Friday, October 31, 2003

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Is this a real story?

The top national story in today's Chicago Tribune, "War contractors are big donors," is about the correlation between those firms receiving reconstruction contracts in Iraq and Afghanistan and the political contributions such firms made. Here's the first few paragraphs:

Many of the companies that have received some of the nearly $8 billion in reconstruction contracts in Iraq and Afghanistan also have been strong contributors to the Republican Party or have close connections with government officials, a new study by a government watchdog group concluded Thursday.

The report, issued by The Center for Public Integrity, a non-partisan, non-profit investigative group, was the result of a six-month investigation into contracts in Iraq and Afghanistan.

Charles Lewis, executive director of the center, said in a statement that the report reveals "a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan."

The Tribune is not the only paper to run with this -- it's also in the New York Times, Los Angeles Times, USA Today, and Washington Post.

If you want to see the whole report, it's available here.

Sounds pretty damning? Well, yes, until you consider the following facts:

  • The report basically equates campaign contributions with cronyism -- in other words, there's no direct evidence of wrongdoing, just a claim that campaign contributions contributed to the allocation of reconstruction contracts. What's presented is circumstantial evidence.

  • Even the circumstantial case is pretty damn weak. Look at the top ten companies in terms of contract amounts (here's the full list) and then look at the size of their campaign contributions since 1990 (here's the full list). If you look at the top ten firms in terms of the size of awarded contracts, you discover that only four of them made contributions greater than $250,000 over the entire twelve-year span. In other words, the majority of the top-ten contractors were actually quite miserly in their campaign contributions.

    Is that how the Center for Public Integrity or the media sees it? Nope. Here's the Washington Post paragraph:

    The winners of the top 10 contracts for work in Iraq and Afghanistan contributed about $1 million a year to national political parties, candidates and political action committees since 1990, according to the group, which studies the links between money and politics.

    This is mathematically true, but overlooks the fact that the overwhelming majority of these contributions come from only three of the firms on the list -- Bechtel, Dell, and Kellog, Brown & Root (yes, they're a subsidiary of Halliburton).

  • As even Josh Marshall -- who thinks this is a story -- pointed out last month:

    [W]hen this much money is flying around, you inevitably get a lot of it steered into friendly hands, even without systematic crony-ization of the whole process. And one hears more and more examples of contracts getting very inexpensive bids from local Iraqi companies, only to end up in the hands of American companies whose bids are an order of magnitude higher. I don't think you have to figure wholesale corruption or even favoritism is taking place, at least not only that. The people who award the contracts are likely acting under provisions which (understandably and rightly) give preferential treatment to American companies. And many of the people making the calls probably have little knowledge of Iraqi society or business practices and thus little way of evaluating the trustworthiness and reliability of local operators.

  • The Center for Public Integrity wants to claim that there's a fire here. Looking over their numbers, I'm not even convinced there's any smoke.

    More on this soon.... and now it's here.

    UPDATE: While the allegations of systemic corruption appear to be bogus, that doesn't mean that the reconstruction process is being efficiently managed. This Newsweek story (hat tip to mc_masterchef for the link) suggests that incompetence is a much bigger problem than malfeasance when it comes to reconstruction. The first two paragraphs:

    Helmut Doll waits. And waits. Doll, the German site manager for Babcock Power, a subcontractor of Siemens, is hoping for the arrival of Bechtel engineers at the Daura power plant, Baghdad’s largest. U.S. construction giant Bechtel has the prime contract, now worth about $1 billion, for restoring Iraq’s infrastructure. That includes Daura, which should supply one third of the city’s generating capacity but today, six months into the U.S. occupation, is producing only 10 percent. “Nobody is working on the turbine,” explains Doll. “Bechtel only came and took photos. We can’t judge Bechtel’s work progress because they’re not here.” Questioned, Bechtel spokesman Howard Menaker says Iraq’s power has to be viewed as “a holistic system”—generation doesn’t have to come from a particular plant—and in recent weeks Bechtel has sent engineers to the site. He also blames the delay on more stringent—or finicky, depending on your point of view—American standards. Menaker said the Daura turbine is “covered with friable asbestos and is right now a hazardous work site.” The company says it has just completed “a protocol for asbestos abatement.”

    Still, It's not easy determining why the biggest power plant in Iraq’s largest city seems to be such a low priority. Baghdad is still beset by blackouts, and so much of America’s success or failure depends on power: the economy can’t recover with-out it. The next logical place to ask is the U.S. Agency for International Development, which gave Bechtel the contract last April. Questioned by NEWSWEEK about Daura, USAID chief Andrew Natsios referred to a priority list drawn up by a coordinating committee under the Coalition Provisional Authority—the chief occupying power—and said he didn’t know where Daura was on it. His aide said the CPA would know. No, Natsios said, he thought Bechtel would know. But Bechtel’s Menaker responded: “We perform the work tasked to us by USAID. We don’t make decisions on priorities. USAID and CPA make those decisions.” Some CPA officials concede privately that the problem stems from the lack of preparation before the war. “It always comes back to the same thing: no plan,” says one CPA staffer. (emphasis added).

    ANOTHER UPDATE: Tom Maguire has a newsbreak on another Center for Public Integrity study.

    posted by Dan on 10.31.03 at 12:00 PM


    Just FYI, Halliburton is the parent company of Kellogg, Brown & Root--not vice versa.

    posted by: Diogenes on 10.31.03 at 12:00 PM [permalink]

    It was also front page today in the New York Time's kid brother (and best selling paper in New England), the Boston Globe.

    posted by: Roger Sweeny on 10.31.03 at 12:00 PM [permalink]

    If a politically connected company gets a government contract it is only a scandal if it can be shown that a less connected firm sought but lost the deal. The article is utterly silent on that point. It's not as if Halliburton and Bechtel are not qualified to execute the contracts. This may be the first time in my life I've defended Halliburton and Bechtel, but the charges made in the report issued by The Center for Public Integrity are sleazy and unsubstantiated.

    posted by: Ed Thibodeau on 10.31.03 at 12:00 PM [permalink]

    Perhaps the answer is to give preference to French,German,Russian and Chinese corporations ;o)

    posted by: mark safranski on 10.31.03 at 12:00 PM [permalink]

    A prime reason I do not get my news from the mainstream news sources. They are so lame it is incredible. Oh that's right. Evidence does not count anymore.

    posted by: Richard Cook on 10.31.03 at 12:00 PM [permalink]

    Anyone remotely familiar with how major government contractors work know they rely for influence mostly on things other than campaign contributions. They hire government officials and retired military officers intimately familiar with the government's often complex contracting procedures and its substantive needs. They do purchasing or (for defense contractors) agree to locate plants in the states and districts of key legislators. They acquire the substantive expertise to do the things the government is likely to ask them to do -- which can be a very expensive and time-consuming process.

    Campaign contributions, if they come into the picture at all, are very far down on the list of things a company seeking a major contract for running Army logistics or doing reconstruction work in Iraq would use to get it. I'm not saying it's impossible (and contributions may be made by the same companies for other reasons, for example relating to their support for administration tax policies), only that we are not talking about greasing the skids to get a bill through Congress here.

    posted by: Zathras on 10.31.03 at 12:00 PM [permalink]

    I'm sick of this sort of cronyism. If they were fair they would have given all the contracts to the National Lawyers Association and the Teamsters.

    posted by: Owen on 10.31.03 at 12:00 PM [permalink]

    What about companies that made major campaign contributions that did not get contracts? If you're going to level charges of cronyism, wouldn't it be better to look at major contributors to the Republicans and then compare those to companies that got contracts? They seem to be doing the reverse.

    posted by: scott h. on 10.31.03 at 12:00 PM [permalink]

    Another comment on the issue here.

    posted by: Stuart Buck on 10.31.03 at 12:00 PM [permalink]

    Are you seriously claiming that campaign contributions don't influence policy?

    What the hell would these guys give so much money if it were otherwise?

    Businesses expect results. They make "investments" in order to garner a return. They've obviously determined that the expected benefits of donation outweigh the costs.

    Don't be deliberately naive.

    posted by: praktike on 10.31.03 at 12:00 PM [permalink]

    "Are you seriously claiming that campaign contributions don't influence policy?"

    Research has shown that policy influences campaign contributions. That is, that donors direct money to those candidates who already have views thought to be beneficial to the donors.

    posted by: Paul on 10.31.03 at 12:00 PM [permalink]

    "Are you seriously claiming campaign contributions don't influence policy?"

    That's a basic chicken and egg sort of question.
    Considering the policy positions of candidates Bush and Gore, I would say anyone in the Energy industry would have to have been brain-dead to contribute to Mr. "Earth in the Balance" Gore. Companies, more accurately their CEOs, give money to politicians who will promote the right sort of policies. Don't like that? Stop regulating, the money will dry up.

    posted by: Glenn C on 10.31.03 at 12:00 PM [permalink]

    Whoa, Mr. Prattike - are you attacking Mr Zathras? Reality check time.

    I regularly disagree with Mr. Zathras, yet see the logic of his argument this time, and am thereby bound to agree with him.

    This must say something about the logic of your argument, no?

    Where is the logic in "B is occuring, and must therefore be caused by A"

    Said someone else" I find your lack of (sense) disturbing"

    Tell him about his lovely parting gifts, Mr Zathras... ;)

    posted by: Art Wellesley on 10.31.03 at 12:00 PM [permalink]

    Ouch, Prattle... Looks like your getting voted off the island.

    P.S. How's the iMAC working?

    posted by: TommyG on 10.31.03 at 12:00 PM [permalink]

    First, I don't think anyone should be surprised that this sort of thing occurs ALL THE TIME - and efforts to claim that contributions/access don't impact purchasing decisions are just naive and silly.

    Second, Drezner's argument is based on the fact that the top ten contract winners are not in the top of contributers. That doesn't actually support his point - the fact is that all top 10 contract winners ARE contributers. A better supporting point would be evidence of top contract winners that are NOT contributers - but they likely don't exist.

    Of course, the reality is that all qualified firms will likely be contributers since they recognize that is how the game is played.

    posted by: Kismet on 10.31.03 at 12:00 PM [permalink]

    Our problem was with Afghanistan and Al-Queada, not the whole Middle East! This Imperial venture constructed by Republican Social-Democrats benefits Likud and the House of Saud and that slime-ball in Pakistan. Now we have American taxes funding Socialist in Israel, Egypt and Iraq. This is becoming a bigger social welfare program this country has ever seen and the most expensive failed assassination attempt in military history!

    For Omar
    by Karen Kwiatkowski
    Whose War?
    A neoconservative clique seeks to ensnare our country in a series of wars that are not in America’s interest.
    by Patrick J. Buchanan
    Don't attack neoconservatives – it's a 'hate crime'!
    by Justin Raimondo
    The Return of Fusionism
    by Ryan McMaken
    An Introduction to Neoconservatism
    by Gary North
    We've Been Neo-Conned
    by Rep. Ron Paul, MD
    Big government vs. Bible and Constitution
    by Marvin Olasky
    Are your ready for WW IV?
    by Paul Craig Roberts
    Wisdom Of The Father, Folly Of The Son
    by Paul Craig Roberts
    The Axis of Hubris
    by Paul Craig Roberts
    What’s In A Name? The Curious Case Of “Neoconservative”
    by Paul Gottfried

    posted by: Luther on 10.31.03 at 12:00 PM [permalink]

    Remember when I chided you for the paucity of comments? What can I say, but "Drezner gets results from...his readers!"

    Happy Halloween All!

    posted by: Kelli on 10.31.03 at 12:00 PM [permalink]

    Looks like Mr. Luther is already playing dress-up.

    But, what the "hell", ...Happy Halloween Miss Kobor, wherever you are.

    posted by: Art Wellesley on 10.31.03 at 12:00 PM [permalink]

    Time to defend myself here.

    If I implied that the relationship between campaign contributions and policy was unidirectional, I apologize.

    I actually hadn't read Zathras' post; I was responding to Dan. Upon reading it now, I mostly agree with Zathras. But all I'm trying to establish is that contributions influence policy.

    a therefore b does not exclude c,d,e,f, and g therefore b.

    I do believe that the constribution/policy relationship is bidirectional. I think powerful politicians can effectively "shake down" corporations for money. I'm sure Tom DeLay does this all the time.

    Then there's just the "I know these guys" factor.

    I'm not one to say that we invaded Iraq to enrich KBR and Bechtel; clearly, the PNAC types behind the war don't really give a shit about that stuff.

    But I maintain that it's naive to think that there's no quid pro quo going on.

    posted by: praktike on 10.31.03 at 12:00 PM [permalink]

    All of the US contractors have “approved” systems, meaning they operate under rules similar to those federal agencies use (minimum number of bids, formal bid request and evaluation process, lots of paper, etc.). They certainly have in-house auditors from the Defense Contract Management Agency. They may have high prices for some work (imagine the hazardous location pay that their in-country professionals probably command), but their profit (fee) as a percentage of sales will be monitored for compliance with the contract.

    Locals probably have little capital and less familiarity with a formal bid system that’s not based on bribes, family connections, or party affiliation.

    Its going to take some time to grow a network of Iraqi companies that have the skills, knowledge, and certification to distribute, install, and maintain specialized systems.

    posted by: The Kid on 10.31.03 at 12:00 PM [permalink]

    I don't own any Halliburton or Betchtel stock. Nor am I or any of my family members employed at either firm. I am, however, a U.S. taxpayer, and therefore responsible for a portion of the cost associated with rebuilding Iraq. I will either pay my share through an increase in taxes, or through a decrease in services. Maybe my car will need to be re-aligned more frequently due to potholes, or I won't be able to get a police officer if my home is broken into.

    So, from my perspective as a taxpayer, I do not benefit from handing out cost-plus, no-bid contracts to American firms. I benefit from getting the best price possible for any firm who is qualified to perform the work. I really don't care if a French firm, with a large degree of previous experience in the Iraqi telecommunications area, gets the re-build contract. I really don't care if a construction firm from Dubai gets a contract, if it's cheap and efficient.

    It is really short-sighted to think the U.S. as a whole benefits from handing out contracts to "American" firms. How do we benefit in the long-term from this American only stuff if it contributes to a bigger budget deficit because costs are higher than they need to be, and the process is dragged out because of efficiency losses due to not using firms already based in the Middle East?

    posted by: Mary C. on 10.31.03 at 12:00 PM [permalink]

    Mary -
    Actually, you do benefit in a way, since dollars spent with US companies ultimately find their way back into the US economy. Trickle down economics. Not as direct, but certainly more direct than sending the money to France/Dubai.

    Kid -
    I wanted to point out that 'fees' are not the same as 'profits', although related. While we might regulate profits, our total costs are the fees, where fees=costs+profits. Since profits are often tagged as a percentage of costs (profits=2% of costs), you end up with a warped situation where the contractors are rewarded by making costs as HIGH as possible, even if their profits are capped at a specific percentage.

    posted by: Kismet on 10.31.03 at 12:00 PM [permalink]

    “Our problem was with Afghanistan and Al-Queada, not the whole Middle East! “

    This is an absolutely false dichotomy. The “whole Middle East” is our problem! Far too many radical Muslims and their more secular cohorts consider us to be their unrelenting foe, and there is nothing we can realistically do to lessen their rage. They hate us, not for what we might have done to them---but because we value liberal democracy. Rightfully, they sense that our culture threatens their totalitarian cultural milieu. We therefore are confronted with an unavoidable fight to the death.

    “... The Center for Public Integrity, a non-partisan, non-profit investigative group..”

    Non-partisan? Does anybody really believe that the vast majority of the members of this organization are Bush supporters? This is just another example of the liberal dominated (yes, here I go again) media doing their best to slime President Bush. What else is new?

    posted by: David Thomson on 10.31.03 at 12:00 PM [permalink]

    Agreed, Mr. Praktike.

    Happy Halloween.

    posted by: Art Wellesley on 10.31.03 at 12:00 PM [permalink]

    I would like to see certain terminology clarified.

    Mr. Thomson scorns the description of the Center for Public Integrity -- "a non-partisan, non-profit investigative group..” -- because it does not support Bush.

    Is that the working definition of "non-partisan" hereabouts? "Supports George Bush"?

    posted by: SurelyYouJest on 10.31.03 at 12:00 PM [permalink]

    Kismet -
    In defense contracting lingo, “fee” is the allowable profit on a cost-reimbursement contract or task. “Profit” (or “loss”) is the difference between the price to the government and the contractor’s costs on fixed price contracts.

    Since all these guys are federal contractors, the government has tremendous insight into their operations and in fact defines what allowable costs are. For example, bribes are no longer allowable costs in computing what amount the fee is computed on. A lot of contractors have accounts designated as non-billiable and as coming out of the profit pool to avoid disputes and speed payment.

    posted by: The Kid on 10.31.03 at 12:00 PM [permalink]

    “Is that the working definition of "non-partisan" hereabouts? "Supports George Bush"?”

    My definition of a nonpartisan organization is one that does not unfairly blast a particular administration. These folks come across as a bunch of liberals who desire to destroy President Bush’s presidency. Am I jumping to an invalid conclusion? I doubt it very much. When it looks like a duck, quacks like a duck....

    Am I also someone tempted to blame the liberal media for everything under the sun? Are they guilty of causing the bubonic plague in the Middle Ages? Did they make the dinosaurs disappear during the Ice Age? Oh well, even I won’t go that far.

    posted by: David Thomson on 10.31.03 at 12:00 PM [permalink]

    And one hears more and more examples of contracts getting very inexpensive bids from local Iraqi companies, only to end up in the hands of American companies whose bids are an order of magnitude higher. I don't think you have to figure wholesale corruption or even favoritism is taking place, at least not only that. The people who award the contracts are likely acting under provisions which (understandably and rightly) give preferential treatment to American companies.

    Understandably and rightly?

    Come off it.

    Local Iraqi companies ought to be given preference over any other bids. If there's a local Iraqi company who can do the job - whatever the job is - then of course they should be given preference. That ought to be a no-brainer.

    If a local Iraqi company gets a reconstruction bid, that means the reconstruction money is going to Iraqis. That's where it should be going. Local Iraqi companies getting reconstruction bids means double benefit.

    American companies getting reconstruction bids means double disadvantage: not only is the money not going to Iraqis, it looks unsavory, and discourages potential donors from other nations from providing much-needed cash help. What they might well be willing to give to help the Iraqis reconstruct, why should they be willing to give to enrich big US companies?

    posted by: Jesurgislac on 10.31.03 at 12:00 PM [permalink]

    Every contractor that is qualified to bid under US Federal acquisition law (FAR and DFARS) has a political action committee contributed to by individual employees- not the corporation itself. That PAC donates money first to the Congressional people of any party who have the Committee assignments that are useful for their interests, then to those whose views agree with their interests. Any person who believes that donating cash to Bush OR Gore steers the big contract to them knows next to nothing about the process.

    Every such competitive procurement has two, at most three, firms that are truly capable of doing the job and believe that they have enough of a shot at the win to justify the bid investments. They spend money not on political contributions- that is puerile and fair game for idiotic "watchdogs" like the persistently leftist CPI- but on consultants. Retired general officers and high level civilians who know the inside of how the acquisition is likely to be going down and can suggest the hot buttons of the most likely Source Selection Authority, target prices that might be competitive, etc.

    Every time I read one of these purported whistleblower press releases about some other shallow "study" I laugh for a week.

    BTW, Brown & Root won its LOGCAP contract competitively, following on to the requirements contract awarded under Clinton.

    posted by: Duane on 10.31.03 at 12:00 PM [permalink]

    Kid - thx for the clarification. I'm more accustomed to regulated utilities, which have a similar cost-plus relationship with the public in terms of recoverable/non-recoverable costs but a slightly different terminology.

    posted by: kismet on 10.31.03 at 12:00 PM [permalink]

    There a several good posts from people who understand the bidding process. People, read them.

    I used to work for Brown & Root. It is a fine company, so is Kellogg and so is Bechtel. These companies are as qualified as any firms in the US if not the world for this work.

    posted by: tallan on 10.31.03 at 12:00 PM [permalink]

    Glenn C wrote:

    "Considering the policy positions of candidates Bush and Gore, I would say anyone in the Energy industry would have to have been brain-dead to contribute to Mr. 'Earth in the Balance' Gore."

    However, on January 16, 2002, Jerry Seper wrote the following for the Washington Times:

    "Enron Corp. donated $420,000 to Democrats over a three-year period while
    heavily lobbying the Clinton administration to expedite passage of a 1997 global warming treaty that would have dramatically increased the firm's sales of natural gas.

    Federal and confidential corporate records show that after donating
    thousands of dollars in soft money and PAC donations beginning in 1995, Enron
    received easy access to President Clinton and Vice President Al Gore."

    Gore's pet issue was Enron's pet issue. Energy companies in the natural gas sector and utilities certainly could not be considered "brain-dead" for contributing to Gore.

    BTW, Enron CEO Ken Lay contributed to W in 2000, not Gore. Does this make Ken Lay "brain-dead," given Enron's interest in Kyoto? No; W was then Gov. of TX, and Lay also contributed to TX Dems like Shiela Jackson-Lee and Martin Frost.

    Kellog, Brown & Root, back in the day when it was just Brown & Root, had "ties" to LBJ, not Cheney.

    All of which supplements the basic point made by Mr. Drezner and others. Firms give to politicians for a number of reasons. But the guiding principle is that the more that government regulates the private sector, and the more money it takes from the private sector, the more firms in the private sector will feel compelled to get involved in politics. Almost all large firms do so (Microsoft discovered the cost of ignoring what it used to call "the other Wasington"). Thus, it is extraordinarily likely that the losing bidders on Iraq contracts will also have donated to a variety of politicians.

    It's also worth noting that a number of the winning companies, like Bechtel, have a long history of work in Iraq that renders them more qualified than some others (and no, I don't work for Bechtel or any of the companies involved here). For example, the company that built a particular pipeline would be a natural candidate for repairing and refurbishing it. And how did they get that earlier work...?

    posted by: Karl on 10.31.03 at 12:00 PM [permalink]

    I saw a blurb from this "story" while perusing google news and I immediately new it was crap just from the info in the two sentence summary. The "damning" amount of contributions given is only a small fraction of the contributions Bush has already raised (less than 1% I believe), and considering the conglomeritized nature of modern business it's little surprise that any company large enough to play a substantial role in the rebuilding of Iraq would be inclined to make substantial political contributions. And I'd like to know, for example, what the amount of contributions to the Democratic party or Democratic candidates were from the same companies. Statistics such as that (along with a description of the process by which contracts are awarded as described above) would put the contributions in better perspective and give people the information they need to understand whether these contributions were unusual and nefarious or normal and no more dangerous to our democracy than campaign contributions usually are. However, I suspect that that sort of perspective is precisely what the article writers didn't want.

    It's a classic smear strategy and it usually works fairly well. Simply take a few carefully selected unargued facts and juxtapose them so they look kind of odd together. Then add a heaping pile of "rational" skepticism and cynicism with just a hint of leading questions and voila! you've got a political hit piece with plenty of defensability as "just good, honest, unbiased reporting," or "just asking questions and looking for answers." But really it's little more than "have you stopped beating your wife yet?"

    posted by: Robin Goodfellow on 10.31.03 at 12:00 PM [permalink]

    There's probably nothing wrong going on except the appearance of impropriety and the inefficient application of scarce resources. There is likely no quid pro quo going on, but anyone who wants to hire Haliburton hasn't examined its business track record or spreadsheets very closely. It's been a loser in the marketplace both before and after Cheney left. The same thing with awarding MCI the cellphone contract - nothing illegal about it but something potentially criminally stupid yes. Read Kaplan's war stories column for his take on it.

    The reason why we shouldn't be awarding these contracts to these people isn't to stamp out cronyism, but to actually deliver results we have to start relying on companies that don't have track records of fumbling and failure in the most important national security threat to the United States of America in the first part of the 21st century.

    That's why we ought to have fair and transparent bidding. Too much more of this help and surely we will perish.

    posted by: Oldman on 10.31.03 at 12:00 PM [permalink]

    CNN 10.25.03

    (CNN) -- Halliburton Co., the energy services giant once led by Vice President Dick Cheney, has called on its employees to write letters to newspapers and lawmakers in defense of the company's image.

    In a memo dated October 17, company President Dave Lesar lambasted what he called "unfounded" criticism against the company and asked its 100,000 employees to get out Halliburton's message "in a thoughtful, non-confrontational manner.

    "We should avoid stooping to our critics' level of dialogue, no matter how tempting that may be," wrote Lesar, who is also chairman and chief executive officer.

    The memo, obtained by the Web site, which opposes the Bush administration, carried the subject line "Defending our Company."

    Dallas Morning News 10.25.03

    "Is it the policy of The Dallas Morning News to print form letters?" Dallas reader Jennifer Steel Walter wrote yesterday. No. But the gray area is large. Ms. Walter was referring to the Tuesday letter "Halliburton doing good" from Mary Hubbard, a Halliburton employee in Carrollton. A Web site late this week,, disclosed that Halliburton CEO Dave Lesar sent a four-page memo Oct. 17 to company employees entitled "Defending our Company." In it, he urged them to help by "writing a letter to the editor of your newspaper. Please add your voice to mine, so we can be heard over those who are distorting our efforts." A Halliburton spokesman verified the authenticity of the memo, saying the company had an ongoing effort to encourage civic involvement by its employees, such as contacting their congressmen (also part of the memo, which can be viewed at While Ms. Hubbard's letter is not strictly a form letter – some of it is entirely her own – she used some of the wording from the memo.

    I guess that explains the letters defending Halliburton here.

    posted by: Dee Mento on 10.31.03 at 12:00 PM [permalink]

    Exactly right, Mr Goodfellow. And what's more, those who consume these kinds of pieces and regurgitate them, imagine the following scenarios:

    GB: "Well, Then, looks like Cogswell Cosmic Cogs can do this thing best, judging from their proposal..."

    KR: "Except, Mr President, you're forgetting how much Spacely Space Sprockets contributed to your election campaign...

    RC: "Yeah, and that I used to work for them..."

    GB: "heh, heh..."

    KR: "Heh, Heh, heh..."

    RC: "Bwah-hah-ha!"

    CR: (Coming back with coffee)... "Waitaminute fellas, your talking about a contract worth hundreds of millions, Spacely donated, what, $350,000??? Big deal.

    GB: "Whadda I care, it was all Wolfies idea anyways."


    Scary, Huh? Happy Friggin' Halloween

    posted by: Thomas Gunn on 10.31.03 at 12:00 PM [permalink]

    Another point that has been driving me crazy is the way that the Halliburton contracts have been termed non-competed. Rich Lowry at NRO had an article several weeks ago that said that the Halliburton contract is really an indefinite delivery contract that they won through competitive bid in 2001, before the election. This sort of contract is set up by the government so that when they have requirements for this sort of support they don't have to go through the entire procurement cycle (12 - 18 months) for each particular job. Basically they win an on-call contract by proposing the cheapest rates against their competitors

    If you notice Democratic congressman talking about this they will refer to "task orders" that Halliburton has gotten which is the contract term for "releases" against a contract of this sort.

    This gives the game away that they are playing. Legally these are not sole-source contracts. To compete them again, they would have to break the existing Halliburton contract and then go through the entire bidding process of many months to select (maybe) someone else. And then they could beat the Administration up for being too slow to respond.

    Why more isn't made of this I don't know. Maybe it just doesn't condense into a good sound bite. But it is infuriating to those of us who work in and understand government contracts. I am glad to see others in the thread who understand this too

    posted by: TR Farmer on 10.31.03 at 12:00 PM [permalink]

    There is likely no quid pro quo going on, but anyone who wants to hire Haliburton hasn't examined its business track record or spreadsheets very closely. It's been a loser in the marketplace both before and after Cheney left.

    Is that supposed to mean that KB&R is technically incompetent to perform the required tasks, or does it really only mean that Halliburton management has participated in some unprofitable projects? If it's the latter, which I suspect, then it has no bearing on the KB&R contracts in Iraq.

    That's why we ought to have fair and transparent bidding.

    We would all like that, but are you prepared to wait the 6-12 months before the first (and, thankfully, few) oil well fires were put out, water and sewer pipe laid, the first yard of cement poured, or anything else was done. I think there are already too many complaints about how slow Afghanistan and Iraq reconstruction is.

    posted by: Lynxx Pherrett on 10.31.03 at 12:00 PM [permalink]

    There's a way to stop criticism of Halliburton and other defense contractors. Just elect people who have no ties to these corporations and who have not and will not profit in any way from military expenditures and restrict the government from appointing or employing any people with said affiliations.

    If you want to be thought blameless, be transparent and avoid any appearance of corruption.

    posted by: Dee Mento on 10.31.03 at 12:00 PM [permalink]

    “There's a way to stop criticism of Halliburton and other defense contractors. Just elect people who have no ties to these corporations and who have not and will not profit in any way from military expenditures and restrict the government from appointing or employing any people with said affiliations.”

    Such a rule would be a utter disaster for this country. It effectively precludes some of our best people from seeking public office. Also, where might this end? Why not deny trial lawyers an opportunity to serve their country? Who would not seem like tainted goods?

    “We would all like that, but are you prepared to wait the 6-12 months before the first (and, thankfully, few) oil well fires were put out, water and sewer pipe laid, the first yard of cement poured, or anything else was done. “

    Your point is most accurate. Every administration, whether Democrat or Republican, would do exactly the same thing. Only a handful of companies can even begin to handle this sort of challenge. This recent flap is nothing more than the liberal media seeking a way to slime the Bush administration. We can be sure that President Clinton wouldn’t have received this sort of nonsensical criticism.

    I might add that it initially appears that the Liberal media are greatly responsible for the horrible fires in California. They did everything to coverup the shenanigans of the extremist environmentalists. This has resulted in perhaps the worst tragedy in California’s history. Am I prematurely getting too carried away? OK, let’s be fair and wait a little longer for further evidence to unfold. But right now, it looks bad for the Liberal media.

    posted by: David Thomson on 10.31.03 at 12:00 PM [permalink]

    Here's to Dee Mento, for suggesting that no one sullied by contact with large corporations should be elected to public office!

    This "contaminant" model of viewing the world works well in our postmodern society. Just look at academia, where hothouse flowers (no offense, Dan) are grown in an atmosphere completely cut off from the nasty realities of having to turn a profit or make difficult decisions based on empirical facts rather than grandiose theories. Why, just yesterday the good folks at Boston University paid nearly $2 million to a man who hasn't even ARRIVED yet to kindly bugger off. Outside of professional sports, it's hard to imagine another sphere of activity in which this bs would be tolerated. Maybe we can get Elliott Spitzer to investigate.

    But back to the question at hand, perhaps Dee has a suggestion for what pool of applicants could be tapped that would not be contaminated by "impure" thoughts and deeds. Lawyers? Maybe not. Soccer moms? Perhaps.

    I know, let's clone smart people, raise the darlings in a carefully monitored environment, free from taint of worldly possessions or cares (say, a monastery in the Himalayas) then bring them to Washington as needed to run the country.

    And if they don't work out as politico-saviors, the FDA says we can eat them. Yum yum.

    posted by: Kelli on 10.31.03 at 12:00 PM [permalink]

    Eewwwww. Halloween was yesterday, Miss Grim ;)

    posted by: Art Wellesley on 10.31.03 at 12:00 PM [permalink]

    Another article on the subject that I don't think has gotten as much play around the blogosphere is this this piece from Newsweek/MSNBC. What concerns me far more than the blush of impropriety that comes from government contractors kicking back contributions to the administrations hiring them is the question of whether using private military firms is really an advisable policy over all in the first place. Peter Singer's book is a good introduction to the topic but for the most part I haven't seen anyone question the conventional wisdom that using private companies to supplement your military forces is really always beneficial; given the charges of overcharging, poor coordination, and the lack of transparency and accountability, I'm not sure that claim has really been verified by privatization advocates; at least certainly not by those who made the decisions in Iraq. If you are going to be limiting yourself to two or three private monopolies, why not just nationalize them and try and assert more public control over your defense policies? Either that or some form of increased regulation for these companies seems like it will be necessary, if you're not going to have the genuine competitive marketplace that's supposed to be prompting benefits from privatizing in the first place.

    posted by: mc_masterchef on 10.31.03 at 12:00 PM [permalink]

    This is a perfectly valid concern. It may well be that privatizing, say, the logistics of an Army deployment is no less expensive than having the Army run the whole thing. This can be argued.

    What can't be argued is the prerequisite for having the Army run the whole thing, namely a lot more people in uniform than we have now. That would require conscription, a politically unsaleable idea. Sometimes the conventional wisdom becomes conventional for good reasons.

    posted by: Zathras on 10.31.03 at 12:00 PM [permalink]

    If that's in fact the case (the lack of political support for committing need resources if it is confirmed that the PMF model is inferior) then I'm afraid we may have already set ourselves up for a huge and ultimately unsustainable foreign policy project abroad.

    Personally I don't think conscription is the only way to boost Army rolls, but I would agree that right now private military firms appear to be the best qualified parties actively interested in filling the gaps between demands of American policies and the amount of resources the public seems willing to allocate towards the achievement of those demands. If we're not going to be diverting those public resources, though, then I think we had really better start paying attention to how the private actors do our work for us, which at very least should mean more transparency, more accountability, and potentially more regulatory infrastructure than exists right now. And to that extent I think investigative reports like the CPI's very important indeed.

    posted by: mc_masterchef on 10.31.03 at 12:00 PM [permalink]

    I hope no one here is suggesting that members of the Clinton-Gore administration took (or earned) billions of taxpayer dollars from any association with trial lawyers. Or that any trial lawyers received tens of billions of dollars through nonbid government contracts.

    Turn it around for a minute, if you dare. If Clinton cronies got upwards of $300 billion in taxpayer dollars for making war anywhere in the world (even without phony pretexts for the war), what would have happened?

    Just have some intellectual honesty, for god's sake.

    posted by: Dee Mento on 10.31.03 at 12:00 PM [permalink]

    Dear Mr. Pherrett,

    Certainly companies are underperforming in Iraq. The reason why we know this is that some of these companies are even failing to deliver food and water properly to our troops. Their track-record goes downward from there. Are you suggesting that we don't hire competent companies?

    In addition, your remark about the wait for companies is intellectually specious. This war didn't exactly catch anyone by surprise. There was plenty of time to bid out contracts.

    Since we're already there now though, there is nothing stopping us from setting up fairer but expedited bidding processes, with each company on a probationary basis and with the contract going to their competitors waiting in the wings if they stumble after three months. That will keep them on their toes.

    It would be against the rules for bidding, but we broke those anyway when we assigned the bids in the first place to the present companies ... even though we had plenty of time to get the best company for the job.

    Apolgists for mendacity are especially disturbing you know. Try not to do it as often.

    posted by: Oldman on 10.31.03 at 12:00 PM [permalink]

    Why is anyone surprised at this "revelation"? It's business/politics as usual. A big part of the problem is the cronyism networking system whereby government officials at all levels transition into the role of lobbyist or direct liason between government and private industry. This is particulary true for elected and politically appointed positions. These people start looking for the next job the first day in office. It is commonly accepted that a perk of a federal position is the helpful contacts you will make during your tenure. Where do all the Congressmen/women and Presidential appointees go to work when they leave office? They might even be seen in the reception office of their former workplace making an appointment that could lead to a future business contract.

    We are all aware that legal processes are supposed to govern contract grants but, just like real hiring practices, the contracts can be given to whomever the grantee desires. You just work out the legal details to show conformity to the rules by adjusting the requirements to fit the applicant's ability to fill them. I have worked in governmental (federal, state, county and university) agencies and have seen this done.

    We haven't overlooked the lobby industry in Washington, have we? Professional lobbying and political contributions are part of any company's operation if they wish to be part of the federal contracts programs. For the corporate giants seeking multi-billion dollar contracts, greasing the cogs of the government/military/industrial machinery is essential for survival. The most money always goes to the political party in office, but all get a piece of the action as companies try to cover all bases and all contingencies.

    posted by: Marcel Perez on 10.31.03 at 12:00 PM [permalink]

    Yes, Marcel, but the current situation goes way beyond what you describe. The VP is getting hundreds of thousands of dollars per year in deferred compensation and holds stock options on 433,333 shares -- all from the corporation that is making the most money from the war. Family members and personal friends of the POTUS are making untold millions of dollars from military action.

    This isn't just lobbying for contracts.

    This is the systematic and intentional looting of the U.S. Treasury; taking tax dollars directly from American families and laundering them through the military-security complex so they end up in the pockets of Bush family and cronies. (Think of the people who are making money in their own spin-off ventures: Pug Winokur. Richard Perle. James Woolsey. James A. Baker, whose firm represents the Saudis against litigation brought by 9-11 families. Close Bush consigliere in the Carlyle Group.)

    It really is sickening.

    I used to have some respect for many Republicans. But the situational ethics exhibited by "conservatives" in their support for this criminal corruption is just a stinking heap of contradiction and anti-Americanism.

    posted by: Dee Mento on 10.31.03 at 12:00 PM [permalink]

    Dee wrote: "Or that any trial lawyers received tens of billions of dollars through nonbid government contracts."

    Yeah. All the tobacco settlements were put out for bid. (Not - they were sole sourced.) The fact that the highest profile trial attorney in Texas has testified that he was frozen out of that work because he was told his firm was expected to donate in 7 figures to the Democrats and they refused. The attorney general that delivered that news is now going to jail for money laundering and tax evasion connected with that.

    IMHO, being an attorney should disqualify you for public office - it's a conflict of interest.

    posted by: Edmund Hack on 10.31.03 at 12:00 PM [permalink]

    Proportion, man, proportion. The difference between "seven figures" and $10 billion is $9 billion, 999 million. The looting by the Buch cronies makes your scenario above nothing but chump change. (And how can a firm legally donate a million dollars, anyhoo?)

    Incidentally, it's a fair trade to exclude lawyers from public office if we also exclude anyone who has profited or profits from war. That works for me. (Although under your scenario, Abe Lincoln himself would have been O-U-T.)

    posted by: Dee Mento on 10.31.03 at 12:00 PM [permalink]

    Have we overlooked the clandestine ways individuals and corporations have learned (with, of course, the gracious guidance of both parties)how to donate seemingly illegally large amounts of political contributions?

    Since the late '80s, party-guided contributors have used the tactics of donating "soft money" to the political party for their discretionary distribution to individuals; money directed to "advocacy issues" that can then be laundered to specific campaign war chests; money to pay for "independent expenditures" (i.e. costs related to physical/logistical planning and construction); money to pay "compliance costs" (i.e., lawyers' fees, filing, reporting, etc.,to meet federal campaign/election requirements; "bundling" of maximum level contributions by a number of company employees at the request of the CEO or other administrative officer. In this magic act, 10 - $100,000 donations effectively become a company $1,000,000.00 donation. And, finally, someone must pay for the inaugural festivities. Here's another opportunity to slip millions to our election winner.

    This skirting around federal campaign/election laws that limit maximum donations occurs during primaries, conventions and the general elections. The total of these additional, unaccounted for monies probably matches the declared and accountable sum.

    The money peddling is even greater than we have already described and makes the issue of buying influence even more odious than we can ever imagine.

    posted by: Marcel Perez on 10.31.03 at 12:00 PM [permalink]

    Drezner: "If the corruption argument is true, then the size of campaign contributions should be strongly and positively correlated with the size of government contracts."

    This is essentially a straw man argument. Let me illustrate. For example, a CEO is accused of nepotism because he hired a couple of VPs who were his nephew and brother-in-law. The CEO defends himself, claiming that if the nepotism argument is true, then the positions awarded should be strongly and positively correlated with how closely they are to the CEO. Yet none of the CEO's immediate family were hired by the company. Furthermore, there were numerous senior VP positions filled by people completely unrelated to the CEO. Therefore, there is no correlation.

    Is this a valid defense? No, because the charge is not that these people were hired solely on the basis of their relationship to the CEO. The charge is that the relationship played a role at all. This is a conflict of interest. Ditto for campaign contributions. Although these contributions predated the Shays-Meehan soft money ban and thus were perfectly legal at the time, the proper thing to do to remove the conflict of interest would have been to return the contributions of all the companies bidding for the contract. Just like a judge recusing himself from a case.

    Campaign contributions affect policy, either by gaining favors, or making it more likely for a certain candidate to win (presumably one more favorable to you than their opponent). If this was not true, companies that spend shareholder money on campaign contributions would lose out in the free market to companies that spend that money more wisely (either reinvesting it in the company, buying back shares, or distributing dividends to the shareholders). The fact that this does not occur means that money spent on campaign contributions must have a positive return.

    posted by: Felix on 10.31.03 at 12:00 PM [permalink]

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