As President Reagan was ramping up defense spending nearly 30 years ago, a small but persistent band of Pentagon watchdogs and whistle-blowers revealed through a series of investigations that the military was paying far too much for even its most basic supplies. The horror stories, now infamous, include tales of $640 toilet seats and $436 hammers. The Pentagon, already trying to recover from the nadir of the post-Vietnam era, became the butt of inside-the-Beltway jokes. Across the Potomac, Congress eventually passed laws intended to stop the waste, fraud, and abuse.
But despite these activists’ best efforts—and further reform attempts on Capitol Hill and within the Pentagon—the Defense Department’s financial house is still a mess. After the September 11, 2001, terrorist attacks, the department enjoyed a seemingly endless cash flow, so managers had little incentive to bore down on just what they were buying, how much they were paying, and whether they really needed this good or that service. The wars in Iraq and Afghanistan—and, particularly, the urgent equipment needs in the field—often forced economy to take a backseat to expediency.
The result is that a quarter-century after those first embarrassments, many of the problems persist. It turns out that the Army recently paid $644.75 apiece for tiny “spur gears” worth $12.51 and shelled out $1,678.61 for small roller wheels that should have cost just $7.71 each, according to a report this spring from the Pentagon’s inspector general that bears a shocking resemblance to the findings of the 1980s. Boeing ultimately refunded the government nearly $2 million for those and several other overpriced helicopter parts it sold to the Army. But the report begs the question: How much money does the department waste?
In the end, the Pentagon may not even know. Each military service and defense agency has dozens, if not hundreds, of archaic accounting systems that cannot talk to each other, making it impossible for officials to balance the checkbook of the department that consumes more than half of the nation’s discretionary spending—nearing $700 billion annually. Watchdogs say that accountants often cannot track a check once it is cut, and investigators have uncovered instances where officials failed to review invoices, making it easy for contractors to overcharge.
Now, the days of free-flowing cash are winding down as the White House and Capitol Hill prepare to scale back the Pentagon’s budget. But the problems are so pervasive that top Defense officials publicly acknowledge that correcting them will take years. That means billions more dollars squandered even as the military weighs how to reduce the size of the fighting force and pare down missions to free up dollars. “There’s a culture in the Defense Department that has to be just shaken up,” Sen. Chuck Grassley, R-Iowa, who has been tracking these issues since the days of the overpriced toilet seats, said in an interview. “There’s a culture of nonconcern about waste and fraud.”
Pentagon Comptroller Robert Hale, who has the unenviable task of cleaning up the department’s finances, doesn’t think things are quite as grim as Grassley says they are, but he acknowledges that accomplishing the military’s core goals often trumps dotting the i’s and crossing the t’s. “There are only 24 hours in a day, and you have to sleep and eat,” Hale said. “If you’re trying to handle a shooting war in Afghanistan and a military commitment in Iraq and start a Libya operation and handle humanitarian operations in Japan … that’s a tall order for people who have to make this work.”
WATCHING THE PENTAGON
It seems fitting that Dan Blair’s office on Army Navy Drive in Arlington, Va., has an unobstructed view of the Pentagon. As the deputy inspector general for auditing, Blair is charged with overseeing the 100-plus audits that the IG’s office churns out every year. Most of them, like the report on the overpriced Boeing parts, do not portray the Defense Department in a particularly flattering light.
Blair, a 16-year veteran of the Government Accountability Office, is just one of thousands of auditors and investigators who believe that the Pentagon needs a better balance between accountability and expediency—even during wartime. “We don’t want to say you need to be fiscally responsible at the cost of meeting your mission,” Blair says. “But the converse is also true—you can’t be so focused on the mission that you’re not fiscally responsible, either.” While paying too much for an urgent need may be understandable, auditors get concerned when the military continues to cut exorbitant checks for spare parts, questionable body armor, and other gear long after the procurement becomes routine.
To these watchdogs, saving money saves lives, particularly as the Defense Department looks to trim its annual budgets. With fewer dollars at its disposal, the military simply can’t afford to waste its resources. “We save billions of dollars, and we make it easier for the department to get the best equipment and the best training for the troops,” Blair says. But if Defense officials are tightening their belts, how does waste—particularly, obvious embarrassments like the toilet seats—keep happening?
This article appears in the July 16, 2011 edition of National Journal Magazine.