Military Logistics The 37 Billion Non Competition
Post on: 2011-09-05 By: admin
When U.S. forces moved into Afghanistan in 2001, there was little, if any, infrastructure to support and house U.S. troops. The military needed someone to do everything from quartering troops to rebuilding airfields. The solution was a contract called the Logistics Civil Augmentation Program, or LogCap, a type of umbrella contract the Army had been using to support its military bases overseas.
In late 2001, the Army, after a competition, awarded LogCap III, the newest (hence, “III”) comprehensive base-services contract, to KBR, which already had substantial experience with such work. Under LogCap III, the Houston engineering firm, once a subsidiary of Halliburton, began providing base services in Afghanistan, everything from showers to dining halls.
Strictly speaking, LogCap isn’t a sole-source contract. But it can result in a wide and diverse array of work being awarded without subsequent competition. “It’s the government’s way of saying ‘We don’t know what we want, and we don’t know how much it costs,’” said Laura Peterson, a senior policy analyst with Taxpayers for Common Sense, awatchdog group. “Instead they say, ‘We’ll put you on retainer and tell you later what we want and when we want it, and you just bill us.’ Youbecome the government’s concierge, and it’s like a gigantic monopoly.”
That’s the way LogCap III operated for almost a decade. And while KBR had to compete with other companies to win the umbrella contract in December 2001, it didn’t have to compete for any of the subsequent work, which totaled over $37 billion by the end of July 2011.
As an ongoing series by the Center for Public Integrity shows, Pentagon dollars flowing into no-bid contracting has exploded over the past 10 years of war. But KBR’s LogCap contract shows that sole-source contracts aren’t thePentagon’s only way of limiting competition. There’s also umbrella-type contracts, like LogCap, that allow the government to buy unspecified goods and services over long periods of time.
On paper, LogCap is competitive, because it was initially open for multiple bids. So when the Pentagon says it competitively awards more than 60 percent of its contracting dollars, that includes money spent on LogCap.
But contracts like LogCap likely hide a much worse picture, according to Charles Tiefer, a commissioner on the congressionally mandated Wartime Contracting Commission. KBR did win the initial contract competitively, he said, but “for the next 10 years, there were task orders without further competition that went to KBR.”
When the U.S. moved into Iraq in 2003, KBR came along, too. It eventually provided modern dining facilities for military and State Department personnel, featuring everything from made-to-order Caesar salads to adessert station featuring more than a dozen types of pie and cakes.
Though KBR was limited to charging $20 per per person, a State Department inspector general investigation in 2010 found government personnel were being encouraged to scan their IDs at meals and snacks as many times as possible to justify the expenses. A notice in an embassy newsletter read, “more scans = more goodies” — which, the inspector general found, was hiding the true costs of meals.“One person scanned his card 25 times in two days,” the report states.
A later Defense Contract Audit Agency report confirmed those findings, saying that headcount inflation could be as high as 36 percent. In other words, for every 100 people eating meals, 136 people were being counted.
As LogCap expanded in Iraq, adding more and more work, KBR came under increasing scrutiny, particularly when the Army tried to extend the contract into new areas. Pentagon audits and government reports accusedKBR of overbilling.
At one Wartime Contracting Commission hearing, April Stephenson, then head of the Defense Contract Audit Agency,confirmed that the LogCap III contract had generated $553 million in questionable billing and 32 fraud referrals for investigation. “I have tosay in the history of DCAA,” Stephenson testified, “I do not think we are aware of a program, a contract or a contractor that has had this number of suspensions or referrals.”
Somecriminal charges have already resulted regarding the LogCap contract, including a former employee who pleaded guilty to receiving kickbacks ona subcontract to a Kuwaiti company.
The U.S. government is also now in the middle of a $100 million lawsuit against KBR, alleging breach of contract and false claims related to providing private security under the LogCap contract. A federal judge in August rejected the company’s bid to have the suit thrown out.
Facing mounting criticism of the LogCap contract, the Army eventually held a new competition, and in 2007 awarded contracts to three companies — KBR, DynCorp and Fluor Corporation — under what was called LogCap IV. Unlike the previous LogCap III, the three companies under LogCap IVwould compete for specific work, creating an incentive for lower prices and better services, and quelling the major criticism of theprevious contract structure.
In 2010, however, the Army announced that rather than moving to thecompetitively awarded LogCap IV for base services, it would extend theLogCap III for work in Iraq.
“Theater commanders have raised concerns that a transition from LogCap III to LogCap IV would strain logistics and transportation assets in Iraq at the same time that a massive withdrawal of U.S. forces, weapons and equipment is under way,” according to an Army release about the decision.
As of July 2011, just $5.7 billion had been spent on LogCap IV — a trickle compared to over $37 billion pumped into LogCap III to date.
The LogCap III contract has its defenders. Doug Brooks, president of the International StabilityOperations Association, a trade association that represents more than 50 Defense Department services contractors (KBR is not a member of IPOA), argues that most of the scandals revolving around LogCap III are related to poor planning or client errors — waste rather than fraud.
“Because of LogCap III, we have the best supported and supplied military operations in history,” said Brooks, who defends the LogCap concept. But Brooks also points out that the government lacked the contracting personnel to ensure sufficient oversight and management of a contract the size of LogCap III.
But the real problem may simply boil down to competition — or lack thereof. Tiefer said that during commission hearings, it came out that contracts that use so-called indefinite delivery, indefinite quantity task orders — like LogCap — were counted as “competitive” in federal data figures, even though the tens of billions of work under it wasn’t up for competition.
“It’s not at all an obscure example,” Tiefer said. “It shows that the rate of real competition may be less than the claimed rate of competition.”
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Tags: Cash Rules Everything Around Me, Center for Public Integrity, Charlies Tiefer, Iraq's Insanity, KBR, Laura Peterson, LOGCAP III, Taxpayers for Common Sense, Wartime Contracting Commission
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Article original from: http://www.wired.com/dangerroom/2011/08/military-logistics-the-37-billion-noncompetition/
