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White House Blocking Army's Plan To Overhaul Contracting System

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WASHINGTON — The Army's march to overhaul its tarnished contracting system has been slowed by an unlikely foe: the White House.

The Office of Management and Budget, President Bush's administrative arm, has shot down a service plan to add five active-duty generals who would oversee purchasing and monitor contractor performance.

The boost in brass was a key recommendation from a blue-ribbon panel that last fall criticized the Army for contracting failures that undermined the war effort in Iraq and Afghanistan, wasted U.S. tax dollars, and sparked dozens of procurement fraud investigations.

As the Army's contracting budget ballooned _ from $46 billion in 2002 to $112 billion in 2007 _ it had too few experienced people negotiating and buying equipment and supplies, according to the panel. Worse still, there wasn't a single Army general in a job with contracting responsibilities. That meant the profession had little clout at a critical time.

Senior officers are needed to make sure past mistakes are not repeated, said the panel, chaired by former Pentagon acquisition chief Jacques Gansler.

"If a contracting person has to say to a general that they have to follow the rules, it's easier if you have your own general who will back you up," says David Berteau, a panel member and a former Defense Department official.

Having generals in contracting jobs also will build the talent pool by showing junior soldiers that contracting is a promising career path.

The increase would generate a modest $1.2 million per year in personnel costs. But the Army already has more than 300 full-time generals, enough, it's been told, to handle any new demands.

The panel called for two major generals and three brigadier generals. One of the major generals, who wear two stars, would run a newly established Army Contracting Command. Formation of the command was another of the Gansler panel's recommendations.

The second two-star general would be assigned to a senior staff position at the Pentagon.

Two of the brigadier generals, who wear a single star, would also be assigned to the contracting command while the third would become chief of contracting at the Army Corps of Engineers.

According to a May 28 report to Congress on the status of the recommendations, Army Secretary Pete Geren said a proposal for five extra generals was submitted in March to OMB for approval. The office's role is to ensure proposed budgets and legislation are consistent with the administration's policies.

On May 12, the Army learned its proposal had been rejected. The report does not say why. A week after the rejection, the Army appealed OMB's decision.

OMB spokeswoman Corinne Hirsch said Wednesday the office is "internally deliberating" the proposal and would not discuss the reasons for the initial rejection.

Lt. Col. Martin Downie, an Army spokesman, said Thursday that communications between the Army and OMB are "pre-decisional and not releasable to the public at this time."

Generals are carefully controlled commodities; federal law prescribes how many each military branch may have. The Army has 306 generals leading nearly 525,000 troops. More than 240 of those are one- and two-star officers.

Adding a brigadier general to the ranks costs roughly $217,000 a year in pay, benefits and retirement contributions; a major general costs $261,000 annually.

The Army opened the Contracting Command three months ago. Jeffrey Parsons, a senior Army civilian official with heavy contracting experience, was picked to run it. Parsons will be in charge "until an appropriately skilled and experienced (major general) is available to assume command," the Army's report to Congress said.

The Army is also adding 1,400 military and civilian employees to its contracting work force. A purchasing office in Kuwait that had been identified as a hub of corruption has been revamped.

In the complex world of military acquisition, contracting is a specialized occupation. Contracting personnel negotiate with vendors, translate jargon-filled requirements for equipment and services into sensible descriptions, and oversee the deals to be sure the Army gets what it ordered.

The war in Iraq exposed major flaws in the Army's contracting abilities, particularly when the buying was done outside the United States. An overworked, under-experienced, and short-handed Army contracting staff was unable to meet the fast-paced demands for supplies and services. Bad deals were made and procurement fraud cases mounted in an environment prone to abuse.

Defense contractors, frequently criticized for war profiteering, complained of being pushed to accept flat-fee arrangements in high-risk combat zones where expenses could soar and confusion existed over what U.S. laws and regulations applied.

Collectively, the shortcomings created a "perfect storm," according to the panel.

Since 2005, the Army Criminal Investigation Command has opened 168 investigations related to contract fraud in Iraq, Kuwait and Afghanistan, according to spokesman Chris Grey. Ninety-five of those cases are ongoing. Of the 73 that have been closed, the subjects were indicted, the allegations turned out to be false, or the inquiry ended because of a lack of evidence.

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