[Ed. note: Promoted as this deserves greater attention. It's very important to remember that the Defense Department still can't say how many contractors' and subcontractors' personnel are working for them even after a request from the House Oversight Committee last November.]

The other day I received an email from a friend with a link to an article in the September 1, 2010 issue of Government Executive discussing an audit the US Army Inspector General had conducted on 18 different contracting vehicles (seven contracts and 11 task orders) used to support activities in Iraq and Afghanistan. (The actual audit report is a PDF at the first link of the GE article.)

The GE article and the audit itself seemed to concentrate on the process errors in the award of some of these contracts and Task Orders as sole source and the failures to follow the Federal Acquisition Regulations (FAR) and the Defense Acquisition Regulations (DAR) and these are indeed serious problems.

I worked in Accounting and Finance while I was in the USAF, for the Defense Logistics Agency as an in-plant QA specialist for a couple of years as well as other contracting support activities after that. Some of the FAR and DAR can be a real pain to comply with and the lead times necessary to plan for a contract award can be years, depending on the scope of the effort. I’ve been involved as a "Non-government Technical Adviser to the Source Selection Board" and I’ve been on both the winning and losing end of various contract awards. I’ve been on the winning end where we took a contract away from a preferred incumbent and I’ve been on the losing end of the same situation.

As I read the audit report, the problems with the contracts and task orders highlighted in the report seemed to be as much the result of laziness as anything. A lot of failures to follow all the required processes and due diligence.  . . .

In September 2006, for example, the Army Contracting Agency at White Sands Missile Range in New Mexico awarded a $9.9 million sole-source task order to Computer Sciences Corp. for "operation, training and maintenance of foreign aviation systems at Kabul Afghanistan International Airport." The Army had noted CSC was the only firm capable of performing the work due to its specialized nature, but officials offered no evidence to back up their claim, auditors said.

"The justification also included an unexplained assertion that it would take 24 months and cost $25 million for another contractor to acquire the skills needed to gain proficiency for this effort," the report said. "This assertion was shown to be false a year later, when CSC was forced to compete for the follow-on contract and lost to Northrop Grumman."

My guess here is that someone at CSC had the ear of the Contracting Office and convinced them that they shouldn’t compete the effort and the Contracting Office took the easy way out.

The audit report and the article both also mention problems with the lack of analysis of Labor Rates and Categories where the Contracting Office did at best a superficial analysis of the proposed rates and apparently accepted the contentions of the contractors as to why the rates needed to be higher even than the ones used in comparison. As a companion with this, the Contracting Office and contractors compared the rates presented to various GS (General Service – civil service) and SES (Senior Executive Service) job categories without showing how and why the categories chosen were at all pertinent to the acquisitions involved. I can guarantee you that if desired, the Government is quite capable of squeezing contractors on their loaded labor rates such that a position can require a PhD in Electrical Engineering or Computer Science yet pay the contractor a maximum of $40 an hour (which would put the actual worker filling this slot at somewhere between $25 and $30 an hour – after all, the company supplying the body has to make a profit, right?). The differences in Labor Rates is an area that the IG highlighted for the Contracting Offices to go back and request refunds of as much as $3.68M on total contracts of over $605M.

But the area of the Audit Report that GE paid the least attention to yet was far more troubling to me was the lack of oversight on Contractor performance in Iraq and Afghanistan and in those contracts/task orders where a Contracting Office Representative was available and doing the job, they were overruled by superiors who directed invoices be paid with no documentation that the work was performed or performed appropriately.

From page 28 of the PDF linked at the GE article:

With no CORs assigned to either contract, REF had several different officials review and approve the Ideal Innovations invoices for each month. These officials were all located in Fort Belvoir, Virginia, while the work was performed in Iraq. These officials were not in a position to know if the invoices accurately represented the work performed. Some of Ideal Innovations employees billed up to 372 hours per month, so it was necessary for REF to have adequate surveillance in place to ensure that the invoices were accurate.

Some Ideal Innovations employees worked on both contracts. For example, for the month of August 2005, one individual billed more than 100 hours to each contract. The invoices were reviewed by different REF officials, thus it is unlikely that they would have detected any possible double-billing. If REF had assigned an in-country COR to monitor the contracts, REF would have been in a far better position to verify that the work was properly performed and that the invoices were accurate.

This is perilously close to the line for fraud. If someone is working five days a week, eight hours a day, they are probably going to be charging 160 to 184 hours for a month. To bill 372 hours for a month, the worker has to charge 12 hours a day for 31 days. It’s possible I guess in a war/occupation zone but I sure as hell would not want to rely on the individual to be fully functional if those were standard work hours.

A final extract from Page 29 of the PDF of the audit report:

Contracting and program officials had not planned and organized a sufficient contractor surveillance structure. Specifically, the contracting officer’s technical representative (COTR) in Afghanistan attempted to conduct significant oversight, but he was impeded by other program and contracting officials. In January 2006, the COTR stated that he would not approve an invoice because he wanted an explanation for $27,000 spent on office supplies and $2,000 spent on “non-labor costs.” MPRI refused to provide supporting documentation. As a result, contracting officials and other program officials decided to “take the COTR out of the approval process” and pay the invoice anyway. The contracting officer stated that the COTR was taking too long to approve the invoices.

They decided that future invoices would be paid unless they were significantly different from the contract. Contracting and program officials decided to rely on a Defense Contract Audit Agency closeout audit after the contract was complete to ensure that the invoices were accurate.

So even when there was a Contracting Office Technical Rep wanting to do things correctly, they were interfered with. As the audit concludes, relying on a closeout audit report from DCAA does not equal oversight.

Some folks still wonder how billions of dollars have gone missing in Iraq and Afghanistan.

And because I can: