Commission on Wartime Contracting Final Report: A Decade's Lessons on Contingency Contracting

By NEIL GORDON

At least one out of every six dollars spent by U.S. taxpayers on contracts in Iraq and Afghanistan over the past decade--more than $30 billion--has been wasted.

That, and the fact that the government over-relies on contractors for contingency operations, are the key findings in the final report issued today by the Commission on Wartime Contracting in Iraq and Afghanistan (CWC). The eight-member, bipartisan, congressionally chartered commission filed the 240-page report with the House and Senate this morning.

Taxpayers have spent a total of $206 billion on contracts in Iraq and Afghanistan. More than $40 billion of this was awarded to KBR. KBR and 21 other companies accounted for more than half of the total. An additional $38.5 billion went to “miscellaneous foreign contractors,” demonstrating once again the difficulty of compiling reliable, accurate contract spending data in those countries. The CWC estimates that waste and fraud have amounted to at least $31 billion and possibly as much as $60 billion (about $12 million every day for the past 10 years) and warns that we may be at risk of losing an equal amount of money if the governments of Iraq and Afghanistan are unable or unwilling to sustain U.S.-funded projects after we leave.

According to the report, fraud and waste stems from a variety of shortcomings equally attributable to both the government and contractors: poor planning, vague and shifting contract requirements, inadequate competition, substandard contract management and oversight, lax accountability, weak interagency coordination, and subpar performance or outright misconduct by some contractors and federal employees. “There are many causes,” the CWC announced in a press release accompanying the report, “and no simple solution.”

Morning Smoke: U.S. Urged to Get Out the Ban Hammer for Wasteful War Contractors

MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

Contract Oversight

U.S. is Urged to Bar Wasteful War Contractors by Congressional Commission
Tony Capaccio, Bloomberg

Financial Oversight

SEC Lawyer Blew Whistle Before
Jenny Strasburg, The Wall Street Journal

National Security

Where's the Plan for Defense Spending?
Joe Sestak, Huffington Post

Homeland Security Purchase Card Oversight Not Up to Snuff, Watchdog Finds
Caitlin Fairchild, Government Executive

Post-9/11 Commission Assessment Sees Security Gaps
Brian Bennett, Los Angeles Times

AF: Raptors Could Resume Flying 'Soon'
Philip Ewing, DoD Buzz

Good Government

Arlington National Cemetery Officials Seek to Account for the Dead
Christian Davenport, The Washington Post

Foreign Corrupt Practices Act

U.S. Probes Oracle Dealings Abroad
Joseph Palazzolo and Samuel Rubenfeld, The Wall Street Journal

Nuclear Issues

Mixed Results on Los Alamos Audit
Frank Munger, Atomic City Underground

NRC's Path After Fukushima: Still Lined with Pitfalls
Ed Lyman, All Things Nuclear

ATF Scandal

Holder Names New ATF Leader Amid Criticism of Gun Sting
Mike Scarcella, The Blog of Legal Times

Open Government

Justice Department Mum on Tax Fraud Settlement with Islamic Bank
Aruna Viswanatha, Main Justice

Contractor Behind Bungled Embassy Construction Sends State Dept. List of Claims Totaling $375 Million

By JAKE WIENS

It's like a bad movie that never seems to end. First Kuwaiti General Trading & Contracting Company, the contractor responsible for bungling the construction of the U.S. Embassy in Baghdad, has sent the State Department a list of claims totaling hundreds of millions of dollars related to its work on that Embassy, according to people familiar with the situation.

Totaling over $375 million, the claims include $22 million for extra security, nearly $13 million for danger pay, and a hair over $4 million for food shortages. The majority of the claims pertain to a “War Risk” clause in First Kuwaiti’s contracts, according to documents reviewed by POGO.

The claims come more than three years after the completion of the Embassy. They also come just months after a heated exchange during a Commission on Wartime Contracting (CWC) hearing, in which CWC Commissioner Charles Tiefer pressed the State Department’s top management official, Patrick Kennedy, to commit to seek a $132 million rebate from First Kuwaiti.

The State Department Office of Inspector General (OIG) recommended the Department attempt to recover that amount from the contractor in an October 2009 audit. The audit detailed a laundry list of deficiencies associated with First Kuwaiti’s work on the Baghdad Embassy.

In response to the OIG’s recommendations, State asserted that the OIG would “need to furnish the Contracting Officer a detailed breakdown of how each dollar value in these recommendations was computed” in order for State to formally request a rebate.

Nearly two years later, during the CWC hearing, Kennedy claimed that State had repeatedly asked the OIG for this breakdown, and strongly insinuated that they had yet to receive it:

"Contractors Supervising Contractors Supervising Contractors," And Other Cautionary Tales from Post-9/11 Government Restructuring

A new report likens congressional oversight of DHS to a "crazy-quilt."

DANA LIEBELSON

In the aftermath of 9/11, the Bush Administration launched the most significant government restructuring in decades: the creation of the Department of Homeland Security (DHS) and the Office of the Director of National Intelligence (ODNI). Now, almost ten years after the terrorist attacks, a new report is calling these national security initiatives a “cautionary tale” in management.

The report is the result of interviews with more than 20 government officials involved in the reorganization. It paints the post-9/11 merger of DHS—which brought together 22 domestic and law enforcement agencies and 180,000 employees—as resulting in “mission overlaps and policy shortfalls, confused functional and operational roles and responsibilities and dissatisfied citizens.”

ODNI faced similar problems, such as “uncertainty over the power and authority of the director, and turf wars within the intelligence community.” The organization was also found to lack formal policies for management oversight and suffered from noncompliance and schedule overruns.

In other words (the words of Tom Ridge, former secretary of DHS, to be precise) “The notion that everyone was going to join hands and sing ‘Kumbaya,’ I don’t think anybody in our leadership expected that to happen. And it didn’t.”

According to the report, the overwhelming need to prevent another catastrophic terrorist attack routinely took precedence over basic management issues.

POGO Urges More Sunshine With Regard to Contractor Misconduct Reporting Rule

By NEIL GORDON

Last week, POGO submitted a public comment to the General Services Administration (GSA) in response to a proposed extension of a Federal Acquisition Regulation (FAR) provision requiring contractors to disclosure certain contract-related misconduct. Since December 2008, the FAR has required contractors to timely disclose to the government credible evidence of criminal violations related to a federal contract or subcontract, violations of the civil False Claims Act, or significant contract overpayments or else be subject to suspension or debarment.

Despite a few misgivings, POGO has publicly supported the mandatory reporting requirement ever since it was first proposed back in November 2007. Based on what we’ve seen and heard since then, it seems to be working as intended. POGO blogged in September 2009 about reports that contractors were taking the new requirement very seriously.

Unfortunately, the government has never provided a comprehensive accounting of the mandatory disclosure program’s successes, failures, strengths, and/or weaknesses. This is in marked contrast to its willingness to share with the public an array of information about the implementation and enforcement of other federal laws and regulations, such as the False Claims Act and the Foreign Corrupt Practices Act. POGO’s public comment proposed a reasonable solution. Every agency’s Inspector General should be required to periodically report such statistics as the number and types of disclosures the office receives, the actions taken in response to those disclosures, whether any contractors were suspended or debarred for violating the requirement, and, most importantly, how much money is being recovered.

The mandatory disclosure requirement is a win-win for contractors and taxpayers. It forces contractors to strengthen their ethics practices and fosters a good working relationship with the government. It benefits the government and taxpayers by encouraging the early detection and reporting of contract-related problems before they worsen and lead to costly enforcement actions, poor contract performance, contract terminations, and the loss of taxpayer money to fraud, waste, and abuse. We believe that compiling and sharing statistics about the implementation and enforcement of the mandatory disclosure requirement would increase government transparency and accountability and enable the government to determine if the requirement is achieving its intended objectives.

Neil Gordon is a POGO Investigator.

Follow @pogoblog

What Would You Pay? Washingtonians React to Boeing Overcharging the Army

By ANDRE FRANCISCO

POGO's Bryan Rahija and I went out on the streets of Washington, DC, to ask people what they thought about the government paying $327.60 for a spare part that costs $8.88.

They weren't happy.

The part was a sleeve bushing used in U.S. Army Helicopters, and it is one of a handful of parts that the Army was charged an extra $13 million for by Boeing.

But even more outrageous is that the government isn't asking for a refund. Join the people we talked to in asking Secretary of Defense Leon Panetta to demand a refund from Boeing.

Andre Francisco is a POGO communications associate

Follow @andrefrancisco

Morning Smoke: PTSD Drug No Better than Placebo, but VA Keeps Buying More

MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

Public Health

VA Awards New Contract for Debunked PTSD Drug
Bob Brewin, NextGov

National Security

The Air Force's B-2 Deceptions
Philip Ewing, DoD Buzz

Report Faults Government Restructuriing after 9/11
Sean Reilly, Federal Times

Contract Oversight

Pentagon Contracting Policy Faulted in Two Reports
Charles S. Clark, Government Executive

KBR, the Government's Concierge
Sharon Weinberger, iWatch News

Financial Oversight

In the Dark? Probing the SEC's Probes
POGO's Michael Smallberg will be on the Kojo Nnamdi show today at 1pm

Cohan: Another Reason to Shut the SEC and Restart
William D. Cohan, Bloomberg

Open Government

Warrantless Surveillance Memos Stay Classified
Associated Press

Wikileaks Leaves Names of Diplomatic Sources in Cables
Scott Shane, The New York Times

Foreign Corrupt Practices Act

Michael Mukasey Pushes to Alter Bribery Law
Josh Gerstein, Politico

Nuclear Energy

Nuclear Panel Expanding Team to Check for Quake Damage
Matthew L. Wald, The New York Times

Would You Pay $720 million in Late Fees for These? The Pentagon Did

By DANA LIEBELSON

If you're someone who never returns library books, Netflix movies and rental cars on time--it could be worse! At least you haven't racked up $720 million dollars in late fees over the last decade. That's how much the Pentagon owes for failing to return shipping containers on time, according to a USA TODAY report.

Troops use these 20-foot containers for storage, shelter, and building materials in Afghanistan and Iraq. According to the report, returning just one container late could cost taxpayers more than $2,200 in late fees. If the military chooses the “rent-to-own” plan, it still would pay nearly $7,400 for a container. Given that the containers are only worth around $3,200, this isn’t exactly a deal.

The reason for the late fees is familiar to anyone who has forgotten to return Jarhead to Blockbuster on time. The Pentagon thought the late fees would be minimal and the war(s) brief, according to John Pike, executive director of Globalsecurity.org.  

Morning Smoke: No-Bid Pentagon Contracts Tripled Since 9/11

MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

Contract Oversight

Windfalls of War: Pentagon's No-Bid Contracts Triple in 10 Years of War
Sharon Weinberger, iWatch News

Reducing Waste in Wartime Contracts
Christopher Shays and Michael Thibault, The Washington Post

National Security

Pentagon Pays $720 Million in Late Fees for Storage Containers
Tom Vanden Brook, USA Today

F-22s Fly Again, Briefly
Philip Ewing, DoD Buzz

JSF Un-Deflown
Bill Sweetman, Aviation Week

Protest Brings Army's Top Program to Grinding Halt
Carlo Munoz, Aol Defense

Army's Networked Soldier System Gets Another Facelift
Eric Beidel, National Defense Magazine

Open Government

What's Secret About World War II?
Editorial, The New York Times

Government Will Not Declassify 2001 Opinion on Surveillance
Steven Aftergood, Secrecy News

State Department: Don't Invade Privacy of Cleric on CIA Kill List
Catherine Herridge, Fox News

Whistleblower Issues

Decision to Fire Air Marshal Risks Silencing Whistleblowers, OSC Says
Stephen Losey, Federal Times

Insiders Say Pentagon's Top Personnel Official Is Incompetent, Retaliatory, and Wastes Money

By NICK SCHWELLENBACH

The Pentagon's top civilian official in charge of personnel issues has been accused of being incompetent, gutting his office of expertise by driving out employees, retaliating against employees with dissenting views, wasting $5 million on outside consultants to perform an inherently governmental function, and other issues according to at least four complaints to the Department of Defense Inspector General (DoD IG) and Congress sent from May through August.

Employees within the Defense Department wrote the letters. POGO is making three of these complaints public. These three complaints have all been made anonymously; however, POGO has verified that they were written by DoD employees and has confirmed that several congressional offices and the DoD IG have received them. The complaints from May, July, and August were written by different groups of employees, one senior DoD official told POGO.

Pentagon spokeswoman Cynthia Smith told National Journal’s Megan Scully, who reported on these complaints a week ago, that “the department is aware of the allegations and takes them seriously.” Scully wrote that the investigation into Under Secretary of Defense for Personnel and Readiness (USD P&R) Clifford Stanley, “one of the Pentagon's most senior and powerful appointees, could pose the first significant personnel challenge for new Defense Secretary Leon Panetta.” The Army Times’ Karen Jowers first reported on some of these allegations in July.

Stanley and his office did not respond to press inquiries by both the Army Times and National Journal. POGO sent a detailed list of many of the allegations to Pentagon spokeswoman Cynthia Smith for further comment, but was sent a generic response that did not directly address the allegations. She wrote that “the personnel and readiness enterprise must create a culture of relevance, effectiveness and efficiency to meet the emerging needs of our service members and their families.” Underscoring the high level nature of the issue, Pentagon Press Secretary George Little also sent POGO a statement. “Secretary Panetta values Dr. Stanley's experience, skill, and dedication and believes that he is working hard to support our troops and their families,” Little wrote. “He's an important part of the Pentagon's senior leadership team."

The steady drumbeat of allegations from multiple parts of Stanley’s office cannot be brushed off easily. The complaints against Stanley come as the issues under his purview have become increasingly challenging. For instance, budgetary pressures have forced the Pentagon to scrutinize the cost of its workforce, particularly service contractors. Stanley’s office also plays a key role in tackling DoD’s health care costs, which have spiraled as significant numbers of troops return home wounded, including the “invisible” wounds of Traumatic Brain Injury and Post-Traumatic Stress Disorder.

Yet the complaints say that Stanley and a coterie of individuals that he has brought into the Office of the Under Secretary for Personnel and Readiness (OUSD P&R) have hindered the ability of that office to competently address these very issues.

FOIA Friday: Memo Regarding Potential Conflict of Interest Violations by Former NRC Commissioner

FOIA FRIDAY

This week's document:  Memo: Potential Conflict-of-Interest Violation of Ethics Requirements by Former NRC Commissioner Klein   Originating agency: Nuclear Regulatory Commission Office of the Inspector General (NRC OIG) Document date: September 28, 2010 Every Friday, POGO will strive to make one document available that we or others have obtained through the Freedom of Information Act (FOIA), especially documents that have not previously been posted online. Some of these documents will be more important than others, some may only be of historical interest— although relevance is in the eye of the beholder. POGO is doing this to highlight the importance of open government and FOIA throughout the year.

By BRYAN RAHIJA

If a top federal regulator of the nuclear industry joined the board of a company that owned nuclear power plants shortly after his departure from government, would he be violating any conflict of interest or ethics rules?

In the case of former Nuclear Regulatory Commission (NRC) Commissioner Dale E. Klein, the answer is no, according to this week's FOIA Friday release, an NRC Office of Inspector General memo.

"OIG found that Klein's acceptance of board-of-director appointments did not violate Federal post-employment regulations," the memo states. "Furthermore, OIG did not identify any evidence that Klein violated conflict-of-interest statutes by considering post-employment offers made to him by private companies while still employed at NRC."

As indicated in the memo, the NRC IG began investigating whether Klein ran afoul of conflict of interest rules after word got out that he joined the board of Pinnacle West Capital Corporation and its subsidiary Arizona Public Service Company, which owns Palo Verde Nuclear Generating Station.

Klein also joined the board of directors for Southern Company, which owns a trio of nuclear plants—a detail that came to the OIG's attention during the investigation, according to the memo. Klein joined Southern Company's board in July 2010, just four months after leaving the NRC in March of that year.

As part of its investigation, OIG interviewed former NRC legal advisor Roger Davis, who said Klein was aware of the conflict of interest rules:

Klein had planned to return to the University of Texas after resigning from NRC and that Klein was very cognizant of conflict-of-interest issues. Klein wanted to avoid any conflict of interest. Davis told OIG that Klein would not consider offers of employment that he received while employed as a Government employee so as not to violate or be perceived in violation of any regulations or statutes.

As the OIG points out, current law (18 United States Code, section 207, to be precise) "is not intended to prevent private sector employment after an individual terminates Federal service." The memo continues: "Instead, it restricts an individual from engaging in representational activities before NRC after the individual has terminated Federal service."

But are there sufficient controls in place to ensure that NRC Commissioners are acting with the public's best interest in the waning days of their regulatory careers? That's certainly a question worth asking, especially in light of some of the recent criticism about the NRC's excessive coziness with the industry it's tasked with overseeing.

Bryan Rahija edits POGO's blog.

Follow @bryanrahija

Dear Super Committee: Defense Contractors are "Second to None" In Wasteful Spending

By BEN FREEMAN

In what some are calling an "unprecedented" campaign, defense contractors as an industry bloc are fighting reductions in national security spending to preserve their place on the government gravy train. Spearheaded by the Aerospace Industries Association, the so-called "Second to None" campaign has reportedly enlisted the help of LMG Inc., a Washington public affairs firm, the conservative Heritage Foundation, and the Center for Strategic and Budgetary Assessments to push its agenda. This is on top of at least $700,000 they have donated to Members of the Super Committee in the past five years.

The campaign’s website sets up a straw man by asserting that “extreme voices” are asking for massive cuts to national security, countering that “moderates are calling for a more careful approach that cuts waste and gets rid of things that don’t work or that we don’t need.”

Yet the Second to None campaign is the extreme voice, fighting to preserve a level of defense spending higher than at any point during the Cold War, even adjusting for inflation. The U.S. is Second to None when it comes to defense spending. No other country in the world even comes close to the amount we spend. In fact, the U.S. spends more than five times as much on defense as China—the country with the second highest level of defense expenditures. The U.S. spends nearly as much on national security as the rest of the world combined. Even with significant cuts to defense spending, the U.S. will remain Second to None. As the U.S. faces a fiscal crisis and major conflicts in Iraq and Afghanistan are drawing to a close, it is only sensible that the U.S. should spend significantly less on defense.

Furthermore, no one should be fooled by Second to None’s assertion that they are the moderate voices: their website offers no recommendations to cut waste, get rid of programs that don’t work or that aren’t needed. Making specific recommendations would likely upset this alliance of defense contractors whose united front is fighting simply to keep their spigot of money flowing.