GE: Crony Capitalism Made Easy

It’s good to be the king. It’s equally good to be a friend of the king (“FOK”), as GE can attest. Indeed, you may recall GE CEO Jeffrey Immelt, was recently appointed to lead Obama’s President's Council on Jobs and Competitiveness. You may also recall that Immelt spent the last two years trying to foist cap and trade rules on the rest of us so we would be forced to buy his company’s products. Well, it gets better.

It was reported the other day that GE received a waiver from the EPA’s new greenhouse gas emissions rules for a power plant GE is building in California. Yes, the same greenhouse gas rules GE has been lobbying Congress to force upon the rest of us. That’s how you do it when you’re a FOKer.

Of course, GE wants to distance itself from the bad press this generates, so GE issued a press release, in which it claims that it did not request a waiver, nor was it given one. In fact, it says, it’s not even building the project! GE has only offered to provide turbines to the project but its offer hasn't even been accepted yet. So there, nothing to see here. Moreover, the project manager, not GE, requested the waiver.

So who is right? Well, let me say that I have no doubt that everything GE says in its press release is absolutely, technically true. But there’s a problem with GE’s claim. I spent years involved in government contracts, including construction contracts just like this one. And what GE says here is misleading.

When a company submits a bid on such a project, it already has its subcontractors lined up. Indeed, these bids are essentially the work of teams of contractors, whose efforts are coordinated by a single general contractor, who assembles and submits the final bid. Each contractor participating in the team will submit their own bid to the general contractor, usually on the condition that the bid is binding on both parties but only if the team is chosen to handle the contract. What this does is it allows the general contractor to know their costs and what capabilities they can offer, but doesn't require anyone to agree to anything unless they end up winning the overall contract, at which point everything automatically falls into place.

This is how it's always done. Indeed, it’s inconceivable that anyone would submit a bid to build a power station without having an agreement in place for GE (or some competitor) to supply the turbines at a certain price. Thus, while I don't doubt for a moment that GE is being legally correct when it claims that its offer has not been accepted, I have little doubt this is also highly misleading. The technical acceptance is a formality.

What’s more, it's also inconceivable that a project manager would request such a waiver without the full knowledge, support and participation of GE. Indeed, they would have needed GE to identify the issue for them and to guide them through the process. Thus, while it is probably technically correct that the general contractor made the request rather than GE, the general contractor would only make the request at GE’s direction.

Why would GE try to mislead the public on this? Because this is crony capitalism. GE spent $32,050,000 lobbying in 2010 and now it’s calling in those markers to get its politicians to put harmful anti-competitive regulations in place, and then to get exemptions from those regulations for itself. Keep this in mind, along with the 25,000 jobs GE shipped overseas during the last two years the next time you see a GE ad telling you about all of the good things they are doing for America and the world. And even more importantly, keep this in mind the next time some politician (Republican or Democrat) tries to tell you why we should be doing something GE wants. . . because they're FOKers.