Declining DCAA Role in Oversight of Tens of Billions of Pentagon Contract Dollars

POGO has obtained a Defense Contract Audit Agency (DCAA) memo showing that the Pentagon has radically reduced oversight of tens of billions of contract dollars. From our press release today:

According to the memo, contracting guidance “now limits contracting officer requests for audit services to Fixed-price proposals over $10 million and Cost-Type proposals over $100 million, unless there are exceptional circumstances.”

These audit services are reviews of cost data (referred to as “reviews”) and they entail an examination of a contractor’s cost proposal to the government. In these proposals, contractors estimate how much it will cost them to accomplish work on a contract.

Previously, there was no dollar threshold for reviews on fixed-price contract proposals, but contracting officers would limit requests for DCAA reviews of proposals over a threshold tied to the submission of cost or pricing data, which is currently $700,000. The old threshold for reviews of cost-type proposals was $10 million, but could be lower if the contractor has systemic problems estimating costs.

As POGO Director of Investigations Nick Schwellenbach suggests in a statement today, this move could run counter to the Pentagon's cost savings goals:

Whistleblower Film Series Wrap-Up

Many thanks to all who joined us for the Whistleblower Film Series earlier this month. We were thrilled with all of the support, interest, and thoughtful discussion surrounding this incredibly important issue.

You can view some photos from the Series over on POGO's Watercooler. We hope you’ll join us next time—but meanwhile, we hope you’ll continue to help us push for legislation to create enhanced and credible whistleblower protections.

-- Bryan Rahija

Flightglobal Poll: Did British Move Sound "the Death Knell" for JSF Variant?

While certainly not scientific, Lockheed Martin can’t be too happy with the results of a recent Flightglobal poll on whether the British shift from buying the F-35B STOVL (short take-off and vertical landing) version to the F-35C carrier variant “sounded the death knell” for the F-35B. Lockheed is the prime contractor for the Joint Strike Fighter (JSF) program.

On its website, Flightglobal posed the question, “Has the UK’s dramatic switch to the F-35C sounded the death knell for the Joint Strike Fighter’s STOVL variant?”

Morning Smoke: Pentagon Inquiry Concludes Contractor Ran Illegal Spying Ring

Pentagon says intel contractors went too far  [Associated Press]

U.S. reveals skyrocketing cost of intelligence- gathering since 9/11 attacks by Ken Dilanian [Los Angeles Times]

New questions on stability of cement in gulf oil well before explosion by Steven Mufson [The Washington Post]

Contractor compliance crunch fuels boom at outsourced accounting firm by Bryant Ruiz Switzky [Washington Business Journal]

Volcker on His 'Rule'— Keep It Broad by Deborah Solomon [The Wall Street Journal]

GAO audit: Public records mishandled by National Archives by Lisa Rein [The Washington Post]

Army Buying Needs ‘Big Bang’ by Colin Clark [DoD Buzz]

'Deadly' report details federal waste by Ed O'Keefe [Federal Eye]

Alcoholic energy drink taken off Haggen shelves by  Daniel Berman [The Western Front]

State Department Inspector General Documents AGNA Antics in Afghanistan

The State Department Office of the Inspector General (OIG) today released a damning performance evaluation of ArmorGroup North America (AGNA), the contractor responsible for guarding the U.S. Embassy in Kabul, Afghanistan.

Among the revelations from today's OIG report:

 

• AGNA employed, and the State Department’s Bureau of Diplomatic Security failed to scrutinize, “Nepalese guards without verifiable experience, training, or background investigations in violation of its contract.”
  
  
• “AGNA cannot account for 101 U.S. Government-furnished weapons that have been missing since 2007. AGNA used U.S. Government-furnished weapons for training rather than required contractor-furnished weapons.”
  
  
• “AGNA regularly allows individuals who are not vetted by Embassy Kabul’s regional security office unescorted access to Camp Sullivan, a U.S. Government-owned camp containing sensitive materials.”

The report confirms and expands on the findings of our investigation last year, which pulled back the curtain on a "Lord of the Flies environment" that had taken hold of the Embassy security guard force.

Lewd and obscene photos of AGNA security guards helped our investigation garner considerable attention—but the key revelation, as detailed in our letter to Secretary of State Hillary Clinton, was that the State Department was failing to conduct oversight of a contractor performing an incredibly important service. Today's OIG report is just one more piece of evidence demonstrating that the State Department continues to struggle in its oversight of private security contractors.

Find statements by POGO Executive Director Danielle Brian and POGO investigator Jake Wiens here.

ArmorGroup’s contract expired on June 30, 2010, but the company will continue to guard the Embassy through the end of 2010. The State Department has selected EOD Technology, Inc. (EODT) to take over security at the Embassy.

-- Bryan Rahija

See also:

• Testimony of Danielle Brian before the Commission on Wartime Contracting in Iraq and Afghanistan Regarding Private Security Contractors
• Senate Report Says ArmorGroup Funded Warlords In Bed With the Taliban
• Did Triple Canopy Instruct Its Guards to Lie to State Department Investigators?
• Kabul Embassy Deja Vu
• Kabul Embassy Guards Back in the Spotlight
• POGO Letter to Secretary of State Hillary Clinton regarding U.S. Embassy in Kabul

New Investigative Lead: Allegation Weakens Case for $5 Billion Energy Department Facility

A knowledgeable government source has provided POGO with information that may undermine one of the Energy Department's key rationale for constructing a new Uranium Processing Facility (UPF).

UPF is a $5 billion facility designed to manufacture highly enriched uranium (HEU) secondaries, which are added to single-stage nuclear weapons to create a thermonuclear explosion.

The Energy Department claims there is an urgent need for the facility, but the source says that thus far, not a single secondary has had to be cut apart and re-manufactured as part of the Lifetime Extension Program. Several hundred of each of the four types of nuclear weapons (W87, B61 Mod 7, B61 Mod 11, W76) have already gone through the program.

Find a statement by POGO Senior Investigator Peter Stockton here.

-- Bryan Rahija

Insider Trading in the Halls of Congress?

Earlier this month, the Wall Street Journal reported that 72 congressional aides had recently traded shares of stock in companies that their bosses help oversee.

A few examples cited in the piece:

 

• The top energy-policy adviser to Senate Majority Leader Harry Reid (D-NV) purchased stock in a renewable-energy firm, which, according to the WSJ, stood to benefit from tax credits supported by Senator Reid.


• The chief of staff of Rep. Shelley Moore Capito (R-WV), a member of the House Financial Services Committee, "invested $1,570 in Citigroup Inc. on Feb. 27, 2009, the day Citi and the Treasury announced the bank would issue common stock in exchange for preferred shares," a move that "helped bolster investor confidence," according to the WSJ.


• An aide for House Speak Nancy Pelosi (D-CA) "had several successful trades in 2008 in a Charles Schwab brokerage account with her husband," who purchased "about $2,000 worth of Freddie Mac and $2,700 worth of Fannie Mae on July 11, 2008, just two days before the Fed authorized emergency funding to Freddie and Fannie."

Most staffers mentioned in the piece denied that they had done anything improper. Chris Miller, the Reid staffer noted above, told the WSJ that it had "cherry-picked information and woven a misleading narrative," explaining his investment this way:

Morning Smoke: Auditors Describe Afghanistan Reconstruction Landscape: A "Confusing Labyrinth"

Auditors find US Afghan aid contract system chaotic [Reuters]

The Spill [FRONTLINE / ProPublica]

Democrats call for investigation of Defense subcontracting by Robert Brodsky [Government Executive]

Law Empowers SEC to Go After More U.S. Market Players [Reuters]

Whether heads or tails, Pimco wins by John Maggs [Politico]

Proprietary Trading Goes Under Cover: Michael Lewis by Michael Lewis [Bloomberg]

A Cheryl Eckard Recap: ‘I’m A Little Emotional’ by Ed Silverman [Pharmalot]

Q&A: Leaked War Logs Raise Questions of Accountability for Military Contractors by Marian Wang [ProPublica]

Treasury hiring FOIA officers 'to withhold information from release to public' by J.P. Freire [Washington Examiner]

Five Observations about Contracting and Good Governance in the Philippines

POGO's Scott Amey recently traveled to the Philippines to talk federal contracting and good governance. Here's five factoids related to good governance in the Phillippines that he picked up on his trip:

1. Only 25 percent of each procurement Peso gets to its intended target.


2. Some anti-corruption measures have been added to the procurement process: Bid and Award Committees have been created to oversee the contracting system, and NGOs like Procurement Watch, Inc. are selected to participate in government contract bid and award process and submit reports reflecting actual observations on the bidding activity monitored.


3. The Philippines has nothing equivalent to the Freedom of Information Act (FOIA), and has no whistleblower protection laws.


4. Instead of hammers and coffee pots, taxpayers in the Philippines are ripped off on hand dryers and motorcycle helmets.


5. Prosecutions are long and drawn out and the witnesses are offered little actual protection when they step forward to fight corruption.

Read a full account of his trip over on the POGO Watercooler.

-- Bryan Rahija

Morning Smoke: Relatively Unknown Members of Congress Now Popular with Lobbyists

Lobbyists Court Potential Stars of House Panels by Eric Lipton and David M. Herszenhorn [The New York Times]

[F-35] Fighter jet purchase risky, Auditor-General says by Steven Chase [The Globe and Mail]

Adviser to Consumer Agency Had a Role in Lending by Edward Wyatt [The New York Times]

So Much for Treasury's [REDACTED] Transparency? by Daniel Indiviglio [The Atlantic]

Fed Won’t Join Bank High Court Appeal on Crisis Loans by Bob Ivry and Greg Stohr [Bloomberg]

U.S. Seeks to Shield Goldman Secrets by Scott Patterson [The Wall Street Journal]

Interior Official Says Administration Hasn’t Done Enough to Reform Offshore Drilling by Andrew Restuccia [The Washington Independent]

US Has Its Worst Showing In Transparency Index History by Samuel Rubenfeld

In Medicare's Data Trove, Clues to Curing Cost Crisis by Mark Schoofs and Maurice Tamman [The Wall Street Journal]

Drilling rig inspectors had vast gaps in knowledge, oil spill panel finds by David Hammer [The Times-Picayune]

USAF Has Nuke Issues, Again. Really, Really?! by John Reed [Defense Tech]

NCI Ethics Director Suffered Retaliation: Grassley by Ed Silverman [Pharmalot]

Chief Pentagon Tester's Memo Partly Directed at the Joint Strike Fighter

J. Michael Gilmore, the Pentagon’s director of operational test and evaluation, has recently urged that “production-representative articles should be used for test and evaluation,” according to an October 18 memo by him. by In other words, the Defense Department should be testing weapons that come off a contractor’s production line, or are similar to the ones that will. These are the weapons that will be most like the weapons that eventually may make their way to the battlefield.  Weapons produced for the development phase of a program, particularly in its earlier stages, are often substantially different from the production-representative versions.

The Joint Strike Fighter (JSF) is perhaps the most notable target of his frustration.

In December 2009, Gilmore’s annual report on test and evaluation noted “the [military] Services and operational test agencies need to monitor the production-representative quality of” the first batches of JSF aircraft and support systems. “Given the concurrency of development, production, and test, shortfalls in capability must be recognized early to ensure resources are available to modify these aircraft and support systems so they are production-representative and ready for a successful” initial operational test and evaluation (IOT&E).

Morning Smoke: SIGTARP: Treasury May Have Used Misleading Figures in Details about AIG Repayment Plan

TARP watchdog questions AIG valuation; reveals that Treasury has appointed observers to monitor "deadbeat'' banks by Ryan Holeywell [BailoutSleuth]

The Australian continues to mislead its readers about Defence and the F-35 by Eric Palmer [DOD Watch]

Potential compromise offered on Afghan private security ban by Robert Brodsky [Government Executive]

New SBA rule designed to boost government contracts awarded to women-owned small businesses by Marjorie Censer [The Washington Post]

Grassley Asks FDA About Conflicts & Human Research by Ed Silverman [Pharmalot]

So What Is Insider Trading? by Andrew Ross Sorkin [DealBook]

Security Contractors, Coalition Comms, and Friendly Fire by Bill Sweetman [Ares]

Healthcare Fraud, Whistleblowers & US Treasury by Ed Silverman [Pharmalot]

The Next JSF Debate by Bill Sweetman [Ares]

ATF's oversight limited in face of gun lobby by Sari Horwitz and James V. Grimaldi [The Washington Post]

Podcast: FDA's Oversight of Drug Imports and Foreign Inspections [Government Accountability Office]