KBR's Giant New Contract

KBR's Giant New Contract
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Just days after Stewart Bowen, the Special Inspector General released a new report which explains how KBR has been gouging taxpayers from inside the Green Zone, the Army announced that the company (which was split off from Halliburton this year) will divvy up another $150 billion with two other contractors -- Fluor and Dyncorp -- over the next ten years.

The results of Bowen's audit come as no surprise, because they track the kinds of abuses that whistleblowers and others working for the company and the military have said are quite common. For example, one of Bowen's conclusions is that the company lacks adequate inventory controls, and hasn't kept good track of the fuel it is disbursing.

That problem should remind everyone of the situation that ultimately led the military to cancel a gasoline contract years ago.

In a report on that earlier scam, GAO report found "a pattern of contractor management problems" at KBR, including ineffective planning, a poor materials requisition system and inadequate supervision of subcontractors.

At one point investigators working for Rep. Henry Waxman reported that KBR had charged an extra $165 million to transport the gasoline into Iraq. The situation caused an embarassed Pentagon's Defense Energy Support Center (DESC) to stop using KBR and take responsibility for its own fuel supply in April 2004. (A year after it lost the contract, KBR reportedly attempted to disrupt fuel deliveries by other subcontractors.)

Now, three years later, KBR seems to be up to its old tricks. The "inadequate controls" over the gas inventory provide another opportunity to cook the books and bilk the taxpayers. All from the comfort of the Green Zone.

And who was going to catch them if Bowen didn't conduct the audit?

In its 2004 report, GAO criticized military officials for failing to properly oversee Halliburton's work. GAO reported interviewing military officials who "told us that they knew nothing about LOGCAP before they deployed and had received no training regarding their roles and responsibilities."

But now that they are promising KBR and the other companies another ten years and up to $150 billion worth of contract work, the Army says hold on, it has found a solution: To beef up its ability to provide adequate oversight, it hired another contractor.

I.e., because it isn't competent enough to oversee contractors who are being hired to do the work it used to do (that's the whole point of the logistics contract to begin with), the Army has decided to hire a British-American company -- SERCO -- to oversee the three logistics contractors.

If you're beginning to think there's something absurd in all this, you wouldn't be alone. But the Army has apparently anticipated your objections. In section 1.3 of the SERCO contract -- which you can find here -- it says, "It is not the intent of this contract to have the contractor perform inherently Governmental functions, or to have the contractor make discretionary decisions for the Government relating to the program or contract support," even though that's essentially what the contract does!

This new arrangement will also make worse one of the big unresolved issues identified by Rep. Waxman and Senator Byron Dorgan over the course of their years of investigations: By adding another layer of contracts, the government has made it all the more difficult for government officials themselves to oversee the actual work.

No company can be expected to provide this kind of accountability -- companies are designed to make money for themselves and their shareholders, not safeguard the taxpayers. The buck ultimately stops somewhere in the Pentagon's chain of command where, instead of overseeing the actual work (keep in mind that KBR has some 200 subcontractors working in Kuwait and Iraq) they will spend increasingly more time evaluating SERCO's work. And even then, SERCO has influence over the process. (See page 31 of SERCO's contract -- "Contractors Self-Assessment")

All of this outsourcing of government functions is part of a broader pattern that started long ago, but is now epidemic in scale, according to Waxman, who recently updated his review of federal contracting during the Bush administration.

The report -- Dollars, Not Sense: Government Contracting Under the Bush Administration -- measures the magnitude of this Wholesale outsourcing of government.

The figures are staggering:

Between 2000 and 2005, federal procurement spending rose by over 80%, no-bid and other contracts awarded without full and open competition increased by over 100%. The amount raked in by the administration's corporate cronies and other contractors rose from $203.1 billion in 2000 to $412.1 billion in 2006, a new record.

Talk about major major major major opportunities to fleece the taxpayers!

As Waxman reports, the kind of abuses witnessed in Iraq are now ubiquitous across the entire federal government: He identified 189 contracts valued at $1.1 trillion that have been plagued by waste, fraud, abuse, or mismanagement.

Which is why a new example pops up just about every day. On Thursday, for example, Robert O'Harrow reported that a $2 million no-bid contract given by DHS to Booze Allen ballooned to $124 million.

Like the LOGCAP contract (which Cheney's Pentagon first gave to KBR during the Bush I administration), this one was supposed to save us money. Yet as O'Harrow reports, it turns out that the average annual cost of a contract employee has been $250,000 -- almost twice that of a federal employee, according to an estimate recently cited by the Senate Select Committee on Intelligence.

The conclusion to be drawn is that Bush and Cheney are rapidy transforming the entire government into a turnkey operation run by their corporate cronies. And ten-year contracts like the LOGCAP one given to KBR will ensure that they don't run out during the next two terms (i.e. last until Jeb arrives?).

The outsourcing of inherently governmental work in recent years has reached an extreme level. And whether it's intelligence operations, running security and background checks, providing contract oversight, processing of FOIA requests, even counting our votes -- the corporatization has gone to ridiculous extremes.

Although doing so may not illegal, per se, it's one of those huge crimes that is so pervasive that it's hard to perceive.

Remember how at the beginning of Bush's first term, someone floated a fake story about how the Clinton-ites had stolen all the W's off the keyboards?

Imagine what the story will be in January 2009. And it won't be a lie.

As their second term winds down, these guys aren't exactly busy prising loose a few keys.

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