Follow the Money Project

During questioning at a session of the Senate Armed Services Committee last April, it was brought out that KBR received $256 million in award fees based on “glowing evaluations” from a review board and many “excellent” and “very good” ratings the company received. Sen, Carl Levin, D-Mich, chairman of the committee, asked a very important question given the more than $1 billion in questioned and unsupported costs and many allegations of overcharging the Army: “How in the heck could they be given these ratings?” The answer from a high level Pentagon official was unclear - ambiguous at best. But the results of a recent Special Inspector General for Iraq Reconstruction audit of a LOGCAP Task Order may have brought clarity to that question. The IG found that the government survey process regarding KBR’s performance depended only on whether KBR actually supplied the services and not on KBR’s internal controls over the services provided or ensuring cost efficiency.

Now, why wouldn’t the Pentagon take into consideration the important aspects of a contract of cost efficiency and internal controls? Simply, according to the audit, the Army did not have oversight personnel in Iraq technically qualified to conduct such reviews. The responsibility of overseeing the LOGCAP contract in Iraq has rested with the Defense Contract Management Agency (DCMA). Their Administrative Contracting Officers (ACOs) are assigned to large bases within Iraq. They are essentially generalists who provide overall administrative duties on the contract. The DCMA personnel responsible for technical expertise on a contract are called Contracting Officer’s Technical Representatives (COTRs) and are prominent at major contractor sites within the U.S. However, they have not been seen in Iraq. They could have provided expertise on internal controls and cost efficiency. Their absence may have cost the government and taxpayer billions of dollars.

In our book, Betraying our Troops: The Destructive Results of Privatizing War, Major it was revealed that at Camp Speicher, in Iraq, they had one ACO who did not have the time to conduct specific oversight of cost controls. In an After-Action Report by LOGCAP Planners who served at large bases within Iraq, stated that ACOs were not trained in LOGCAP. One LOGCAP Support Officer said “many of the ACOs I am getting are so inexperienced that they will struggle with typical ACO duties…” Also, the LOGCAP Planners have no acquisition background and are not able to provide technical expertise.

With the lack of Pentagon technical representatives to monitor contractor costs, the IG found that contracting officers were actually relying on KBR to do their own reviews and engage in self-reporting. This is an invitation to fraud, waste and abuse no matter what contractor is involved. Who is going to determine if the reports are accurate? The IG found in their audit of services in four areas, including serving meals and delivering fuel, a high degree of inaccuracy in measuring fuel services provided and $4.5 million in overspent costs for food products. And this was for only one food service area. When the IG compiled available fuel data, they found that KBR reported 78,270 liters of fuel in excess of the maximum fuel capacities that would have been billed to the government. This on top of the fact that the IG found that KBR was using inaccurate homemade fuel measuring sticks, uncalibrated meters, and an unreliable database.

Although the IGs findings are small potatoes given the more than $26 billion already spent on the overall contract, the audit provides a window into the problem of ignoring cost controls for the entire contract. One can only imagine the scope of money wasted if the contract were audited in its entirety throughout Iraq where KBR performed its services. So now clarity is at hand. How could KBR have been given the ratings they got to receive the $256 million in bonuses? By ignoring cost controls, of course.

Robert Bauman

Senator Claire McCaskill returned from a trip to Iraq this week. She traveled there with Senator Tom Carper of Delaware and Army Auditor Patrick Fitzgerald specifically to look at fraud in Iraq contracting. McCaskill has pledged to make accountability in war spending a priority in the tradition of Harry Truman, the Senator who occupied her desk in the Senate and was responsible for rooting out war profiteering in World War II. Will she become the new Truman in a skirt? She can if she sticks to her guns and doesn’t believe the soothing rhetoric being dished out by the DOD that they are getting control of the costs of this war.

Much of the focus on Iraq contracting fraud has been on Iraq reconstruction contracts. Stuart W. Bowen, the inspector general for Iraq reconstruction, told the House Judiciary committee this week that the fraud in the reconstruction programs in Iraq would be in the tens of millions rather than the “hundreds of millions or billions as is sometimes imagined.” Bowen has been surprisingly diligent and I will withhold my judgment on that hoping that he is right.

But that isn’t where all the huge fraud, waste and abuse lie. The amount we have spent in Iraq reconstruction is small compared to the huge amounts that we have been spending in support of our troops. A large portion of the supplemental money for this war is going to contractor billings which, on all accounts, is out of control because of the lack of oversight and guts by the DOD.

KBR, the biggest contractor supplying the troops, saw their LOGCAP III contract, the one used for this war, grow from around $60 million before the war to a total contract of around $26 billion. And this number is just a rough estimate because the accounting for this contract ( and others) is so chaotic. With the contractor contracts surging with the most recent troop surge, it is past time to get control of these costs. With this level of spending our troops should have everything that they need. But as I outlined in my book, Betraying Our Troops: The Destructive Results of Privatizing War, the contractors have made life nice for troops at the large bases but the troops who are outside the safe perimeters have trouble getting even the basics of support, including decent food and water. The contractor billings are also threatening the money for basic fighting equipment such as night vision goggles and up armored vehicles.

Senator McCaskill realized early on that KBR and other suppliers were running up their costs with cost reimbursable contracts with little oversight. She was told in this trip to Iraq that there have been improvements because the Army is “centralizing contracting oversight and increasing the number of fixed-price contracts containing incentives not to pad costs.” But she shouldn’t fall for this soothing talk. The damage may have been done unless the Army is willing to go back and scrub the padding of costs and fraud out of the original contracts. Most contracting in the DOD relies on historical costs, in other words, what you spent before becomes the base of how much your new contract should be. If the Army allows these huge costs to become the norm for all the follow on contracts, we will continue to pay extremely inflated costs in Iraq, whether we are there for months or years. Waste and fraud will become the new normal for using contractors to support our troops. Considering that these same Army managers gave KBR bonuses for their abysmal performance in Iraq so far, it will take outside pressure and legislation from Congress to try to get any type of control over this contractor feeding frenzy of the supplemental money.

It also may be very hard to get enough oversight because of the deteriorating security situation in Iraq. Unless Congress insists that the oversight is down and is willing to withhold other DOD pet project money unless it is done, the DOD won’t do it based on their past. This most recent war spending binge makes the scandals of the past look like child’s play. It will be tough to wrestle for control over this money.

Will Senator McCaskill step up to the plate? Someone in the Senate has to make this their cause and stick to it. Representative Waxman has been leading the charge in the House of Representatives and has allies on that side of the Hill. Senators have been promising to recreate Harry Truman’s work for years but they haven’t really been willing to tame the beast. Perhaps the newest Senator from Missouri, a member of the Armed Services Committee, a former prosecutor and state auditor will finally have the tools and moxie to pull it off. If she tries, she will need the support of the public and the press to overcome the power derived from the huge amount of spending involved. The soldiers and taxpayers need a hero here but it is a tough and often thankless job.

Dina Rasor

Contractors Using Exploited, Cheap Labor to Support our Troops

First it was stories of overcharging, fraud, waste and abuse of taxpayer money in Iraq by contractors. Then there were stories of poor performance, unreliability, corporate bottom-line decisions tragically affecting some contractor employees. But now, thanks to the reporting of David Phinney, a freelance journalist, human trafficking of cheap labor from third world countries, for KBR and other contractors in Iraq, has now been revealed. In 2005, Phinney reported in CorpWatch that KBR, a division of Halliburton at the time, was importing thousands of cheap labor from impoverished south Asian countries such as Pakistan, Philippines, Nepal, Sri Lanka and India using “subcontractor” labor providers. These labor providers, based in the Middle East, such as First Kuwaiti and Prime Projects International, would also subcontract to “recruiters” in those countries thus creating many layers making it difficult, if not impossible, for the Pentagon to track the labor and billings that would flow up to KBR and then to the Army.

While American workers received $80,000 to $100,000 a year working for KBR in Iraq, these Third Country Nationals, known as TCNs, were only earning between $200 and $1000 a month doing much of the same work. Along with that, reports by former KBR employees and some soldiers, have disclosed these TCNs were working under terrible conditions – frequently sleeping in crowded trailers, waiting outside in line in 100 degree heat to eat “slop” while their American counterparts were sleeping in more comfortable housing and dining at the military dining facility. Reports from former employees have also disclosed that KBR is increasingly relying on TCNs apparently with the goal of comprising at least 80% of their labor force.

But the problem of poor working conditions is not the only issue facing TCNs. According to Phinney, allegations of workers being “recruited” under false pretenses, charging them “recruiting fees” that indebted the poorly paid workers, that they were going to work in Kuwait, then diverted to Iraq after their passports were confiscated so they could not leave resulting in forced labor – involuntary servitude.

Despite the complaints by many TCNs about the awful working conditions, the seizure of their passports, and being forced to work in Iraq since 2003, the reporting of Phinney, and complaints by returning American KBR employees and soldiers, it wasn’t until April 2006 that the Pentagon acknowledged the problem as a widespread practice and issued a directive to contractors to cease and desist in the practice of human trafficking and abuse. But that doesn’t seem to have had much of an effect. Phinney reported this month in IraqSlogger, more than a year after the directive, that the U.S. Justice Department is investigating human trafficking by First Kuwaiti used for the building of the U.S. Embassy in the Green Zone of Iraq.

Because of a lack of oversight on the part of the Pentagon over the LOGCAP contract since the war started in March 2003, many abuses of the contract have taken place and now human trafficking has become a part of it. It has taken the Pentagon three years to even start looking into the problem. Yet, First Kuwaiti has billed KBR contracts, an estimated $2 billion that would be passed on to the U.S. Government. Besides the mess the invasion and occupation has created in Iraq, due in large part to poor decision making, the contracting has also been equally a mess, again due to poor decision making, inadequate oversight, and general neglect of the problems by Pentagon officials despite constant information and complaints by our soldiers and former contractor employees alerting them to many contracting abuses and overcharging. We have seen constant denials of any problems with contractors by both the Pentagon and contractor officials. In the face of growing evidence to the contrary, it is almost laughable to hear officials make such denials. We as a country are better than this.

Robert Bauman

Last week, there was yet another story on our troops not getting what they need. The Columbus Dispatch wrote about how Ohio National Guard troops had to train with different weapons than what they will use in Iraq and, once again, don’t have enough night vision goggles and armored vehicles to train effectively. We have heard this so often it is becoming a disturbingly old story.

We are spending two billion dollars a week on this war and nearly a half a trillion dollars this year for the rest of the DOD budget. What is going on here?

I have been looking at DOD spending for almost thirty years and seen the situation get worse and worse. Our defense procurement system is broken. In the past, that has meant that the taxpayers have been cheated and our war readiness has been poor. Now it threatens soldiers’ lives and it is time to start doing something about it.

There is probably nothing more Byzantine and boring as military procurement but the public, the press and the Congress has to start paying attention to it. Current attempts to get a handle on it by the military bureaucracy are failing. Take, for example, the Marine’s attempt to get to process “urgent needs” for equipment for their troops has been a failure. According to an Associated Press story , from February 2006 to February 2007, only 10 percent of the urgent equipment needs were processed and sent to the troops. An official use only briefing from the Marines claimed that "Process worship cripples operating forces," and “Civilian middle management lacks technical and operational currency."

This problem did not happen overnight. Many of the hard fought military procurement reforms, pushed through Congress because the public was angry about $435 hammers and $7600 coffee brewers, were eviscerated under the guise of Clinton’s Reinventing Government. The DOD’s way to streamline the government was to eliminate many reforms and severely cut the number of auditors and investigators in the DOD during the 1990s. For more information on the subject, go to www.pogo.org and click on their reports. The report was published in 2002.

Another untold story is that the heavy use and dependence on contractors in a war zone has disrupted the traditional system and the Army was not ready for it. This has added to the chaos and malfunction of getting our soldiers what they need.

How many news stories does the public need to hear before they pressure the Congress? Whether you support this war or not, this is an issue that everyone can agree—we are spending huge amounts of money to make sure that our troops are not going without but they are still not getting what they need.

With my co-author Robert Bauman, I have outlined the failures and problems by following eleven soldiers and contractor employees in my book, Betraying Our Troops: The Destructive Results of Privatizing War, through the buildup to the war, the war and the occupation. My book is filled with stories of brave men, some who are still on active duty, because they wanted to come forward to tell their story on how the system is broken. Now it is up to the public, the press and the Congress to start to seriously do something to channel the tremendous amount of money we are spending to what the troops need and get some serious oversight. Will we continue to wait until we get more stories of equipment shortages and possible deaths?

Dina Rasor

Our First Line of Defense

With the recent “Washington Whistleblowers Week” gathering in Washington, DC, that hardly caused a ripple in the media, the plight of whistleblowers is an issue that needs to be addressed. If it were not for whistleblowers, much of the fraud, waste, abuse, incompetence, cover-ups, and more, especially within government and of government contractor practices, would not have been made public or brought to the attention of congressional members. They are the frontlines of a type of oversight that government often lacks or is unwilling to conduct. Yet, despite their heroic deeds, whistleblowers have consistently been maligned, intimidated, threatened, and retaliated against, by government agency and military officials, and contractor management, for bringing the truth to public light, or internally within their agencies or companies. Even the agency responsible for protecting federal employee whistleblowers – the Office of Special Counsel (OSC), has come under criticism by public interest groups for failing to protect whistleblowers and even practicing retaliation against its own employees. Despite hundreds of retaliation cases that have been referred to OSC, they have yet to announce a single case to be investigated. In fact, the OSC summarily dumped 600 disclosure cases in 2004 without investigation. This lack of action on the part of OSC has had a chilling affect on potential federal employee whistleblowers and has caused many very skilled and bright employees to leave government.

Not only is there an effort to stifle federal employee whistleblowers, but also an environment of zero tolerance of whistleblowers has reared its ugly head within the Pentagon for military personnel. Former Secretary of Defense Rumsfeld set this environment when he demoted and forced out General Shinseki for making public before a congressional committee the need for more troops to invade Iraq than what Rumsfeld has mandated. Senior officials within the Pentagon have been going to great lengths to prevent military personnel from making public negative information that could embarrass Pentagon brass or even the Bush Administration regarding the Iraq war. We saw recently reported the effort to muzzle military personnel from testifying before Congress and the effort to limit military access to certain websites.

The costs of the war in Iraq and Afghanistan have passed the $400 billion mark and rising with at least $26 billion allocated to the large troop support contract called LOGCAP. Yet, there has been very little oversight on the part of the Pentagon over how this money is being spent. Without meaningful oversight, whistleblowers have become the de facto first line of defense the Pentagon has lacked by disclosing to Congress and the public how that money is really being spent and how the contractors are impacting the troops. But, are whistleblowers being embraced by the Pentagon for their information? Are they acting on the information to control spending and oversee the contractors? Not a chance. Instead, military officials, especially the Army, have been expending their energy and time trying to “shoot the messenger” while denying that anything is wrong with what contractors are doing in Iraq or that fraud, waste and abuse exists.

A good example of the Army’s misguided efforts to quash whistleblower information is highlighted in our book, Betraying our Troops: The Destructive Results of Privatizing War. An Army Major who was part of the LOGCAP team conducting oversight in Iraq over the contract, tried, unsuccessfully, to report fraud, waste and abuse on the part of the contractor within the LOGCAP chain of command. Out of frustration he disclosed this information to a congressional member. The result was that LOGCAP unit officials called him a “snitch” and threatened to ruin his career for speaking out. An administrative investigation was initiated on him for frivolous charges and he faces an official reprimand that could derail his 25-year spotless career. This is just one example of many stories affecting other career soldiers who are frustrated with the lack of attention to controlling costs.

The plight of whistleblowers has not been lost on some members of Congress. In the House, Rep. Henry Waxman (D-CA) spearheaded an effort to bolster whistleblower protection by introducing the “Whistleblower Protection Enhancement Act of 2007” in February 2007. The bill was eventually passed by the House and sent to the Senate in March where it has languished in the Committee on Homeland Security and Governmental Affairs.” Unfortunately the president has threatened to veto the House version of bill.

Recently, Sen. Claire McCaskill, (D-MO) introduced an amendment to the fiscal 2008 Defense Authorization Bill that would enhance whistleblower protection for Defense Department contract employees who report potential fraud, waste, and abuse. Sen. McCaskill stated that “Employees of private contractors in Iraq have witnessed all kinds of fraud, waste and abuse. They desperately need stronger whistleblower protection so they can help us stop the incredible waste of taxpayer dollars.”

Legislation, not withstanding, it’s the ingrained prejudicial “snitch” mentality that needs to be changed in order to effect any meaningful change. As long as whistleblowers are considered “the enemy,” “snitches,” and a threat to careers, jobs, and in the case of contractors, a threat to acquiring future contracts, they will continue be retaliated against.

Robert Bauman