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Why the Pentagon’s many campaigns to clean up its accounts are failing

87 points by joshuahedlund 13y ago

smtddr 13y ago
Of course it's failing. Screwed up accounting allows for easier stealing and harder to pinpoint who/when/where money ended up.
- arethuza 13y ago
  "Who in their right mind would send 363 tonnes of cash into a war zone?" http://www.theguardian.com/world/2007/feb/08/usa.iraq1 http://www.theguardian.com/world/2007/feb/08/usa.iraq1
  - smtddr 13y ago
    That's ridiculous! These wars are just fronts for money laundering & control of oil. It's only by coincidence that they can align some wars with some human-rights violation. Otherwise, they'll just make stuff up. We need a revolution, there I said it. Go ahead NSA and add me to the watch-list. Nobody here doubts that you scan this site daily.
    - arethuza 13y ago
      Well, there might be good reasons for having that amount of cash - but you can't help wondering what the processes and systems there were for controlling what it was all used for.. Edit: This attitude by a US general doesn't exactly come across well: Q: "But the fact is billions of dollars have disappeared without trace." Oliver: "Of their money. Billions of dollars of their money, yeah I understand. I'm saying what difference does it make?"
    - saraid216 13y ago
      Dear NSA, please also add me to the watch list. I feel lonely.
- VLM 13y ago
  And not just thievery, I searched the article and found nothing about secret programs. "consequences for failure" isn't the problem, the real problem is "consequences for success" No tinfoil hat stuff needed, merely look at history, opening the books of the Manhattan project or area 51 in the stealth fighter years would not have been very wise. I suspect as a former .mil guy that a lot more money disappears into stuff like that, than is officially admitted, or is lost to corruption. If you think a simple IT project is expensive when .mil does it, doing anything secretly insta-quadruples the cost if not more.
a2tech 13y ago
The biggest problem I see in these articles is the insistence on using off the shelf systems. SAP and Oracle are always at the center of these deals, and they end up being disasters. If you have MULTIPLE billion dollar failed projects using COTS systems, maybe its time to step back and look at a custom system.
- jerf 13y ago
  To solve problems, first you have to identify the problem, then examine possible solutions to establish how the solutions will solve the problems. It is not clear to me how a custom system will solve any of the problems of the process. I'm not close enough to know, but the primary problem is probably entrenched bureaucracy that has been given no reason to change and perceives major threats-to-power if they change. A custom system seems more likely to exacerbate the problem than solve it by giving the entrenched bureaucracy even more knobs to demand they can twiddle (and knobs on the knobs, and knobs on those knobs....), though admittedly the fail is flowing so thickly here it would probably be impossible to distinguish the additional fail from the already stratospheric baseline.
- Spooky23 13y ago
  These solutions are highly customizable. I'm not a defender of SAP/Oracle, but I don't see how writing your own package would be any more likely to succeed than paying an ERP vendor. An ancient and creaky administrative regime like what the military has is nearly impossible to manage financially. The GAO has tried and essentially given up on trying to audit.
  - mabhatter 13y ago
    the military CAN get things working when they can't write checks. They have a system that works for THAT function and has for 50 years. So it's a matter of LEVERAGE to get compliance. The problem with Oracle and SAP is that they aren't "home builders" they are parts and tools salesmen. They don't know ANYTHING about BUILDING HOUSES... they just sell the tools. even their own businesses aren't actually GOOD businesses with huge amounts of nepotism and politics. The first thing when you sign up with them (or any of the big named software vendors) is that you have to find yourself a "contractor" just like building a house. The "big famous software company" disavow any actual results, your mileage may vary, etc.... They're like the "Music Man" selling boy's bands. If you want to audit the military, that's where North Korea has the correct idea. Generals don't "retire" until the leader says they do. Start enforcing Sun Tzu style discipline to get this done... knock off a few 5 star general's heads. That'll get things done. At a minimum, strip them of private residences, and put them in boot camp barracks (complete with scrubbing their own floors) till they get this thing done.
holograham 13y ago
Lots of comments below are accurate e.g. terrible gov't oversight, extremely large and complex projects, corporations responding correctly to bad incentives, corporations thriving off the complexity of govt contracting However I will posit an additional layer to this...and it lies with the American people themselves. We just cant handle gov't officials and contractors making a ton of money. The real root of the complexity in govt contracting is FAR (Federal Acquisition Regulations) Which create the complexity to avoid egregious corruption and profits in the federal space. While on paper it sounds great...lets make rules that limit what corporations can make off of the government... what you actually get is tremendous waste. Redundancy, arcane billing practices and auditing, and huge bureaucratic RFP bidding systems that limit competition. A classic case in not doing a complete cost-benefit analysis. The solution is not palatable to the general American public. Put up with some fraud and corruption in the federal government which would be offset by increased competition from the private sector (thus better products and prices). And dont kid yourself if you think fraud and corruption doesnt still go on...it's just more sophisticated.
- Retric 13y ago
  IMO, the real solution is to let the government compete with the private sector on 'government' contracts. Basically, do an analysis on how much it would cost to do in house and then put the same contract up for bid. (aka a Sanity check) However, you need to add a companies reputation to their bid so if they say it costs X and they tend to be 30% over budget or have quality issues then you don't just accept X. With that said and done if someone can really deliver high quality and still make a 20% profit then let them.
  - holograham 13y ago
    I am not sure this is feasible in practice. The government is not a business so "competing" isnt a fair rubric. The government has unlimited resources and does not have to "make a profit". I dont know how you could create an apples to apples comparison. In the business world it's easy...profit. Companies reputation is a fuzzy number too. As the stock market adage goes "past performance does not guarantee future success". Sure brand reputation means something but how do you measure that and create equal comparison...across hugely disparate government contracts. Comparing the US Census contract (yes this is contracted out almost entirely) to the F35 contract would be absurd. I do not necessarily have the end all solution. I tend to favor smaller government because I am not sure our current political system scales to be able to execute large projects (I tend to think the ideas behind many large scale projects are correct but fail when you consider the costs of implementation within our political constraints).
rayiner 13y ago
One aspect that's missing in these comments is an acknowledgement of the complexity of the projects which are the subject of defense contracts. The Pentagon and its contractors are literally at the edge of the state of the art in fields like aerospace. Very few companies have the expertise to even attempt to take on these contracts, and most projects have ill-defined specifications simply because nobody is quite sure what is technologically possible until the project is well underway. And nobody knows how much money will be needed up front. That's like asking Zuck in his dorm room: "how much money will you need to build Facebook as it exists circa 2013?" I used to work at a company that did DOD contracts (in the wireless sector). In that area, what the DOD was playing with in the early 2000's is what VC-funded companies are playing with just in the last few years. For the work we did, there were no detailed specs because nobody really knew what was within reach. In response to the question: "what do you want?" the DOD's response is often: "what could we have?" Pointing at how much more efficient private industry is makes no sense. Take an example like Space X. They're a shining example of private industry, and are doing very innovative stuff, but they're treading a lot of the same ground NASA and DOD contractors did in the 1960's. Of course they're getting it done for a lot less money! They know what's possible, they have a general idea of what works. The contractors doing this stuff in the 1960's had none of that to work with. Obviously the time is due for modernizing the accounting system. But it's important to realize that a lot of the mess dates from the Cold War, where keeping up with the Soviet Union was the priority, not satisfying the bean counters.
- omegant 13y ago
  This is very well explained at the book moon lander, it's an amazing inside story of the problems they encountered during the design and comstruction of the modules. What has surpriced me is that the design effort was minor compared with the management and quality control. They had to multiply the budgets severaltimes to be able to correct unexpected problems.
- bhewes 13y ago
  I have to agree with you about dealing with the Soviet Union it made accounting an after thought. Now the war has moved to an economic front (if it was not always that). And a fighting force that cannot effectively keep track of its resource usage is a vulnerable one.
Shivetya 13y ago
If its anything like what happens when Oracle or similar come in its this, they spent so much that it would be a waste to not keep spending. That and the higher level people who started it, bought into it, put their name on it, are the last people who ever back down and are damn near not approachable by those in the trenches. Seen it far too many times. Backing down cost reputation which is more expensive than money from someone else
pitchups 13y ago
From the article : >"The Pentagon alone has never been audited, leaving roughly $8.5 trillion in taxpayer dollars unaccounted for since 1996, the first year it was supposed to be audited." Wow - that means an average of $500 billion per year of taxpayer money unaccounted since then! From reading the article, one distinct impression is that the real reason for failed accounting may be simpler and more troubling than all the other obvious ones : because it is so much easier to hide inefficiency, incompetence, and gross abuse/misuse of funds if there are no proper accounting systems in place. The freedom from oversight can be addicting. While there may be no grand conspiracy in place at the top to achieve this - the will to fix what is broken could certainly be weaker if it gives you the freedom to do as you please.
wehadfun 13y ago
Did anyone read the first article? This is the third
mathattack 13y ago
I couldn't imagine the pain involved in being attached to one of these projects for multiple years. I suspect most smart and ambitious people agree with me. So in the end, you add a lack of talent to all the other very real things that others have added.

87 points by joshuahedlund 13y ago

Of course it's failing. Screwed up accounting allows for easier stealing and harder to pinpoint who/when/where money ended up.

arethuza 13y ago
"Who in their right mind would send 363 tonnes of cash into a war zone?" http://www.theguardian.com/world/2007/feb/08/usa.iraq1 http://www.theguardian.com/world/2007/feb/08/usa.iraq1
- smtddr 13y ago
  That's ridiculous! These wars are just fronts for money laundering & control of oil. It's only by coincidence that they can align some wars with some human-rights violation. Otherwise, they'll just make stuff up. We need a revolution, there I said it. Go ahead NSA and add me to the watch-list. Nobody here doubts that you scan this site daily.
  - arethuza 13y ago
    Well, there might be good reasons for having that amount of cash - but you can't help wondering what the processes and systems there were for controlling what it was all used for.. Edit: This attitude by a US general doesn't exactly come across well: Q: "But the fact is billions of dollars have disappeared without trace." Oliver: "Of their money. Billions of dollars of their money, yeah I understand. I'm saying what difference does it make?"
  - saraid216 13y ago
    Dear NSA, please also add me to the watch list. I feel lonely.
VLM 13y ago
And not just thievery, I searched the article and found nothing about secret programs. "consequences for failure" isn't the problem, the real problem is "consequences for success" No tinfoil hat stuff needed, merely look at history, opening the books of the Manhattan project or area 51 in the stealth fighter years would not have been very wise. I suspect as a former .mil guy that a lot more money disappears into stuff like that, than is officially admitted, or is lost to corruption. If you think a simple IT project is expensive when .mil does it, doing anything secretly insta-quadruples the cost if not more.

a2tech 13y ago

The biggest problem I see in these articles is the insistence on using off the shelf systems. SAP and Oracle are always at the center of these deals, and they end up being disasters. If you have MULTIPLE billion dollar failed projects using COTS systems, maybe its time to step back and look at a custom system.

jerf 13y ago
To solve problems, first you have to identify the problem, then examine possible solutions to establish how the solutions will solve the problems. It is not clear to me how a custom system will solve any of the problems of the process. I'm not close enough to know, but the primary problem is probably entrenched bureaucracy that has been given no reason to change and perceives major threats-to-power if they change. A custom system seems more likely to exacerbate the problem than solve it by giving the entrenched bureaucracy even more knobs to demand they can twiddle (and knobs on the knobs, and knobs on those knobs....), though admittedly the fail is flowing so thickly here it would probably be impossible to distinguish the additional fail from the already stratospheric baseline.
Spooky23 13y ago
These solutions are highly customizable. I'm not a defender of SAP/Oracle, but I don't see how writing your own package would be any more likely to succeed than paying an ERP vendor. An ancient and creaky administrative regime like what the military has is nearly impossible to manage financially. The GAO has tried and essentially given up on trying to audit.
- mabhatter 13y ago
  the military CAN get things working when they can't write checks. They have a system that works for THAT function and has for 50 years. So it's a matter of LEVERAGE to get compliance. The problem with Oracle and SAP is that they aren't "home builders" they are parts and tools salesmen. They don't know ANYTHING about BUILDING HOUSES... they just sell the tools. even their own businesses aren't actually GOOD businesses with huge amounts of nepotism and politics. The first thing when you sign up with them (or any of the big named software vendors) is that you have to find yourself a "contractor" just like building a house. The "big famous software company" disavow any actual results, your mileage may vary, etc.... They're like the "Music Man" selling boy's bands. If you want to audit the military, that's where North Korea has the correct idea. Generals don't "retire" until the leader says they do. Start enforcing Sun Tzu style discipline to get this done... knock off a few 5 star general's heads. That'll get things done. At a minimum, strip them of private residences, and put them in boot camp barracks (complete with scrubbing their own floors) till they get this thing done.

holograham 13y ago

Lots of comments below are accurate e.g. terrible gov't oversight, extremely large and complex projects, corporations responding correctly to bad incentives, corporations thriving off the complexity of govt contracting However I will posit an additional layer to this...and it lies with the American people themselves. We just cant handle gov't officials and contractors making a ton of money. The real root of the complexity in govt contracting is FAR (Federal Acquisition Regulations) Which create the complexity to avoid egregious corruption and profits in the federal space. While on paper it sounds great...lets make rules that limit what corporations can make off of the government... what you actually get is tremendous waste. Redundancy, arcane billing practices and auditing, and huge bureaucratic RFP bidding systems that limit competition. A classic case in not doing a complete cost-benefit analysis. The solution is not palatable to the general American public. Put up with some fraud and corruption in the federal government which would be offset by increased competition from the private sector (thus better products and prices). And dont kid yourself if you think fraud and corruption doesnt still go on...it's just more sophisticated.

Retric 13y ago
IMO, the real solution is to let the government compete with the private sector on 'government' contracts. Basically, do an analysis on how much it would cost to do in house and then put the same contract up for bid. (aka a Sanity check) However, you need to add a companies reputation to their bid so if they say it costs X and they tend to be 30% over budget or have quality issues then you don't just accept X. With that said and done if someone can really deliver high quality and still make a 20% profit then let them.
- holograham 13y ago
  I am not sure this is feasible in practice. The government is not a business so "competing" isnt a fair rubric. The government has unlimited resources and does not have to "make a profit". I dont know how you could create an apples to apples comparison. In the business world it's easy...profit. Companies reputation is a fuzzy number too. As the stock market adage goes "past performance does not guarantee future success". Sure brand reputation means something but how do you measure that and create equal comparison...across hugely disparate government contracts. Comparing the US Census contract (yes this is contracted out almost entirely) to the F35 contract would be absurd. I do not necessarily have the end all solution. I tend to favor smaller government because I am not sure our current political system scales to be able to execute large projects (I tend to think the ideas behind many large scale projects are correct but fail when you consider the costs of implementation within our political constraints).

rayiner 13y ago

One aspect that's missing in these comments is an acknowledgement of the complexity of the projects which are the subject of defense contracts. The Pentagon and its contractors are literally at the edge of the state of the art in fields like aerospace. Very few companies have the expertise to even attempt to take on these contracts, and most projects have ill-defined specifications simply because nobody is quite sure what is technologically possible until the project is well underway. And nobody knows how much money will be needed up front. That's like asking Zuck in his dorm room: "how much money will you need to build Facebook as it exists circa 2013?" I used to work at a company that did DOD contracts (in the wireless sector). In that area, what the DOD was playing with in the early 2000's is what VC-funded companies are playing with just in the last few years. For the work we did, there were no detailed specs because nobody really knew what was within reach. In response to the question: "what do you want?" the DOD's response is often: "what could we have?" Pointing at how much more efficient private industry is makes no sense. Take an example like Space X. They're a shining example of private industry, and are doing very innovative stuff, but they're treading a lot of the same ground NASA and DOD contractors did in the 1960's. Of course they're getting it done for a lot less money! They know what's possible, they have a general idea of what works. The contractors doing this stuff in the 1960's had none of that to work with. Obviously the time is due for modernizing the accounting system. But it's important to realize that a lot of the mess dates from the Cold War, where keeping up with the Soviet Union was the priority, not satisfying the bean counters.

omegant 13y ago
This is very well explained at the book moon lander, it's an amazing inside story of the problems they encountered during the design and comstruction of the modules. What has surpriced me is that the design effort was minor compared with the management and quality control. They had to multiply the budgets severaltimes to be able to correct unexpected problems.
bhewes 13y ago
I have to agree with you about dealing with the Soviet Union it made accounting an after thought. Now the war has moved to an economic front (if it was not always that). And a fighting force that cannot effectively keep track of its resource usage is a vulnerable one.

Shivetya 13y ago

If its anything like what happens when Oracle or similar come in its this, they spent so much that it would be a waste to not keep spending. That and the higher level people who started it, bought into it, put their name on it, are the last people who ever back down and are damn near not approachable by those in the trenches. Seen it far too many times. Backing down cost reputation which is more expensive than money from someone else

pitchups 13y ago

From the article : >"The Pentagon alone has never been audited, leaving roughly $8.5 trillion in taxpayer dollars unaccounted for since 1996, the first year it was supposed to be audited." Wow - that means an average of $500 billion per year of taxpayer money unaccounted since then! From reading the article, one distinct impression is that the real reason for failed accounting may be simpler and more troubling than all the other obvious ones : because it is so much easier to hide inefficiency, incompetence, and gross abuse/misuse of funds if there are no proper accounting systems in place. The freedom from oversight can be addicting. While there may be no grand conspiracy in place at the top to achieve this - the will to fix what is broken could certainly be weaker if it gives you the freedom to do as you please.

wehadfun 13y ago

Did anyone read the first article? This is the third

mathattack 13y ago

I couldn't imagine the pain involved in being attached to one of these projects for multiple years. I suspect most smart and ambitious people agree with me. So in the end, you add a lack of talent to all the other very real things that others have added.