The late Secretary of Defense James Forrestal’s legacy of the creative use of government contracting vehicles as tactical tools during the Cold War (1947-1991) transitioned smoothly and remains one of the preferred devices in today’s political arsenal. The etymology of the word lace is “Latin laqueus, noose; probably akin to lacere, to entice, ensnare”. Black Chantilly is handmade lace embedded with intricate patterns of light and shadow and what one sees through it may or may not be real.
The Department of Energy (DOE) was particularly fond of the Management and Operating (M&O) contract. During my tenure of service, I worked for three sequential M&O contractors and became something of a BRAM (Biological Random Access Memory) of how that contract worked. This next bit is dry reading but important. The Federal Acquisition Regulations (FAR) is the federal government’s contracting bible. FAR 17.601 defines the M&O contract:
“Management and operating contract” means an agreement under which the Government contracts for the operation, maintenance, or support, on its behalf, of a Government-owned or -controlled research, development, special production, or testing establishment wholly or principally devoted to one or more major programs of the contracting Federal agency.”
A loose translation is the contractor does whatever the federal government needs doing. Because of the DOE mission and the missions of its Prime Contractors, the national laboratories, the DOE was pretty much the exclusive user of this contracting method. We’ll unpack the M&O box because, while the variations on government contracting are as wide-ranging as the scenes in a kaleidoscope, the M&O makes it easy to illustrate the shell game. The DOE Nevada Projects office supplied the Contracting Officer (CO) for the M&Os I worked for. Luckily for me, the CO insisted on adherence to the rules and intent of the M&O contract and effectively resisted political as well as contractor supplied pressure to deviate very much from the intent of the FAR.
M&O contractors are handy beasts. They can be used to support any number of other federal departments or agencies through simple agreements such as Inter Service Support Agreements (ISSAs), Memoranda of Understanding (MOUs), or Memoranda or Agreements (MOAs) as long as the work they are doing is consistent with the mission. As shocking as it may sound, it is amazingly easy to meet the consistency test. What that means is that contractor staff or their services can be sublet to almost any government group; Air Force, CIA, NOAA, EPA, and so on. Government auditors descend on M&O contractor offices in teams once or twice a year. They comb through all the appropriate documentation, review the financial transactions, travel and training and make certain procurements and payrolls are in working order. What they are not looking at is the number of contractor canaries working for other federal agencies. It is how the federal government is able to haul two tons of contractor canaries on a one ton truck; they keep half of the contractor canaries in the air.
M&O contractors are rewarded based on performance. The M&O contractor is paid for the cost of doing business, which is heavily scrutinized, and how well they perform; paid through a separate award fee. Contractors who perform as expected and do not embarrass their various government clients receive a base fee. To get the bigger bucks requires innovation and performance above and beyond that required by the contract. I learned early on in my management career that a nice black bottom line is very, very good. My choice to achieve the bottom-line objective was to develop and deploy sustained high, performance teams that could achieve any government client objective with a great deal of ingenuity and very little money. The government achieved its objectives, which I assumed were in the best interests of the people of the U.S., and my employer was rewarded. As the years went by, I learned that I only saw a small part of the contractor game.
Whether the contract vehicle is M&O or a labor hour contract, an indefinite delivery contract, a cost reimbursement contract, a fixed-price contract, an incentive contract, a time and materials contract, sealed bids or negotiated, the game is the same. The differences lie in the amount and type of paperwork required to achieve the objective. While the focus is on the latest financial scandal in the government contracting world, the contractor canaries continue to fly. When one contractor gets too hot to handle, another one takes up the slack with the same personnel and, frequently, the same management with a different name. Whether or not government contractors are in or out of favor with the American people, they are way too handy to ever disappear.
The government can deflect blame and responsibility for any screw-up by blaming the contractor. Never mind that there are two constants in government contracting; 1. Thou shalt only be paid for work directed by your government CO or the delegate CO representative, and 2) except in the areas of training, no active government employee ever works for a contractor.
Another important point is that it takes very few federal employees to run a large contingent of contractor personnel. More importantly there are any numbers of ways to borrow or loan large numbers of contractor personnel and no one, apart from possibly very senior government officials, knows where they all are and what they are all doing. Protection is afforded to most military contractors from having to disclose the deployment of their personnel and key documentation is contained in that contractor’s office, free from accidental or requested disclosure. With all of the government players, it is impossible to know where those contractors’ employees are and what they are doing unless they slip up and get out from under their invisibility cloak.
Why is this different from any other time in American history? That is good question and it deserves a response. The Constitution does not provide for a standing military, except for a Navy, so the draft finally ended in 1973. An all-volunteer military does not provide an endless supply of cannon fodder and labor. If the current military was populated with conscripts, the complexion of the military industrial complex would be completely different. As long as the politicians and their buddies ‘in the military’ business can convince the American people there is something or someone they need to be afraid of, everybody is happy; except, of course, the fearful American people. The fear punches are coming so fast and frequent that the industrial base of the U.S. cannot re-establish itself and people need work in other than the low-paying service sector. Government contracts provide incomes for families as well as a lot of cash for the corporatists in the private/government sector all paid for by We, The People, taxpayers.
It works, politically, for the current administration to pull the military out of Iraq and Afghanistan but I personally know several of the contractors working in those countries. It is a shell game. As the military is pulled back, contractors fill the void. By all means watch the money. The real game is, however, in the allocation of the people. Where are they? What are they doing? For whom? And Why? We assume that the government acts in our best interest. The government has shown time and again under many administrations, Republican and Democrat, they do not. Like the beautiful black Chantilly Lace, what you think you see may not always be what is really there. For your own good, make sure you lift that veil and know what is going on.
 Code of Federal Regulations and Federal Register; http://federal.eregulations.us/cfr/section/title48/chapter1/part17/sect17.601?selectdate=11/1/2011