Audit of Blackwater Iraq Contract Finds Improper Charges, Weak Enforcement

The State Department failed to punish Blackwater (now known as Xe) for significant violations of its Iraq security contract. This and other shortcomings were detailed in a joint audit report released Monday by the State Department Inspector General and the Special Inspector General for Iraq Reconstruction (SIGIR).

The audit found that, between May 2006 and December 2007, Blackwater's staffing levels fell below those specified in its contract to provide security to State Department employees in Iraq, otherwise known as the Worldwide Personal Protective Services II (WPPS II) contract. Pursuant to the contract, which has cost the government over $1 billion, such violations should have resulted in nearly $55 million in penalties to Blackwater.

According to the report, Blackwater's understaffing was evident on muster sheets, yet the State Department “did not invoke...the contract measure providing for deductions in the award price when proper manning levels are not maintained.” An unidentified contracting officer told the auditors that Blackwater wasn't penalized because the company was “meeting the service requirements, meaning that the convoys were showing up when required.” In other words, no harm, no foul. (When it comes to rationalizing Blackwater's missteps in Iraq, POGO has heard variations of this excuse before. One particular favorite is that Blackwater has a perfect record guarding State Department personnel in Iraq--not a single client has been lost. This ignores the company's less-than-perfect record of injuring or killing bystanders in public shootouts and that its reckless behavior may put the lives of U.S. troops at risk.)

In addition, the audit found that the State Department did not adequately verify charges made by the company under the contract, increasing the risk of fraud, waste and abuse. For example, Blackwater billed the government more than $127,000 for premium airfare costs, which were not allowed under the contract. The State Department paid these costs, however, because it “did not have adequate voucher review staff to identify and prevent overbillings.” (The report notes that, during the audit period, the government was able to recover over $56,000 of these ineligible costs.) Also, the report concluded that the State Department and Blackwater did a poor job of keeping an inventory of government-furnished equipment, with items such as handheld radios and body armor either lost or mislabeled. “While no significant losses were identified during the audit,” the report states, “the potential exists for significant losses.”

The report recommends that the State Department should attempt to retroactively assess penalties on Blackwater (whether this is legally possible, however, is another story), recover the remaining $70,000 of the unallowed travel costs, make sure its contract oversight files contain all the required paperwork and are more accessible, and deploy a full-time contracting officer's representative to Iraq to properly verify invoices and property inventories.

In a sense, these recommendations come too late. With the expiration of the WPPS II contract in May and the Iraqi government refusing to renew its license to operate in the country, Blackwater is winding down its Iraq operations. (A lawsuit filed recently, however, claims the company is illegally remaining in Iraq through corporate name games.) But the overall lessons of the report still matter. Blackwater remains one of the government's main providers of security services, and it is steadily building up its presence in Afghanistan where it continues to make headlines.

-- Neil Gordon

Comments

[Posted on: Oct 21, 2009 at 08:31 PM]

I worked for DoS/INL from 2005 to 2009. I was the program manager for an international reconciliation for all funds managed by INL.

I reconciled over 30 countries totaling over $18 Billion. I found fraud in Plan Colombia Colombian National Police (CNP) and Colombian Military (COMIL) programs totaling over $250 Million dollars. Nothing was ever done. I began reconciling funds managed in Washington DC, funds that included Iraq Reconstruction. I was told several times by James Walsh not to touch those funds.

The significance of Iraq Reconstructions funds and government fraud is that DoS changes accounting systems at during the time of the military surge of 2007. For seven months, almost the entire duration of the surge DoS could not record transaction in the accounting system and contractors were not paid. All contractors except DynCorp. During this time contractors submitted invoices for work in April. They submitted invoices for May expecting payment for April that weren’t paid. Next month they resubmitted payments for April and June making two invoices for April. Next month still no payment they resubmitted April, May and July (Three invoices for April two for May). This went on for months. When the system was operational the decision was made to lump sum all payments. Some advised this was a bad idea and violated Federal Acquisition Requirements but lump sum payments were made and contractors were paid multiple times for their efforts.

I was two months away from proving all of this when my manager used an incident with another employee to fire me.

I have reported this to the IG and that office did nothing. I reported this to the Senate and they called for an investigation and I was told by my senate contact that there was criminality involved and the matter was turned over to the FBI for further investigation and prosecution. Later a reporter questioned the senate representative about the incident and was told that he never said anything about the case being sent to the FBI. He forgot that he left the message on m voice mail which I saved. The reporter and I both confronted the senate about the lie telling me the case was turned over to the FBI and the senate representative said the message was a mistake.

Since then I reported the case to SIGIR who only confirmed I was fired. They never questioned the motives for my termination and chose not to investigate my accusations. They did not even question the first $ 250 million in fraud I proved.

I reported $ 900 million dollars in government fraud and nothing is being done about it. Do you know how to make this information public and force the government to collect these funds back from the contractors or will this be a near $ billion dollar give me for DynCorp, BlackWater, Pro-Telligent and other DoS contractors?