Mar 14, 2018, 10:57 AM ET

Sen. Sanders wants DoD to rein in 'excessive' contractor payments

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Vermont Sen. Bernie Sanders, in a letter to Defense Secretary James Mattis first obtained by ABC News, criticizes the Pentagon for what he called "excessive" and "obscene" compensation to the nation's largest defense contractors.

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In the letter, Sanders argues the Pentagon needs to "fundamentally reform its procurement and business operations to crack down on the widespread waste and abuse of private defense contractors."

The senator pointed out that the CEOs of top defense companies like Lockheed Martin and Raytheon were paid over $20 million in total compensation, including stock options. Yet, he says, 90 percent of those companies' revenue comes from the federal government in the form of defense contracts.

"I think the American people would like to know why a defense contractor can pay its CEO over $20 million, while your salary is capped at $205,700 and other members of the military are paid far less," Sanders wrote to Mattis. "What kind of message does it send when a defense contractor is paid 100 times more than the Secretary of Defense?"

"I can tell you that one of Secretary Mattis' top three priorities is reforming the way we do business. That's why, on Feb. 1, we began reorganizing the former office of acquisition, technology, and logistics. The reorganization is the largest of the department since the 1986 Goldwater-Nichols Act. This reorganization implements overdue Congressionally-mandated reforms and necessary improvements to better support the services. Also, as USD(A&S) Ellen Lord testified to the SASC, Dec. 7, 'Secretary Mattis has placed priority on implementing these provisions alongside other Department-wide reforms and practices required to improve the lethality and readiness of our military'," Commander Patrick Evans, a Department of Defense spokesperson told ABC News.

Lockheed Martin Corp declined to comment and Raytheon Company did not respond to request for comment from ABC News.

There has long been a limit on what the federal government can contribute to an individual's salary.

Prior to 2012, executive compensation limits capped how much the government could pay a company's five top executives.

The National Defense Authorization Act of 2012 expanded the "executive compensation cap" to all employees, not just the top executives. This meant that the most the government could compensate an individual was $487,000, and any salary that individual received above that amount would come from the company.

An exception could be made if the individual had highly specialized technical talent, for example in cybersecurity, deemed necessary for the contract.

Sanders asked Mattis if the law regarding executive compensation caps on defense contractors like Lockheed Martin should be amended further.

"Those corporate interests should never take precedence over the interests of taxpayers or our national security," Sanders wrote. "But paying exorbitant salaries to defense contractor CEOs makes that outcome more likely, and that is simply unacceptable."

Sanders also asked Mattis to look into defense contractor fraud, as well as ways to hold defense companies accountable when contracts go over the original cost estimates.

“When a company like Lockheed Martin receives over 90 percent of its revenue from defense spending, has paid hundreds of millions in fines for fraud, and is responsible for some of the worst cost overruns in history, it should not be allowed to pay its CEO 100 times more than the Secretary of Defense," Sanders told ABC News. "The Defense Department has a responsibility to crack down on the widespread waste, fraud, and mismanagement at the Pentagon.”

The Department of Defense is currently undergoing its first-ever audit, slated to be completed in September, that will look at the Pentagon's financial statements for 2017.

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  • Jake Johnson

    Thank you< Mr. Sanders. What this article, and Mr. Sanders, do not mention is that a large portion of Federal taxes goes to support the Pentagon, and that if waste were cut, taxes could be reduced or redistributed to Social Security or other programs.

  • Onetaxpayer

    Companies that provide military equipment hire those in the military that they work with during the construction and implement phases. When those in the military retire these workers are hired by the companies to work on the next contract at a much higher pay. The incentive to control cost is over ridden by the prize of higher wages when they retire and start working for the company.
    The other part of the cost increases is changing the specification and the scope of the project. When a contractor is asked to bid revisions to a project, the price by the contractor is not competitive. The price given ist what ever the buyer will pay with very little over sight.
    Audits need to be done on each job and cost justified after the fact. This surely result in reduction in overall cost.

  • jon rhodes

    It will be hard to find someone with the clout and moral fortitude to have an effect on these corrupt practices. I am thinking that the folks making millions of dollars are in relationships with our lawmakers and that many of the money making elites, are, in fact, our lawmakers. So, while it is transparently immoral, these money grubbing miscreants will not quit pulling in the millions until someone can actually wield sufficient power to put some of these people behind bars.
    regrettably people in high positions do not have the will to step up and do what is right. American exceptionalism is an illusion when it comes to our elected officials.

  • katerant

    "I think the American people would like to know why a defense contractor can pay its CEO over $20 million, while your salary is capped at $205,700 and other members of the military are paid far less," Sanders wrote to Mattis. "What kind of message does it send when a defense contractor is paid 100 times more than the Secretary of Defense?"

    Exactly.

  • Ira Cohen

    Sanders is right , but it was our general turned president Dwight Eisenhower who really saw this and understood it. "Beware of the Military Industrial Complex".,,,congress scares people about our military inadequacies then makes sure it spends money with fat cat manufacturers who will produce all of our defense items at HYUUGE mark up. But we dare not question them because that would be Anti-American.
    We do need far better auditing and now Donald Trump should be stepping up to the plate and doing the fat cutting, Don, you're the smart deal maker, step up!

  • G Nuissl

    Yes. So they only ripped us off some hundreds of millions of dollars (in reality billions) and their punishment should be that they should not pay their executive 20 million a year. Would 1 million be ok?

    This is a govt. that fundamentally needs to fail. Bankruptcy is that clowns specialty. Let's do it!

  • John

    When you have people leaving the government whether as a legislature, general or admiral, going into these highly paid positions it is hard to convince them to hold the contractors feet to the fire on compensation.

  • Hank R

    "In the letter, Sanders argues the Pentagon needs to "fundamentally
    reform its procurement and business operations to crack down on the
    widespread waste and abuse of private defense contractors.""

    Sen. Sanders is correct concerning waste and gross spending but is going after the wrong organization. DOD follows the guidelines set in place by Congress so he needs to look in the mirror.

  • 18th street

    Bernie, it;s called capitalism. Defense companies operate in the private sector. They are part of the federal government. Why don't you move to Russia or Venezuela where you can live as a Communist, which is what you desire? Even better, why not North Korea? Thee you can worship the murderous child-dictator Kim. You would be in nirvana!

  • Thomas

    "The Department of Defense is currently undergoing its first-ever audit"

    That's a big problem, in my opinion.

    A government organization, in existence for over 70 years only now has its first audit?

  • Blue Wave

    Always been amazed at how much money the DoD pays to contractors. As a GS-13, I supervised several government civilians and four contractors (hired on before I took over). None of the contractors brought anything special to the table that wasn't already being covered by the civilians, yet all four made at least 30% more than the civilians. One was making over 50% more. Then there's the continuity piece: most government contracts are awarded for 3-5 years, meaning there is always a loss of people/skill sets during every cycle. Lousy way to run the government.