Maybe the ambassador is right

The Chinese Ambassador to the U.S. attributes the growing focus on China as a military threat to the defense industry's need for more business. Yes, China's 'official' defense budget has increased 10% a year for the past few years. And, yes, the official number may understate reality somewhat. But we spend close to $600 billion a year compared to China's 'official' budget of less than $50 billion. Is the threat from China so imminent that we have to spend 16% of the total federal budget on defense?

What galls me even more than the amount we are spending is the waste involved. I've written often about the money flushed down the drain in Iraq. But there is waste here at home as well.

For example, take something called in defense-speak 'award and incentive fees'. As the name implies, these are fees to encourage defense contractors to do a very good job - produce better products in a shorter time for less money. Well, it seems that many people in DOD have confused an average job with a very good job.

Would you say that the Space-Based Infrared System is a very good job when its cost is double the original estimate and it is more than a year late? DOD gave the contractor 74% of the award and incentive fee. How about the Joint Strike Fighter? 30% over estimate, a year late? DOD paid the contractor the full award and incentive fee. The list goes on.

The General Accountability Office (GAO) recently completed a study of 93 contracts which have cost us $51 billion. DOD paid 90% of the targeted award and incentive fees "regardless of whether acquisition outcomes fell short of, met, or exceeded DOD expectations".

Like many in government today, DOD has a problem understanding the meaning of words. They feel that "paying a portion of the fee for satisfactory performance is appropriate to ensure that contractors receive an adequate fee." They don't see a disconnect between 'satisfactory' and 'incentive'. Or, is it that they just want to low ball the initial contract? Whatever the reason, what this means for you and me is that, on these 93 contracts, $8 billion of our money was given away without getting anything in return. That's almost 16% of the cost of the contracts. Hmm, 16% of a $600 billion budget is $96 billion. That's not exactly chicken feed.