal — for defense and domestic spending with resulting deficit growth. No faction will get everything they want: not the fiscal hawks, defense hawks, Democrats or the president.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=2411

$4 Billion Stealth Destroyer DDG-1000 Biggest Trials Lie Ahead

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BREAKING DEFENSE

“Problems developing and testing a weapon system at the same time.

It’ll be two more years before combat systems delivery occurs, and then the ship can begin IOT&E (Initial Operational Test & Evaluation) and starting the training cycle to deploy.

As shipbuilder Bath Iron Works laid the keel for the third and final destroyer of the DDG-1000 class, the Navy and industry were struggling to understand embarrassing breakdowns on the first ship, the USS Zumwalt. Congress fears there could be worse to come. “The hard work hasn’t really begun yet in terms of delivering the capability of the ship,” frets one Hill staffer. “We don’t even know really what we don’t know yet about the combat systems because they hadn’t done testing.”

On DDG-1000, there are months of testing still to come even as the third ship, the future Lyndon Baines Johnson, is nearly 60 percent complete (in the form of pre-assembled modules yet to be attached to the keel). “There’s definitely a lot of concurrency,” the staffer said. “It’ll be two more years before combat systems delivery occurs, and then the ship can begin IOT&E (Initial Operational Test & Evaluation) and starting the training cycle to deploy.”

Naval Sea Systems Command is still working out the root causes of engine breakdowns that, among other things, required the $4 billion ship to be towed out of the Panama Canal. But that’s the easy part. What failed in Panama was a relatively simple component called a lube oil cooler, something ships have used “since Noah had an ark,” lamented NAVSEA’s commander, Vice Adm. Thomas Moore. What the Navy has yet to test — indeed, what the Navy has yet to turn on as a single, integrated, ship-wide system — is the ship’s far more complex array of unique, high-tech combat systems:

  • the “integrated fight-through power” system to distribute the ship’s massive amount of electrical power to the highest-priority equipment while re-routing around battle damage, a lot like the fictional starship Enterprise;
  • the two 155 mm Advanced Gun System (AGS) cannon, designed to fire rocket-propelled precision shells that proved so costly the Navy is looking at cheaper but shorter-ranged replacements;
  • the AN/SPY-3 radar, which is new to the Zumwalt destroyers and the similarly troubled carrier USS Ford;
  • and the unique ship-wide computer system meant to control it all, the Total Ship Computing Environment Infrastructure, with over five million lines of code, based on open-source Linux software.

Even when the Zumwalt appears to resemble earlier classes, it’s significantly different. For instance, the Mk 57 Vertical Launch System that allows the Zumwalt to fire a wide variety of missiles is slightly different than the Mk 41 VLS on the Navy’s mainstay warship, the DDG-51 Arleigh Burke class. In particular, the Zumwalt‘s missile tubes are squeezed in around the periphery of the ship, rather than forming one easy-to-load central block as on an Arleigh Burke.

“The combat system testing is a significant concern, since so much of it is new,” said Bryan Clark, a retired Navy commander now with the Center for Strategic & Budgetary Assessments. “The Mk57 VLS launcher, AGS, SPY-3, and volume search radar are all unique to DDG-1000. While each system has been tested individually to some degree, the integration testing of all these new systems is likely to identify unforeseen problems, and subsequent delays in the ship’s first deployment.

Guns and Voltage

Even once everything is working and all systems are go aboard ship, Clark continued, the Navy will need to build a support infrastructure on shore. That means special training programs for the crews of the three DDG-1000s, distinct from other destroyers, he said, “because of all the DDG-1000’s unique systems, including a different electrical system, generators, propulsion system, combat systems, and hull equipment.” The DDG-1000 even draws a different voltage of power from other destroyers, he said, which means it’ll compete for high-voltage pier space with big-deck amphibious assault ships and nuclear-powered aircraft carriers.

Then there’s the cost of ammunition. The ship was built around its two 155 mm guns, a caliber used by no other ship in the Navy. The Advanced Gun System in turn was built to fire a unique hybrid of artillery shell and missile, the rocket-boosted Long-Range Land-Attack Projectile (LRLAP), able to strike targets about 100 nautical miles away. Unfortunately, as the DDG-1000 program kept getting cut back, and the production run of ammo with it, the cost-per-round rocketed to somewhere around $800,000. Now the Navy’s not actually buying LRLAPs and instead looking at the Excalibur round, which is precision-guided but not rocket-boosted: Excalibur costs about $70,000 a shot — less than 10 percent the LRLAP’s price — but can hit targets at most 26 nautical miles away — about 25 percent the LRLAP’s range.

That’s a tactical tradeoff that undermines the whole raison d’etre of the Zumwalt class, shore bombardment, argued naval historian and analyst Norman Polmar. “Less range? It doesn’t have enough range now (with LRLAP)!” Polmar told me. With everyone from China and Russia to Lebanese Hezbollah and Yemeni Houthis boasting anti-ship cruise missiles nowadays, “amphibious forces have to stay at least 25 and preferably 50 miles off shore,” Polmar said. With modern aircraft like the V-22 Osprey and the CH-53K helicopter, he went on, “we’re not going to land troops on the beaches…. We’ve got a capability of going more than a 100 miles inland easily.” So adding the distance ships must stand out to sea and the distance ground forces will go inland, you get ranges that even the LRLAP couldn’t cross, let alone Excalibur.

So what does DDG-1000 do? “It was designed for a mission that’s no longer relevant,” Polmar said, but bombardment of land targets with big guns isn’t the only mission the Zumwalt can do. Take away the guns and, “what do you have? A large ship with a lot of electricity,” he said. “The ship has phenomenal capabilities in terms of its power plant, so let’s get rid of the guns and let’s start putting lasers and other high-tech weapons on the ship.”

“The best things about DDG-1000 have to do with its electrical power (76MW) and internal volume,” agreed Clark. “It will be a great testbed and developmental platform for electric weapons like lasers, high-power radio frequency weapons, and railguns.”

The Hill staffer wasn’t so sure: “The idea that you would reopen the shipbuilding contract to put in a railgun begs for more trouble” on a program that’s already seen plenty. (That doesn’t rule out expensively extracting the 155mm guns and replacing them with railguns later, though).

On the other hand, the contract structure and the advanced state of construction makes it impractical to cancel the third ship, as the Pentagon once studied doing. “(DDG-)1001 and 1002 both are on fixed price contracts,” the staffer said. “The idea of not building the third one doesn’t make any sense; we’ve already paid for it” — all but $200 million — “so we’d better get a ship.”

So what, at this stage, can be done to fix and improve the Zumwalt class? The Navy is reviewing the ships’ missions and studying Concepts of Operation (CONOPS), which will likely reflect the reduced range of the guns. Congress will watch the combat systems testing closely, and it’s already reformed one aspect of shipbuilding. After the Navy commissioned the Zumwalt in October and formally accepted delivery of the ship from Bath, Congress enacted language in the 2017 National Defense Authorization Act (Section 7301) defining delivery to occur only when “all systems contained” are ready and ordering the Navy to amend the Zumwalt class’s delivery dates accordingly. That statute should help prevent concurrency from rearing its troublesome head on future shipbuilding programs.

Then there’s the longer-term lesson of the DDG-1000 and similarly ambitious ships like the aircraft carrier Ford and the Littoral Combat Ship. On both sides of the Potomac, the emerging consensus is that the hoped-for 355-ship fleet should be built with incremental upgrades of proven classes, not with more ambitious, leap-ahead ships packed with new technologies like the Zumwalt.

“I think the ship has a lot of potential,” the Hill source said, “but we shouldn’t believe it until we see it demonstrated.”

http://breakingdefense.com/2017/02/stealth-destroyer-ddg-1000s-biggest-trials-lie-ahead/

 

Government Financials a Mess, Improper Payments Rise Again

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Photo Credit: Tax Credits / Flickr

“THE PROJECT ON GOVERNMENT OVERSIGHT”

Improper payments are payments made by the federal government in the wrong amount, to the wrong people, or for the wrong reason

Reported improper payments have reached another all-time high after increasing for the third year in a row, from $137 billion to $144 billion, according to the Government Accountability Office’s (GAO) fiscal year 2016 financial audit of the federal government.

The GAO discusses these totals and how the majority of change resulted from increases in outlays of Medicare and other large programs, but that ignores the larger issue: the accuracy of improper payments estimates are still not complete or reliable in many agencies, so these numbers do not fully encompass the scope of the issue.

Congress and the executive branch have been trying to determine the extent of this problem since 2002; but a 2016 House Oversight and Government Reform Committee report paints a not-so-bright picture of the government’s progress. Representative Mick Mulvaney (R-SC), President Trump’s nominee for director of the Office of Management and Budget, also highlighted similar issues in his confirmation hearing, specifically discussing agency non-compliance with current laws and the urgent need to solve this issue.

The GAO audit supports both the Oversight Committee’s report and Representative Mulvaney’s testimony, pointing out a number of challenges that hinder the government’s ability to understand the scope of the improper payment problem:

  1. Incomplete, unreliable, or understated estimates
  2. Risk assessments that do not accurately assess a program’s risk to make improper payments
  3. Noncompliance with federal laws that try to address the above

The importance of having complete, reliable, and accurate estimates is pretty clear: without them, we will never be able to identify the true causes of financial mismanagement in the government or find a way to stop it. And even if all the current estimates are accurate, we still aren’t analyzing all relevant programs for improper payments. Having accurate risk assessments is important because improper payment estimates are only required for programs that are found to be at a high risk for them. If risk assessments are incorrect, then programs with significant improper payments may not be getting analyzed for such payments, and thus likely never stop misspending taxpayer money.

These issues are compounded and complicated by the fact that various agencies are not complying with laws already in place to address them. The Oversight Committee reported that 16 agencies failed to comply with improper payment laws in 2015 and that 9 agencies have never complied. The GAO audit found that 18 federal programs at risk for improper payments did not report estimates in 2016 as required by law. Ensuring complete compliance with the laws already in place should be a first, seemingly not-difficult step for the government to take towards fixing the improper payment problem.

Improper payment oversight is not the only fiscal area in which the government is lacking, however.

The GAO was again unable to provide an opinion on the entirety of the government’s financials due to long-standing deficiencies, including:

  1. Persistent financial management problems at the Department of Defense
  2. The government’s inability to account for and reconcile certain transactions
  3. An ineffective process for preparing the consolidated financial statements

The government is and will continue to be unable to provide policymakers with reliable financial and performance data, information that is “crucial for the difficult spending decisions that lie ahead.” Without effective processes to accurately determine the full extent to which financial mismanagement occurs, the federal government has no reasonable assurance that the use of federal funds is occurring effectively, appropriately, or in line with the needs of taxpayers.”

http://www.pogo.org/blog/2017/01/govt-financials-a-mess-improper-payments-rise-again.html

Bringing Pentagon Efficiency and Effectiveness to the Forefront

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Image:  “The Project on Government Oversight”

 

“DEFENSE NEWS”

“It is time to explore what can be achieved by bringing business considerations up front to help us navigate the treacherous national security waters ahead.

Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s war fighting mission.

In James Mattis’ confirmation hearing before the Senate two weeks ago, most of the questions directed at him appropriately focused on threats to the United States. There were thoughtful exchanges on Russia and Iran. And discussions about sequestration. However, one of the greatest threats not receiving appropriate attention is the Pentagon’s current business processes. Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s warfighting mission.

National defense too often is only discussed in context of size and cost in relation to external threats. While those are unquestionably important considerations, more emphasis must be placed on internal efficiency and effectiveness. Processes that monitor and reward output as opposed to processes that focus exclusively on inputs illuminate opportunities for dramatic improvements in our military posture.

As a former business leader, Donald Trump is well suited to prioritize business processes. And as president, he can direct Defense Secretary James Mattis and his staff to explore what can be achieved by elevating the primacy of efficiencies and effectiveness within the Pentagon.

Reconsidering how the Pentagon collects and uses data to make decisions will be particularly important. Indeed, better and more proficient employment of existing business process technologies and associated data has the potential to enable new capabilities, drive efficiencies, and promote more informed management decisions. Advanced analytics can provide insight into effects of even micro-level changes on readiness, with hope that current reporting could forecast how today’s decisions impact future military readiness.

Defense acquisition – historically the symbol of the slow-to-decide-and-act defense bureaucracy – is another area worthy of review. Pentagon procurers must have the opportunity to embrace and expand on the principles of rapid innovation. Rapid innovation has been adopted by Silicon Valley start-ups through some of our largest corporations, and its model would better attract existing and future military suppliers while providing our military world-class capability at lower costs.

The president and secretary of defense should also pursue measures that shed uniformed military responsibility of non-core services. The Pentagon has already seen success of such measures when they privatized military housing decades ago. There have been several studies over the years identifying other non-core military services that can be done more efficiently.

To move the Pentagon toward best-in-class processes and practices, the president must begin by outlining his support for efficiency and cost-savings reform in his budget. Notably, the budget must advance progress on auditability.

Under the current  plan, all four services must be audit ready by the end of September, with independent auditors in 2018 determining whether they passed or failed. Few are optimistic that the services will return a clean opinion, but the process is vital for prudent fiscal oversight while shedding light on how senior Pentagon leaders can run their organization more effectively. What is more, it provides a step toward full cost accounting which would provide even greater insight by capturing direct and indirect costs, driving decision making accordingly.

Another key provision would be support for eliminating, consolidating or repurposing excess infrastructure and facilities; to include requesting a new round of Base Realignment and Closure (BRAC). While unpopular in Congress, divesting unneeded infrastructure is basic best business practice and another BRAC round is well overdue. The last round occurred over a decade ago.

Our military and defense leadership is trained to operate in ambiguous and uncertain conditions — and that is necessary and appropriate for the battlefield. But we can and must do better when it comes to process, management, and generally keeping our own house in order. Indeed, a key rationale of strengthening business processes is to reduce the frequency of decision-making-by-gut-feel.”

http://www.defensenews.com/articles/bringing-pentagon-efficiency-and-effectiveness-to-the-forefront

 

 

The Army Handgun: A New Poster Child for Acquisition Malpractice?

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“DEFENSE NEWS”

“A handgun is not an aircraft carrier.

The Army’s search for a new service pistol officially began in 2011 — long before that if you include the years when concerns with the existing M9 Beretta first emerged. More than a decade by Senate Armed Services Committee Chairman John McCain’s own estimates.

The system is broken.

Consider what went down in the handgun buy: There were a couple years of information-gathering industry days. There was a draft solicitation that noted an expected date for a final bid request, but that got pushed back and yet another industry day was scheduled. And there was Beretta, the incumbent, which pushed back on the planned replacement, then formally proposed altering the existing contract, so it could provide a different model that would address the concerns for less money. That, of course, was something government had to consider. More time.

So, what the market got in return for supposed due diligence was delays, often with an explanation that read something like this: “to allow for improvements to the RFP as a result of feedback received from Industry.”

And Army soldiers continued to wait. As Sen. Joni Ernst said during the confirmation hearings for retired Marine General James Mattis earlier this month, “The joke that we had in the military was that sometimes the most effective use of an M9 is to simply throw it at your adversary.” That’s less a cut on the Beretta handgun and more a slam on the process, which includes so much bureaucracy that a product is too often a dinosaur by the time its replacement actually happens.

It wasn’t that long ago when government was forced to look long and hard at how it procured cybersecurity products and services. The existing model was just too slow and arduous to keep up with the threat. While still not perfect, new models came out to enable agencies to roll out cyber products and services fast. I note this not to imply that a handgun is any more like a cybersecurity tool than an aircraft carrier, but rather to point out that acquisition models can be adapted. And the much-feared prospect of procurement reform does not need to be some massive undertaking that transforms how the Pentagon and all agencies do business with industry, across all markets.

Companies want fairness, but they also want predictability. And excessive bureaucracy in the name of fair competition, where contracting officers treat all competitions with kid gloves in fear of getting reprimanded if something goes awry, is counterproductive. It will simply drive companies not to bother, which in turn will cause competition to deteriorate.

Diligence is one thing. Foolishness is another.”

http://www.defensenews.com/articles/the-army-handgun-a-new-poster-child-for-acquisition-malpractice

America’s Military Has a Big Problem: It’s Dead Broke

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500-hammer

“THE NATIONAL INTEREST”

“The Pentagon has made big plans for which it lacks the money.

DoD has breathtaking liabilities—as much as $88 billion a year—that ought to be addressed before procuring a single additional plane, ship or tank.

“We’re broke.” In essence, that’s the message Deputy Secretary of Defense Bob Work delivered to Defense-Secretary-in-Waiting James Mattis at the December 5 Future Strategy Forum.

Military leaders have testified to the problems caused by five straight years of budget cuts and how these cuts, combined with an extraordinarily high operational tempo, have resulted in a smaller, less capable military force.

What has received less attention is the degree to which the Pentagon’s future plans bank on questionable assumptions and budgetary sleight-of-hand to balance the books for 2018 and beyond. These gimmicks include: relying on rosy future estimates for the cost of labor, fuel and currency exchange; pushing the costs of large modernization programs like the nuclear triad into the ill-defined “out years,” and using Overseas Contingency Operations funds to help cover normal DoD operating costs. Taken together, these liabilities, combined with the administration’s decision to submit budgets in excess of the Budget Control Act caps, constitute about $100 billion dollars per year of unbudgeted liabilities or risk—a staggering sum that will severely limit the new administration’s ability to quickly rebuild the U.S. military.

In October 2016 a Pentagon spokesman publicly acknowledged, and Secretary Work confirmed, what many have known for some time: that as much as half of the money requested in the DoD Overseas Contingency Operations (OCO) funding is planned to go to normal Pentagon operations such as training soldiers, steaming ships or flying planes—not the extraordinary wartime operations which OCO was designed to cover.

The President-elect’s nominee to head the Office of Management and Budget, Rep. Mick Mulvaney, (R-SC), has decried such misuse of OCO funds, calling it a “backdoor loophole” in the budget process. Considering that comment, if Congress and the country want DoD’s normal operating costs captured in the appropriations process versus the wartime funding mechanism, this $30 billion annual cost must be eventually covered in the base budget, further adding to DoD’s liabilities. And while it may be a worthy goal to move these enduring costs into the base appropriation it’s important to note that this shift by itself won’t do anything to restore military capabilities.

Here are some other liabilities Secretary Work didn’t mention:

Future Costs of Labor

Section 1009 of Title 37 United States Code requires military pay raises to equal the Economic Cost Index (ECI), a common measure of the cost of labor, unless the president invokes his authority to request an alternative pay raise. The Congressional Budget Office estimated in August that “the ECI will grow by more than 3 percent a year, on average over the next several years.” However, in its budget request, DoD has planned on much smaller raises than CBO forecasted. The 2017 DoD budget projects pay raises of only 1.6 percent for 2017-2019, and 1.8 percent and 2.1 percent for 2020 and 2021, respectively.

From 2014-2016 President Obama used his authority to lower the requested pay raises, and Congress complied. After three years of smaller than prescribed pay raises, this year Congress disregarded the president’s recommendation and set the pay raise at 2.1 percent in the 2017 NDAA, matching the growth in ECI.

Because the DoD has banked on being able to lowball military and civilian pay raises for the next five years, the liability incurred by Congress’ inconvenient compliance with law this year, and potentially in the future, will run to the tens of billions of dollars. Just next year’s change in pay will cost DoD about $800 million in 2017 than planned.

Hopeful Fuel Cost Assumptions

The DoD budget estimate projects that fuel costs for fiscal year 2017 will drop 8.2 percent from 2016. For future years, DoD used planning assumptions that reflected minor increases ranging from 4.8 percent in 2018 to only 1.8 percent in 2021.

However, the latest forecast from the U.S. Energy Information Administration predicts crude oil prices will gradually rise, not fall, next year. And future year energy estimates vary widely, with high end price per barrel of crude oil reaching $150 by 2020. If energy costs grow at even a modest rate of 5 percent annually, the Pentagon will be short billions of dollars compared to its plan.

Living Large In an “Out-year”

Former Secretary of the Army John McHugh famously commented that he always wanted to “live in an out-year.” In Pentagonese, “out-years” fall outside the rigid five-year planning window; they are, consequently, years in which unrealistic procurement plans magically come to fruition and normal budget rules don’t apply.

DoD is notorious for planning to acquire major systems such as planes, submarines and ships in quantities that are patently unaffordable in the next five years, but will be brought on-board when the money somehow materializes in an “out-year.”

This Pentagon has double-downed on that technique. In addition to the unpaid bills associated with the recapitalization of the nuclear triad mentioned by Secretary Work, the replacement for the Ohio class submarine and many other major systems are also all awaiting an out-year deus ex machina to save the day.

For example, the Navy’s current, approved 30-year shipbuilding program only gets them to 308 ships—even though they just announced they need 355, nearly matching the president-elect’s promise to get to 350 ships. Yet when the Congressional Budget Office analyzed the Navy’s 308-ship plan, they found it would cost $3-5 billion dollars more per year than what was budgeted.

In an excellent study of the out-year issue, CSIS’s Todd Harrison suggested that just to execute the DoD’s planned modernization programs would require approximately 7 percent more funding— around $40 billion per year—than was budgeted. This includes nothing of the re-building that President-elect Trump has promised.

Other problems lie ahead. DoD has made optimistic assumptions about foreign currency exchange rates, counting on them to remain near where they are today, which is very favorable for the United States. Another liability includes Pentagon requests for changes to military health care programs that the 2017 NDAA did not fully support.

At the Bottom of a Very Deep Hole

The liabilities described above will build to about $100 billion a year over time, seriously complicating matters for a president-elect who has pledged to rebuild our depleted military.

The Pentagon can save some money through efficiencies, base realignment and closure, restructuring and better business practices, and some of these efforts are already underway. But those savings won’t be nearly enough to close liabilities of this magnitude. It’s unfortunate this critical information hasn’t been part of a national discussion by our nation’s leaders, including the president, prior to the imminent transition.

In It’s a Wonderful Life, George Bailey’s financial problems were solved with a crowdfunding solution among the residents of Bedford Falls. General Mattis won’t be so fortunate. It’s among the many challenges that the new administration’s leaders will have to grapple with in their first hundred days to begin the necessary restoration of our military.”

http://nationalinterest.org/feature/americas-military-has-big-problem-its-dead-broke-18956?page=show