Sunday, September 21, 2008

A Blind Eye for Botched Contracts


by: David Axe, The Washington Independent

A snapshot of Lockheed Martin. (Photo: Remy De La Mauviniere / AP)

It was August 2003 when a fellow engineer at Lockheed Martin's Moorestown, N.J., facility dropped by Mike DeKort's office with a seemingly absurd complaint.

He said that Lockheed, the nation's No. 1 defense contractor, had been buying non-waterproof radios from a subcontractor to install on some 15-year-old patrol boats that Lockheed was upgrading for the U.S. Coast Guard. "My initial reaction," DeKort said, five years later, "was that was crazy."

DeKort's reaction is understandable. Lockheed's Moorestown team had built its reputation designing "Aegis" radars for the Navy that can track scores of targets hundreds of miles away with amazing precision. On the strength of its Aegis work, Lockheed, along with its shipbuilding partner Northrop Grumman, just a year earlier had won a contract to manage a wide range of "plug-and-play" Coast Guard equipment projects collectively nicknamed "Deepwater."

They were aimed at replacing what amounts to one of the world's oldest maritime fleets. The typical Navy warship is around 20 years old. After years of under-funding, Coast Guard vessels average 35 years.

The Deepwater projects included new airplanes, upgraded helicopters and patrol boats and huge, powerful new ocean-going cutters the size of Navy warships, all linked by an electronic network.

But it didn't work. In addition to the non-waterproof radios, there were boats and ships with leaky, faulty hulls plus computers that seeped secret data. As DeKort quickly discovered in the course of his own informal investigation, Lockheed and Northrop had botched much of Deepwater, and no one in the government knew anything about it.

When DeKort complained to his bosses, he was fired - making him one of the earliest casualties of a controversial new way of military contracting.

Traditionally, the Pentagon - or, in the Coast Guard's case, the Dept. of Homeland Security - itself issued separate contracts for each of its major pieces of equipment, say, a tank, a ship or a fighter jet. It would then assign government acquisitions officials to oversee the contract - from beginning to end.

But that was before today's sophisticated "systems of systems," where several different vehicles share common electronics, enabling them to swap data and automatically coordinate their actions.

It was also before government budget cuts in the 1990s, with the end of the Cold War, forced the Pentagon acquisitions workforce to shrink by 50 percent, according to a Pentagon panel that convened in January. This atrophied workforce was overwhelmed when defense spending doubled after Sept. 11.

A new way of designing weapons - and the new manpower shortages - has given rise to a new way of buying weapons. Industry teams called "Lead Systems Integrators" would take a vague military requirement and a large pot of money - like Deepwater's projected $25 billion over 20 years - and go to town.

Lead Systems Integrators were responsible for writing many of the detailed requirements and then for doing most of the contracting for actual design and production. Government managers would be thin on the ground, if not absent.

In other words, an industry team would dole out the taxpayer's money as only the team saw fit, "perform[ing] functions that are usually performed by the contracting officer and other officials on the government's acquisition team," according to a March 2007 report from the Congressional Research Service. Systems integrators could even award government-funded contracts to themselves.

Northrop, for example, assigned most of Deepwater's shipbuilding to Northrop shipyards. Lockheed gave itself much of the electronics work.

Private companies doling out taxpayer dollars on government's behalf, sometimes to themselves, obviously represents a major oversight problem.

"It is the equivalent of putting a very juicy steak in front of a very hungry dog, and expecting the steak to still be there the next day," said Jim Atkinson, one of a handful of engineers cleared by the National Security Agency to inspect complex communications systems like those in Deepwater.

Still, for years, no one really questioned the wisdom of those choices. Lead Systems Integrator, or LSI, deals spread like weeds. LSIs now account for the many of the biggest programs in the Army, Air Force and Coast Guard - to the tune of some $300 billion.

Occasional attempts to reign in the contractors were foiled by semantics. Only now is Congress even beginning to recognize the problem. The result in 2008 is a "coming crisis" in the Pentagon, according to a July report by the Defense Science Board, an independent advisory panel. "Much of the responsibility for managing... complex systems has shifted to industry... without effective government oversight."

Reform "must begin now," the report concluded. "The nation's security depends on it."


David Axe is the author of "Army 101: Inside ROTC in a Time of War." He blogs at


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