Hidden Bonuses Enrich Government Contractors at Taxpayer Cost

By David Dietz

U.S. Senator Kit Bond shifted in his chair at a 2005 congressional hearing, poised with a question on national security. He turned to Treasury Secretary John Snow, who was seated at a witness table.

Was Snow sure, asked Bond, a Missouri Republican, that a Treasury Department computer on order for $8.9 million would help detect terrorist money laundering?

"Yes, absolutely," Snow said.

A year later, in July 2006, the U.S. Treasury Department abandoned the project. The computer didn't work. The department had spent $14.7 million -- a 65 percent increase above the original budget -- for nothing.

There was a final ignominy: Under the terms of the contract, Electronic Data Systems Corp., the vendor, collected a bonus of $638,126.

As the federal government's $700 billion bailout of banks sputters, there's an object lesson for the new administration of President Barack Obama: Federal departments, including Treasury itself, routinely squander tens of billions of dollars a year in taxpayer money as they farm out public business to private corporations.

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