june 2009 commission on wartime contracting interim report to congress

8/14/2019 June 2009 Commission on Wartime Contracting Interim Report to Congress

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Commission on Wartime Contracting in Iraq and Afghanistan

At WHAt Cost?Cningency Cnracing inIraq and Afghanian

Inerim ReprJ U N E 2 0 0 9


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Cover Photos

Clockwise from top: Vehicles

at a U.S. base (Army Corps

of Engineers photo); base

security guards (Commission

photo); construction project

in Iraq (Commission photo).Maps on this page courtesy ofthe Coordinator for Maps and Publications, Department of State


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At What Cost?Contingency Contracting

In Iraq and Afghanistan

Interim Report to Congress

CommissiononWartimeContracting

InIraqandAfghanistan

J U N E 2 0 0 9


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ii

Acronyms

CENTCOM U.S.ArmyCentralCommand

CERP TheCommandersEmergencyResponseProgram

COR

ContractingOfficers

Representative

DAU DefenseAcquisitionUniversity

DCAA DefenseContractAuditAgency

DCMA DefenseContractManagementAgency

DFAC DiningFacility

DFARS DefenseFederalAcquisitionRegulationSupplement

DoD DepartmentofDefense

DoDIG DepartmentofDefenseInspectorGeneral

DoS DepartmentofState

FAR FederalAcquisitionRegulation

FOB ForwardOperatingBase

FPDSNG FederalProcurementDataSystem NextGeneration

GAO GovernmentAccountabilityOffice

IDIQ IndefiniteDeliveryIndefiniteQuantity

JCCI/A JointContractingCommand Iraq/Afghanistan

LOGCAP LogisticsCivilAugmentationProgram

MEJA MilitaryExtraterritorialJurisdictionAct

MNCI MultiNationalCorps Iraq

MNFI MultiNationalForce Iraq

PRT ProvincialReconstructionTeam

PSC PrivateSecurityContractor

QAR QualityAssuranceRepresentativeSIGAR SpecialInspectorGeneralforAfghanistanReconstruction

SIGIR SpecialInspectorGeneralforIraqReconstruction

SPOT SynchronizedPredeploymentandOperationalTracker

USACE U.S.ArmyCorpsofEngineers

USAID U.S.AgencyforInternationalDevelopment


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iv


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v

Contents

A c r o n y m s i i

P r e f a c e i i i

E x e c u t i v e Summary 1

C h a p t e r 1 M a n a g e m e n tan d A c c o u n t a b i l i t y 7

C h a p t e r 2 L o g i s t i c s 3 9

C h a p t e r 3 S e c u r i t y 6 0

C h a p t e r 4 R e c o n s t r u c t i o n 7 8

C h a p t e r 5 On t h e A g e n d a 9 2

A p p e n d i x A A u t h o r i z i n g S t a t u t e 9 7

A p p e n d i x B C o m m i s s i o nM i l e s t o n e s 10 2

A p p e n d i x C M e t h o d o l o g y 1 0 7

A p p e n d i x D S t a f f R o s t e r 11 1


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vi


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1

Executive Summary

Since2001,Congresshasappropriatedabout$830billiontofundU.S.operationsinIraq

andAfghanistan.Overthatperiod,Americasrelianceoncontractorshasgrownto

unprecedentedproportionstosupportlogistics,security,andreconstructionefforts

relatedtothoseoperations.Morethan240,000contractoremployeesabout80percent

ofthemforeignnationalsnowworkinIraqandAfghanistan,supportingthe

DepartmentofDefense.AdditionalcontractoremployeessupporttheDepartmentof

StateandtheU.S.AgencyforInternationalDevelopment.

Contractemployeesmanagediningfacilities,washuniforms,guardmilitarybases,

protectdiplomats,transportsupplies,andbuildeverythingfromwatertreatmentplants

tohospitals.Contractorsaredoingvitalwork,generallytogoodeffect,butthesheer

scaleoftheiroperationsandweaknessesinthefederalcontractmanagementand

oversightsystemscreateplentifulopportunitiesforwaste,fraud,andabuse.

TheCommissionwilladdressninefocusareasinpreparationofitsFinalReport.While

thesemaybesomeofthemostintractableissues,ifsuccessfullyaddressedtheyholdthe

greatestpromiseforsignificantreformincontingencycontracting.Theyare:

leadership,culture,andaccountabilitywithinthekeyagenciesresponsiblefor

contingencyoperations;

staffingandtrainingofthefederalacquisitionworkforce;

predeploymentplanningforcontractorsupportandintegration;

policiesrelatedtoinherentlygovernmentalfunctions; theprocessfordefiningcontractrequirements;

contractpricingandcompetition;

contractorperformanceandcosteffectiveness;

visibilityintoandaccountabilityofsubcontractorsinparticular,foreign

subcontractors;and

theIraqdrawdownandtheAfghanistanbuildup.

ThisInterimReporttoCongressaddressesproblemsinoursystemofframing,

managing,andoverseeingcontractsthatsupportAmericanmilitary,diplomatic,and

reconstructionactivities.

Some

of

these

problems,

noted

below

as

Issues

of

Immediate

Concern,requirepromptattentionaswellassystematicstudyandultimately

recommendationsforstatutory,regulatory,ororganizationalchange.

Thereportreviewslongstandingissuessuchasshortagesoftrainedacquisition

personnelthatstillplagueU.S.operations.Italsoaddressestheheavyrelianceon

foreignsubcontractorswhomaynotbeaccountabletoanyAmericangovernmental


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A T W H A T C O S T ?

2

authority.Itcallsattentiontonewconcernssuchastheimplicationsofhiringforeign

contractworkerstoguardU.S.militarybases.Andittakesnoteoftheinadequateplans

andresourcesavailabletomanageanenormoustaskofshippingpropertybacktothe

UnitedStatesortootherareasofU.S.operations,transferringittotheIraqigovernment,

ordisposingofitasweleaveIraqandbolsteroperationsinAfghanistan.

ISSUESEXAMINEDINTHEINTERIMREPORT

ThebodyofthisInterimReportisorganizedintofivechapters.Thefirst,Management

andAccountability,offersessentialbackgroundonthegovernmentsuseofcontingency

contractorsandexamineshighlevel,overarchingissuesofcontractmanagement,

accountability,policy,andprocessthatpermeatethesucceedingnarratives.Chapters2,

3,and4coverthemajorfunctionalareasoftheCommissionswork:Logistics,Security,

andReconstruction.Eachchapterlaysouttheworktodateandtheitemsontheagenda

fortheCommissionsfuturework.Theconcludingchapter,OntheAgenda,gathersthe

projectedlines

of

investigation

from

each

of

the

preceding

chapters

to

outline

an

integratedframeworkforourpathforward.

Thechaptersdescribecurrentknowledgeandtheresultsoffactfindingwork.They

reviewincidents,diagnoseproblems,andidentifypointsforfutureinquiryandanalysis.

Someofthekeyissuesdiscussedinthesechaptersinclude:

ManagementandAccountability

Neitherthemilitarynorthefederalcivilianacquisitionworkforceshave

expandedtokeeppacewithrecentyearsenormousgrowthinthenumberand

valueof

contingency

contracts.

Contractingagenciesmustprovidebetterandmoretimelytrainingfor

employeeswhomanagecontractsandoverseecontractorsperformance.In

particular,membersofthemilitaryassignedtoperformonsiteperformance

oversightascontractingofficersrepresentativesoftendonotlearnofthe

assignmentuntiltheirunitarrivesintheater,andthenfindinsufficienttimeand

Internetaccesstocompletenecessarytraining.

Contractauditorsarenotemployedeffectivelyincontingencycontracting.

Contractingofficialsmakeineffectiveuseofcontractwithholdprovisions

recommendedbytheirauditors,andmanycontractauditfindingsand

recommendationsare

not

properly

resolved.

Thegovernmentstilllacksclearstandardsandpolicyoninherently

governmentalfunctions.Thisshortcominghasimmediatesaliencegiventhe

decisionstousecontractorsinarmedsecurityandlifesupporttasksformilitary

units.


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E X E C U T I V E S U M M A R Y

3

Logistics

ContractorsprovidecriticalsupporttoU.S.militarypersonnelinIraqand

Afghanistan,yettheDepartmentofDefensecannotprovideacomplete

accountingofallthecontractedsupportitreliesupon.Theabsenceofdefinitive

information

affects

commanders

ability

to

understand

and

make

best

use

of

the

supporttheyreceive,andimpedespolicymakersabilitytoaddressthe

appropriatebalancebetweencontractorsandmilitarypersonnel.

TheDepartmentofDefensehasfailedtoprovideenoughstafftoperform

adequatecontractoversight.Inadequateoversight,poorlywrittenstatementsof

work,lackofcompetition,andcontractorinefficiencieshavecontributedto

billionsofdollarsinwastefulspendingintheArmyslargestcontractforsupport

services,theLogisticsCivilAugmentationProgramorLOGCAPcontract.

ContractorsareplayingakeyroleinthedrawdownofU.S.militaryforcesin

Iraq.Asmilitaryunitswithdrawfrombases,thenumberofcontractoremployees

neededtohandleclosingortransfertasksandtodisposeofgovernment

propertywillincrease.Stronggovernmentoversightwillberequired,but

preparationsforthismajorshiftoutofIraqandintoAfghanistanorotherareas

aresketchy.

Security

TheRulesofEngagementforthemilitarydiffersignificantlyfromtheRulesfor

theUseofForceforprivatesecuritycontractors.TheRulesfortheUseofForce

forprivatesecuritycontractorsguardingforwardoperatingbasesmaynot

adequatelyprotectmilitarypersonnel.

Documentedproblemswiththeselection,training,equipping,arming,

performance,andaccountabilityofprivatesecuritycontractoremployeeswill

requirepolicyandregulatorychangestoprovidemoreeffectiveoversight.

Reconstruction

Attemptstoachieveunityofeffortandmoremeasurableresultsarehampered

byweaknessesintheplanning,organizing,coordinating,andoversightof

reconstructionanddevelopmentprojects.

Reconstruction,stabilization,anddevelopmentactivitiesincontingency

operationzonescaninvolvenumerousgovernmentagencies,privatesector,and

nongovernmentalorganizations.Yetthereisnolocusofplanning,coordination,

andinformationasituationthatunderminesthegoalsofthetotaleffort,and

onethatshouldbecorrected.

ThelackofcoordinationbetweenUSAIDprojectsandtheDepartmentof

DefensesCommandersEmergencyResponseProgramfundedprojectsisa

seriousproblemthatneedstobeaddressedtomaximizecapacitybuildingand

avoidcrosspurposeefforts.


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4

THECOMMISSIONSMANDATE

TheCommissionisinvestigatingcontingencycontractinginawartimeenvironment.1

Relianceoncontingencycontractorshasgrownforseveralreasons,including:

theeaseofengagingcontractorsratherthanhiringnewfederalcivilian

employees,

postColdWarreductionsinmilitarypersonnel,

federalcivilianworkforcenotkeepingpacewithdemands,

lackofadequateplanningforextendedcontingencyoperations,and

unplannedanduntimelybudgeting.

Thecombinationofthisgrowingreliancewithamixtureofhastydecisions,lackof

planning,daytodayexigencies,andotherfactorsespeciallylongstandingproblems

instaffingandtrainingthefederalcivilianandmilitaryworkforcesthatperformthe

work,aswellasmanageandauditcontractshasstressedoursystemofwartime

contractingandgeneratedwidespreadcriticism.ThatiswhyCongresscreatedthe

Commission.

In2008,CongressestablishedtheCommissiononWartimeContractinginIraqand

Afghanistan.LawmakersdesignedtheCommissionasanindependent,bipartisanpanel

toassessarangeofissuesrelatedtowartimecontracting,includingtheextentofwaste,

fraud,abuse,andmismanagementofwartimecontractsinIraqandAfghanistan,andto

makerecommendationsconcerningcontractingforreconstruction,logisticalsupport,

andsecurityfunctions.Detailsfromtheauthorizinglanguage,Section841ofPublicLaw

110181,appearinanappendixtothisReport.

PartoftheCommissionsmandateistosurveyandassessbutnotrecreatethework

ofotherswhohaveexaminedcontractingissues.TheseincludetheGovernment

AccountabilityOffice,theCongressionalResearchService,theCommissiononArmy

AcquisitionandProgramManagementinExpeditionaryOperations(betterknownas

theGanslerCommission),andacademicandnongovernmentalorganizations.

Another,especiallyimportantresourceistheworkoftheSpecialInspectorGeneralfor

IraqReconstruction,theSpecialInspectorGeneralforAfghanistanReconstruction,and

1Asstatedin10U.S.C.101(a)(13),thetermcontingencyoperationmeansamilitaryoperation

that(A)isdesignatedbytheSecretaryofDefenseasanoperationinwhichmembersofthe

armedforcesareormaybecomeinvolvedinmilitaryactions,operations,orhostilitiesagainstan

enemyoftheUnitedStatesoragainstanopposingmilitaryforce;or(B)resultsinthecallororder

to,orretentionon,activedutyofmembersoftheuniformedservicesunder[otherportionsofthis

title]oranyotherprovisionoflawduringawarorduringanationalemergencydeclaredby

thePresidentorCongress.


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E X E C U T I V E S U M M A R Y

5

theInspectorsGeneralfortheDepartmentofDefense,theDepartmentofState,andthe

U.S.AgencyforInternationalDevelopment.Theirinvestigationshavebeenavitalinput

tothisCommissionswork.Wewillcontinuetomonitortheirreportsandmaintainour

professionalcontactswiththem.Wearedeterminedtocapturethelessonsoftheir

valuableworkinourFinalReporttoCongressandensurethattheirrecommendations

arenotoverlookedorlost.

ISSUESOFIMMEDIATECONCERN

ManyissuesappearinthisReport.Somearealreadywelldefinedandarereceiving

closeattentionforresearchandevaluation.OthersaspreviewedinChapter5,Onthe

AgendahavebeenflaggedforscrutinyastheCommissionproceedsonitsworkplan

towardtheFinalReporttoCongress.

Webelievesomeissues,however,shouldnotwaitforcompleteanalysisinourFinal

Report.Evidence

already

in

hand

makes

it

clear

some

issues

of

immediate

concern

requirepromptactiontoavoidfurtherunderminingU.S.objectivesandwastingmore

taxpayermoney:

ThedrawdownofU.S.forcesinIraqrisksincurringenormouswaste,which

couldrangefromcompletionofworkthatmaynotneedtobedone,topoorly

controlledhandlinganddispositionofU.S.governmentproperty.

Thereisacriticalshortageofqualifiedcontractmanagementpersonnelintheater

andthosethataretherearestretchedtoothin.Inparticular,theprocessfor

designatingandtrainingcontractingofficersrepresentativestocheckcontractor

performancein

theater

is

broken.

Thebenefitsofcompetitionarenotbeingfullyrealizedbecauseoftheslowpace

ofthetransitionfromLOGCAPIIItothemorecompetitiveLOGCAPIVlogistics

supportcontract.

Toomanycontractorbusinesssystemsareinadequateandmustbefixed.

Thereisaneedforgreateraccountabilityintheuseofsubcontractors.

Subcontractsaccountforabout70percentofthework,butgovernmenthasvery

littlevisibilityintotheiroperations.

TheeffectivenessofcontractorsupportofexpandedU.S.operationsin

Afghanistaniscompromisedbythefailuretoextractandapplylessonslearned

fromIraq,

particularly

those

about

poor

coordination

among

agencies.

TheDepartmentofDefenseshouldaccelerateitsplanstoestablishacontracting

commandinAfghanistan.ThetroopsurgeinAfghanistandemandsthat

contractingoversightbeconductedincountryratherthanfromIraq,whichis

currentlythecase.

TheDepartmentofDefenseshouldtakeimmediatestepstoensurethat

contractorsprovidingsecurityforouroperatingbasesarewelltrainedand

equippedtoprovidestrongforceprotectiontoourmilitary.


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6

CONCLUSION

ThisInterimReportisasnapshotofworkinprogress.Inthemonthsahead,wewillhold

additionalmeetingswithrepresentativesoffederalagencies,military,contractors,non

governmentalorganizations,andothers,includingscholars.Wewillconductadditional

hearings,makeadditionaltripstothetheatersofoperation,gathermoreinformationinstatesidemeetingswithstakeholders,andfurtherdevelopresearchstrategies.Whenour

investigationsuncoverpossibleviolationsoflaworregulation,wewillmakeadditional

referralstolawenforcementandadministrativeofficials.

Ouraimistodiagnosespecificproblems,uncoversystemiccauses,andproduce

actionablerecommendationsforreforminourFinalReporttoCongress.Current

projectsmaychangetoadapttonewfindingsornewdevelopments,andnewtaskswill

nodoubtemerge.Throughoutthatprocess,wewillbeguidedbyourstatutorymandate

andbyourprofessionaldeterminationtoprovidearoadmapforreformsthatwillassist

ourgovernmentandmilitarytomanagecontingencyoperations.

Wewillalsorememberhindsighthas20/20vision,andmeticulousevaluationsofpast

eventscanoverlookthefogandfrictionthatalwaysmarkcombatoperations.Whilewe

shinelightongovernmentalandindustryshortcomingstoreadyourselvesforour

countrysnextengagement,wehonortheeffortsattimesheroicofallthosewho

providesupporttothewarfightersandgovernmentemployeeswhocarryoutAmericas

missions.


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7

Chapter 1

Management and Accountability

DuringthepastseveralmonthstheCommissionaskedthefederalacquisition

communityseveralfundamentalcontingencycontractmanagementquestions.

WhydidthecontingencycontractmanagementprocessusedinSouthwestAsia

permitsomanyperformanceproblems?

Whyhavetheselongstandingproblemsnotbeenfixed?

Whyhaveresourcesnotbeenmadeavailabletoadequatelystafftheacquisition

workforce?

Whyisthecontingencyworkforcenotgettingpropertraining?

Theanswersarecomplicatedandinterrelated:

Strategicplanningislacking;

Speedduringcontingencycontractingtakespriorityoverprecision;

Performanceincentivesareinadequateorcounterproductive;

Forcestructureceilingsareimposed;

Agencyculturesfailtoadapt;and

Policyandbudgetdecisionsdriveunintendedconsequences.

Theseissuesarewelldocumented,butthedilemmastheyrepresentarealsodeeply

rootedandresistanttochange.TheCommissionisfocusingontherootcausesofthese

longstandingproblemsandonidentifyingmethodstoovercomebarriersto

improvement.Weareanalyzingthepotentialobstaclestosuccessfuladoptionof

previousauditreportrecommendations,andareapplyingthisinsighttodevelop

specificimprovementsandanactionableimplementationplan.

Recurringmanagementthemesresonatethroughallphasesofcontingencycontracting.

Acquisitionmanagerswillrecognizethatthesethemesaligncloselywiththeessential

managementcornerstonesthattheGovernmentAccountabilityOfficeidentifiedinits

FrameworkforAssessingtheAcquisitionFunctionatFederalAgencies.2Thesethemesinclude:

humancapitalmanagement,

knowledgeandinformationsystemsexecution,

policyandprocessimplementation,and

2GAOReport05218G,FrameworkforAssessingtheAcquisitionFunctionatFederalAgencies,

September2005.


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C H A P T E R 1

8

organizationalleadershipandalignment.

TheCommissionsworkalsoincludesanindepthexaminationofcontractor

accountability,sowewilladdressafifthmanagementcornerstone(oneoriginally

includedinadraftversionoftheFramework):financialaccountability.

Thischapterexploreselementsofthesefivecrosscuttingmanagementthemes.

Succeedingchapterselaborateonsomespecificchallengeswithinthecontextofthe

Commissionsthreefunctionalcontingencycontractingareas:Logistics,Security,and

Reconstruction.

HUMANCAPITAL

Comprehensivehumancapitalmanagementliesattheheartofeffectivecontract

management.Itdemandsastrategic,integratedapproachtorecruitment,training,

development,and

retention

of

the

acquisition

workforce.

Agencies

often

must

revise

andimplementappropriatedoctrineandpersonnelpolicytoaccomplishthegoalsofa

strategichumancapitalplanandalignresourcestomissionrequirements.

Fromfiscalyears(FY)2001through2008,theDefenseDepartmentsreportedobligations

onallcontractsforservices,measuredinrealdollarterms,morethandoubledfrom

roughly$92billiontoslightlyover$200billion.Infiscalyear2008,thisfigureincluded

morethan$25billionforservicestosupportcontingencyoperationsinIraqand

Afghanistan.3ThesefiguresdonotincludeStateandU.S.AgencyforInternational

Development(USAID)contracts.Whilethenumbersandvalueofservicecontractsin

Iraqand

Afghanistan

have

risen

dramatically,

agencies

have

not

increased

the

trained

andskilledacquisitionworkforceinnumberssufficienttoensurethatcontractorsare

performingasrequired.

TheContingencyContractingWorkforceRemainsUnderstaffed

Understaffingisoneofthemostcriticalbarrierstoeffectivecontractmanagement.The

shortageofproperlytrainedacquisitionprofessionalsisevidentinallphasesofthe

acquisitionprocessfromrequirementsgenerationtopostawardexecutionand

contractcloseout.Understaffingaffectsotherareasaswell.Leadershipseeksalternative

solutions,andthepathofleastresistancehasresultedinhiringcontractorstofillthe

staffingvoid.

This

response

to

understaffing

puts

contractors

in

aposition

to

potentially

performinherentlygovernmentalactions.

InMay2009,theSecretaryofDefenseannouncedaplantobolstertheacquisition

3GAOTestimonybeforetheDefenseAcquisitionReformPanel,CommitteeonArmedServices,

U.S.HouseofRepresentatives,09643T,DefenseAcquisitions:ActionsNeededtoEnsureValue

forServiceContracts,April23,2009,1.


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M A N A G E M E N T A N D A C C O U N T A B I L I T Y

9

workforcebyreducingstaffingshortages.Underthefiscal2010budgetrequest,the

departmentwouldbeginreducingitsrelianceonsupportservicecontractorsby

replacingcontractorpersonnelwithapproximately13,800governmentemployees.By

2015,theacquisitionworkforcewouldgrowbyabout20,000.4Thisplanbeginsa

fundamentaloverhaulofDoDsapproachtocontractmanagementandwillreducesome

oftheunderstaffingshortagesinordertoimprovesupporttothecontingencycontractingmission.

ContractingOfficers

Representatives

Contractingofficersrepresentatives

(CORs)areimportantmembersofthe

acquisitionworkforceperhaps

especiallyimportantinacontingency

environment,wheretheriskoffailurehas

greatconsequences.CORsareappointed

inwritingbyacontractingofficerto

performanumberofcontract

administrationandoversightduties.They

generallyperformtheircontractor

oversightroleinadditiontotheirprimary

jobresponsibilities.DuringCommission

interviewswithCORsinIraqand

Afghanistan,severalCORsexpressed

concernsaboutthelackofsufficienttime

toproperlyoverseecontractorperformance.Theyrecognizethat

monitoringacontractorstechnical

performanceisoneofthemostimportant

aspectsofcontractmanagement.Butso

longastheirperformanceisevaluatedon

theirprimaryjobresponsibilities,their

addedCORresponsibilitieswillalwaysbe

consideredasecondarypriority.

Simpleand

complex

service

contracts

demand

different

levels

of

COR

commitment.

For

example,aservicecontractwithashortduration,asingleservicerequirement,andlow

dollarvaluemayneednoCORoversight.However,ahighdollarvaluecontractwitha

broadscopeofworkrequiringscientificortechnicalexpertisewheretheriskof

performanceishighmayrequireafulltimeCOR.Everycomplexservicecontract

4DoDOfficeoftheAssistantSecretaryofDefense(PublicAffairs)NewsRelease,DoDReleases

Fiscal2010BudgetProposal,May7,2009.

CracksinKabul

DuringitsApril2009triptotheater,

theCommissiontouredtheNewKabul

Compound,soontobeU.S.Forces

Afghanistan

headquarters.

Weobservedstructuralcracks,

improperplumbing(andthus

unusablebathrooms),anincorrectly

sizedsewagesystem,brokenand

leakingpipes,sinkingsidewalks,and

otherconstructiondefects.

TheArmyshouldnothaveaccepteda

buildinginsuchcondition.Atthe

Commissionsrequest,theDoDIG

agreedtoperformaquickreviewof

thesituation.Theresultinglessons

learnedcouldhelpprecludefuture

shortcomingsincontractoversightand

holdcontractorstoahigherstandard

ofaccountability.


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C H A P T E R 1

10

requiresadevotedCOR.

DespitetheacquisitioncommunitiessharedrecognitionoftheimportanceofCORsin

thecontractmanagementprocess,thereareofteninadequatenumbersofqualified

CORsassignedtocontractoroversightinIraqandAfghanistan.Thereisagenerallackof

CORtraining,insufficienttimeformilitaryCORstoperformduties,andimproper

alignmentofCORskillstothetypesofservicecontractstheyarerequiredtomonitor.

Impropercontractoversighthasbeenrepeatedlydocumentedinpastauditreports,

inspections,andtestimony.IntheComptrollerGeneralsJanuary2008testimonybefore

theU.S.HouseofRepresentativesCommitteeonArmedServices,hespecificallylinked

contractorspoorservicecontractperformancetothelackofCORstooverseeexecution

ofcontracts.5TheComptrollerGeneraltestifiedagaininMarch2008,confirmingthat

deficienciesincontractoroversightpersonnelhavecostthegovernmentmoneyand

hamperedtheprocessofensuringthatcontractorsareperformingasrequired.6

InterviewsandbriefingsprovidedtoCommissionmembersasrecentlyasApril2009confirmedthatproblemswithstaffingCORsandmonitoringcontractorperformance

havechangedverylittle.

CORAppointmentsAreNotIncreasingwiththeRequirements

ThedrawdownofcombatforcesinIraqandthesimultaneousbuildupinAfghanistan

aretwostrategicmilitarychangesthatwillrequireanincreaseinservice and

constructioncontractoversightinbothlocations.AsbasescloseinIraq,militaryunits

andtheirmilitaryCORsareleaving.InanApril2009interviewatCampVictoryinIraq,

aDefenseContractManagementAgency(DCMA)representativeexpressedconcern

overtheagencysCentralIraqregion,wheremilitaryunitshavealreadymovedoutand

leftcriticalshortagesinCORsoverseeingremainingcontractorsinthatarea.

5GAOTestimonybeforetheSubcommitteeonReadiness,CommitteeonArmedServices,U.S.

HouseofRepresentatives,08621T,DefenseAcquisition:ExistingGuidanceandOtherActions

NeededtoImproveDoDsOversightandManagementofContractorsinFutureOperations,

January23,2008,910.6GAOTestimonybeforetheSubcommitteeonReadiness,CommitteeonArmedServices,U.S.

HouseofRepresentatives,08572T,DoDNeedstoReexamineItsExtensiveRelianceon

ContractorsandContinuetoImproveManagementandOversight,March11,2008,3.

Withoutproperoversight,thegovernmentcannotconfirmthatcontractorsare

performinginaccordancewithcontractrequirements,cannotsupportpaymentof

awardorincentivefees,cannotsupportthecertificationofinvoicesforservices

performed,andcannotensurethatservicescriticalforthecompletionofourmilitary

andreconstructionmissionsareperformed.Anyoneoftheseconditionsinvites

wasteandabuse.Takentogether,theyareaperfectstormfordisaster.


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11

TheCommissionsharestheDCMArepresentativesconcernthatthedrawdownof

militaryservicemembersmayleavetheU.S.governmentsinterestsinavulnerable

positionascontractorsperformwithevenlessoversight.Asfuturedrawdownplansare

developed,ensuringthatadequatenumbersofCORsareassignedwillbecomeeven

moreimportanttoprovidingpropercontractoroversight.

KBR,Inc.,(formerlyKellogg,Brown,andRoot)stillprovidessupportservicesin

SouthwestAsiaundertheArmyssingleawardcontract(LOGCAPIII).TheU.S.Army

recentlyawardedafollowoncontractforitsLogisticsCivilAugmentationProgram

(LOGCAP)requirements.ThenewLOGCAPIVcontractnowhasthreevendorsKBR,

DynCorpInternational,andFluorIntercontinentalwhomustcompetefortaskorders.

ThetransitiontoLOGCAPIVanditsmandatorytaskordercompetitionswillincrease

thelevelofcontractingactivityandlikelyincreasethenumberofactivetaskordersthat

requireCORoversight.

Inasimilarscenario,apreferencetouselocalnationalcompaniesinIraqand

Afghanistanforavarietyofservicecontractswillalsoincreasetherequirementfor

oversightpersonnel.7Withtheamountofcontractactivityandnumberoftaskordersset

tomultiply,thenumberofCORstomonitorthecontractorswillneedtoincrease

commensurately.

CORunderstaffingexiststhroughouttheU.S.ArmyCentralCommandareaof

operations,socertifiedCORsareoftenvastlyoverworked.InApril2009,Combined

JointTaskForce101inAfghanistantoldtheCommissionthatoneoftheirCORshad19

contractstomonitor;aCORfromTaskForceWarhorsesaidheisresponsibleforoverseeing15contractsandconductingfourperformancereviewsallasextraduty

afterhecompleteshisthreeprimaryduties.TheaverageCORintheregionhad3.55

contractstomonitor.TheshortageofCORshaspromptedcontractoversightsolutions

ofquestionableeffectiveness.DCMAtoldtheCommissionersthatcontractorself

policinghadbeentried,butdidnotworkout.Amilitaryofficersaidheknewof

contractsbeingperformedinAfghanistanthatwerebeingmonitoredbyCORs

physicallylocatedintheUnitedStates.

TrainingForMilitaryCORsIsOften

Inadequate

AdequatetrainingforCORsplaysanessentialrolein

buildingacapabilitytoeffectivelymonitorofservices

providedbycontractors.TheDoDInspectorGeneral

7Section886ofthe2008NationalDefenseAuthorizationActauthorizedthesetasides;theyare

beingimplementedinpartthroughtheIraqiFirstandAfghanFirstprograms.

One soldier describedthe COR nominationand appointment

process as a Hey,you pickup game.


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C H A P T E R 1

12

notedina2008reportthatproblemswithsparsetrainingofoversightpersonnelhad

persistedsinceFY2003foroperationsinIraqandAfghanistan.8WhenTheCommission

visitedCampHammerandCampDeltainIraq,militaryservicememberssaidthey

arrivedwithnopriorinformationaboutCORrequirementsorcontractormanagement

responsibilities.BecausemilitaryservicemembersarenotmadeawareofCOR

requirementsbeforetheirarrival,onesoldierdescribedthenominationandappointmentprocessasaHey,youpickupgame.TheCORatTaskForceWarhorsein

Afghanistansaid,weweregivenatwohourcourseandtoldtorunwithit.

ThisadhocnominationofuntrainedandinexperiencedCORshascreatedacritical

needforsubstantive,justintimeCORtraining.DepartmentofDefenseCORsare

requiredtocompletetheDefenseAcquisitionUniversity(DAU)onlineCORtraining

beforeappointment,buttheintervieweesinIraqtoldtheCommissionthatWebbased

trainingisnoteasilyaccessibleafterarrivalintheaterbecauseofinformationtechnology

infrastructureconstraintsandslowdatatransmissionrates.Theseconstraintscontribute

tolongerthannecessarytrainingperiods,aharriedexperiencefortheCORnominee,andagapincontractoroversightwhiletrainingispending.Apressingneedremainsfor

abettersolutiontotheDAUCORtrainingchallenges.

TheremotelocationofCORnomineesandtheneedtoreducethetimeelapsedin

appointingthemmakesitimportanttoprovideforDAUtrainingthroughalternativesto

instructorledclassesintheUnitedStatesandWebbasedtrainingmethods.These

alternativesdonotyetexist,eventhoughtheuniversityhasreceivedmorethan100

requeststhatCORtrainingbedistributedonacompactdisc,accordingtotheDAU

PerformanceLearningDirectorinterviewedbyaCommissionmemberinApril2009.

BecauseCOR

training

and

certification

is

aprerequisite

for

appointment

and

the

COR

roleiscriticaltocontingencycontractmanagement,inlightofthisunmetdemand,the

Commissionintendstostudythetopicinmoredepth.

NominatingandappointingCORsforparticularcontractsisacontinuousprocess

becauseofthefrequentrotationsofpersonnelandconstantlychangingcontingency

missionrequirements.ADefensepolicymemorandumrequiresthatCORassignments

forcontractoroversightbemadepriortocontractaward,yettheadvanceappointment

processdoesnotprovidearemedyforreplacingCORsthatrotateoutoftheir

assignments,leavingactivecontractswithoutgovernmentoversight.9Thelackof

collaboration

among

military

and

federal

civilian

employees

involved

in

the

contractor

oversightprocessmakestheCORnominationandappointmentprocessvery

8DoDInspectorGeneralReportD2008086,ChallengesImpactingOperationsIraqiFreedomand

EnduringFreedomReportedbyMajorOversightOrganizationsBeginningFY2003throughFY

2007,July18,2008,56.9DoD,SecretaryofDefenseMemorandum,MonitoringContractPerformanceinService

Contracts,August22,2008.


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13

Without accurate and timelycontract-transaction data,

acquisition managers cannot

make quality strategic-sourcing decisions or provide

necessary acquisition-workforce and budgetaryresources.

challenging.

TheCommissiondiscoveredpositivechanges

inthestakeholdersapproachtomanagethis

sharedresponsibility.Contractingofficialsin

theJointContractingCommandIraq/Afghanistan(JCCI/A)andDCMAhave

begunmonitoringtheredeploymentdatesof

CORsassignedtotheiractivecontracts.This

visibilityallowscontractingofficersto

identifytheneedforreplacementsearlier,

providesnomineeswithanopportunityforadvancetrainingandfamiliarization,and

ultimatelyavoidslapsesincontractoroversight.However,thestaffingandtrainingof

CORsremainsariskduetotheongoingabsenceofeffectivecontractoversight.

ImmediateactionbyDoDleadersisnecessarytoensuretimelycontractoversightwhile

longerterm

staffing

increases

are

being

put

in

place.

ProcurementandContractAuditors

LackofresourceswithintheDefenseContractAuditAgency(DCAA)isasignificant

factorcontributingtoineffectiveauditcoverage.TheGovernmentAccountabilityOffice

(GAO)hasraisedseriousconcernsaboutthequalityofsomeDCAAauditsof

contractorsbusinesssystems.10DCAAsoverallstaffinglevelshaveremainedrelatively

constantatroughly4,000sinceFY2000,eventhoughDoDcontracttransactionshave

increasedby328percentfrom304,500inFY2000toover1.3millioninFY2006.11

Withthisrapidandsignificantincrease,DCAAauditmanagersarefacedwithdifficultchoicesastheymanageandprioritizetheirworkload.Moreoftenthannot,the

importantDCAAinitiatedauditsofcontractorbusinesssystemsarepostponedor

deferredtoperformcustomerinitiatedauditsthatalwaysreceivethehighestpriority.

Auditorstaffingchallengesareparticularlyacuteintheater.Duringourspring2009visit

toAfghanistan,welearnedthatDCAAhasonlyfourpeoplethere,twoatBagramAir

BaseandtwoatKandahar.ThisstaffingpostureclearlylimitstheserviceDCAAcan

providetovaluablecontractauditrequirements,astheannouncedbuildupin

Afghanistantakesplace.

10GAOReportGAO08857,DCAAAuditsAllegationsThatCertainAuditsatThreeLocations

DidNotMeetProfessionalStandardsWereSubstantiated,July2008.11DefenseBusinessBoardReportFY091,IndependentReviewPanelReportontheDefense

ContractAuditAgency,October2008,5.


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14

KNOWLEDGEANDINFORMATIONSYSTEMS

DataSystemsAreInadequatetoMeasure

ContingencyContractingActivity

Therearethreecommonmetricsfordeterminingthelevelofcontractactivity:procurementtransactions,budgetappropriations,andcontractdisbursements.

Determiningthelevelofactivity,thenumberofacquisitionpersonneltomanagethe

activity,andwheretoassignthepersonnelarecriticalfunctionsofcontingencycontract

management.Withoutaccurateandtimelycontracttransactiondata,acquisition

managerscannotmakequalitystrategicsourcingdecisionsorprovidenecessary

acquisitionworkforceandbudgetaryresources.Asaprogramormissionmatures,

acquisitionmanagersmustanalyzecontracttransactiondatatogleaninformationona

numberofcontractmanagementissues.

Fundamentaldata

points

that

acquisition

managers

need

for

effective

planning

include:

numberoftransactions,

transactionvalues,

contracttype(forexample,fixedpriceorcostreimbursement),

classificationofproductsandservicesbeingacquired,and

locationsofservicecontractperformance.

Reliabletransactioninformationallowsacquisitionmanagerstomakeinformed

decisionsaboutrecruitinganadequatenumberofstafftomanagetheworkload;identify

appropriateskill

levels

for

the

acquisition

team

that

will

perform

contract

formation,

administration,andoversightduties;anddevelopabudgetforecasttoaccomplishthe

contractmanagementfunction.

TheFederalAcquisitionRegulation(FAR)requiresexecutiveagenciestocollectand

reporttheircontracttransactiondatatotheFederalProcurementDataSystemNext

Generation(FPDSNG)system.12Becauseitisextremelyimportantthatdatacontained

inFPDSNGareaccurate,complete,andsubmittedinatimelymanner,theOfficeof

ManagementandBudgetrecentlyputadditionalemphasisonthedatacollection

processbyrequiringagenciestocertifytheresultsofastatisticallyvaliddataassessment

andto

report

the

accuracy

and

completeness

of

critical

FPDS

NG

data

fields.

13

ThoughtheFPDSNGdatabaseismuchmorecomprehensiveandaccuratethanitwas

evenafewyearsago,itstillisnotareliabletoolfordeterminingthebreadthandextent

12FAR,subpart4.603.13OfficeofManagementandBudgetLetter,ImprovingAcquisitionDataQualityFY2008FPDS

NGData,May8,2008.


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15

ofcurrentdollarsobligatedandcurrentactionsperformedinsupportofoperationsin

IraqandAfghanistan.

In2007,anauditoftheFPDSNGsystemrevealedthatitprovidednomethodto

distinguishprocurementtransactionsofsignificantnationalinterestfromroutine

transactions.14TheFPDSNGsystemwasthenrevisedtoincludeanationalinterestareafieldthatcanbeusedtodesignatethecontingencyoremergencytowhichitrelates.The

FPDSNGsystemsnationalinterestareafieldhasbeenusedincreasinglytoidentify

transactionsthatsupportdomesticnationalemergencies,butithasnotyetbeenusedto

tracktransactionssupportingmilitarycontingencies.

SincetheFPDSNGsystemcannotbereliedupontoproduceaccurateandtimely

informationregardingthelevelofcontingencycontractingactivity,acquisition

managersoftenrelyoninformationfromalternativedatasystemsasameasureof

workload.Thealternativesarebudgetappropriationsandcontractdisbursements.

Budgetappropriations,whilecommon,areanimperfectmetric.Contractobligations

andperformanceoftenlagbehindappropriatedbudgetauthoritybecauseonlysome

portionoffundsisobligatedintheyearappropriated.Thetimeforplanningand

negotiatingcontractsmakesannualprocurementappropriationsanunreliableindicator

ofworkloadandprocurementactivityinagivenyear.

Contractdisbursementsarealsousedtomeasurecontractingactivity.Contract

paymentsmadewhengoodsandservicesaredeliveredwouldbeagoodmeasureof

spendingratesandactualperformanceactivity,exceptthatDoDdoesnottrackoutlays

forroutine

and

contingency

related

contracts

separately.

Without

that

differentiation,

contractdisbursementscannotbereliedupontoaccuratelymeasurethelevelof

contingencycontractactivity.

Giventheshortcomingsofobligations,appropriations,anddisbursementsasmeasures

ofcontingencycontractingactivity,acquisitionmanagersarelefttothedifficulttaskof

analyzingsomeaspectsofallthreemetricstodetermineworkloadtrends.Thefederal

informationsystemsinabilitytoprovidereliableinformationhasundoubtedly

complicatedcontingencycontractmanagement.TheCommissionwillcontinueto

analyzetheinformationsystemslimitations.

14GeneralServicesAdministrationInspectorGeneralReportA070101/Q/R/P07003,LimitedScope

AuditofDisasterReportingthroughtheFederalProcurementDataSystemNextGeneration,

March30,2007,3.


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CompleteandAccurateNumbersforContractorSupport

inSouthwestAsiaAreUnavailable

ContractorsplayasubstantialroleinsupportingtheUnitedStatescurrentmilitary,

reconstruction,anddiplomaticoperationsinIraq,accountingforasignificantportionof

themanpower

and

spending

for

those

activities.15

Aggregate

data

are

available,

but

thereislimiteddetailonthefullarrayofcontractorsupportinformationthat

commandersandpolicymakersneedtomakemissioncriticaldecisions.

Thereisnosingle,commonoperatingpictureofallcontractsupportintheU.S.Army

CentralCommandareaofoperations.InOctober2007,DoDreportedtoCongressthat

functionaloversightandcontrolofthenumberofcontractorswhoaccompanyU.S.

forcestoforwardareasofoperationsinSouthwestAsiahadnotbeenadequatebecause

therewasnocapabilityforacentralizedtrackingandfunctionalmanagementprocess.16

Toaddressthisissue,DoDdesignatedtheSynchronizedPredeploymentand

Operational

Tracker

(SPOT)

as

the

joint

database

for

tracking

contractor

personnel,

the

activecontractsonwhichtheywork,andotheradministrativeinformation.

TheDoDsalternativedatasourceforcontractorsupportpersonnelistheU.S.Army

CentralCommandsquarterlycensusofcontractorsthattracksanaggregatenumberof

contractorpersonnel.Therawdataalsoincludeinformationonthenumberofcontracts

bythereportingcontractingorganization.Thecontractorcensusreportdoesnotinclude

contractorpersonnelworkingforagenciessuchastheDepartmentofStateortheU.S.

AgencyforInternationalDevelopment.TheCommissionhasnotlocatedcomparable

datafortheseagencies.

InApril2008,DoDreportedtoCongressagain,sayingthatSPOTwouldachieve100

percentWebbasedaccountabilityofDoDcontractorsintheU.S.ArmyCentral

Commandareaofoperationsbythefallof2008.AsofApril29,2009,theSPOTdatabase

reflects159,579activecontractorrecordsinSPOT,orapproximately66percentofthe

numberofcontractorsreportedinU.S.ArmyCentralCommandsmostrecentcensus.

Thedelayinachieving100percentaccountabilityisduetoseveralfactors,including

datacapturesystemsthatdonotlinktooneanotherandalackofresourcestodeploy

somedatacapturesystems.

U.S.ArmyCentralCommandssecondquarterfiscalyear2009censusreflected242,657

activeDoDcontractorpersonnelinitsSouthwestAsiaareaofoperations.Thistotal

includes132,610inIraq,68,197inAfghanistan,and41,850inotherSouthwestAsia

locations.

15CongressionalBudgetOffice,ContractorsSupportofU.S.OperationsinIraq,August2008.16DoDReporttoCongress,DoDProgramforPlanning,Managing,andAccountingfor

ContractorServicesandContractorPersonnelDuringContingencyOperations,October2007.


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17

DuringitsApril2009tripstoIraqandAfghanistan,theCommissionsoughttoidentify

thetotalpictureofcontractorsupportinthosecountries.OfficialsinbothIraqand

Afghanistantoldusthattherewasnocentrallistofallcontractsprovidingsupport.The

Commissionwasunabletoputtogetheracompletefootprintofthecontractsbeing

performedatthebaseswevisited.GAOhasalsobeenunabletoidentifycompleteandreliabledataoncontractorpersonnelinSouthwestAsia.OnlyDoDprovideddataonthe

numberofcontractorpersonnel,butofficialshavetoldGAOthatitscensusdatawere

notroutinelyevaluatedforaccuracyorcompleteness.17

AtCampDelta,oneofficialsaid,contractorsdirectlyorindirectlyaffecteverymission

onthis[forwardoperatingbase].DatawereequallyincompleteinAfghanistan.One

basecommanderinAfghanistansaidthatotherthanLOGCAP,hehadnoideaofhow

manycontractorswereonandoffhisbasedaily.Thislackofinformationaffectsmany

areasofacommandersoversightandplanningresponsibilitiesnottheleastofwhich

isacommandersresponsibilityforallpersonnelandactivitiesunderhisorherareaof

operation.

ContingencyContractingLessonsLearned

AreNotSharedEffectively

TheCommissionsauthorizingstatuterequiresthatitsFinalReportshall,amongother

things,identify

lessons

learned

relating

to

contingency

program

management

and

contingencycontractingcoveredbythestudy.Lessonslearnedareharvestedfrom

experience:theyareconfirmedobservations,butaremoreparticularlyobservationsthat

canbetransmittedandusedaspolicy,doctrine,orguidanceforfutureaction.

Identifying,recording,andtransmittinglessonslearnedisanimportantwaytosave

time,lives,andmoney.

TheU.S.governmentfacesmanyofthesamekindsofdifficultieswithcontract

managementinIraqandAfghanistanthatwerepresentinpreviousmilitaryoperations.

In1997,theGAOsNationalSecurityandInternationalAffairsDivisionrecommended

thatthe

Department

of

Defense

incorporate

lessons

learned

from

the

Bosnia

peacekeepingmissionandotherBalkansoperationstoimprovetheefficiencyand

effectivenessoftheArmysLOGCAPcontract.18

17GAOReport0919,ContingencyContracting:DoD,State,andUSAIDContractsandContractor

PersonnelinIraqandAfghanistan,October1,2008,6.18GAO/NSIADReport9763,ContingencyOperations:OpportunitiestoImprovetheLogistics

CivilAugmentationProgram,February11,1997,25.

Thereisstillnoclearpictureofwhothecontractorsintheaterare,whatservicesthey

provide,whichcontractstheyperform,andwhattheirsupportcostsare.


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Inits2003reporttotheU.S.SenateCommitteeonArmedServices,GAOrecommended

thatthedepartmentensurethatthemethodusedtogatherlessonslearnedincorporate

fourprocesselements:collection,verification,storage,anddissemination.19In2006,

whentheGAOsDirectorofDefenseCapabilitiesandManagementcompletedthe

agencysreviewoflongstandingproblems,hereportedthatnoorganizationorentitywithinDoDwasresponsiblefordevelopingprocedurestosystematicallycollect

informationontheuseofcontractorstosupportdeployedforcesortoshareits

institutionalknowledge.20

TheDefenseDepartmenthassincetakenstepstoimproveitsinstitutionalknowledge

sharingprocesses.In2007,DoDreportedcreationofaJointContingencyContracting

CommunityofPracticeknowledgeportalthatishousedontheDefenseAcquisition

UniversityWebsite.TheCommunityofPracticeWebsiteservesasarepositoryfor

policyandguidanceinformation,predeploymentinformation,tools,andafteraction

reportsforusebythecontingencycontractingcommunity.21TheDoDdirectedeachmilitaryservicetoidentifyapointofcontactforcontributingafteractionreportsand

lessonslearnedtotheCommunityofPractice.22

ThedepartmentalsohostsanumberofWebsiteswithreferenceandtrainingmaterials

toaddressthelessonslearnedvoid.ExamplesincludetheWebsitesoperatedbythe

OfficeofDefenseProcurementandAcquisitionPolicy,theU.S.JointForcesCommand,

theU.S.ArmyCentralCommand,andtheArmysTrainingandDoctrineCommand

(TRADOC).ThelessonslearnedWebsiteisonlyoneaspectofTRADOCsknowledge

managementprogram.TheCommandemployslessonslearnedintegratorsatitsschool

housesand

provides

acontracting

officers

representative

booklet

sized

to

fit

in

a

militaryuniformscargopocket.TRADOChasalsopublishedthreepocketsized,

waterproof,smartcards:ContractingOfficerRepresentatives,TheCommanders

EmergencyResponseProgram,andContractingBasicsforLeaders.

ThemultiplemethodsofdisseminatingtheDefenseProcurementAcquisitionand

PolicysJointContingencyContractingHandbookareanothergoodexampleofDoDs

improvedknowledgesharingprocesses.ThehandbookservesasaresourceinDefense

AcquisitionUniversityscontingencycontractingtrainingcourse,isavailableinahard

19

GAO

Report

03

371,

Information

Technology:

DoD

Needs

to

Leverage

Lessons

Learned

from

itsOutsourcingProjects,April25,2003,28.20GAOReport07145,HighLevelDoDActionNeededtoAddressLongstandingProblemswith

ManagementandOversightofContractorsSupportingDeployedForces,December2006,6.21DefenseAcquisitionUniversity,AcquisitionCommunityConnection,

https://acc.dau.mil/CommunityBrowser.aspx.22UnderSecretaryofDefense,DefenseProcurementandAcquisitionPolicyMemorandum,

PointsofContactforAfterActionReportsandLessonsLearned ContingencyContracting,June

12,2007.


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19

copycargopocketbooklet,andispostedasaWebresource.Thehandbookalsocontains

emailaddressesandtelephonenumbersofDefenseAcquisitionUniversityinstructors

whocanprovidecontingencycontractingadvice.

DoDseffortstoimprovethecollectionandpublicationofcontingencycontracting

lessonslearnedarewelcomesignsofincreasedattentiontoaseriousneedfor

knowledgesharing.However,identifyingandpublishinglessonsisoflittleuseiftheir

distilledguidanceisnotreachingthepeoplewhocouldbenefitfromit.

DuringtheCommissionsspring2009visitstoIraqandAfghanistan,federalcivilian

employeesandmilitaryservicemembersspokeofdifficultieswithaccessingrelevant

lessonslearnedinformation.Intervieweessaidtheysometimesbenefitedfromtheir

predecessorslessonslearned,butcomplainedthatthelackofInternetbandwidth

impededtheiraccesstoavastcollectionoflessonsandinformationavailableonlyon

Websites.Eveniftherewerenoconnectivityproblems,theintervieweesexplained,their

timeavailableforWebusewaslimitedafteratypicallylongworkday.

MilitaryservicememberstoldtheCommissiontheirpredeploymenttrainingdidnot

includelessonslearned,andthenormalsevendayoverlapwiththedepartingunitdid

notallowadequatetimeforrelayingallthelessonsthatcouldprovehelpful.Ingeneral,

intervieweesfacedchallengestosharing,collecting,anddisseminatinglessonslearned

before,during,andafterperformingtheircontingencymissionroles.

AswithotheraspectsoftheCommissionswork,fulfillingthemandateofidentifying

lessonslearnedinIraqandAfghanistanwillinvolveagreatdealofadditionalresearch

andanalysis.TheCommissionwillcontinuetoidentifyexamplesofsuccessfullessonslearnedprogramsandwillconductathoroughreviewofworkalreadydoneinthisarea

bytheDepartmentofDefense,theDepartmentofState,theU.S.Agencyfor

InternationalDevelopment,nongovernmentalentities,andcoalitionandNATOallies.

POLICYANDPROCESS

TheCommissionsworkhasrevealedanumberofcontingencycontractingpolicyand

processissuestobeinvestigatedinmoredetail.Ourresearchtodatehasfocusedonthe

outsourcingofcontingencyoperationssupportservicesanditsimplicationsregarding

theperformanceofinherentlygovernmentalfunctions.Afewoftheseimplicationsare

discussedhere.

OutsourcingIncreasestheRiskofContractorsPerforming

InherentlyGovernmentalFunctions

AsthemilitaryoperationsinIraqandAfghanistanhaveprogressed,themilitary

services,defenseagencies,andotherstakeholderagenciessupportingthereconstruction


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missioncontinuetoincreasetheirrelianceoncontractors.Contractorsarenowliterally

inthecenterofthebattlefieldinunprecedentednumbers.Inpreviouswars,themilitary

policeprotectedbasesandthebattlespaceasothermilitaryservicemembersengaged

andpursuedtheenemy.Today,contractorsoftensupportbasesecurityoperations,

diningfacilities,motorpools,aircraftmaintenanceshops,convoys,convoyprotection,

andothersupportfunctions.

Theterminherentlygovernmentalisdefinedinvariouswaysinstatute,regulation,

andtheOfficeofManagementandBudget(OMB)CircularA76.Inherently

governmentalfunctionsarethosesocloselyrelatedtothepublicinterestthattheymust

beperformedbyfederalemployeesorservicemembers.Activitiesthatmaynotbe

appropriatefor

outsourcing

to

contractors

include

those

that

so

closely

support

inherentlygovernmentalfunctionsthattheyprovideanopportunitytoinfluence

governmentdecisions,andactivitiesthatareessentialtothesuccessfulaccomplishment

ofanagencysmission.

GuidanceForDefiningInherentlyGovernmentalFunctions

IsInadequate

RecentlegislationrequirestheOfficeofManagementandBudgettoreviewthemany

definitionsofinherentlygovernmentalfunction.23OMBmustdeterminewhetherthe

variousdefinitionshavesufficientclaritytoensurethatonlyofficersoremployeesofthe

federalgovernmentormembersofthearmedforcesperforminherentlygovernmentalfunctionsandothercriticalfunctionsnecessaryforthemissionsuccessofafederal

departmentoragency.Theobjectiveistodevelopasingle,consistentdefinitionforthe

term.

TheCommissionsstatutoryauthorizinglanguagerequiresittoprovidespecific

recommendationstoimprovetheprocessofdeterminingwhichfunctionsareinherently

governmentalandwhichfunctionsareappropriateforperformancebycontractorsina

contingencyoperation.TheCommissionplanstoexplorethefactorsthatbroughtthe

U.S.governmenttothepointwhereagenciesrelysoheavilyoncontractingforservices.

ContractorsHaveAlwaysSupportedContingencyMissions

FromthedaysoftheRevolutionaryWar,whentheContinentalArmyhiredwagon

driversandcontractedwithbeefsuppliers,theU.S.militaryhasreliedoncontractorsfor

somesupportofwartimeactivities.Theratioofcontractorstomilitarypersonnelisnow

23PublicLaw110417,TitleIII,Section321,DuncanHunterNationalDefenseAuthorizationAct

forFiscalYear2009,October14,2008.

Theincreaseinservicecontractingcreatesaneedtodefinespecificfunctionsthatare

notappropriateforperformancebycontractorsinacontingencyoperation.


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21

roughly1.1to1.24Thefigurebelowshowshowtheratioofcontractorstomilitary

personnelhaschangedovertime,andliststypesofservicesourmilitaryhascometo

relyoncontractorstoprovide.

ChartprovidedtotheCommissionduringavisittoDoDsDefenseProcurementandAcquisition

PolicyofficeonFebruary25,2009.

Anumberofinstitutionalfactorsledthegovernmenttothecurrentsituationwhere

contractorsupporthasbecomecriticaltocontingencymissionsuccess:

lackofadequatecontingencyplanninginadvanceofoperations;

lackoffederalemployeeswiththeappropriateskillstoperformtheservices;

reductionofthemilitaryforcestructureandlimitsonthetotalnumberof

militarypersonnelauthorizedbyCongress;

requirementsprocessfordecidingthenumberofpositionsneededintheforce

structure;and

relativeeaseofcontractingforaservicecomparedtothelengthyprocessof

hiringcivilianpersonnel.

24U.S.ArmyCentralCommand,CCJ4,ContractingBranch,May11,2009.


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TheDepartmentofDefensereportedtoCongressinApril2008thatthemissionsinIraq

andAfghanistanarethefirstmajorcontingencyoperationstoreflectthefullimpactof

theshifttoheavyrelianceoncontractorpersonnelforcriticalsupportfunctionsin

forwardoperatingareas.25Despitethekeyroleofcontractorsinoverseasoperations,

DoDlacksenoughstafftoprovideadequatecontractoversight.TheStateDepartmentandtheU.S.AgencyforInternationalDevelopmentalsousesignificantlevelsof

contractorsupportinSouthwestAsia.TheCommissionwillstudyandanalyzethe

changesneededtopreventimproperrelianceoncontractorsinfuturecontingency

operationslikeIraqandAfghanistan.

IdentificationOfEssentialContractorSupportServicesIsIneffective

Responsibilityforensuringthatallcontractorservicesarereviewedannually,including

newandexistingcontracts,andfordeterminingwhichservicesareessentialduring

crisissituationsrestswiththeheadsofDoDcomponents.Thecomponentsmustalso

conductanannualassessmentofhowtheunexpectedorearlylossofessentialcontractorserviceswouldaffectsupporttomobilizinganddeployedforces,andincorporatethe

assessmentresultsintotheirplanning.

DoDInstruction3020.37,ContinuationofEssentialDoDContractorServicesDuring

Crisis,issuedin1990andupdatedin1996,assignsresponsibilitiesandprescribes

procedurestoimplementplansthatprovidereasonableassurancethatessentialservices

willcontinueduringcrisissituations.26TheInstructionincludesdirectionfor

developmentofcontingencyplanstoobtainessentialservicesfromalternativesources

ofsupplywhenreasonabledoubtaboutcontinuationofserviceexists.

TheDepartmentofDefenserecognizestheimportanceofensuringcontinuityof

essentialservicesprovidedbycontractors,buthasdonelittletoidentifythose

servicesortodevelopbackupplansshouldcontractorsbecomeunavailable.

In2003,GAOreportedthatDoDhadnotfullyincludedcontractorsupportinits

operationalandstrategicplans.Accordingtothereport,thedepartmentwasawareas

earlyas1988oftheneedtoidentifycontractorsprovidingessentialservices,buthad

donelittletocomplyinthenext15years.DespitethedirectiongiveninInstruction

3020.37thatDoDcomponentsidentifyessentialservicesprovidedbycontractorsand

developplanstoensureservicecontinuationshouldcontractorsbecomeunavailablethedirectedreviewshadnotbeenconducted.GAOalsofoundlittlehadbeendonein

25DoDReporttoCongress,DoDProgramforPlanning,Managing,andAccountingfor

ContractorServicesandContractorPersonnelduringContingencyOperations,April2008.26DoDInstruction3020.37,ContinuationofEssentialDoDContractorServicesDuringCrisis,

January26,1996.


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23

operationalplansorasseparatedocuments.27

BasedonitsdiscussionswiththeJointChiefsofStaffLogisticsDirectorateandtheU.S.

ArmyCentralCommand,theCommissionconfirmedthatlittlehasbeendonesincethe

2003GAOreport.CompliancewithDoDsInstructionisnottakingplaceorbeing

enforced.Intheory,groundcommandersidentifywhichoftheirrequirementsare

missionessential.Inpractice,commandersappeartotreatallcontractorsupportas

missionessential.However,inasettingofconstantchangeandshiftingrequirements,

effectivemanagementofcontractorsupportrequiressomemeansofdistinguishing

betweencriticalandroutinesupportactivity.

DuringaMarch2009meetingwiththeJointChiefsofStaff(JCS)LogisticsDirectorate

(J4)staff,theCommissionlearnedthatJ4isnotawareofanyofficialidentificationof

missionessentialcontractorsupport.TheViceChairmanoftheJCShasestablishedthe

DependenceonContractorSupportinContingencyOperationsTaskForcetoaddress

theissue.Accordingtothetaskforcecharter,severalfactorshaveledtoaneverincreasingrelianceoncontractorsacrosstherangeofmilitaryoperations:

thecontinualintroductionofhightechnologyequipment,

forcestructureandmanningreductions,and

theintensepaceofoperations.

TheJCStaskforceplanstoassessdependenceoncontractorsupport,developareport,

andbriefseniorleadershipinJune2009.U.S.ArmyCentralCommandJ4staffis

providingtheJCStaskforcewithdataoncontractorsupportactivitiesintheSouthwest

Asiaareaofoperations.ContractingofficialsandoperationplannersfromtheU.S.ArmyCentralCommandsLogisticsDirectoratetoldtheCommissiontheyhavenot

undertakenorheardofanyothereffortstoidentifywhichcontractorsprovidemission

essentialsupportoutsideofthecurrentJCStaskforceinitiative.

ORGANIZATIONALLEADERSHIPANDALIGNMENT

FailureToAlignContingencyMissionsAndResourcesCreatedThe

NeedForSpecialInvestigations

Specialinspectorsgeneral(IGs)establishedinrecentyearshaveworkedtoexpose

contractingfraudandwasteinthewakeofacontingencyoremergency.Congresshas

authorizedestablishmentoftheSpecialInspectorGeneralforIraqReconstruction,the

SpecialInspectorGeneralforAfghanistanReconstruction,andtheSpecialInspector

GeneralfortheTroubledAssetReliefProgram.TheranksoftheGovernment

27GAOReport03695,MilitaryOperations:ContractorsProvideVitalServicestoDeployed

ForcesbutAreNotAdequatelyAddressedinDoDPlans,June24,2003.


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AccountabilityOffice,theDepartmentofDefenseIG,theDepartmentofHomeland

SecurityIG,andotherauditorganizationshavegrownasthenumberofatriskfederal

programshasrisen.

Theseorganizationshaveissuednumerousreportsandheldcountlesshearingson

federalacquisitionfailuresfollowingcontingenciesandemergencies.TheIGsare

workingtoidentifyandholdaccountablethepersonsresponsibleforabusethatcan

occurintheabsenceofeffectiveorganizationalleadershipandalignment.Despitethe

auditreportfindingsandhearingtestimonybyacquisitionleaders,timeandagain

Congressappropriatedsupplementalbudgetstoacquiretheequipmentandservices

requiredtoprepareforandrecoverfromcontingenciesandemergencieswithout

providingadequateresourcestoobtaintheacquisitionsupportservicesnecessaryfor

obligatingandexpendingthefundsduringcontractformationandexecution.

Hadthefederalgovernmentcommittedadequateresourcestocontractmanagement

andoversightfunctions,itwouldnotneedtospendasmuchnowonspecialinspectors

generaltodeterminewhatwentwrongintheacquisitionprocess.TheCommissionwill

worktohelpensurethatfuturecontingenciesareadequatelyresourcedtoalignthe

missionwiththefederalacquisitionworkforcenecessarytosupportit.

AgenciesHave

Not

Fully

Implemented

Prior

Recommendations

OneoftheCommissionsmajorobjectivesistoconductathoroughassessmentofthe

systemicproblemsidentifiedwithwartimecontracting.Hundredsofreportsrelatedto

wartimecontractinghavebeenpublishedbyresearchandoversightorganizations.The

1,287recommendationscontainedinthese537reportsreflecttheextensiveeffortalready

conductedonproblemsidentifiedincontingencycontractinginIraqandAfghanistan.28

ThetablebelowshowsoversightagencyreportsissuedintheperiodFY2003FY2009on

contingencycontractingandthenumberofrelevantreportsandrecommendations.

28TheyincludereportsbytheGovernmentAccountabilityOffice,DoDInspector

General,DepartmentofStateInspectorGeneral,U.S.AgencyforInternational

DevelopmentInspectorGeneral,ArmyAuditAgency,NavalAuditService,AirForce

AuditAgency,SpecialInspectorGeneralforIraqReconstruction(SIGIR),andSpecial

InspectorGeneralforAfghanistanReconstruction(SIGAR).

Effectiveacquisitionleadersunderstandthatprofessionalstaff,tools,resources,

training,andincentivesarenecessarytoensureadherencetothefundamentaldeterrentsoffederalacquisitionwaste,fraud,andabuse:competition,

transparency,andfairness.


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25

Oversight Agency No. ofReports

Reviewed

No. ofRecommendations

ReviewedDepartment of Defense, Office of Inspector

General

68 174

Army Audit Agency 79 239

Naval Audit Service 1 2

Air Force Audit Agency 15 50

Special Inspector General for IraqReconstruction

135 302

Special Inspector General for AfghanistanReconstruction

0 0

Department of State Office of Audits 13 42

United States Agency for InternationalDevelopment, Office of the Inspector

General

71 180

Government Accountability Office 129 228

Congressional Budget Office 4 0

Congressional Research Service 18 0

Other 4 70

Total 537 1,287

Wewillanalyzetherecommendationsmadeineachcategory.Wewillconsiderthe

extenttowhichtherecommendationsareimplementedandwhatimpedes

implementation.

TheCommissionisbuildingonthisauditworkoncontingencycontractingforIraqandAfghanistan.Sometimestherecommendationsareimplementedandhavefixedthe

identifiedproblem.Atothertimes,recommendationsthathavebeenacceptedand

implementedhavenotfixedtheproblem.Somerecommendationshavebeenmadeover

andover.Thefollowupprocessesarenotalwaysthesame,norarethestandardsfor

closingrecommendations.Nevertheless,whetherrecommendationsareclosedornot,

someofthesameproblemscontinue.

TheGovernmentAccountabilityOfficeandDoD,State,USAID,andtheSpecial

InspectorsGeneralforIraqandAfghanistanfollowuponthestatusofthe

recommendationstheymakeandclassifythemasopenorclosed.Inaddition,theyreportonthisstatusinsemiannualreports.Someoversightorganizations,suchasthe

CongressionalBudgetOfficeortheCongressionalResearchService,donotmake

recommendations.Somespecialentities,suchastheStateDepartmentsKennedyPanel

andtheArmysGanslerCommission,havemaderecommendationsthatarebeing


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26

followed.29

Institutionalbarriersorsituationsmayexistthatarenotbeingaddressedorthatprevent

arecommendationfromresolvingtheunderlyingissues.Thesebarriersmayormaynot

havebeenidentified.InkeepingwiththeCommissionsauthorizinglegislation,weare

identifyingthesesituationsandwillselectseveralofthemosthighriskproblemsfor

futureanalysis.

Theongoinganalysisincludesareviewofthereportsrelatedtocontingencycontracting

publishedbetweenFY2003andFY2009.Anumberofthemessurfaceinthesereports,

suchasstaffingissues,inadequateinternalcontrols,andtheneedformoretrainingof

personnelwithcontractingresponsibilities.

FINANCIALACCOUNTABILITY

TheDefenseContractAuditAgencywasamongthefirstauditagenciestoestablishasustainedpresenceintheater.DCAAsetupitsIraqBranchOfficeinMay2003withthe

primarypurposeofimprovingfinancialaccountabilitybyprovidingintheateroversight

ofcontingencycontractors.DuringDCAAssixyearpresenceinIraq,regional

contractingcommandsmaderelativelyfewrequestsforitsauditservices.DCAAcould

provideavarietyofpre andpostawardauditservicestothecontingencycontracting

community,butotherpartieshavenotuseditsservicestofulladvantage.

TheCommissionrecognizesthatwithouteffectivecontractoroversightand

accountabilityinacontingencyenvironment,thecontractingprocessisripeforwaste,

fraud,and

abuse.

Our

preliminary

research

revealed

four

major

problems:

ineffectivecontractorbusinesssystems,

ineffectiveresolutionofauditfindings,

ineffectiveuseofDCAAresourcesinthecontingencyenvironment,and

ineffectivemanagementofsubcontractors.

TheCommissionseffortstodatehavebeenlimitedtoevaluatingDoDcontractor

oversightactivitiesbasedprimarilyondataobtainedfromDCAA,DCMA,andthe

manyauditspreviouslypublished.WehavemetwithrepresentativesfromDCAAand

DCMAduring

office

calls

in

the

United

States,

Iraq,

and

Afghanistan.

Over

the

coming

months,theCommissionwillexpanditseffortsbyconductingadditionalvisitstothe

29DepartmentofState,ReportOfTheSecretaryofStatesPanelonPersonalProtectiveSecurity

ServicesinIraq,October,2007;U.S.Army,ReportOfTheCommissionOnArmyAcquisitionAnd

ProgramManagementInExpeditionaryOperations,UrgentReformRequired:Army

ExpeditionaryContracting,October31,2007.


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27

agencies,variousbuyingcommands,andotherorganizationstoassesstheadequacyof

actualoversightactivity.

IneffectiveContractorBusinessSystems

IncreasetheLikelihoodofWaste

Basedonananalysisofdatacoveringsome$43billioninhighvalueawardsto15

contractorsinIraqandAfghanistan,welearnedthatroughly30percentofcontractor

businesssystemsauditedbytheDefenseContractAuditAgencycontainedsignificant

deficiencies.Thesameanalysisrevealsthatcontractorbillingsystemsandestimating

systemsweredeficientatevengreaterrates50and42percent,respectively.Thetable

belowreflectstheadequacyofseveralcategoriesofcontractorbusinesssystemsandthe

timelinessofDCAAsauditsofthesystems.

Status of Contractor Business System Audits for 15 of the Largest ContractorsIs System Adequate? Audit Completed

Within Cycle?

DCAA Audit

Completed Timely?

Business

SystemsYes No %No Yes No %No Yes No %No

Accounting 9 3 25 9 6 40 12 2 14Billing 6 6 50 12 3 20 10 3 23Budget 10 1 9 8 7 47 9 2 18

Compensation 5 5 50 9 6 40 7 4 36EDP 11 2 15 10 5 33 12 1 8

Estimating 7 5 42 8 6 43 8 4 33Indirect/ODC 7 3 30 10 5 33 6 4 40

Labor 8 3 27 10 5 33 8 4 33Purchasing 6 3 33 7 8 53 7 2 22

TOTALS 69 31 31 83 51 38 79 26 25

TableNotes:

1.

DCAA

generally

performs

audits

of

10

contractor

business

systems;

however,

our

analysis

was

limitedtotheninebusinesssystemsidentified.

2.Forsomecontractorsaspecificbusinesssystemauditmaynothavebeencompletedormaybe

inprocess.Consequently,theYes/Novaluesassociatedwitheachsystemmaynotequateto15,

thenumberofcontractorssurveyed.

Significantdeficienciesincontractorsystemsincreasethelikelihoodthatcontractorswill

provideproposalestimatesthatincludeunallowablecostsorthattheywillrequest

reimbursementofcontractcoststowhichtheyarenotentitledorwhichtheycannot

support.Throughfiscalyear2008,theDCAAhastakenexceptiontoover$13billionin

questionedandunsupportedcostsassociatedwiththeeffortsinIraqandAfghanistan.30

A

significant

portion

of

these

questioned

and

unsupported

costs

reflect

problems

with

contractorsinconsistentandineffectivebusinessmanagementsystems.Eventhough

manycostquestionsareresolvedwithadditionalresearchanddocumentation,the

reworkrepresentstimeandeffortthatcouldbeappliedelsewhereifbusinesssystems

wereuptostandard.

30TestimonyofAprilStephenson,Director,DefenseContractAuditAgency,beforethe

CommissiononWartimeContracting,May4,2009,4.


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ProvisionsintheFederalAcquisitionRegulationandDefenseFederalAcquisition

RegulationSupplementrequirecontractorstomaintaineffectiveandreliablebusiness

systemsasaconditionofcontractawardand/orcostbasedcontractfinancing.31

Adequatebusinesssystemshelptoensurecompliancewithcontracttermsand

conditionsandapplicablelawsandregulations.

TheenvironmentinIraqandAfghanistanhasbeenandcontinuestobesusceptibleto

waste,fraud,andabusebecausecontractorsgenerallydonothaveaccountingand

businesssystemsandsystemsofinternalcontrolsthatweredesignedforthemagnitude

ofeffortrequiredbythecontingencycontractsorfortheconditionsinwhichtheywere

expectedtooperate.32

BusinessSystemsAuditsAreNotConductedinaTimelyManner

Asreflectedinthetableabove,theCommissionspreliminaryanalysisrevealedthat

roughly40percentofDCAAsauditsofbusinesssystemshavenotbeenperformed

withinprescribedtimeframes.DCAApolicyrequirescontractorbusinesssystems(for

example,accounting,billing,estimating,labor,andpurchasingsystems)thathavea

significantimpactoncontractcostsbeauditedatleastonceeveryfouryears.33In

addition,roughly25percentofthemostrecentlycompletedbusinesssystemauditstook

longerthanoneyeartocomplete,withseveralauditsstillinprocessafterseveralyears.

Lackoftimelyauditsincreasesthelikelihoodthatsignificantdeficienciesarenotvisible

tocontractingofficersastheymakecontractawardandothercontractingdecisions.

Lackoftimelyauditsalsocreatesanenvironmentwherecontractorscanbeslowto

implementimprovementstotheirbusinesssystems.Withouttheproperincentives,

somecontractorsmaynotimproveinternalcontrolprocessestoaccommodatethevolumeofcontingencycontractingactivityandsupporttheconditionsinwhichtheyare

operating.

ContractAuditorsAreNotEmployedEffectivelyInTheater

Underordinarycircumstances,contractingofficersrequestauditorassistancein

evaluatingprospectivecontractorsystemstoassesswhethertheyareadequateforthe

typeofcontractcontemplated;thisiscommonlyreferredtoasacontractorpreaward

survey.Auditorsmaybeaskedtoexaminecontractorproposalstoensurethat

estimatedcostsarereasonable,andtoadviseontheproposalsadequacyasabasisfor

negotiatingacontractprice.Onflexiblypricedcontractscontractsthatallowreimbursementforactualcostsincurredauditorsoftenprovidecontinuingaudit

surveillanceduringperformancetohelpcontractingofficersensurethatactualcosts

31SeeFARsubparts16.3013and32.5036,andDefenseFederalAcquisitionRegulation

Supplement(DFARS)subpart242.7501.32TestimonyofAprilStephenson,33.33DefenseContractAuditManual,subsection5103.1(a).


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29

incurredareallowableunderthetermsofthecontract.Theabsenceofcontinuingaudit

surveillanceathighrisk,remotelocationsisexacerbatedbyDCAAslimitedtravelto

theselocations.Thisisaseriousissuebecausehundredsofmillionsofdollarsare

incurredandbilledoncosttypecontracts,especiallyLOGCAPandconstructionwork.

Despitethehighvalueofsuchauditservicesforcontingencycontractsespecially

contractswithforeignnationalcompanieswhoseaccountingsystemsandpricing

techniquesoftendifferfromthoseofU.S.companiescontractingofficershavenot

madeeffectiveuseofDCAAresourcesinIraqandAfghanistan.

Withoutpreawardaudits,theriskgrowsthatcontractswillbeawardedto

unqualifiedbiddersandthatcontractpricesmaybeunreasonablyhigh.

Limitedauditoroversightofcontractorpracticesduringcontractperformancealso

increasestheriskofexcessivechargesagainstflexiblypricedcontracts.

ContractAuditFunctionsRequireAdditionalEmphasis

Today,theDCAAandtheDefenseContractManagementAgencyprovidecontract

audit,contractoversight,andcontractadministrationservicesforDoD,usinguniform

policiesandprocedures.WhileDCAAwasestablishedprimarilytosupportallofDoD

anditscontractingefforts,theagencyalsoprovidessimilarservicestononDoDentities

includingtheU.S.AgencyforInternationalDevelopmentandtheDepartmentofState

onacostreimbursablebasis.DCMAisresponsibleforapplyingauniformsetof

oversightprocedurestoensurethatDoDcontractorsareheldaccountableforfailureto

complywithlaws,regulations,andcontracttermsandconditions.

AuditcoverageforcontractorsperformingintheaterisprovidedbyDCAAsIraq

BranchOffice.MuchofDCAAsworkiscommonlyreferredtoaseitherselfinitiated

or discretionary. SelfinitiatedauditservicesmaybeperformedbytheIraqBranch

Office,attherequestofastatesideauditor.Examplesofselfinitiatedauditservices

includeauditsofcontractorbusinesssystems,auditsofCostAccountingStandards

compliance,andauditsofoperationaleconomyandefficiency.Discretionaryauditsare

generallyplannedbytheDCAAstatesideofficeauditors,asopposedtobeingrequested

bythecontractingofficer.

UnlikethesituationinIraqandAfghanistan,DCAAstatesideauditorsaregenerally

locatedclosetowherecontractorsmaintaintheirbooksandrecords.Themostcommon

typeofauditserviceprovidedbyDCAAatthecontractsplaceofperformanceisknown

asadirectlaborfloorcheck.Thesefloorchecksaredesignedtodeterminewhether

contractoremployeesarephysicallypresent,areperformingtherequiredwork,andare

chargingtothepropercontractsandprojects.OtherobservationsthatDCAAauditors

makeattheplaceofperformancearedesignedtovalidatechargesfordirectmaterials


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acquiredandconsumedinsupportofcontractorsdeliveryofservicesorsupplies.

Severalaspectsofcontracteconomyandefficiency(operations)auditspresentaunique

valuetocontractcostcontrol.Contractingofficersmustremainespeciallyalerttothe

prospectthatbecausecontingencycontractingproceduresallowforexceptionsto

normalcompetitivepricingrequirements,contractorsmayincurunreasonableoperating

costsinacontingencyenvironment.Also,thefastpaceofoperationsoftenreducesthe

governmentsabilitytoeffectivelycontrolcosts.Auditsofcontractoroperations

conductedbyDCAAauditorsareaparticularlyhelpfulmethodformaintainingcost

controlonhighdollar,complex,noncompetitivelyawarded,and/orcostreimbursable

contracts.

DepartmentofDefenseJointPublication(JP)410establishesdoctrineonplanning,

assessing,andconductingoperationalcontractsupportintegrationandcontractor

managementfunctionsinsupportofjointcontingencyoperations.34JP410emphasizes

thatcommandersmustaddressthemethodofcostcontrolintheiroperationsplans.WithrespecttoDCAA,thepublicationstatesthatonsiteauditorsareresponsibleto

identifypracticesneedingimprovementonarealtimebasisandrecommendcost

avoidanceopportunitiestoselectedcontingencycontracts.JP410goesontosaythat

thesustainmentphaseofacontingencyoperationshouldbemarkedbyafocusoncost

reductionandestablishingbusinessefficiencies.

TheIraqBranchOfficehasinsomecasesmadeimportantcostsavingdiscoverieswhile

inspectingcontractworksites.Forexample,acontractorsubmittedquestionable

expendituresforhousingunitsknownaslivingcontainersandjustifiedthecostsby

claimingthe

containers

had

special

features

and

enhancements.

DCAA

auditors

inspectedcontainersatanumberoflocationsinIraqanddeterminedtheseparticular

livingcontainersdidnothaveenhancementsandthuswereunreasonablypriced.Thisis

oneexampleoftheobviousvalueofemployingauditorsatthecontractplaceof

performance.Nevertheless,DCAApoliciesandpracticesinthecontingencyoperating

areahavetendedtoinhibittravelbyauditorsoutsidetheirbaseofassignmentforsafety

concerns.

Atthesametime,DCAAisnotaggressivelyself

initiatingaudits,especiallyonsiteauditsof

contractoroperations.

The

DCAA

Director

testified

beforetheCommissionthattheagencywillgive

greaterprioritytoconductingonsiteeconomyand

efficiency(operations)audits,andgenerallyagreed

thatthereareopportunitiesforadditionalcostavoidance.Atthatsamehearing,DCMA

DirectorWilliamscommittedthesupportofDCMAinassistingDCAAasappropriate

34JointPublication410,OperationalContractSupport,October17,2008.

Contingency-acquisition

officials do not take fulladvantage of availableaudit services.


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31

withthetechnicalaspectsofsuchreviews.35TheCommissionwillcontinuetofollowthe

agenciesprogressonthisinitiativeandanalyzeanyactionstaken.TheCommission

believesthatthisactionisacriticalandlargelymissingcomponenttopreventwaste,

fraud,andabuse.

ContractingOfficials

Make

Ineffective

Use

of

Contract

Withhold

Provisions

TheDefenseFederalAcquisitionRegulationSupplementrequiresthecontractingofficer

toconsiderwithholdingapercentageoffuturepaymentswhenitisdeterminedthat

contractorbusinesssystemscontainsignificantdeficiencies.36Thecontractingofficer

wouldgenerallyimplementwithholdsagainstDefenseDepartmentcontractsafter

receivingaDCAAauditreportwithfindingsofsignificantbusinesssystemdeficiencies.

InherMay2009testimony,theDCAADirectorstatedthatauditorrecommended

withholdswouldnormallybeintherangeof10percent;however,indicationsarethat

DCAAfieldauditorshavebeenreluctanttomakewithholdrecommendations.Given

thelackofsuchrecommendations,contractingofficersoftendonotusethewithhold

provisionorholdcontractorsaccountablefortheadequacyoftheirbusinesssystems.

Untilrecently,DCAAhadnottakenactiontorecommendwithholdsonfuturecontractbillingsatthesefivecontractorlocations.Withouttheuseofwithholds,contractorshave

littleincentivetoadequatelyaddressthedeficiencies.DCAArecognizedthereluctance

ofitsfieldpersonneltorecommendwithholdsandrecentlyissuedguidancereaffirming

agencypolicytodosowhenappropriate.37Asaresult,DCAAfieldpersonnelrecently

recommendedwithholdsatfourofthefivecontractorlocationswherecompletedaudits

determinedthesubjectbusinesssystemtobeinadequateasaresultofsignificant

deficiencies.

TheCommissionbelievesthattheuseofwithholdsassociatedwithfuturebillingsserves

asapowerfulincentiveforcontractorstoimprovetheirbusinesssystems.Forexample,inacaseinvolvingacontractorwhoprovidedtranslatorsandinterpretersinIraqand

35CommissiononWartimeContracting,recordoforaltestimony,May4,2009.36SeeDFARSsubpart242.7502.37DefenseContractAuditAgency,MemorandumforRegionalDirectors08PAS043(R),Audit

GuidanceonSignificantDeficiencies/MaterialWeaknessesandAuditOpinionsonInternal

ControlSystems,December19,2008.

Ourindependentanalysisoffiveofthe15highvaluecontractorsrevealedthat24of

39businesssystemsweredeterminedbyDCAAtocontainsignificantdeficiencies.

Thesefivecontractorsaccountforover$34billionincostreimbursablecontract

awards.


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Afghanistan,DCAAfoundthecompanyslaborsysteminadequateandrecommended

thatthecontractingofficerimplementawithholdagainstfuturebillings.Thecontracting

officeragreedandroughly$43million(representingapproximately10percentoflabor

costs)waswithheldfromtheFebruary2004throughJanuary2006billings.As

deficiencieswereaddressed,withholdswereincrementallyreleased,andbySeptember

2007,thecontractorhadcorrectedallsignificantdeficienciesandreceivedallthefundswithheld.

Withoutenforcementofstrongpenalties,contractorssimplydonothaveanincentiveto

devotetheresourcesnecessarytoimprovetheirsystemsandoftendonotdoso.For

example,ouranalysisrevealedthatDCAAhascitedcertaincontractorsforthesame

systemdeficiencyoverseveralauditcycles,demonstratingthatthecontractorhasnot

devotedthenecessaryresourcestoimplementcorrectiveactionsasgenerallypromised.

InhertestimonybeforetheCommission,theDCAADirectoremphasizedtheagencys

commitmenttoensuringcontractorsareheldaccountableformaintainingadequatebusinesssystemsbyrecommendingthatspecificpercentagesofinterimpaymentsbe

withheldwhereappropriate.38TheCommissionrecognizesthatDCAAservesan

advisoryroleanditisgenerallytheDefenseContractManagementAgencys

administrativecontractingofficersthathavetheauthoritytoimplementDCAA

recommendations.Thisisvitallyimportantinresolvingreportedsystemdeficienciesto

effectcontractorimprovement.

TheCommissionbelievesgreaterconsiderationofDCAArecommendationsand

documentationofnegotiationresultsbyDCMAisrequired.

BoththeDCAAandDCMAdirectorsagreedtoincreasetheirpersonalcoordination

overthecomingmonths.TheCommissionwillmonitorDCAAsimplementationofits

policyandDCMAsactionstoensurethatcontractorsoperatinginIraqandAfghanistan

areheldaccountableformaintainingeffectiveandreliablebusinesssystems.

ManyContractAuditFindingsandRecommendations

AreNotProperlyResolved

TheCommissionanalyzedtheDepartmentofDefenseInspectorGenerals(DoDIG)

recentreportoncontractauditfollowupactionswithrespecttoIraqreconstruction

contractsadministeredbytheDefenseContractManagementAgency.39Inseveralcases,

DoDIGfoundthatauditfindingshadnotbeenproperlydispositionedinaccordance

38TestimonyofAprilStephenson,33.39DoDIGAuditReportD20096004,DefenseContractManagementAgencyActionsonAudits

ofCostAccountingStandardsandInternalControlSystemsatDoDContractorsInvolvedinIraq

ReconstructionActivities,April8,2009.


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33

withDoDInstruction7640.02.40Theyhavehadnotbeenpromptlyprocessed,adequately

justifiedanddocumented,and/oradequatelycoordinatedwiththeDefenseContract

AuditAgency.TwoofthethreeDCMAofficesreviewedbytheDoDIGhadnot

implementedadequatecontrolstoensureaneffectivecontractauditfollowupfunction.

AlthoughtheInspectorGeneralsreportwaslimitedtospecifictypesofDCAAaudit

findingscoveredbytheexistingInstruction,theCommissionhasobservedthat

contractingofficersdonotalwaysadequatelyjustifyanddocumentdeparturesfrom

auditorfindingsregardlessofwhethertheyarecoveredbytheInstruction.Likethe

DoDIG,theCommissionobservedthatcontractingofficersareoftennotresolving

DCAAauditfindingsofdeficientcontractorbusinesssystems,whicharecoveredbythe

Instruction.Wealsolearnedthatcontractingofficersarenotadequatelydocumenting

departuresfromauditrecommendationsregardingquestionablecostsoncontractor

proposalestimates,whicharenotcoveredbytheexistingInstruction.TheInstruction

apparentlyhaslittleeffectontheprioritycontractingofficialsplaceonresolvingaudit

findingsandrecommendations.

Acomparisonoftotalquestionedcoststoquestionedcostssustainedorupheldduring

negotiationsisagoodindicatorofcontractingofficersacceptanceofDCAA

recommendations.InherMay4testimony,DCAADirectorStephensonsaidthatabout

65percentoftheamountsquestionedbyDCAAissustainedbycontractingofficers.A

briefingbyDCAAtotheCommission,however,indicatedthatlessthan40percent($1.3

billionof$3.4billion)ofDCAAquestionedamountsrelatedtothecontingencyeffortsin

IraqandAfghanistanhavebeensustainedthroughAugust2008.41ApplyingtheDCAA

averagecostsustainmentratetothequestionedcontingencyrelatedcontractcosts

wouldhave

pro

june 2009 commission on wartime contracting interim report to congress

Documents