Defense Contracting Fraud: A Persistent Problem

During the five year period from 2013-2017, there were 1,059 criminal cases of defense contracting fraud resulting in the conviction of 1,087 defendants, including 409 businesses, according to a newly released Department of Defense report to Congress. There were another 443 fraud-related civil cases resulting in judgments against 546 defendants.

During that same period, the Department of Defense entered into more than 15 million contracts with contractors who had been indicted, fined, and/or convicted of fraud, or who reached settlement agreements. The value of those contracts exceeded $334 billion, according to the DoD report. See Report on Defense Contracting Fraud, DoD report to Congress, December 2018.

The report was prepared in response to a requirement in the FY2018 defense authorization act at the initiative of Sen. Bernie Sanders. It was released this week under the Freedom of Information Act.

A previous report covering the period of 2001-2010 was produced by the Department of Defense in 2011, also at the request of Senator Sanders. The earlier report likewise found extensive fraud including criminal and civil offensive in defense contracting.

“Simply put, the Pentagon continues to be riddled with waste, fraud and abuse of taxpayer funds to a degree unmatched across the federal government,” Sen. Sanders said in 2017. “It is unacceptable that the Department of Defense continues to lose vast sums of taxpayer money because of fraud perpetrated by major defense contractors. This has got to end.”

The 2011 report listed dozens of defense contracting firms that had been convicted of criminal fraud, and hundreds more that had been subject to civil judgments.

The latest report names nine firms that were debarred or suspended but otherwise does not identify the criminal or civil defendants from the 2013-2017 period covered by the report. But much of this information can be gleaned from the Federal Contractor Misconduct Database (FCMD) maintained by the Project on Government Oversight.

Several recent instances of defense contractor fraud are described in the latest Semi-Annual Report from the Department of Defense Inspector General.

“Procurement fraud includes, but is not limited to, cost and labor mischarging, defective pricing, price fixing, bid rigging, and defective and counterfeit parts,” the DoD IG report said. “The potential damage from procurement fraud extends well beyond financial losses. This crime poses a serious threat to the DoD’s ability to achieve its objectives and can undermine the safety and operational readiness of the warfighter.”

Costs of War Add Up

“Since September 11, 2001, the Department of Defense (DoD) has obligated $1,534.8 billion for war-related costs,” according to a new Pentagon quarterly report.  See Cost of War Through December 31, 2018, FY 2019, 1st quarter.

The DoD report summarizes and categorizes spending patterns over the past two decades by operation (Iraq, Syria, Afghanistan), by year, by DoD component, and by amount appropriated. The report has been transmitted to the General Accounting Office, but it is otherwise not publicly distributed by the Department of Defense.

The validity of the DoD cost accounting in these periodic reports is questionable, and not only because they exclude the significant costs of health care for wounded personnel, reconstruction, and other war-related costs.

Several past DoD cost of war reports had “systemic problems,” were “inaccurate” and “unreliable,” the Department of Defense Inspector General found earlier this year. See Summary Audit of Systemic Weaknesses in the Cost of War Reports, DODIG-2019-066, March 22, 2019.

“Over the past three years, obligations for war spending have averaged $47 billion per year, mostly to fund the operating support costs of U.S. forces in and around Afghanistan,” according to a recent overview from the Congressional Research Service. See U.S. War Costs, Casualties, and Personnel Levels Since 9/11, CRS In Focus, April 18, 2019.

Meanwhile, the U.S. military last week issued updated doctrine on peace operations, which encompasses five distinct activities: conflict prevention, peacemaking processes, peace enforcement operations (PEO), peacekeeping operations (PKO), and peace building. See Peace Ops: Multi-Service Tactics, Techniques, and Procedures for Peace Operations, ATP 3-07.31, May 2, 2019.

Congress Members Speak Up for JASONs

The Department of Defense decision not to renew the underlying contract for the independent JASON scientific advisory panel drew criticism from a bipartisan, bicameral group of congressmen and senators.

“We believe that cancelling the JASON contract could damage our national security by depriving not only the Pentagon, but also other national security agencies, of sober and sound advice in confronting some of the Nation’s most complex threats,” the members wrote on May 3.

They noted that the National Nuclear Security Administration had recently intervened to sustain the JASONs for the coming year.

“However,” they wrote, “given the national security interests involved in cancellation of the JASON contract, a permanent solution must be found. We encourage you to work with NNSA and the other agencies that utilize JASON to find an appropriate long-term home for JASON, whether it be Research and Engineering, another office, such as Acquisition and Sustainment, or NNSA.”

If the JASONs’ current sponsor at Defense Research and Engineering is indifferent to or uninterested in the work of JASON, it would be pointless to compel continued sponsorship of the group there. But other agencies such as NNSA have an interest in preserving JASON, as does Congress itself.

“Members of Congress have long counted on their nonpartisan, independent, science-based advice to inform our decisions on a range of national security issues facing our nation, such as nuclear weapons, space, and emerging technologies,” the members wrote. They posed a series of questions about the Pentagon’s handling of the JASON contract and they asked the Acting Secretary of Defense to cooperate in resolving the issue.

Last week a Freedom of Information Act request for a copy of a 2016 JASON report entitled “Counterspace” was denied on appeal by the Defense Advanced Research Projects Agency. The unclassified JASON report is exempt from FOIA as deliberative material and because it contains arms export control information, DARPA said.

DoD Network Operations Face a Contested Environment

All US military operations depend on the Department of Defense information network (DODIN). But the network is under increasing stress both internally and from external threats.

“DODIN operations are arguably the most important and most complex type of operation the Army performs on a daily basis,” according to a new Army doctrinal publication. “The network is the foundational capability for all other Army warfighting functions and capabilities.”

But the foundational character of the DoD information network also makes it a target.

“Because communications are a key command and control enabler, U.S. military communications and information networks present high value targets for enemies and adversaries.”

The new Army publication “establishes non-prescriptive ways to perform missions, functions, and tasks associated with Department of Defense information network operations in Army networks to enable and support the Army’s mission at all echelons.” See Techniques for Department of Defense Information Network Operations, ATP 6-02.71, April 30, 2019.

To a certain extent the Army vision of the DoD information network is aspirational and does not correspond to current reality.

The actual network infrastructure is “antiquated and is failing at high rates,” Secretary of the Air Force Heather Wilson told the House Armed Services Committee last year in response to questions for the record in a newly published hearing volume.

Rising China Sells More Weapons

“In 2018, China’s arms sales increased, continuing a trend that enabled China to become the world’s fastest-growing arms supplier during the past 15 years,” according to the 2019 China Military Power report published by the Department of Defense. “From 2013 through 2017, China was the world’s fourth-largest arms supplier, completing more than $25 billion worth of arms sales.”

“Arms transfers also are a component of China’s foreign policy, used in conjunction with other types of military, economic aid, and development assistance to support broader foreign policy goals,” the Pentagon report said. “These include securing access to natural resources and export markets, promoting political influence among host country elites, and building support in international forums.”

Needless to say, the United States and other countries have long done the same thing, using arms exports as an instrument of foreign policy and political influence. Up to a point, however, US arms sales are regulated by laws that include human rights and other considerations. See U.S. Arms Sales and Human Rights: Legislative Basis and Frequently Asked QuestionsCRS In Focus, May 2, 2019.

To assist soldiers in identifying Chinese weapons in the field, the US Army has produced a deck of “playing cards” featuring various weapons systems.

“The Worldwide Equipment Identification Playing Cards enable Soldiers to be able to readily identify enemy equipment and distinguish the equipment from friendly forces. Cards can be used at every level and across all services.” See Worldwide Equipment Identification Cards: China Edition, US Army TRADOC, April 2019.

Pentagon Blocks Declassification of 2018 Nuclear Stockpile

For the first time in years, the Department of Defense has denied a request to declassify the current size of the U.S. nuclear weapons stockpile.

“After careful consideration. . . it was determined that the requested information cannot be declassified at this time,” wrote Andrew P. Weston-Dawkes of the Department of Energy in a letter conveying the DoD decision not to disclose the number of warheads in the U.S. arsenal at the end of Fiscal Year 2018 or the number that had been dismantled.

The Federation of American Scientists had sought declassification of the latest stockpile figures in an October 1, 2018 petition. It is this request that was denied.

Because the current size of the U.S. nuclear stockpile constitutes so-called “Formerly Restricted Data,” which is a classification category under the Atomic Energy Act, its declassification requires the concurrence of both the Department of Energy and the Department of Defense. In this case, DOE did not object to declassification but DOD did.

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The size of the current stockpile was first declassified in 2010. It was one of a number of breakthroughs in open government that were achieved in the Obama Administration. (Until that time, only the size of the historic stockpile through 1961 had been officially disclosed, which was done in 1993.)

“Increasing the transparency of our nuclear weapons stockpile, and our dismantlement, as well, is important to both our nonproliferation efforts and to the efforts we have under way to pursue arms control that will follow the new START treaty,” said a Pentagon official at a May 2010 press briefing on the decision to release the information.

In truth, the size of the U.S. nuclear stockpile was not such a big secret even when it was classified. Before the 2009 total of 5,113 warheads was declassified in 2010, Hans Kristensen and Robert Norris of FAS had estimated it at 5,200 warheads. Likewise, while the 2013 total turned out to be 4,804 warheads, their prior open source estimate was not too far off at 4,650 warheads.

But even if it is partly a formality, classifying stockpile information means that officials cannot publicly discuss it or be effectively questioned in public about it.

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But why now? Why is the Pentagon reverting to the pre-Obama practice of keeping the total stockpile number and the number of dismantled weapons classified? Why could the FY 2017 total (3,822 warheads) be disclosed, while the FY 2018 total cannot?

No reason was provided in the latest denial letter, and none of the decision makers was available to explain the rationale behind it.

But another official said the problem was that one of the main purposes of the move to declassify the stockpile total — namely, to set an example of disclosure that other countries would follow — had not been reciprocated as hoped.

“Stockpile declassification has not led to greater openness by Russia,” the official said.

“Anyway, it’s not a bilateral world anymore,” he said. And so DoD would also be looking for greater transparency from China than has been realized up to now.

Have new U.S. nuclear weapons programs played a role in incentivizing greater secrecy? “I doubt it,” this official said. “If anything, it’s the reverse. The US government has a motive to make it clear where it’s headed.”

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“I think we should have more communication with Russia,” said U.S. Army Gen. Curtis Scaparrotti, the retiring Supreme Allied Commander Europe. “It would ensure that we understand each other and why we are doing what we’re doing.”

But for now, that’s not the direction in which things are moving, and not only with respect to stockpile secrecy. See “US-Russia chill stirs worry about stumbling into conflict” by Robert Burns, Associated Press, April 14.

Pentagon Cancels Contract for JASON Advisory Panel

Updated below

In a startling blow to the system of independent science and technology advice, the Department of Defense decided not to renew its support for the JASON defense science advisory panel, it was disclosed yesterday.

“Were you aware that [the JASON contract] has been summarily terminated by the Pentagon?”

That was one of the first questions asked by Rep. Jim Cooper, chair of the House Armed Services Committee Strategic Forces Subcommittee, at a hearing yesterday (at about 40’20”).

NNSA Administrator Lisa Gordon-Hagerty replied that she was aware that the Pentagon had taken some action, and said that she had asked her staff to find out more. She noted that NNSA has an interest in maintaining the viability of the JASON panel, particularly since “We do have some ongoing studies with JASON.”

In fact, JASON performs technical studies for many agencies inside and outside of the national security bureaucracy and it is highly regarded for the quality of its work.

So why is the Pentagon threatening its future?

Even to insiders, the DoD’s thought process is obscure and uncertain.

“To understand it you first have to understand the existing contract structure,” one official said. “This is a bit arcane, but MITRE currently has an Indefinite Delivery / Indefinite Quantity (IDIQ) contract with the Office of the Secretary of Defense (OSD), the purpose of which is to manage and operate the JASON effort. However, you don’t actually do anything with an IDIQ contract; rather, the purpose of the IDIQ contract [is to] have Task Orders (TO’s) placed on it. These TO’s are essentially mini-contracts in and of themselves, and all the actual work is performed according to the TO’s. This structure allows any government agency to commission a JASON study; conceptually, all you need to do is just open another TO for that study. (The reality is slightly more complicated, but that’s the basic idea).”

“The underlying IDIQ contract has a 5-year period of performance, which just expired on March 31. Last November, OSD started the process of letting a new 5-year IDIQ contract with essentially the same structure so that the cycle could continue. They decided to compete the contract, solicited bids, and were going to announce the contract award in mid-March. Instead, what happened is that about two weeks ago (March 28, two days before the expiration of the existing IDIQ contract) they announced that they were canceling the solicitation and would not be awarding another contract at all. Instead, they offered to award a single contract for a single study without the IDIQ structure that allows other agencies to commission studies.”

But “I do not know the reason” for the cancellation, the official said.

And so far, those who do know are not talking. The Office of the Under Secretary of Defense (Research and Engineering) “would not answer any questions or discuss the matter in any way whatsoever.”

The news was first reported in “Storied Jason science advisory group loses contract with Pentagon” by Jeffrey Mervis and Ann Finkbeiner in Science magazine, and was first noticed by Stephen Young.

The JASON panel has performed studies (many of which are classified) for federal agencies including the National Nuclear Security Administration, the Central Intelligence Agency and the National Reconnaissance Office, as well as the Census Bureau and the Department of Health and Human Services.

Lately, the Department of Agriculture denied a Freedom of Information Act request for a copy of a 2016 JASON report that it had sponsored entitled “New Techniques for Evaluating Crop Production.” The unclassified report is exempt from disclosure under the deliberative process privilege, USDA lawyers said. That denial is under appeal.

The Pentagon move to cancel the JASON contract appears to be part of a larger trend by federal agencies to limit independent scientific and technical advice. As noted by Rep. Cooper at yesterday’s hearing, the Navy also lately terminated its longstanding Naval Research Advisory Committee.

Update, 4/25/19: National Public Radio and Defense News reported that the National Nuclear Security Administration has posted a solicitation to take over the JASON contract from the Department of Defense.

Tracking “Unobligated” Military Construction Funds

A new congressional tally of military construction projects that have unobligated fund balances turned up hundreds of current projects fitting that description. See “FY2017-2019 Military Construction Projects/Programs with Unobligated Balances.”

Because the President declared a national emergency, some of the funds for those military construction activities could be repurposed in order to pay for barriers along the border with Mexico, pursuant to 10 USC 2808.

Declaring that a national emergency exists made it possible “to secure additional resources” to construct barriers along the border, the Trump White House said on February 15.

The White House said that up to $3.6 billion in unobligated Department of Defense military construction funds would now “be available to build the border wall.”

Funds are said to be “obligated” as the result of a purchase, contract or other government action that incurs a legal obligation to pay them. Until that happens, they are “unobligated” even though they have been appropriated for a specific purpose.

There is a considerable amount of military construction money that has not been obligated.

“According to DOD information, the department reported unobligated balances in the military construction and family housing accounts totaling $13.3 billion at the end of FY2018,” the Congressional Research Service noted recently.

Even though the money may be legally available, it is not “free.”

“All of this money has been assigned for other purposes, so it really then comes to what can — what are you going to trade off, because when you say tradeoff, it really is a tradeoff,” said Acting Secretary of Defense Patrick Shanahan on February 16.

The President’s declaration of national emergency faces a legislative challenge as well as pending litigation.

IG Reports on Wars Abroad Unaffected by Trump Rebuke

In apparent disregard of criticism from President Trump, two new Inspector General reports on aspects of the wars in Afghanistan, Syria and Iraq were openly published this week.

“What kind of stuff is this?” the President had complained at a January 2 cabinet meeting. “We’re fighting wars, and they’re doing reports and releasing it to the public? Now, the public means the enemy. The enemy reads those reports; they study every line of it. Those reports should be private reports. Let him do a report, but they should be private reports and be locked up.”

Despite that rebuke, however, the reports produced this week were published as usual.

There was no basis for a change. According to the Special Inspector General for Afghanistan Reconstruction (SIGAR), no policy directive implementing the President’s remarks last month was ever generated, and so the continuing release of SIGAR reports has not been affected.

The latest SIGAR report finds that DoD is delivering more military helicopters to the Afghan Air Force than can be used. “Based on the current UH-60 delivery schedule, it is unlikely that there will be enough pilots trained before all 159 UH-60s are delivered. DOD runs the risk of wasting U.S. taxpayer dollars to purchase aircraft the AAF and SMW [Afghan security forces] cannot fly or maintain.” See the report here.

Meanwhile, another DoD Inspector General report released this week finds that “ISIS remains a potent force of battle-hardened and well-disciplined fighters” — a finding that is at odds with the President’s public remarks. A classified appendix to the IG report that was not released addressed topics such as “ISIS Retains its Military Capabilities [in Syria] Despite Loss of Territory” and “Iran Strikes ISIS in Syria.” That report is here.

The bureaucracy’s indifference to the President’s objections is remarkable. Philosophers of language (following J.L. Austin) speak of “performative utterances,” meaning speech that not only describes but transforms the reality under discussion. When a judge or clergyman declares “I now pronounce you man and wife,” for example, that statement actually effects a change in the status of the couple to whom it is addressed.

Likewise, one might have expected the strictures on publication uttered by the President — who is the chief executive and commander-in-chief of the armed forces and who was speaking in an official capacity before his own subordinates — to have this sort of performative quality and to alter agency conduct in the way he prescribed.

But that is not what happened. The President’s remarks were not connected to any policy apparatus that might have put them into effect. And so they were inconsequential.

Can the Defense Department Build a Border Wall?

If the President were to declare a national emergency in order to justify building a “wall” on the border with Mexico, there would be certain legal authorities that he could invoke to initiate construction operations.

But the scope of those legal authorities is uncertain and would almost certainly trigger litigation to challenge their application, the Congressional Research Service said last week.

“Whether these authorities — individually or in combination — extend to the construction of a border wall would present a reviewing court with several questions of first impression,” CRS said. See Can the Department of Defense Build the Border Wall?CRS Legal Sidebar, January 10, 2019.

On the other hand, the National Emergencies Act has been effectively invoked on two previous occasions to authorize military construction activity overseas (by Presidents George H.W. Bush and George W. Bush), CRS said in another new publication. See Military Construction Funding in the Event of a National EmergencyCRS Insight, updated January 11, 2019.

Some other noteworthy new and updated publications from the Congressional Research Service include the following.

Mexico’s Immigration Control EffortsCRS In Focus, updated January 3, 2019

How a Government Shutdown Affects Government ContractsCRS Legal Sidebar, January 10, 2019

Defense Primer: FY2018 Department of Defense Audit ResultsCRS In Focus, updated January 9, 2019

New CRS Series: Introduction to Financial ServicesCRS Insight, updated January 11, 2019

Federal Grand Jury Secrecy: Legal Principles and Implications for Congressional Oversight, January 10, 2019

U.S. Sanctions on Russia, updated January 11, 2019

Cluster Munitions: Background and Issues for Congress, updated January 7, 2019

U.S.-Proposed Missile Technology Control Regime ChangesCRS In Focus, January 10, 2019