Trump Has Ordered Safeguards Stripped From Procurement As Pentagon Prepares To Spend $1 Trillion

This article is part of TPM Cafe, TPM’s home for opinion and news analysis.

The Trump White House this month announced two new executive orders radically changing procurement procedures, especially defense procurement procedures, in ways that will unleash waste, fraud and abuse. These orders — which largely flew under the radar — will effectively wipe out spending safeguards with potential effects that are hard to overstate considering that President Trump announced he will expand the defense budget to a breathtaking $1 trillion, and that the secretary of defense, Pete Hegseth, is no counterweight to politically driven spending.

To summarize, the new executive orders purport not merely to change or improve regulations, but to simply eliminate most of the existing procurement rules developed through years of oversight processes and outside scrutiny. They effectively undo procurement safeguards put in place after tremendous waste was exposed during the Cold War. In their place, the executive orders would elevate certain procedures that allow the government to spend unlimited sums without competition — the so-called “other transactions” process that need not be competed and that circumvents safeguards put in place to protect tax dollars. The Executive Orders say there should be a “first preference” for other transactions processes, which is like having a “first preference” for bringing a pistol with no safety to compete in a boxing match.

These revisions will also likely interfere with the system relied upon by competitors challenging improper awards, the “bid protest” system, which has long been a critical check on decisions made based on suspicious preferences rather than best value to the taxpayer. The orders proclaim that their goal is to “centralize decision-making,” which apparently means to move decisions on choosing weapon systems away from specialized, analytical government technical personnel steeped in the objective review of weapons choices so as to allow the decisions to be made by politically appointed officials attuned to politically favored contractors.

The number one safeguard being sacrificed is competition. Nothing suppresses waste, fraud and abuse as much as making defense contractors compete with one another, so that the award only goes to the bidder who provides reasonable pricing and “best value,” which encompasses the virtues sought in any procurement system. To take a recent example, one occasion when the government felt it had to veer from competition was during the intensification of the Iraq War; the war started and ramped up so suddenly, the Bush administration deemed there to be insufficient time to properly compete contract requirements. I served as a commissioner on the Commission on Wartime Contracting in Iraq and Afghanistan, which reported on the landmark instances of waste. A single such example was the tens of billions of dollars that were spent on a questionable logistics contract, which was awarded competitively once — just once — for ten years before any war, and then had no competition — none — after the wars had begun.

Here we go again. When the administration eliminates the Federal Acquisition Regulation at full length, it will be wiping out Titles 5 and 6 on competition. To be sure, the Trump administration cannot, without Congress, repeal the Competition in Contracting Act of 1984, but the act allows exceptions — like the one used in the Iraq logistics contract of “urgency” — and the executive orders express another “first preference” for exceptions open to abuse, like items mischaracterized as “commercial.”

The number two safeguard being sacrificed is fair and equal evaluation based on stated solicitation factors. That is the process by which companies submit bids responsive to Pentagon proposals to buy weapons systems. Technical government personnel delve into the details of each proposal and evaluate just how good it is and how likely it is to be successful in its promises. The procurement regulations serve as the bible for that process. But, the executive orders say they will wipe out the entirety of those regulations, other than those statutorily required or otherwise spoken of vaguely as perhaps to be saved. What will fill the vacuum? Again, “centralizing” the decision means it will be made by a few politically chosen individuals. The significant reform efforts of the past to keep influence-peddling and favoritism at bay will simply disappear overnight.

Particular types of accounting abuses may also flourish with the end of the regulations. Take one example. Existing regulations prevent a contractor on a cost reimbursable contract from charging the government for “interest” on borrowed money. In other words, contractors use their own capital to do their work, and they get the costs and profit of the contract as their return. But they do have to bring their own capital to the table. Now, if the regulation on this principle is wiped out, major defense contractors could reserve their own capital to use on other kinds of work, and could make the government foot the bill for interest expenses on the cost-type contracts. This will mean a new and unheard-of charge which will saddle taxpayers with tens of billions of dollars in extra costs per year — maybe more — without the government getting anything new or additional. It’s just a transfer of big bucks to giant contractors and financial institutions.

Who will benefit from the new system? One group will be those friends and favorites of the administration. Imagine Elon Musk getting no-bid contracts with no competition and no evaluation. Or, Peter Thiel, the Silicon Valley billionaire sponsor of Vice President J.D. Vance. Or any contractors of the many who invested their political donations in this White House.

A second group is made up of the classic big defense contractors, like Lockheed Martin, which had the sense to invest $1 million in the Inauguration slush fund. Such contractors have had to stay on their toes in competitions to make sure their bids provide best value at a reasonable price. And, once a company received a cost contract, the accounting regulations provided a framework for Pentagon contracting personnel to at least try to keep it honest and to avoid the $400 hammer of years past. Remember, this administration started by firing all the inspectors general in the government. The end of the procurement regulations will complete the carnage and eliminate any actual oversight to protect the taxpayers.

A third group of likely beneficiaries is made up of the contractors who get close politically to House and Senate Republican members, particularly those on the relevant Armed Services and Appropriations committees. The $1 trillion figure for Trump’s defense budget represents an executive total, but the actual amounts for each spending item get determined by the Republican members who have methodically situated themselves at the levers of power, paying off their parties through campaign fundraising. These members have very much not been fighting with President Trump, and have thereby husbanded their political capital to influence where and to which companies the defense spending goes. This is not to say the White House has no influence itself, but everything we have seen suggests a happy collaboration: There will now be more than enough to go around at the defense feast, to which the public will not be invited. Getting those pesky regulations out of the way will make everything so much easier.

A certain amount of priority-setting is natural at the start of every administration. But no other administration has started by bulldozing away the rules like this one. The Trump administration appears to be cloaking its maneuvers by starting with things tentatively tried by the Clinton administration’s “Reinventing Government” initiative, but this time on steroids. It is a recipe for corruption and disaster.