Accountable Strategies blog

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

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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