'A Perfect Storm for Disaster' Brewing With Washington's 'Unprecedented' Shadow Army

I've been reading through the hot-off-the-presses, exciting 100+ page report from the Commission on Wartime Contracting: "At What Cost? Contingency Contracting In Iraq and Afghanistan." There have been several good pieces
that covered the Congressional hearings related to this report, so I
thought I would just post some of the more important excerpts from the
report. One general note: The Commission, which was created due to the
diligent efforts of Senators Jim Webb and Claire McCaskill, has been
doing some incredibly important work digging deep into the corruption,
waste, abuse, fraud, etc of the US war contracting system. The statute
that created the commission "requires the Commission to assess a number
of factors related to wartime contracting, including the extent of
waste, fraud, abuse, and mismanagement of wartime contracts. The
Commission has the authority to hold hearings and to refer to the
Attorney General any violation or potential violation of law it
identifies in carrying out its duties."

While the new report
reveals some critical details about issues of waste and abuse, the
general tone is very pro-contractor, which is not surprising. However,
I find it disturbing that one of the members of the Commission, Dov Zakheim,
is, according to his Commission bio, a current vice-president of Booz
Allen Hamilton, a major defense, homeland security and intelligence
contractor with a direct stake in US policy on contractors.

Booze is now majority owned by The Carlyle Group, which has deep political connections. In an Op-ed in The Washington Post
last year, Zakheim campaigned against "More regulations and
bureaucratic restrictions on contractors" and advocated for "a larger,
more diversified base of prime contractors and suppliers." Zakheim, who
was a foreign policy advisor to Bush and part of the circle of the
Vulcans, is now a key member of the primary body that is responsible
for investigating the industry and making formal recommendations on US
policy. While the Commission is made up of appointees from both
political parties, (Zakheim was appointed by President Bush) Zakheim's
corporate stake on these matters should be cause for a review of his
position on the Commission.

***

One fact that jumped out at me in the report is that, at present,
according to the Commission, "contracting oversight" in Afghanistan is
being done remotely from Iraq. And remember, there are 70,000
contractors (and growing) in Afghanistan.

Here are some excerpts from the report, which I have categorized and in some cases highlighted or analyzed:

EXTENT OF US RELIANCE ON CONTRACTORS

• Contractors are playing a key role in the drawdown of U.S. military
  forces in Iraq. As military units withdraw from bases, the number of
  contractor employees needed to handle closing or transfer tasks and to
  dispose of government property will increase... preparations for this
  major shift out of Iraq and into Afghanistan or other areas are sketchy

• As the military operations in Iraq and Afghanistan have progressed,
  the military services, defense agencies, and other stakeholder
  agencies... continue to increase their reliance on contractors. Contractors are now literally in the center of the battlefield in unprecedented numbers.

• From fiscal years (FY) 2001 through 2008, the Defense Department's
  reported obligations on all contracts for services, measured in
  real-dollar terms, more than doubled-from roughly $92 billion to
  slightly over $200 billion. In fiscal year 2008, this figure
  included more than $25 billion for services to support contingency
  operations in Iraq and Afghanistan. These figures do not include State
  and U.S. Agency for International Development (USAID) contracts.

• [T]he missions in Iraq and Afghanistan are the first major
  contingency operations to reflect the full impact of the shift to heavy
  reliance on contractor personnel for critical support functions in
  forward operating areas. Despite the key role of contractors in
  overseas operations, DoD lacks enough staff to provide adequate
  contract oversight. The State Department and the U.S. Agency for
  International Development also use significant levels of contractor
  support in Southwest Asia.

• The Commission believes that a serious shortage of U.S.
  government civilians in Afghanistan is all too likely to trigger heavy
  reliance on contractors in both the short term and the long run.

THE NUMBERS

• During its April 2009 trips to Iraq and Afghanistan, the Commission
  sought to identify the total picture of contractor support in those
  countries. Officials in both Iraq and Afghanistan told us that
  there was no central list of all contracts providing support. The
  Commission was unable to put together a complete footprint of the
  contracts being performed at the bases we visited. GAO has also
  been unable to identify complete and reliable data on contractor
  personnel in Southwest Asia. Only DoD provided data on the number of
  contractor personnel, but officials have told GAO that its census data
  were not routinely evaluated for accuracy or completeness. There is
  still no clear picture of who the contractors in theater are, what
  services they provide, which contracts they perform, and what their
  support costs are.

• U.S. Army Central Command's second-quarter fiscal year 2009 census reflected 242,657
  active DoD contractor personnel in its Southwest Asia area of
  operations. This total includes 132,610 in Iraq, 68,197 in Afghanistan,
  and 41,850 in other Southwest Asia locations.

ARMED "SECURITY CONTRACTORS"

According to a chart contained in the report, the total number of
DoD PSCs in Iraq is: 12,942 and 3,321 for the State Department. In
Afghanistan, there are 4,373 DoD PSCs and 689 State Department PSCs.
As we previously reported, in the first quarter of 2009, there has been
a 29% increase in the number of PSCs in Afghanistan and will continue
to grow. The report also raises concerns about the poor or inadequate
training some of the PSCs receive, particularly Third Country Nationals
hired to guard US bases and facilities: "Poorly trained and
ill-equipped contractor employees providing security for our operating
bases put American forces at increased risk of harm."

• In Iraq, 25,000 to 30,000 PSC personnel work for U.S. agencies, the
  government of Iraq, coalition governments, and U.S. contractors. These
  numbers exceed the PSC census data in the table above because they
  include PSC support to the government of Iraq and coalition
  governments. The total U.S. spending for PSCs is estimated to be between $6 billion and $10 billion from 2003 to 2007.
  Of this amount, $3 billion to $4 billion is estimated to be for
  obligations made directly by U.S. government agencies, and $3 billion
  to $6 billion is estimated to have been spent by U.S. contractors to
  acquire PSC support.

Regarding accountability, the report notes that the US civilian laws covering contractors are rarely enforced:

• The MEJA (Military Extraterritorial Jurisdiction Act) statute has
  been used infrequently. From MEJA's enactment in 2000 through March
  2008, DoD has referred 58 cases involving PSCs and other contractors to the Department of Justice.
  Federal prosecutors brought charges in 12 of those cases, and state
  prosecutors brought charges in one other case. Of those, eight resulted
  in a conviction and five await trial.

WASTE, FRAUD ABUSE

According to the Commission's report, there is a severe
shortage of oversight personnel to monitor these massive contracts and
contractors. The report notes that within the Defense Contract Audit
Agency "overall staffing levels have remained relatively constant at
roughly 4,000 since FY 2000, even though DoD contract transactions have
increased by 328 percent-from 304,500 in FY 2000 to over 1.3 million in FY 2006."

• Through fiscal year 2008, the DCAA has taken exception to over
  $13 billion in questioned and unsupported costs associated with the
  efforts in Iraq and Afghanistan.

• Inadequate oversight, combined with poorly written statements
  of work, lack of competition, and contractor inefficiencies have
  contributed to billions of dollars in wasteful spending. The drawdown of U.S. forces in Iraq brings the risk of more waste. Money is being wasted on completing projects that are no longer needed. And
  poor control of U.S. government property in Iraq that must be moved,
  handed over to the Iraqis, or scrapped could cause even more waste.

• Without proper oversight, the government cannot confirm that
  contractors are performing in accordance with contract requirements,
  cannot support payment of award or incentive fees, cannot support the
  certification of invoices for services performed, and cannot ensure
  that services critical for the completion of our military and
  reconstruction missions are performed. Any one of these conditions invites waste and abuse. Taken together, they are a perfect storm for disaster.

CONTRACTORS "SELF-POLICING"

The Defense Contract Management Agency "told the Commissioners that
contractor 'self policing' had been tried, but 'did not work out.'"
Some contracts are actually being "monitored" by investigators
physically located in the United States. While the Commission asserts
there have been improvements in contractor oversight in Iraq, the
system in Afghanistan "is very different and raises significant
concerns about contracting for certain functions generally performed by
the government." Similar to what happened in Iraq, a contractor was
hired to monitor contractors as part of the Armed Contractor Oversight
Division (ACOD). The company that won the contract is Aegis, the
British-owned firm headed by famed mercenary Tim Spicer. According to
the report, ACOD is "primarily staffed" by the company:

Aegis's work raises heightened inherently governmental concerns because the ACOD receives limited U.S. government supervision. Since its establishment, ACOD in Afghanistan has primarily been run by contractor personnel from Aegis.
Aegis's responsibilities include working with the Afghan Ministry of
Interior in investigations concerning PSC escalation-of-force
incidents. CJTF-101 submitted an expedited request for four field-grade
officers for ACOD; however, as of mid-May the request had yet to be
approved and there were still no senior U.S. military officials
assigned full-time to the directorate. A review of the Aegis
contracting documents showed that without these military officers in
place, Aegis is in a role of significant official responsibility in reviewing activities of other private security contractors.

According to the report, "DoD interviewees informed the Commission
that sufficient military manpower and/or expertise did not exist in
Afghanistan, and that contracting with Aegis allowed the Combined Joint
Task Force (CJTF-101) to obtain expertise quickly. Aegis does not
currently provide armed contractors in Afghanistan, and as the ACOD is
currently structured, an Aegis contractor serves as the Deputy Director
and has day-to-day responsibility for managing the directorate. Should
they be awarded a PSC contract under the current structure, there would
be a conflict of interest."

KBR

• The Commission believes that the services provided by contractor KBR under LOGCAP III- with $31.4 billion funded through March 20, 2009-could have been delivered for billions of dollars less.

• DCAA is reviewing $277 million in LOGCAP III subcontracts involving
  KBR employees or ex-employees that have been or may have been involved
  in improper procurement activities. The purpose of DCAA's review is to assess the reasonableness of payments under those subcontracts.

The report notes that KBR is still firmly entrenched in the latest LOGCAP contract:

• LOGCAP IV, the fourth iteration of the program, is a multiple-award
  contract competitively awarded in April 2008 to DynCorp International
  LLC, Fluor Intercontinental, and KBR Services. Each contractor can
  receive up to $5 billion of work under the contract in a given year, so
  total spending over the possible 10-year life of the contract could be
  as high as $150 billion. Meanwhile, work contracted under LOGCAP III continues, so a slow segue from one contract to another is under way.

The full report can be downloaded on the website of the Commission on Wartime Contracting.