Overseas Civilian Contractors

News and issues relating to Civilian Contractors working Overseas

Oversight of war zone subcontractors is lacking, panel finds

Robert Brodsky at GovExec

Prime contractors in Iraq and Afghanistan are not managing their subcontractors’ performance and fees consistently, the Defense Department’s top auditing official told the Commission on Wartime Contracting on Monday.

A Defense Contract Audit Agency review of prime contractors’ billing and cost records identified several situations in which they failed to award fixed-price subcontracts based on fair and reasonable prices, often leading to unreasonable or unallowable costs.

“Prime contractors must be held accountable for establishing fair and reasonable subcontract prices,” Patrick Fitzgerald, director of DCAA told commission members.

Subcontractors comprise about one-third of the roughly 200,000 contractor employees in Iraq and Afghanistan, according to the commission’s data. But federal regulations limit government officials’ visibility into the activities of in-theater subcontractors.

Federal agencies enter into agreements with the prime contractors and have no direct business relationship, known as privity of contract, with subcontractors. Prime contractors are legally responsible for managing subcontractors, but many lack the internal controls or oversight mechanisms to carry out that role, the panel suggested.

For example, DynCorp International billed the government roughly $6 million for work performed by Kuwaiti-owned subcontractor Al-Shora International General Trading and Contracting Co. The cost-type subcontract terms required Al-Shora to provide cost data to support its invoices. When DCAA requested that Al-Shora open its books to document its costs, the company declined, citing Kuwaiti law. DCAA has since suspended payment for DynCorp’s billed costs from Al-Shora.

“If foreign companies want to be in business with this government, they ought to play by our rules,” said commission member Dov Zakheim.

DCAA plans to recommend that Pentagon officials consider adding a contract clause that would require primes to manage its subcontractors more closely.

“Prime contractors should have systems or processes in place to review subcontractor billing processes to ensure [they] are in accordance with subcontract terms and conditions,” Fitzgerald said.

In addition, the Defense Contract Management Agency has yet to approve the purchasing systems of two of the three prime contractors — DynCorp and Fluor — for the Army’s multibillion-dollar LOGCAP IV logistical-support contract for operations in Iraq and Afghanistan. The government relies on data from prime contractors’ purchasing systems to ensure subcontract costs are reasonable.

Commission members cited ethical, security and logistical concerns with wartime subcontractors, including allegations of exploitation of unskilled foreign laborers, human trafficking and excessive costs from tiering contracts, or adding layers of subcontractors to obscure fees and credentialing.

“Subcontracting is a normal business practice,” said commission co-chairman Christopher Shays. “But what makes sense for an office renovation project in Maryland can create some unique risks when the contractor is hiring subcontractors in a combat zone half a world away.”

The daylong hearing included officials from four federal agencies, four prime contractors and six subcontractors. Each agreed that subcontracting in a wartime environment presents unique security and operational concerns.

“We recognize the risks of contracting in a contingency operation,” said Edward Harrington, deputy assistant secretary of the Army for procurement. “We must ensure that America’s integrity is not harmed by the actions of our contractors and subcontractors.”

Both State Department and U.S. Agency for International Development officials said prime contractors must obtain their contracting officers’ written consent prior to the award of a subcontract.

Prime contractors told the panel that oversight of subcontractors was lacking at the start of the wars in Iraq and Afghanistan, in part, because relatively few foreign-owned firms in the region had any experience working with the U.S. government. They said the environment has improved considerably in recent years, but challenges remain.

For example, the federal government frequently prevents local citizens from working on U.S. bases, where much of the subcontract work is performed, said John Supina, DynCorp’s senior vice president of business administration.

“Vetting of host country employees to ensure that they do not support insurgents, will not divert funds to insurgent causes, or pose a threat to U.S. and allied personnel is very difficult,” he said.  Original here

July 26, 2010 Posted by | Civilian Contractors, Contingency Contracting, Contractor Corruption, Contractor Oversight, DynCorp, Wartime Contracting | , , , , , , , , , | Leave a comment

Senators Call for Changes to Troubled, Costly Afghan Police Training Program

by Ryan Knutson, ProPublica

State and Defense department officials took a tongue-lashing today, trying to explain to a Senate subcommittee how the government has poured $6 billion since 2002 into building an effective Afghan police force with disastrous results.

ProPublica and Newsweek examined the problems [1] with police training in Afghanistan in a story published last month. The program, managed under a contract with DynCorp International, has faced challenges on every front, from recruitment to inadequate training periods to corruption to poor officer retention.

“Everything that could go wrong here, has gone wrong,” Gordon S. Heddell, the inspector general of the Department of Defense, acknowledged to an ad hoc subcommittee [2] of the Senate Committee on Homeland Security and Governmental Affairs. Heddell’s office, along with the State Department’s Inspector General, completed a six-month audit in January of the program that found significant lapses.

Sen. Claire McCaskill, D-Mo., the subcommittee chair, and others on the panel were less interested in rehashing the program’s well-known shortcomings and more interested in hearing about solutions. “What you laid out was a problem we knew in 2001,” said Sen. Edward Kaufman, D-Del., in response to comments from Heddell. “What are the two or three things you can spend $6 billion on and not end up with essentially nothing?”

Defense and State Department officials agreed that clearer guidelines for the contractor and more oversight are needed to improve the program. Currently, the State Department has just seven contract overseers in Afghanistan, said David T. Johnson, an assistant secretary for the State Department. The agency hopes to have 22 in place by September, Johnson said.

Another key would be to make training ongoing, rather than just the six weeks that police recruits are getting now, said David S. Sedney, a deputy assistant secretary with the Defense Department. “This is not a weeks- or months-long [process] — it’s a years-long process,” he said, adding that police need to be partnered with American military and more experienced Afghan troops on whom they can model their behavior.

Even if the program makes headway, some senators questioned whether it would be sustainable without a massive ongoing commitment from U.S. taxpayers. The Afghan police and army are slated to receive $11.6 billion to fund their operations for 2011, with just over half going to the police, Sedney said. McCaskill pointed out that’s only $2 billion less than the entire country’s Gross Domestic Product.

“It’s obvious that Afghanistan is not going to be able to afford what we’re building for them,” she said. The U.S. has made a “billion-dollar commitment for years to come.”

The government is already exploring whether a change in contractors might benefit the police-training program. DynCorp’s contract has been extended for several months, but the State Department has issued a call for new bids, hoping an array of companies will step up to compete for the job, Johnson said. McCaskill was skeptical, however.

“I will be shocked — like winning the lottery — if we end up with anybody other than DynCorp,” she said.

Write to Ryan Knutson at Ryan.Knutson@propublica.org

April 15, 2010 Posted by | Civilian Contractors, Contractor Corruption, DynCorp, Wartime Contracting | , , , , , , , , , , , | Leave a comment