Bloomberg at SF Gate July 31, 2011
A U.S. contractor in Iraq overbilled the Pentagon by at least $4.4 million for spare parts and equipment, including $900 for an electronic control switch valued at $7.05, according to a new audit.
Based on the questionable costs identified in a $300 million contract with Dubai-based Anham LLC, the U.S. should review all its contracts with the company in Iraq and Afghanistan, which total about $3.9 billion, said Special Inspector General for Iraq Reconstruction Stuart Bowen.
“The audit found weak oversight in multiple areas that left the government vulnerable to improper overcharges,” Bowen wrote in the forward to his 30th quarterly report, released today. The contract in question was funded with a combination of money earmarked for Iraqi Security Forces and Army operations and maintenance funds.
Among the “egregious examples of overbilling” by Anham were $4,500 for a circuit breaker valued at $183.30, $3,000 for a $94.47 circuit breaker and $80 for a small segment of drain pipe valued at $1.41
by Spencer Ackeman at Wired’s Danger Room July 22, 2011
By January 2012, the State Department will do something it’s never done before: command a mercenary army the size of a heavy combat brigade. That’s the plan to provide security for its diplomats in Iraq once the U.S. military withdraws. And no one outside State knows anything more, as the department has gone to war with its independent government watchdog to keep its plan a secret.
Stuart Bowen, the Special Inspector General for Iraq Reconstruction (SIGIR), is essentially in the dark about one of the most complex and dangerous endeavors the State Department has ever undertaken, one with huge implications for the future of the United States in Iraq. “Our audit of the program is making no progress,” Bowen tells Danger Room.
For months, Bowen’s team has tried to get basic information out of the State Department about how it will command its assembled army of about 5,500 private security contractors. How many State contracting officials will oversee how many hired guns? What are the rules of engagement for the guards? What’s the system for reporting a security danger, and for directing the guards’ response?
And for months, the State Department’s management chief, former Ambassador Patrick Kennedy, has given Bowen a clear response: That’s not your jurisdiction. You just deal with reconstruction, not security. Never mind that Bowen has audited over $1.2 billion worth of security contracts over seven years
U.S. contractors with almost $2 billion worth of counter-narcotics business in Afghanistan will get more scrutiny than they faced for work completed in Latin America over the past decade, government officials said.
The Washington Post June 26, 2011
DynCorp International, Lockheed Martin, Raytheon, ITT and ARINC, which are working with the Defense and State departments on anti-drug efforts in Afghanistan, performed similar work in Latin America with inadequate competition and little oversight, according to a report by the majority staff of a Senate Homeland Security subcommittee and a previous investigation by the Pentagon’s inspector general.
The contractors should expect new accountability measures at State and the Pentagon, as well as heightened scrutiny from Congress, as the United States seeks to stabilize the government in Afghanistan, where drug trafficking generates as much as $100 million a year for the Taliban, officials said.
“Many of the things we’ve been doing in Afghanistan, it’s not reinventing the wheel — we’ve been doing it in Colombia for a decade, and with many of the same contractors,” said Laura Myron, a spokeswoman for Sen. Claire McCaskill (D-Mo.), chairwoman of the subcommittee.
McCaskill is to convene a hearing this week on Afghanistan contracting, at which she’ll address the counter-narcotics work, Myron said in an e-mail.
As the post-Iraq drawdown gets underway, 3.4 million pieces of military hardware will need to leave the country. Many have already been repaired and shipped to new theaters of operation, and thousands more are waiting for repairs at support bases around the Middle East. However, despite the fact that overseas support contractors were exempt from Secretary Gates’ push to eliminate 33,000 contractor positions from DoD’s payroll, some major changes are coming to logistics support contracting.
First and foremost: oversight. DCMA is hiring contracting oversight officers to address problems identified during the Iraq conflict, including a lack of oversight for contractors. The most obvious change that will be apparent is the increase in DCMA pesonnel, with plans to hire thousands of new professionals.
Also, expect training for DoD personnel interacting with contractors (including unit commanders) to become standardized, as DoD has recognized the need to train all personnel, not just oversight personnel, to work with contractors. Commanders who don’t understand the intricacies of the command and control relationship between soldiers and civilian support personnel could direct contractors to perform work outside the scope of the original contract, risking extra fees and even violations of competition requirements.
Finally, expect DoD to more clearly identify contractor requirements. One of the lessons learned from Iraq is that failing to identify precisely what support the Pentagon needs early on in a conflict can lead to cost overruns later. Expect future logistical support contracts to be very specific about what work will need to be performed, and expect fewer surprises in future support contracts.
Overall, the changes mean more DCMA personnel being hired as well as standardized training for them. Unit commanders in particular can benefit from this harmonization. Fewer surprises in contractor requirements also means fewer surprises in costs – a move which could very well save government clients money. This change in logistics, smoothing and standardizing the interaction between government agencies and the contractors they employ, could very well be a win-win situation. Please see the original article here
The Pentagon’s top watchdog has abandoned efforts to do in-depth audits of defense contracts, leaving billions of dollars in taxpayer money at risk because of overpayments and fraud, according to an investigative report due to be made public on Thursday.
The report, written by Republican Senator Chuck Grassley’s staff and obtained by Reuters, concludes that the Defense Department’s Office of Inspector General has focused instead on less important types of audits, and that its productivity has plunged in recent years.
It said the inspector general’s office in fiscal 2009, which ended September 30, 2009, did not audit any “major or non-major weapons contract or contractor.”
The report contends too that the inspector general’s office has failed to follow up even when it finds evidence of serious misdeeds.
In one example, auditors in 2007 stumbled upon a recurring error in the Pentagon’s overall financial statements, because military officials had failed to record $1 billion in proceeds from the sale of closed U.S. military bases in Europe.
They also found that about $107 million of the money had disappeared. However, senior officials turned down the auditors’ recommendation to launch an investigation.
The watchdog’s poor performance, the report says, has resulted in little oversight in recent years of annual payments to contractors, which currently total more than $390 billion, up from $154 billion in 2001.
The report said that misdirected efforts by the watchdog left “huge sums of the taxpayers’ money vulnerable to fraud and outright theft.”
It said this lack of thorough audits occurred despite a 35 percent increase in the inspector general’s staff since 2003, to 765 employees.
The Grassley report, however, also puts heavy blame on the Defense Department itself for inadequate oversight of contracts. Please read the entire story here
at DiploPundit You’ll want to check out this blog for more interesting reading
SIGIR might be winding down but it continues its forensic review of Department of Defense (DoD), Department of State (DoS), and U.S. Agency for International Development (USAID) expenditures. These reviews systematically examine Iraq reconstruction program expenditures to identify anomalies in transactional data that may indicate fraud, waste, or abuse. From its latest Interim Report (#2) dated January 28, 2010:
SIGIR’s Results to Date
51,000 | additional transactions reviewed by SIGIR$17.3 billion | value of transactions reviewed by SIGIR73,000 | total transactions reviewed todate$28 billion | total value of transactions reviewed todate$340 million | anomalous transactions identified800 | approximate number vendors involved with anomalous transactions27 | criminal investigations opened by SIGIR36 | total subjects in criminal investigations opened by SIGIR
Anomalous transactions excerpted from the report:
Since our last report, SIGIR has reviewed an additional 51,000 transactions valued at $17.3 billion, bringing the total transactions reviewed to 73,000 transactions valued at $28 billion. We continue to identify numerous anomalous transactions, including payments that may be duplicates, payments to possibly fictitious or generic vendors, notable variances in payment activity, payments occurring prior to or on the date of invoice, and oddly sequential contractor invoices. We also identified payments to firms with what appear to be fictitious addresses, and payments to possibly suspended or debarred contractors.
To date, we have identified almost $340 million in anomalous transactions involving approximately 800 vendors that we are in the process of researching to determine if they are fraudulent or improper. To do this, we are examining the transactions and reviewing relevant contract file documentation. Due to the number of transactions that must be examined, we are prioritizing our work using risk factors such as transaction type and amount and whether there is a prior history of questionable activity. A SIGIR forensic audit team is currently focusing on possible duplicate payments associated with DoD expenditures. In addition, a SIGIR initiative that focuses on programs that afford easy access to cash associated with weak controls over expenditures continues to identify instances of questionable activity. As a result of this effort, to date SIGIR has opened 27 criminal investigations currently involving a total of 36 subjects. Detailed information regarding ongoing criminal investigations will not be presented in these reports.
The results of SIGIR’s forensic audit efforts will generally be reported in the aggregate and specific findings will be included where appropriate and useful. We are also providing lessons learned that can be applied to other contingency operations, such as in Afghanistan.
WASHINGTON — An independent panel examining waste and fraud in wartime spending accused contracting giant KBR Inc. on Tuesday of resisting government oversight and failing to cut costs on support work in Iraq.
During a hearing held by the Commission on Wartime Contracting, KBR defended its performance, telling the panel the company was under heavy pressure to meet the urgent demands of military commanders.
KBR’s internal accounting and cost estimating systems have been inadequate since 2005, commissioners said, leading to questionable billings and drawn out arguments with federal auditors over hundreds of millions of dollars in charges.
Commissioner Dov Zakheim said KBR’s top managers meet regularly with the Defense Contract Audit Agency. Yet the company has been unable to come up with solutions that satisfy the agency. By comparison, other large contractors, such as Dyncorp International, seem to work out their problems quickly, he said.
“Are you guys stonewalling?” asked Zakheim, a former Pentagon comptroller.
William Walter, KBR’s senior vice president for government compliance, said the company was incurring expenses for the work it was doing in Iraq at the same time auditors were poring over the company’s cost projections, a situation prone to confusion and disagreements.
“It’s a vicious cycle that we were stuck in,” Walter said. He described the disagreements over contract charges as “differences of judgments.”
KBR is the primary support contractor in Iraq, providing troops with essential services, including housing, meals, mail delivery and laundry. The company has been paid more than $32 billion since 2001.
But in a prior report, the commission said billions of dollars of that amount ended up wasted due to poorly defined work orders, inadequate oversight and contractor inefficiencies.
Commissioner Charles Tiefer said KBR is keeping more employees in Iraq than it should in order to keep charging the government for work even as U.S. forces are drawing down.
In late January, Army Gen. Ray Odierno, the top U.S. commander in Iraq, ordered military units to begin cutting U.S. contractors by 5 percent each quarter and to hire Iraqis instead.
Tiefer, a professor of government contracting at the University of Baltimore Law School, said figures he’s compiled show KBR’s personnel rates in Iraq are declining more slowly than others.
“They’re slow rolling the drawdown,” he said.
Walter said much work remains to be done in Iraq even as the U.S. presence is decreasing. That includes shutting down bases and housing units.
Commissioners also faulted KBR for building a $30 million dining facility at a U.S. base in Iraq shortly after the company had renovated the base’s existing mess hall at a cost of $3.36 million.
The panel wanted to know whether KBR tried to tell the military the new facility was unnecessary, especially with American forces scheduled to be out of Iraq by the end of 2011.
Walter said the renovation work and the new facility were two separate contracts from two different Army agencies, evidence of the need for government to speak with “one voice.”
“And nobody from KBR went to anybody senior in the Army and said, ‘What in God’s name are you doing?'” Zakheim said.
Walter said KBR does what it is told to do by the customer.
Commissioner Linda Gustitus asked Walter whether the company has been criticized by government officials for not proactively seeking cost savings.
Walter didn’t answer immediately.
“The answer is yes, by the way,” Gustitus said.
WASHINGTON — The government has kept a closer eye on U.S. contractors in Iraq since a deadly 2007 shooting by Blackwater guards, but it still needs to do a better job tracking and investigating when private security guards fire their guns, two new Pentagon audits have found.
The reports were released Tuesday by the Pentagon’s special inspector general for Iraq reconstruction. They looked at the oversight of at least 13 U.S. firms working for the Defense and State departments between May 2008 and February 2009.
In perhaps the most serious lapse of oversight, one of the audits concluded, contractor watchdogs did not properly report and track the May 2008 death of an Army Corps of Engineers employee who was caught in a gunfight between security guards and al-Qaida suspects near Bayji, in central Iraq.
Pentagon auditors said the employee’s death should have been recorded in a database and triggered an Army investigation. U.S. officials in Iraq, however, said that was unnecessary if “the incident is caused by the enemy and does not involve a local national,” the audit found.
“Because of the lack of documentation, we could not determine if the incident was not investigated for the reasons cited by … officials or there simply is no record of an investigation,” the audit noted.
In all, contractor watchdogs did not record five out of 109 incidents where private guards fired their weapons during the 10-month period, the audit found. Moreover, the watchdogs’ database did not have evidence supporting 51 percent of the incidents reported.
Responding, the military’s Armed Contractor Oversight Branch in Iraq reported that it now tracks all serious incident reports of contractor shootings in its database, including 44 between February and June.
The reports ranged from 25 accidental shootings and the killing of a poisonous snake to 17 so-called “graduated force response” incidents that escalated into shootings. Of those 17, three have been referred for investigation, auditors found.
The second audit found that new rules for contractors that were put in place after the 2007 Blackwater shootings generally have helped oversight and coordination between private guards and the military.
Seventeen Iraqi civilians died in the notorious Blackwater shootings in Baghdad’s Nisoor Square, an incident that strained U.S.-Iraqi relations. Blackwater is no longer operating in Baghdad, although it still has guards in some southern areas who are working under the company’s new name, Xe.
Five Blackwater guards have pleaded not guilty in the shootings, which Justice Department prosecutors say was an unprovoked attack on civilians. The guards’ lawyers, however, say the five men believed they were under attack and acting in self-defense.
A sixth Blackwater guard struck a deal with prosecutors and pleaded guilty to killing one Iraqi and wounding another.