Hope is not a plan

Last month, the GAO issued a report titled Securing, Stabilzing, and Rebuilding Iraq: Key Issues for Congressional Oversight. In it, they compare their earlier advice on these efforts in Iraq with what's actually going on (and going wrong) on the ground there. As with almost any GAO report, it's a treasure trove of useful information. As you might expect, it could be succinctly summed up as "there's a lot going wrong in Iraq."

This GAO report touches on a number of key concerns and problems related to Iraq: (1) The cost of the war has been steadily increasing, and may not be accurately reported; (2) Iraqi security forces are ineffective, and their numbers are overreported; (3) Nearly 200,000 small arms issued to Iraqis are unaccounted for; (4) Up to to a third of Interior MInistry employees are "ghosts", their salaries going to someone else; (5) Oil production, both refined and crude, is well below target levels, and up to a third of refined product may be going onto the black market, with some of its proceeds funding insurgents; (6) The failure to secure conventional munitions -- both in 2003 and on an ongoing basis -- continues to lead directly to the deaths of American soldiers and Iraqi civilians.

A full discussion, with quotes, is in the extended.

The GAO recently issued a report titled "Food Stamp Program: Payment Errors and Trafficking Have Declined Despite Increased Program Participation." You can read it by clicking here.

I think this one is worthwhile because programs such as food assistance and welfare in general are frequent targets for people looking for an "easy" place to cut funding. In addition to high-handed claims about making people into "welfare queens," the thought is that these programs are rife with corruption and misspent money.

Of course, the scale of Federal food stamp money in the U.S. is nothing in comparison with the money lost to poor military procurement procedures, corporate welfare and such novel ideas as destroying the estate tax.

The GAO reports that the error rate -- a rate that combines over- and under-payment of food stamp recipients -- has dropped from 9.86% in 1999 to 5.84% in 2005. This amounts to prevention of $1.1 billion in payment errors in 2005.

The food stamp trafficking rate -- that is, fraud involving food stamps -- has also declined. It ran at about 3.8 cents per dollar of redeemed benefits in 1993, versus 1 cent per dollar in 2002-2005. New electronic benefit management methods and other tools have helped reduce food stamp fraud. Law enforcement agencies are now targeting high-volume traffickers in hopes of further reducing the fraud rate. To put the trafficking figures into actual money, an estimated $812 million in benefits were trafficked in 1993, versus $241 million in recent years. Still big money, but that's $571 million less lost to unscrupulous people.

Maybe we can send the auditors from the USDA's Food and Nutrition Service over to DoD to audit all those lovely no-bid contracts given out to our friends at KBR.

In their report Defense Logistics: Preliminary Observations on the Army's Implementation of its Equipment Reset Strategies, the GAO discusses some potential problems with the Army's reset policies, and the subsequent difficulties they may cause for our forces in Iraq and Afghanistan.

"Reset" is the shorthand term for bringing equipment back up to spec after it has been deployed in the field. The formal goal of reset is to make sure military units are appropriately equipped to be sent back into action. According to the GAO, the current reset policy focuses on refurbishing equipment as it comes back from the field, rather than ensuring units that are about to deploy have proper equipment. This, along with other factors, may mean that those units where reset is most critical are the same units where it is lacking.

Although Congress has given the Army about $38 billion for reset since 2002, the GAO concludes that the fact that reset is not an independent budget line item has made it difficult to tell whether money tasked for reset is actually spent on reset. Given that the current reset cost estimate is another $12-13 billion per war year (and then that same amount again for each of another two years after both the Iraq and Afghanistan conflicts end), it's critical that we know that the money is going where it's meant to be going. At the moment, the opacity of the reset budget means that no one -- GAO or Army -- can really say that all of the reset funds are going where they're meant to.

Perhaps a more pressing issue is that even funding known to be going to reset may not be going to the right kind of reset. From the report:

For example, the Army plans to induct 7,500 High Mobility, Multi-Purpose Wheeled Vehicles (HMMWV) into depot level recapitalization programs in 2007 at a cost of $455 million. The Army intends to use these HMMWVs to fill gaps in the Army’s force structure to allow units to train and perform homeland security missions. However, according to Army officials, the HMMWVs that emerge from this recapitalization program will not be suitable for use in the OIF theater because they will not be armored and, thus, will not provide protection from sniper fire and mine blasts. The unarmored M1097R1 HMMWVs will not offer the same level of force protection as the M1114 Uparmored HMMWV, and do not have the M1114’s rooftop weapons station. According to Army officials, only fully armored HMMWVs are being deployed to the OIF theater. While the Army’s HMMWV recapitalization activities may raise overall HMMWV equipment on hand levels of non-deployed units in the United States, they will not directly provide HMMWVs to equip units deploying for OIF missions, or allow them to train on vehicles similar to those they would use while deployed.

That is, while the stock of "ready" HMMWVs will see a general increase, none of the targeted models will be deployable to Iraq. Similarly, large portions of reset money are currently going toward longer-term goals (in the one- to two-year range) even as unready units are redeployed to Iraq. This latter problem may be exacerbated by a tendency of unit commanders to increasingly overestimate their unit's readiness as the deployment date approaches. Whether that contributes or not, certainly the overarching policy of directing reset toward equipment at home and equipment coming home is out of step with our need to deploy our units with the highest possible readiness.

There is no suggestion of anything nefarious behind the current problems with reset, but rather a failing of standing policy to match up to the actual needs of the deployed Army. As such, the GAO report highlights areas where, without acrimony or blame, reset can be restructured to best serve our soldiers in the field.

In a recent report titled Energy Efficiency: Long-Standing Problems with DOE's Program for Setting Efficiency Standards Continue to Result in Forgone Energy Savings, the GAO reports that DOE's failure to set required standards is costing us a lot in terms of wasted energy.

As a bit of background, the Department of Energy was tasked by the 1975 Energy Policy and Conservation Act (EPCA) with setting energy efficiency targets on a regular basis in key energy-use areas, some industrial, most residential. However, at the moment, DOE is woefully behind in setting new energy efficiency rules, only successfully setting requirements in four major residential applications. DOE has, in fact, missed 34 deadlines in 20 product areas that came up for revision. Of these missed deadlines, only 11 were late -- the other 23 have not yet been issued, with some of these up to 15 years overdue.

On the plus side, the standards that have been set by DOE should account for $125 billion in energy savings by 2030. On the minus side, the standards that are overdue will account for another $28 billion in lost energy savings over the same period if they are not put into place. Also, as the report points out, delays in enacting Federal standards may lead to standards being set at the state level. This uncertainty and potential irregularity in standards nationwide creates a problematic environment for businesses working in the regulated areas.

DOE management has submitted a plan for rectifying these problems and bringing standards up to date by 2011. However, the GAO report indicates that this plan is suspect, as it is based largely on anecdotal reporting on why earlier delays occurred, and assigns a six-fold increase in workload without a matching increase in assigned resources. Here's what the report had to say about management practices at DOE:

The plan lacks critical project management elements. According to leading project management practices, effective project plans have two key components that are lacking in DOE’s plan. First, plans should hold officials and staff accountable for meeting interim and final deadlines. If the officials do not meet these deadlines, they should provide legitimate reasons for the delays. Second, the plan should include provisions for adequate resources. Instead, DOE’s plan increases the workload sixfold over that in recent years without increasing proportionately the resources it will devote to the program. DOE officials told us they plan to rely on increased productivity, with only a marginal increase in resources, to bring the standards up to date. Furthermore, DOE’s plan does not include a means of ensuring that staff and reviewers are accountable for meeting deadlines.

However, lest this all seem like an issue of pure bad management at DOE, consider the role of Congress and those regulated businesses:

According to the report, Congress’s rulemaking schedule was “rigorous.” As a result, the program staff were unable to meet the deadlines from the beginning. These delays were exacerbated when Congress increased the number of products that required rulemakings. In 1994, DOE attempted to address the backlog by proposing standards for eight products in one rulemaking. However, according to DOE, this rulemaking effort met with strong opposition from industry, drawing over 5,000 responses during the comment period, and DOE withdrew the proposal. Following this experience, Congress imposed a 1-year moratorium on new or amended standards. The moratorium further exacerbated the backlog, according to DOE.

So, to clarify that progression, Congress originally called for rapid assessment of new standards. Then they added additional standards. DOE complied with both requests, and businesses complained vociferously. As a consequence, Congress blocked DOE from setting any new standards for a year.

Representatives from DOE could very reasonably point out that it's hard to comply with Congressional requests when Congress expressly keeps you from doing so.

Other business-friendly practices from DOE were also problematic when it came to meeting deadlines:

Adhere to the deadline for closing public comments. DOE reported that it will only consider comments received before their deadlines in its current analysis. In the past, DOE continued to consider comments after the closing date stated in the Federal Register and responded to those comments with additional analysis, which delayed the issuance of the final rulemaking.

From the overall assessment, it appears likely that DOE will continue to miss these deadlines, both because of a wildly optimistic view of their own ability to set new standards and because of continuing interfering from would-be regulatees and their associated Congressional support.

On the plus side, GAO reports that DOE is largely up to date in its job of evaluating revisions to residential building codes.

In their report titled Passenger Vehicle Fuel Economy: Preliminary Observations on Corporate Average Fuel Economy Standards, the GAO surveys the recent history of passenger vehicle fuel standards, and the even more recent attempt to get them moving in the right direction again.

Following the fuel crisis of the 70s, Congress developed the concept of Corporate Average Fuel Economy (CAFE). The gist of the CAFE concept is that on average, the vehicles produced in a given class by an auto manufacturer must meet a National Highway Traffic Safety Administration (NHTSA) fuel efficiency standard, or the company pays a penalty. This is an average, so some vehicles may not meet the standard, balanced out by others that exceed it. Standards for passenger vehicles are divided into the categories of cars and light trucks, the latter category picking up many vehicles that have gained in popularity from the 90s onward, most notably SUVs.

Congress sets the fuel effiency target for cars in CAFE, and the NHTSA is tasked with setting fuel efficiency standards for light trucks at the "maximum feasible level using the same criteria and lead-time requirements used in setting standards for passenger cars". This all sounds pretty good.

Unfortunately, Congress has not mandated any increases in the car mileage standard (set at 27.5 mpg) since 1990. Furthermore, Congressional appropriations acts in the span 1996-2001 actually prevented NHTSA from spending money on updating standards, such that there was no funding available to change the light truck standard. The net effect was no change in fuel effiency standards for cars or light trucks between 1996 and 2001. Remembering who was in power in Congress during that time is left as an exercise for the reader.

The inability to alter light truck fuel efficiency standards was especially destructive, since vehicles that fall into the light truck category (this includes minivans, pickups, and SUVs) have risen from 20% of the passenger vehicle market in 1980 to 50% of the market today. As a consequence of this combined freeze in standards and growth in that sector, the overall fuel effiency of American cars actually declined in the 1990s.

NHTSA was finally able to change light truck effiency standards in 2003, setting a target of 22.2 mpg in 2007 (which would be an increase of 1.5 mpg from the 2004 standard). Subsequently, they reworked their light truck standards to match the standard to a calculation based on the total size of the truck. This metric lets them optimize efficiency while maintaining safety, by not batching in larger and necessarily heavier vehicles with much lighter vehicles.

It's a good sign that NHTSA is finally free to set new standards. Nationwide, we're already lagging on this, and even my own home state of California is starting to have trouble with auto manufacturers who got used to the static 90s and would rather sue than conform to our standards. The GAO has some additional recommendations culled from many experts in the field:

...these experts also identified some further revisions to the CAFE program that could be considered in determining ways to further optimize the CAFE program, including:

• evaluating a size-based approach for cars similar to the one implemented for light trucks to address safety and other concerns and encourage fleet-wide improvements in fuel efficiency;
  
• considering harmonizing light truck and car standards to have an integrated program and reduce incentives to classify vehicles as light trucks;
  
• reassessing the length of time for which standards are set to reduce costs for manufacturers;
  
• allowing trading of CAFE credits between vehicle classes and among manufacturers to provide additional incentives and flexibility in meeting CAFE standards; and,
  
• evaluating the need for the distinction between domestic and foreign vehicles when calculating CAFE to simplify the program and recognize changes in where automobiles are manufactured.

Problems with our military procurement system are a known quanity -- consider the issues with equipping our troops with second-rate body armor, for example. In a report titled Defense Acquisitions: Issues Concerning Airlift and Tanker Programs, the GAO reiterates some concerns about how the Department of Defense -- specifically the Air Force, in this case -- runs procurement.

Briefly, the GAO has looked at both DoD's analysis of our air transport needs for the near future and how it operates procurement, and found that both areas involve insufficient oversight and poor planning.

GAO has this to say about DoD's Mobility Capabilities Study:

For the past several years, we have reported our concerns with the analyses done to support requirements and have recently issued two reports that raise concerns about the quality of analyses underpinning the programmatic decision-making surrounding DOD’s airlift requirements. In September 2006, we issued our report on DOD’s Mobility Capabilities Study (MCS). The MCS determined that the projected mobility capabilities are adequate to achieve U.S. objectives with an acceptable level of risk during the period from fiscal years 2007 through 2013; that is, the current U.S. inventory of aircraft, ships, prepositioned assets, and other capabilities are sufficient, in conjunction with host nation support. In our report, we stated that conclusions of the MCS were based on incomplete data and inadequate modeling and metrics that did not fully measure stress on the transportation system.

Specific problems arose when they reviewed the MCS. GAO analysts found that MCS analysis was often based on severely incomplete information and untraceable assertions. When MCS conclusions were backed by fact, the facts used were probably not the best choice:

For example, the MCS modeled hypothetical homeland defense missions rather than missions for homeland defense demands from a well-defined and approved concept of operations for homeland defense because the specific details of the missions were still being determined, and DOD acknowledged that the data used may be incomplete.

Additionally, the MCS modeled the year 2012 to determine the transportation capabilities needed for the years 2007 through 2013. The year 2012 did not place as much demand for mobility assets in support of smaller military operations, such as peacekeeping, as other years. However, DOD officials considered 2012—the year modeled—as “most likely” to occur and stated that statistically it was not different from other years in the 2007 to 2013 period even though the number of smaller military operations is the least of any of the years reviewed.

Moving from planning to procurement, GAO noted that the Air Force is planning on requiring passenger and cargo transport capacity in its next generation of tanker planes, without having carried out mandated analysis to make sure that capacity is necessary:

Mandatory Air Force policy requires Air Force organizations to use a formal capabilities-based approach to identify, evaluate, develop, field, and sustain capabilities that compete for limited resources. Contrary to mandatory Air Force implementing guidance, however, the Air Force proposal for a replacement refueling aircraft, the KC-X tanker, included a passenger and cargo capability without analyses identifying an associated gap, shortfall, or redundant capability. According to mandatory Air Force implementing guidance, analyses supporting the decision-making process should assess a capability based on the effects it seeks to generate and the associated operational risk of not having it. In this case, the supporting analyses determined neither need nor risk with regard to a passenger and cargo capability. Air Force officials could not provide supporting information sufficient to explain this discrepancy between the analyses and their proposal. Without sound analyses, the Air Force may be at risk of spending several billion dollars unnecessarily for a capability that may not be needed to meet a gap or shortfall.

Specifically, the addition of passenger and cargo capacity will add at least $4.3 billion above and beyond the expected $72 billion price tag of replacing the current tanker fleet.

DoD disagrees with GAO's assertions here:

DOD disagreed with our first recommendation to accomplish the required analyses. In its comments, DOD stated that through the Joint Capabilities Integration and Development System process, the Air Force presented analysis and rationale for the passenger and cargo capability. DOD further stated that its Joint Requirements Oversight Council and the Air Force concluded that the analysis was sufficient justification for the capability and the Joint Requirements Oversight Council validated the requirement. However, as our report points out, DOD did not perform the required analyses and failed to identify a gap, shortfall, or redundancy for the passenger and cargo capability.

It sounds, however, as if they're not quite talking about the same thing. Although one would need to look at the individual documents, the Air Force emphasis appears to be on the rationale for this capacity, whereas GAO is pushing on the topic of whether or not it is necessary. In other words, Air Force may think it would be handy as hell to have passenger space on tankers, but GAO wants to make sure it's not redundant with existing capabilities, and thus wasting money that should be spent on other defense needs.

Finally, GAO points out that lack of good business practices during procurement and development leads to extra costs and delays. Specifically, they point out that "DOD programs often do not capture sufficient knowledge by critical junctures but decide to move forward regardless." This means that a program is neither halted nor reevaluated when it fails to meet a benchmark or makes a cost overrun, but simply continues going -- even though hard requirements and constant reevaluation would not only lead to cost savings, but to faster overall completion in the long run.

Consider the following Air Force programs, all suffering from delays and cost overruns:

This kind of "fuzzy" evaluation and assumption that programs should continue no matter what may come from the feeling that certain defense programs are critical, and can't just be shut down, or even halted. It's true that cost overruns seem acceptable for defense-critical items -- until you realize that by allowing this fuzziness, you actually end up with weaker defense capabilities than if timelines and evaluations were strictly enforced. The report highlights this very problem with regards to the programs shown in the table above:

The net effect of the outcomes to date is that DOD is now paying more to modify or acquire these systems and the warfighter has had to wait longer than initially planned before new capability is delivered. For example, the Air Force now expects by 2011 to have completed the modification of about 135 fewer C-130 airlift aircraft when compared to its plan 2 years ago.

Procurement reform is vital to national defense. By promoting rigor in planning and expenditures, we ensure that our troops will have the support they need faster, at higher quality, and more abundantly than if we just make best guesses and let deadlines slide.

In a report titled Maritime Security: Public Safety Consequences of a Terrorist Attack on a Tanker Carrying Liquefied Natural Gas Need Clarification, the GAO surveyed a group of experts and the current unclassified literature on liquid natural gas (LNG) spills to determine just how safe ships full of LNG are.

This is an area of growing concern because imported LNG is expected to grow from 3% to 17% of our natural gas supply in the next twenty or so years. As a consequence, new LNG offloading facilities are being planned, as shown in the graphic above. It's occurred to some folks in the last few years that, although LNG tankers have a solid safety record and as a consequence there have been no LNG spills, someone might get it into their head to go and try to blow one up while it's in port.

Intuitively, it feels like a ship full of compressed gas ought to be able to kick up a devastating explosion. However with supercooling as a prerequisite to move the gas into liquid form, it's not so much an issue of explosion as it's one of a spill followed by a fire. The current "worst case" estimate generated from research at Sandia National Laboratories suggests that an LNG spill could generate what's known as a "cascading tank failure" and a substantial fire, under the right circumstances. In a cascading failure, LNG leaking from one tank leads to a breach of several other tanks in the tanker. They estimate that an LNG fire resulting from this kind of accident would burn people to a distance of over a mile (that is, the heat of the fire would cause burns in people over a mile away from the fire itself). That certainly suggests some functional limits on placing LNG offloading facilities near residential areas.

The expert reviewers couldn't agree on whether or not this "worst case" is an over- or underestimate. Thus the title of GAO's report. They want to make sure we neither over- nor underspend on safety for our new LNG import facilities. In the meantime, you have something to chew on should someone ever try to stick an LNG facility within a mile of your home.

In their report titled Stabilizing Iraq: Factors Impeding the Development of Capable Iraqi Security Forces, the GAO takes stock of the current status of security forces in Iraq, and why their impact on the violence in that country has been less than astonishing.

This chart compares the increase in total numbers of Iraqi security forces with an apparently matching increase in violence. If you look more carefully at the violence track, you'll notice that the biggest "gains" come in attacks on civilians and security forces. In a way, the second part is logical -- the more security forces there are, the more there are to attack. One might expect things to reach a tipping point, however, and see attacks finally decrease. As the GAO notes, the exact opposite has happened so far, with the daily attack rate more than doubling from 70 (in January of 2006) to 160 (in December of that year).

GAO identifies several roadblocks standing in the way of effective security forces in Iraq. First, despite the monicker "security forces," only 40% of the reported numbers -- the Iraqi army, specifically -- are tasked to counterinsurgency. The rest are, in short, cops, and one does not effectively pit cops against insurgents. Second, it's hard to say exactly how many of the reported 327,000 trained security forces are really still on the job, or on the job at any one time. Although Iraqi Ministry of Defense figures exclude soldiers who are AWOL, Ministry of Interior figures include them. Military units deployed outside their home area report up to 50% absentee rates. In addition, GAO estimates that about a third of the Iraqi army is on leave at any one time.

So for the army, that's a starting tally of 130,000 troops, with 44,000 on leave, and up to 50% absentee rates among the 86,000 left on the job. It's hard to say where to begin with the Ministry of Interior, since they don't even bother to track absentee rates.

Third, and a big one, is the problem of sectarian "influence" in Iraqi police units. This has hit the news repeatedly in the last year, with American and British raids conducted against Iraqi "police" stations to rescue kidnap and torture targets.

Finally, GAO notes that Iraqi security forces are still quite dependent on coalition forces for logistical, command, and intelligence support. Their effectiveness is limited by their dependence.

GAO caps its report by reiterating an earlier complaint. Chiefly, DOD continues to balk at handing over to GAO its TRAs -- readiness reports on each of the Iraqi units trained and equipped by us. Without these, it's especially hard to say whether an Iraqi security unit should really be counted among the "ready" responders to the insurgency.

In addition to providing reports for Congress on a wide range of topics, the GAO handles legal challenges made after contracts are awarded. These challenges typically involve an assertion by one of the non-winning bidders that the contract was improperly awarded. They're also typically denied by the GAO.

Not in this case, however. In this report, ITT Federal Services International Corporation, October 11, 2005, ITT Federal Services protested as improper the awarding of a contract to provide logistics support in the European theater to the Army Corps of Engineers. You'll recall that KBR is a subsidiary of the best-known Iraq war profiteer, Halliburton, and a frequent winner of shady contracts (including some big no-bid ones).

In evaluating ITT's protest, GAO identified some key flaws in the way the contract was awarded.

First off, KBR cheated to make their staffing seem appropriate:

In the evaluation, the agency concluded that ITT had understated the hours necessary to perform this functional area by 198,963 hours, LSA Summary Report, supra, at 8, and that this understaffing resulted in its FFP proposal being understated by $3,068,179. SSEB Briefing, June 3, 2005, at 213. In contrast, since KBR’s offer of 570,076 hours was only approximately 3 percent below the estimate, the agency found that its proposed staffing was reasonable and realistic to satisfactorily perform all aspects of the requirement, LSA Summary Report, supra, at 10, and found no price/cost understatement for this aspect of the requirement.

The agency’s argument misses the point. The fact that KBR’s total labor hours number aligned with the agency’s estimate for total labor hours was irrelevant, since that number was calculated using a number of occurrences figure lower than that provided in the RFP. Using a lower number of occurrences resulted in an artificially low number for KBR’s total labor hours. Since the contractor will have no control over the number of occurrences, that number should have been the same for all offerors--indeed, it appears the agency understood this when it provided a specific figure in the RFP. Based on its own proposal, KBR will need additional hours to perform the work where all occurrences are accounted for; in fact, as the parties acknowledge, KBR would need 938,561.8 more hours to perform all occurrences. Thus, the agency should have concluded that KBR understated its staffing.

To boil that down, the RFP (request for proposal -- the document on which you base your bid) required staffing able to provide a certain level of service. To make their lowball staffing estimates seem to make sense, KBR actually reduced those numbers. Imagine going into a grocery store and saying, "Can you give me ten apples for five bucks?" and the grocer says, "Sure, we can give you apples for five bucks" while secretly scribbling out your "ten" and replacing it with a "six". The Army contracts folks acknowledged this fibbing by KBR, but then, stunningly, said "but their total estimate was lower."

Well, naturally. They cheated to make it lower.

In that vein:

We note as well that KBR estimated in its FPR that it would need 6.99 and 6.32 hours, respectively, to perform Tactical Vehicles repairs and services and CAP repair and services, compared to the agency’s figure of 5 hours per occurrence in each category. In its preceding proposal revision, KBR estimated that it actually needed some 20 percent more time per occurrence in these areas, and used figures of 8.57 and 7.74 hours per occurrence respectively. KBR FPR, at 6dd-6ee. It appears that KBR’s FPR reduction was merely in response to a discussion question in which the agency noted that its staffing in this area was approximately 20 percent above the government estimate. However, KBR’s proposal offers no meaningful explanation of how it was able to achieve these further efficiencies in light of its technical approach. Id. This was inconsistent with the instructions in the RFP:

The offeror shall provide a concise narrative summary for each priced CLIN/SCLIN of the contract base program year discussing the technical approach used to satisfy the PWS requirements. The offeror should provide detailed rationale and explanation to support the level of manhours and the skills and skill mixes . . . proposed.

KBR was told initially "your estimates are too high." KBR solved this problem by lowering their estimate, no reason given. Magic.

Perhaps more galling is that fact that KBR came up with the initial staffing estimate in the RFP in the first place:

However, the agency’s explanation for arriving at the number of FTEs required to perform these functional areas is problematic. The record shows that the agency used KBR’s proposed staffing approach as the basis for arriving at the distribution of FTEs among the various SCLINS. Specifically, the cognizant agency personnel determined that, because KBR’s staffing approach was similar to the IGCE staffing approach, they would use KBR’s proposed staffing to arrive at the appropriate number of FTEs for the various program management functional area SCLINS; they concluded that this would provide a more realistic FTE and hour count for the government standard. Amended KTR Program Management Document, May 27, 2005, at 1.

The agency’s actions were improper. The agency’s use of an offeror’s staffing approach to arrive at the government’s standard was not a reasonable substitute for an agency-generated estimate based on historical workload data and the PWS requirements. While the agency’s estimate and the staffing approach proposed in the KBR proposal could be similar, in the absence of an analysis from the agency reconciling the two, there was no reasonable basis for the agency to use the KBR staffing approach as its benchmark for evaluation purposes. Using the KBR staffing approach without such an analysis had the effect of possibly giving KBR an improper competitive advantage since, obviously, KBR’s staffing automatically would be deemed acceptable, while ITT’s would not.

Yup. The Army used KBR's staffing estimates in the initial bid development. And KBR still failed to meet them. And the contracts people involved chose KBR anyway.

Seems fair.

In light of the recent problems at Walter Reed, I was very interested in hearing what the GAO had to say about the VA. In a report titled Veterans' Disability Benefits: Processing of Claims Continues to Present Challenges, the GAO tells us that the VA has actually improved its procedures over the years, but that filing claims and appeals is still an arduous, overlong process, and that the VA's disability policies are probably out of step with the modern world.

As the following chart shows, the VA actually reduced its pending claim backlog in the early 2000s.

However, following a commendable low in 2003 -- the year of the Iraq invasion -- the backlog started to pile up again. By the end of last year, initial compensation claims took an average of 127 days to be processed, up 16 days from the year before, and appeals resolution took an average of 657 days.

Consider that this means that our veterans are currently waiting just over four months to have claims processed, and potentially another two years if they try to appeal a rejected claim. That's a long time to hang out, disabled, waiting for help.

The VA notes that they're receiving quite a few more claims than they used to, due to our pair of wars and other causes:

The increase in VA’s inventory of pending claims, and their average time pending is due in part to an increase in claims receipts. Rating-related claims, including those filed by veterans of the Iraq and Afghanistan conflicts, increased steadily from about 579,000 in fiscal year 2000 to about 806,000 in fiscal year 2006, an increase of about 39 percent. While VA projects relatively flat claim receipts in fiscal years 2007 and 2008, it cautions that ongoing hostilities in Iraq and Afghanistan, and the Global War on Terrorism in general, may increase the workload beyond current levels. VA also attributes increased claims to its efforts to increase outreach to veterans and servicemembers. For example, VA reports that in fiscal year 2006, it provided benefits briefings to about 393,000 separating servicemembers, up from about 210,000 in fiscal year 2003, leading to the filing of more original compensation claims. VA has also noted that claims have increased in part because older veterans are filing disability claims for the first time.

Newer claims also take longer to process because they involve harder-to-substantiate conditions, all neurological -- post-traumatic stress disorder (PTSD) and brain injuries (the latter a notable consequence of near hits by IEDs). In processing PTSD the VA runs into specific roadblocks based on the need to substantiate the causative incident(s):

Additionally, claims-processing timeliness can be hampered if VA cannot obtain the evidence it needs in a timely manner. For example, to obtain information needed to fully develop some post-traumatic stress disorder claims, VBA must obtain records from the U.S. Army and Joint Services Records Research Center (JSRRC), whose average response time to VBA regional office requests is about 1 year. This can significantly increase the time it takes to decide a claim.

The VA, aware that its improving outlook has taken a retrograde turn since the invasion of Iraq, has a number of plans to fix the situation. Their fiscal year 2008 staffing request is a 6% increase over 2006 levels. They intend to bring the additional staff up to speed quickly using overtime from regular staff and training led by retired VA employees. They also want to capture more of a servicemember's military records electronically at discharge, so they can cut down on problems such as that one-year wait time from JSRRC. They're also trying to cut down on problems that lead to appeals.

The GAO applauds these efforts, but points out that the VA may have an antiquated idea of just how disability works these days:

Specifically, our research showed that the disability programs administered by VA and the Social Security Administration (SSA) lagged behind the scientific advances and economic and social changes that have redefined the relationship between impairments and work. For example, advances in medicine and technology have reduced the severity of some medical conditions and have allowed individuals to live with greater independence and function in work settings. Moreover, the nature of work has changed in recent decades as the national economy has moved away from manufacturing-based jobs to service- and knowledge-based employment. Yet VA’s and SSA’s disability programs remain mired in concepts from the past, particularly the concept that impairment equates to an inability to work.

If I'm reading that correctly, GAO is pushing in a good direction here. The ability to work in some capacity should not, alone, be a metric that a veteran is no longer in need of assistance and care. We want our injured veterans to return to a real life, not just to survive.

In a report titled Tactical Aircraft: DOD Needs a Joint and Integrated Investment Strategy, the GAO once again addresses the broken military procurement system. This is a frequent point of interaction between DOD and GAO, dealing as it does with money and the making of realistic versus unrealistic estimates on costs and needs.

In this report, GAO evalutes DOD's approach to three major "future fighter" acquisition programs -- the F-22, the Joint Strike Fighter (JSF), and the latest-generation F-18 -- with an eye toward how shortfalls in these programs affect current and future military readiness and expenditures. Briefly, the outlook is not good. Problems and failures in programs meant to upgrade and modernize the fleet force the military to fall back on its "legacy" set of older aircraft. However, a continuing culture of unbounded optimism in "planning" means that this need to fall back on legacy units is perpetually unexpected, and perpetually funded on an emergency basis. Thus, modern acquisition failures lead to several problematic outcomes:

• The new aircraft suffer massive cost overruns, and we can thus buy less of them
• The new aircraft come in much later than when we originally planned to have them, leaving us vulnerable
• Legacy aircraft are increasingly expensive to operate and maintain

These problems occur because of a dangerous mixture of over-optimism and what I'll call the "core procurement fallacy." This core fallacy is that critical defense projects can't be canceled because they are critical. In contrast, GAO argues, and I agree, that critical projects must receive extra scrutiny and detailed, reality-checked planning so that they will proceed on schedule, serve our needs, and get the job done.

Should our pilots ever end up facing a mass of Sukhois over the Taiwan Strait, they would be much better served by an extant fleet of next-generation fighters than by amazing "next-next generation" vaporeware fighters that'll be ready "any day now."

(Some charts and more discussion are in the extended.)

As discussed before here and here, GAO thinks that the DOD's procurement methods are broken. Unsurprisingly, this problem is not limited to the purchase of physical items. In a report titled Defense Acquisitions: Improved Management and Oversight Needed to Better Control DOD's Acquisition of Services, GAO points to poor business practices and disorganization in DOD procurement of services -- and how this presents risks to the military.

In the last decade, DOD has shifted a lot of labor over to contractors. As a consequence, those outside contractors are pulling down a lot more money (over $151 billion in 2006, up from $85.1 billion in 1996) and DOD has less control over outcomes:

Within this environment, our work, as well as that of some agency Inspectors General, have identified numerous instances of weak business practices—poorly defined requirements, inadequate competition, insufficient guidance and leadership, inadequate monitoring of contractor performance, and inappropriate uses of other agencies’ contracts and contracting services. Collectively, these problems expose DOD to unnecessary risk, complicate efforts to hold DOD and contractors accountable for poor acquisition outcomes, and increase the potential for fraud, waste, or abuse of taxpayer dollars.

Perhaps the central problem with this shift over to contractors for services, as identified by GAO, is the lack of a systematic or managed approach to this problem. Rather than a conscious, unified decision to lean more heavily on contractors -- and thus, a developed scheme for doing so -- DOD has "migrated" that way in aggregate. Without a sound policy, and under time pressures, especially in wartime, contracts are often awarded for undefined tasks:

We noted, for example, the statement of work required the contractor to provide water for units within 100 kilometers of designated points but did not indicate how much water needed to be delivered to each unit or how many units needed water

Note that in cases like this, it's not just a cost and waste issue -- it's also a matter of not supplying military forces with needed supplies or services. Nor is this necessarily a matter of contractors trying to take advantage of the situation. Given the job of "supplying water in this area", even the most well-meaning, honest of contractors can't do much without DOD telling them who they're supplying.

What GAO is pointing to here is a culture of haphazard, poor planning that seems far more prevalent these days than it used to be. The unfortunate fact is that is does not require that a lot of people in the armed forces and the rest of DOD to be like this to have this kind of sloppiness ripple down through the organizational structure. Having a Wolfowitz-style declaration that 'privatization will solve all problems' made at the top leaves everyone else in these organizations to do their best to implement that declaration, all in the absence of an actual policy about how to do so.

Right now, the executive culture that accepts a half-assed PowerPoint presentation as if it were a plan is still damaging DOD by throwing down directives without a plan.

In a report titled Stabilizing and Rebuilding Iraq: Coalition Support and International Donor Commitments, GAO checks in with our "coalition of the willing" and with the pool of international donors providing grants and loans to Iraq.

GAO includes this chart by way of showing how non-US coalition participants have dropped off the scene in the last year or so. Currently, American forces are 92% of what's on the ground in Iraq, and 2006 was the first year we lost coalition partners with no new ones to replace them.

This chart is perhaps even more notable for how directly it illlustrates the lie of the surge. In December of 2005, coalition forces numbered 178,100. We recently "surged" up to a whopping 157,600. In other words, the "surge" took us to just 88% of a historical troop level that didn't stop the violence back in late 2005. Do you really feel the need to "give the plan a chance" at this point?

The report also includes a view of our current force structure in Iraq, which I've included in the extended. Our major partners in Iraq at this point -- that is, those nations actually in charge of a region of the country -- are the United Kingdom, Poland, and South Korea. Although the Korean role in Iraq is rarely reported on in the US, the Korean force is in charge of operations in the northeast of Iraq, from Irbil to Kirkuk. They're also planning on leaving the country in 2007.

In addition to the force structure chart, I've also included GAO's coalition participation chart in the extended. As mentioned above, 2006 was the first year that saw only dropouts from the coalition, with no replacements:

• 2004: Japan and Singapore join, Dominican Republic, Honduras, Hungary, New Zealand, Nicaragua, Philippines, Spain, and Tonga drop
• 2005: Armenia and Bosnia-Herzegovina join, Singapore drops
• 2006: Estonia, Macedonia, Mongolia, and Netherlands drop

The remaining coalition is mostly a "who's who" of former Eastern bloc nations.

The US has spent about $1.5 billion in support of coalition partners since the start of the war, with nearly $1 billion of that going to Poland (as befits their relatively large contribution of troops and concomitant inability to transport or house them). The second-place recipient here is actually Jordan, to whom we've paid about $300 million to help them secure their border.

The report also takes a look at international (non-US) aid offered to Iraq. About $15.6 billion in aid has been offered to Iraq, with the substantial caveat that 70% of this is as loans, rather than as outright payment. The biggest "givers" overall are the European Commission ($921 million), Iran ($1 billion), Japan ($4.9 billion), and the IMF and World Bank (which together amount to at least $5.5 billion in proposed loans).

But that's loans. Who's giving the most money outright? It turns out that the big gift-giving nations (again, non-US) are Japan ($1 billion), the United Kingdom ($775 million), Korea ($153 million), Canada ($110 million), and Spain ($100 million).

The GAO gave no specific recommendations in this informational report. I do think the total troop levels over time shown in the very first chart provide mute witness to George Bush's lies about Iraq.

In its report Climate Change: Financial Risks to Federal and Private Insurers in Coming Decades are Potentially Significant, GAO evaluates a frequently overlooked area of high impact for global warming -- insurance.

The report opens by reviewing the likely outcomes of continued global warming. As ever, the GAO's eye is focused on financial impacts, in this case specifically focusing on financial impacts on property insurers:

This table, although instructive, is a little bit dry and hard to draw financial conclusions from. Fortunately, the GAO has some real numbers to work with:

You can easily pick out two disasters by eye -- the WTC in 2001, and Hurricane Katrina in 2005. Absent those extraordinary cases, the trend is still obviously toward greater property damage over time. Two additional tables in the report clearly show that both flood and crop damage claims are trending upwards over time. Although flood damage increases (again, not counting Katrina) can be at least partially attributed toward cyclical upswings in hurricane activity and unwise coastal building, crop damage has nothing to do with choosing to live anywhere new or foolish.

As it happens, many private insurers are taking measures to try and account for this apparent increase in risk. After all, it affects their bottom line.

In addition to managing their aggregate exposure on a near-term basis, some of the world’s largest insurers have also taken a longer-term strategic approach to changes in catastrophic risk. Six of the eleven private insurers we interviewed reported taking one or more additional actions when asked if their company addresses climatic change in their weather-related risk management processes. These activities include monitoring scientific research (4 insurers), simulating the impact of a large loss event on their portfolios (3 insurers), and educating others in the industry about the risks of climatic change (3 insurers), among others. Moreover, major insurance and reinsurance companies, such as Allianz, Swiss Re, Munich Re, and Lloyds of London, have published reports that advocate increased industry awareness of the potential risks of climate change, and outline strategies to address the issue proactively.

The nonprofit Federal insurance programs, however, have not taken steps to try and model increasing risk ahead of time, preferring to operate reactively:

Neither program has assessed the implications of a potential increase in the frequency or severity of weather-related events on program operations, although both programs have occasionally attempted to estimate their aggregate losses from potential catastrophic events. For example, FCIC officials stated that they had modeled past events, such as the 1993 Midwest Floods, using current participation levels to inform negotiations with private crop insurers over reinsurance terms. However, NFIP and FCIC officials explained that these efforts were informal exercises, and were not performed on a regular basis. Furthermore, according to NFIP and FCIC officials, both programs’ estimates of weather-related risk rely heavily on historical weather patterns. As one NFIP official explained, the flood insurance program is designed to assess and insure against current—not future—risks. Over time, agency officials stated, this process has allowed their programs to operate as intended. However, unlike private sector insurers, neither program has conducted an analysis of the potential impacts of an increase in the frequency or severity of weather-related events on continued program operations in the long-term.

NFIP is Fema's National Flood Insurance Program. FCIC is the FDA's Federal Crop Insurance Program.

Reactive measures are a bit of a worry, because the rate of increase in risk appears to be outpacing the historical trend:

AIR Worldwide, a leading catastrophe modeling firm, recently reported that insured losses should be expected to double roughly every 10 years because of increases in construction costs, increases in the number of structures, and changes in their characteristics. AIR’s research estimates that, because of exposure growth, probable maximum catastrophe loss—an estimate of the largest possible loss that may occur, given the worst combination of circumstances—grew in constant 2005 dollars from $60 billion in 1995 to $110 billion in 2005, and it will likely grow to over $200 billion during the next 10 years.

As a cap to this discussion, consider the fact that insured losses account for only 40% of total losses from any typical natural disaster. Obviously, it's in everyone's best interest to consider the financial impact of changing weather.

When the president wants to make a temporary end-run around Congress, he uses a recess appointment to place someone in a position. This avoids any sort of confirmation hearing. This provision was not actually put in place to let the president avoid hearings, but rather to let him assign people to critical roles even when members of the Senate were, perhaps, weeks away by carriage from the capital. In the late 18th and early 19th centuries, recess really meant recess, and people weren't going to be able to come back quickly.

However, as discussed in this GAO report penned by Gary Kepplinger, Congress is well within its rights to deny pay to any recess appointee. The report was actually addressing a weird confluence of regulation and Constitutional law. Congress can deny pay to an appointee that did not receive a confirmation, and certain rules prevent unpaid work by government employees. However, it has been deemed unconstitutional for Congress to be able to deny the Constitutionally-provided recess appointment right by denying pay -- so the "no work without pay" rule is effectively waived in this case.

Or, more briefly, if Congress doesn't like a recess appointment, they can't stop it, but they don't have to pay the appointee a salary.

The specific appointee in this case was Sam Fox, entrepreneur, Swift-Boat-ad-campaign backer, and now volunteer ambassador to Belgium.

It's a popular pasttime in the US to point to the UN as a bloated, inefficient entity that really doesn't deserve our money. Certainly, strange decisions are made by parts of the UN, like the incomprehensible vote that put Zimbabwe in charge of the commission on Sustainable Economic Development. In a report titled Peacekeeping: Observations on Costs, Strengths, and Limitations of U.S. and U.N. Operations, the GAO addresses the issue of the relative efficiency and capabilities of the UN and the US in peacekeeping operations. In short, does it make more sense for us to send our own troops, or to give the UN money to send in a UN-led force?

This is an important issue both because the US is already stretched across quite a few military commitments right now, and because peacekeeping operations are pulling in a lot of American money.

The GAO analysis used as a point of comparison the current UN stabilization mission in Haiti (MINUSTAH), and estimated the cost of an equivalent peacekeeping mission as carried out by US forces. The punchline?

An American peacekeeping mission would cost roughly twice as much as its UN equivalent. The major cost differences come primarily in salary and housing, as we pay our troops and civilian elements much more than the UN does, and we'd put more money into housing our civilian employees in secure facilities.

Add to that something I didn't know, namely that the UN actually practices realistic budgeting:

This table shows that the UN has consistently come in somewhat under budget for the entire MINUSTAH peacekeeping operation in Haiti. In contrast, the American practice of late has been one of very unrealistic budgeting, especially for military operations. Part of the problem there may be that, unlike in our prior wars, we have not yet integrated the war into the regular budget, instead funding it with emergency appropriations.

Obviously, cost is not the only factor involved in the decision of "who to send." The GAO report addresses some of the key elements to consider for each force.

For the US:

• Rapid deployment - We have the best airlift capacity in the world, and can have troops on the ground within the critical first 6-12 weeks following a ceasefire or peace accord. No one in the world can match us on this.
• Unified command and control - Naturally, since an American force consists of troops from one nation.
• Superior training and equipment - Remember how we pay our troops more? It matters.
• Shortages of skills and equipment - As mentioned, American military forces are stretched thin right now, and we might not have people to spare from Afghanistan and Iraq.
• Perceived lack of impartiality - This is why we didn't try to directly intervene as a peacekeeping force in Lebanon in 2006.

For the UN:

• Multinational participation - This is one way to avoid the perceived lack of impartiality mentioned above. If a force consists of several nationalities, it seems more likely to be fair.
• Experienced peacekeeping officials - The UN has people whose entire job is peacekeeping operations. They have experience from earlier peacekeeping efforts that are transferable ot each new operation.
• Able to coordinate international assistance - Similarly, the UN is geared for international cooperation, and can channel aid in from donors, the World Bank, and so forth.
• Limited rapid deployment - In a mirror of the American strength above, UN forces just aren't put together and deployed quickly. It takes time to round up troops from member nations, to put a command together, and then to put people in place.
• Limiteds on command and control - As a multinational force, any UN peacekeeping group is potentially a lot more disorganized and chaotic than a one-nation force. Also, as the report notes, UN peacekeepers have been caught comitting crimes and abuses, but appear to rarely face disciplinary action.
• Varying equipment and training - Not all nations have the same standards for training and equipping their troops. Some nations have sent troops with basically no equipment, which then puts the burden on the force commander to equip them. Similarly, undertrained troops may lead to the abuses cited above.

The final conclusion is, of course, that there are reasons to go either route. If you want fast, disciplined, and expensive (and the risk of inflaming the situation due to past history), pick a US force. If you want slower, experienced, cheaper, but potentially disorganized, go with a UN force.

The real conclusion, as far as I'm concerned, is twofold. One, the UN does something we currently don't -- they make realistic budgets. Two, we can't afford to carry out anymore peacekeeping operations anyway, so we might as well ditch some of our knee-jerk, know-nothing responses to the UN and accept that sometimes, it's the right choice.

The GAO just denied a protest by war profiteer KBR concerning the awarding of several global contingency contracts by the Navy to companies other than KBR. As big contractors who lose out on contracts tend to do, KBR complained about everything. However, GAO determined that the major points of failure in the comparison of KBR and the other bidders were entirely legitimate. For the record, KBR scored poorly in these areas (we want to see "excellent" and "good" here, just so you know):

• Contingency Response Plan: Satisfactory
• Management Approach: Satisfactory
• Accounting and Management Systems and Procedures: Marginal
• Past Performance in Small Business Utilization: Satisfactory

KBR's "Contingency Response Plan" rating took a big hit due to their poor performance in responding to hurricane Katrina. They complained that "that the agency ignored the unusual circumstances regarding performance of those projects and discounted KBR's overall record of "stellar" performance in a contingency environment." The Navy responded by explaining that it "gave "significant weight" to KBR's Hurricane Katrina response projects because this contingency relief work was "very recent and highly relevant to the RFP.""

The small business issue of interesting, too. Here's KBR's complaint:

KBR next argues that the agency misevaluated its proposal under the past performance in small business utilization subfactor of the small business utilization factor, under which KBR's proposal received a "good" rating. KBR complains that the agency miscalculated that KBR met only 31 percent of its small business subcontracting goals under prior contracts, when KBR in fact met at least 52.9 percent of its goals. KBR complains that the agency's math is incorrect and that it inappropriately considered an overseas contract.

That's a pretty big difference there. So what's going on?

For example, with regard to one of KBR's contracts (CONCAP III), KBR committed to a "small business concerns" goal of 74 percent, or $74,000,000, which was based on an estimated overall contract value of $100,000,000. However, KBR was in fact awarded $446,689,816 in contract dollars, which is more than four times the estimated contract value. Of this, KBR awarded $199,947,441 in subcontracts to small business concerns. While this dollar value exceeded the $74,000,000 identified as a goal, it constituted only 44.7 percent of the overall contract dollars actually awarded. Contracting Officer's Statement at 45; exh. 4. Although KBR asserts that it should be credited for exceeding its small business goal because it awarded subcontract dollars exceeding $74,000,000, we find reasonable the agency's consideration that the overall percentage goal had not been met.

In other words, on past contracts, KBR has massively lowballed the bid, then ended up raking in much more money than the said they would (over four times as much, in this example). The company then weaseled out of its commitment to assign 74% of that particular contract to small businesses by sticking to 74% of the original bid, rather than 74% of the money they were actually payed. The Navy legitimately called foul on this.

It's also worth considering, given this example of KBR ending up costing the government more than 400% of the original bid, that KBR being the lowest bidder on this new contract means very, very little.

I've spoken to so many service people in our military who couldn't get food and basic needs that were supposed to be provided by KBR that I'm happy to see them being taken to task for what they've done. It's not incompetence. It's negligence.

We're currently in a boom time for detained aliens. In 2001, the INS had about 95,000 aliens in custody. In 2006, the INS's successor, ICE (Immigration and Customs Enforcement) held 283,000 aliens. Although the alien custody system is not a prison system, such a dramatic upswing in numbers suggests it might feel the same kinds of strains as overcrowded prisons do. As such, the system merited some GAO review.

In a report bearing the unwieldy title Alien Detention Standards: Telephone Access Problems Were Pervasive at Detention Facilities; Other Deficiencies Did Not Show a Pattern of Noncompliance, the GAO visited 23 alien detention facilities and looked for problems or concerns. As the title suggests, they only hit on one systematic problem, with the rest being more isolated issues like an unclean grill in the Denver facility or detainee populations exceeding rated capacity in four of the facilities.

The phone problem, however, is both systematic and kind of significant, at least for people stuck in custody. The GAO found that the free phone system, meant to let detained aliens resolve their situation, was often nonfunctional, with successful connections no more than 74% of the time. They also found that lists of consulate numbers posted in many institutions were out of date and as a consequence sometimes had dead numbers. These flaws with the phone system are especially significant because the phone is a primary means of resolving your custody, by speaking with your home nation's consulate, and of resolving issues relating to custody, such as health needs or complaints.

The GAO further determined that the problems with the phone system come from a lack of oversight -- there's just no one tasked with making sure the contractors who run the phones and the facilities keep things working and lists up to date. Fortunately, this suggests a reasonably straightforward fix, in the form of assigning a handful of people to do routine compliance checks on facilities to make sure these phone issues -- as well as other issues discussed in the report -- are handled in a timely fashion.

As befits its generally cluttered, clumsy, and often ill-thought-out nature, defense procurement is a common target for budget and risk concerns from the GAO. In a recent report titled Defense Contracting: Improved Insight and Controls Needed over DOD's Time-and-Materials Contracts. The basic gist of the report is that the Department of Defense may well be using one high-risk type of contract, the "Time-and-Materials" contract, far more often than it should.

Knowing that readers might not be familiar with the range of available contract types, the GAO begins its discussion with this handy table:

Note in particular the second set of entries that distinguishes between "Fixed price," "Cost reimbursable," and "Time-and-materials." Very briefly, each one might be described this way:

• Fixed price - The government pays a fixed price, and the contractor delivers a product or service as required. Even if costs are higher or lower than expected, the amount paid by the government is the same.
• Cost reimbursable - The government pays allowed costs for the contractor, as well as a possible additional fee. The contractor tries to stick within reasonable costs.
• Time-and-materials - The government pays fixed per-hour labor wages.

Looking at all three, you'd hope the government would pick the "Fixed Price" option most of the time. In fact, I suspect most people intuitively think that's how it works, because that's how most contracts in our daily life tend to work (even if we don't always think of them as contracts). Indeed, when the GAO interview commercial businesses, they found that these businesses almost never stray from fixed price contracts, viewing all the others as unacceptably risky.

It might surprise you, then, to find that somewhere over $9.6 billion ("over," because GAO knows for a fact another chunk of similar spending has not been reported) of DOD spending was done via time-and-materials contracts in 2005, and the percentage of money going to these kinds of contracts is rising somewhat higher than the overall amount of money going to service contracts. More problematically, GAO found that contracting officers rarely provided justification for going with a time-and-materials contract instead of some other format. Notably, this isn't how it's supposed to be done:

Because of the risks involved, the Federal Acquisition Regulation (FAR) directs that time-and-materials contracts should only be used when it is not possible at the time of award to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence.

The suggestion, then, is that time-and-materials is used because it's easier, and no one really cares to check on these things. This is a problem, however, because it lets contractors bill heavily without much oversight.

Functionally, it's going to the emergency room for $500 when you could probably have seen your GP for a $40 co-pay.

The GAO recommends requiring greater diligence in justifying use of riskier contracts, with an eye toward keeping it from becoming the default type of contract.

As in any large organization with a substantial body of equipment and ever-changing needs, the Department of Defense frequently finds itself in the possession of items that it no longer needs. Rather than just eating the loss and junking these things, DOD auctions them off at govliquidation.com. Auction items today include 71 different forklifts, over a thousand lots of electronic testing equipment, 15 different small boats, and tens of thousands of other items, all typically sold at generously low prices.

In a report titled Sales of Sensitive Military Property to the Public, GAO follows up on an earlier report in which they showed that an unacceptably high number of demil-required items (items that are of a sensitive nature) were accidentally sold to the public. Notably, this included F-14 parts, which, as GAO reminds us, are in high demand in Iran, along with potential interest by less hostile nations.

Fortunately, there's a lot of upside to this report. Following the initial observation, DOD has worked to change its operating methods to better catch demil-required items before they go on sale. Changes include consolidating the way property is grouped into lots, including physically inspecting all lots to check on what they actually contain, increasing scrutiny of items before they are sold, adding a post-sale review and retrieval process (in case demil-required items are accidentally sold), and qualifying additional items as sensitive. They also added an incentive and disincentive system to their contract with the liquidation company. Now, removal of sensitive items before sale yields a financial bonus, whereas sale of sensitive items results in a financial penalty.

This chart from the report shows DOD's recent progress in avoiding sale of sensitive items:

It's good to see DOD leap on a problem like this, and to see a contractor's income tied directly to performance. Perhaps the people in DOD who handle liquidation can speak with all the folks over in procurement.

In a report titled Defense Contract Management: DOD's Lack of Adherence to Key Contracting Principles on Iraq Oil Contract Put Government Interests at Risk, GAO examines the $2.5 billion "Restore Iraq Oil" (RIO I) contract awarded to KBR in 2003. This dual-purpose contract was intended to help restart the oil industry in Iraq -- remember that paragon of planning Paul Wolfowitz said that Iraq would be able to pay for its own reconstruction -- as well as ensuring a continuing supply of fuel into Iraq. A recent audit by the Defense Contract Audit Agency identified $221 million in questionable contract costs stemming from ten task orders included in the overall RIO I contract. GAO was, in turn, asked to look at these questionable costs, and how DOD addressed them.

Notice that about two-thirds of the questionable costs are fuel delivery overcharges. You may recall hearing about those on the news last year. GAO did not address the nature of disputed charges in this case (DCAA did that); GAO was simply tasked with figuring out in what ways DOD dealt with DCAA's findings, how often DOD payed award fees (bonuses for good performance), and if they followed their set procedure for doing so.

As it happens, DOD formally decided that most of the disputed fees found by DCAA were just fine, and paid them. Apparently, there's still a lot of leeway given to KBR despite their corporate tendency to cheat us.

In looking at award fees, GAO found that DOD regularly did not follow their own procedures for assigning awards, failed to have reviews at proper intervals, and instead just handed out awards at the end of the task with no input before then. DOD retorted that it's awfully hard to put together review boards in present-day Iraq.

GAO agrees, and has officially recommended that DOD be more realistic when writing its own rules. Given that the original rules were written in 2003, it's entirely likely that some optimistic soul within DOD really thought Iraq was going to be peaceful enough to have regular review boards and routine oversight of KBR's mission. Instead, of course, we have Iraq as it is now, with massive violence and very little oil flowing.

DOD agreed, in writing, with this recommendation from GAO. Perhaps the forces of deliriously blind optimism are finally waning.

In a reported titled Advanced Earned Income Tax Credit: Low Use and Small Dollars Impede IRS's Efforts to Reduce High Noncompliance the GAO looks at the amount and quality of use of the Advance Earned Income Tax Credit.

The traditional EITC was introduced in the 1970s to counterbalance Social Security taxes and make working a more feasible option for lower-income individuals. People who qualify may end up receiving a credit at the end of the year that actually exceeds their income tax on the year. Naturally, however, having to pay Social Security taxes up front all year can be a hard hit for the working poor. With that in mind, in 1979 Congress introduced the Advance EITC (AEITC), which lets you file a form with your employer and receive regular disbursements from your EITC throughout the year, simply added to your paycheck.

Although this sounds like a great option, only around 3% of eligible individuals used the AEITC option in the early 2000s. GAO was called on to figure out why, and to check on compliance issues (that is, are people receiving the AEITC who shouldn't?).

As can be seen in the summary charts above, few take the option, and most fail to comply with one or more of the program rules.

On the topic of getting people to use the AEITC in the first place, GAO concludes that IRS has tried to promote the idea with minimal effect. There's some suspicion that people prefer to receive a lump sum payment at the end of the year (the classic EITC) rather than being paid incrementally. Purely in terms of being able to earn interest on your money (or avoiding interest on debt by dint of being able to pay it off early) this is a poor decision. Given the option, the AEITC is the better choice.

On compliance issues, GAO points to a number of problems with compliance with AEITC rules. Major problems include:

• Failure of a would-be AEITC recipient to have a valid Social Security Number (20% of the noncompliance cases, which seems quite high)
• Failure to file a tax return (40% of noncompliance cases)
• Failure to report receiving AEITC (about 70% of cases)

Note that some cases involve noncompliance in more than one area, so these do not add up to 100%.

In other words, a number of people who do receive AEITC money receive it without fulfilling some of the basic requirements that help ensure that, for example, someone does not receive both AEITC money and classic EITC money. Suggestions to help resolve these issues include sending "soft notices" to recipients to remind them to fulfill the requirements, requiring employers to verify SSNs, and making a database of W-5 forms sent in (that's the form your employer sends to the IRS when signing you up for AEITC). All of these options are, naturally, limited by the available resources of the IRS. Should they be ineffective, GAO recommends that IRS refer the issue to Congress, who can then determine whether or not AEITC should be continued.

With all that said, however, the true take-home message for the many low-income workers out there is that 97% of you aren't taking advantage of the AEITC. Click here to find out if you're eligible. If you are, it seems like an awfully good idea to take the AEITC and get your money now instead of later.

This week, the GAO released a report on the progress of the Iraqi government toward various benchmarks.

The report was titled Securing, Stabilizing, and Rebuilding Iraq: Iraqi Government Has Not Met Most Legislative, Security, and Economic Benchmarks. There is additional content in the associated Congressional testimony, which was released in parallel with the report, under the same title.

All the media coverage I've seen on this most recent GAO report emphasizes the failings of the Iraqi government. However, the more important punchline may be GAO, in its quiet way, saying that the Bush administration is misrepresenting progress in Iraq. They explicitly state that the administration's interim progress report in July overstated progress in many areas, most notably by suggesting that sectarian violence has diminished.

Specifically, the entirety of the decrease in overall violence is due to reduced attacks on Coalition forces. Attacks on civilians have actually risen slightly. In short, the Bush administration is lying, and sectarian violence persists.

See the extended for a full review and explanation.

In a report titled Sale of Magnetic Date Tapes Previously Used by the Government Presents a Low Security Risk, the GAO addresses the issue of the reselling of used Government data tapes, and the possible risk of exposure of sensitive data.

Spurred by claims from one company in the field that other media companies that buy magnetic media from the Federal Government were subsequently reselling it, the GAO investigated both that initial claim and the inherent risk of sensitive information being extracted from the media.

Their investigation revealed that at least one of five companies -- all unnamed -- admitted to reselling formerly Federal magnetic tapes, purchased from NOAA, the Federal Reserve, and the Air Force. They insisted that these tapes had been degaussed when that was feasible, although they noted that some tapes (those with servo tracks) would be destroyed by degaussing. These tapes were "cleaned" by repeated overwriting of the prior data.

The GAO investigators then tried to extract data from both degaussed and overwritten tapes. Using both commercial and forensic methods, they were unable to extract anything from the degaussed tapes. They were, however, able to extract some image data from the overwritten tapes. Their official opinion is that additional data could have been retrieved, but "this work would have represented a very expensive, intensive effort spanning months and, potentially, years."

I think they may underestimate the ability to successfully extract information from the tapes. That said, the tapes are resold unlabeled and in bulk. Any hopeful spy would be better served getting their data by some other method than the needle-in-a-haystack hope of trying to find something useful in unsourced, overwritten tapes -- so the GAO report is fundamentally correct. The risk from resale is low.

(Unless, of course, some lazy reseller stops cleansing the tapes appropriately. But shouldn't that be done by the Federal agencies before the tapes go out?)

In a report titled Drug Testing: Undercover Tests Reveal Significant Vulnerabilities in DOT's Drug Testing Program, GAO evaluates the drug testing protocols and centers responsible for carrying out regular drug testing of motor carrier employees (e.g. long-haul truck drivers).

GAO approached this evaluation by creating a couple fake motor carrier companies and then sending "employees" to be tested. Most critically, they found that their test employees were able to take drug tests at all 24 official Department of Transportation testing facilities using fake identification, meaning that a would-be test taker could send anyone they wanted in their place using fake ID. Keeping that fundamental flaw in mind, they also found that many test centers could be spoofed in a number of other ways:

In testing the sites, the GAO also found that many of the adulterants or spoofing agents that can be purchased online actually do work (this surprised me).

In another report, GAO noted that drug use among motor carrier employees is not one of the biggest contributors to motor vehicle accidents caused by cargo vehicles, but this report is great for highlighting just how weak many of our favorite controls are. Fundamentally, this process is broken from the start because it relies on photo identification -- much like watch lists at airports, which assume that diabolical terrorists are going to try and board planes under their actual name and using their own identification. This is especially problematic when innocent people who happen to share a name are repeatedly staked up trying to go through airport security (and when you can't convince TSA to provide an exception for you).

There are straightforward ways around some of these problems -- for example, biometrics on file, compared with biometrics on site. In the meantime, many security measures will provide the sense of security while being so weak that any highly motivated teenager can get past them.

The United Nations is a common and safe target of criticism for American politicians. Although we helped create it and make use of it, it's still "other" and thus strikes all the chords of fearing and disliking the outside world. A member of Congress is unlikely to antagonize a significant portion of their voter base by taking the time out to suggest that the United Nations is corrupt, or inefficient, or a waste of money or effort. It's much safer to point to the outside world and cry foul than to point to a fellow member of Congress and ask them to explain their earmarks, or their inefficiencies, or their ethical lapses.

In their report United Nations: Progress on Management Reform Efforts Has Varied, the GAO gives a progress report on efforts to clean up certain components of the UN, both in terms of ethics and efficiency.

The report leads with the ethics issue. As an organization formed from many nations, the UN naturally can have no expectation that everyone comes in with the same ethical norms. With that in mind, the UN ethics office has the potentially big job of getting everyone on the same page. As with many other elements described in this report, progress in ethics management is "okay":

As of October 2007, the UN ethics office had made some progress in developing and circulating ethics standards and guidance and had begun to develop a systemwide code of ethics. The office reported that it had received 287 requests for services from staff at different levels of the Secretariat between August 2006 and July 2007, including ethics advice on issues such as potential and actual conflicts of interest, protection against retaliation for reporting misconduct, and training.

The ethics office has increased ethics training within the organization, including half-day ethics training workshops for over 3,000 staff members at all levels of the Secretariat and consultations on the acceptance and disposal of gifts received by staff in their official capacity. The office has also developed new ethics standards, such as postemployment restrictions standards.

That last bit is interesting, since within the US we need stronger postemployment restrictions standards for many high-level appointed jobs. The current easy transition between lobbyist for an industry, government regulator of that industry, and back again has of late put a number of the most vulnerable Americans in danger.

The UN has similarly made progress with its whistle-blower policy, with the possibly major caveat that the current rules may only apply to direct employees of the Secretary General. Given recent problems with improper acts by UN peacekeepers, an effective whistle-blower policy is especially important.

GAO seems rather more optimistic about UN oversight efforts. The UN Office of Internal Oversight Services (OIOS) is basically the mirror image of the GAO within the UN. In the past year, OIOS has expanded its audit capacity by adding new locations and additional staff members, as well as handing off non-oversight work that was distracting the office from its primary role. There is still one major hiccup, though, in funding:

However, OIOS faces two conflicts that have been impeding its independence: (1) OIOS’s budget is subject to the review of the Department of Management, for which OIOS has oversight responsibility, and (2) OIOS must negotiate funding for nearly two-thirds of its budget with the entities it is chartered to audit. Without operational independence, OIOS is constrained in its ability to prevent or mitigate risks to the UN’s resources and personnel.

OIOS sees this as a problem as well, and fundamentally agrees with GAO's assessment of things.

GAO sees less progress overall in procurement:

Some progress has been made in strengthening the procedures for its procurement staff and suppliers, developing a comprehensive training program for procurement staff, and developing a risk management framework. However, the UN has made little or no progress in establishing an independent bid protest system and creating a lead agency concept for procurements, whereby specific UN organizations would procure certain goods and services in order to enhance division of labor, reduce duplication, and reduce costs.

Here, we would do well to pocket our stones and return to our own glass house, as we've seen over and over again in recent years that American procurement is rife with bad planning, massive inefficiency, laziness, and out-and-out corruption. Given that the unstated subtext of many criticisms of the UN boils down to "corrupt and inefficient," it ought to sober the ready critics up a little to look at our own recent record.

GAO rounds out the tracking portion of its report by citing management inefficiencies and the lack of review on certain UN programs and activities.

So what keeps reforms moving slower than they might? It mostly comes down to the committee nature of the United Nations. Member states frequently disagree on priorities, and given the consensus-driven nature of the UN, it's not surprising that there is no strong, successful, executive push for reform. It's one of the ironies of the tired and cheap criticisms of the UN from within our country that were the UN to be more efficient, more organized, and more directed, it would be much more like the one world government that so many of our lawmakers pretend to fear.

The hopeful message of this report is that the UN continues to trend in the right direction. It simply does so in the pace and time of a worldwide committee, which is no more than we might expect.

In a recent report titled Rental Housing: Information on Low-Income Veterans' Housing Conditions and Participation in HUD's Programs, the GAO gives us a survey of how veterans are doing in terms of housing, receiving assistance in paying for housing, and related concerns. This is much more of a survey than many other GAO reports, as the investigators have trouble pinning down reasons for some of their findings.

Overall, American military veterans push toward both extremes of the housing spectrum. Based on 2005 census data, 20% of Ameri