Monday, May 22, 2006

Doing Business With The Government

Being a government contractor turns out to be a pretty sweet deal. Northrup Grumman is a pretty good example of that, according to an editorial in today's Washington Post.

...Why, then, should Northrop Grumman be getting hundreds of millions of dollars from the federal government to pay for cost overruns on Navy ships as a result of damages from Hurricane Katrina? Answer: It shouldn't.

The money for Northrop Grumman is contained in the bloated, $109 billion Senate version of an emergency spending measure to pay for costs of the war in Iraq and Katrina. The contractor says it needs the money -- the amount isn't specified in the legislation, but Northrop estimates between $140 million and $200 million -- to help it cover extra costs as a result of massive damages to its shipyards from Katrina. "Unprecedented events require unprecedented actions," Philip A. Teel, who heads the company's ship operations, said at a news conference this month.

Sen. Thad Cochran, a Mississippi Republican and, perhaps more to the point, chairman of the Senate Appropriations Committee, argues that the federal government will end up paying either way: Higher ship prices would be passed on to the government -- an additional $300 million to $600 million, Northrop Grumman warns. "You can pay me now or pay me later," Mr. Cochran said during the Senate debate. "I guess that is the way to say it." If so, perhaps this episode reflects a bigger problem with the way the military pays defense contractors.
[Emphasis added]

Let's be clear about this: Northrop Grumman wants the extra money even though at least some of it is probably going to be covered by insurance. The company just wants the money now, and it wants to the government to pay it.

I'm sure lots of smaller businesses along the Gulf Coast would like the same deal. Unfortunately, most of them don't do business with the federal government, so they can't raise the specter of blackmail that Northrop-Grumman so brazenly did. "Pay me now or pay me later", indeed!

Corporate welfare: it's the new black.


Anonymous Mike said...

The Washington Post titled their story very appropriety, "Ship of Pork." This Ship of Pork, if approved, will be on the back of the tax payers. If a small contractor couldn't deliver for any reason, they would be in breech of contract. The work would simply be pulled back and given to someone who had the resources to deliver. I truly hope the House has what it takes to block this scam. Enough is enough. If Grumman can't deliver, give the work to another shipyard - PERIOD!

4:26 PM  

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