January 31, 2009

WHILE POLITICIANS COMPLAIN ABOUT WALL STREET BONUSES, WHAT ABOUT THIS? Hidden Bonuses Enrich U.S. Government Contractors.

U.S. Senator Kit Bond shifted in his chair at a 2005 congressional hearing, poised with a question on national security. He turned to Treasury Secretary John Snow, who was seated at a witness table.

Was Snow sure, asked Bond, a Missouri Republican, that a Treasury Department computer on order for $8.9 million would help detect terrorist money laundering?

“Yes, absolutely,” Snow said.

A year later, in July 2006, the U.S. Treasury Department abandoned the project. The computer didn’t work. The department had spent $14.7 million — a 65 percent increase above the original budget — for nothing.

There was a final ignominy: Under the terms of the contract, Electronic Data Systems Corp., the vendor, collected a bonus of $638,126.

As the federal government’s $700 billion bailout of banks sputters, there’s an object lesson for the new administration of President Barack Obama: Federal departments, including Treasury itself, routinely squander tens of billions of dollars a year in taxpayer money as they farm out public business to private corporations.

Obama, like presidents before him, said during his bid for the White House that he wanted to curtail waste in government. With contracting, he faces a mismanaged system that accounts for almost 40 cents of every federal dollar spent outside of mandatory obligations such as Social Security and Medicare.

Pot, meet kettle. But wait, there’s more:

In many cases, bureaucrats are motivated to give millions of dollars in bonuses to contractors no matter how poorly a company performs because generosity with taxpayer money may help them land better-paying jobs after they leave the government.

Contractors on dozens of jobs at federal departments collected more than $8 billion in what federal auditors said were unwarranted bonuses from 1999 to 2005.

I wonder what 2009 will look like.