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Committee hearing highlights inadequate Defense contract auditing

Putting Federal Contract Auditing in the Spotlight

Better Auditing Could Save Taxpayers Billions

Pratap Chatterjee – February 1, 2011 – The Senate Subcommittee on Contracting Oversight hearing today to improve the way federal government agencies audit the half-trillion dollars given to contractors each year is a step toward making our government more efficient and competitive, as President Barack Obama proposed to do in his State of the Union address last week. But senators need to ask the right questions to make sure the auditing process is as effective as possible and taxpayer dollars are not being wasted.

The subcommittee will hear testimony from federal agencies and watchdog groups on how the government audits the $530 billion it doles out to contractors each year. In the spotlight will be the Defense Contract Audit Agency, or DCAA, which is the primary federal authority that audits contracts including defense and most civilian ones.

The senators will consider whether DCAA should be replaced by a more powerful independent agency—perhaps a Federal Contract Audit Agency—that reports to Congress and the White House. Such a move would not be unprecedented: The U.S. Treasury and subsequently the General Accounting Office, which is now the Government Accountability Office, once audited all federal contracts.

DCAA’s oversight of contract dollars has expanded manifold since its inception 46 years ago. It has a formidable role to play with federal procurement at well more than $500 billion. Yet the number of DCAA audit staff has shrunk from a high of some 7,000 in the early 1990s to a low of 4,114 auditors today.

Despite this, the agency considers itself to be a profitable investment for taxpayers. Each dollar spent on DCAA returned $5.10 for a total of $2.7 billion, according to the agency’s own estimates in fiscal 2010.

Patrick Fitzgerald, the director of DCAA, was appointed by Secretary of Defense Robert Gates. He reports to the Defense Department comptroller. Each of the other major federal agencies are responsible for auditing their own contracts. But almost all of them pay DCAA to audit for them because of a lack of capacity. Indeed, even contracts issued by the Government Accountability Office, or GAO, which conducts oversight for Congress, are audited by DCAA staff. (Click HERE for article)

Federal Government Needs Strong, Independent Auditor to Oversee Billions in Contract Spending, POGO Tells Senate Panel

February 1, 2011 – The responsibility of auditing the hundreds of billions of dollars spent each year on defense and civilian contracts should fall to a single, independent agency that is outside of the Pentagon’s chain of command, the Project On Government Oversight (POGO) told a U.S. Senate panel today.

Rather than creating a new bureaucracy, Congress could simply expand the duties of the existing Defense Contract Audit Agency (DCAA), while making it independent of the Department of Defense (DoD), POGO Director of Investigations Nick Schwellenbach told the Senate Homeland Security and Governmental Affairs Committee’s Subcommittee on Contracting Oversight.

Unlike most agencies, a new Federal Contract Audit Agency (FCAA) could save more money each year by uncovering waste and fraud than it would cost to run it. The FCAA would provide a needed check on contractors, ensuring that the government is not overcharged for goods and services.

An independent, central auditor would be more efficient than the current system, under which  contract audits are performed by the DoD’s DCAA, small auditing offices in other agencies, contracted auditors, and various Inspectors General. Non-DoD agencies, which currently can utilize the DCAA for a fee, would have a greater incentive to use a central auditor. (Click HERE for article)

US Contractors Hired Iranian Spies, Taliban, Warlords To Guard US Troops In Afghanistan

Report: US Contractors Hired Iranian Spies, Taliban, Warlords To Guard US Troops In Afghanistan
Senate Investigators Say Chaotic Security Contracts Pose ‘Grave Risk’ To US Troops

Oct. 7, 2010

A scathing Senate report says US contractors in Afghanistan have hired warlords, “thugs,” Taliban commanders and even Iranian spies to provide security at vulnerable US military outposts in Afghanistan. The report, published by the Senate Armed Services Committee, says lax oversight and “systemic failures” have led to “grave risks’ to US forces, including instances where contractors have employed Afghan subcontractors who were “linked to murder, kidnapping and bribery, as well as Taliban and anti-coalition activities.” The chairman of the committee, Sen. Carl Levin, D.-Michigan, said the report was evidence that the US needs to reduce its reliance on contractors. “We need to shut off the spigot of US dollars flowing into the pockets of warlords and power brokers who act contrary to our interests,” said Sen. Levin. The committee reviewed roughly 125 unclassified Department of Defense security contracts between 2007 and 2009, and found that there are some 26,000 private security contractors operating in Afghanistan, the majority of whom are Afghan nationals. The review found “systemic failures” of the military oversight for contracts, including the hiring of what Levin called “many too many” security contractors who had been improperly vetted, improperly trained or were not provided weapons.

In some cases, companies were awarded contracts though they had no ability to provide the services needed. In those cases, companies then quickly hired local nationals without proper vetting or security checks. The chaotic system left US facilities and personnel vulnerable to attack. The report found that some Afghan security guards simply walked off their posts at remote forward operating bases. Read the remainder of this entry »

KBR’s Idle Hands in Iraq

-Flickr user Jayel Aheram

The megacontractor’s been making millions from mechanics who put in as little as 43 minutes a month. And as more GIs come home, the waste could get even worse.

By Adam Weinstein -Copy Editor – MotherJones.com
Thu Mar. 25, 2010 4:30 AM PDT

It was just a single contract for a single job on a single base in Iraq. The Department of Defense agreed to pay the megacontractor KBR $5 million a year to repair tactical vehicles, from Humvees to big rigs, at Joint Base Balad, a large airfield and supply center north of Baghdad. Yet according to a new Pentagon report [PDF], what the military got was as many as 144 civilian mechanics, each doing as little as 43 minutes of work a month, with virtually no oversight. The report, issued March 3 by the DOD’s inspector general, found that between late 2008 and mid-2009, KBR performed less than 7 percent of the work it was expected to do, but still got paid in full.

The $4.6 million blown on this particular contract is a relatively small loss considering that in 2009 alone, the government had a blanket deal worth $5 billion with KBR (formerly known as the Halliburton subsidiary Kellogg Brown & Root). Just days before the Pentagon released the Balad report, KBR announced it had won a new $2.3 billion-plus, five-year Iraq contract. But the inspector general’s modest investigation offers new insight into just how little KBR delivers and how toothless the Pentagon is to prevent contractor waste. Moreover, the government’s own auditors predict that as the military draws down its forces in Iraq, KBR will keep most of its workforce intact, enabling it to collect $190 million or more in unnecessary expenses. Much of any “peace dividend” from the war’s gradual end—potentially hundreds of billions of dollars—could wind up in the hands of contractors. Read the remainder of this entry »

David Isenberg: Would Blackwater Lie?

David IsenbergHuffington Post
Author, Shadow Force: Private Security Contractors in Iraq (Praeger Security International)
Posted: March 4, 2010 01:19 PM

The title is not an attempt at facetiousness. It is a genuinely serious question. The reason I ask is that Politico’s Laura Rozen has just published a story about Senate Armed Services Committee Chairman Carl Levin (D-MI) today releasing letters he wrote to Defense Secretary Robert Gates and Attorney General Eric Holder on Feb. 25 regarding the committee’s investigation of a Blackwater “shell” company in Afghanistan, Paravant, which conducted training for the Afghan National Army.

In his letter to Holder, Levin asked him to “initiate an inquiry into whether individuals from Blackwater and Raytheon made false or misleading statements in their submission of the ‘Paravant’ contract proposal to the U.S. government.”

Levin noted that the committee’s investigation found that Blackwater-Paravant had made false statements to get the Afghan National Army training contract, including in creating a shell company, Paravant, fully owned by Blackwater but not encumbered by its public relations “baggage” to bid for the contract.

“Among concerns raised by the investigation were representations made by Blackwater in its proposal for the subcontract that Paravant had ‘over 2000 personnel deployed overseas supporting U.S. Government contracts’ and ‘many years experience in identifying and selecting top candidates for training, security, and consulting positions,'” a SASC press release accompanying the letters said. Read the remainder of this entry »

Army decision to deny millions in bonuses to KBR is “Right call, but only fist step”

American Chronicle – Congressional Desk
February 26, 2010

Former Task Force SAFE Electrical Subject Matter Expert James Childs testifies before the Senate Democratic Policy Committee about the shoddy electrical work performed by KBR. Cheryl Harris, SSG Ryan Maseth's mother, sheds a tear as she listens to why her son was electrocuted and died in his shower in Baghdad on January 2, 2008.

WASHINGTON, D.C. – U.S. Senator Byron Dorgan (D-ND), who chaired Senate hearings on electrocutions of soldiers in Iraq resulting from shoddy contracting work by KBR, said Thursday the Army´s decision to deny million of dollars in bonuses to the firm for its 2008 work in Iraq “is the right call, but it is only a first step.”

Dorgan chaired two Senate Democratic Policy Committee (DPC) hearings in 2008 and 2009 on KBR´s shoddy electrical work in Iraq. The hearings revealed widespread problems with KBR´s electrical work there including countless electrical shocks including one that killed Staff Sgt. Ryan Maseth, and perhaps others, and injured dozens more on their own bases as they showered and engaged in other routine activities.

Following the hearings, Dorgan and Senator Robert Casey (D-PA) wrote the Army asking that it review KBR´s work and the electrocution death of Staff Sgt. Ryan Maseth. They also asked the Army to re-evaluate the millions of dollars in bonuses it has routinely awarded KBR for supposedly excellent work, even when the Army´s own evidence made clear it was highly questionable.

The Army´s investigation of Maseth´s January 2008 death found that KBR´s work exposed soldiers to “unacceptable risk.” A theatre-wide safety review that resulted from the Dorgan-Casey request — Task Force SAFE — also found widespread problems with KBR´s electrical work that exposed soldiers to life threatening risks. Read the remainder of this entry »