Tuesday, July 20, 2004

The grifting of America's troops
Diana Henriques has a brilliantly researched and written piece on the insurance and investment companies that prey on young American servicemembers on U.S. military bases in today's New York Times. Believe it or not, most of these sales pitches come during officially-sanctioned "classes" on financial readiness. But due to lax oversight and predatory tendencies on the part of the companies, these classes transform into high-pressure sales pitches. The soldiers often sign up for these financial services with something less than meaningful and informed consent, because the presence of these classes on the official training schedule stamps them with the command's imprimatur — and young soldiers are often reticent to question their command on issues like this. Here's a short excerpt from the lengthy piece:
A six-month examination by The New York Times, drawing on military and court records and interviews with dozens of industry executives and servicemen and women, has found that several financial services companies or their agents are using questionable tactics on military bases to sell insurance and investments that may not fit the needs of people in uniform.

Insurance agents have made misleading pitches to "captive" audiences like the ones at Fort Benning. They have posed as counselors on veterans benefits and independent financial advisers. And they have solicited soldiers in their barracks or while they were on duty, violations of Defense Department regulations.

The Pentagon has been aware of practices like these since the Vietnam War; investigations have even cited specific companies and agents. But because of industry lobbying, Congressional pressure, weak enforcement and the Pentagon's ineffective oversight, almost no action has been taken to sanction those responsible or to better protect those who are vulnerable, The Times has found.

And the problem has only intensified since the beginning of the Iraq war, say military employees who monitor insurance agents. With the death toll rising in Iraq, interest in insurance among the troops has surged, making the war a selling opportunity for many agents, they said.

The military market includes hundreds of thousands of men and women, many of them young and financially unsophisticated, all of them trained to trust leadership, obey orders and show loyalty to comrades.

To reach the buyers, many companies have used their military connections to lend credibility to their sales efforts, recruiting heavily from among retired or former military people for their corporate boards and sales forces. The advisory board at one company, First Command Financial Planning in Fort Worth, includes Gen. Anthony C. Zinni, the retired commander in chief of the United States Central Command.

Many financial experts say the products sold are often ill-suited for the military people who buy them. Like Specialist Stachler, almost all service members purchase low-cost insurance through the military, and, like him, 94 percent carry the maximum coverage of $250,000, the Defense Department says. But agents are nevertheless selling these men and women policies that have steep premiums for relatively small amounts of coverage.
Analysis: Some of the companies which give these classes do an excellent job of providing information in an objective and non-pressuring manner. They do so because they want to build good will, which they believe will help build long-term business relationships and profits. But others are less scrupulous. I actually attended a couple of these classes as a young ROTC cadet and 2nd Lieutenant. Fortunately, I had friends and family who were smart enough about investments to remind me of the old adage: caveat emptor. I didn't fall prey to any of the less scrupulous pitches I got, and I tried to pass this maxim onto my soldiers as well, so they could avoid becoming victims.

If you visit any military town in America, whether it's Killeen, TX, or Columbus, GA, or Fayetteville, NC, you're bound to see a slew of predatory businesses that exist for no other purpose than to take a share of soldiers' hard-earned money. Pawn shops, used car dealers, electronic stores, paycheck lending shops, clothes stores, etc. — they usually form a strip of stores outside the main gate of any military base that has a large number of young soldiers. I really don't fault these businesses — they're simply responding to market demand. Soldiers have disposable income, and young soldiers often want to burn a hole in their pocket. These businesses may seem predatory or parasitic at times, but the same could be said for almost any business that responds to demand (e.g. bankruptcy lawyers in a down economy.)

The burden, in my opinion, rests on military leaders to teach their soldiers how to avoid the predators and parasites out there seeking to steal their money. Granted, training a unit for combat is already a 24/7 job, so there's not a lot of time left to run Financial Ed 101. But good officers and NCOs find time anyway, because it's part of taking care of soldiers (and their families). Thus, in Ms. Henriques' story, I single out the businesses for their fair share of the blame. But I also single out the leadership at Fort Benning and other bases for their blame too. The military leaders at those locations allowed these abuses to happen, and that's just not good leadership.

Update I: The second half of Ms. Henriques story lays much of the blame for this fiasco at the feet of the Defense Department and Congress. Both have aided the financial and insurance industry to some extent in their solicitation efforts on U.S. military bases, and so both deserve some blame for the abuses committed by these companies.

This is a disappointing story to me, but not a surprising one. Soldiers, sailors, airmen and Marines simply don't have an organized constituency on The Hill the way that the financial industry does. Oh sure, there's the Association of the U.S. Army and the various other service and veterans organizations. But they don't really stand for issues like this -- they typically weigh in on matters of materiel and force structure, or retirement/veterans benefits. Present-day servicemembers rely on the Pentagon to serve as their advocate in Congress. And when the Defense Department puts its priorities elsewhere -- whether we're talking about body armor, new barracks or security from predatory insurance companies -- there isn't another loud voice to speak up for soldiers on Capitol Hill.

Update II: One of my readers wrote to let me know of a November 2002 story by Tom Lauricella in the Wall Street Journal describing many of the same problems as the NYT mini-series by Ms. Henriques. This has been an issue for some time. Yet, the powers that be on the Potomac have done very little to cure this problem, leaving it instead to officers and sergeants at the lowest levels to act with no official policies from Washington. Suffice to say, it's very hard as a young captain in command of a company to bar an insurance company from talking to your soldiers when you don't have a policy from Washington to provide covering fire.

Monday, July 19, 2004

Down to the wire
Admin note: The California bar exam is 8 days away. To ensure that I pass the first time, I'm devoting most of my time to studying for that exam. Frankly, I'm too fried after studying to write intelligently on anything, so it's probably best that I abstain from blogging. In my absence, please continue to check out my colleagues on my blog roll. See you in a week or so... when I recover from both the bar and my post-bar hangover.

Friday, July 16, 2004

Bloodied, but better
U.S. Army emerges more combat ready from the crucible of combat in Iraq

The Washington Monthly has posted my new article on the Army, and how it has been affected by the war on terrorism. Clearly, the wars in Afghanistan and Iraq have stretched the Army. But contrary to conventional wisdom, I think the net effect of these wars may prove to be positive. Metaphorically, it's as if the Army went to the gym to do a hard workout — it's sore right now, and in need of some rest, but the Army has emerged from these wars stronger than when it began. Here's a brief excerpt from the story, available on the TWM website:
Since September 11, the U.S. military has expended an enormous amount of spirit, blood, and treasure on battlefields halfway around the world. In Iraq and Afghanistan, 979 of our soldiers have been killed; and another 5,600 wounded. More than a quarter of a million young men and women have been exposed to the horrors of combat. The abuses at Abu Ghraib have damaged America's moral credibility, and that of our armed forces, around the world, hampering our ability to win hearts and minds in the war on terrorism. The Bush administration's foreign policy decisions have been expensive both in dollars--$149 billion in taxpayer money to date, with billions more yet to be spent--and in material, having all but depleted the Pentagon's stocks of pre-positioned vehicles, equipment, and ordnance. Our enormous commitment of resources to Iraq has emboldened our enemies, including North Korea, and has forced us to neglect other crisis spots such as Haiti and the Sudan. And it has pushed American soldiers to the breaking point. Even when our commitment in Iraq ends, it will be several years before our forces have recovered enough to take on a military venture of similar size.

But the stresses of war--and in particular the aftermath of defeat or failure--have historically spurred the most profound and lasting revolutions in military affairs. During World War II, Gen. George Patton used the Army's trouncing at the Kasserine Pass as an excuse to whip our poorly-disciplined, poorly-trained, and poorly-led forces into shape. Out of the ashes of defeat in Vietnam, a cadre of officers, including Colin Powell and Anthony Zinni, turned a dispirited draft force into a volunteer body that became the most powerful military the world had ever seen. And only after the debacle of Desert One--the failed 1980 Delta Force raid to rescue American hostages from Iran--did the military get serious about special operations and joint warfare.

Today, the pattern appears set to repeat itself. Though we don't yet know whether historians will judge the second Gulf War to have been a victory or a defeat--America decisively won the battle of tanks and artillery, but has yet to win the peace--the searing experience of Iraq is already inspiring the U.S. military to reshape itself for the better.
One area of combat-related development deserves special emphasis: the impact of the war on American military officers, and particularly on those officers serving at the junior levels as lieutenants and captains in Iraq. LTC (ret.) Leonard Wong has a new monograph titled "Developing Adaptive Leaders: The Crucible Experience of Operation Iraqi Freedom". Dr. Wong's analysis parallels my own, although he goes into much more detail about precisely how the combat experience in Iraq is building better officers to lead the Army of tomorrow. Here's his summary and conclusion:
This monograph examines the Operation IRAQI FREEDOM environment and concludes that the complexity, unpredictability, and ambiguity of postwar Iraq is producing a cohort of innovative, confident, and adaptable junior officers. Lieutenants and captains are learning to make decisions in chaotic conditions and to be mentally agile in executing counterinsurgency and nation-building operations simultaneously. As a result, the Army will soon have a cohort of company grade officers who are accustomed to operating independently, taking the initiative, and adapting to changes. The author warns that the Army must now acknowledge and encourage this newly developed adaptability in our junior officers or risk stifling the innovation critically needed in the Army's future leaders.

* * *
Today's junior officers are not afraid to lead in ambiguous conditions. They can execute a mission with minimal guidance. They are an incredibly valuable resource to a transforming Army that has desired and sought adaptive capacity in its leaders. The crucible of OIF has delivered to the Army a cohort of adaptive leaders. The challenge for the Army is to encourage and leverage this priceless potential.
The full report is available on the Army War College website, and you can download a copy in PDF format from my server.
A candid assessment of why our post-war planning was so poor
In testimony yesterday before the House Armed Services Committee, three distinguished and retired Army officers held forth on why American planning for post-war Iraq was so poor. ONe specific exchange, between retired Gen. Jack Keane and ranking Democrat Rep. Ike Skelton, was especially noteworthy. Gen. Keane admitted both the negligence of the Pentagon to plan effectively -- and the damage, in terms of American lives, this negligence has caused. In my opinion, this testimony is the most sweeping admission yet regarding the negligent post-war planning process. In terms of candor, it certainly ranks up there with ret. Gen. Eric Shinseki's farewell comments ("Beware the 12-division strategy for a 10-division army.") Lisa Burgess reports on the exchange today in Stars & Stripes:
"When I look back on it myself, having participated and contributed to [the war planning], one of the things that happened to us ... is many of us got seduced by the Iraqi exiles in terms of what the outcome would be" after the war, Keane said.

"'We're all going to be treated as liberators,'" interjected Rep. Ike Skelton, the committee's ranking minority member.

"That's correct," Keane replied. "So therefore the intellectual capital to prepare ourselves properly for an insurgency was not there."

* * *
Keane did not criticize operations in war on Wednesday. But he was frank in his assessment of what he said was lack of planning for the war's aftermath.

"There were very few people who actually envisioned, honestly, before the war what we are dealing with now after the regime went down," Keane said.

"We did not see [the insurgency] coming, and we were not properly prepared to deal with it."

* * *
Skelton said that he did "not want to belabor the point, but there were a lot of young folks who paid the price for that lack of foresight."

"Yes, sir," Keane replied.
Analysis: This is nothing less than a full admission of neglect when it comes to post-war planning. The result is all too clear: botched post-war planning led to frustrated post-war execution, which has meant an extended stay in Iraq coupled with a protracted counter-insurgency effort. A friend who was present for the hearing relayed a visual of exactly how Gen. Keane described the amount of "intellectual capital" poured into the post-war planning process:
"General Keane said if this represents the intellectual effort spent on planning the war - and held his hands apart about a foot - then this represents the intellectual effort behind the post war planning - and pinched his fingers together."
I'll reserve comment for now because I'm busy with some bar studying that has to get done today. But I think this testimony bolsters the assertions that many people have been making for some time. First, that senior White House and Defense Department officials assumed a tremendous amount of risk with respect to post-war planning, resources and execution. Second, that they devoted entirely too much thought to how that risk might play out, and third, that too few resources were staged in order to mitigate that risk. More to follow...

Thursday, July 15, 2004

More contractual irregularities emerge for interrogation arrangements
The Wall Street Journal (subscription required) carries a report today regarding some unconventional means used to procure interrogation services for Guantanamo Bay. Rather than simply setting up a contract under the Army's auspices for the provision of linguistic support, the Pentagon instead bought these services under a GSA contract and later an Interior Department contract, raising questions about these agreements' propriety.
According to documents reviewed by The Wall Street Journal, the U.S. General Services Administration concluded that the Army violated contracting rules in late 2002 when it awarded the interrogation work at Guantanamo using a contract intended for procuring computers and information-technology services.

"This is an anomaly, and it wasn't supposed to happen," said Mary Alice Johnson, a GSA spokeswoman. "You can't run interrogation services through an IT contract."

GSA officials terminated the contract in February, but the Southern Command, which administers the Guantanamo base, revived the work almost immediately by turning it over to an existing engineering-services contract that Lockheed had with the U.S. Interior Department.

* * *
Fred Quimby, an Interior Department spokesman, said the agency plans to honor all the interrogation work under way, but none of it will be renewed once the contract term expires. The original Guantanamo contract was for one year with four possible one-year extensions.

Because the Pentagon has other ways of securing such services, Mr. Quimby said, the Interior Department issued a policy last month that bars use of these contracts to pay for interrogators, human intelligence gathering, translators and associated expenses. He said the Pentagon had justified using unrelated contracts because "there was an urgency" to secure the services. "They had all of these al Qaeda and Taliban prisoners and they needed to interrogate them," he said.
The WSJ article goes onto say that the Pentagon is implementing a series of new procedures this week to ensure better accountability and transparency in its contracting processes. The trade journal GovExec.Com reported in a related story on Tuesday that senior DoD and GSA officials had announced a "new zero-tolerance policy" for these kinds of contractual irregularities.
The Pentagon's chief procurement executive, Deidre Lee, joined GSA Administrator Stephen Perry in announcing a joint initiative called Get It Right, which they said would address significant deficiencies in government contracting, many of which have been exposed by an ongoing investigation of GSA contracting as well as reports of misuse of contracts for military and reconstruction efforts in Iraq.

Addressing a capacity crowd in an auditorium at GSA headquarters, and via a Web broadcast viewed by GSA and Defense employees nationwide, Lee and Perry said instances of improper contracting constituted a tiny portion of their organization's overall activities. Both acknowledged that corners had been cut and procedures hadn't been followed in some cases, but they said their plan, which will require agency employees and contracting officers to be more circumspect about how contracts are awarded, would correct those problems.

"We're striving here to achieve a zero-deficiency environment," Perry said. "No exceptions, no excuses."
My problem with all of this is that the government has set the conditions for contractual irregularities, and now it's acting as if the contractors themselves are to blame. It's no secret that government contractors are out to make money — of course they are!!! They're rational economic actors, who usually have shareholders demanding profits. It's a no-brainer that these companies will do what they can to maximize profits, especially if the only thing they have to do is take a contract that's offered to them. I hardly blame Lockheed-Martin or CACI for accepting these contracts from government procurement officials. If there's any blame here, it belongs to the acquisition officials for creating such a permissive atmosphere that would allow such contractual irregularities to occur and to flourish.

There are a number of remedies available should the government find bad conduct on the part of the contractors. But so far as I can tell, such bad conduct is the exception, and not the rule. Most of the reconstruction contractors in Iraq are doing the best they can given the security situation there, and most of the other contractors (e.g. KBR with its military logistics contract known as LOGCAP) are doing a decent job too, notwithstanding some accounting issues that tend to appear in wartime where unforeseen costs are the norm. However, I don't think that's really the issue here. The issue here is that the government — DoD, GSA, etc — has to get its house in order. The rules simply aren't clear for contractors in a war zone, and in the absence of clear guidance, some contractors are running amok. The root problem though is the lack of guidance. The government has the power and the obligation to issue clear guidance — in the form of regulations and contractual language — to these contractors. By and large, these contractors want clear guidance, because it will allow them to predict their risks and costs with reasonable certainty.

So when I hear government acquisition officials blaming contractors for contractual irregularities, I instantly get suspicious. At common law, there was a doctrine known as contra preferendum, which holds that errors and ambiguities in contractual language will be strictly construed against the drafter. This doctrine lives on today as one of many maxims for contractual interpretation. In the government contracting context, this means that such errors are to be construed against the government. Acquisition officials, not contractors, hold the power to do the right thing here. It's time they used it.

Update: The Washington Post adds to the story on Friday with a report about how this contract is to be rewritten a third time.
Interior Department spokesman Frank Quimby said yesterday that the department will redo the contract on a sole source basis because interrogators are already on the job and the contract will expire in January. The General Services Administration determined that the contract had been improperly awarded twice before.

The department will not renew the contract once it expires, Quimby said. "This is not really what Interior's mission is really about," he said. "We're going to get out of the interrogation business."

* * *
Southern Command is awaiting the Pentagon's guidance on how to proceed after the contract expires, Duany said. "Our understanding is that we have not broken any laws or regulations," he said. "We just looked at the most expeditious way to meet the requirements and do our share in the war on terror and to contribute to intelligence gathering."