Boom Times for Sellers of $600 Toilet Seats

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As you're preparing the details of your financial life for inspection, consider the Pentagon's accounting skills:

The basic defense budget for 2007 was $439.3 billion, up 48 percent from 2001, excluding the vast additional sums appropriated for the wars in Iraq and Afghanistan. According to federal regulators and current and former Pentagon officials, the accounting process is so obsolete and error prone that it's virtually impossible to tell where much of this money ends up. While the department's brass has made a few patchwork improvements, billions are still unaccounted for. The problem is so deeply rooted that, 18 years after Congress required major federal agencies to be audited, the Pentagon still can't be…

Until the Pentagon can get its records in order, no comprehensive audit is required. Instead, the department writes each year to the inspector general certifying that "material amounts" in its financial reports can't be substantiated.

That it can't be audited "goes to the heart of the department's credibility," says Dov Zakheim, who was Defense Department chief financial officer and comptroller under Rumsfeld. "Nobody would trust even a half-million-dollar enterprise if its books weren't clean."

The Pentagon has repeatedly assured Congress that it is working toward an audit. Yet the projected date continues to slip further away. In 1995, Pentagon officials testified that it could be audited by 2000. In 2006, an audit wasn't envisioned until 2016.

That's from a Portfolio piece called "The Pentagon's $1 Trillion Problem." Veronique de Rugy's fantastic May cover story—"The Trillion-Dollar War"—will make you just as excited to pay your taxes.

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  1. Kerry, why do you hate America?

  2. In 1995, Pentagon officials testified that it could be audited by 2000. In 2006, an audit wasn’t envisioned until 2016.

    In 11 years, they’ve managed to push back the release date 16 years. They’re further away now than when they started.

  3. Let’s say you were a you were a company that was asked to design and build several toilet seats for a aircraft that only about 100 or so existed and the normal size seats do not fit. The specifications call for 315 SS .5 inches thick, ss bolts and the normal documentation regarding the making of the seat and so forth.
    Since these seats are not going to be mass produced, well they will be buits on some $100,000 CNC machine.
    I bet the fuck your seats cost more that $600 each.

  4. Come on, you can’t expect the government to keep its books in order. It’s too busy requiring that everyone else have their books in perfect shape.

  5. I remember a comedian but not his name who was talking about the Pentagon’s overspending. This was back in the 80’s. He mentioned the fact that the Pentagon was paying over $600 for a toilet lid. He said that when his income tax was $900 he sent the govn’t a chain saw and told them to keep the change.

  6. I remember a comedian but not his name who was talking about the Pentagon’s overspending. This was back in the 80’s. He mentioned the fact that the Pentagon was paying over $600 for a toilet lid. He said that when his income tax was $900 he sent the govn’t a chain saw and told them to keep the change.

    That’s hilarious!

  7. Let’s say you were a you were a company that was asked to design and build several toilet seats for a aircraft that only about 100 or so existed and the normal size seats do not fit. The specifications call for 315 SS .5 inches thick, ss bolts and the normal documentation regarding the making of the seat and so forth.
    Since these seats are not going to be mass produced, well they will be buits on some $100,000 CNC machine.
    I bet the fuck your seats cost more that $600 each

    …The Russians, meanwhile, just used a pencil.

  8. The problems that military has (and has always had) with accounting arise largely from the sheer size of the organizations involved. In terms of the number of people employed, the amount of money involved and the degree of accuracy and accountability required, the U.S. military is the largest organization in the world easily by an order of magnitude.

    People often think that government or other large institutions fail because of poor leadership or execution. I think the problem much more fundamental: the practical scope of the problem dwarfs the technology and organizational techniques we have to deal with the problem. Strange to think of it but it’s true that he military pushes the boundaries of accounting the same way it pushes the boundaries of technology.

    This underlies the central failure of centralized planning. The technology and organization does not exist that can process the information needed to run an entire national economy in real time.

  9. Walmart is bigger and they always win the price war.

  10. …The Russians, meanwhile, just used a pencil.

    I’m not sure how the Russians sat on a pencil to take a crap, but that sounds really uncomfortable. Personally, I’d rather shell out $600 to have a proper toilet seat.

  11. In Russia, bureacracy craps on you!

    Oh, wait, that’s true everywhere.

  12. The Pentagon is staffed by financially-obtuse gay men… not that there’s anything wrong with that!!

  13. Walmart is bigger and they always win the price war.

    This may be a joke I’m not getting;
    but as for who’s ‘bigger,’ here’s two possible measurements (most others seem pretty meaningless to me as a basis of comparision):

    Employees
    Walmart: 2.1 million (full & part time)
    DOD: 700k civ, 1.4 million AD, (+1 million ‘part timers’)

    ‘Budget’:
    Walmart: $380 billion (operating revenue)
    DOD: $450-500 billion (baseline budget) + 150-200 billion for afg/iraq.

    It’s really hard to grasp how big the DOD is.

  14. The big difference between Walmart and the DOD is that Walmart actually provides a service that its customers are willing to pay for.

  15. tarran – not to go all “love it or leave it” on you, but short of leaving, you’re funding the DoD of your own free will.

  16. …The Russians, meanwhile, just used a pencil.

    I’m not sure how the Russians sat on a pencil to take a crap, but that sounds really uncomfortable.

    The reference was to NASA pen that writes in free fall. If your an old bastard, you’ll remember it was an advertising point when selling it to the public. “It writes upside down!” Cost a ton to develop, the cosmonauts used pencils, which also write regardless of gravitational specifics.

  17. Yes, the pentagon is way overdue for a financial record keeping overhaul. That they haven’t done it yet is unconscionable.

    No Shannon, size is not the problem. Institutional inertia, and the beneficiaries of the present unauditable system are the causes.

  18. tarran – not to go all “love it or leave it” on you, but short of leaving, you’re funding the DoD of your own free will.

    You mean like all those shop-keepers who voluntarily fund the mafia?

  19. JsD,

    Yea, pencil, great idea to have a bunch of graphite dust floating around all of those relays and other electrical stuff.

    I believe there was something about that being short lived, or usually mis-described a few years ago.

  20. Sure, we could cut corners and settle for the $600.00 toilet seat, but I think our brave men and women in uniform deserve better than that. They deserve a toilet seat that (as it were) makes you stand up and take notice. And I’m ^*$& proud of our titanium-plated, bombproof, diamond-studded $1 million Crapmaster 2.0 seats!

  21. Actually I should correct a mistaken assumption that Ayn Randian’s riposte made:

    I am not a customer of the DOD. Various congressmen and government officials are customers of the DOD.

    They of course don’t want to pay for the damn thing – after all as wealthy as they are, the politicians who want them could never even afford a single nuclear weapon.

    No, they want me to pay for their toys.

    Thus my comment: people who shop at Walmart are paying for their services. The DOD’s customers are not paying for the services they buy. Other people are.

  22. BTW, I did work with two DoD agencies that had visibility of their money down to $1000 on any task for Allocated/Committed/Obligated money, down to the penney for Expended/Accrued.

    However, those were relatively “new” agencies. The older pieces of DoD, as much of the criticism suggests, have not been so good at getting their accounting up to speed.

  23. It’s not surprising that the biggest bureaucracy in the world is bad at accounting, and even less surprising they can’t fix it.

    As a programmer and CPA, I can tell you exactly what the problem is: homegrown software. They tried to build their own ERP system. Guess what, write-once use-once ERP software is a very bad paradigm even for mere $1B companies. That’s why most companies use package software like SAP.

    Even today, new incompatible financial systems continue to proliferate within the services, contrary to directives from the secretary of Defense’s office.

    But they can’t ever get around that, because they aren’t allowed to do the sane thing and buy something off the shelf. So they’ll just keep making more and more incompatible systems.

    At taxpayers expense.

    I know companies who bid on these contracts. It’s a sham and everyone knows it.

    I am not a customer of the DOD.

    Well, as a public good, we’re all defense consumers and have derived substantial benefit from their work.

  24. There are certain advantages to not having good records of where all your money went. I use this system all the time. If the wifefriend knew how much I spent on my various, uh, lets call them “activities”, I expect it might cramp my style a bit. I spend a lot on “blah, blah, gas, blah, food, blah, blah”.

  25. Talldave, have you ever used SAP? I have, and my conclusion is it is a German conspiracy to destroy our will. I recall having to click on a “little green alien” icon – this was supposed to be a logical icon of some kind, but being only a little German, it was lost on me.

  26. I like to think that the $600 toilet seat is just their way of hiding funding of really cool Black Ops with, like, underground submarine bases and laser beams. I like to think that, because it would be too depressing if they really paid $600 for a toilet seat.

  27. You mean like all those shop-keepers who voluntarily fund the mafia?

    Uh, no. Not like that at all.

    I know, I know, the concept of the nation-state is SOOOO statist of me. I got it.

  28. I know, I know, the concept of the nation-state is SOOOO statist of me. I got it.

    Well, they say the first step to fixing a problem one has is to recognize that one has one … ­čśë

  29. J sub D,

    No Shannon, size is not the problem. Institutional inertia, and the beneficiaries of the present unauditable system are the causes.

    All of which are also attributes of size and complexity. The larger and older an institution is, the more difficulty it has in implementing new technology.

    The history of Walmart is an excellent example. Walmart grew from a small regional chain to a supergiant precisely because it succeeded in computerizing while it was still relatively small. The giants of the retail world in the early 80’s, Kmart, Woolsworth, Sears etc were all many time larger than Walmart and all proved slow and inept at computerizing. Walmart will face the same fate when the next big technology wave comes. They won’t be able to adapt as quickly as smaller, newer and more nimble competitors will.

    The market creates efficiencies by killing organizations that cannot adapt. Government has no such pressures. Organizations stagger along, requesting more money to paper over their inefficiencies.

  30. I just had a cool idea – why can’t Wal Mart sell to the Pentagon? Our low prices will ensure that the taxpayers will never pay too much for a toilet seat again.

    But I’m not being ambitious enough. Why can’t Wal Mart *merge* with the Pentagon? Then world domination would only be a short step away from realization.

  31. Another thing Wal*Mart capitalized on was the low bar that was customer service when they went national.

    All the customers had to see was a store that did not suck like K-Mart and they shifted to the nice stores where the staff was actually helpful and happy.

    Of course, all that invintory automation mentioned above was huge too.

    If you have a chance to read some funny stuff, go check some of the Wal*Mart bashing sites, like Ezra Klein’s ‘blog. Sort of ties into the latest Sen. Obama gaffe too, with how misirable and mistreated the Wal*Mart employees are treated vs. all the stores they are putting out of business. If what was written by these critics were true, the bitter folks would be working at Wal*Mart, rather than the ones who insist on staying in shops that lose customers until they close.

  32. My father was an auditor for a branch of the military (or rather assigned to audit a particular a branch of the military) up until he retired around 10 years ago.

    I asked him about the infamous $600 toilet seats. He said that his job was to make sure that they didn’t overpay for the seats and that, if they ordered 500 of them, that they actually received 500 of them. Stuff like that. He gave me the impression that there wasn’t any place in the process where the auditor could say “This toilet seat costs way too much”.

  33. Talldave, have you ever used SAP? I have, and my conclusion is it is a German conspiracy to destroy our will.

    No question, it’s a huge pain in the ass. The fact that it’s still better than the homegrown or cobbled-together alternatives 90% of the time speaks to the power of write-once, use-many-times.

  34. Sadly, the space pen story is an urban legend, or so says Snopes. Both the Americans and Russians used pencils until an American scientist designed a space pen to solve the problems associated with pencil lead fragments floating around in zero gravity. Apparently he did this unprompted and free of charge, and the Russians used the space pen too.

    I wish it were true; it’s a great story.

  35. No question, it’s a huge pain in the ass. The fact that it’s still better than the homegrown or cobbled-together alternatives 90% of the time speaks to the power of write-once, use-many-times.

    How long have you been in IT, TallDave? Every SAP implementaion is cobbled-together.

  36. The Iraq War is probably a much shorter and cost-effective project for the Pentagon than an SAP implementation would be.

  37. Yet, come this November, millions of “libertarians” will vote for John “Bomb Iran” McCain, who will guarantee to shovel even more money to the Penatagon, and hundreds of thousands more will not vote for the only man who can beat him (voting third party (such as the LP) is voting to not to vote; you are saying each major party candidate is equally bad and you don’t care which wins).

  38. TallDave: did you ever work at a place called Frontline in Pearl River, NY?

    Not sure why I remember this, but a guy I worked with there used the same handle.

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