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Fraud Close to $60 Billion in Outsourcing Wars

Thursday, 15 September 2011 09:17 By William Fisher, Prism Magazine | News Analysis

More than a quarter of a million security contractors have been deployed to Iraq and Afghanistan since 2002, and between them they have managed to “lose” at least $31 billion of the $190 billion spent on their contracts and grants, or approximately 30 per cent of taxpayer funds they received, according to a government watchdog commission.

The Commission on Wartime Contracting estimates that the U.S. contractor workforce has at times exceeded 260,000, outnumbering the deployed military.”

It charged that the $31 billion loss was “due to lack of oversight” over the private companies providing national security and support services.

The eight-member, bipartisan Commission submitted its last report to Congress this week.

The Congressionally chartered panel has held 25 hearings, participated in more than 1,000 meetings and has previously published two interim reports and five special reports to Congress.  Many of the group’s findings have indicated a lack of strict oversight in keeping track of the more than 200,000 contractor employees working in Iraq and Afghanistan.

The Commission members include: Michael Thibault and Christopher Shays, co-chairs; Clark Kent Ervin, Grant Green, Robert Henke, Katherine Schinasi, Charles Tiefer, and Dov Zakheim.

Commission Co-Chair Michael Thibault, former deputy director of the Defense Contract Audit Agency, said, “The government has known for 20 years that contractors would be a key part of any major response to large or sustained hostilities or major disasters. Yet the government was not prepared to go into Afghanistan in 2001 or Iraq in 2003 using large numbers of contractors, and is still unable to provide effective management and oversight of contract spending that will have exceeded $206 billion by the end of September. That has to change.”

The Commission recommended reform objectives including improving federal planning for use of contracts, strengthening contract management and oversight, expanding competition, improving interagency coordination, and modifying or canceling U.S.-funded projects that host nations cannot sustain.

Co-Chair Christopher Shays, a former U.S. Representative for Connecticut, said, “The Commission finds the government is over-relying on contractors.”

He added, “Some contractors have been performing tasks that only federal employees should perform, while others are doing work that is permissible but still too risky or inappropriate for contractors. And overall, there is simply too much contracting for the federal contract-management and oversight workforce to handle. From every angle, that’s over-reliance.”

The co-chairs said the biggest problem in wartime contracting is waste. Thibault said, “We have found billions of dollars of waste stemming from a variety of shortcomings, poor decision making, vague contract requirements, lack of adequately trained federal oversight people in the field, duplicative or unnecessary work, failure to revise or recompete contracts, unsustainable projects, inadequate business processes among contractors, and delayed audits.”

The Commission estimates that waste and fraud could possibly reach as much as $60 billion in Iraq and Afghanistan. The additional waste may develop if host countries cannot or will not sustain U.S.-funded projects and programs after the United States hands them over or reduces its support.

Shays said the Commission report lays blame at the doorsteps of both government and the contracting industry. “Many of the convictions and guilty pleas for bribery, kickbacks, theft, and other offenses involve federal civilians and members of the military,” he said.

“Likewise, poor performance shows up both in government and contractor operations. We’ve had soldiers injured or electrocuted because of faulty wiring in base showers, and we’ve had federal officials tolerating a far greater supply of contract labor than was needed for military-vehicle maintenance. There is plenty of blame to go around.” Shays called attention to a key paragraph in the executive summary of the Commission’s final report. It said:

“Much of the contingency-contract waste and fraud could have been avoided. Unless changes are made, continued waste and fraud will undercut the effectiveness of money spent in future operations, whether they involve hostile threats overseas or national emergencies here at home requiring military participation and interagency response.”

Before President Eisenhower warned us about the military-industrial complex, Senator Harry Truman led a special investigative committee to go after war profiteers. Two years later, Truman’s team discovered that aerospace firm Curtiss-Wright was delivering defective motors to the Air Force. While military officials denied the accusations, Truman took testimony from company employees and military officials confirming that the company was selling leaky motors to the government and covering it up with forged inspection reports.

While Truman’s subject matter was different, the need now is even greater. The country has a compelling and urgent need for a permanent, dedicated, high-level, Congressionally-chartered watchdog unit capable of ferreting out waste, fraud and abuse, not in the past tense, as the current Commission was obliged to do, but in real time.

The military-contractor complex is likely to be with us for generations. And so is the need to continually look over its shoulder to ensure that taxpayer funds are going where they’re supposed to go.

We have seen examples of the effective use of such units. Witness Stuart Bowen, the Special Inspector General for Iraq Reconstruction. Mr. Bowen is tasked with auditing and investigating the use of taxpayer funds appropriated for the Iraq reconstruction effort. Since 2004, he has produced over 350 audits and inspections, resulting in financial benefits in excess of $1.1 billion; his investigations have yielded over 50 convictions, with recoveries in excess of $150 million via forfeiture orders, fines, and seizures.

Stuart Ackerman of Wired reports that Bowen is being stonewalled by Hilary Clinton regarding State’s contractor plans after US troops largely depart. There are also a few stealthy efforts by some in Congress to scuttle his whole operation. Yet it remains in place doing its job and doing it well.

Come to think of it, Stuart Bowen would be an ideal candidate to use his Iraq experience to head a new unit providing oversight of security contractors in both Iraq and Afghanistan. But a watchdog like Bowen can only recommend. He needs the cooperation of Congress. And it’s up to Congress to act – to move aggressively against those who can be found guilty of waste, fraud and abuse.

William Fisher

William Fisher has managed economic development programs in the Middle East and in many other parts of the world for the US State Department and USAID for the past thirty years. He began his work life as a journalist for newspapers and for the Associated Press in Florida. Fisher also served in the international affairs area during the Kennedy administration. Go to The World According to Bill Fisher for more.


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Fraud Close to $60 Billion in Outsourcing Wars

Thursday, 15 September 2011 09:17 By William Fisher, Prism Magazine | News Analysis

More than a quarter of a million security contractors have been deployed to Iraq and Afghanistan since 2002, and between them they have managed to “lose” at least $31 billion of the $190 billion spent on their contracts and grants, or approximately 30 per cent of taxpayer funds they received, according to a government watchdog commission.

The Commission on Wartime Contracting estimates that the U.S. contractor workforce has at times exceeded 260,000, outnumbering the deployed military.”

It charged that the $31 billion loss was “due to lack of oversight” over the private companies providing national security and support services.

The eight-member, bipartisan Commission submitted its last report to Congress this week.

The Congressionally chartered panel has held 25 hearings, participated in more than 1,000 meetings and has previously published two interim reports and five special reports to Congress.  Many of the group’s findings have indicated a lack of strict oversight in keeping track of the more than 200,000 contractor employees working in Iraq and Afghanistan.

The Commission members include: Michael Thibault and Christopher Shays, co-chairs; Clark Kent Ervin, Grant Green, Robert Henke, Katherine Schinasi, Charles Tiefer, and Dov Zakheim.

Commission Co-Chair Michael Thibault, former deputy director of the Defense Contract Audit Agency, said, “The government has known for 20 years that contractors would be a key part of any major response to large or sustained hostilities or major disasters. Yet the government was not prepared to go into Afghanistan in 2001 or Iraq in 2003 using large numbers of contractors, and is still unable to provide effective management and oversight of contract spending that will have exceeded $206 billion by the end of September. That has to change.”

The Commission recommended reform objectives including improving federal planning for use of contracts, strengthening contract management and oversight, expanding competition, improving interagency coordination, and modifying or canceling U.S.-funded projects that host nations cannot sustain.

Co-Chair Christopher Shays, a former U.S. Representative for Connecticut, said, “The Commission finds the government is over-relying on contractors.”

He added, “Some contractors have been performing tasks that only federal employees should perform, while others are doing work that is permissible but still too risky or inappropriate for contractors. And overall, there is simply too much contracting for the federal contract-management and oversight workforce to handle. From every angle, that’s over-reliance.”

The co-chairs said the biggest problem in wartime contracting is waste. Thibault said, “We have found billions of dollars of waste stemming from a variety of shortcomings, poor decision making, vague contract requirements, lack of adequately trained federal oversight people in the field, duplicative or unnecessary work, failure to revise or recompete contracts, unsustainable projects, inadequate business processes among contractors, and delayed audits.”

The Commission estimates that waste and fraud could possibly reach as much as $60 billion in Iraq and Afghanistan. The additional waste may develop if host countries cannot or will not sustain U.S.-funded projects and programs after the United States hands them over or reduces its support.

Shays said the Commission report lays blame at the doorsteps of both government and the contracting industry. “Many of the convictions and guilty pleas for bribery, kickbacks, theft, and other offenses involve federal civilians and members of the military,” he said.

“Likewise, poor performance shows up both in government and contractor operations. We’ve had soldiers injured or electrocuted because of faulty wiring in base showers, and we’ve had federal officials tolerating a far greater supply of contract labor than was needed for military-vehicle maintenance. There is plenty of blame to go around.” Shays called attention to a key paragraph in the executive summary of the Commission’s final report. It said:

“Much of the contingency-contract waste and fraud could have been avoided. Unless changes are made, continued waste and fraud will undercut the effectiveness of money spent in future operations, whether they involve hostile threats overseas or national emergencies here at home requiring military participation and interagency response.”

Before President Eisenhower warned us about the military-industrial complex, Senator Harry Truman led a special investigative committee to go after war profiteers. Two years later, Truman’s team discovered that aerospace firm Curtiss-Wright was delivering defective motors to the Air Force. While military officials denied the accusations, Truman took testimony from company employees and military officials confirming that the company was selling leaky motors to the government and covering it up with forged inspection reports.

While Truman’s subject matter was different, the need now is even greater. The country has a compelling and urgent need for a permanent, dedicated, high-level, Congressionally-chartered watchdog unit capable of ferreting out waste, fraud and abuse, not in the past tense, as the current Commission was obliged to do, but in real time.

The military-contractor complex is likely to be with us for generations. And so is the need to continually look over its shoulder to ensure that taxpayer funds are going where they’re supposed to go.

We have seen examples of the effective use of such units. Witness Stuart Bowen, the Special Inspector General for Iraq Reconstruction. Mr. Bowen is tasked with auditing and investigating the use of taxpayer funds appropriated for the Iraq reconstruction effort. Since 2004, he has produced over 350 audits and inspections, resulting in financial benefits in excess of $1.1 billion; his investigations have yielded over 50 convictions, with recoveries in excess of $150 million via forfeiture orders, fines, and seizures.

Stuart Ackerman of Wired reports that Bowen is being stonewalled by Hilary Clinton regarding State’s contractor plans after US troops largely depart. There are also a few stealthy efforts by some in Congress to scuttle his whole operation. Yet it remains in place doing its job and doing it well.

Come to think of it, Stuart Bowen would be an ideal candidate to use his Iraq experience to head a new unit providing oversight of security contractors in both Iraq and Afghanistan. But a watchdog like Bowen can only recommend. He needs the cooperation of Congress. And it’s up to Congress to act – to move aggressively against those who can be found guilty of waste, fraud and abuse.

William Fisher

William Fisher has managed economic development programs in the Middle East and in many other parts of the world for the US State Department and USAID for the past thirty years. He began his work life as a journalist for newspapers and for the Associated Press in Florida. Fisher also served in the international affairs area during the Kennedy administration. Go to The World According to Bill Fisher for more.


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