The Good and the Bad in Using PMC in the Iraq Drawdown

Two reports issued this past week by the Defense Department's Inspector General (IG) offers good and bad news regarding private military contractors (PMC).

LOGCAP is, of course, the mother of all logistics contract. Every base constructed, every meal served, ever piece of laundry cleaned, and every drop of fuel delivered is due to LOGCAP. And most of what the U.S. is withdrawing from Iraq is being done through LOGCAP. That process will continue through December 2011.

The IG report addressed the accountability and disposition of Logistics Civil Augmentation Program (LOGCAP) Government furnished property (GFP) in Iraq. The IG determined whether DOD had adequate controls over LOGCAP GFP as it draws down forces from Iraq. As of September 30, 2009, there were 572,928 GFP items in the LOGCAP property book in Iraq, valued at about $2.9 billion.

The good news is that, "Generally, DOD had adequate accountability over LOGCAP GFP. We estimated that the LOGCAP contractor could account for 443,918 of the 458,408 GFP items (96.8 percent) in our sample frame."

Of course, that is not to say that the contractor - that would be KBR if you did not know - did everything perfectly. The IG report also noted:

We also identified systemic issues concerning the management and disposition of GFP items located at the LOGCAP contractor's Fair, Wear, and Tear yards. This occurred because the Defense Contract Management Agency did not require the contractor to include Fair, Wear, and Tear yard management processes or care and disposition instructions specific to export-controlled GFP (such as ballistic plates and ballistic blankets) in its property control procedures.

Still, they did reasonably well. And considering we're talking about KBR, that is almost enough for atheists to declare their belief in God.

But the other report showed there are still problems with using PMC. In the report DOD Needs to Improve Management and Oversight of Operations at the Theater Retrograde-Camp Arifjan, Kuwait the IG conducted an audit in response to a request to focus oversight on U.S.-funded assets to ensure they are properly accounted for and there is a process for assets' proper transfer, reset, or disposal. As of May 2009, DOD estimated that the drawdown from Iraq would include the withdrawal of approximately 3.4 million pieces of equipment. The Theater Retrograde at Camp Arifjan, Kuwait, is responsible for receiving and processing containers of equipment and ensuring the equipment's proper disposition.

The IG found that DOD officials did not effectively manage Theater Retrograde operations. Specifically, Army and Defense Contract Management Agency (DCMA) officials did not ensure that contractor personnel complied with contract requirements and applicable regulations when processing materiel at the Theater Retrograde. Army and DCMA officials also did not ensure the contractor had sufficient staffing at the Theater Redistribution Center to meet container processing requirements.

Now, that sounds like a problem of the regular military and not the PMC and that is true.

The background is that in 1999, the U.S. Army Atlanta Contracting Center awarded Combat Support Associates the Combat Support Services Contract-Kuwait, a $503 million cost-plus-award fee contract that encompasses several operations, one of which is the Theater Retrograde. The contract consists of one base year, nine option years, and two 6-month extensions extending contract performance through September 2010. The total contract value through March 2010 was more than $3 billion. Throughout the life of the contract, multiple organizations were responsible for contract management, administration, and oversight. Currently, contract management is assigned to the U.S. Army Contracting Command, Rock Island Contracting Center; contract administration is delegated to the Defense Contract Management Agency (DCMA); and day-to-day contract oversight I delegated by the 1st Theater Sustainment Command to an Army sustainment brigade.

The IG found that

DOD officials did not effectively manage Theater Retrograde operations for the reutilization and disposition of equipment at Camp Arifjan. Specifically, Army and DCMA officials did not ensure that contractor personnel complied with contract requirements and applicable Federal, DOD, and Army regulations when processing materiel at the Theater Retrograde. For example, contractor personnel did not:

comply with security requirements to prohibit foreign nationals from unauthorized access to classified and potentially controlled materiel,

store hazardous materiel properly or have the required equipment to safely respond to a hazardous spill,

conduct adequate research to identify serviceable nonstandard equipment for reutilization, and

assign correct national stock numbers to serviceable materiel.

This occurred because Army officials did not develop and implement effective policies and procedures for processing materiel at the Theater Retrograde. In addition, Army and DCMA officials did not resolve all deficiencies identified during contractor performance reviews and did not perform administrative functions in accordance with their appointment letters and the Federal Acquisition Regulation. As a result, DOD remains at an increased risk that a foreign country or adversary could gain a military or economic advantage over the United States, which could impact national security. In addition, officials will continue to be exposed to increased safety risks and serviceable materiel will not be effectively reutilized, but instead may be potentially destroyed or sold without direct monetary benefit to the Government.

The IG report also found that "Audit reports and weekly and monthly performance reviews showed that Army and DCMA officials did not hold the contractor accountable for not complying with the contract staffing level and specific performance requirements."

What this indicates is that a PMC is only as good as the federal acquisition workforce supervising it. If they don't provide proper guidance and oversight problems are inevitable. In other words a chain is only as strong as its weakest link and according to the IG the some DOD officials are looking fairly underwhelming.