01/10/2012 11:08 am ET Updated Mar 11, 2012

FAR 49.402-4(b) to the Rescue

From an oversight perspective, the situation in Iraq today where the bulk of private military and security contractors are now working for the State Department, and not the U.S. military, is certainly interesting, and more than a little ironic.

I mean after all, how diligent can the client, the U.S. State Department, be in overseeing its contractors, when those very same contractors are responsible for preserving the security, indeed, the very lives of all the client's staff in Iraq? Saying "do better or I'll fire you and do it myself" isn't a viable solution.

This bring us to the article, "Private Military Contractor Liability Under the Worldwide Personal Protective Services II Contract" published in the Spring 2009 issue of Public Contract Law Journal by Samuel P. Cheadle, then a student at the George Washington University Law School.

WPPS is the State Department's effort to pre-plan, organize, set up, deploy and operate contractor protective service details around the world. It has also been the main cash cow for what was once Blackwater, now Academi. Its primary public contract was WPPS and WPPS II umbrella contracts, along with DynCorp International and Triple Canopy, Inc. for protective services in Iraq, Afghanistan, Bosnia and Israel.

This is not a contract which will go down in contracting history for its transparency. In January 2010, the state's inspector general office released its August 2009 Memorandum Report on the Preliminary Review of the Second Worldwide Personal Protective Services (WPPS II) Contract Task Orders. The memo informed various State offices of the audit cancellation of the WPPS II contracts due to "insufficient documentation."

The Department of State's Bureau of Diplomatic Security contracts with Triple Canopy, the U.S. Training Center (formerly Blackwater), and DynCorp for personal protective services around the world, including Jerusalem, Iraq, and Afghanistan.

OIG's review of Triple Canopy, Blackwater, and Dyncorp contract TOs found insufficient documentation to meet the objectives of the audits. Federal Acquisition Regulation (FAR) 4.805 requires contract files listed in FAR 4.803 to be retained for a minimum of six years and three months after the disbursement of the final payment on the contract.

OIG requested 34 contract and procurement documents for each TO. The table below depicts the number of documents provided for review and the number not available for review.

Based on DIG's receiving insufficient documentation during its preliminary review of the Office of Acquisition Management, DIG is cancelling the following previously announced audits immediately:


Audit of Contract Administration of the DynCorp Second Worldwide Protective Services (WPPS II) Contract in Iraq, Task Order 009, under Contract Number S-AQM-PD-05-D1099;


Audit of Contract Administration of the Triple Canopy Second Worldwide Personal Protective Services Contract in Iraq, Task Order 007, under Contract Number S-AQM-PD05-D-1100.

I've written before on the limitations of such laws and regulations as the Military Extraterritorial Jurisdiction Act and the Uniform Code of Military Justice and thus won't rehash them here. But putting aside their specific problems what they have in common is that they focus on creating avenues of criminal liability for individual contractors, as opposed to ensuring corporate accountability to ensure long-term compliance with "use of force" policies.

According to Cheadle, contract enforcement is a simple vehicle to achieve corporate accountability. Yet, little has been written on the actual terms of the contracts that PMCs hold with the U.S. government and the potential liability they could face for criminal actions that breach specific terms of those contracts.

Just like PMC trade groups, Cheadle recognizes that PMCs are a necessary element of our armed forces abroad and that removal of PMCs from their responsibilities is an option the government cannot afford. Yet he believes that at the same time the U.S. government must find a means of punishing PMCs for criminal conduct while not hindering their essential roles in the war effort.

His solutions is elegantly simple; especially so, given that he is not proposing a new law; remember that PMC trade groups always say that there are plenty of laws on the books to ensure proper PMC accountability. Cheadle agrees with this view. He thinks the government should resolve this dilemma by holding PMCs liable for breaches of contract under an alternative clause in FAR Part 49, termination for default. FAR 49.402-4(b) permits the performance of a contract to continue in lieu of a termination for default, but only under a third-party contract or subcontract.

Termination for default is generally the exercise of the government's contractual right to completely or partially terminate a contract because of the contractor's actual or anticipated failure to perform its contractual obligations." Specifically, the government can terminate a contract for default if the contractor fails to perform any provision of the contract.

However, standard termination for default, however, is not a feasible solution to the problem of how best to enforce a violation of the WPPS II contract. PMCs cannot simply be uprooted from their roles abroad and replaced by military. PMCs cannot simply be uprooted from their roles abroad and replaced by military personnel because, to name one reason, there are not enough military personnel to replace them.

Thus, part 49 of the FAR to the rescue. It provides several options for the government "in lieu of termination for default. Under one such alternative clause, FAR 49.402-4, the government may, when in its best interest, permit the contractor to continue performance under a revised delivery schedule 8 or continue performance "by means of a subcontract or other business arrangement with an acceptable third party." This permits a contract to continue, benefiting the government, while effectively punishing the contractor by transferring the work to a third party.

How would this work in real life? Think back to the killing of Iraqi civilians by Blackwater contractors in 2007. According to Cheadle the government may, "under FAR 49.402-4(b), let Blackwater's duties under the WPPS II contract continue upon a finding of termination for default through a subcontract or third-party contract. Discussed below, this could be in the form of requiring Blackwater to hand some of its duties over to one of the other contractors under the WPPS II contract-DynCorp International or Triple Canopy-companies already familiar with the contract and fit to meet its demands."

Considering that PMC trade groups always say that it is free market competition which allows the private sector to produce "cost-effective" high performance solutions. Cheadle agrees, writing that "The key to this system is its focus on competition within the existing contract. The purpose of this competition would be to create incentives to comply with the "use of force" policy. Competition is the heart of the government contract system, the policy being to get the best price and product through competitive procedures."

Thus, trade groups can hardly complain when the laws of supply and demand are used to ensure contract compliance. This would be a great opportunity for trade groups like ISOA and PSC to match their corporate funding with their talking points.

Cheadle recognizes that a "potential problem presented by applying FAR 49.402-4(b) is that it may cause the government to hire an entity unfamiliar with the dangers of operating in Iraq and Afghanistan to take over the contract, endangering the lives of the individuals the PMCs were hired to protect. Thus, he proposes that:

The government should utilize this clause by establishing a system that requires the contract to continue through one of the two nonbreaching parties already under the WPPS II contract. Creating a system of competition among the parties already under the WPPS II contract is the best option to attain the necessary balance between a policy that ensures the safety of the con tractors and the officials they are hired to protect and a policy that ensures compliance with the "use of force" terms of the contract. This remedy would allow smooth transitions between contractors because all parties involved would already be familiar with the contract and the terrain, and would have the experience to negotiate the dangers inherent in providing security services in Iraq.

Essentially, if a contractor screws up by, say, shooting someone it shouldn't have, the company will pay the price by see its work go to another company working on the same WPPS contract.

But perhaps the greatest benefit would be this:

The greatest asset of this system would be its ability to achieve the delicate balance between the best protection of U.S. and foreign officials and compliance with the "use of force" policy of the contract, which ensures the safety of Iraqi civilians. All three of the contractors already at work under the WPPS II contract know the territory and know what they have to do to keep their subjects and their own employees safe. They would, over time, learn what steps are necessary to ensure compliance with the "use of force" policy while maintaining maximum levels of safety for their security subjects. No contractor would go so far as to sacrifice safety by not firing when there is a clear and present threat of danger. Competition among the three contractors would force them to find the balance between an effective defensive policy and maximum safety for the officials who are at the heart of the contract. The competition also likely would induce greater oversight of contractor actions within the contracting companies themselves. PMCs would likely monitor each other for potential violations, creating another layer of oversight on top of the Regional Security Officers and the Diplomatic Security High Threat Protection Program Office.