How the DoD Allows Contractors to Grade Themselves and Write Their Own Contract Terms

The Department of Defense (DoD) Inspector General's (IG) office recently found that the Marine Corps allowed their contractors for a vital troop protection system to act as government employees, including directing and evaluating government employees' work, grading their own work and writing up requirements for the follow-on contract. The contractors then bid on those requirements and won multimillion-dollar contracts.

The IG issued a report this month with the mundane title, “Contract Management of Joint Logistics Integrator Services in Support of Mine Resistant Ambush Protected Vehicles Needs Improvement.” The report points out, in glaring examples, how the Marine Corp allowed two companies to infiltrate and control two very important logistics and maintenance contracts.

The program where this abuse occurred could not be more crucial to the troops. The program does maintenance support and logistics for the Mine Resistant Ambush Protected vehicles program (MRAP). MRAP is a $17.6 billion program to build or modify military vehicles with a V-shaped hull to prevent or reduce troop injuries and death from IEDs (Improvised Explosive Devices). MRAP was a rushed program because it had the potential to save lives and prevent severe injury at a time when IEDs were wreaking havoc on American troops in Iraq and Afghanistan.

From the report:

On May 2, 2007, the Secretary of Defense designated the MRAP program as the highest priority DoD acquisition program and stated that all options to accelerate the production and fielding of the MRAP capability to the theater should be identified, assessed and applied where feasible. To reduce the burden on units receiving MRAP vehicles, JPO [Joint Program Office] MRAP established a forward presence in Iraq, Afghanistan, Qatar and Kuwait. According to the Joint Supportability Plan, the JPO MRAP Forward includes personnel from the JPO, JLI [Joint Logistics Integrator] and MRAP vehicle original equipment manufacturers to form an integrated team to stand-up, coordinate and execute JPO MRAP operations in theater.

The two companies, Jacobs Technology and SAIC (Science Applications International Corp) received contracts worth $193 million and $285 million, respectively, to do this work. SAIC started out as a subcontractor in the Jacobs Technology contract and then won the bid for the follow-on contract. This contract work was provided in Iraq, Afghanistan and Kuwait from 2007 to 2011 and the DoD provided only one government employee overseas to oversee the whole program.

According to the report, “… officials inappropriately allowed the contractor to perform inherently governmental functions, such as disciplining DoD employees and to have organizational conflicts of interest, such as helping prepare requirements for the follow-on contracts that the contractor bid on and won.” The contractors also were allowed to act like government employees and direct government personnel, signing SOPs (Standard Operating Procedures) and even went as far as being involved in disciplinary actions on government personnel. In other words, the line between the government and the contractor became so blurred that many people did not know who was a government employee and who was a contractor employee.

The report contained an amazing chart that showed that the intermingling of the government and the contractor was complete. In the top box of the organizational chart, the program manager was a government employee, but in the four boxes below him, which included the deputy and assistant program managers, were all contractor employees. The lower eight boxes for locations were government employees who had to report to the contractor employees and not directly to the government program manager. The chart reminded me of one of the last lines in George Orwell's novel “Animal Farm”:

“No question now, what had happened to the faces of the pigs. The creatures outside looked from pig to man and from man to pig and from pig to man again; but already it was impossible to say which was which.”

This, of course, was not the first time that the DoD had allowed contractors to take inherently governmental slots. Because of the lack of available troops, the DoD has used contractors in the Iraq and Afghanistan wars in areas never broached before. I wrote a book about how destructive this was for the troops and the war effort. The DoD also has jeopardized this very important MRAP program, a potential lifesaver for the troops, by allowing the contractors to literally take over the oversight and support work.

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One of the most egregious actions in this report was to allow the contractors to write up the requirements of the follow-on contract and then allow them to bid and win the contract. From the report:

The contractor also performed functions that FAR [Federal Acquisition Regulations] 7.503 lists as approaching inherently governmental, such as participating in the development of the SOW [Statement of Work, i.e. what is required to be done on the contract] and situations where contractor employees may be assumed to be DoD employees or representatives. For example, on December 7, 2009, the audit team met with the ACC-Warren Chief of Armaments Contracting Group, contracting officer and contracting specialist, where the contracting specialist stated that the contractor and JPO MRAP officials worked together to prepare the contract requirements for the JLI 02 SOW and the contracting officer agreed. Furthermore, on December 7, 2009, we asked the Product Manager for Logistics and Sustainment, JPO MRAP, about the contractor's involvement in the preparation of the SOW and he confirmed that JPO MRAP officials discussed the contract requirements in the SOW with the contractor. Therefore, contractor personnel participated in the preparation of the requirements for the contract that they bid on and were awarded.

This craziness would be laughable if it didn't have such important consequences. Cutting corners on this program could compromise the mission of providing MRAPS to the troops and threaten lives. The Marine Corps made the right noises and did a slow roll on the IG, promising that they were going to change. They will probably just wait out the IG and then go back to doing business as usual.

And it isn't the only time the DoD has done this. I have seen this contractor crossover before many times. One of the more memorable times was when I exposed the $7,622 coffee brewer on the C-5 cargo plane in the 1980s. The coffee brewer became a popular punch line on late-night television and the Pentagon became frantic to show that it was worth the money. Ludicrously, they told the press that the coffee brewer could also heat soup, and when that didn't work, they said that the coffee brewer requirements included surviving an impact of 40 Gs and was shielded from EMP (Electro Magnetic Plus that can occur during a nuclear blast and knock out electronics). It certainly was understandable that you would want to protect a plane's vital electronics from EMP, but its coffee brewer? Also, what would a C-5 look like after an impact of 40 Gs? The plane would be reduced to rubble, but the coffee brewer would be intact and perking away.

This produced another round of satire, including a cartoon of a flight crew sitting next to a crashed C-5, giving the thumbs up while drinking fresh coffee from the coffee brewer, with a mushroom cloud in the background. Finally, the Air Force fell on its sword and said that it was their fault because they wrote overly strong military requirements for the coffee brewer. I investigated more and received a document that clearly showed that Lockheed, the manufacturer of the C-5, had written the main requirements for the coffee brewer and the Air Force went along with the ridiculous requirements. The height of irony was that Lockheed did not put in an automatic shut off for the unit and the heating coil burned up when it ran out of water. Maintenance crews for the C-5 told me that they had to replace the heating coil over and over, but the unit would survive a nuclear war.

Lockheed justified charging $7,622 for a coffee brewer, and the acquiescence by the DoD cost us untold money with no increase in defense. This MRAP fiasco is just another example, but more important because it could cost the lives of our troops if the contractor cuts corners as they evaluate themselves.

This destructive collusion between the contractors and the DoD has unfortunately been inbred into our military procurement culture. I remember when June Gibbs Brown was nominated in 1987 to be the first female DoD inspector general. I had high hopes for her since she had made a reputation as a tough investigator while serving as inspector general of NASA and inspector general of the US Department of the Interior. However, my expectations were crushed when her first quote as the nominee for DoD IG was that she wanted to raise the comfort level between the DoD and their contractors. This preposterous quote came from the person who was supposed to be the head hard-nosed auditor for the DoD. Ironically, she went on to be the IG for Health and Human Services and got a reputation for rooting out Medicare fraud. Unfortunately, nothing really changed during her two years at the DoD IG while being comfortable with the contractors.

So, what is the solution to this? Not easy after all these years. As I mentioned in a past column, dramatically closing the revolving door between contractors and the DoD would be a start. However, I believe that the DoD must decide what is inherently governmental (such as writing requirements, doing evaluations on contractors and managing contracts) and throw out the management companies that are commingled with most of the management in the DoD. Known as Beltway Bandits, these contractors keep perpetuating their contracts by making them the only company that can fit the requirements. The Bush administration made a huge push to outsource and privatize the oversight of DoD contracting and management and the Obama administration is trying to bring these duties back into the government, but progress is slow, especially now that the House of Representatives is trying to push the outsourcing of management again. This back and forth of procurement regulations is encouraging more chaos and difficult oversight because the goal posts keep changing.

It should be obvious to anyone with common sense that contractors should not be supervising government employees, evaluating themselves and writing requirements for contracts on which they plan to bid. Anyone with even a basic understanding of checks and balances knows this, and outside this line are just people who are gaming the system.

Then, Congress needs to make it illegal, not by regulation or civil law, but by criminal law, for DoD management to allow contractors to get back into evaluating themselves and government employees or writing requirements so that they or their buddies get the contracts without true competition. This “comfort level” is so strong between the contractors and the DoD that I believe only the threat of jail, not just the threat of fines, will get the attention of the government contract managers and the Beltway Bandits. White-collar employees who commit fraud in the DoD on both sides often see the fines from civil actions against contractors as just the cost of doing business and rarely does anyone truly get debarred once they are caught because they are deemed vital to the national defense. A few contractor CEOs might change their tune if they thought that they might go to jail. The same goes to the generals who have tolerated or encouraged this insidious type of fraud. Of course, Congress also has to press the DoD to criminally prosecute the offenders and that also will not be easy.

Sen. Harry Truman had the guts to do this with his committee that investigated war fraud in World War II. From David McCullough's book, “Truman”:

Disclosures produced by his committee were shocking. Curtiss-Wright was discovered manufacturing faulty airplane engines for delivery to combat forces. One inspector for Curtiss-Wright, a man with two nephews in the Army Air Corps, broke down and wept as he told a committee investigator what was going on. “If I were the executive in charge of a plant of that sort, I would know what was going on,” Truman told an Air Corps officer who testified, “and I think it is plain negligence and maybe worse than that … that they didn't know. They should have known.” The officer agreed. “No doubt about it,” said Truman. The Air Corps had denied there were problems. Curtiss-Wright launched an advertising campaign stressing the company's contribution to winning the war. But faulty engines were a reality and as Truman surmised, more than negligence was involved. As an aftermath of the committee's investigation, one Air Corps general involved was sent to prison.

I used to mention this jailing of a general to high-level people in Washington and they would answer that it was a special circumstance because the US was at war and the stakes were high. Well we are at war again and the MRAP program's mismanagement and fraudulent self-dealing could also cost lives. So, where is our patriotism now, Mr. Truman? Who will step up to the plate and jail another general? Still waiting after all these years.