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Another
Scandalous No-Bid Contract Makes Us Look Like Fools
June
6, 2003
By Pat Gerber
Critics have been howling since the announcement that the
Department of Defense gave a no-bid contract for cell phone
service in Iraq to a disgraced company called WorldCom. And
with good reason.
Competitors in the telecommunications business pointed out
that WorldCom has no experience in building cell phone systems
and objected to the fact that industry leaders were not even
informed that such a contract was contemplated, much less
given the opportunity to bid on it. Reform-minded watchdogs
were appalled that any contract of any description was given
to a bankrupt company whose $11 billion accounting fraud scandal
was the largest in history, a company that is regarded as
the poster child for everything that is dysfunctional about
American corporations today. Budget-watchers were aghast at
the outrageous cost.
And then there is the sheer stupidity of it all. Satellite
phones make sense in a place like Baghdad, but cell phones
do not. Satellite phones are reliable, though slightly cumbersome.
They work everywhere, even in the roughest conditions, which
is why Afghan warlords use them. They can be depended on when
other means of communication have failed. Cell phones, by
contrast, cannot even be completely relied upon in major U.S.
cities, where the networks are as good as the still-evolving
technology allows.
The contract is for a small, temporary network. Its $45
million price tag is supposed to buy enough infrastructure
to service 5,000 to 10,000 phones, if there are no cost overruns.
In other words, each phone's share of the network will be
$4,500 to $9,000. Since some people carry more than one phone,
the cost per user will be higher. These figures are so grotesque
that they make clean government advocates yearn for the good
old days when the Pentagon confined its spending excesses
to $640 ash trays. Had this contract been put out for open
bidding, companies that have actually done this type of work
before would not only have been interested but would probably
have agreed to a more reasonable dollar figure.
The notion of plunking down any cell phone equipment amid
the rubble and chaos of a devastated, crime-ridden city like
Baghdad is foolish. The 19 antennas and base stations that
form the backbone of the network will quickly become tempting
targets to every Iraqi who is angry with Americans, and even
if soldiers are diverted from their regular duties and used
to provide tight security for the equipment, it is highly
probable that a few antennas will get hit from time to time
and cause the phones to go dead. Moreover, cell phone networks
run on electricity, a commodity that is likely to remain scarce
in Iraq for some time. The amount of electricity needed just
to keep the base stations cool enough to operate in the summer
heat is unlikely to be available, and blackouts pose their
own special problems for cell phone systems. Installing generators
to power the equipment will only add more targets for irate
Iraqis to attack. The bottom line is that after this system
is built out, it will provide only intermittent phone service
in some parts of the city. Aid workers, military personnel
and others who need dependable phone service would be out
of luck.
Finally, there is the question of whether WorldCom should
be eligible for any government contracts. Last year,
when the Government Accounting Office reviewed a different
contract between the Department of Defense and WorldCom, it
concluded that the DoD "relied on grossly inaccurate financial
information in making a determination that WorldCom was a
responsible contractor." That is a polite way of saying that
WorldCom lied. Groups from the left, right and center have
lobbied Congress to exclude WorldCom from all government work.
They have not forgotten that WorldCom's spectacular bankruptcy
reamed investors' portfolios when its stock price dropped
99%, put thousands of employees out of work and wiped out
their retirement accounts, cheated suppliers who will never
be paid what they are owed and wracked other economic mayhem,
and they continually remind us that its purported culture
of deceit has not yet been supplanted with a culture of fairness
and decency. The fact that the company recently paid a record
$500 million penalty to the SEC has not quieted critics, who
claim that this fine is merely a slap on the wrist, is not
in proportion to the damage done, and serves as further evidence
that the current administration shows favoritism.
Our government looks like - and is - a hypocrite when it
encourages other nations to have a free and open economy while
practicing exactly the opposite. Deals such as this only provide
additional ammunition to those who would disparage us.
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