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MONDAY
AUGUST 30
1999
         
     



WND Exclusive
Defense infrastructure 'gone,'
warns insider

Spokesman admits Pentagon is
using European contractors



By Jon E. Dougherty
© 1999 WorldNetDaily.com

The former chief executive officer of a now-defunct defense manufacturing firm says the infrastructure necessary to maintain U.S. weapons systems - especially during wartime -- is "gone," and has been shifted largely overseas to European contractors.

Bill White, who says his small defense contracting firm was destroyed by a bureaucracy "intent on driving out the little guy," told WorldNetDaily that because of incompetence and greed, even large contractors are beginning to have trouble getting government contracts.

White explained that during the Eisenhower administration, laws were passed requiring defense procurement officials to subcontract work to smaller defense firms, rather than give all the work to prime (large) contractors. However, he said, eventually the federal government realized its subcontracting rules were cost prohibitive and began requiring the prime defense contractors not only to subcontract the work themselves, but also to bear the costs of doing so.

"That was the biggest hammer the government ever could have given the prime contractors," White said, "because that change in policy is what they eventually used to begin squeezing out smaller contractors."

Over time, White said, prime contractors realized that the federal government had begun to ignore its own directive to the prime contractors. Consequently they just stopped subcontracting to smaller firms and instead kept all work on government contracts "in house." Over the years, "the prime contractors simply absorbed the technicians and engineers from these smaller firms as they failed, one by one" - and normally at a higher pay scale.

That higher pay, he explained, resulted in contractors overcharging the federal government for weapons systems and components, "because they were trying to recoup the costs of paying these absorbed workers more money."

"The stories people have heard about $3,500 hammers and $35 million space station toilet seats are absolutely on the money," White said.

During the defense buildup of the 1980s, he said, "Reagan had a chance to change things -- to begin reinforcing the subcontractor policies, but he didn't, even though he knew what was going on."

President Reagan "did an excellent job in building up our military, but a lousy job in doing something to rebuild our depleted manufacturing base," he added. "All he did was allow the prime contractors to get even bigger." Their growth, in turn, squeezed out even more small contractors.

After the Cold War, things only became worse for the beleaguered defense industry.

"The Clinton administration was in a mood to cut defense spending because they believed there was no longer any need for all the expenditures in the defense budget," he explained. As a result, "they started granting contracts to European manufacturers because it was cheaper, and because there weren't enough small defense contractors left to bid the work to here in the United States." In other words, White added, "there was no competition left here."

That decision resulted in still further consolidation of the defense industry, with one prime contractor buying out another and, ultimately, defense industry layoffs. This, White said, served only to further reduce competition and limit government defense purchasing options.

"President Eisenhower once told the American people, 'Beware of the military-industrial complex,'" he said. "This was what Eisenhower was trying to warn against. He knew that when the government stopped administering its own subcontracting process and left it up to the big contractors, they would eventually squeeze out the little guy, end competition, and drive the prices of the weapons systems through the roof."

And the profits, he said, have been used "in part" to buy the loyalty of congressmen "so they won't be interested in changing the system back to the way it was during the late 1950s."

Oddly enough, White told WorldNetDaily, years ago a government study revealed that "nearly 85 percent of the country's defense manufacturing base was performed by smaller subcontractors." It was this competition that helped keep defense costs down, he said, but ultimately "the government didn't listen to itself and allowed this manufacturing base to go away."

White commented that "even if by some miracle" the government were to begin requiring prime defense contractors to subcontract work to smaller firms again, "they couldn't do it because the knowledge -- the skilled workforce necessary to make these weapons systems -- is no longer in the job market because the smaller firms have disappeared. And because of the kind of high-tech systems our military uses, you can't just pull anyone into a defense factory and have them start manufacturing, say, targeting systems for M1A1 tanks."

Not only has the underlying defense infrastructure been broken, he added, but "we're talking about billions of dollars a year going out of our economy" and into the coffers of European contractors.

A spokesman with the Pentagon's defense procurement office confirmed to WorldNetDaily that indeed the U.S. government does contract with European manufacturers, but added, "We're more interested in quality than in price."

The spokesman, who did not identify himself, cited a recent "major purchase" of military radios that were manufactured by an unnamed European contractor. But, he added, "to get a complete picture, you'd have to probably submit a request in writing to the Department of Defense because that's something they'd have to search the appropriate data base for, in order to get you the particulars." And, he said, the U.S. government "routinely" buys goods, services and equipment locally in NATO and Asian countries -- "anywhere there are U.S. troops."

Without a competitive base domestically, White said, there would continue to be little competition among U.S. contractors and virtually no incentive for small U.S. business owners to bid on government military contracts. Furthermore, he added, the loss of the defense industry base "could be hazardous to our health" at some point if the U.S. has to fight a prolonged war and cannot depend on European contractors to deliver new weapons components.

White said he is also concerned that "a vast amount of U.S. military technology -- really, some of our prime weapons systems" have now been released to foreign companies. That, in turn, has made it more likely that "at least some of it" has ended up in the hands of potential enemies.

"At this point," White concluded, "I don't know what the answer is. We can't simply restart an industry of this size and complexity, but at the same time we've got to do something to get it back. We should be in charge of our own destiny when it comes to our own defense industry."

"People like Pat Buchanan, Ross Perot, and Alan Keyes have it exactly right when they decry all of the business leaving this country," he said. "I know for certain that has happened to the defense industry, and, really, a lot of manufacturing and farming base" as well.

"It's criminal and stupid," he said.



Jon E. Dougherty is a contributing editor to WorldNetDaily.

   
   

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