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The Military Government The Almighty Buck News

Pentagon Lost Billions, Pennies At a Time 323

Posted by timothy
from the different-kind-of-cuckoo's-egg dept.
Hugh Pickens writes "MSNBC reports that in 1969, Walter T. Davey, an aeronautical engineer at North American Rockwell, discovered he was being overpaid by roughly 2 cents an hour, or one-third of 1 percent of his pay. Davey submitted the discovery to his superiors and suggested a simple fix. 'It was so simple to correct,' said Davey, a 79-year-old retired Air Force colonel, 'just change a few digits in the coding software.' The Project on Government Oversight, which reviewed Davey's findings last year, estimated the change could save taxpayers $270 million a year. Multiply by 40 years — the length of time since Davey made his discovery — and the figure grows to an astounding $10.8 billion. Legislators ignored Davey's letters, federal auditors deferred to Congress, and lobbyists 'descended on it and tore it into a piece of Swiss cheese' but legislators aren't eager to challenge the powerful defense lobby about a figure that's a relative pittance in the overall defense budget — even if it exceeds $100 million annually. 'A lot of people have taken advantage of the system to reap as much in taxpayer dollars as possible,' says Scott Amey, general counsel for the Project on Government Oversight. 'But when you're going up against the contractor lobby — whether you're an individual across the country or a public interest group or a government employee — it's a tough road.'"
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Pentagon Lost Billions, Pennies At a Time

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  • by notgm (1069012) on Monday May 04, 2009 @07:08AM (#27814195)

    he made $6.00 an hour, and he was complaining about being overpaid?

    nice.

    • by sopssa (1498795) <sopssa@email.com> on Monday May 04, 2009 @07:10AM (#27814217) Journal

      Well, as a tax payer he probably get fed up paying too much taxes towards his own salary.

      • Re:overpaid? (Score:5, Interesting)

        by Arthur B. (806360) on Monday May 04, 2009 @09:21AM (#27815389)

        Both funny and insightful.

        To put it another way, government employees don't pay taxes, they're payed out of taxes. The fact that they fill out taxes is merely an accounting trick.

    • Re:overpaid? (Score:5, Informative)

      by Madball (1319269) on Monday May 04, 2009 @07:18AM (#27814283)
      This was 1969. $6.00/hr (12,522/year) wasn't so bad. Equivalent in 2009 dollars is $34.87/hr (72,773/year).
    • CPI in 1969 (Score:5, Informative)

      by mangu (126918) on Monday May 04, 2009 @07:18AM (#27814289)

      You can get the official consumer price index, from 1913 up to now here [bls.gov]. $6 in 1969 would translate to approximately $36 today.

      For older historical data, plus many other interesting historical data about prices and economic indicators, this site [measuringworth.com] is very interesting.

    • Re:overpaid? (Score:5, Informative)

      by Carbonite (183181) on Monday May 04, 2009 @07:20AM (#27814305)

      His salary was equivalent to about $70,000 today, which isn't too shabby (though hardly "overpaid"). Also, the article mentioned that there was a financial incentive for discovering ways to save money. Davey admitted that he was hoping to get some award from his discovery.

    • When accounting for inflation, using this inflation calculator [westegg.com], $6.00 an hour in 1969 is just over $33 an hour in 2007 money. That works out to be $68k a year, based on the articles 2080 hours per year figure.

      So yeah, not a huge amount of money, but still a decent wage imho

    • I would say this is much significant. Two cents an hour per government employee is less than a cent an hour for each taxpayer. Looking at the final figure he saved each taxpayer one dollar a year. Not that much.

      But it is still a cool story, though. It should be a pleasant feeling to be responsible for the saving of $270M a year. And certainly something to brag about.

      However, did he save the taxpayers $270M, or did he cost the employees $270M? And are his fellow workers happy about this?

    • How exactly can one be OVERpaid for doing actual work.
      Singers and movie stars get overpaid - the ones that earn millions for dicking around.

      But being overpaid for doing an actual JOB?

      • Re: (Score:3, Insightful)

        by jlarocco (851450)

        Singers and movie stars get overpaid - the ones that earn millions for dicking around.

        How do you figure? If they sell a CD for $x and people agree to pay $x for it, then where's the problem? Who exactly are they ripping off?

        But being overpaid for doing an actual JOB?

        Well it's not too hard to figure out. He agreed to work for $x an hour, but was getting $(x+0.02) instead. In other words, he was making more money than he was supposed to, "real work" or not.

        It's pretty basic stuff, really.

        • Re:Besides that... (Score:5, Insightful)

          by denzacar (181829) on Monday May 04, 2009 @10:42AM (#27816391) Journal

          Actors:
          Arnold Schwarzenegger's salary for The Terminator: $75,000
          Arnold Schwarzenegger's salary for The Terminator 2: $15,000,000
          Arnold Schwarzenegger's salary for The Terminator 3: $30,000,000 + 20% of the profits (about 117 million).

          Arnold Schwarzenegger's salary as governor: $206,500 - which he waived cause he already earned over 230 mil. (that is without these 117 T3-millions) over his 30 years in the movies.
          Indicating that he himself felt that he was being overpaid already.

          Same guy, same role, 400 times the original pay.
          Sure, sequels made a lot more money but still - $147,000,000 for a year's work? That is almost $17000 per hour - including being paid for sleeping, eating etc.

          Singers:
          Britney Spears makes about $737,000 per month. [cnn.com] That comes out to about $1024 per hour. (Is that a kilobuck or megabuck?)
          Again - getting paid for sleeping.

          HOW is that not overpaid?

          And let us not even start with football, baseball, soccer and other enthusiasts who are little more than overpaid manual labor.
          Getting millions for kicking a ball around? Fuck that! That is not work.
          That is why you never hear about a "job" or "work" or "assignment" of basketball.
          What were the words they use? Aaah.. yes!
          They PLAY a GAME.

          The only group of professional actors/entertainers (IMHO) who are not being overpaid (and are actually underpaid) are porn actors and actresses.
          Anyone who does not agree - you try "performing" in front of cameras for hours and then upload that online for all to see.

          • HOW is that not overpaid?

            It's not overpaid for the simple fact someone was willing to pay that much for it. It may not feel "fair" that these examples you cite get paid obscene amounts of money for singing, kicking a ball, or sleeping; but, strictly speaking, they are not overpaid.

            Overpaid is when one is being paid more than the agreed upon amount. If we've agreed that you will pay me $6.00/hour for my work, and through an accounting error you pay me $6.02, then I've been overpaid. Arnold agreed to the wages he was paid, throu

    • If someone like the US Government overpays you and then it's discovered years later, then you'll likely have to pay it back. And they are so much bigger than you that you will pay them it if you have it, or even if you don't. So being overpaid means you are obligated to save it for them. Except since it's your's you can be sued for it, or lose it in a bankruptcy. If you have gone to the trouble of calculating the government's overpay rate, then saving it in the form of T-Bills, and then you go bankrupt,
  • Oblig.... (Score:5, Funny)

    by pHus10n (1443071) on Monday May 04, 2009 @07:11AM (#27814235)
    "Ok! Ok! I must have, I must have put a decimal point in the wrong place or something. Shit! I always do that. I always mess up some mundane detail."
  • by VinylRecords (1292374) on Monday May 04, 2009 @07:13AM (#27814243)

    http://www.imdb.com/title/tt0151804/ [imdb.com]

    Sounds like the plot to Office Space but in reverse order.

  • Explicitly allowing military contractors to overcharge the taxpayer to deliver broken systems on no-bid contracts is the heart of True Capitalism(tm) and A-OK.

    Making it easier for employees to enter into unions so they can negotiate better pay/benefits within the constraints of market competition is Pure Socialism(tm) and Must Be Stopped at all costs lest the USA degenerate into a communist backwater like Sweden.

    Makes perfect sense!

    • Er, you mean force workers into Unions to control them using a open ballot system. Hmmmm, billions since 1969 vs trillions in his first 100 days. Defense vs. Wealth redistribution.... Hmmm.....
      Me thinks people should be skeptical of your type...
      • Re: (Score:2, Troll)

        Obama can't take full credit for all the trillions being spent. Bush approved the vast majority of the first trillion without any strings attached because the financial system was too big to fail.

        Too bad Obama had to inherit the problems created under the 8 years of Bush.

        I loathe party politics and the left versus right BS, but come on just look at the facts.

        I guess the only thing the remaining republicans can do is just stir up crap in hopes that maybe they can trick people into thinking their way is be

        • Re: (Score:3, Funny)

          by gerglion (1264634)
          Larry, Moe, and Curly?
        • Re: (Score:3, Insightful)

          by theaveng (1243528)

          >>>Too bad [Bush] had to inherit the problems created under the 8 years of [Clinton].

          Fixed that for ya. Bush inherited not only a dot-com crash from Clinton, but also the headache of Saddam and Bin Laden. So as long as you're going to be giving Obama a "free pass" and blame today's problems on Bush, then we should give Bush a free pass and blame those problems on Clinton.

          By the way I hate them all. I haven't liked any of our presidents since the Ronald Reagan/Bush Senior combo. Not that they we

          • Re: (Score:3, Insightful)

            by arb phd slp (1144717)

            Perhaps Clinton would have had more time in his second term to launch even more Tomahawk missiles at bin Laden if he wasn't busy being deposed about his blow jobs. I seem to recall him being criticized about launching attacks at the terrorist training camps as though it were a "wag-the-dog" distraction from the country's real priority: the president's philandering.

            • Re: (Score:3, Informative)

              by rhsanborn (773855)
              The implication that Clinton was drummed around because he was sleeping around is getting really old. The big issue wasn't the affair. The issue was that the POTUS committed perjury, a felony, in a case in which giving the correct testimony would have been relevant.
          • by shma (863063) on Monday May 04, 2009 @11:10AM (#27816815)

            Bush inherited not only a dot-com crash from Clinton, but also the headache of Saddam and Bin Laden.....I haven't liked any of our presidents since the Ronald Reagan/Bush Senior combo.

            For someone who likes Reagan and hates Clinton you don't seem to know much about them. It was Reagan who allied himself with Saddam Hussein and gave him money and weapons. From wikipedia [wikipedia.org]:

            The Reagan administration gave Saddam roughly $40 billion in aid in the 1980s to fight Iran, nearly all of it on credit. The U.S. also sent billions of dollars to Saddam to keep him from forming a strong alliance with the Soviets. Saddam's Iraq became "the third-largest recipient of US assistance".

            Reagan's support for the Mujahadeen also played a role [wikipedia.org] in giving Bin Laden more power:

            Alhough there is no evidence that the CIA directly supported the Taliban or Al Qaeda, some basis for military support of the Taliban was provided when, in the early 1980s, the CIA and the ISI (Pakistan's Interservices Intelligence Agency) provided arms to Afghans resisting the Soviet invasion of Afghanistan, and the ISI assisted the process of gathering radical Muslims from around the world to fight against the Soviets. Osama Bin Laden was one of the key players in organizing training camps for the foreign Muslim volunteers. The U.S. poured funds and arms into Afghanistan, and "by 1987, 65,000 tons of U.S.-made weapons and ammunition a year were entering the war.

            So before you start blaming Clinton for everything, you might want to read up a bit on your history.

    • Re: (Score:2, Insightful)

      It's funny, because you're making fun of people for not understanding socialism while you yourself don't understand capitalism.
  • Ironic, really... (Score:5, Insightful)

    by fuzzyfuzzyfungus (1223518) on Monday May 04, 2009 @07:18AM (#27814279) Journal
    In all likelihood, it will be our own military contractors, too politically powerful to reign in, who will eventually destroy our military effectiveness. We can spend as much as we like(and we already do) but, so long as our spending is a mixture of "what Raytheon feels like producing" and "the ultimate weapon against the forces of the evil empire rolling across Europe in alternate-1979" it won't do nearly as much good as we would like.

    I wonder if this is how the Romans felt?
    • by Octorian (14086)

      Also, don't forget that anything major project is managed according to this chart [dau.mil]. :-)

      Now the fun part... Try and find the boxes in the diagram where something functional actually gets built!

    • by elrous0 (869638) *
      Haven't you heard? The latest and greatest contractor fad is non-lethal weapons. The results of the $400 million pumped in so far are, of course, wildly successful [foxnews.com].
    • If you work anywhere near the military it isn't near here... I don't know how many stories I've heard where contractors were forced to use FCS to fast-track equipment to the soldiers in Iraq because the standard military procurement process would have had the equipment to the soldiers in Iraq after we finish the conflict in Afghanistan. Of course, the press runs that as wasteful spending of the FCS money.
      • Re: (Score:3, Interesting)

        Uhh, it IS wasteful spending of the FCS money, because what the military should actually be doing is streamlining the procurement process or implementing a fast-track procurement process for combat operations.
  • by copiedright (1357445) on Monday May 04, 2009 @07:22AM (#27814321) Homepage
    This issue could be considered more of a scapegoat for the horrendous spending and poor budget management of the many poorly managed defense contracts over the last 40 years. Trust me, 10 Billion pales in comparison to what has been directly wasted. Also, 10 Billion dollars may seem a lot, but given its based around 40 years it cuts it down quite a bit.
    • that is properly run?

      When your accountability will not result in demotion, being fired, or such, what do they expect?

      This Pentagon example is yet another reason why everyone should be running and screaming away from the current Administration and Congress goal of even larger Federal Government.

      Why not harp more on the Congressional mandated waste in the Pentagon? Like how bases are kept open and programs going just to keep votes rolling in? I am quite sure it amounts to more than a decimal error

      • Re: (Score:3, Insightful)

        by TnkMkr (666446)

        Having worked in both for the government and for a private business I don't think the government does any worse at project management and accountability than any other company.

        The Government just has to publically disclose all of its screw ups (eventually) and they become fodder for political campaigns, thus we are exposed to them over an over. Unlike private companies who tend to cover the tracks a bit more until it is totally too late (Enron and GM come to mind). But as far as sheer competence goes I d

  • Of all the expenditures the government wastes money on the one I care least about is paying those who actually defend our country. Not only that but it's one of the few powers explicitly granted to the federal government and one of the few that needs to be federalized.
    • While, as you say, defense expenditures are on a sound constitutional footing, that doesn't absolve them from the need to be effective.

      Of particular note, given your formulation "paying those who actually defend our country" is the fact that the defense budget, while gigantic, is hardly infinite. If, because of political pressure or poor oversight, more money is going to contractors, less is going to "those who actually defend our country". Further, if oversight is poor, the quality of equipment they are
  • Contrary to popular belief, the main purpose of most government spending is simply to create new money. This allows subsequent credit expansion and "growth".

    The whole concept of value for money or saving taxes is completely wrong in this regard and simply doesn't fit with our monetary system. Which might help explain why nobody is keen to do anything about over spends.

  • It's all Richard Pryor's fault!

    (cf: Superman 3)

  • by RevWaldo (1186281) * on Monday May 04, 2009 @07:53AM (#27814553)
    This sounds like a "King of the Hill" episode, writ large.

    "No, Peggy, you don't understand! They're OVERPAYING ME! I'm stealing from the government, I tell you what! And I can't get them to stop! It keeps me up at night, I tell you what!"

    Forty years later: A Colonel shows up at Hank's door.

    - "Mr Hill? We've responded to your letter, and it turns out you were right. We have been overpaying you all this time."
    - (sighs.) "I always knew this day would come." (hold out his wrists) "I'll come along quietly."
    - "No, no, Mr. Hill! You don't understand. We're implementing the fix you suggested. It'll save the government millions of dollars a year. We just wanted to thank you!"
    - "Oh. Huh. Well, thank you sir. But in that case, can I at least give you back the money?"
    - "I beg your pardon?"
    - "Wait here." (Hank goes to his garage, wheels out a 50-gal drum on a hand truck.) "I've been putting the extra pennies in here since 1969, I tell you what. And now I'm ready to return it."
    - (smiles) "No, you go ahead and keep that. We're cool." (leaves)
    - "Alright! I can go to college now!"
    - "Bobby, go to your room!"
    - "I'm 45 years old! You can't make me go to my room!"
    - "Now, mister!"
    - "Aw.."
  • by sunking2 (521698) on Monday May 04, 2009 @08:02AM (#27814627)

    This guy doesn't work directly for the government. I'll assume its cost plus work that he's doing, so Rockwell charges his hours directly back to the government. However, they don't charge his hourly rate, they charge Rockwells hourly rate for his job position, which is more than his personal calculated take home (or Rockwell would be making no money on his work). So the real losers here would seemingly be Rockwell as they have to pay him out of their pool of money and the $0.02/hr would come out of their profits.

    Employees don't have individual rates. It typically goes by job title/position, ie: assoc engineer time is worth $120/hr, senior is worth $200/hr (purely made up numbers, not sure on the actual rate or title names), etc.

    If its not cost plus then this is even more confusing as Rockwell is working to a contract dollar value and any extra pay again would come out of their profits. The accounting doesn't make a whole lot of sense to me. Unless this is some special case in which the numbers of people it would affect would seem pretty small.

    • by rnelsonee (98732)

      The second page of the article talks about the 'bug' - Rockwell figures salaries based on 2080 hours/yr. while the Federal gov't uses 2087. I see how your point can be valid, but it's possible that Rockwell gets a price on the contract, say $50M; but then instead of getting a $50M check, the gov't just uses that to set up the payroll figures. But by having different hours/yr, Rockwell, too, gets more than $50M over the life of the project. With multi-year projects, and the fact that they almost never get f

      • by sunking2 (521698)
        I dunno. Still doesn't seem to make much sense as work is charged back by the hour, not by the year. Actually by the 6 minute. Nobody charges full time back to the government so the hour/yr makes no sense. The accounting rules are very specific as to what you can charge back and what you can't. For example, your weekly staff meetings go to overhead charge numbers, not back to the customer/government. Now I'm talking today, not 30 years ago which is when this apparently is from. A lot has changed since then
    • This guy doesn't work directly for the government. I'll assume its cost plus work that he's doing, so Rockwell charges his hours directly back to the government. However, they don't charge his hourly rate, they charge Rockwells hourly rate for his job position, which is more than his personal calculated take home (or Rockwell would be making no money on his work). So the real losers here would seemingly be Rockwell as they have to pay him out of their pool of money and the $0.02/hr would come out of their profits.

      If its not cost plus then this is even more confusing as Rockwell is working to a contract dollar value and any extra pay again would come out of their profits. The accounting doesn't make a whole lot of sense to me. Unless this is some special case in which the numbers of people it would affect would seem pretty small.

      It really comes down to what a contractor can charge the government for on a contract; not what the individual gets paid. The contractor can calculate an hourly rate for each job category (using 2080 hours /year) and then every hour anyone in that category bills gets an associated cost charge to the project. The contractor then gets paid for those costs.

      It's a way to let a contract where you don't know what it will take to complete the job. The government takes the cost risk so that contractors don't bid

  • by ericferris (1087061) on Monday May 04, 2009 @08:15AM (#27814743) Homepage

    The American taxpayers' dollars are the single most fantastic pile of loot on the planet. It is so big that pilfering it is a full-time job for millions of people. It's like a horde of scavengers around a perpetually gushing cornucopia.

    Defense contractors are not even the big time scavengers here. No, the real T-Rexes in this game are the Federal employee unions, believe it or not. A defense contract comes and goes, and is generally audited. A union benefit is forever.

    Disclaimer: I have nothing personally against unions, contractors or T-Rexes.

  • We blame the lobbists for their stance, and rightly so. We also have to blame the politicians, congress etc...if they actually stood for what is right and is common sense the lobbyists view wouldn't matter. But the politician is only about power for himself and getting re-elected. Since the lobbyist serves his personal agenda well, the lobbyist get a lot power from it simply by the politicians selfish motivations. So the politicians are equally to blame. They don't care about 100 million dollars that i
  • Time and materials? Cost plus?

    None of this is stated in the article. It is quite likely that Rockwell lost money, not the government.

  • When it's not your money and you don't have to fight for every penny by convincing customers not to purchase the alternative (no alternative to taxes), then you have little incentive to curtail waste. That our government pads all numbers with nine zeros is very predictable given the incentives.

  • To the Pentagon's desire for large toys, or, "Just Think of how Many F-22's you could've had if you saved that cash, every single one you asked for!"

    Oh well...

  • Not Natural (Score:3, Informative)

    by Brandybuck (704397) on Monday May 04, 2009 @12:03PM (#27817593) Homepage Journal

    Military contractors are not natural entities. They have evolved over the decades since WWI to be specialized in getting government military contracts, and away from actually producing at the lowest cost for the highest profit.

    There's a joke about $700 hammers. But I've worked for some military contractors, and it's no joke. They're not so much overcharging the Pentagon, as they're probably just trying to recoup their costs. It might actually cost them $650 to produce that hammer. Seriously. And it's not just US military contractors. I've also worked for a couple non-US firms that were just as bad.

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