Last week, the Senate Armed Services Committee (SASC) heard testimony, regarding a so-called “revolving door” between the Pentagon and companies to which it awards contracts. The SASC’s Personnel Subcommittee presented a report from Sen. Elizabeth Warren (D-Mass.) on the topic. It expresses concerns about undue influence and the potential ethical dilemmas of having so many former Department of Defense (DoD) officials working in the private sector. As you can imagine, this has the folks who represent the interests of those companies worried this could be the case of a solution looking for a problem. To hear more about that and other legislative developments, Federal Drive with Tom Temin  spoke to Stephanie Kostro, executive vice president for Policy at the Professional Services Council.

Interview transcript:

Stephanie Kostro The report that Senator Warren issued, she calls it an investigation, it’s about a seven page report on the number of former high level DoD folks who have ended up in private sector. And this piqued our interest over an industry because, obviously, we are the folks who are looking for to hire expertise, to hire people with high integrity, such as those coming out of the uniformed services. And so this was a hearing that we watched very, very closely.

Eric White And involved in it were several branches of the military, as well as DoD. I am curious what the government side of the folks said, whether or not they even found it an issue or not.

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Stephanie Kostro A few years ago, Senator Warren introduced legislation to increase restrictions on post government employment, and we’ll call that PGE, Post Government Employment. Right now you have a two year cooling off period, etc.. The DoD folks, and I’ll say it was the general counsel folks, so it was DoD, Army, Navy and Air Force, they think they have fairly tight constraints, ethical constraints on what post government employment looks like for former high level folks. For example, if you are a three or four star admiral or general, you have different requirements than say someone lower ranking if you were separating out of the service or retiring. And so, they walked the committee through sort of what the considerations are in coming up with post government employment restrictions. And so that’s the perspective they came from, which was they think the restrictions are adequate. And obviously, the investigation from Senator Warren is on the other side of the of the coin there, of that they’re not adequate, that they should be tighter. One of the things that her report goes into is the number of former high level DoD folks who are, they use the words cashing in on their expertise or otherwise. In industry we don’t really use that, the contractors look to hire former senior folks for their expertise, and as I mentioned earlier, for their loyalty. They don’t check their honor or their integrity at the door once they sign retirement papers. They’re still pretty loyal to the United States, and the contractors are generally as committed to the federal missions set as government employees. And so from an industry perspective, we do take a couple of issues with the report that Senator Warren put out.

Eric White Yeah. And from the industry standpoint, I imagine that the main concern on your side of things is that certain companies may have more of a foot inside the door when they hire certain individuals. And that may break down the, OK, now we’re facing against each other. How do they address that? And what is your concerns from the PSC standpoint regarding that?

Stephanie Kostro Now, that’s a great question. I mentioned post government employment restrictions. I know of no former senior person who doesn’t know their ethics lawyers number by heart back at the Department of Defense. And so, if anything comes up that is even crossing a line into undue influence, they call that person up. And so one of the things that we are looking for, if Senator Warren reintroduces that legislation, is to have a conversation about what is appropriate. At the end of the day, if you are involved in a contract award, you are for life not allowed to deal with the implications of that award. So we at PSC recently hired someone who had worked for the Navy, and she wasn’t a senior executive service member, but she was a civil servant. And she’s got post government employment restrictions and she knows her government ethics lawyer number by heart, can reach out and contact them at any point. And so I do think there are really good, I would say, safeguards in place. But I would like to have a conversation with Senator Warren and her staff who put together this report about what they’re really trying to get at and how can we work together to get us there.

Eric White And let’s bring the focus back to the people who are actually doing these jobs, other than, obviously, the money is probably pretty good, and it’s a nice little stipend after you retire. But what are some of the other reasons for wanting to join private industry after putting in many years of government service?

Stephanie Kostro When you retire out of government service after decades of being in the military, you have a built up a knowledge base and a skill set. Yes, you also have contacts because, anybody who works in an industry for decades would have contacts. But really, it’s the knowledge base that  private companies are looking for. It’s not so much, I would say undue influence, which is, I think also a phrase that the senator uses. I think it’s also, they are the ones who are familiar with the program, and I’ll give you an example. Recently announced was this Australia, UK, U.S. trilateral security pact, which is also known as AUKUS. And it’s a huge step forward to what we are trying to accomplish from a national security perspective in the Indo-Pacific area of responsibility. It wouldn’t have happened without engagement of all sides, military, civilian and industry. And I think as we move forward in things like that, bringing knowledge to bear is critical. And I think, it’s not like you can find someone who has the same experience and knowledge that as a three star general or admiral, just growing organically outside of the military. You’re going to have to take someone who was recently separated or retired. One other point that I’ll bring up, is one of the individuals mentioned in the senator’s investigative report is from a company, but they had left government 17 years before they started working for the private sector in this area. And so I would like to talk to the senator’s staff about why they cited somebody who is high level up in a large defense contractor citing that is a revolving door issue, when he waited 17 years before going into defense industry. I think, again, would really like to get at what the senator’s trying to accomplish here and work with her and her staff to figure out what right looks like.

Eric White There’d be a slow door to go into. We’re speaking with Stephanie Kostro from the Professional Services Council. That wasn’t the only concern defensively on the Hill this month. Earlier in April, DoD sent a third package of its legislative proposals to Congress, and it includes a way for them to kind of get started when Congress is lagging behind in giving them the funding for new projects. What can you tell me about what DoD sent to the lawmakers on Capitol Hill?

Stephanie Kostro More often than not, we do start the fiscal year under what’s called a continuing resolution, which is a straight line. We don’t have a full year appropriation passed for the coming fiscal year. So instead they just do a straight line from the last approved full year appropriation. This legislative proposal was very interesting to me, because it it’s about doing some design work and other sort of low rates production work on platforms that are really, really important. So things like hypersonics or kinetics coming out from a from a DoD perspective, like 100% see where they’re coming from. They would like to continue work under a continuing resolution. You cannot start a new program. And that often is a problem for these high end, fast paced requirements that are coming down. Whether they’re considering a Chinese scenario or an Eastern European scenario. We are trying to field capabilities at the speed of relevance. That’s hard when you don’t have full year funding. So I understand where the Department of Defense is coming from, where they’d like to be able to do some design work, experiments, etc.. On the other hand, one of the big impetus is to pass a full year appropriation, is because you can’t start new starts. And members of Congress go we would like to move forward and feel these capabilities. Let’s go ahead and pass a full year appropriation. So I think this is going to be an interesting area to watch. I think there’s probably going to be some reluctance on the Hill initially to consider this legislative proposal, because it does give them an out. And people like to pass full year appropriations to get back to their districts and fundraise and to do that kind of stuff. I don’t think Congress likes having continuing resolutions that historically mess up the December holidays. So I think as we move forward watching this, I’m curious to see what the Department of Defense comes, what arguments it comes with to the Hill for this legislative proposal.

Eric White Yeah, And I imagine that this is all compounding into the debt ceiling debate that is now ongoing in the House of Representatives. What can you tell me is the latest on what you’re hearing from your folks up there on the Hill?

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Stephanie Kostro When you go back, it’s what, 12 years ago when we had these conversations in the Obama administration about whether you have a clean extension of the debt limit or you have riders on it. We had that conversation again a few years after that 2011 issue. What I’m hearing is that, the the House did pass, what I believe is called the Limit, Save, Grow Act of 2023. It is dead on arrival in the Senate, because it does have a lot of tough pills to swallow. Whether this brings the White House back to the negotiating table to talk about anything other than a clean extension, remains to be seen. I think we now know where the House Republicans stand, or at least 217 of them where they stand. And so this could be an indication that they’re going to go back to the negotiating table, but we still don’t know what X date is. And so we don’t know when we’re going to hit that debt ceiling debt limit again. And so anything can happen. I’ve never seen, and I’ve been in Washington now almost three decades, I have never seen it quite like this where people are dug in on the debt limit this way and not even willing to talk about it. So we’ll see what happens.

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