The Struggle to Police Foreign Subcontractors in Iraq and Afghanistan
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Billions at Stake, but U.S. Investigators Stymied by Murky Rules, Enforcement Obstacles
By Nick Schwellenbach – August 29, 2010
To win hearts and minds in Afghanistan and Iraq, military experts want U.S. companies to contract with local firms for a variety of tasks like trucking, feeding troops, and providing security. The U.S. government’s “Afghan First” and “Iraqi First” initiatives increasingly seek to rely on local contractors, often through subcontracts, in part to stimulate their local economies.
But a host of investigations underscore the perils in the murky world of subcontracting with foreign firms, and the difficulties in making sure taxpayer dollars are well spent. Among the current and recent probes by the Pentagon, congressional panels, and federal investigators:
- Up to $300 million in subcontracts in Iraq and Kuwait were allegedly tainted by a Saudi-based subcontractor employee’s kickback scheme;
- Subcontracted security forces in Afghanistan are suspected of bribing both Taliban and Afghan government officials;
- U.S. money for a trash collection program in Iraq, administered by a bewildering array of subcontractors, has allegedly ended up in the pockets of insurgents; and
A former contractor employee alleged that Middle Eastern subcontractors, trying to sway the award of more subcontracts, were sneaking prostitutes into Baghdad’s Green Zone by abusing their security access cards.
Subcontracting is among the most challenging parts of the U.S. government’s widespread outsourcing of war-related tasks. It works like this: A government agency — most likely the Defense Department, State Department, or U.S. Agency for International Development — will award work to a “prime” contractor. That prime contractor, usually a large American company like Kellogg, Brown and Root (KBR) or DynCorp International, will often subcontract some or even a majority of its work to other companies, including foreign-owned firms. Those subcontractors sometimes then turn around and subcontract part of the work, and so on.
“There are good reasons for using subcontractors,” said Christopher Shays, a former Republican lawmaker who is now co-chair of the congressionally created Commission on Wartime Contracting. “Business economists tell us that subcontracting can help businesses tap into specialized skills, configure their organization to meet changing needs, and adjust to shifts in demand.”
Subcontractors do everything from providing translators for American soldiers to trucking supplies into war zones, as well as building military bases and providing security. Without foreign subcontractors, U.S. troops could not operate halfway around the globe.
But in footing the bill for all this work by a network of companies, the U.S. government often doesn’t know who it is ultimately paying. And that can lead to fraud, shoddy work, or even taxpayer funds ending up in the hands of enemy fighters.
“What makes sense for a renovation project in Connecticut or Maryland can create some unique risks when the contractor is hiring subcontractors in a combat zone halfway around the world,” said Shays.
Prosecuting Subcontractors Difficult
The problem isn’t new. Three years ago, Democratic Rep. Henry Waxman of California said the subcontracting world “is so murky that we can’t even get to the bottom of this, let alone calculate how many millions of dollars taxpayers lose in each step of the subcontracting process.”
Compounding the abuses are the difficulties in holding companies accountable. The Defense Department’s management of contractors has been on the non-partisan Government Accountability Office’s “high risk” list since 1992, but the challenges are even greater when foreign companies are working under a subcontract.
“Without good subcontract control by prime contractors and good oversight by the government,” said Michael Thibault, co-chair of the Wartime Contracting Commission, in a press release, “we risk not only wasting money, but also depriving our troops of support they need, overlooking misconduct that alienates local populations, and even handing funds to violent insurgents.”
It’s also difficult for the United States to prosecute citizens of other countries for fraud or corruption. Cooperation with foreign law enforcement is essential, but often “they don’t take this as seriously as we do,” a Pentagon criminal investigator told the Center and the Fund.
Prosecutions often rely on whistleblowers inside a company to report suspected fraud. But whistleblower protections typically do not extend to subcontractors’ employees. Furthermore, many foreign subcontractors do not feel the need to cooperate with U.S. law enforcement or auditors.
Tamimi Group: Where’s the Money?
Take the Saudi-based Tamimi Group. After a four-year criminal investigation, the United States is unable to determine how Tamimi’s top manager for Iraq and Kuwait obtained at least $133,000 to bribe KBR employees for subcontracts. In 2006, Mohammad Shabbir Khan, a Tamimi manager and naturalized U.S. citizen, pleaded guilty in the U.S. on 14 kickback-related charges and sentenced to 51 months. He was convicted on two other counts of witness tampering in 2009. He admitted to paying $133,000 to an American KBR employee to win $21.8 million in subcontracts to supply food to troops in in Iraq and Kuwait.
Tamimi has refused to turn over its financial records to the Defense Contract Audit Agency and to prime contractor KBR, which want to examine the company’s books to pinpoint how Khan obtained the money for the bribe, according to Charles Tiefer, a member of the Wartime Contracting Commission. There could be as much as $300 million in “tainted subcontracts” linked to the kickback scheme, including $49 million with just Tamimi, Tiefer said at a July hearing by the commission.
Perry Dalby, Tamimi’s ethics director, said the company was not required by the terms of its contract to supply the records sought. “What happened with Mr. Khan was a terrible thing,” Dalby said. “The company itself did not profit or did not gain any awards as a result.” Tamimi, he added, “cannot find where we are missing $133,000.”
Even a seemingly simple question — how much money goes to foreign subcontractors annually — has no clear answer because of the complex contracting chain.
Edward Harrington, an Army procurement official, could not tell the Wartime Contracting Commission hearing in July how much the Pentagon spent on foreign subcontractors, saying he could only estimate it was “likely in the lower billions of dollars.”
The State Department and U.S. Agency for International Development likewise did not know how much they spend on foreign subcontractors. USAID’s Drew Luten told the commission that the problem may get worse with the U.S. government’s Afghan First effort to steer more money to local companies.
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Other Related Posts From Ms Sparky
- US firm DynCorp fell short on Afghan police training
- Police Trainer, Brett Benton Killed In Afghanistan
- Dyncorp Wins Afghan Police Training Contract Despite Scandals
- Dyncorp employee Gary Willard killed in attack on Afghanistan Police Training Facility-Updated
- Foreign National Guards Not Protecting US Troops In Iraq
Sunday, August 29th 2010 at 10:11 am |
Based on the above story, how is Tamimi still allowed to operate the Kuwait DFACs contract? Back in 2008 Agility beat their price by nearly 75%. Tamimi protested based on the fact that Agility had an unfair advantage due to its Sultan Center (TSC) ties and could sell any unused FFV back to the TSC. Hello, those ties are simple business efficiencies, not illegal. FYI….I am a staunch opponent of Agility. Somehow, GAO decided the protest was worthwhile, threw out the award, and allowed Tamimi to remain on the contract. Tamimi actually filed several protests and the word on the street is that GAO couldn’t figure out how NOT to deny them. Hence, they awarded the follow on contract to Tamimi as well despite them having Agility’s prices from the initial award. WTF?!
Can anyone else add more facts to this suspicious contract?
Sunday, August 29th 2010 at 10:48 am |
Is this the Department of State’s retina scan test to detect corrupt subcontractors ?
http://www.scribd.com/full/36588926?access_key=key-2dcx7ljokfwxq2vgh4pt
We all know the GAO are told what to do by the DLA and DoD. They are just following orders.
Sunday, August 29th 2010 at 11:07 am |
Also, what about the Subsistence Prime Vendor award to Anham? GAO decided to dismiss, not deny KGL’s protest and is now forcing DSCP to amend the solicitation.
Keven, maybe you can decipher what that means. Does that mean the contract is “still up for grabs” like the KGL Chairman stated a few weeks back? If bidders must provide amended bids, how can DSCP allow Anham to continue work? In my read of the situation, amended bids means a further evaluation must occur with the final awardee to be determined. Or is this simply GAO and DSCP crossing their Ts and dotting their Is before confirming their initial selection?
I also saw via FOIA that InterGlobal (the third bidder) has submitted two protests, but I’m not aware of the status of either. Can anyone fill Ms Sparky readers in?
Apologies, I’ve been out of the loop for a few weeks.
Sunday, August 29th 2010 at 12:04 pm |
Dismissed means the award stands unless another contractor has a GAO protest also. What are the other GAO decisions ?
Speaking of other GAO Protests and the DLA’s private $ 5.7 million solicitation
SP4510-10-R-1004
after a message from ARU’s LuLu (on her way out the door) that has local contractor’s up in arms enough to file protests to the GAO. I see the following have filed protests:
The last solicitation to draw that many Protests was the corrupted Kuwait Shuttle Bus contract where Rock Island’s Justin Trine and Jake Adrian used an amateurish EXCEL document after bidding closed which couldn’t add 2 + 2 to draw the Protests to keep HETCO (was that by design Rock Island ??) rolling for a few more months while awarding to an unqualified company with no buses, no drivers and no maintenance facility. It is no wonder Trine disappeared from Rock Island – but why is Adrian still there ?
Protesters of DLA’s Diettel’s Private $ 5.7 million solicitation, SP4510-10-R-1004, DRMO that bypassed Fedbizopps are:
Al Jameh Group General Trading & Contracting (SP4510-10-R-1004)
Department of Defense : Defense Logistics Agency
Quick View Quick view toggle Outcome: Not Decided Status: Case Currently Open
Latvian Connection Trading and Construction, LLC (SP4510-10-R-1004)
Department of Defense : Defense Logistics Agency
Quick View Quick view toggle Outcome: Not Decided Status: Case Currently Open
Trade Links Logistics General Trading (SP4510-10-R-1004)
Department of Defense : Defense Logistics Agency
Quick View Quick view toggle Outcome: Not Decided Status: Case Currently Open
Decision
Matter of: Alalamiah Technology Group
File: B-402707.2
Date: June 29, 2010
Dismissed
Sunday, August 29th 2010 at 2:38 pm |
Take a read through this and tell me why the U.S. Army and the DOJ cannot put the subcontractors on the EPLS. Do you see SOFA written in Title 48. KGL and Agility have learned this the hard way. They bid on United States Federal Contracts, not a Afghanistan Khrarzi Corrupt Contract or a Kuwait Civil Contract. And not only that, when they got the contract, they signed they did not pay a bribe or offer to pay a bribe and they were not requested for a kickback. The subcontractor saw all the terms and conditions. If they don’t read English, maybe they shouldn’t be given the contract.
Stop making excuses for the DOJ and the Army. They are just as much part of the corruption as the dog and pony show they put on to put down a KBR SCA. Usually the DOJ, the Army and the Air Force are reserved for disavowing their association with criminals for murder and then they extended it to corruption (well with Camp Arifjan at 30 – no wonder) If you notice, the DOJ are now extending their cover-up to DoD LOGCAP Contractors and other Prime Contractors who are the subject of criminal investigations. Way to go Holder – Accomplice No 1.
Here is what the law says DOJ and Army. Maybe you think no one is watching your cover-up of the subcontractors or in this case LOGCAP Prime Contractor KBR.
TITLE 48 – FEDERAL ACQUISITION REGULATIONS SYSTEM
CHAPTER 1 – FEDERAL ACQUISITION REGULATION
SUBCHAPTER A – GENERAL
PART 3 – IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST
3.502 – 2 – Subcontractor kickbacks.
The Anti-Kickback Act of 1986 (41 U.S.C. 5158) was passed to deter subcontractors from making payments and contractors from accepting payments for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or a subcontract relating to a prime contract. The Act (a) Prohibits any person from (1) Providing, attempting to provide, or offering to provide any kickback; (2) Soliciting, accepting, or attempting to accept any kickbacks; or (3) Including, directly or indirectly, the amount of any kickback in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the United States.
(b) Imposes criminal penalties on any person who knowingly and willfully engages in the prohibited conduct addressed in paragraph (a) of this subsection.
(c) Provides for the recovery of civil penalties by the United States from any person who knowingly engages in such prohibited conduct and from any person whose employee, subcontractor, or subcontractor employee provides, accepts, or charges a kickback.
(d) Provides that (1) The contracting officer may offset the amount of a kickback against monies owed by the United States to the prime contractor under the prime contract to which such kickback relates; (2) The contracting officer may direct a prime contractor to withhold from any sums owed to a subcontract under a subcontractor of the prime contract the amount of any kickback which was or may be offset against the prime contractor under subparagraph (d)(1) of this subsection; and (3) An offset under subparagraph (d)(1) or a direction under subparagraph (d)(2) of this subsection is a claim by the Government for the purposes of the Contract Disputes Act of 1978.
(e) Authorizes contracting officers to order that sums withheld under subparagraph (d)(2) of this subsection be paid to the contracting agency, or if the sum has already been offset against the prime contractor, that it be retained by the prime contractor.
(f) Requires the prime contractor to notify the contracting officer when the withholding under subparagraph (d)(2) of this subsection has been accomplished unless the amount withheld has been paid to the Government.
(g) Requires a prime contractor or subcontractor to report in writing to the inspector general of the contracting agency, the head of the contracting agency if the agency does not have an inspector general, or the Department of Justice any possible violation of the Act when the prime contractor or subcontractor has reasonable grounds to believe such violation may have occurred.
(h) Provides that, for the purpose of ascertaining whether there has been a violation of the Act with respect to any prime contract, the General Accounting Office and the inspector general of the contracting agency, or a representative of such contracting agency designated by the head of such agency if the agency does not have an inspector general, shall have access to and may inspect the facilities and audit the books and records, including any electronic data or records, of any prime contractor or subcontractor under a prime contract awarded by such agency.
(i) Requires each contracting agency to include in each prime contract exceeding $100,000 for other than commercial items (see part 12), a requirement that the prime contractor shall (1) Have in place and follow reasonable procedures designed to prevent and detect violations of the Act in its own operations and direct business relationships (e.g., company ethics rules prohibiting kickbacks by employees, agents, or subcontractors; education programs for new employees and subcontractors, explaining policies about kickbacks, related company procedures and the consequences of detection; procurement procedures to minimize the opportunity for kickbacks; audit procedures designed to detect kickbacks; periodic surveys of subcontractors to elicit information about kickbacks; procedures to report kickbacks to law enforcement officials; annual declarations by employees of gifts or gratuities received from subcontractors; annual employee declarations that they have violated no company ethics rules; personnel practices that document unethical or illegal behavior and make such information available to prospective employers); and (2) Cooperate fully with any Federal agency investigating a possible violation of the Act.
(j) Notwithstanding paragraph (i) of this subsection, a prime contractor shall cooperate fully with any Federal government agency investigating a violation of Section 3 of the Anti-Kickback Act of 1986 (41 U.S.C. 5158).
So, why are the DOJ and Amry covering up for contractors violation the FAR and not getting them on the EPLS ?
Monday, August 30th 2010 at 10:26 am |
gonewild99 – Obviously I edited your comment. Please contact me about this affidavit. I emailed you at the email you provided. I would like a link to the source or an original document so I can post that. ~Ms Sparky
Tuesday, August 31st 2010 at 2:13 pm |
why did they wait this long to get rid of them?
Friday, November 26th 2010 at 11:43 pm |
News from Jalalalabad,Afghanistan. It seems that when one speaks with Tier 1 Fluor workers that this is not the Fluor that they know back in the USA. This is a current theme from them all.
The hatchet again is falling on ex-pats.
Recently they told Jeff Clark that he was terminated. Why? It was because he approved timesheets of some people who de-mobed. Here one is sent from Fob to Fob. One cannot know all of the workers or where they are at all times. Jeff took over the duties of one supervisor on R and R. He did not know he de-mobed. In any case, about $10,000 in salary was paid out to ex-workers. The questions arise as to how did this happen. Where is HR in all this since people de-mobed? Why wasn’t their SAP numbers placed on hold? Why is it that this was all of J. Clark’s fault? Why wasn’t the other supervisors , Mark and Jim, also terminated for this action as they also approved some time sheets?
Then in the Material Yard 2 workers were fired because of not following safety. The problems here are as follows. Management from Bagram violated the same rules but were not fired. This according to the company policy should be no more than a write up. But it is the people on the bottom who go home, just llike KBR.
Last week a email was sent out about not contacting bagram or corporate. Why is this? To hide the mismanagement of the management here at JAF.
Why is Jim Luchsinger is allowed to take more than 45 days for medical and return when others are not?
These are some reasons people are fed up with this new employer. The old boy system is in place but only for management.
Saturday, November 27th 2010 at 8:58 am |
I would very much like to get a copy of that email tell Jalabad (JAF) people not to contact corporate or Bagram!