Is our Defense Department simply unwilling or is it incapable of proper contract management? Did it know that multiple tiers of Halliburton subcontractors added exorbitant overhead fees? Follow the sleuthing of Henry Waxman and the committee he chairs, Oversight and Government Reform.
In Iraq and other deployed locations contractors provide billions of dollars worth of services each year and play a role in most aspects of military operations. Last month the GAO issued another report giving Defense a D, “High Level DOD Action Needed to Address Long-standing Problems with Management and Oversight of Contractors”.
Past reports of enormous waste and the potential for fraud prompted recommendations that Defense establish clear accountability and authority to coordinate actions over contractor support. DOD agreed but stalled. Interviews yielded many examples, a few among them:
- The Air Force has about 500 civilians deployed to Iraq, but could not readily identify how many were contractor personnel and how many were DOD
- the Office of the Under Secretary of Defense was unaware of its responsibility to develop and implement procedures for counterintelligence and security screenings of contractors
- A battalion commander from a Stryker brigade said he was unable to determine the number of contractor-provided interpreters available for his unit
- Contracting officials at U.S. Central Command said they do not maintain centralized information on contractor support in their area
Henry Waxman’s office has collected information on government contractor fraud and waste for years. Following the issuance of this GAO report, he sent a letter to the general in charge of U.S. Army Materiel, requesting a briefing on the report’s conclusions as related to Halliburton. He cited the history of inflated costs of dining halls for contractors: Halliburton and its subcontractors supply free meals for people who receive per diem food allowances. The Army estimates it loses $43 Million every year on this.
Halliburton deserves a colonoscopy. The story is outlined in a readable December 2006 letter to Rumsfeld. A Halliburton subcontractor, ESS, operated in Iraq as a dining facility subcontractor. Apparently, it used Blackwater USA for armed security. Blackwater received a reported markup of 36% on each employee paid $650 a day. Additional costs include $1200 a day for hotel room (another 100% markup). Blackwater’s vice president refused to provide documents as promised; his testimony contradicted the terms of his firm’s contract.
Meanwhile, the Army denied knowing of any such arrangement. Its contract with Halliburton prohibited it.
In probing for the multiple layers of overhead caused by contract tiers, Rep. Waxman is pressing the Army to account for payments for Blackwater services to all defense subcontractors.
… the Defense Department still lacks a basic understanding of these contractor activities and their effect on the prices paid by the U.S. taxpayer.
An aside —
Who in the Pentagon has been responsible for preventing fraud and waste? The Army Inspector General.
Who was that, March 2002 – September 2005? Joseph E. Schmitz. He became the target of a congressional inquiry about blocking two criminal investigations, one of John Shaw, former deputy undersecretary of defense and former Rumsfeld aide, and the other of Mary Walker, general counsel for the Air Force.
Where did he go? General counsel and COO for the Prince Group, parent company of Blackwater USA .
The world of Waste and Abuse is so, so small.
Rep. Waxman’s Committee on Oversight and Government Reform has established a searchable database of “problem contracts” under the Bush administration, Dollars, Not Sense. Currently 142 contracts are in the database, each found by investigators or auditors to involve significant waste or mismanagement. You can plug in a federal department, e.g., Defense, an issue, e.g., “Iraq” and/or a problem, e.g., “wasteful spending.” Try it out. I found three Defense contracts flawed by “corruption.”
And it’s only January.
