THE BLOG

The Ghost of Truman: The Wartime Contracting Commission Gives DOD Hell on Iraq Contracting

09/13/2009 05:12 am ET | Updated May 25, 2011

I felt the usual dread as I settled down to watch the hearings by the congressional Wartime Contracting Commission on Tuesday and Wednesday. I have now spent thirty years listening to hearing after hearing on the horrors of military procurement and have been up to my ears the last five years in Iraq war contracting fraud.

I expected the usual Kabuki dance. The DOD bureaucrats give droning testimony about how there was a problem but that they were fixing it on a time multiplex basis. The members of Congress or a commission ask well prepared questions after their initial opening statements, saying how outraged they are, but are unable to ask detailed follow-up questions as the witnesses go into unnecessarily complex procurement speak. Then the bureaucrats and the companies promise to do better and the members can give some good quotes to any reporters who happen to be covering the hearing. It turns out to be a one-day wonder with a couple of articles and everyone feels that they have done their civic duty. Meanwhile, the procurement problems remain, year after year, with the bureaucracy knowing that they can go on business as usual and the troops and the taxpayers take it in the neck.

But the ghost of Harry Truman must have been lurking in the hearing room. This commission was fashioned after his famous Truman Committee that during World War II went after dishonest contractors with a vengeance, recovering amazing amounts of money and actually putting a general in jail. I watched as the commissioners, under the co-chairmanship of Christopher Shays and Michael Thibault, grilled the witnesses from the Army Contractor Command, the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA) about the notorious LOGCAP contracts, where in one of them, LOGCAP III, KBR has committed enormous waste and fraud that has been publicized for years without serious challenge.

Several new things came out of the hearing. One issue was not new. The Army and the DCMA have been freezing out the DCAA's audit input on the billing and procurement processes. DCAA has been finding massive problems but DCMA and Army Contractor Command have been ignoring its audits and recommendations to try to withhold some of the money from KBR until they fixed their grossly inadequate billing process. Considering that KBR has already billed around $32 billion in Iraq and Afghanistan to just support and feed the troops for six years, this bureaucratic tiff has real consequences. It is also crucial to fix this problem because the Afghanistan war is promising to cost as much, if not more, than our spending in Iraq.

Commissioner Charles Tiefer, back fresh from Iraq, talked about questionable labor costs by KBR to the tune of $368 million dollars and Commissioner Grant Green talked about how KBR was told to do a hiring freeze in February because they had too many personnel in Iraq, which lead to $50 million in labor cost overruns. Meanwhile, the DCMA witness kept going around and around with the commissioners claiming that it was too difficult and complicated to withhold a percentage of money from the company until their cleaned up their billing.

Chairman Shays went last on the first round of questioning and he pressed down hard on the government witnesses. He could not believe that they were not cooperating to get to the bottom of hundreds of millions of overbillings and mischarging. He talked about how a contractor would have eight electricians on a job with just two of them working while all of them were charging twelve hours a day. He also asked the staid government witnesses why they were not outraged about this and instead, seemed to be more interested in fighting each other while the contractors were out of control.

I have seen tough hearings like this before but when the hearing is over, the witnesses from the DOD and the contractors then go back to business as usual. But the Commission did something different here. Chairman Shays told the government witnesses to go back, work out their problems and come up with solutions within 60 days. Usually, the Congress would just have them submit a report that was ignored as everyone moved on to the next scandal, but Chairman Shays told them that there would be another hearing in 60 days to hear how they planned to fix the problems and get real accountability. That made this hearing vastly different from the usual oversight hearings... it had real and scheduled follow up.

The commissioners knew the subject well enough to press with follow up questions until the witnesses knew that they could not just do bureaucratic doublespeak.

Meanwhile, in these sixty days and beyond, the contractor meter, especially KBR's, just keeps on running at full speed, costing us hundreds of millions of dollars. Most of what I heard in these hearings, I have heard before while researching my book, Betraying Our Troops: the Destructive Results of Privatizing War. In that research, we found that KBR not only had too many people just sitting around with not enough to do, but that they were illegally billing twelve hours a day, seven days a week which was not allowed in the contract. That is how you can charge $32 billion dollars to do ordinary tasks such as feeding the troops, driving trucks, and maintaining buildings.

The Commission will continue their work to try to stop the rampaging water flow of dollars in these contracts, but there will be a permanent base of fraud and waste unless the government goes after the money that has already been illegally gotten. This waste and fraud will affect all future contracts with contractors in the war zone because the DOD uses historic costs to determine how much future contracts will be. So if you don't go back and scrubbed the numbers for unallowable and/or illegal costs, KBR's and other contractor's outrageous spending in these past six years will became the new normal, even if you get other companies to do the work. According to information at the hearing, Dyncorp, the contractor who will replace KBR in Afghanistan, bid low to win the contact but now has told the Army that they have to charge 50 percent more for their labor costs. They are hiring many of the KBR employees in Afghanistan and are finding that they have to pay them KBR inflated rates.

There are several ways to peel back these grossly inflated costs before they become permanent. The Army Contract Command, the DCMA, and the DCAA can go back through the billings, scrub the numbers and recover the money. Even though they have the legal right to do this, they often don't care about the water under the bridge and it is easier to concentrate on tweaking the system and going on with business as usual. If the Commission would push them to do this with congressional backup, they could recover money as large as Harry Truman did in World War II.

Another way to get some of this money back is through whistleblower lawsuits. These lawsuits are filed under seal (in secret) in order for the Department of Justice (DOJ) to investigate. However, the DOJ has not had the resources to investigate many of these cases as they remain under seal for as much as five years and the contractors continue their illegal billings. It has been estimated that there are 50-70 cases on Iraq war fraud alone, worth hundreds of millions if not billions of dollars, stuck in secret limbo in the Bush administration. It appears that these cases are under the radar screen with the new Obama administration, but Congress and the Commission need to ask the new head of the DOJ Civil Division, Tony West, why these cases have not had the investigative resources to recover the money. If these cases are turned down by the DOJ because of lack of investigative resources, KBR and other contractors will have gotten away with billions of dollars of fraud.

If the past money is not recovered, the fraud and waste of the first six years of these wars will be institutionalized in future war support contracts. The Commission has given me some hope that they plan to follow-up and drill down to the bottom of this problem, but unless the DOD departments and the DOJ are pressured to recover the ill gotten goods, the high billings will remain and the companies will think it is business as usual. If the Truman style of this Commission remains, real history could be made and contractors would be finally brought to task. I will report back in 60 days.