Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

Information, or its lack, is an essential component: The government personnel with particulars about a given project have no contractual monitoring responsibility, while the contracting officer—without those specifics—is responsible. With regard to CACI, the GAO determined that the army officials who were supposed to oversee CACI “for the most part, lacked knowledge of contracting issues and were not aware of their basic duties and responsibilities in administering the orders.” The result was de facto governing by contractor. CACI “effectively replaced government decision makers in several aspects of the procurement process,” the GAO concluded. 55

With much of the work in government contracting of services done under IDIQ contracts, many of them also interagency ones, CACI is unlikely to be an aberrant case. Moreover, the dearth of manpower and expertise in government, thanks to caps on or reductions in the number of civil servants, leaves still more contractors to fill the holes.

Another complex (but not unusual) case, this one involving compensation to nuclear weapons workers via interagency contracting, was first brought to light by Richard Miller, former senior policy analyst at the Government Accountability Project, a public-interest NGO, in 2004. In this case, the Department of Energy outsourced responsibility to a well-connected IT firm called Science and Engineering Associates, which was hired under a GSA contract through an interagency agreement with the Navy). In the process, the work to be done transmuted from an IT contract into a contract for workers’ compensation claims development and processing. The entity chosen to do the job had scant qualifications, experience, or in-house knowledge for it, and contracting arrangements were convoluted and nearly impossible to track. As Miller summarized the case: “An IT contract issued through GSA morphed into a completely different scope of work and ballooned in size. Meanwhile, the contractor failed to perform. No federal agency was willing to accept responsibility for the circle of mismanagement. Ultimately Congress was forced to strip the Energy Department of the program, restructure it, and offload it to the Labor Department.” A slew of congressional hearings and press reports followed Miller’s revelations about the case. When GAO investigators tried to hold agencies accountable for who contracted with whom for what and why—not to mention the results produced—each agency rejected culpability. The buck stopped nowhere and a circular firing squad formed. Not surprisingly, in 2005 the GAO added the “management of interagency contracting” to its high-risk list. A clear chain of command and real-time oversight are lost in such a contracting system. 56

Real-time monitoring may not be in the cards, but what of after-the-fact sanctions? The CACI and Energy Department examples, unusually, culminated with in-your-face excesses that eventually hit the press, with little consequence to the entities involved. Once the General Services Administration initiated an investigation into whether CACI had broken federal contracting rules, the results of which could have resulted in its being barred from further government work, CACI retained the services of powerful Washington lobbyists. CACI was cleared in July 2004, and, that August, awarded a contract without competitive bidding—this time for interrogation services. 57

While a substantial portion of government contracting was being drained of its accountability lifeblood, competition among businesses—supposedly the free market’s signature feature—was also diminishing. Now, for the first time on record, most federal procurement contracts are conferred either without competition or through the use of IDIQ contracts to a limited set of contractors. Industry consolidation (defense is a case in point) has produced fewer and larger firms. This development, the Acquisition Advisory Panel notes, results in more opportunities for organizational conflicts of interest, in which, for instance, one section of the organization bids on a project that the other section designed. 58

Although IDIQ contracts help maintain the façade of government efficiency, the reality is that favored contractors sometimes make the list because they have personal connections with government officials. For instance, huge, noncompeted awards, justified on national security grounds, have been granted for work in Iraq. Defense companies linked to senior members of the Bush administration’s inner circles were the beneficiaries of some of these awards. Audits conducted by the inspectors general for the departments of Defense and Interior found that more than half of the contracts inspected were granted without competition or without checking to see that the prices were sensible. And in the aftermath of hurricanes Katrina and Rita, FEMA initially contracted with four large companies to provide housing by using noncompetitive procedures. Some government procurement specialists have also argued that the supposedly cost-saving IDIQ system has often kept government contracting officials from getting good deals for their agencies. In fact, in the few cases in which government agencies have “insourced,” they have done so after calculating they would save significant amounts of money. The money salvaged through competitive sourcing is also overstated, according to the GAO. So much for competition and the free market. 59

When on-the-books competition gives way to off-the-books “competition,” rational bureaucracy to personalized bureaucracy, and chains of command to Swiss-cheese bureaucracy, it is not hard to see how contractors can become de facto government officials and accountability vanishes.

Ambiguous Authority

Swiss-cheese bureaucracy, government by contractor, and emasculation of government are not the only developments that have created opportunities for private players to sway public policy while serving their own interests. Ambiguous institutional arrangements provide additional playgrounds for them by enabling greater discretion or making it difficult to establish where authority resides.

Consider first the Coalition Provisional Authority (CPA), the U.S. occupation authority in Iraq under L. Paul Bremer (from May 2003 until June 2004). Although the CPA was short-lived (and the United Nations and representatives of other governments also participated in its governance structure), it was created and funded as a division of the U.S. Department of Defense, and Viceroy Bremer reported directly to the U.S. defense secretary. Until its dissolution, the CPA was vested with executive, legislative, and judicial authority over Iraq. During its reign, the CPA transferred billions of U.S. taxpayer dollars to contractors. Power clearly lay with U.S. authorities. Yet the CPA’s murky status enabled contractors under its authority to wheedle out of accountability. In response to a case brought by former employees of a U.S. contractor in Iraq, the U.S. Department of Justice ruled in 2004 that the CPA was beyond the purview of U.S. authority. In response to the same charges, a federal judge ruled in 2006 that “the CPA was not a U.S. government entity, and therefore employees of the CPA were not working in their official capacity as employees or officers of the United States government.” Only in April 2009, six years after the creation of the CPA, did a U.S. Court of Appeals panel dismiss the argument that the contractors were not working for the CPA. While ambiguity in this case merely enabled contractors (allegedly) to misuse millions of taxpayer dollars (not to privatize U.S. policy), the issue the case raises is crucial: To whom were the contractors answerable, if not to the U.S. government? 60

Second, on American soil a host of institutional arrangements generate opportunities for private players, supposedly engaged in public service, to infuse the agendas of their companies, networks, or selves in government policy, and for this to be hidden from governmental overseers and the public. These institutional arrangements include the quasi-government organizations and federal advisory committees mentioned earlier, which have grown in quantity and significance, along with task forces of ambiguous standing. Many of these bodies make invaluable contributions by bringing the expertise of scientists and other specialists to bear on public policy issues. And getting the relevant and competing players together in the room may enhance the possibility that they will keep each other honest. But not every member of these organizations or committees is engaged simply in public service or résumé building; members not only find out what is going on but can gain entrée to the people who are helping it go on. The information and access these bodies provide can make the difference between being an influencer, or not, in the service of one’s company, network, or self, rather than the public’s. And how would we know? Federal advisory committees can operate in a less-than-transparent way because, under the Federal Advisory Committee Act (FACA), to which they are subject, so-called “task force,” “subcommittee,” or “working group” meetings (less than full FACA meetings) do not have to be open to the public. The Center for Public Integrity has concluded that these committees “sometimes are tainted by financial conflicts of interest, needless secrecy, industry dominance and outside interference.” The information, access, and government imprimatur that the entities provide their members with may help them serve private agendas, rather than public ones. 61