Hope and Fail

No-bid contracts are bad for Halliburton, but great for Democratic fat cats UPDATE: State Department cancels contract

During the 2008 campaign, candidate Barack Obama continually used a refrain about ending “sweetheart deals for Halliburton and the like,” referring to the infamous no-bid defense contracts awarded to Dick Cheney’s former employer.

He also promised that he would put all government contracts totaling more than $25,000 out to competitive bid.

As with so much, his actions as president belie the candidate. Fox News reports:

Despite President Obama’s long history of criticizing the Bush administration for “sweetheart deals” with favored contractors, the Obama administration this month awarded a $25 million federal contract for work in Afghanistan to a company owned by a Democratic campaign contributor without entertaining competitive bids, Fox News has learned.

The contract, awarded on Jan. 4 to Checchi & Company Consulting, Inc., a Washington-based firm owned by economist and Democratic donor Vincent V. Checchi, will pay the firm $24,673,427 to provide “rule of law stabilization services” in war-torn Afghanistan.

… The legality of the arrangement as a “sole source,” or no-bid, contract was made possible by virtue of a waiver signed by the USAID administrator. “They cancelled the open bid on this when they came to power earlier this year,” a source familiar with the federal contracting process told Fox News.

“That’s kind of weird,” said another source, who has worked on “rule of law” issues in both Afghanistan and Iraq, about the no-bid contract to Checchi & Company. “There’s lots of companies and non-governmental organizations that do this sort of work.”

The folks at USAID told Fox that the “no-bid contract” they awarded to Checchi was a renewal of the company’s previous contract, and therefore not quite “no-bid.”

But the president didn’t make such a distinction when running for office or during speeches throughout 2009. And judging by his campaign rhetoric, one can’t imagine he would have made such an exception for Halliburton. This is just a sampling, but shows that the president’s promise to end the no-bid practice was not made in passing. His campaign Web site said this:

Make Government Spending More Accountable and Efficient: Obama and Biden will ensure that federal contracts over $25,000 are competitively bid.

PolitiFact points out that the $25,000 threshold is unrealistic and would actually wind up costing the government more to put smaller contracts out to bid. However, the Checci wasn’t for $25,000. It’s for $25 million (perhaps the campaign promise was a typo and some intern left off a few zeros).

During a speech on education, of all things, in Dayton, Ohio on Sept. 9, 2008, candidate Obama spoke of increasing teacher pay, expanding access to higher education and expanding charter schools. When it came time to talk about the costs of his education plan, he said this:

And you know what? We can do all of this for the cost of just a few days in Iraq. We can do it. We’ll pay for that cost by carefully winding down the war in Iraq, by ending no-bid contracts, and by eliminating wasteful spending.

At a rally on Oct. 1, 2008 in La Crosse, Wis., candidate Obama said this:

We can save billions of dollars by cutting private contractors and improving management and oversight of the hundreds of billions of dollars our government spends on contracts. And I’ll finally end the abuse of no-bid contracts once and for all – the days of sweetheart deals for Halliburton will be over when I’m in the White House.

The next day, in Grand Rapids, Mich., the teleprompter was loaded with the same script:

We’ll finally end the abuse of no-bid contracts once and for all. The days of sweetheart deals for Halliburton and the like will be over when I’m in the White House.

As president, Barack Obama continued to denounce no-bid contracts.

During his first speech to a joint session of Congress on Feb. 24, 2009, he said:

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate … we’ll eliminate the no-bid contracts that have wasted billions in Iraq, and … and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use.

After signing a memo on reforming government procurement on March 3, 2009, flanked by Sens. John McCain, R-Ariz., and Carl Levin, D-Mich., the president said:

Today I’m announcing that part of this deficit reduction will include reforms in how government does business, which will save the American people up to $40 billion each year. It starts with reforming our broken system of government contracting. There is a fundamental public trust that we must uphold. The American people’s money must be spent to advance their priorities — not to line the pockets of contractors or to maintain projects that don’t work.

Recently that public trust has not always been kept. Over the last eight years, government spending on contracts has doubled to over half a trillion dollars. Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability. In some cases, contracts are awarded without competition. In others, contractors actually oversee other contractors. We are spending money on things that we don’t need, and we’re paying more than we need to pay. And that’s completely unacceptable.

… Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat: That’s $295 billion in wasteful spending. And this wasteful spending has many sources. It comes from investments and unproven technologies. It comes from a lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars.

… So here are a couple of immediate steps we’re going to take. First, with the presidential memorandum that I’m signing, I am instructing my administration to dramatically reform the way we do business on contracts across the entire government. So starting today, Peter Orszag, my budget director, will work with Cabinet officials and agency heads to develop tough new guidelines on contracting by the end of September. We will stop outsourcing services that should be performed by the government, and open up the contracting process to small businesses. We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability.

… I can assure you that this will be a priority for my administration. It’s time to end the extra costs and long delays that are all too common in our defense contracting. We need to invest in technologies that are proven and cost-effective. We need more competition for contracts and more oversight as they’re carried out.

After meeting with Defense Secretary Robert Gates on April 30, 2009, the president said:

Every dollar that’s wasted because of .. uh … inappropriate no-bid contracts and waste and abuse — that’s a dollar that could be going to help our, protect our troops, advance our national security and keep the American people safe.

Then, during the VFW convention in Phoenix on Aug. 17, 2009, President Obama explained how important it was to end no-bid contracts and reign in waste in defense spending in order to support American troops. He also claimed to have already shut-down the no-bid contracting process.

Here’s the simple truth: We cannot build the 21st-century military we need, and maintain the fiscal responsibility that America demands, unless we fundamentally reform the way our defense establishment does business. It’s a simple fact. Every dollar wasted in our defense budget is a dollar we can’t spend to care for our troops or protect America or prepare for the future.

You’ve heard the stories: the indefensible no-bid contracts that cost taxpayers billions and make contractors rich; the special interests and their exotic projects that are years behind schedule and billions over budget; the entrenched lobbyists pushing weapons that even our military says it doesn’t want. The impulse in Washington to protect jobs back home building things we don’t need has a cost that we can’t afford.

This waste would be unacceptable at any time, but at a time when we’re fighting two wars and facing a serious deficit, it’s inexcusable. It’s an affront to the American people and to our troops. And it’s time for it to stop.

… So already I’ve put an end to unnecessary no-bid contracts. I’ve signed bipartisan legislation to reform defense procurement so weapons systems don’t spin out of control. And even as we increase spending on the equipment and weapons our troops do need, we’ve proposed cutting tens of billions of dollars in waste we don’t need.

We get the point, Mr. President. No-bid contracts are repulsive.

Except …

Federal campaign records show Checchi has been a frequent contributor to liberal and Democratic causes and candidates in recent years, including to Obama’s presidential campaign.

The records show Checchi has given at least $4,400 to Obama dating back to March 2007, close to the maximum amount allowed. The contractor has also made donations to various arms of the Democratic National Committee, to liberal activist groups like MoveOn.org and ActBlue, and to other party politicians like Sen. John F. Kerry, former presidential candidate John Edwards and former Connecticut Senate candidate Ned Lamont.

So now it makes sense. No-bid defense contracts for companies with Republican ties are inexcusable. If they’re donating to Democrats, it’s OK.

UPDATE:

Since the story about the Checchi contract came out, the State Department axed it because it “violated” Obama’s campaign pledge. Again, from Fox News:

The recent awarding of a lucrative federal contract to a company owned by a financial contributor to the Obama presidential campaign — without competitive bidding — “violated” President Obama’s many campaign pledges to crack down on the practice, a top State Department official told Fox News.

Assistant Secretary of State P.J. Crowley, familiar to many Americans from his erudite delivery of the State Department’s daily press briefings, made the admission in a telephone interview Saturday night.

… Crowley confirmed that the contract has been “terminated” because the circumstances under which it was awarded, “violated the Competition in Contracting Act.” Crowley said the contract was actually a renewal of a $44 million contract first awarded to Checchi and Company in October 2004 by the Bush administration — after a competitive bidding process — and will now be put out for competitive bids.

The existence of the Checchi contract was first publicly reported by Fox News on Jan. 25.

However, Crowley insisted the cancellation of the contract had nothing to do with Fox News’ reporting but rather was the result of a protest lodged by ARD Inc., a Vermont-based competitor of Checchi and Company. Crowley said the contracting officer in Kabul decided to renew the contract to Checchi and Company on a no-bid basis without being aware of ARD’s protest.