Pentagon Acquisition Mismanagement Leads to Questionable Contract Awards

Pentagon Acquisition Mismanagement Leads to Questionable Contract Awards
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I have been writing about the problems with Iraq and Afghanistan contractor KBR since 2006 but the beat goes on. My co-author, Robert Bauman (Betraying Our Troops: the destructive results of privatizing war), has written an explanation of why we keep giving the contracts to a company that overcharges while threatening our troops. We can't afford to keep exporting the Iraq fraud and waste to Afghanistan as we move our troops. The entrenched DOD has to change. Let's hope that true DOD reform's time has come. Here is his blog:

Recently, New Hampshire Congresswoman, Rep. Carol Shea-Porter complained that the Pentagon had failed to justify awarding a new $35 million contract to build a convoy support center in southern Iraq that includes the construction of an electrical power grid. The contract was awarded to KBR, the largest contractor in Iraq. The contract was awarded in spite of recent revelations that KBR was responsible for shoddy electrical work in Iraq that led to the deaths of at least three soldiers and causing electrical shocks to hundreds more. There has been a loss of confidence among some defense officials on KBR's ability to do electrical work. Also, many news stories and congressional hearing testimony have blamed KBR for other miscues that have affected our troops along with overcharging the Pentagon for its services.

Given the dismal public record of KBR's performance in Iraq, it would be expected that any contractor that actually performed as poorly would not be given another contract to do the same work. But that is not how the strange world of DOD procurement actions works. When trying to explain why KBR, and other contractors that do not perform well are not put on the Excluded Parties List System, but, instead, get new contracts, one has to throw all logic out the window.

I posed this problem to a source who was a high level procurement official in the Pentagon and is very knowledgeable on the subject. He explained it this way: The primary problem of putting a contractor on the Excluded Parties List System is a lack of a good system for accumulating past performance data and having it available in award decisions. In KBR's case, the performance record generated by the Award Fee Board process played a key role in awarding new contracts to KBR. The primary role of the Award Fee Board is to grade the contractor on performance leading to Award Fees paid to the contractor over and above their normal fees. The performance record accumulated for the award fee also establishes a record for additional contract awards.

Award Fee Boards are "managed" by high-level Pentagon procurement officials and are subject to significant influence and undue pressure. The "managing" of the Board for KBR resulted in an average rating of about 92-94% and made it impossible for evaluators to give them anything lower than the highest evaluation. This record was the key part of KBR's past performance submission that led to that contractor's award for LOGCAP IV and other awards such as the new $35 million contract in Iraq. So, despite the continual media stories and congressional hearings on shoddy work and overcharging, the "official record" reflected good performance. These exposes did not count, only the Award Fee Board's record.

Of course, that raises the question of why Award Fee Board evaluators give KBR such high performance marks when whistleblowers are coming out of the woodwork talking about KBR's poor performance. There are several reasons for this. First, there is the problem of high level Army officials being to close and often even chummy to contractors, such as KBR, and the contractor knows how to satisfy the requirements that base commanders and evaluators consider important. On top of that, the government personnel who oversee these contractors often rely on the same contractors to give them a job after they retire from government service.
Second, considerable peer pressure is imposed on evaluators to give the contractor high marks. Giving the contractor low marks would incur the wrath of government contract superiors who want to maintain a good, close relationship with KBR. In addition, the contractor would make life difficult for an evaluator who dares to give it low marks affecting his or her career.

Third, DOD acquisition personnel engage in procurement practices that do not hold contractors accountable. In December 2005, GAO issued a report critical of DOD paying billions in award and incentive fees regardless of acquisition outcomes. GAO found that DOD's practices "included evaluating contractors on award-fee criteria not directly related to key acquisition outcomes."

And fourth, DOD does not have enough oversight personnel deployed to Iraq and Afghanistan to evaluate contractor performance. GAO has reported that insufficient numbers of contract oversight personnel at deployed locations "limits its ability to obtain reasonable assurance that contractors are meeting contract requirement efficiently and effectively." In its most recent report, GAO found that DOD "continues to face challenges in employing sound practices when contracting and managing service contracts."

Mismanagement, political influence, insufficient acquisition personnel, and poor documentation result in evaluations and ratings for contractors, like KBR, that often do not reflect the reality of performance outcomes and almost guarantee the contractor will receive follow-on contracts that can be justified by the "official record."

To truly change this system would require a complete change in DOD procurement culture and a major growth in acquisition personnel. Changing the culture will not be an easy task since it has been ingrained in the system for decades, but it has to be done to restore some sense of rationality and accountability in DOD contracting. Congress needs to understand this culture in order to enact any changes. The White House has set down a marker to the DOD that wasteful and fraudulent business as usual will not be tolerated. Time will tell if either branch of the government can truly tame the ingrained DOD bureaucracy. Investigating and auditing KBR to get a truthful record on their performance would be a good way to start.

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