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Home News Archive Senate Committee Exercises Oversight on Afghan Contracting Oversight

Senate Committee Exercises Oversight on Afghan Contracting Oversight

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On December 17, 2009 the Ad Hoc Senate Committee on Contracting Oversight (a subcommittee of the Senate Committee on Homeland Security and Governmental Affairs) held hearings regarding oversight of contracting in the Afghanistan theater of operations.  In the words of the Subcommittee website, the hearing was to “review whether the lessons learned from Iraq are being applied in Afghanistan. The hearing will also examine new findings from federal auditors and explore abuses in the award, management, and oversight of Afghanistan contracts.”

 

To accomplish its objectives, testimony was taken from officials from five agencies with active contracts in the area—Department of State, Department of Defense, USAID, the US Army, and the Joint Contracting Command.  As Senator McCaskill (R-MO) noted, the agencies cumulatively are responsible for billions of dollars of contracting activity.  She noted that “contracting in Afghanistan has exceeded $23 billion since the beginning of the war; [however] we also know that, because of problems with tracking Afghanistan contracts, the real value of contracts is likely to be much higher.”

 

Senator McCaskill continued, “We know that federal auditors have already identified nearly a billion dollars in wasteful spending on Afghanistan contracts. That’s nearly 1 of every 6 dollars.  And we also know that, because auditors have only looked at a fraction of contracts, the real amount of waste is likely to be much higher.”

 

We were more interested in Senator McCaskill’s numbers than in the rather predictable testimony from the agency officials.  So rather than delve into the testimony, we thought we’d look at the background information provided to the Subcommittee.  In a somewhat unusual step, the Subcommittee provided a link to a staff “backgrounder” memo that seemed to be the source of Senator McCaskill’s information.

 

The Staff Memo, entitled “An Overview,” was prepared by the Subcommittee Majority Staff for the Senators’ use. The 15-page memo can be found here.  Following is a discussion of some of the memo’s talking points that we found to be of interest.

 

  • In 2008, the Defense Department, State Department, and the U.S. Agency for International Development (USAID) combined had more than 16,000 active contracts in Afghanistan. (Source: GAO Report GAO-10-01, October 2009.)
  • Wasteful Spending on Defense Department Contracts Nears $1 Billion. According to federal auditors, approximately $950 million in questioned and unsupported costs has been submitted by Defense Department contractors for work in Afghanistan. This represents 16% of the total contract dollars examined.
  • Number of Defense Department Contractors in Afghanistan May Reach 160,000. There are currently 104,000 Defense Department contractors currently working in Afghanistan. The increase in troops may require an additional 56,000 Defense Department contractors, bringing the total number of Defense contractors in Afghanistan to 160,000.
  • As of September 30, 2009, there were approximately 104,000 Defense Department contractors and approximately 64,000 U.S. military personnel in Afghanistan. In other words, contractors comprised more than 60% of the Defense Department’s workforce in Afghanistan. In December 2008, contractors comprised 69% of the Defense Department’s workforce, the highest ratio of contractors to military personnel in US history. From June 2009 to September 2009, there was a 40% increase in Defense Department contractors in Afghanistan. During the same period, the number of armed private security contractors working for the Defense Department in Afghanistan doubled, increasing from approximately 5,000 to more than 10,000. (Source: Congressional Research Service Reports (09/21/09 and 12/14/09) and DOD reports.)

 

With respect to “waste, fraud, and abuse,” the Staff Memo provided several anecdotes for the Senators’ consideration.  Without repeating the anecdotes, suffice to say that the focused on projects that were overspent and/or behind schedule.  In the main, the issues seemed to be lack of management oversight and lack of visibility into project status and results, rather than allegations of contractor fraud. That said, the Memo also noted that “DCAA recently suspended $14.3 million in costs billed by Fluor under LOGCAP IV. According to DCAA, the contractor needs to provide further clarification about its price competition and the potentially disproportionate share of corporate office expenses allocated to government contracts.”

 

The Memo devoted a section to information provided by DCAA during a December 9, 2009 “briefing” to the Subcommittee Staff.  In that briefing, DCAA claimed that it had identified “$533 million as questioned costs and $417 million as unsupported costs.”  The aggregate amount represents 16% of the $5.9 billion in examined costs.  However, the Memo notes that—

 

The DCAA auditors also informed the Subcommittee that the Defense Department has rejected the majority of their recommendations to disallow questioned costs. Of the $533 million in questioned costs, the Defense Department and contractors have reached a resolution on only $223 million. Of this $223 million, Defense Department officials have agreed with DCAA recommendations to withhold $78.8 million. This represents only 35% of the costs questioned in audits of Afghanistan contracts.

 

We note that the 35% sustainment rate is not dramatically different from DCMA’s overall DCAA questioned cost sustainment rate, which is roughly 38%.  (See the semiannual DOD IG report.)  It is also worth noting that no DCAA personnel were invited to testify before the Subcommittee.

 

To conclude, the Senators are making much of the fact that lessons supposedly learned in Iraq are not being implemented in Afghanistan.  That’s probably true.  It takes time to hire and train acquisition professionals.  It is rather far-fetched to expect seasoned contracting officers and COTRs to spring up overnight, as if from a tree.  Until the DOD and the other agencies involved in Southwest Asia contracting oversight will have to make do with the existing resources they’ve been given through the prior years’ budgets.


 

Newsflash

Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.