If US companies are in this particular case doing such a bang-up jobs, then we ought to have no problem establishing an expedited open bidding system *going forward* for *long term contracts*.

Note I am NOT saying retract current contracts. Just divy up the 20 or so billion of the $87 billion going forward differently. If American companies are competitive, then we can win AND remove the appearance of impropriety.

That will silence critics espousing cronyism and restore some of our credibility. Refusal to do so will tarnish even the most sterling progress however.

Where is the weak point in the argument for privatization? It's exactly where the Times Magazine article says it is -- private contractors cannot be ordered to work in war zones. Thus far in Afghanistan and Iraq they have not often been exposed to enemy fire, and the KBR and other employees of private contractors who have appear to have conducted themselves well. But we may face future situations where the enemy is more formidable than the ones we have faced in the last two years, and the threat to rear echelons greater. That is when we will find out how good an idea contracting out logistics is.

Actually, it's probably LBJ's fault. As detailed in the second volume of Robert Caro's LBJ bio, Brown and Root might not have gotten off of the ground without LBJ's support/patronage. Nor would have LBJ's career gone as far without B&R's money. Also, it might be worth considering that the US gov't is in a position to have market power as well. Much like, say, baseball unions and owners, the negotiations b/t the gov't and KBR would just be over a big pile of rent. The moral hazard here would be that those negotiating for the gov't may not have the gov't's best interests/checkbook, in mind. Which is why it would be nice if some modern-day Harry Truman would run a commission to make sure everything is on the up'n'up.

This may be off-topic a bit, but point 3 dates Brown and Root's involvement with government contracting far too early. The story of the company's government activities is related in Robert Caro's Path to Power, the first volume of his biography of Lyndon Johnson. Brown and Root financial support was critical to Johnson's early election victories in the 1930s, and Johnson was instrumental in landing government contracts for the firm. He was able to get the contract for the Mansfield Dam near Austin, TX, which produced the Lake Travis reservoir, electrified much of Johnson's congressional district, and bailed Brown and Root out of financial difficulty due to the depression. Much of this firm's business has been based upon connections to government throughout a long portion of its history.

Economically speaking I would not be adverse to hiring, say, a German or British company to do work in Iraq if they could do it cheaper than and just as effectively as Halliburton et al. That said, given the howls of disapproval from Democrats on the stump on the phenomenon of outsourcing and "lost jobs," I find it amusing that they'd rather spend American funds to hire foreign firms than "buy American."

Drezner's Slate article was an exercise in partisan obfuscation. He sets up a "straw man" hypothesis that the CPI report never attempted to put forth . . . and then debunks it.

Specifically, he tries to set up some kind of a thesis of proportionality between the amount of contributions and the size of the reconstruction contracts. This is a bullshit hypothesis, that conveniently ignores the fact that both Halliburton and Bechtel are well connected to the Administraiton insiders--in fact, they ARE the administration insiders--and therefore don't have to spend as much to get favors.

After reading about Drezner's political affiliation, I am not surprised that he wrote the article that he did on Halliburton and contracts. In fact, I suspected as much when I saw he taught at University of Chicago.

He's essentially an apologist for the GOP.

In any event, here is another "gem" of reasoning from his Slate article:

"On the other hand, if you look at Table 2, top 10 campaign contributors, you find that only four of them received more than $100 million in contracts—and none of those top four donors are in the top 10 for contracts. General Electric, the biggest campaign contributor, has actually spent more in contributions than it has received in reconstruction contracts."

Objection: If GE's only reward for its political contributions were reconstruction contracts, then I would agree with Drezner. But he CONVENIENTLY ignores the fact that GE has its tentacles into many things . . . including military/defense contracts.

Don't tell me that overall, GE hasn't gotten MUCH MORE THAN WHAT IT HAS contributed to the GOP in terms of the sum total of Iraq reconstruction contracts, weapons systems contracts, and other types of contracts.

Drezner's article was an excercise in dishonest obfuscation that masked as "journalism." In reality, it was just a partisan hackjob.

As I told him in an e-mail message, to the undiscering, he might appear to be some kind of insightful debunker of "liberal" or "Democratic" myths. The reality is, however, he either is not that bright, or you is an outright liar.

Isn't "path dependence" just a way of saying "an entrenched pattern of cronyism"? KBR created the Logcap program when Cheney was SecDef, and the contract pays off now now that he's VP? They're still paying him money, through a tax loophole, and he's still making them money by the boatload. Most people would call that corruption of an elected office.

Mr. Drezner, it seems to me that your whole argument can be summed up this way: Halliburton & Bechtel are not guilty of corruption & war profiteering now, because they've been guilty of corruption & war profiteering for the past 15 years.

There is an old saying in business, as I am sure everyone knows, "we can do it fast, good and cheap, pick any two."

We wanted it fast and good. That costs.

Phillip G.
You really don't understand GE at all. Having worked there for 15 years I can say that the corporation has heavily withdrawn from government business having sold off most of the operations that dealt with the DoD. It really does not invest in portions of the business that deal with the government for a variety of reasons, mostly dealing with exposure to audit.

Jordan
KBR did not create the LOGCAP, the DoD did. If they were so wired in how did they lose it in the recompete in the mid-90's?

Phillip G:

You have good thoughts in your post, but your language is, um, intemperate. So let's translate, 'cause our proprietor here has not addressed the problem.

Basically, you take isssue with the Slate article, because by finding no correlation between contributions and contracts, you believe that DD has missed the main point, which is that the folks causing the contracts to be issued are benefitting their buddies (whther or not the buddies are giving money). And if you look at Drezner's post, you can trace an interesting problem:

In 1992, Dick C., as Sec of Defense, has KKR write a report how private companies can help DoD. Then, Gee, surprise, KKR gets the contract that's based on the report. (Probably since KKR wrote the report suggesting various contract specifications. Of course, any such specs were written in a way that favored KKR.)

And, Dick Cheyney becomes CEO of KKR's parent. Hmmmm....

BTW, Jordan -- Cheyney's deferred comp package from H does not increase if Haliburton's stock price rises, and Cheyne's bought insurance to ensure that he is not affected if the stock price falls, or H goes bankrupt. The corruption you are looking for is not there, and not quite that obvious. The problem is the age old one of friends doing favors for friends, even if the national interest might dictate another course.

This all said, our proprieter certainly did not misrepresent the press coverage of the CPI. But his article does not exempt this administration from charges of cronyism, either.

KBR did not create the LOGCAP, the DoD did. If they were so wired in how did they lose it in the recompete in the mid-90's?

TRFarmer, I see dots, I connect the dots. KBR, or then BR, wrote a report at SecDef Cheney's request. Cheney moves to Halliburton. Enter Clinton, no doubt with his own cronies. Exeunt, Cheney becomes VP, KBR picks up the Logcap contract. Point is, via Cheney, DoD and KBR are much one and the same. If you don't smell a dirty deal, then I've got some bridge property you ought to look at.

To blame Gore is to demonstrate a willful ignorance of history.

What I see here is that KBR and other Texas energy-related companies have a long and storied history of corrupt links to Texas politicians.

If you haven't read Caro's account of how KBR was giving piles and piles of illegal cash to politicians all over the country, via Johnson, you're missing a vital part of the story.

That said, it sounds like KBR is great at what they do.

It also sounds like it's time for a look at the Sherman Antitrust Act here.

Glad someone mentioned LBJ (via Caro). [Kellogg] Brown & Root have had their fingers in the pie, regardless of party, for more than two generations.

Specifically, he tries to set up some kind of a thesis of proportionality between the amount of contributions and the size of the reconstruction contracts. This is a bullshit hypothesis, that conveniently ignores the fact that both Halliburton and Bechtel are well connected to the Administraiton insiders--in fact, they ARE the administration insiders--and therefore don't have to spend as much to get favors.

So, why did they spend more?

Isn't "path dependence" just a way of saying "an entrenched pattern of cronyism"?

It could be. Cronyism is one of the manifestations of path dependence, but not all forms of path dependence are cronyism. If you know how to do your job function well, and it requires a certain amount of specialization, you're likely to be sought out for similar jobs. And within the same company, your contract will be easier to extend or renew when it lapses. Similarly, you're a lot more likely to get a teaching position at a good university if your degree is from Harvard or Yale (or the University of Chicago). And your path to Harvard or Yale may have started with a good relationship with a HS teacher, or even earlier with a parent who instilled good work habits.

What Dan is saying is that there's no reason to jump to the conclusion that corruption is involved (since I'm not even sure that all forms of cronyism are necessarily corrupt).

A couple observations/questions: The fact that companies give money to curry influence with politicians of both stripes is hardly reassuring and demonstrates the enmeshment of industry and the military (echos of Ike). Should anyone be allowed to profit from war? The profit motive and ability to influence politicians of whatever party is the danger. Why on earth would these companies give so much money? Patriotism? If so wouldn't they forgo much/all the profit? Firmly held political beliefs? Why spread the money to both party's (Repub's always get the lion's share)? Simple answer is to corrupt the process in your favor, which may or may not be in the interest of the nation as a whole. Bad policy, corrupt political process. Not discussed, how often have these companies been cited for over charges etc.?

Why indeed, Gaines?!?!?

Say it with me now...

T-a-x D-e-d-u-c-t-i-o-n. What, you think all corporate philanthropy is done out of the goodness of their hearts ? How do you think Microsoft managed to pay ZERO taxes last year ? They all know that they have to pay money out somewhere, either to private charities / organizations, or to the government in the form of taxes. And we all know how well the government does at spending our tax money efficiently.

Actually, I believe Drezner has proved that if Halliburton and Bechtel are guilty of war profiteering, they are extremely bad at it.

Jordan and Philip G, I strongly encourage you to learn something about government contracting before you say another word on KBR. You are revealing yourselves to be so anxious to find scandal where none exists that you reveal either a breathtaking ignorance of the law and policy, or you just don't care about truth when it comes to the larger objective of finding something, anything, to trash Cheney.

I worked in contracting for the Army for several years, went through all their training, then spent 16 years in the aerospace industry. I'd be glad to educate you on reality if you care to learn. The point is, as Kelman said, every nickel put against an unpriced task order issued under the public Exigency rule has to be justified by the procurement professionals. And not even the President can direct the Contracting Officer. That means that all follow-on longer term procurements are handled on a more traditional basis, where there is 6 months available to conduct a full procurement, with advance procurement planning, time on the street, bid conferences, etc. That process is just beginning now for the $19 billion (not $87B) for reconstruction, and that will mostly be openly competed.

This whole phony non-issue obscures more legitimate elements of debate regarding Iraq. Find a different issue.

If I understand Philip G correctly -- and I confess that I may not as his writing style and logic are a bit, um, dense -- we should assume that Bush & co. are guilty of corruption because they are aquainted with the people doing contract work for the military. And the only evidence of this is that Cheney once worked for Haliburton. No proof, no evidence, just the fact that people in the administration may know people who win military contracts.

Seems a bit thin to me. Got anything else?