05/10/2012 12:21 pm ET Updated Jul 10, 2012

Hotel Contingency Operation: Money Can Check in but It Can Never Leave

On April 17, the Contracting Oversight Subcommittee of the Senate Homeland Security and Governmental Affairs Committee held a hearing. The subject was the Comprehensive Contingency Contracting Reform Act of 2012.

The purpose of the bill is "to enhance security, increase accountability, and improve the contracting of the Federal Government for overseas contingency operations, and for other purposes." In case you haven't been following the news for the past decade and wonder why this bill is necessary, just search online using "Iraq, Afghanistan, private contractors, and oversight," and you will understand why. Specifically, the bill would:

  • Require the Department of Defense, the State Department and USAID to improve their training and planning for contract support and contingencies.
  • Reduce reliance on non-competitive contracting practices and restricts subcontracting practices that have resulted in a lack of transparency and visibility.
  • Require agencies to conduct risk analyses before relying on private security contractors, and to terminate unsustainable reconstruction and development projects.
  • It also strengthens tools to combat human trafficking.

Now that the full transcript is out, let's look at a couple of excerpts just to better understand why this legislation is needed.

Here is part of the opening statement from Sen. James Webb (D-VA), one of the witnesses.

I had spent five years in the Pentagon, in different capacities, including four years on a Defense Resources Board. And one of my eyeopeners coming to the Senate was sitting on Foreign Relations Committee in '07 when we had a hearing on Iraq reconstruction programs with the State Department. And they mentioned in their testimony that they had $32 billion in Iraq reconstruction programs, that had been appropriated and were in some form of being put into play.

And I asked, in a way that I would normally have asked if I were in the Pentagon years before, to see the contracts and the amount and what -- who the contractor was and what the state of implementation was on these different contracts. And they couldn't tell us.

We worked with them for months, and they could not tell us where $32 billion had been spent in a specific way where we could evaluate the results.

So, to paraphrase the famous Eagles song, money can check into Hotel Contingency Operation but it can never be accounted for. Okay, somewhat of an exaggeration I admit. But considering that the final report of the Commission on Wartime Contracting in Iraq and Afghanistan released last August found that out of the $206 billion spent on service contracts in Iraq and Afghanistan, between $31 billion and $60 billion was lost to what they termed avoidable waste -- not that much of an exaggeration.

And here is Sen. McCaskill (D-MO) talking about subcontracting:

Well, as you know, we had a Tamimi problem in the LOGCAP contract where we have kickbacks with KBR, and that's one of those large, duration-of-wartime contracts that is kind of the poster child for contracting gone badly. And the host trucking contract with multiple layers of subcontracts really had a security risk associated with it as it related to where the money was going.

Clearly, we figured out that some of the money was going to the bad guys.

So what we're looking for here is, we don't want to get away from the efficiencies that subcontracting might provide. But we've got to really get to a much more transparent situation.