Friday, February 08, 2008

Your federal set-asides at work

In most US Government purchases, a certain percentage is set aside (by Congressional order) for small, minority, women-owned, and other "disadvantaged" businesses. The NY Times had a story yesterday on what the Department of Defense has received in exchange for their set-aside dollars.

Surprisingly, it's not good news. (But if it were good news, the NY Times wouldn't cover it, would they?) Registration required, but is a fine, fine Web site that you should visit.

A North Dakota manufacturer has agreed to pay $2 million to settle a suit saying it had repeatedly shortchanged the armor in up to 2.2 million helmets for the military, including those for the first troops sent to Iraq and Afghanistan.

A buck apiece (actually, 91 cents) for defective helmets that endanger soldiers in combat -- not a bad deal. But in government contracting, you get the occasional mulligan, and this case is no exception:

Twelve days before the settlement with the Justice Department was announced, the company, Sioux Manufacturing of Fort Totten, was given a new contract of up to $74 million to make more armor for helmets to replace the old ones, which were made from the late 1980s to last year.

So, Sioux Manufacturing only needs to make 3% profit on the new contract to repay their fine. Moderately talented accountants can make that happen with rounding errors.

Oh, yeah, I forgot to mention the name of the case: "United States v. Spirit Lake Tribe". Yep, it's not just a company, it's a tribe, which is how they got the contract.

The article points out that the manufacturing process employed by the company/tribe didn't meet specifications, could never have met specifications given their equipment, and nobody caught it until this had been going on for almost 20 years. So, an entire generation of soldiers has potentially been wearing non-spec Kevlar helmets, and the company suffers the incredible indignity of a $2.2 million fine -- and a $74 million new contract.

And it's not as though it was inadvertent, either:

In the evidence in the suit were hundreds of daily inspection records showing repeated violations of the weaving standards, as well as tape recordings of six managers and employees’ admitting covering up violations.

In a conversation Mr. Kenner secretly taped, Rhea Crane, quality assurance officer, worried “if we ever had someone get killed, and they decided to investigate because they thought maybe the helmet wasn’t any good.”

“If we ever got audited,” she said, “you know what they would do to us. Shut us down and fine us big time. Probably never see another government contract.”

Brilliant observation, Rhea. It's called debarment, and it is the very minimum that your company/tribe should suffer. You've been screwing the government for 20 years, so a minimum 20-year debarment seems reasonable.

But here's the delightful part, right at the end of the article:

Soldiers generally cannot sue the government. And Sioux is owned by an Indian tribe, the Spirit Lake Nation, that can, he said, assert sovereign immunity against private suits.

Note that the Evil $600 Hammer Government Contractors are not immune from lawsuits and cannot invoke sovereign immunity, because they're companies, not "nations". So much for the untouchability of the military/industrial complex ...

The company also benefits from a 5 percent federal incentive program for Indian contractors and preferences for disadvantaged small businesses.

The company benefits. Our guys in combat suffer. The set-aside rules are still in place. And the beat just goes on ...

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