An arti­cle by James Risen in today’s New York Times con­firms some­thing we’ve long sus­pected: the single most impor­tant reason why the military’s depen­dence on pri­vate con­trac­tors is a bad idea is that such depen­dence effec­tively allows the con­trac­tors to extort the fed­eral government.

That seems to be just what hap­pened in the case of Charles M Smith, a senior civil­ian Army offi­cial, and the $20+ bil­lion KBR con­tract he was respon­si­ble for over­see­ing during 2004. As Risen tells it, Army auditors

had deter­mined that KBR lacked cred­i­ble data or records for more than $1 bil­lion in spending…Mr. Smith refused to sign off on the pay­ments to the com­pany. “They had a gigan­tic amount of costs they couldn’t justify,” he said in an interview.

The fact–if it is a fact–that an outfit like KBR would try to shaft the fed­eral gov­ern­ment out of $1 bil­lion dol­lars would sur­prise exactly no one, I expect. But what comes next is the really out­ra­geous part: two days after Smith noti­fied KBR of his deci­sion, he dis­cov­ered that he’d been uncer­e­mo­ni­ously replaced in his over­sight posi­tion. The bil­lion dol­lars in pay­ments and per­for­mance bonuses were approved, and KBR got its money.

For the Army, the deci­sion was appar­ently an easy one. Accord­ing to Risen,

[Army offi­cials] said that KBR had warned that if it was not paid, it would reduce pay­ments to sub­con­trac­tors, which in turn would cut back on services.

There it is, pure extor­tion. KBR says: if you won’t pay us for these expenses that we can’t jus­tify, then we’ll cut back ser­vices that you’ve already paid for. And–I mean this seri­ously–who could argue with that logic? Jef­frey P. Par­sons, the exec­u­tive direc­tor of the Army Con­tract­ing Com­mand, explained the Army’s bind to Risen in terms whose pre­ci­sion of mean­ing belies their appar­ent vague­ness: “You have to under­stand the cir­cum­stances at the time…We could not let oper­a­tional sup­port suffer because of some other things.”

In other words: they had us by the balls; how could we say ‘no’ when they told us to cough?

The only bright spot in the whole story is that thanks to an incau­tious quote by Parson (whoops! there goes plau­si­ble deni­a­bil­ity) we know exactly how high this deci­sion went:

“This issue was not decided overnight, and had been dis­cussed all the way up to the office of the sec­re­tary of defense.”