Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Archive for August, 2009

Dysfunctional oversight in Iraq and Afghanistan

Posted by David Kassel on August 20, 2009

The two wars we’re fighting in Iraq and Afghanistan are causing enough of a drain on our economy as it is.  We shouldn’t be making things worse by permitting billions of dollars to be lost due to waste and fraud over there.

Since 2001, according to the Commission on Wartime Contracting, a panel appointed by Congress, some $80 billion has been appropriated by Congress for reconstruction efforts in Iraq and more recently in Afghanistan.  That is only part of the work being done by hundreds of thousands of contract employees operating in those countries, who are also transporting supplies, guarding military bases, managing dining halls and more.

One key problem is that all of that contracting has been subject to little effective oversight.  In particular, there are too few government personnel who are qualified and in place in the region to oversee the contractors and subcontractors, both large and small, that are undertaking the work.

Moreover, the Commission alleges a dysfunctional relationship between the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), two of the key oversight agencies involved.

DCAA is responsible for auditing contractors’ purchasing, cost estimation and other business systems.  But DCAA only has the authority to make recommendations for improvements based on its audits; and it is the DCMA that ultimately decides whether to withhold payments or disqualify contractors from contract awards based on shortcomings in their business systems.

In a hearing last week, members of the Commission accused the DCMA of ignoring recommendations from DCAA with regard to the business systems of logistical support contractors Fluor Corp., KBR Inc. and DynCorp International.

An interim report  issued in June by the Commission noted an inadequate number of qualified contract management personnel in Iraq and Afghanistan.  It also pointed out that there were only four DCAA auditors in Afghanistan.
The report stated that an “absence of continuing audit surveillance at high-risk remote locations is exacerbated by DCAA’s limited travel to  these locations.”   It’s a serious issue because of the large amounts of money incurred and billed on cost-reimbursement contracts.

The Commission report noted that federal regulations require contracting officers to consider withholding a percentage of future payments when it is determined that contractors’  business systems contain significant deficiencies.  The report stated that DCAA field auditors have been reluctant to recommend withholding those payments.  Given the lack of such recommendations, the report concluded that contracting officers often do not hold contractors accountable for the adequacy of their business systems.

In May, DCAA Director April Stephenson told the Commission that the DCMA sustains or upholds the DCAA  in about 65 percent of the amounts it questions.  A briefing by DCAA to the Commission, however, indicated that less than 40 percent ($1.3 billion of $3.4 billlion) of DCAA questioned amounts related to the contingency efforts in Iraq and Afghanistan were sustained through August 2008.  

The DCAA itself has been the subject of criticism of its own auditing practices.  As the GAO noted last year, DCAA’s auditing staff has been sharply cut in recent years.  In addition, the GAO reported instances in which DCAA auditors were allegedly intimidated or replaced by upper-level managers in the agency for including critical audit findings in reports about military contractors.

Unless we improve oversight of our nation-building efforts overseas, we will continue to waste billions of dollars that could have gone to productive uses.


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Terrorists, bureaucrats, and the Coase Theorem

Posted by David Kassel on August 3, 2009

Terrorists may not be happy to know this.  But many of them are….well…bureaucrats.

In an article in the current July/August issue of the journal Public Administration Review, Scott Helfstein maintains that bureaucratic theory may be overlooked as means of explaining what appears to be two divergent trends in terrorism today.

On the one hand, there has been a tendency toward “leaderless jihad,” in which terrorists operate almost autonomously and use only the Internet for information.  At the same time, there has been  “a high level of organization and bureaucratization” among  certain groups, such as the Taliban in Pakistan and al-Qaeda in Iraq.

Helfstein, who teaches at the Combating Terrorism Center at West Point, argues that terrorism is,  in a fundamental way,  like any other commodity or service that gets transacted or exchanged in society.  At one end of the exchange spectrum is the pure market, which operates with a minimum of organizational constraints.    At the other end is complete bureaucracy. 

Without any apparent sense of irony, Helfstein maintains that a characteristic of bureaucratic terrorist organizations is “the tendency to adopt similar (and perhaps best) practices from similar organizations.”   The purpose of these “best practices” is to minimize the groups’ exposure to counterterrorism.

In order to explain why terrorists choose different points on the market-to-bureaucracy spectrum, Helfstein turns to the Coase Theorem in economics.  Coase contended that individuals forego the efficiency of the market when certain “transaction costs” become too high. 

Transaction costs for terrorists include costs of communicating with other terrorists and recruiting them.  Counterterrorism aims to increase these costs by tracking and intercepting those communications, planting spies inside terrorists organizations,  increasing border security etc.  Helfstein theorizes that when the transaction costs of the terrorism marketplace get too high, terrorist organizations move away from the pure market and adopt bureaucratic alternatives.  Those alternatives include such things as centralized planning, training, and recruitment, and formal or informal contracting mechanisms.

Many terrorist groups, such as al-Qqeda and Hamas, have organizational structures that look like any bureaucracy, Helfstein says.  They are staffed with financial, operations, and strategy officers, and even public relations personnel.  Computers and hard drives seized by counterterrorism officials often contain bureaucratic forms outlining standard operating procedures.

Where I would differ from Helfstein is when he attempts to describe what the “terrorism marketplace” looks like and, in particular, the “supply and demand” aspects of it.  He notes, for instance, that one conception of the terrorism market is analogous to the employment market. 

In this conception, a government’s policies may be so disliked that they create a demand among the population for terrorist acts.  The terrorist group responds to this demand by recruiting terrorists from members of the public, who represent the supply of people available for employment as terrorists.

I’m no expert on terrorism; but it seems to me that terrorsts do not respond to a perceived demand among the public.  In fact, they often target the public in their own countries with their terrorist acts.  Is the public really demanding that?  In fact, terrorists are not interested in the public’s demand for change in government policies.  One might go so far as to argue that terrorists  seek power for themselves, not societal change; and their method lies in instilling fear–not fear in government officials, but in the public itself.

Helfstein concludes that the two divergent trends noted above in terrorism were a response to the post-September 11 counterterrorism efforts, and are likely to continue to evolve.  Counterterrorism experts “will probably need every tool in the social science arsenal to predict, analyze, and understand the next evoluationary cycle.” 

True enough.  Until we understand what truly motivates terrorists as well as how they operate, we can never hope to eradicate them and the fear they have instilled in us.

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