Shay Assad may be the most important Pentagon official no one’s ever heard of. As the agency’s director of pricing, he’s made it his mission to crack down on overspending by haggling with the weapons contractors over the cost of equipment. “Our policy is simple,” he told National Defense in 2014. “If you have a market based price that can be substantiated through sales in the commercial marketplace, we pay what the market pays.”
In other words, Assad is trying to prevent taxpayers from getting ripped off by unnecessary markup. Naturally, this hasn’t endeared him to the big contractors. According to a new report in Politico, they’re coming after him with a vengeance:
The contractors, who are enjoying record stock prices, are actively trying to undermine him. In one proposal circulating on the Hill, they are seeking to erode contract officers’ ability to demand cost data from subcontractors — what companies view as an excessive grab of competitive information.
The request would weaken the grip of Assad’s cost squeeze, as the Pentagon uses all the extra cost information to “manage” profit margins, according to a congressional staff member with purview over the Pentagon budget who was not authorized to speak publicly. Without that information, the staffer explained, the Pentagon can’t demand better deals.
So a watchdog is to be handcuffed and transparency is to be opaqued so the weapons companies can enrich themselves as much as possible. Try selling that in a general election.
Start with the fact that the Department of Defense wildly overpays for just about everything. It’s not just iconic eyesores like the F-15; according to the GAO, in 2014, acquisition costs for weapons exceeded their initial estimates by 42 percent, for a total of $448 billion in extra cost growth. And it’s not just weapons. Another GAO report found that the Defense Department pays an average of 60 percent more for prescription drugs than Medicaid. Think about that: Medicaid, constantly derided, actually gets taxpayers a significantly better deal than the military.
It’s easy to see why. As its squealing threats to shutter its firehouses over sequestration demonstrate, the Pentagon is accustomed to getting what it wants without controversy over the costly consequences. This is the agency that’s supposed to have undergone a full audit every year since 1995, yet never has thanks to stalling and excuse-making that would be met with criminal charges in the private sector. The Department of Defense may count among its employees the most capable armed forces the world has ever known, but it also houses a dense civilian bureaucracy subjected to the same temptations of excess and sloth as the General Services Administration.
So of course it’s getting gipped by the weapons companies. Outside of Northern Virginia, it’s difficult to find anyone in the know who denies that the Pentagon’s procurement system is an unmitigated mess. Even Senator John McCain has introduced a tough incentives system that he hopes will streamline the procurement process—no lily-livered dove like me, the Arizona senator simply wants to make sure the military obtains the best weapons systems at the best prices. Who can disagree with that?
The answer is the contractors who don’t want to reduce their profit margins. They’ve formed a concerted effort to push back against Assad, claiming he wants too much pricing information—consumers, they note, don’t demand to see data for every production step of an Apple product; they just pay the market price. But Apple customers aren’t shelling out taxpayer money, nor are they being fleeced by a crony capitalist shambles of a procurement system. This is clearly apples and oranges.
Assad notes that the contracts in question already mandate detailed pricing information, but in the past the Pentagon hasn’t enforced this requirement. A former senior executive at Raytheon, he’s been here before. “I know, because I was on the other side of the table,” he says. “I’m very aware of what industry and major corporations were negotiating for profit rates versus what we presently do.” Good on him for cracking down.