Wartime contract fraud expected to increase

Federal Times May 24, 2010

More instances of contract fraud and theft are expected as American troops draw down in Iraq and increase their presence in Afghanistan, witnesses at a hearing on wartime contracting said Monday.

“We expect an increase in the volume of criminal investigations as a result of the drawdown in Iraq and force increases in Afghanistan,” said James Burch, deputy inspector general for investigations at the Pentagon.

The potential theft of military equipment that has accumulated in Iraq over the last seven years and cost overruns are two areas of concern, he added. Also, paying bribes to government officials is commonplace in some regions, further complicating matters, Burch said.

The speed required in wartime contracting itself is a risk factor for more contract abuse, and contract administrators may see oversight as a burden that hurts their ability to effectively do their work, Burch said.

This was the 12th hearing of the Commission on Wartime Contracting, created by Congress to look at wartime contracting for reconstruction, logistics and security.

The Defense Department arm that investigates criminal cases is working on 223 investigations, 18 percent more than a year ago, in overseas contingency operations, Burch said. Other investigative offices also have seen numbers rise.

The Office of Special Inspector General for Iraq Reconstruction (SIRIR) has opened 64 cases so far in 2010, compared with 69 in all of 2009, and has 113 cases open currently versus 93 a year ago.

SIGIR’s counterpart for Afghanistan, created in 2008, has also seen its caseload increase with increases in staffing. The Office of Special Inspector General for Afghanistan Reconstruction (SIGAR) has 42 investigations pending into government property theft, contract fraud and corruption compared with just four cases a year ago.

About half the cases SIGAR is investigating involve Afghan nationals who are working on U.S.-funded reconstruction projects and are suspected of corruption, said Raymond DiNunzio, an assistant inspector general with SIGAR. That presents a challenge because it means working through the underdeveloped Afghan judicial system and weak law enforcement system, he added.  Read the full report here

Contingency Contracting: A Framework for Reform

United States Department of Defense
Office of Inspector General

Contingency Contracting:  A Framework for Reform

Report No. D-2010-059
May 14, 2010

Download here

Security contractors could face new rules

Roxanna Tiron at The Hill

House defense authorizers are pressing ahead with efforts to weed out fraud, waste and performance debacles that have plagued private security contractors in Iraq and Afghanistan.

Lawmakers on the House Armed Services Committee are expected to approve several provisions in the 2011 defense authorization bill that would establish standards for how private security contractors would win Pentagon business.

Private security contractors have lobbied for the changes, arguing that higher standards and more oversight would ensure that contracts go to legitimate companies. The Armed Services Readiness subcommittee already vetted the provisions under consideration.

House lawmakers are trying to establish a third-party certification process to determine whether private security contractors should be eligible for Pentagon contracts. Defense authorizers are requiring the Defense secretary to establish a third-party certification process for “specified operational and business practice standards to which private security contractors must adhere” as a condition of being selected as contractors.

It has not yet been determined whom the “third party” issuing the certifications would be, but the provisions aim to establish a baseline for acceptable contractor performance, industry officials said.

It would ensure that “everybody is up to the same standard,” said Doug Brooks, the president of the International Peace Operations Association (IPOA), which represents the Association of the Stability Operations Industry and has advocated for the provision. “We support the concept that somebody would check on how these companies do everything they are supposed to.”

Private security contractors have tried to convince lawmakers to support contracts that offer the best value rather than just the lowest price. As a result, defense authorizers are seeking to establish a pilot program within the Pentagon that would implement best-value standards for private security contracts in Iraq and Afghanistan.

The contracts awarded under the pilot program would continue until they are supposed to expire even if the pilot program is terminated, according to language in the defense authorization bill awaiting a full committee vote. The Defense secretary has to provide to the committee each Jan. 15 for three years a report identifying the contracts awarded under the pilot program, including the consideration that led to the award of the contract.

“The best-value language would avoid the race to the bottom,” said Jeff Green, who lobbies for IPOA.

Avoiding contracts that are awarded solely on the lowest-cost criterion would go to the heart of the private security industry’s efforts to preserve good standing. Lowest bidders often trim “some of the ethical aspects of their operations to save money,” said IPOA’s Brooks.

Companies could cut their training standards or the vetting of their own employees to keep costs low, explained Brooks.

“In the long run it will provide enormous value for U.S. taxpayers,” Brooks said. The best-value concept “focuses more on getting the mission done right rather than simply saving money.”  Read the full story here

Secret Erik Prince/Blackwater Tape Exposed

The reclusive Blackwater founder tries to ban journalists and recorders from his speeches in front of friendly audiences. This time he failed.

By Jeremy Scahill  at RebelReports

[Note: This post, written for TheNation.com, will be posted on The Nation magazine’s homepage soon as part of the launch of a new blog. I am posting it here until the site is fully functional because of the timely nature of the story. Please check The Nation site for exciting developments.]

Erik Prince, the reclusive owner of the Blackwater empire, rarely gives public speeches and when he does he attempts to ban journalists from attending and forbids recording or videotaping of his remarks. On May 5, that is exactly what Prince is trying to do when he speaks at DeVos Fieldhouse as the keynote speaker for the “Tulip Time Festival” in his hometown of Holland, Michigan. He told the event’s organizers no news reporting could be done on his speech and they consented to the ban. Journalists and media associations in Michigan are protesting this attempt to bar reporting on his remarks.

Despite Prince’s attempts to shield his speeches from public scrutiny, The Nation magazine has obtained an audio recording of a recent, private speech delivered by Prince to a friendly audience. The speech, which Prince attempted to keep from public consumption, provides a stunning glimpse into his views and future plans and reveals  details of previously undisclosed activities of Blackwater. The people of the United States have a right to media coverage of events featuring the owner of a company that generates 90% of its revenue from the United States government.

In the speech, Prince proposed that the US government deploy armed private contractors to fight “terrorists” in Nigeria, Yemen, Somalia and Saudi Arabia, specifically to target Iranian influence. He expressed disdain for the Geneva Convention and described Blackwater’s secretive operations at four Forward Operating Bases he controls in Afghanistan. He called those fighting the US in Afghanistan, Iraq and Pakistan “barbarians” who “crawled out of the sewer.” Prince also revealed details of a July 2009 operation he claims Blackwater forces coordinated in Afghanistan to take down a narcotrafficking facility, saying that Blackwater “call[ed] in multiple air strikes,” blowing up the facility. Prince boasted that his forces had carried out the “largest hashish bust in counter-narcotics history.” He characterized the work of some NATO countries’ forces in Afghanistan as ineffectual, suggesting that some coalition nations “should just pack it in and go home.” Prince spoke of Blackwater working in Pakistan, which appears to contradict the official, public Blackwater and US government line that Blackwater is not in Pakistan.

Prince also claimed that a Blackwater operative took down the Iraqi journalist who threw his shoes at President George W Bush in Baghdad and criticized the Secret Service for being “flat-footed.” He bragged that Blackwater forces “beat the Louisiana National Guard to the scene” during Katrina and claimed that lawsuits, “tens of millions of dollars in lawyer bills” and political attacks prevented him from deploying a humanitarian ship that could have responded to the earthquake in Haiti or the tsunami that hit Indonesia.

Several times during the speech, Prince appeared to demean Afghans his company is training in Afghanistan, saying Blackwater had to teach them “Intro to Toilet Use” and to do jumping jacks. At the same time, he bragged that US generals told him the Afghans Blackwater trains “are the most effective fighting force in Afghanistan.” Prince also revealed that he is writing a book, scheduled to be released this fall.

The speech was delivered January 14 at the University of Michigan in front of an audience of entrepreneurs, ROTC commanders and cadets, businesspeople and military veterans. The speech was titled “Overcoming Adversity: Leadership at the Tip of the Spear” and was sponsored by the Young Presidents’ Association (YPO), a business networking association primarily made up of corporate executives. “Ripped from the headlines and described by Vanity Fair magazine, as a Tycoon, Contractor, Soldier and Spy, Erik Prince brings all that and more to our exclusive YPO speaking engagement,” read the event’s program, also obtained by The Nation. It proclaimed that Prince’s speech was an “amazing don’t miss opportunity from a man who has ‘been there and done that’ with a group of Cadets and Midshipmen who are months away from serving on the ‘tip of the spear.’” Here are some of the highlights from Erik Prince’s speech:

Send the Mercs into Somalia, Yemen, Saudi Arabia and Nigeria

Prince painted a global picture in which Iran is “at the absolute dead center… of badness.” The Iranians, he said, “want that nuke so that it is again a Persian Gulf and they very much have an attitude of when Darius ran most of the Middle East back in 1000 BC. That’s very much what the Iranians are after.” [NOTE: Darius of Persia actually ruled from 522 BC–486 BC]. Iran, Prince charged, has a “master plan to stir up and organize a Shia revolt through the whole region.” Prince proposed that armed private soldiers from companies like Blackwater be deployed in countries throughout the region to target Iranian influence, specifically in Yemen, Somalia and Saudi Arabia. “The Iranians have a very sinister hand in these places,” Prince said. “You’re not going to solve it by putting a lot of uniformed soldiers in all these countries. It’s way too politically sensitive. The private sector can operate there with a very, very small, very light footprint.” In addition to concerns of political expediency, Prince suggested that using private contractors to conduct such operations would be cost-effective. “The overall defense budget is going to have to be cut and they’re going to look for ways, they’re going to have to have ways to become more efficient,” he said. “And there’s a lot of ways that the private sector can operate with a much smaller, much lighter footprint.”

Prince also proposed using private armed contractors in the oil-rich African nation of Nigeria. Prince said that guerilla groups in the country are dramatically slowing oil production and extraction and stealing oil. “There’s more than a half million barrels a day stolen there, which is stolen and organized by very large criminal syndicates. There’s even some evidence it’s going to fund terrorist organizations,” Prince alleged. “These guerilla groups attack the pipeline, attack the pump house to knock it offline, which makes the pressure of the pipeline go soft. they cut that pipeline and they weld in their own patch with their own valves and they back a barge up into it. Ten thousand barrels at a time, take that oil, drive that 10,000 barrels out to sea and at $80 a barrel, that’s $800,000. That’s not a bad take for organized crime.” Prince made no mention of the nonviolent indigenous opposition to oil extraction and pollution, nor did he mention the notorious human rights abuses connected to multinational oil corporations in Nigeria that have sparked much of the resistance.

Blackwater and the Geneva Convention

Prince scornfully dismissed the debate on whether armed individuals working for Blackwater could be classified as “unlawful combatants” who are ineligible for protection under the Geneva Convention. “You know, people ask me that all the time, ‘Aren’t you concerned that you folks aren’t covered under the Geneva Convention in [operating] in the likes of Iraq or Afghanistan or Pakistan? And I say, ‘Absolutely not,’ because these people, they crawled out of the sewer and they have a 1200 AD mentality. They’re barbarians. They don’t know where Geneva is, let alone that there was a convention there.”

It is significant that Prince mentioned his company operating in Pakistan given that Blackwater, the US government and the Pakistan government have all denied Blackwater works in Pakistan.

Taking Down the Iraqi Shoe Thrower for the ‘Flat-Footed’ Secret Service

Prince noted several high-profile attacks on world leaders in the past year, specifically a woman pushing the Pope at Christmas mass and the attack on Italian Prime Minister Silvio Berlusconi, saying there has been a pattern of “some pretty questionable security lately.” He then proceeded to describe the feats of his Blackwater forces in protecting dignitaries and diplomats, claiming that one of his men took down the Iraqi journalist, Muntadhar al-Zaidi, who threw his shoes at President Bush in Baghdad in December 2008. Prince referred to al-Zaidi as the “shoe bomber:”

“A little known fact, you know when the shoe bomber in Iraq was throwing his shoes at President Bush, in December 08, we provided diplomatic security, but we had no responsibility for the president’s security—that’s always the Secret Service that does that. We happened to have a guy in the back of the room and he saw that first shoe go and he drew his weapon, got a sight picture, saw that it was only a shoe, he re-holstered, went  forward and took that guy down while the Secret Service was still standing there flat-footed. I have a picture of that—I’m publishing a book, so watch for that later this fall—in which you’ll see all the reporters looking, there’s my guy taking the shoe thrower down. He didn’t shoot him, he just tackled him, even though the guy was committing assault and battery on the president of the United States. I asked a friend of mine who used to run the Secret Service if they had a written report of that and he said the debrief was so bad they did not put it in writing.”

While the Secret Service was widely criticized at the time for its apparent inaction during the incident, video of the event clearly showed another Iraqi journalist, not security guards, initially pulling al-Zaidi to the floor. Almost instantly thereafter, al-Zaidi was swarmed by a gang of various, unidentified security agents.

Blackwater’s ‘Forward Operating Bases

Prince went into detail about his company’s operations in Afghanistan. Blackwater has been in the country since at least April 2002, when the company was hired by the CIA on a covert contract to provide the Agency with security. Since then, Blackwater has won hundreds of millions of dollars in security, counter-narcotics and training contracts for the State Department, Defense Department and the CIA. The company protects US Ambassador Karl Eikenberry and other senior US officials, guards CIA personnel and trains the Afghan border police. “We built four bases and we staffed them and we run them,” Prince said, referring to them as Forward Operating Bases (FOBs). He described them as being in the north, south, east and west of Afghanistan. “Spin Boldak in the south, which is the major drug trans-shipment area, in the east at a place called FOB Lonestar, which is right at the foothills of Tora Bora mountain. In fact if you ski off Tora Bora mountain, you can ski down to our firebase,” Prince said, adding that Blackwater also has a base near Herat and another location. FOB Lonestar is approximately 15 miles from the Pakistan border. “Who else has built a [Forward Operating Base] along the main infiltration route for the Taliban and the last known location for Osama bin Laden?” Prince said earlier this year.

Blackwater’s War on Drugs

Prince described a Narcotics Interdiction Unit Blackwater started in Afghanistan five years ago that remains active. “It is about a 200 person strike force to go after the big narcotics traffickers, the big cache sites,” Prince said. “That unit’s had great success. They’ve taken more than $3.5 billion worth of heroin out of circulation. We’re not going after the farmers, but we’re going after the traffickers.” He described an operation in July 2009 where Blackwater forces actually called in NATO air strikes on a target during a mission:

“A year ago, July, they did the largest hashish bust in counter-narcotics history, down in the south-east. They went down, they hit five targets that our intel guys put together and they wound up with about 12,000 pounds of heroin. While they were down there, they said, ‘You know, these other three sites look good, we should go check them out.’ Sure enough they did and they found a cache—262,000 kilograms of hash, which equates to more than a billion dollars street value. And it was an industrialized hash operation, it was much of the hash crop in Helmand province. It was palletized, they’d dug ditches out in the desert, covered it with tarps and the bags of powder were big bags with a brand name on it  for the hash brand, palletized, ready to go into containers down to Karachi [Pakistan] and then out to Europe or elsewhere in the world. That raid alone took about $60 million out of the Taliban’s coffers. So, those were good days. When the guys found it, they didn’t have enough ammo, enough explosives, to blow it, they couldn’t burn it all, so they had to call in multiple air strikes.  Of course, you know, each of the NATO countries that came and did the air strikes took credit for finding and destroying the cache.”

December 30, 2009 CIA Bombing in Khost

Prince also addressed the deadly suicide bombing on December 30 at the CIA station at Forward Operating Base Chapman in Khost, Afghanistan. Eight CIA personnel, including two Blackwater operatives, were killed in the bombing, which was carried out by a Jordanian double-agent. Prince was asked by an audience member about the “failure” to prevent that attack. The questioner did not mention that Blackwater was responsible for the security of the CIA officials that day, nor did Prince discuss Blackwater’s role that day. Here is what Prince said:

“You know what? It is a tragedy that those guys were killed but if you put it in perspective, the CIA has lost extremely few people since 9/11. We’ve lost two or three in Afghanistan, before that two or three in Iraq and, I believe, one guy in Somalia—a landmine. So when you compare what Bill Donovan and the OSS did to the Germans and the Japanese, the Italians during World War II—and they lost hundreds and hundreds of people doing very difficult, very dangerous work—it is a tragedy when you lose people, but it is a cost of doing that work. It is essential, you’ve got to take risks. In that case, they had what appeared to be a very hot asset who had very relevant, very actionable intelligence and he turned out to be a bad guy… That’s what the intelligence business is, you can’t be assured success all the time. You’ve got to be willing to take risks. Those are calculated risks but sometimes it goes badly. I hope the Agency doesn’t draw back and say, ‘Oh, we have to retrench and not do that anymore,’ all the rest. No. We need you to double down, go after them harder. That is a cost of doing business. They are there to kill us.”

Prince to Some NATO Countries in Afghanistan: ‘Go Home’

Prince spoke disparagingly of some unnamed NATO countries with troops in Afghanistan, saying they do not have the will for the fight. “Some of them do and a lot of them don’t,” he said. “It is such a patchwork of different international commitments as to what some can do and what some can’t. A lot of them should just pack it in and go home.” Canada, however, received praise from Prince. “The Canadians have lost per capita more than America has in Afghanistan. They are fighting and they are doing it and so if you see a Canadian thank them for that. The politicians at home take heavies for doing that,” Prince said. He did not mention the fact that his company was hired by the Canadian government to train its forces.

Prince also described how his private air force (which he recently sold) bailed out a US military unit in trouble in Afghanistan. According to Prince, the unit was fighting the Taliban and was running out of ammo and needed an emergency re-supply. “Because of, probably some procedure written by a lawyer back in Washington, the Air Force was not permitted to drop in an uncertified drop zone… even to the unit that was running out of ammo,” Prince said. “So they called and asked if our guys would do it and, of course, they said, ‘Yes.’ And the cool part of the story is the Army guys put their DZ mark in the drop zone, a big orange panel, on the hood of their hummer and our guys put the first bundle on the hood of that hummer. We don’t always get that close, but that time a little too close.”

Blackwater: Teaching Afghans to Use Toilets

Prince said his forces train 1300 Afghans every six weeks and described his pride in attending “graduations” of Blackwater-trained Afghans, saying that in six weeks they radically transform the trainees. “You take these officers, these Afghans and it’s the first time in their life they’ve ever been part of something that’s first class, that works. The instructors know what they’re talking about, they’re fed, the water works, there’s ammunition for their guns. Everything works,” Prince said. “The first few days of training, we have to do ‘Intro to Toilet Use’ because a lot of these guys have never even seen a flushed toilet before.” Prince boasted: “We manage to take folks with a tribal mentality and, just like the Marine Corps does more effectively than anyone else, they take kids from disparate lifestyles across the United States and you throw them into Paris Island and you make them Marines. We try that same mentality there by pushing these guys very hard and, it’s funny, I wish I had video to show you of the hilarious jumping jacks. If you take someone that’s 25 years old and they’ve never done a jumping jack in their life—some of the convoluted motions they do it’s comical. But the transformation from day one to the end of that program, they’re very proud and they’re very capable.” Prince said that when he was in Afghanistan late last year,  “I met with a bunch of generals and they said the Afghans that we train are the most effective fighting force in Afghanistan.”

Prince also discussed the Afghan women he says work with Blackwater. “Some of the women we’ve had, it’s amazing,” Prince said. “They come in in the morning and they have the burqa on and they transition to their cammies (camouflage uniforms) and I think they enjoy the baton work,” he said, adding, “They’ve been hand-cuffing a little too much on the men.”

Hurricane Katrina and Humanitarian Mercenaries

Erik Prince spoke at length about Blackwater’s deployment in 2005 in New Orleans during Hurricane Katrina, bragging that his forces “rescued 128 people, sent thousands of meals in there and it worked.” Prince boasted of his company’s rapid response, saying, “We surged 145 guys in 36 hours from our facility five states away and we beat the Louisiana National Guard to the scene.” What Prince failed to mention was that at the time of the disaster, at least 35% of the Louisiana National Guard was deployed in Iraq. One National Guard soldier in New Orleans at the time spoke to Reuters, saying, “They (the Bush administration) care more about Iraq and Afghanistan than here… We are doing the best we can with the resources we have, but almost all of our guys are in Iraq.” Much of the National Guard’s equipment was in Iraq at the time, including high water vehicles, Humvees, refuelers and generators.

Prince also said that he had a plan to create a massive humanitarian vessel that, with the generous support of major corporations, could have responded to natural disasters, such as earthquakes and tsunamis across the globe. “I thought, man, the military has perfected how to move men and equipment into combat, why can’t we do that for the humanitarian side?” Prince said. The ship Prince wanted to use for these missions was an 800 foot container vessel capable of shipping “1700 containers, which would have lined up six and a half miles of humanitarian assistance with another 250 vehicles” onboard. “We could have gotten almost all those boxes donated. It would have been boxes that would have had generator sets from Caterpillar, grain from ADM [Archer Daniels Midland], anti-biotics from pharmaceutical companies, all the stuff you need to do massive humanitarian assistance,” Prince said, adding that it “would have had turnkey fuel support, food, surgical, portable surgical hospitals, beds cots, blankets, all the above.” Prince says he was going to do the work for free, “on spec,” but “instead we got attacked politically and ended up paying tens of millions of dollars in lawyer bills the last few years. It’s an unfortunate misuse of resources because a boat like that sure would have been handy for the Haitian people right now.”

Outing Erik Prince

Prince also addressed what he described as his outing as a CIA asset working on sensitive US government programs. He has previously blamed Congressional Democrats and the news media for naming him as working on the US assassination program. The US intelligence apparatus “depends heavily on Americans that are not employed by the government to facilitate greater success and access for the intelligence community,” Prince said. “It’s unprecedented to have people outed by name, especially ones that were running highly classified programs. And as much as the left got animated about Valerie Plame, outing people by name for other very very sensitive programs was unprecedented and definitely threw me under the bus.”

Security Brief: Contractors pay the price in Iraq

CNN April 30. 2010

Military contractors are a fact of life in Iraq – doing everything from protecting diplomats and those involved in the reconstruction process to delivering supplies.

In September of 2008, there were some 160,000 of them working for the Department of Defense alone, today that number is closer to 100.000. Just over 50,000 are Iraqi nationals – but nearly 28,000 are U.S. citizens. And their service comes at a high price.

I’m not talking about the monetary cost of contracting out, (on which there has been a protracted debate over whether hiring them is more cost efficient than having troops do the same work.) I’m talking about the price that’s paid in blood.

The Special Inpector General for Iraq Reconstruction (SIGIR) notes that 25 contractor deaths were reported in the first quarter of 2010, bringing the total number of contractors killed since the Department of Labor began keeping figures in March of 2003, to 1,471.

Compare that to a total of 3,899 U.S. military deaths since the start of the war and you begin to better understand the significant price contractors are paying.  In fact, according to SIGIR, In January of 2009, contractor deaths actually exceeded those of U.S. troops for the first time.

Those familiar with the debate like to argue that the U.S. has always relied on contractors, and they would be right, but the U.S. has never relied on hired help in conflict zones to the extent that is does today.

SIGIR estimated contractor contributions to prior U.S. conflicts and found that the U.S. utilized the services of one contractor per 24 members of the military during World War I; to 1 to 7 in World War II; 1 to 5 in Vietnam, to a projected estimate of 1 contractor to every  0.7 members of the military in Iraq by this August.  In other words, more contractors than military personnel. And that estimate is CONSERVATIVE.

It doesn’t take into account contractors working on something called LOGCAP which is a fancy military acronym for logistics contracts – which include delivering food to bases – under which some 190,000 additional contractors are hard at work, and sometimes dying when doing the job.

End KBR’s Monopoly in Iraq

Project on Government Oversight

March 29, 2010

We may have spoken too soon when we praised the Army for taking past contractor performance into consideration for the LOGCAP program. POGO was recently informed that the Army is considering awarding KBR additional work in Iraq under the LOGCAP III contract. That action would continue KBR’s monopoly on LOGCAP work in Iraq, rather using the competitive procurement procedures created under LOGCAP IV.

In a letter sent today to Army Secretary John McHugh, POGO urged the Army to end KBR’s monopoly in Iraq and reconsider the continued use of the LOGCAP III program. To better evaluate goods and services, and to get the best value for taxpayers, the government must encourage genuine competition.

The spotlight on KBR’s work in Iraq was also reviewed today as company representatives testified before the Commission on Wartime Contracting at a hearing on the “Rightsizing and managing contractors during the Iraq drawdown.” The military is going to have to handle many issues, including troop withdrawals and determining adequate levels of contractor support needed for ongoing activities. Additionally, the government must resolve logistical problems with the goods that have brought into the country to support military and reconstruction effort – sometimes with a lack of planning and management.

Panel examines contractor drawdown in Iraq

Trancript of Hearing

From WaPo

A congressional committee on Monday questioned one of the Pentagon’s biggest defense companies and military leaders about how they plan to reduce the nearly 100,000 contractor employees in Iraq, as the U.S. draws down its military forces there.

“Taxpayers need assurance that contractors don’t have unnecessary staff hanging around — accidentally or by design — without work, but still drawing pay,” the Commission on Wartime Contracting in Iraq and Afghanistan said in its prepared statement.

The Pentagon expects the number of contractor employees in Iraq — mostly foreign nationals and Iraqis — to have declined from 149,000 in January 2009 to no more than 75,000 by August 2010. KBR, of Houston, has the largest service contract for $38 billion to provide a range of logistic services including equipment eminence, feeding troops and other work.

A recent Pentagon inspector general report found that KBR contractors were billing the government for 12 hours in doing truck maintenance, but in reality were working an average of 1.3 hours — a waste of $21 million. The report also found that KBR could save $193 million if it drew down its workforce faster, according to an audit by the Defense Contract Audit Agency.

KBR defended its practices in written responses to the auditors, saying that under the contract, it is up to the U.S. military to decide what work it wants done and set the staffing needs. It also said that it has put in place more cost-efficient methods for doing its work.

Officials on the wartime commission said they are concerned that the U.S. military has “yet to make key decisions that will affect contractors’ draw down plans.”

“The government is not giving contractors adequate guidance on events, dates, and requirements for them to trim or redeploy workforces appropriately,” the commissioners said in the prepared statement.

Moving personnel and equipment out of Iraq is a massive job, Army officials said.

Lt. Gen. James H. Pillsbury, deputy commanding general of the U.S. Army Materiel Command, which is helping oversee the drawdown of the logistics operations in Iraq, said the “magnitude and scope of the Iraq drawdown is unprecedented.”

There are, he noted, more than 341 facilities; 263,000 soldiers, Defense Department civilians and contractor employees; 83,000 containers; 42,000 vehicles; 3 million equipment items; and roughly $54 billion in assets that will ultimately be removed from Iraq.

Pillsbury said that the effort is “equivalent, in personnel terms alone, of relocating the entire population of Buffalo, New York.”

Commission to examine level of contractors in Iraq

Rightsizing and managing contractors during the Iraq drawdown

9:30am to 2pm
Dirksen Senate Office Building

C Span 2 on your television

http://www.c-span.org/Watch/C-SPAN2_wm.aspx

Kimberly Hefling AP

WASHINGTON — The independent Commission on Wartime Contracting wants to know whether American contractors in Iraq are adequately reducing the number of employees in the country as U.S. troops are withdrawn.

The commissioners take up the matter at a Capitol Hill hearing on Monday. At issue is whether the government is ensuring that contractors don’t have idle workers. Each contracted employee can cost thousands of dollars a month, and some 100,000 contracted employees are working in Iraq.

The number of U.S. troops in Iraq is scheduled to fall to 50,000 in August; all are to leave by the end of 2011.

KBR Inc., the Army’s primary support contractor in Iraq, was warned last fall by Pentagon auditors to cut its numbers or face nearly $200 million in penalties.

On the Net:

• Commission on Wartime Contracting: http://www.wartimecontracting.gov/

DOD seeks big penalties for IT errors

Government would withhold payment from vendors with deficient business systems

By Patrick Thibodeau

Computerworld – The U.S. Department of Defense has seen repeated instances of paying for critical war zone supplies that were not delivered, or double billed. At fault are, in many cases, underlying business, according to a U.S. commission that investigated these problems.

To fix this, the DOD has proposed a new rule allowing the government to withhold payment for goods and services starting at 10% for each deficiency that’s identified in a business system.

But the proposed rule is raising alarm with some industry groups, including the largest IT industry group, TechAmerica, which says the move is unfair and excessive.

The problems with double billing and missing order was raised by Commission on Wartime Contracting, a group formed by Congress in 2008 to look at the more than $800 billion that has been spent to fund operations in Afghanistan and Iraq, money which pays the salaries of 240,000 contractor employees.

Orders for body armor, rifle scopes and water purification systems are just a few of the things that have been affected.

The commission reported that many internal business systems used by contractors were inadequate and without “proper incentives” some contractors may not improve them. Some of the business system deficiencies remain despite repeated audits, the commission reported last year.

But the remedy, TechAmerica says, is that the withholdings could arise to 100% of a contract and “threaten the financial solvency of many contractors,” as well as reduce competition by driving some contractors out the market.

This threat of arbitrary withholdings “will impose exorbitant costs on contractors to try to develop systems that are free from even the potential from being questioned about deficiencies,” wrote Trey Hodgkins, TechAmerica’s vice president of national security and procurement policy.

Ray Bjorklund, vice president at consulting firm Federal Sources Inc., said traded companies “are supposed to have systems and processes that meet the requirements of Sarbanes-Oxley for adequate internal controls and financial visibility.”

However, absent additional checks and balances that could be achieved through ombudsmen and other governance mechanisms, Bjorklund said he believes the proposed rule does seem too severe.

Bjorklund does see the motivation, though. “[Ultimately] cash flow manipulation is a great motivational tool for getting a contractor to perform better,” he said.

Lauren Jones, principal analyst at market research firm Input Inc., said for a smaller contractor that only works on a couple of contracts at a time, the rule may cripple them. But she said it’s an effort by the DOD to put some teeth in its contracting rules. “They know how critical it is to keep that mission going,” she said.

KBR: Failing Upwards

David Isenberg at Huff Post

Up is down, night is day, and now, in the best tradition of George Orwell’s 1984 newspeak KBR — the company that was the subject of a recent Department of Defense Inspect General report that found that the Army broke federal procurement rules in 2004, when two commanding generals improperly directed a contracting officer to pay millions of dollars in fees to KBR Inc., when funds should have been withheld, per the language in the contract with KBR – has been awarded its first task order under the newest version of LOGCAP.

For those who don’t know, LOGCAP is the mother of all logistics support contracts. Without it the U.S. Army simply can’t function.

The award also comes just a week after the Army announced that KBR would not be awarded $25 million in bonuses under the LOGCAP III Iraq support contract because KBR “failed to meet a level deserving of an award fee payment for work it did during the first four months of 2008.” Although the Army did not specifically cite it when announcing the withholding of the payment KBR’s “failed” work occurred during the time a Green Beret was electrocuted in a barracks shower in Iraq KBR was responsible for maintaining.

KBR was informed of the new LOGCAP task order award, just one day after executives told shareholders about the lost award fees.

The cost-plus, fixed-fee contract, announced Tuesday, is for one base year ($571 million) plus four option years, that, if exercised, could be total $2.8 billion, for work to be done in Iraq.

Read Full Story here

See also at Ms Sparky

Blackwater Took Hundreds of Guns From U.S. Military, Afghan Police

Senate Inquiry Shows Contractor Signed for Rifles Using ‘South Park’ Alias

by Spencer Ackerman

Employees of the CIA-connected private security corporation Blackwater diverted hundreds of weapons, including more than 500 AK-47 assault rifles, from a U.S. weapons bunker in Afghanistan intended to equip Afghan policemen, according to an investigation by the Senate Armed Services Committee. On at least one occasion, an individual claiming to work for the company evidently signed for a weapons shipment using the name of a “South Park” cartoon character. And Blackwater has yet to return hundreds of the guns to the military.

A Blackwater subsidiary known as Paravant that until recently operated in Afghanistan acquired the weapons for its employees’ “personal use,” according to committee staffers, as did other non-Paravant employees of Blackwater. Yet contractors in Afghanistan are not permitted to operate weapons without explicit permission from U.S. Central Command, something Blackwater never obtained. A November 2008 email from a Paravant vice president named Brian McCracken, obtained by the committee, nevertheless reads: “We have not received formal permission from the Army to carry weapons yet but I will take my chances.”

Full Story by Spencer Ackerman here

Senate Slams ‘Reckless’ Contractor

By AUGUST COLE

Wall Street Journal

Military contractors in Afghanistan affiliated with the security company formerly known as Blackwater Worldwide regularly carried unauthorized weapons and engaged in “reckless” behavior that included the accidental shooting of a fellow contractor, a Senate investigation has found.

Investigators from the Senate Armed Services Committee also found weak oversight by the U.S. Army and Raytheon Co., which had hired the contractors from Paravant LLC to train Afghan forces. Paravant was a special unit set up by Blackwater to work for Raytheon on the contract.

The problems reveal a potential weak link in the Obama administration’s strategy to build up Afghan forces to secure the country, an approach that relies heavily on defense firms to conduct training missions that are difficult to oversee and often dangerous. It also reveals the risk big defense companies, such as Raytheon, Northrop Grumman Corp. and Lockheed Martin Corp., court as they consider whether to bid on what will amount to billions of dollars in future training contracts in war zones in the coming years. Xe Services LLC, which is the new name for the parent company of Blackwater Worldwide, is continuing to vie for such work.

The committee’s chairman, Sen. Carl Levin (D., Mich.) said misconduct by contractors in Afghanistan undermines U.S. efforts there. The Defense Department and civilian agencies are intent on winning over the Afghan populace to help stabilize the war-ravaged country. “If we are going to win that struggle we need to know that our contractor personnel are adequately screened, supervised, and held accountable, because in the end the Afghan people will hold us responsible for their actions,” said Mr. Levin at a briefing with reporters ahead of a Senate hearing Wednesday on the Paravant contract.

The Justice Department indicted two former military trainers working for Paravant in January for their alleged role in a May 2009 shooting in Kabul that left two Afghan civilians dead and another injured. The men were charged with second-degree murder, attempted murder and weapons charges. The men have said they acted in self-defense after a traffic accident.

In a statement, Xe said the company’s new management, brought in early last year, “was taking steps to address shortcomings in the Paravant program” at the time of the May 2009 incident. Xe also said that Raytheon and the Defense Department knew that Paravant contractors carried unauthorized weapons, and said they shouldn’t have been doing so without official approval, which was being sought. The two contractors involved in the May shooting “clearly violated clear company policies,” Xe said.

Prior to that incident, Senate investigators uncovered a December 2008 shooting that involved a senior Paravant trainer accidentally shooting a colleague during an impromptu practice session of firing assault rifles from moving vehicles. A Paravant executive wrote in a memo after the incident that “everyone on the team showed poor judgment.” There were about 72 trainers on the contract, but it was frequently undermanned, according to committee staffers. The Army was notified of the incident by Raytheon, but didn’t investigate it.

The trainers were not authorized to carry weapons. Yet Blackwater contractors had already taken hundreds of AK-47 rifles from a supply intended for use by the Afghan National Police, which was also where the Paravant trainers acquired their assault rifles, according to committee staffers. The company has yet to account for all of the weapons it removed from the depot, they said.

In September 2008, more than 200 assault rifles guns were signed out to “Eric Cartman,” which is the name of a character on the animated television show “South Park.” The company said it had no contractors by that name, according to committee staffers.

Mr. Levin was particularly critical of the companies, as well as the Army. He said of Raytheon’s supervision of Paravant: “They weren’t minding the shop at all.”

Raytheon declined to comment ahead of the hearing.

According to the committee, the Paravant subcontract was valued at about $20 million over two years as part of Raytheon’s approximately $11 billion U.S. Army training contract that stretches over 10 years.

Raytheon replaced Paravant with MPRI, a unit of L-3 Communications Holdings Inc., last year.

A spokesman for the U.S. Army office overseeing the training program declined to comment ahead of the hearing.

Mr. Levin was especially critical of Blackwater, who he said “misrepresented the facts” during the committee’s investigation and who he accused of operating with “carelessness and recklessness” in Afghanistan.

Raytheon and Xe executives are expected to appear as witnesses at Wednesday’s hearing.

Report Finds Army broke contracting regulations in Iraq

Robert Brodsky at Gov Exec

he Army broke federal procurement rules in 2004, when two commanding generals improperly directed a contracting officer to pay millions of dollars in fees to KBR Inc., according to a report released on Monday by the Defense Department inspector general.

Under the Federal Acquisition Regulation, the Army Sustainment Command should have withheld 15 percent of its payments to KBR under a cost-reimbursement task order through the massive Logistics Civil Augmentation Program III, because terms and price had not been finalized.

But when a contracting officer tried to withhold the funds, she was overruled by Army leaders who said KBR warned the move could hurt battlefield operations.

“The decision to postpone enforcement of the clause was influenced by contractor claims that withholding of funds might adversely affect vital support services provided to the troops,” the IG report said. “ASC’s failure to enforce the clause from inception of the contract and develop a contingency plan for obtaining LOGCAP III services from other sources put the government at significant risk of overpayment.”

In its written response, the Army disagreed with many of the report’s conclusions, noting that the service had legal authority to suspend the withholding of funds and that top officials, including the assistant Army secretary, agreed with the decision.

“The review also fails to recognize that LOGCAP III is the contingency contract for use by the Army during times of crisis to ensure continuation of essential services,” said Teresa Gerton, the Army’s acting executive deputy to the commanding general.

KBR officials said they still are reviewing the report and aren’t in a position to comment specifically.

Many of the key findings outlined in the report, which was requested by the Senate Armed Services Committee, are not new. But the report does shed light on the timeline of events leading up to the controversial payments to Houston-based KBR, the largest contractor in Iraq.

The Army Sustainment Command awarded the 10-year sole-source LOGCAP III contract in December 2001. KBR was responsible for providing support services such as fuel, food, water and shelter to troops. The firm still operates exclusively in Iraq under the LOGCAP contract, although the Army is planning to compete the work among three firms. The service already has awarded task orders under the revamped LOGCAP IV contract for Kuwait and Afghanistan.

During the initial years of the Iraq war, the Army depended almost exclusively on the former Halliburton subsidiary to take care of troops in theater. And to meet urgent operational needs the Army frequently authorized KBR to begin work before individual task orders were set in stone.

Although “undefinitized” task orders allow contractors to begin work earlier, investigators said they carry major risks to the government. To reduce those risks, the FAR mandates that no more than 85 percent of fees can be paid to a contractor on a reimbursement contract until the terms are finalized.

It was not until February 2004 — more than three years after awarding the contract — that the Army discovered it had failed to comply with the 15 percent rule. After some initial delays, the contracting officer moved to correct the mistake and withhold future funds.

KBR opposed the decision and lobbied the Army to reverse it, saying it would cost the company $60 million per month, the IG report said.

“The contractor warned the Army that it would pass the withholding of funds to its subcontractors, which could cause a severe disruption of vital support services provided to the troops,” the report said. “Two officials, one from ASC and one from the Army Materiel Command, testified that a contractor representative had even threatened to initiate a lawsuit against them personally as well as the Army over any withholding of funds.”

While officials at the Defense Contract Audit Agency and the Defense Contract Management Agency dismissed KBR’s claims of financial hardship, the Army apparently took the company’s threats seriously. ASC leadership began expressing concern that imposing the clause “could seriously jeopardize battlefield operations,” the report said.

After postponing enforcement of the clause for several months in 2004, the Army eventually asked the director of defense procurement and acquisition policy to grant a waiver that would allow them to reimburse KBR for all allowable costs.

But the request lacked key information, such as proof that the Army had considered alternatives in obtaining the LOGCAP III services, the report said. Nonetheless the waiver was granted in February 2005.

“We are not questioning the consequences that might have occurred if the LOGCAP contractor was unable to financially support the Army,” the report said. “We previously stated the Army could not risk a significant disruption of LOGCAP III support services given the critical nature of those services. However, we do question why the Army cited some of the contractor’s financial hardship claims without verifying them.”

The IG also found there was not enough evidence to prove that the Army reassigned Charles Smith, the former chief of the Field Support Contracting Division for the then-Army Field Support Command, because he supported the 15 percent hold.

Smith told a congressional panel in 2008 that he was verbally attacked by then-Brig. Gen. Jerome Johnson, the head of the Army Sustainment Command who later relieved Smith of his duties, at KBR’s offices in June 2004. Smith said he was then told to draft a letter to KBR that would not implement the 15 percent hold.

But the IG said it appeared that the Army wanted to go in a new direction with the LOGCAP contract and that the 15 percent withholding dispute likely was not a primary factor in his reassignment.

David Isenberg: Contractors and the Civilian Extraterritorial Jurisdiction Act

David Isenberg

Original at Huff Post

Posted: February 2, 2010 02:37 PM

Senator Patrick Leahy (D-VT) and Congressman David Price (D-NC) have just announced a new bill to ensure accountability under U.S. law for American contractors and employees working abroad.

One might think, given the rush in recent years by various members of Congress to grandstand on this issue, that this is just more of the same. Industry trade groups have long claimed that private contractors operate under a myriad of international and national laws, rules, directives and regulations. That is true. But one has only to look at the most recent Congressional Research Service report on legal issues affecting private military contractors in Iraq and Afghanistan to see that there is still much ambiguity that needs to be clarified.

The bill’s co-sponsors alone mean that the bill will be worth examination. Rep. Price has long been one of the leading members of the House on this issue. He is known for a careful, dispassionate, non-polemical approach.

Sen. Leahy is better known for his long and admirable work on banning antipersonnel landmines, as well as his work on judicial issues, as Chairman of the Senate Judiciary Committee. But he too is known for his painstaking, and non-sensationalistic approach.

The proposed legislation allows the government to prosecute government contractors and employees for certain serious crimes. The legislation expands on the Military Extraterritorial Jurisdiction Act (MEJA), which provides similar criminal jurisdiction over Department of Defense employees and contractors but does not clearly apply to U.S. contractors working overseas for other federal agencies, such as the Department of State.

The Civilian Extraterritorial Jurisdiction Act will:

• Direct the Justice Department to create new investigative units to investigate, arrest and prosecute contractors and employees who commit serious crimes.
• Allow the Attorney General to authorize federal agents to arrest alleged offenders outside of the United States, if there is probable cause that an employee or contractor has committed a crime.
• Require the Attorney General to report annually to Congress the number of offenses received, investigated and prosecuted under the statute; the number, location, and deployments of the newly created investigative units; and any changes needed in the law to make it more effective.

Currently, the Domestic Security Section of the Department of Justice Criminal Division provides preliminary liaison with the Defense Department and other federal entities and to designate the appropriate U.S. Attorney’s Office to handle a case.

But given the December 2009 opinion by Judge Urbina throwing our charges against five Blackwater contractors because of the way the Justice department handled the case it seems clear the Justice Department needs help.

It is also worth noting that currently the jurisdiction of MEJA for contractors working for a department other than Defense is uncertain. The decision by Judge Urbina meant that the defendants’ argument that MEJA didn’t apply to them as contractors working for the State Department in support of its mission never reached trial.

One irony is that back in October 2007 the House approved a bill introduced by Congressman Price which would ensure that the U.S. government has the legal authority to prosecute crimes committed by U.S. contractor personnel working in war zones. Defense Department contractors were already covered under U.S. law, but contractors who worked for the State Department and other agencies, were not liable for criminal activity under current law. Price’s bill extended the jurisdiction of MEJA to cover all contractors working for the government in a war zone.

Price’s bill also was supposed to ensure that the Administration has the tools it needs to investigate and prosecute allegations of abuse. The fact that two years later he is co-sponsoring another bill that, in part, has the same requirements as his previous bill shows how difficult it is to achieve meaningful governmental action in this area.

Iraq confiscates arms in private security crackdown

BAGHDAD (Reuters) – Security forces confiscated hundreds of rifles, thousands of rounds of ammunition and other military gear in a crackdown on private security contractors in Iraq, officials said on Saturday.

Police raided three locations in Baghdad on Friday, a week after Iraqi authorities were incensed by a U.S. judge’s decision to throw out charges against five Blackwater Worldwide security guards accused of killing over a dozen Iraqi civilians in 2007.

Officials said they are targeting private security companies that are no longer legally licensed to operate in Iraq.

“All those companies with their work permits expired are not allowed to move one meter inside Baghdad, or own one piece of weaponry,” Baghdad security spokesman Qassim al-Moussawi said.

He would not reveal how many unlicensed contractors were on the target list, or their names.

Authorities raided the headquarters of a foreign security contractor, whose name could not be immediately confirmed, on Friday night and confiscated 20,000 rounds of ammunition and more than 300 armored shields.

In another location they found 400 rifles, helmets, radio devices and more than 35 vehicles believed to belong to the same company, officials said. No one was arrested.

Private foreign security contractors played a major role in Iraq following the U.S. invasion in 2003, in many cases hired by the United States to guard diplomats and other officials. Iraqis accused them of running roughshod over locals.

For a time, the foreign guards enjoyed immunity from prosecution. That ended with a bilateral agreement that took effect in 2009.

The Iraqi government called unacceptable the U.S. court’s December 31 dismissal of charges against five Blackwater guards accused of shooting indiscriminately in a Baghdad traffic circle, and said it is taking its own legal steps against the company, now known as Xe Services.

Major General Hussein Kamal, Iraq’s deputy interior minister, denied that the Baghdad crackdown was a reprisal for the Blackwater case. He said the ministry had given a group of security firms ample warning to renew their permits.

“We have closed some of the companies and confiscated their weapons and vehicles,” he said, adding, “We are not reacting to the (Blackwater) judge’s decision.”