WSJ Criticizes Contracting Out

My my what a difference a decade makes. The Wall Street Journal today published this. Yes the Wall Street Journal, the voice of Rupert Murdock, the voice of corporate capitalism in America sounding like Mother Jones magazine. The irony is that contracting out government services has created a welfare state for private companies, and an increase in the size of government. The exact opposite of what the neo-copns claimed it would do.

Government by Contractor Is a Disgrace
Many jobs are best left to federal workers.
Back in 1984, the conservative industrialist J. Peter Grace was telling whoever would listen why government was such a wasteful institution.
One reason, which he spelled out in a book chapter on privatization, was that "government-run enterprises lack the driving forces of marketplace competition, which promote tight, efficient operations. This bears repetition," he wrote, "because it is such a profound and important truth."
And repetition is what this truth got. Grace trumpeted it in the recommendations of his famous Grace Commission, set up by President Ronald Reagan to scrutinize government operations looking for ways to save money. It was repeated by leading figures of both political parties, repeated by everyone who understood the godlike omniscience of markets, repeated until its veracity was beyond question. Turn government operations over to the private sector and you get innovation, efficiency, flexibility.
What bears repetition today, however, is the tragic irony of it all. To think that our contractor welfare binge was once rationalized as part of an efficiency crusade. To think that it was supposed to make government smaller.
As the George W. Bush presidency grinds to its close, we can say with some finality that the opposite is closer to the truth. The MBA president came to Washington determined to enshrine the truths of "market-based" government. He gave federal agencies grades that were determined, in part, on how abjectly the outfits abased themselves before the doctrine of "competitive sourcing." And, as the world knows, he puffed federal spending to unprecedented levels without increasing the number of people directly employed by the government.
Instead the expansion went, largely, to private contractors, whose employees by 2005 outnumbered traditional civil servants by four to one, according to estimates by Paul Light of New York University. Consider that in just one category of the federal budget -- spending on intelligence -- apparently 70% now goes to private contractors, according to investigative reporter Tim Shorrock, author of "Spies for Hire: The Secret World of Intelligence Outsourcing."
Today contractors work alongside government employees all across Washington, often for much better pay. There are seminars you can attend where you will learn how to game the contracting system, reduce your competition, and maximize your haul from good ol' open-handed Uncle Sam. ("Why not become an insider and share in this huge pot of gold?" asks an email ad for one that I got yesterday.) There are even, as Danielle Brian of the Project on Government Oversight, a nonpartisan watchdog group in Washington, D.C., told me, "contractor employees -- lots of them -- whose sole responsibility is to dream up things the government needs to buy from them. The pathetic part is that often the government listens -- kind of like a kid watching a cereal commercial."
Some federal contracting, surely, is unobjectionable stuff. But over the past few years it has become almost impossible to open a newspaper and not read of some well-connected and obscenely compensated contractor foisting a colossal botch on the taxpayer. Contractors bungling the occupation of Iraq; contractors spinning the revolving door at the Department of Homeland Security; contractors reveling publicly in their good fortune after Hurricane Katrina.
At its grandest, government by contractor gives us episodes like the Coast Guard's Deepwater program, in which contractors were hired not only to build a new fleet for that service, but also to manage the entire construction process. One of the reasons for this inflated role, according to the New York Times, was the contractors' standing armies of lobbyists, who could persuade Congress to part with more money than the Coast Guard could ever get on its own. Then, with the billions secured, came the inevitable final chapter in 2006, with the contractors delivering radios that were not waterproof and ships that were not seaworthy.
Government by contractor also makes government less accountable to the public. Recall, for example, the insolent response of Erik Prince, CEO of Blackwater, when asked about his company's profits during his celebrated 2007 encounter with the House Oversight Committee: "We're a private company," quoth he, "and there's a key word there -- private."
So you and I don't get to know. We don't get to know about Blackwater's profits, we don't get to know about the effects all this has had on the traditional federal workforce, and we don't really get to know about what goes on elsewhere in the vast private industries to which we have entrusted the people's business.

SEE:
The Failure of Privatization
Another Privatization Failure
Moral Turpitude Is Spelled Blackwater
IRAQ- THIS WAR IS ABOUT PRIVATIZATION
The Neo Liberal Canadian State


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Last One Out Turn Off The Lights

Nortel has been shedding jobs for over a decade as it lost money every year since the dot com bubble burst. But of course the guy at the top responsible for Nortel's losses keeps his job. Whle advocating layoffs and concessions as the solution to Nortels problems. Unfortunately that has been tried for a decade and it ain't worked.

Nortel has now lost more than $4.5 billion since Chief Executive Officer Mike Zafirovski took over at the end of 2005, pushing him to cut 18 percent of the workforce. Today he said he plans further reorganization aimed at saving as much as $400 million next year, freezing travel, ending salary increases and getting rid of at least four top executives.

The more than 32,000 people who work for shrunken telecom giant Nortel, its investors who have seen share value plunge from $20 to pennies in a year, and analysts following the firm awoke Monday expecting a financial tsunami of an announcement.What they got as Nortel announced a $3 billion red ink bath for the third quarter was a series of announcements that might slosh water out of a nearly full bathtub.Did a reorganization plan accompanied by some job trims and the booting of some top executives save the S.S. Nortel, or did management just reshuffle deckchairs on what many analysts are growing to believe is a business Titanic?

Deregulation and the optical boom
In 1983, due to deregulation, Bell Canada Enterprises (later shortened to BCE) was formed as the parent company to Bell Canada and Northern Telecom. Bell-Northern Research was jointly owned 50-50 by Bell Canada and Northern Telecom. The combined three companies were referred to as the tricorporate.[5][6][7]
As Nortel, the streamlined identity it adopted for its 100-year anniversary in 1995, the company set out to dominate the burgeoning global market for public and private networks.
In 1998, with the acquisition of Bay Networks, the company's name was changed to Nortel Networks to emphasize its ability to provide complete solutions for multiprotocol, multiservice, global networking over the Internet and other communications networks. As a consequence of the stock transaction used to purchase Bay Networks, BCE ceased to be the majority shareholder of Nortel. In 2000, BCE spun-out Nortel, distributing its holdings of Nortel to its shareholders. Bell-Northern Research was gradually absorbed into Nortel, as it first acquired a majority share in BNR, and eventually acquired the entire company.

After the Internet bubble

Nortel Networks Corp (NYSE: NT) stock price (source: ZenoBank.com)
In the late 1990s, stock market speculators, hoping that Nortel would reap increasingly lucrative profits from the sale of fibre optic network gear, began pushing up the price of the company's shares to unheard-of levels despite the company's repeated failure to turn a profit. Under the leadership of CEO John Roth, sales of optical equipment had been robust in the late 1990s, but the market was soon saturated. When the speculative telecom bubble of the late 1990s reached its pinnacle, Nortel was to become one of the most spectacular casualties.
At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX). Nortel's market capitalization fell from C$398 billion in September 2000 to less than $5 billion in August 2002. Nortel's stock price plunged from C$124 to $0.47. When Nortel's stock crashed, it took with it a wide swath of Canadian investors and pension funds, and left 60,000 Nortel employees unemployed.
CEO John Roth retired under controversy to be succeeded by former CFO Frank Dunn. Despite some initial perceived success in turning the company around, he was fired for cause in 2004 after being accused of financial mismanagement. Dunn and other former Nortel officers have been accused of engaging in accounting fraud by the SEC (for more information, refer to "Accounting scandal").[8]
Retired United States Admiral Bill Owens was hired as the CEO to replace Dunn. In late 2004, Nortel Networks returned to using the Nortel name for branding purposes only (the official company name was not changed).
Nortel acquired PEC Solutions in June, 2005, renaming it Nortel Government Solutions Incorporated or NGS. The wholly-owned subsidiary provides information technology and telecommunications services to a variety of government agencies and departments.[9]
On August 17, 2005, LG Electronics and Nortel signed an agreement to form a joint venture to offer telecom and networking solutions in the wireline, optical, wireless and enterprise areas for South Korean and global customers. Nortel owns 50 percent plus one share in the joint venture.

Here are some key dates in the company's history:
May 1, 2000 - BCE Inc (BCE.TO: Quote, Profile, Research, Stock Buzz), Canada's biggest telecommunications group, completes spinoff to shareholders of 35 percent stake in Nortel, worth about C$88.5 billion ($75.6 billion)
Feb. 15, 2001 - Nortel cuts 2001 earnings and sales forecast in half, blaming severe erosion in U.S. economic conditions. The warning triggers a 33 percent drop in its stock and brings class-action lawsuits.
May 29, 2002 - Nortel plans to cut 3,500 jobs and sell more assets as it pares its revenue forecast.
June 4 - Nortel shares collapse to decade-long lows on concerns a new financing will further dilute its stock. Cash-hungry Nortel raises $1.49 billion June 7.
Oct. 23, 2003 - Nortel reports a quarterly profit, but says it will restate results going back to 2000.
March 15, 2004 - Nortel says it will likely restate results for a second time and delay filing its annual report.
April 5 - The U.S. Securities and Exchange Commission launches a formal investigation into Nortel's accounting
June 29 - Nortel exits manufacturing business, sells plants to Flextronics International, transfers 2,500 staff.
Sept. 30 - Nortel cuts almost 10 percent of its staff, 3,250 jobs, and vacates offices worldwide.
Jan. 11, 2005 - Nortel restates its results and says 12 senior executives will repay $8.6 million of bonuses.
Oct. 17 - Motorola's No. 2 executive, Mike Zafirovski, is appointed CEO, promising renewed growth and focus.
Feb. 8, 2006 - Nortel says it will pay $2.47 billion to settle two class-action suits from its accounting scandal.
Feb. 7, 2007 - Nortel slashes 3,900 jobs and shifts 1,000 positions to lower-cost locations such as China and India.

Oct. 15 - Nortel pays $35 million to settle civil charges filed by the SEC related to its accounting scandal.
Feb. 27, 2008 - Nortel says it will cut 2,1000 jobs as it faces persistently slow demand for its products.
Sept. 17, 2008 - Nortel cuts revenue forecast, plans another round of restructuring and the sale of its Metro Ethernet Networks business. It says it may also look for a partner to develop fourth-generation wireless technology.
Nov. 10 - Nortel announces 1,300 layoffs, a freeze on salary increases and a review of its real-estate portfolio after posting a $3.4 billion quarterly loss.

SEE:

Nortels Chickens Roost

NORTEL: Canada's Enron

Nortel Slash & Burn

NORTEL: REDUX

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Not So Green Apple

And what are the chances that Apple will blame China, where their phones are produced, for this? After all China bashing is all the rage in the US of A.

Apple’s iPhone contains hazardous chemicals and materials, according to the results of scientific tests commissioned by Greenpeace and released today. This is the first testing of an Apple product following the commitment by Steve Jobs, Apple CEO, to a ‘Greener Apple’, in May 2007.

An independent scientific laboratory tested 18 internal and external components of the iPhone and confirmed the presence of brominated compounds in half the samples, including in the phone’s antenna, in which they (1) made up 10 per cent of the total weight of the flexible circuit board. A mixture of toxic phthalate esters (2) was found to make up 1.5 per cent of the plastic (PVC) coating of the headphone cables.

The insight into the components of the iPhone is presented in the Greenpeace report, ‘Missed call: the iPhone’s hazardous chemicals’ This is the third time that Greenpeace has tested an Apple product since 2006. Similar analyses of a MacBook Pro and an iPod Nano also revealed the presence of brominated flame retardants and PVC in some components.

(1) Bromine: Whether in additive or reactive form, the presence of high proportions by weight of bromine in electronic components is of concern with respect to the disposal or recycling of end-of-life iPhone handsets, as even cross-linked organic-bound bromine can contribute to the formation of toxic chemicals, including persistent and bioaccumulative brominated dioxins and related compounds during thermal destruction or processing.

(2) Phthalates: The European Directive 2005/84/EC prohibits the use of di(2-ethylhexyl) phthalate(DEHP), dibutyl phthalate (DBP) and benzyl butyl phthalate(BBP) in all toys or childcare articles put on the market in Europe (with a limit of 0.1% by weight).

SEE:

PC is 25 years old

Slaves To Ipod

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Mattel In China

The problem is not with China but with the outsourcing by American Corporations who then do not take responsibility for either worker or consumer protection for their products as the Mattel recalls showed this summer.

The fact is production in China is no different than production anywhere else. It is the corporations responsibility to insure safety standards are met both for workers and consumers. Instead cheap production has also meant a lowering of those standards.

In order to avoid responsibility for recalls the corporations, and the ineffectual Consumer Protection Agency in the U.S. would rather blame China.

Twenty years of the ideology of contracting out/outsourcing for profit meant that corporations relied on making record profits from lower standards abroad for quicker and higher profits. Now the chickens come home to roost. And again as typical of corporate bosses they look for others to blame.

Mattel did not meet safety standards for it's products and spent the summer allowing the blame to fall on China.

"China has received a lot of blame for the recalls in the West," said Hari Bapuji, assistant professor at the University of Manitoba in Canada and lead author of the report, "Toy Recalls -- Is China the Problem?"

"They do have problems, there is no doubt. But I think the blame they received was larger than their share of their responsibility for the problem."

This paper analyzes the data on toy recalls over the last 20 years and
finds that the number of recalls and the number of recalls of Chinese-made
toys have witnessed an upward trend. We examine the increase closely and
find that the number of defects attributable to design issues is much higher than those attributable to manufacturing problems. We contextualize these findings in light of the latest recall of toys by Mattel and make two major suggestions: first, ensuring the accountability of toy companies to improve their product designs and second, encouraging the development of global standards to enhance product safety.

Our analysis of toy recalls revealed that an overwhelming majority of the recalls
could have been avoided with better designs. Therefore, it is important to focus efforts on learning from the recalls that occurred in the past and minimize their recurrence. Our analysis also revealed that the presence of excess lead paint is a result of differences in the standards of exporting and importing country. These could be avoided through legislation and education.

Mattel sorry for 'design flaws'

Mattel says it was mainly to blame

Mattel has admitted that most of the toys recalled in recent safety scares had "design flaws" and that Chinese manufacturers were not to blame.

Why Mattel Apologized to China - TIME

BBC NEWS | Business | Chinese province 'may sue Mattel'

China's Guangdong province is likely to join a planned libel suit against the US toy giant Mattel, according to the China Daily.

Mattel recalled more than 21 million Chinese-made toys this summer, but later said that 85% of the recall was due to its own design faults.

Responsible Shopper Profile: Mattel

MONITORING MATTEL IN CHINA

By Stephen Frost and May Wong

Recently the Asia Monitor Resource Center published a report which assessed the way in which Mattel monitors its code of conduct. We called it Monitoring Mattel: Codes of conduct, workers and toys in southern China, and in it we tried to show the limitations inherent in the implementation and monitoring of codes in China (and perhaps elsewhere). We discussed many issues, but here I want to raise three of our major themes.

The first is that a chasm separates what we might call corporate Mattel and production line Mattel. The second theme, arising out of this, is that Chinese workers do not have a voice in the formulation, implementation, or monitoring of Mattel's code of conduct. The final theme is that despite some major steps on Mattel's behalf, there is still some way to go before the code and its monitoring could be called transparent.

Strengthening of Consumer Agency Opposed by Its Boss - New York Times

The top official for consumer product safety has asked Congress in recent days to reject legislation that would strengthen the agency that polices thousands of consumer goods, from toys to tools.

On the eve of an important Senate committee meeting to consider the legislation, Nancy A. Nord, the acting chairman of the Consumer Product Safety Commission, has asked lawmakers in two letters not to approve the bulk of legislation that would increase the agency’s authority, double its budget and sharply increase its dwindling staff.

Ms. Nord opposes provisions that would increase the maximum penalties for safety violations and make it easier for the government to make public reports of faulty products, protect industry whistleblowers and prosecute executives of companies that willfully violate laws.

The measure is an effort to buttress an agency that has been under siege because of a raft of tainted and dangerous products manufactured both domestically and abroad. In the last two months alone, more than 13 million toys have been recalled after tests indicated lead levels of almost 200 times the safety ceiling.

Ms. Nord’s opposition to key elements of the legislation is consistent with the broadly deregulatory approach of the Bush administration. In a variety of areas, from antitrust to trucking and worker safety, officials appointed by President Bush have sought to reduce the role of regulation and government in the marketplace.

Nord clinging to her job as head of commission amid dangerous toy recalls

Nord also told a House Energy and Commerce panel that she did no wrong by accepting three free trips from industry worth thousands of dollars, saying it had been common agency practice with approval from CPSC attorneys.

“This practice, not common by me, is legal ... and was in place for 20 years, long before I came to the commission,” she told lawmakers who questioned her independence.

“Faced with limited enforcement dollars,” Nord said, “I would much rather spend $900 in a laboratory than on airfare and hotel.”

Profits valued over children's safety

By MARIANNE MEANS
SYNDICATED COLUMNIST

WASHINGTON-- It's a national embarrassment.

The Consumer Products Safety Commission is ordinarily not a controversial agency -- it is so small it operates largely in obscurity. But it has suddenly become a public outrage, a symbol of the Bush administration's cavalier attitude toward the public good when it conflicts with big business interests.

We have always known this is President Bush's basic notion of how to govern, but up to now we had seldom been hit smack in the face with it. The acting chairman of the CPSC, Nancy Nord, testified recently on Capitol Hill that the commission opposed congressional efforts to expand the agency's budget and powers in order to get a handle on tainted toys and other products flooding the U.S. from China.

Her indifference to the threat from lead-contaminated toys and other consumer items created a firestorm. It forced the administration to rush forth with an alternative plan that had been languishing for months. That plan would set up a system allowing most industries to police themselves but add more inspectors for companies with particularly dangerous products or bad safety records.

It is, predictably, far more limited in scope and authority than the congressional plan. But it will temporarily serve the administration's purpose of muddying the issue.

The decline of the CPSC is a shame. Congress proposed the agency at the peak of the consumer movement in the late 1960s, when the country was rebelling against the traditional concept of caveat emptor -- let the buyer beware. The public was tired of business getting away with shoddy practices and shoddy goods.

The major champion of the cause, Ralph Nader, was listed in a magazine as one of the nation's 10 "most admired" men and consumerism enjoyed support across political and philosophical lines. But then Nader, full of himself, made a major mistake. He endorsed the 1972 presidential candidacy of George McGovern and dragged his cause to the far left. As a consumer crusader, he was popular; as a potential presidential candidate, he was a disaster.

(And still is -- Democrats loathe him because his pitiful 2000 candidacy got just enough votes to do in Vice President Al Gore in Florida's tight contest. Yet he recently mused that he would like to run for president again next year because he saw no difference between GOP and Democratic principles. The man is an egomaniac.)

Meanwhile, the CPSC continues its drastic fall. Nord and her predecessor, Hal Stratton, have made several trips around the world on junkets financed by the industries they are supposed to be regulating.

Nord rejected the congressional offer of more money and authority. She warned that the bill "would harm product safety and put the American people at greater risk."

Nord's logic seems a little nutty.

The bill would increase the agency's budget from $63 million to $142 million by 2015 and increase its staff by 20 percent. It would raise the cap on penalties for safety violations from $1.8 million to $100 million, ban lead in kids' products and make it illegal to sell recalled goods. It would add whistleblower protections.

But she is used to viewing the world from the one-sided viewpoint of business. She is a lawyer who worked for the U.S. Chamber of Commerce and in private practice for clients such as General Electric and other leading manufacturers and retailers.

Her agency is responsible for overseeing more than 15,000 types of products. But it has only 400 staffers, fewer than half the number when the agency was formally established in 1973. It has only one full-time toy tester.

The CPSC has been without a chair for more than a year. In March, Bush nominated Michael Baroody, a manufacturing industry lobbyist, to become chairman. He withdrew his name two months later rather than reveal his severance agreement with the National Association of Manufacturers.

Democrats are now calling for Nord to resign. She is certainly in an inappropriate job. But Senate Majority Whip Dick Durbin, D-Ill., warned that if she leaves, Bush might just forget to replace her and leave the commission rudderless and helpless. That seems to have been Bush's goal all along. To get real consumer protection, we will have to wait for a Democratic president.

Marianne Means is a Washington, D.C., columnist with Hearst Newspapers. Copyright 2007 Hearst Newspapers.

SEE:

NAFTA Poisioning

Turning Lead into Gold

Made In U.S.A. Food Recall

Criminal Capitalism: Pet Food Scandal

Fish Contamination


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Contracting Out Is A Crime

Once again the attempt by the Liberals to Reinvent government, the mantra of the neo-con revolution of the nineties, ends up costing Canadians millions. Whether it was the P3 Boondoggle with the Firearms registry, the RCMP pension fund fraud or this case where the Department of National Defense was bilked for millions. It all has to do with contracting out and outsourcing IT functions of the State.

Ex-federal employee guilty of huge fraud

A former defence bureaucrat, who led a jet-set lifestyle, pleaded guilty today to two charges in a phoney contract billing scheme that bilked $146-million out of the federal government before it was stopped.

Paul Champagne, who had been an $80,000-a-year contract manager with the department, pleaded guilty to one count of fraud and one count of breach of trust in an Ottawa courtroom.

He was fired from his job in 2003 after billing irregularities were revealed involving a contract with U.S. computer giant Hewlett-Packard.

After a lengthy RCMP investigation, Champagne, 49, was charged with seven fraud-related crimes. After he pleaded guilty today to two charges, the Crown dropped the remaining five counts.

He will be sentenced in January.

In the late 1990s, the Defence Department issued a series of contracts to Hewlett-Packard (Canada) Inc., eventually paying $159 million for computer maintenance services. The government later discovered it got little or nothing for its money.

The Public Works Department red-flagged the contracts over the four years prior to Champagne's dismissal, but did nothing. A scathing report in 2003 found that managers at the federal government's tendering department failed to appreciate the significance of at least three audits that warned something was terribly wrong with the computer contracts.

After the scandal became public, Hewlett-Packard said it was told by the department to pay a group of subcontractors and their work was deemed secret.

In May 2004, the computer giant repaid $145 million to the federal government, and said its employees did nothing wrong.

Two Ottawa businessmen, Peter Mellon and Ignatius Manso, were also charged, but the Crown said Monday only one case remains to be resolved. A spokesman for the RCMP couldn't say what the status of the cases might be.

Over 10 years, starting in 1993, five contracts worth a total of $250 million were signed with the Compaq Computer Corp., Digital Equipment and Hewlett-Packard, which eventually bought Compaq.

Audits conducted by Public Works in 1999 and 2000 raised concerns about three of the contracts, but in 2001 a further review found unauthorized billing and "evidence of contractual funding appropriated for other purposes."

After Champagne was fired, National Defence did its own internal review of contracts and discovered problems with two dozen other projects. Today, the Defence Department did not respond to requests for comment about what safeguards have been put in place to prevent a repeat of the fiasco.

At the time of his arrest Champagne was a multimillionaire, who insisted his wealth and homes in exclusive districts of Ottawa, Florida and the Turks and Caicos were the results of shrewd investment in high-tech stocks during the tech boom of the late 1990s.

SEE:

Defense Lobbyist Now Minister

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Free Trade=Cheap Wages

The truth is in reading the fine print. Free Trade is not about trade, or sustainable markets, it is about off-shoring production and contracting out services.

India also offers Canadian companies another cheaper-wage locale besides China where they can shift production to save money and remain competitive.

This little fact will get lost in the hoopla that will be generated around a bilateral free trade agreement between Canada and India.



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