Department of Defense
Office of the Inspector General -- Audit
Contracts Awarded for the Coalition Provisional Authority by the Defense Contracting Command-Washington - Report No. D-2004-057(PDF) - Project No. D2003CF-0152.000
Date: March 18, 2004
To obtain copies of Office of the Assistant Inspector General for Auditing Reports, contact the Secondary Reports Distribution Division of the Audit Followup and Technical Support Directorate at (703) 604-8937 or FAX (703) 604-8932.
Who Should Read This Report and Why? The acquisition and contracting community in DoD as well as the key officials in the Department of the Army who have contract oversight responsibility for rebuilding Iraq should read this report. The report provides insight on the actions that members of the Office of Reconstruction and Humanitarian Assistance/Coalition Provisional Authority and the Defense Contracting Command-Washington took when awarding contracts for humanitarian assistance. The report also provides information regarding post-award oversight by DoD officials of the contractors involved.
Background. In May 2003 the Defense Contract Audit Agency began reviewing contracts that the Defense Contracting Command-Washington awarded for the Office of Reconstruction and Humanitarian Assistance/Coalition Provisional Authority. During the review, the Defense Contract Audit Agency found irregularities in both the award and administration of the contracts and recommended that the Inspector General of the Department of Defense perform an in-depth review. Between February 2003 and August 2003, the Defense Contracting Command-Washington awarded 24 contracts, valued at $122.5 million. Thirteen of the 24 contracts, valued at approximately $111 million, were awarded on a sole-source basis to fill urgent needs. Of the 24 contracts, 16 were awarded for services and 8 were awarded for computer equipment. As of November 2003, 7 of the 24 contracts were ongoing. The contracts were primarily for humanitarian assistance, such as media support, and consultants to assist the Office of Reconstruction and Humanitarian Assistance/Coalition Provisional Authority. The contracts we reviewed did not involve rebuilding the infrastructure of Iraq. The Army Corps of Engineers and the U.S. Agency for International Development awarded those contracts, and the General Accounting Office is reviewing them.
The Office of Reconstruction and Humanitarian Assistance was established in January 2003 to rebuild Iraq. The President of the United States placed the office within the DoD. The office began deploying overseas on March 16, 2003, and had approximately 2 months to organize before deploying and beginning its mission. In May 2003, the Office of Reconstruction and Humanitarian Assistance was placed under control of the Coalition Provisional Authority, and in June 2003 DoD dissolved the Office of Reconstruction and Humanitarian Assistance. The Coalition Provisional Authority assumed the functions that the Office for Reconstruction and Humanitarian Assistance previously performed.
Results. The Department of Defense did not plan for the acquisition support that the Office of Reconstruction and Humanitarian Assistance required to perform its mission. As a result, supplies and services were quickly acquired and contracting rules were either circumvented or liberally interpreted. Specifically,
- personnel who generated contract requirements did not establish firm contract requirements (8 of 24);
- of the 24 contracts awarded, 18 were awarded using General Service Administration Federal Supply Schedules and contracting officers misused General Service Administration Federal Supply Schedules (10 of 18);
- contracting officers inappropriately awarded personal services contracts
(10 of 24);
- contracting officers permitted out-of-scope activity (1 contract);
- contacting officers did not support price reasonableness determinations
(22 of 24); and
officials performed little or no Government surveillance on awarded contracts (13 of 24).
As a result, DoD cannot be assured that the best contracting solution was provided, that DoD received fair and reasonable prices for the goods and services, or that the contractors performed the work the contract required.
To preclude future problems, the Deputy Secretary of Defense should designate an office to study existing DoD post-war strategy and establish responsibilities, policies, and procedures for acquisition of goods and services in support of future post-war occupation and relief operations. Also, the Commander, Defense Contracting Command-Washington should analyze any ongoing contracts for personal services, determine the Government liability, and initiate appropriate termination actions. The commander should also comply with the Federal Acquisition Regulation regarding documentation of contract files, appoint trained points of contact or contracting officer representatives for Iraqi contracts, require monthly status reports of the contracts, ensure the Government is refunded overpayments made to contractors, and use Federal Supply Schedules for their intended purposes.
The problems identified are primarily attributed to the need to react quickly to the rapidly changing situation in Iraq in early 2003 and that acquisition support was an afterthought to the Office of Reconstruction and Humanitarian Assistance. We did not identify where actions taken by Government personnel were based on the desire for personal gain despite numerous acquisition problems. We recognize that the Defense Contracting Command-Washington contracting personnel were in a difficult and time- sensitive position. However, the Federal Acquisition Regulation was established to ensure that DoD obtains quality products and services at fair and reasonable prices and the Regulation was not followed for 22 of the 24 contracts. Accordingly, the Commander, Defense Contracting Command-Washington, should perform a review and initiate appropriate administrative actions for contracting officers that did not follow prescribed procedures.
Management Comments and Audit Response. The Staff Director and Special Advisor to the Under Secretary of Defense for Policy suggested that the Recommendation to designate an office to study existing DoD post-war strategy should be revised and redirected to the Deputy Secretary of Defense. He believed that the recommendation was too general and that it involves the activities and expertise of more than one component within DoD. We agreed with that suggestion and changed and redirected the recommendation to the Deputy Secretary of Defense.
The Commander, Defense Contracting Command-Washington, generally concurred with the majority of Recommendations. However, the commander did not believe he had a basis to obtain a refund on payments for two subject matter experts. The commander acknowledged that the Defense Contracting Command-Washington made mistakes and took shortcuts in supporting the Office of Reconstruction and Humanitarian Assistance. The commander disagreed with the need to perform a review and initiate appropriate administrative action against the contracting officers who circumvented the Federal Acquisition Regulation and misused the General Administration Federal Supply Schedules. The commander further stated that there was no evidence that any contracting officials in his command acted illegally or in bad faith and that it was unconscionable to recommend that administrative action be taken against the contracting officials and not hold senior officials responsible for generating the demands accountable. We believe there is a basis for collecting a refund for any overpayments for the two subject matter experts. Because of the inappropriate contracting actions identified there is a need to perform a detailed review of the contract files and actions and determine if any administrative action is warranted. We request that Commander, Defense Contracting Command-Washington, reconsider his position and provide additional comments to the final report by May 20, 2004. See the Finding section of the report for a discussion of the management comments and the Management Comments section of the report for the complete text of the comments.
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