KBR Gets Cut Out of LOGCAP Work in Afghanistan

It looks like the extensive misconduct history of Kellogg, Brown and Root (KBR) may finally be catching up with it.

This week, the Army awarded task orders under the Logistics Civil Augmentation Program (LOGCAP IV) military support contract to DynCorp International and Fluor worth over $7 billion each. Under the task orders, DynCorp and two partners, CH2M Hill and Taos Industries, will provide logistics support at Army installations in the southern region of Afghanistan, and Fluor will do the same in the north. The companies will provide a top-to-bottom range of support services, including electrical power, water, sewage and waste management, construction services, laundry operations, food services, and motor pool operations.

Missing out on the action is KBR, the third prime LOGCAP IV contractor. KBR, which currently provides services in Afghanistan under the prior LOGCAP contract and will remain in the country until the transition to LOGCAP IV is complete, will not provide any further work in Afghanistan, according to the Army.

Rumor has it that KBR got the brush-off because of its past performance history. Sen. Byron Dorgan (D-ND), chairman of the Senate Democratic Policy Committee, said in a press release on Wednesday the Pentagon told him that past performance was one of the reasons. Dorgan is quite familiar with KBR. Since 2003, he has chaired 19 oversight hearings on waste, fraud and corruption in Iraq and Afghanistan, and KBR's poor performance has repeatedly come up during those hearings.

"KBR's poor performance became the issue so frequently at our hearings that I came to wonder why the Pentagon keeps awarding it contracts," Dorgan said in the press release.

Dorgan welcomes the Pentagon's decision to award the LOGCAP IV task orders to other companies, but he still has concerns. "This decision suggests that the Pentagon is finally beginning to give a contractor's past performance the consideration it deserves when awarding contracts," he said. "But we need more evidence of that. Time will tell whether this is a serious change in policy that sends a strong message that a Pentagon contract is not a blank check and that contractors will be held accountable.”

-- Neil Gordon

Lawsuit Accuses SAIC of Bid-Rigging - Did It Happen Before?

You never know when those old FOIA documents gathering dust in your office will come in handy.

POGO found out last week. The day before the Fourth of July holiday weekend, the Department of Justice (DOJ) announced it had joined a False Claims Act lawsuit alleging that Science Applications International Corp. (SAIC) participated in a bid-rigging scheme to win a $3.2 billion General Services Administration (GSA) information technology contract back in 2004.

The GSA sought bidders for a contract to provide support services to the NAVO MSRC--the Naval Oceanographic Major Shared Resource Center at the Stennis Space Center in Mississippi. In April 2004, the GSA awarded the contract to a consortium consisting of SAIC and subcontractors Applied Enterprise Solutions (AES) and Lockheed Martin Space Operations. The lawsuit accuses SAIC, AES, AES president Dale Galloway, and two NAVO MSRC officials--director Stephen Adamec and deputy director/contracting officer technical representative (COTR) Robert Knesel--of conspiring to rig the solicitation process in favor of the SAIC team and later attempting to cover up the scheme by destroying documents and computer hard drives. Adamec and Knesel allegedly shared information with SAIC that was not provided to the other bidders and put language in the solicitation that favored the SAIC team. SAIC denies the allegations.

When we heard about the lawsuit, bells went off. Something about it seemed oddly familiar. Here's where those old FOIA documents come into play: Last December, POGO submitted a FOIA request to the GSA Office of Inspector General (GSA-OIG) to obtain closed investigation files in cases involving several contractors in our Federal Contractor Misconduct Database, including SAIC. In response, the GSA-OIG sent approximately 1,000 heavily-redacted pages of documents from an investigation of SAIC that was closed in 2007.

The investigation file didn't seem particularly important or useful until last week's announcement. It prompted us to take another look at the documents, compiled during an investigation into possible Procurement Integrity Act (PIA) violations involving another GSA contract, a $90 million contract to provide IT services at the National Counterdrug Center (NCC) at the Department of Energy's (DOE) facility in Hanford, Washington in 2001. (The first few documents in the case file, which provide a good overview of the case, are posted here.)

The investigation, carried out by the GSA, DOE, FBI, and Defense Criminal Investigative Service (DCIS), determined that a number of questionable activities took place during the solicitation process which gave SAIC an unfair competitive advantage. A DOE program manager (name redacted) met privately with SAIC and gave it information that was not disclosed to the other potential bidders and tailored the language in the solicitation so that it would fit SAIC's qualifications. Sound familiar?

As the documents illustrate, the five-year investigation resulted in no punishment to SAIC, although the company probably dodged a bullet. At least one senior acquisition official at the GSA (name redacted) believed there was sufficient evidence to conclude that SAIC had violated the PIA. In August 2006, the GSA-OIG provided information to the GSA Debarment Section about the “inappropriate business ethics behavior” of SAIC; however, a recent check of the Excluded Parties List System shows no record of SAIC ever having been suspended or debarred. At one point, the U.S. Attorney's Office for the Eastern District of Virginia accepted the case for prosecution, but it later declined to prosecute and instead referred the case to the DOE, which handed out the only known sanction in the whole affair--a relatively lenient administrative punishment of the unnamed program manager.

Freedom of Information Act, we salute you.

-- Neil Gordon

Former Lockheed Martin Engineer Calls Fraud on F-22 Stealth

As the fight over whether to continue production of the F-22 rages on, a recently unsealed qui tam lawsuit raises major questions about its stealth capabilities, one of the key air-superiority features of the fighter jet. If the allegations are true, the justification for the whole program may be in question.

The lawsuit, filed by a Materials and Process engineer specializing in stealth (also known as low-observable materials), accuses Lockheed Martin of fraudulently developing the stealth capability of the F-22 and falsely portraying to the Air Force that the stealth coating on the fighter met specifications. The engineer, relator Darrel O. Olsen, also alleges that the management at Lockheed Martin directed him not to speak to the Air Force about the problems with the coating, and that his advice to modify the coatings or purchase different coatings to meet specifications were ignored due to concerns with meeting contract milestones. While the relator in the case left Lockheed Martin in 1999, the suit claims that third-party sources report that the stealth capability of the F-22 remained dysfunctional through at least 2004, with Lockheed Martin knowingly using defective coatings and never fully disclosing the low observable system defects to the Air Force.

This of course is not the first time that the real and practical capability of the stealth of the F-22 has come into question. Just last February, POGO reported that the maintenance requirements for the stealth capability significantly reduced the F-22's mission capability. As we said at the time, we believed that this may have been one of the primary reasons why then-Defense Department Acquisition Chief John Young said that the F-22's mission capable rate was too low to waste additional taxpayer dollars on further procurement.

-- Mandy Smithberger

Don't Do the Dew

Earlier this year, we pointed out that newly appointed FEMA chief of staff Jason McNamara had potential conflicts of interest based on his working for Dewberry, a major FEMA contractor. Due to Dewberry's involvement inside FEMA and in the field, we were afraid that potential conflicts would make it difficult for McNamara to perform many of his job responsibilities.

After submitting a FOIA and receiving some responsive documents, POGO has received one additional document. On June 11th, we received an email from the FEMA Office of the Chief Counsel that included an April 9, 2009 "Caution Letter - Appearance of Conflict of Interest."

That letter acknowledges potential conflicts of interest based on McNamara's work for Dewberry and outlines steps to prevent them, including non-participation in Dewberry-related regulations, contracts, meetings and communications. The letter states that the White House is increasing ethics restrictions “to combat the perception that former employers may appear to have privileged access, which they may attempt to exploit to influence an appointee outside the public view.”

Those public perceptions exist because the government continues to close off access to contracting, revolving door, and ethics information. Additional exposure of sole-source contracts adds to the view that dealing with the government is based on who you know, not what you know. Senior Executive Pledge or not, more needs to be done to restore the public's faith in government operations.

-- Scott Amey

A Gross Conflict?

Over the past few weeks, BlackRock has been the target of increased scrutiny due to its deeply entangled role in the bailout: thanks to a slew of contracts from the New York Fed, many of which were no-bid, the firm is now in a position to buy, sell, manage, and valuate toxic assets, both for the government and for its own private clients. But BlackRock is hardly the only company that's been able to form a cozy relationship with the government during this economic downturn.

This weekend, The New York Times featured an in-depth profile of Pacific Investment Management Company (PIMCO) and its founder and co-chief investment officer, Bill Gross. The article provides some interesting background on PIMCO's unparalleled success in the bond market and on Gross's personal eccentricities (he's been known to take investment lessons from the blackjack table and to strategize while standing upside-down during his yoga routine). At the same time, the article paints a disturbing picture of PIMCO's wide-ranging influence on the government's bailout programs, highlighting many of the concerns POGO has raised about the Fed and Treasury's reliance on private asset managers with intricately conflicted financial interests.

Congress Just Can't Say Goodbye to the F-22

Many in the weapons acquisition reform community--including POGO--have zeroed in on the F-22 as a flash point for determining whether Defense Secretary Gates's reforms, and particularly his budget cuts, will stick. For those subscribing to that fight, Inside Defense has bad news: the House Armed Services Committee voted today to include $369 million for the advance procurement of 12 F-22A.

-- Mandy Smithberger

UPDATE: August Cole at the Wall Street Journal points out that the vote to include more F-22s was extremely close: 31 to 30. So maybe Congress is edging towards real reform that would prioritize national security objectives over parochial interests. But for now, the F-22 is still closer to their heart.

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

IG Finds No Evidence of Inappropriate Influence at Pentagon Oversight Agency, But Concerns Remain

Last fall, POGO sent a letter to Acting Department of Defense (DoD) Inspector General Gordon Heddell asking him to investigate whether the Air Force and Lockheed Martin exerted inappropriate influence over the Defense Contract Management Agency (DCMA). POGO was specifically concerned that the DCMA had played an inappropriate role in the Air Force and prime contractor Lockheed Martin's lobbying effort to thwart then-Defense Secretary Donald Rumsfeld's decision to cancel the C-130J. The IG publicly released his report on the matter yesterday, finding that "the DCMA played only a minor role in DoD and Air Force actions in response to the 2004 C-130J termination" and that there was no evidence to suggest that the Air Force or Lockheed Martin exerted inappropriate influence over DCMA. In POGO's letter, we attached an award justification letter from June 2006 that described the use of a DCMA Estimate to Complete (ETC) conversion analysis for multiyear procurement to support procurement of the C-130J, which the IG found was incorrectly attributed. But the IG's report fails to wrestle with the propriety of the actions listed in the award letter justifying a $1,500 bonus for the DCMA employee:

[Redacted] served as the lead focal point for providing support to the Department of the Air Force in its effort to challenge the Presidential Budget Decision concerning the C-130J program. [Redacted] provided critical data, analysis and assessment information that supported the USAF's case for the continuation of the program. He was able to gather critical information working within the constraints of the C-130J commercial contract. This was a challenge within itself because the information needed was not contractually deliverable...Information that [Redacted] provided was directly used in discussion on Capitol Hill with opponents of the C-130J program and provided to Secretary of Defense D. Rumsfeld. [Redacted] had a direct influence over Honorable Rumsfeld's decision to remove the C-130J program from the PBD [Program Budget Decision] list of programs to be terminated.

The IG said he found no evidence that the employee was involved in the termination discussions:

The overlapping time frames of the PBD and the C-130J contract conversion decision, and the manner in which terminology was used in the PBD 753 decision contributed to confusion between what work the employee actually performed and what work the employee was said to have performed in the award justification letter. Our discussions with personnel at DCMA, Air Force headquarters, and the C-130J SPO supported statements made to us by the employee that he did not work on a termination cost analysis. Since the employee's work was in support of the ETC conversion analysis, we found no evidence that DCMA resources were inappropriately expended.

"Since the award justification was in error, we referred the issue to the DCMA for potential administrative action," the IG wrote. While the IG may not have found any inappropriate influence, POGO's concerns about DCMA's independence still stand. The fact that an employee could be rewarded for this behavior indicates that there is still a certain illness in the culture of DoD's oversight agencies. As we wrote last year, the DCMA is supposed to be working to ensure that taxpayers are getting a good deal, rather than bending over backwards to appease the Air Force and its contractors:

The award justification letter concludes that this guy "has received a number of compliments for his professionalism and commitment from the contractor and from the customer for providing data...often on very short notice."

POGO wants to know: just who the heck is the customer here? It certainly seems like this highly touted DCMA employee was being praised for pleasing the Air Force and the contractor rather than saving money for the taxpayer--who we thought was the real customer.

The Defense Contract Audit Agency (DCAA) blocking a recent critical article of the agency also fails to build confidence.

-- Mandy Smithberger

All Those in Favor of Insourcing Say 'Pfui!'

A report released last week by the Federal Acquisition Innovation and Reform (FAIR) Institute, a new nonprofit focusing on federal contracting reform, has touched off another skirmish in the never-ending war between government employees and contractors.

The FAIR Institute's report warns the Obama administration to take a “deliberate and systematic” approach to insourcing, or transferring functions performed by contractors to government employees. Since last year, federal agencies have been stepping up efforts at insourcing, but President Obama really got things rolling back in March when he directed the Office of Management and Budget (OMB) to issue guidance on when it would be appropriate or inappropriate to subject certain government functions to private sector competition.

The report is a short policy paper that sets out several common-sense recommendations in a tone that is neither pro- nor anti-contractor. Yet the report seems to have opened up old wounds in the federal contracting community. It generated an immediate response in the comments section on FederalComputerWeek's blog, with the louder, more animated responses coming from the anti-contractor/anti-outsourcing crowd.

One commenter, presumably an Air Force employee, pithily sums up his/her feelings about the report and its recommendations: “Pfui!” Another writes, “There are many talented individuals with 'specialized expertise' sitting in civil service with little or no meaningful work and no funding because it was all shifted to contractors during the Bush years. That needs to end now!”

The negative reaction seems partly motivated by suspicion of the FAIR Institute itself. Not much is known about the organization, which was launched in April. However, the fact that its board includes the President/CEO of a federal contractor and others with past or present ties to the private sector might lead some to question whether the FAIR Institute can live up to its name as an honest and independent source of information.

-- Neil Gordon

The Commission on Wartime Contracting's Sneak Preview

The Commission on Wartime Contracting in Iraq and Afghanistan just released its interim report, "At What Cost? Contingency Contracting In Iraq and Afghanistan" (PDF file: 5.2 MB). Commission co-chairs Michael J. Thibault and Christopher Shays also presented their findings to the House Subcommittee on National Security and Foreign Affairs. (In the interest of fairness, the subcommittee also invited Alan Chvotkin of the Professional Services Council, a contractor trade association, to testify.)

The commission was established by Congress in 2008 to evaluate and report on wartime contracting in Iraq and Afghanistan, where about $830 billion has been spent on U.S. operations since 2001. More than 240,000 contractor employees--about 80 percent of which are foreign nationals--are supporting the operations and projects of the military, the State Department, and the U.S. Agency for International Development (USAID). In fact, as you've probably heard, there are more contractors over there than military and government civilian personnel.

The commission's final report is due in 2010. In the meantime, the commission highlights several “issues of immediate concern” that require prompt attention:

“Contractors are doing vital work, generally to good effect,” according to the report, “but the sheer scale of their operations and weaknesses in the federal contract-management and oversight systems create plentiful opportunities for waste, fraud, and abuse.” As operations shift from Iraq to Afghanistan, the commission warns of a high risk of waste, fraud and abuse from the handling and disposition of government property, functions in which contractors are playing a key role. It recommends that the Department of Defense accelerate plans to establish a contracting oversight command in Afghanistan, rather than continue to perform this function from its current base of operations in Iraq. The commission also warns about the lack of accountability in the use of subcontractors. “Subcontracts account for about 70 percent of the work [in Iraq and Afghanistan], but the government has very little visibility into their operations,” according to the report.

-- Neil Gordon