[Senate Hearing 110-673]
[From the U.S. Government Publishing Office]
S. Hrg. 110-673
EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT WASTE, FRAUD,
ABUSE, AND CORRUPTION IN IRAQ
=======================================================================
HEARINGS
before the
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
SPECIAL HEARINGS
MARCH 11, 2008--WASHINGTON, DC
JULY 23, 2008--WASHINGTON, DC
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
__________
U.S. GOVERNMENT PRINTING OFFICE
43-280 PDF WASHINGTON DC: 2009
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001
COMMITTEE ON APPROPRIATIONS
ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont TED STEVENS, Alaska
TOM HARKIN, Iowa ARLEN SPECTER, Pennsylvania
BARBARA A. MIKULSKI, Maryland PETE V. DOMENICI, New Mexico
HERB KOHL, Wisconsin CHRISTOPHER S. BOND, Missouri
PATTY MURRAY, Washington MITCH McCONNELL, Kentucky
BYRON L. DORGAN, North Dakota RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California JUDD GREGG, New Hampshire
RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah
TIM JOHNSON, South Dakota LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island SAM BROWNBACK, Kansas
FRANK R. LAUTENBERG, New Jersey WAYNE ALLARD, Colorado
BEN NELSON, Nebraska LAMAR ALEXANDER, Tennessee
Charles Kieffer, Staff Director
Bruce Evans, Minority Staff Director
C O N T E N T S
----------
Tuesday, March 11, 2008
Page
Opening Statement of Senator Patrick J. Leahy.................... 1
Prepared Statement of Senator Robert C. Byrd..................... 1
Statement of Senator Thad Cochran................................ 4
Statement of Hon. David M. Walker, Comptroller General,
Government Accountability Office............................... 5
Prepared Statement of........................................ 7
Background....................................................... 9
Poor Contracting Outcomes and Accountability Hinder U.S. Efforts
in Iraq........................................................ 10
Long-standing Problems Hinder DOD's Management and Oversight of
Contractors Supporting Deployed Forces......................... 13
Lack of Adequate Strategic Planning Impedes U.S. Efforts to
Develop Capacity in Iraqi Ministries and Improve Outcomes in
Iraq's Energy Sector........................................... 16
Statement of Hon. Claude M. Kicklighter, Inspector General,
Department of Defense.......................................... 19
Prepared Statement of........................................ 22
OIG Strategy..................................................... 22
In Theater Presence.............................................. 22
Coordination..................................................... 22
Details on Munitions Accountability.............................. 23
Details on Investigations........................................ 24
Details on Audits................................................ 26
Completed Audit Work............................................. 27
Ongoing Audit Work............................................... 28
Planned Audit Work............................................... 29
Details on Anticorruption Activities............................. 29
Panel on Contracting Integrity................................... 30
Significant Accomplishments...................................... 30
Statement of Stuart W. Bowen, Jr., Special Inspector General for
Iraq Reconstruction............................................ 31
U.S. Anticorruption Programs Insufficient........................ 32
Fraud in Iraq Reconstruction..................................... 32
Waste in Iraq Reconstruction..................................... 32
Sustainment of Reconstruction Effort............................. 33
Prepared Statement of Stuart W. Bowen, Jr........................ 34
SIGIR Background................................................. 35
Audits........................................................... 36
Inspections...................................................... 36
Investigations................................................... 37
Reconstruction Program Vulnerable to Fraud, Waste, and Abuse..... 38
The Challenge in Quantifying Waste............................... 41
Government of Iraq (GOI) Acceptance and Sustainment of U.S.-
funded Infrastructure Crucial to Ensuring U.S. Assistance is
Not Wasted..................................................... 41
U.S. Transfer Process Needs Improvement.......................... 42
SIGIR Inspections and Audits Indicate Problems in GOI Sustainment
of U.S. Funded Projects........................................ 42
Results of SIGIR Investigations.................................. 44
Anticorruption: U.S. Programs and Iraqi Efforts.................. 46
The Nature of Corruption......................................... 46
U.S. Embassy Progress in Sustaining High Level Leadership and
Comprehensive Approach......................................... 47
Government of Iraq Anticorruption Efforts: Challenges and
Progress....................................................... 47
Corruption Efforts Must be Sustained............................. 48
SIGIR Lessons Learned and Recommendations........................ 48
Options for Congress to Consider................................. 49
Systemic Acquisition Challenges at the Department of Defense..... 60
Use of Overseas Companies by Kellogg, Brown and Root (KBR)....... 62
The Betrayal of Judge Radhi...................................... 69
Statement of Judge Radhi Hamza al-Radhi, Former Commissioner,
Commission on Public Integrity, Republic of Iraq............... 77
Prepared Statement of........................................ 78
Greetings........................................................ 78
Reasons for an Iraqi Commission on Public Integrity.............. 78
Appointment as Commissioner...................................... 79
Operation of CPI................................................. 79
Results.......................................................... 79
Guiding Principle................................................ 80
Main Obstacles................................................... 80
The Future....................................................... 81
Additional Committee Questions................................... 99
Questions Submitted to David M. Walker........................... 99
Questions Submitted by Senator Robert C. Byrd.................... 99
Questions Submitted by Senator Dianne Feinstein.................. 100
Questions Submitted by Senator Judd Gregg........................ 102
Questions Submitted to Claude M. Kicklighter..................... 103
Questions Submitted by Senator Robert C. Byrd.................... 103
Questions Submitted by Senator Dianne Feinstein.................. 106
Questions Submitted to Stuart W. Bowen, Jr....................... 107
Questions Submitted by Senator Robert C. Byrd.................... 107
Questions Submitted by Senator Frank R. Lautenberg............... 111
Questions Submitted by Senator Judd Gregg........................ 113
Questions Submitted by Senator Larry Craig....................... 115
Questions Submitted to Judge Radhi Hamza al-Radhi................ 115
Questions Submitted by Senator Robert C. Byrd.................... 115
Wednesday, July 23, 2008
Opening Statement of Senator Robert C. Byrd...................... 121
Statement of Senator Thad Cochran................................ 123
Statement of Hon. Gordon England, Deputy Secretary of Defense,
Department of Defense.......................................... 125
Shay Assad, Director, Defense Procurement, Department of Defense. 125
Prepared Statement of Gordon England............................. 127
Oversight of DOD Contracts for OIF............................... 127
Department of Defense Inspector General's Report................. 128
Systemic Challenges by Functional Area........................... 128
Systemic Challenges Across Functional Areas...................... 128
DOD Initiatives.................................................. 128
DOD Audit Community Initiatives.................................. 128
Defense Contract Audit Agency (DCAA)............................. 128
Special Inspector General for Iraq Reconstruction (SIGIR)........ 129
Actions Stemming From SIGIR Contracting Lessons Learned
Recommendations................................................ 129
Gansler Commission Report........................................ 129
Defense Contract Management Agency (DCMA)........................ 130
Excellence in the Pursuit of Perfection.......................... 130
Combating Corruption, Waste, Fraud, and Abuse in Iraq............ 131
Statement of Hon. Gordon S. Heddell, Acting Inspector General,
Department of Defense.......................................... 132
Mary Ugone, Department of Defense................................ 132
IG Strategy...................................................... 132
Section 842...................................................... 133
Lessons Learned and Initiatives.................................. 133
Prepared Statement of Gordon S. Heddell.......................... 133
OIG Strategy..................................................... 134
New OIG Initiatives.............................................. 135
Ongoing Oversight Work........................................... 136
Audit............................................................ 139
Policy and Oversight............................................. 141
Special Plans and Operations..................................... 142
Intelligence..................................................... 143
Interagency Oversight............................................ 144
Comprehensive Audit Plan for Southwest Asia...................... 145
Statement of General Benjamin S. Griffin, Commanding General,
U.S. Army Materiel Command..................................... 205
Jeffrey Parsons, Executive Director, U.S. Army Materiel Command.. 205
Lee Thompson, Program Director, Logistics Civil Augmentation
Program, U.S. Army Sustainment Command......................... 205
Prepared Statement of General Benjamin S. Griffin................ 207
Weapons Misplaced in Iraq........................................ 212
Loss of U.S. Coalition Provisional Authority Funds in Iraq....... 214
Army Contracting Command......................................... 215
Acquisition Workforce Training................................... 216
Lack of Oversight of U.S. Contracts in Iraq...................... 217
Extending the Statute of Limitations............................. 219
Prepared Statement of Senator Patrick J. Leahy................... 220
Army Requests Additional General Officers........................ 221
Construction Contracts in Afghanistan............................ 222
Accountability from U.S. Contractors............................. 223
Agressive Prosecution of Wrongdoing.............................. 224
Poorly Executed Contracts Endanger our Troops.................... 226
AEY Ammunition Contracts......................................... 228
Fair Treatment of Whistleblowers?................................ 229
Charles Smith Allegations........................................ 230
KBR Water Allegations............................................ 233
LOGCAP IV Acquisition Strategy................................... 233
RCI Audit Assistance............................................. 234
Additional Committee Questions................................... 236
Questions Submitted to Hon. Gordon England....................... 236
Questions Submitted by Senator Robert C. Byrd.................... 236
Questions Submitted by Senator Byron L. Dorgan................... 244
Questions Submitted by Senator Frank R. Lautenberg............... 255
Questions Submitted by Senator Mitch McConnell................... 256
Question Submitted by Senator Wayne Allard....................... 257
Questions Submitted to General Benjamin S. Griffin............... 257
Questions Submitted by Senator Robert C. Byrd.................... 257
Questions Submitted by Senator Byron L. Dorgan................... 259
Question Submitted by Senator Frank R. Lautenberg................ 264
Questions Submitted to Gordon S. Heddell......................... 265
Questions Submitted by Senator Robert C. Byrd.................... 265
Questions Submitted by Senator Byron L. Dorgan................... 271
Questions Submitted by Senator Frank R. Lautenberg............... 272
Questions Submitted by Senator Wayne Allard...................... 273
Questions Submitted by Senator Larry Craig....................... 275
EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT WASTE, FRAUD,
ABUSE, AND CORRUPTION IN IRAQ
----------
TUESDAY, MARCH 11, 2008
U.S. Senate,
Committee on Appropriations,
Washington, DC.
The committee met at 10:44 a.m., in room SD-106, Dirksen
Senate Office Building, Hon. Patrick J. Leahy presiding.
Present: Senators Leahy, Murray, Dorgan, Feinstein,
Lautenberg, Nelson, Cochran, Craig, and Allard.
OPENING STATEMENT OF SENATOR PATRICK J. LEAHY
Senator Leahy. Good morning.
First off, I apologize to all of our witnesses and those in
the audience for being late. It was unavoidable.
Chairman Byrd is not here today, but without objection I
will include his full statement in the record.
[The statement follows:]
Prepared Statement of Senator Robert C. Byrd
Ladies and Gentlemen, Members of the Committee, and our
witnesses, I thank you for your attendance this morning.
Today's hearing is the first in a series of hearings to be
conducted by the Appropriations Committee to examine the costs
and consequences of fraud, waste, abuse and corruption within
Iraq and with U.S. government contracts involving Iraq. I hope
that over the course of these hearings we will discover some
solutions to these problems, some remedies to drain the
festering abscess of waste, fraud, abuse and corruption.
Media reports, think tank papers and Congressional efforts,
especially those of Representative Waxman and Senator Dorgan,
have documented many aspects of these problems. But, it is
still difficult to determine the full extent of the fraud and
corruption that have become epidemic throughout seemingly every
aspect of U.S. involvement in Iraq.
Since 2003, there has been a slow steady drumbeat of
reports that throw light in some very dark corners of the Iraqi
reconstruction effort, but over the last year, that drumbeat
has intensified. It is becoming clear that fraud, waste, abuse
and corruption are major contributors to the lack of progress
on economic and governmental reconstruction in Iraq. This lack
of success, in turn, undermines the legitimacy and authority of
the Iraqi government and contributes to the perceived need for
the United States and the international community to remain in
Iraq.
The United States alone has invested well over six hundred
billion dollars, five long and difficult years, and almost
4,000 lives to overthrow of Saddam Hussein's regime and to the
subsequent stabilization and rebuilding of Iraq. Our own
economy suffers while war deficits mount. We will hear
testimony today about billions in U.S. dollars, wrapped in
plastic and flown to Iraq, never to be seen again. We have
learned about millions of dollars in cash, U.S. currency,
carried out of U.S. offices in Iraq in boxes and put in car
trunks, only to be seized by Iraqi officials before it could be
spent on its intended purpose. That money has never been
accounted for. Weapons, too, by the tens of thousands, have
been distributed with little or no accountability, and their
current whereabouts remain in question.
Iraq is a nation of great natural resources, with vast oil
wealth. It was asserted by the Administration that such
resources could be tapped to fund reconstruction and investment
in economic growth. So what has happened?
We all know that the security situation in Iraq is still
poor. Better, perhaps, than it was in 2006, but still
insufficient to encourage local economic investment, let alone
foreign investment. Despite more than $45 billion in U.S.
reconstruction investment alone since 2003, Iraq's
infrastructure remains in poor shape. Oil production has not
surpassed pre-war levels, power production fails to deliver
more than a few hours of electricity per day, clean water is
often not available, schools and hospitals still struggle. As
of April 2007, only 8 of 150 planned primary healthcare
facilities to be built by 2006 with U.S. reconstruction aid
were open to the public. Our billions in reconstruction have
not translated into bricks and mortar or lights and water, at
least for the average Iraqi.
After five years of U.S. assistance, Iraq's economy is
still struggling, and most of the country remains on a cash
economy. Iraq soldiers disappear for weeks to hand carry their
paychecks to their families because the banking system is
inadequate. The government is unable to execute its budgets, it
is rife with corruption and fraud, and it appears unable or
unwilling to police itself. We have heard of instances in which
$800 million of $1.3 billion allocated for Iraqi military
procurement in a single year simply vanished, lost in the
overseas bank accounts of former officials who live in luxury
while their nation suffers.
Iraq's vast oil wealth has, to far too large an extent,
financed Iraqi insurgents and militias. Some of it has lined
the pockets of Iraqi government officials who have legions of
so-called ``ghost employees'' working for them. It pays for
fuel subsidies to Iraqi citizens, some of whom profit by
reselling oil purchased at the subsidized price to United
States contractors at an inflated price. No wonder there is
little incentive for them to achieve political reconciliation.
Some U.S. officials ask why we should care how the Iraqis
spend their own money. I'll tell you why. When Iraq misspends
its own money and does not provide for its own security and its
own reconstruction, guess who steps in to backfill that need?
You do, and I do, and every American taxpayer does, to the tune
of over $150 billion each year after year. That is why we must
care, and care a lot, about corruption in the Iraqi government.
Some Americans might not mind their tax dollars helping average
Iraqis build a workable society, but I will bet that not one
single American taxpayer likes the idea of their tax dollars
fattening the wallet of a corrupt Iraqi official or going to an
insurgent group that uses that money to build or buy explosive
devices to be used against our troops.
Some U.S. contractors appear to be getting fat off of this
war as well. Congress has heard from some whistleblowers that
have brought to light the excesses associated with the
profligate use of ``cost-plus'' contracts, and the practice of
double counting or double billing for services provided to U.S.
service members, as well as egregious abuses involving shoddy
materials, contaminated water, or spoiled food. Contractors
have been paid in full and been given bonuses even when their
work was not exemplary. No civilian contractor here in the
United States would get away with this kind work; why is it
allowed to occur in Iraq?
What we are seeing in Iraq, I fear, is an endless cycle of
corruption, an ever-turning water wheel of corrupt practices
fed by the endless stream of dollars from U.S. reconstruction
assistance, military operations support contracts, and
misappropriated Iraqi oil revenues. As long as this wheel keeps
turning and profiting contractors, officials, insurgents, and
militias, there is no incentive for anyone to shut it down. Why
would Iraqi officials want to build a functioning, transparent,
accountable government and live only on their own salaries,
when they can skim millions, take bribes and collect salaries
for non-existent employees? Why would contractors want to make
only a modest profit, when there is little accountability for
fraudulent practices? And why would the insurgents and
militants work for reconciliation or peace and stability in
Iraq when their funding, prestige, and social aims are fostered
in an environment of instability and corruption?
Our witnesses today include, on our first panel, the
Honorable Claude M. Kicklighter, the Inspector General for the
Department of Defense; Stuart W. Bowen, Jr., the Special
Inspector General for Iraq Reconstruction; and the Honorable
David M. Walker, Comptroller General of the United States.
On our second panel, I am pleased that Judge Radhi Hamza
al-Radhi, the former Director of the Iraqi Commission on Public
Integrity, will share his observations regarding the scope of
government corruption and criminal activity in Iraq, as well as
the adequacy of anticorruption efforts within the Iraqi
government and the effectiveness of U.S. anticorruption
support. Judge Radhi has faced death threats for his heroic
efforts in Iraq, and members of his staff have been killed
pursuing corrupt activities in Iraq.
Senator Leahy. As you know, the chairman's been a strong
voice for accountability of our assistance programs in Iraq. I
talked with Senator Byrd yesterday. I know he still has that
concern. We look forward to him being back here very soon.
This committee has heard testimony on the President's
budget request for billions of dollars for Iraq reconstruction
over several years.
The Appropriations Committee is actually the only regulator
on the spigot this administration opened in 2003, to flood Iraq
with billions of dollars of U.S. taxpayers' money. I think it's
time, after all these years, for the Congress to have a strong
hand on that spigot, especially as we're considering another
$108 billion in supplemental emergency funds--money which the
United States has to actually borrow, and pay interest on.
Investigations of the Special Inspector General for Iraq
Reconstruction (SIGIR), the Government Accountability Office
(GAO), the media and others, have revealed waste and fraud on a
scale unprecedented in our foreign assistance programs.
The administration's attitude toward budgeting, spending
and accounting for U.S. tax dollars in Iraq can actually be
summed up in two words, ``Anything goes.'' Just put it on the
American taxpayers' credit card.
Meanwhile, the American people's priorities here at home
have been relegated further and further to the back of the
line. We've heard this year that there are even more needs in
the United States that are going to have to be put on the back
burner, as we send more money to Iraq. Incidentally, we've been
there longer than the United States was in World War II.
Beginning last year, the new Congress has begun oversight
to try to correct these mistakes, and learn lessons so we can
avoid them in the future. At today's hearing, we'll continue
that process.
For an administration that came into office insisting they
could be trusted to spend taxpayer dollars wisely, and then
ignored any advice they disagreed with--including from people
with decades of experience--both Republicans and Democrats--the
record's shameful.
Even today, the administration continues to oppose remedies
like the War Profiteering Prevention Act.
It's not that nothing has been accomplished--none of us are
suggesting that. There have been some very successful projects
in Iraq. But if one compares the results with the exorbitant
amounts spent, it's an embarrassment.
As we struggle here, in the United States, to find the
money to repair our decaying bridges or our roads or our
schools, the administration has wasted hundreds of millions of
dollars--some would say billions--in Iraq.
Now, at first, of course, we were told by the
administration and the American people were told that Iraqi oil
would pay to rebuild the country. That assertion by the chief
architects of the war turned out to be either naive or
intentionally dishonest. I tend to think the latter.
Instead, since 2003, they spent $45 billion for Iraqi
relief and reconstruction, which of course does not include the
half trillion dollars spent on the military operations. In
fact, the long-term cost of this war is already expected to
approach $3 trillion, if you count the cost of rebuilding our
military and caring for the wounded.
The administration spent huge amounts on no-bid contracts
to companies like Halliburton and their subsidiaries, companies
that have close connections with the White House. They charged
exorbitant fees, they often did shoddy work, or never completed
the work they were paid to do.
I, and others, have urged the administration to focus on
smaller projects and give more responsibility and involvement
to the Iraqi people themselves, those who know the area the
best. But stubbornness, arrogance and incompetence won out, and
only recently has the approach begun to change.
I want to commend Ambassador Ryan Crocker, and Ambassador
Charles Ries, and their staffs, for the long overdue changes
they're making.
As chairman of the State and Foreign Operations
Subcommittee, I've seen how foreign aid can be effective--it
can help transform people's lives for the better, it can help
transform whole countries. And it serves our national interests
in many, many ways. But in Iraq the experts were ignored by
political ideologues who wanted a quick fix. So, at a time when
hardworking Americans are losing their homes, and losing their
jobs, and spending their savings on the soaring costs of
healthcare, trying to make ends meet, these same taxpayers have
a right to know how the administration has squandered so much
of their hard-earned money in Iraq.
And they have a right to ask, today, with the price of oil
at $108 a barrel, and the administration asking for billions of
dollars more for Iraq reconstruction, why the American people
should continue to foot the bill for what many say the Iraqis
can afford themselves.
I've been joined by one of the most distinguished and
senior members of the United States Senate, Senator Thad
Cochran, who has also chaired this committee in the past, and I
yield to Senator Cochran.
STATEMENT OF SENATOR THAD COCHRAN
Senator Cochran. Mr. Chairman, Thank you very much. You
know, the seniority system is still alive and well in the U.S.
Senate, and the more I'm here, the longer I'm here, the more I
appreciate it.
I also appreciate the fact that we have a panel of
witnesses here who are very important. We appreciate your
coming to talk with us about the reconstruction, the rebuilding
in Iraq, and the challenges that we face there, Comptroller
General, GAO, Inspector General of the Department of Defense,
and Stuart Bowen, the Special Inspector General for Iraq
Reconstruction. We appreciate all of the hard work you are
undertaking in terms of trying to analyze and make
recommendations for changes in policies, procedures, laws that
we may consider, identifying the priorities for more funding,
or funding that isn't necessary in this effort--we would
appreciate your advice and counsel as we proceed with our
hearing today.
Thank you, Mr. Chairman.
Senator Leahy. Thank you, Senator Cochran.
And our witnesses will be, first, David Walker, who is the
Comptroller General of the United States. He became the seventh
Comptroller General and began his 15-year term November 9,
1998, if I'm correct.
As Comptroller General, he is the Nation's chief
accountability officer, and he's the head of the U.S.
Government Accountability Office, in the legislative branch,
which was founded in 1921 to improve the performance and ensure
the accountability of the Federal Government for the benefit of
the American people.
He will be followed by Claude M. Kicklighter, who is the
Inspector General of the Department of Defense. He's the sixth
Senate-confirmed DOD Inspector General, but he's served his
country, not only since becoming inspector general on April 30
of last year, for over 50 years. First, as an Army officer for
35 years, retiring as a lieutenant general, followed by over 15
years as a distinguished public servant.
He is selected by the Secretaries of State and Defense to
establish and direct the Iraq/Afghanistan Joint Transition
Planning Group, and is a man of great knowledge and competence.
He'll be followed by Stuart Bowen, who is the Special
Inspector General for Iraq Reconstruction. He has served as
Special Inspector General since October 2004. He was previously
the Inspector General for the Coalition Provisional Authority,
for which he was appointed in January 2004, and he has been
asked to conduct effective oversight of $47 billion
appropriated for the reconstruction of Iraq.
We'll begin with the Comptroller General.
Mr. Walker, go ahead.
STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL,
GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Walker. Thank you, Senator Leahy, Senator Cochran,
members of the Senate Appropriations Committee. I'm pleased to
be here today to discuss the challenges that the United States
must address in order to improve performance and assure
accountability over U.S. efforts to stabilize and reconstruct
Iraq.
Between fiscal years 2001 and 2008, Congress appropriated
nearly $700 billion for the global war on terrorism (GWOT). The
majority of this amount has been provided for DOD military
operations in support of Operation Iraqi Freedom (OIF),
including the cost of equipping, maintaining, and supporting
our deployed forces.
About $45 billion of this amount was provided for
reconstruction efforts, including rebuilding Iraq's oil and
electricity sectors, improving its security forces, and
enhancing Iraq's capacity to govern.
I'm pleased to appear here today with two of my colleagues
from the accountability community, the DOD Inspector General,
and the Special Inspector General for Iraq Reconstruction. As
you know, GAO and the Inspectors General have different roles
and responsibilities, and we try to work in a coordinated
fashion to try to get our job done, while avoiding duplication
of efforts.
At GAO, our work tends to be more strategic, more long
range, and cross-cutting across the different silos of
Government, whereas the Inspectors General tend to focus on
fighting fraud, waste, abuse, and mismanagement within their
respective Departments and agencies, and they tend to drill
down more than GAO does.
I would like to note that--since one of the concerns of
this committee is the issue of fraud, waste, and abuse--I would
like to note that with regard to U.S. funds, fraud is not a
major problem. It is a major problem with Iraqi funds.
Corruption is a serious problem in Iraq.
But waste is a huge problem, both for the United States as
well as for Iraq, and in that regard I recently worked with
several of my colleagues in the Inspector General community to
develop a definition of waste, which I found had not been
defined before.
As we see it, waste occurs when taxpayers, in the
aggregate, do not receive reasonable value for money in
connection with any Government-funded activity, due to
inappropriate acts or omissions by officials with control over,
or access to, Government resources.
Most waste does not involve a violation of law, but it does
involve mismanagement resulting from poor leadership or
guidance, inappropriate acts or omissions, including the use of
poor business arrangements or inadequate oversight, often
caused by having too few skilled people to manage and oversee
the task.
The United States is entering into its fifth year of
efforts to rebuild and stabilize Iraq, but these efforts have
neither consistently achieved their desired outcomes, nor have
they done so, always, in an economic and efficient manner.
While specific facts and circumstances differed, a lack of
well-defined requirements, poor business arrangements, and
inadequate oversight and accountability have affected
reconstruction, stabilization, and support efforts, alike.
Several longstanding and systemic problems continue to
hinder the Department of Defense's management and oversight of
contractors at deployed locations, including the failure to
follow guidance, the failure to provide adequate numbers of
contract oversight personnel, the failure to systematically
collect and distribute lessons learned, and the failure to
ensure pre-deployment training for military commanders and
contract oversight personnel who have a role in connection with
contractors.
I might, however, note, in fairness--things are getting
better, and that a number of the recommendations we've made
have been implemented. There's been an intention to implement
others, and so we're seeing improvement, but we've still got a
long way to go.
The United States has made available nearly $6 billion to
rebuild Iraq's energy sector, as an example, and $300 million
to develop its Government ministries, but neither one of these
important efforts has a strategic and integrated plan.
We have a number of players on the field in the Federal
Government, working with their Iraqi partners. Each are trying
to do the best they can with regard to their narrow span of
control, but we need a strategic and integrated plan with
responsibility and accountability, not only overall, but with
regard to each major components in order to make sure that
we're going to achieve positive results in an economic,
efficient, and effective manner.
The Iraqi Government is challenged. There is rampant
corruption. There are problems with regard to capacity of their
skills and knowledge, there are problems, also, with regard to
factionalization that exists within a number of the ministries,
especially the largest ministries.
We've made certain recommendations to the State Department
about putting together this strategic and integrated plan in
connection with these two matters. As an example, they came
back and said they felt that was the responsibility of the
Iraqi Government. In our view it's a shared responsibility.
U.S. taxpayer money is involved. And while it's a shared
responsibility to be successful, we think that the State
Department needs to work with the Iraqi Government to make
these plans a reality.
Thank you, Senators, and I will be more than happy to
answer questions after my colleagues have their opportunity to
speak.
Senator Leahy. Thank you very much, Mr. Walker.
[The statement follows:]
Prepared Statement of David M. Walker
Mr. Chairman and Members of the Committee: I am pleased to be here
today to discuss the challenges the United States must address to
successfully improve performance and ensure accountability over U.S.
efforts to stabilize and reconstruct Iraq. In my statement today, I
will discuss (1) factors contributing to poor contracting outcomes and
accountability, (2) long-standing issues in the Department of Defense's
(DOD) management and oversight of contractors supporting deployed
forces, and (3) efforts to improve the capacity of the Iraqi
government.
Between fiscal years 2001 to 2008, Congress appropriated nearly
$700 billion for the global war on terrorism.\1\ The majority of this
amount has been provided to DOD for military operations in support of
Operation Iraqi Freedom, including the cost of equipping, maintaining,
and supporting our deployed forces. About $45 billion was provided for
reconstruction efforts, including rebuilding Iraq's oil and electricity
sectors, improving its security forces, and enhancing Iraq's capacity
to govern. Prudence with taxpayer funds and growing long-range fiscal
challenges demand that the United States maximize its return on the
billions of dollars invested in Iraq. Further, strengthening Iraq's
fragile government institutions, which have thus far failed to
adequately deter corruption, stimulate employment, or deliver essential
services, is critical to establishing a peaceful, stable, and secure
Iraq.
---------------------------------------------------------------------------
\1\ This figure includes military appropriations for Operation
Noble Eagle, Operation Enduring Freedom, and Operation Iraqi Freedom,
as well as stabilization and reconstruction appropriations for Iraq and
Afghanistan.
---------------------------------------------------------------------------
My statement today is based upon GAO's extensive work spanning
several years. Since 2003, we have issued nearly 130 Iraq-related
reports and testimonies.\2\ Our work in Iraq largely has been performed
under my authority as Comptroller General to conduct evaluations on my
own initiative since it is a matter of broad interest to the entire
Congress. We performed this work in accordance with generally accepted
government auditing standards.
---------------------------------------------------------------------------
\2\ To see GAO reports on Iraq, click on http://GAO.gov/docsearch/
featured/oif.html.
---------------------------------------------------------------------------
I am pleased to appear with the DOD Inspector General and the
Special Inspector General for Iraq Reconstruction. As you know, GAO and
the inspectors general have different, but complementary, roles and
responsibilities. GAO's broad audit authority allows it to support
Congress through strategic analyses of issues that cut across multiple
federal agencies and sources of funding, while the inspectors general
focus primarily on preventing and exposing fraud, waste, and abuse in
individual federal agency programs. The abilities of the inspectors
general to provide in-country oversight of specific projects and
reconstruction challenges have enabled GAO to focus on national,
sector, and interagency issues. We and the other accountability
organizations coordinate our oversight efforts to avoid duplication and
leverage our resources.
I would like to note that several of my colleagues in the
accountability community and I have developed a definition of waste. As
we see it, waste occurs when taxpayers do not receive reasonable value
for their money in connection with any government-funded activity due
to inappropriate acts or omissions by officials with control over or
access to government resources. Most waste does not involve a violation
of law, but it does involve mismanagement resulting from poor
leadership or guidance; inappropriate actions or omissions, including
the use of poor business arrangements; or inadequate oversight, often
caused by having too-few skilled people. Our reports and testimonies
have provided specific examples where such issues resulted in higher
costs, schedule delays, and unmet goals. I highlight some of these in
my testimony. Nevertheless, estimating or quantifying the financial
impact of fraudulent, wasteful, or abusive practices is not always
feasible or practicable. However, the inability to do so should not
detract from the need to improve management and accountability over our
efforts in Iraq.
SUMMARY
The United States is entering its fifth year of efforts to rebuild
and stabilize Iraq, but these efforts have neither consistently
achieved their desired outcomes nor done so in an economic and
efficient manner. While the specific facts and circumstances differed,
a lack of well-defined requirements, poor business arrangements, and
inadequate oversight and accountability have affected reconstruction,
stabilization, and support efforts alike. Two GAO reports issued in
July 2007 illustrate some of these problems. In one report, we found
that DOD completed negotiations for task orders on an oil contract more
than 6 months after the work commenced. As a result, the contractor
incurred almost all of its costs at the time of negotiations, which
influenced DOD's decision to pay nearly all of the $221 million in
costs questioned by the Defense Contract Audit Agency (DCAA). In a
second report, we found that unclear DOD guidance, inadequate staff,
and insufficient technology resulted in poor accountability over
190,000 weapons provided to the Iraqi security forces. DOD concurred
with our recommendation to identify accountability procedures for the
program to train and equip the Iraqi security forces. However, as of
March 2008, DOD had not developed the necessary procedures.
Several long-standing and systemic problems continue to hinder
DOD's management and oversight of contractors at deployed locations,
including the failure to follow planning guidance, provide adequate
numbers of contract oversight personnel, systematically collect and
distribute lessons learned, and ensure predeployment training for
military commanders and contract oversight personnel on the use and
role of contractors. The scale of contractor support DOD relies on
today in locations such as Iraq and elsewhere amounts to billions of
dollars worth of goods and services each year, underscoring the need to
effectively manage and oversee contractor efforts. The magnitude of
this support demands that DOD ensure that military personnel have the
guidance, resources, and training to effectively monitor contractor
performance at deployed locations. However, our work has identified
instances where poor oversight and management of contractors led to
negative financial and operational impacts. We have made a number of
recommendations aimed at strengthening DOD's management and oversight
of contractor support at deployed locations, and the department has
agreed to implement many of those recommendations. However, we have
found that DOD has made limited progress implementing some key
recommendations.
The United States has made available nearly $6 billion to rebuild
Iraq's energy sector and $300 million to develop its government
ministries but lacks integrated strategic plans for both efforts.
Building the capacity of the ministries is critical to ensure that Iraq
can effectively assume responsibility for delivering government
services and sustain the effort to rebuild and stabilize the country.
Rebuilding Iraq's energy sector is necessary to ensure that Iraq can
pay for these tasks and provide essential services to the Iraqi people.
However, in the absence of a comprehensive and integrated strategic
plan, U.S. efforts to build the capacity of the Iraqi government have
been hindered by multiple U.S. agencies pursuing individual efforts
without overarching direction. The creation of a comprehensive and
integrated strategic plan for the energy sector is also essential for
Iraq to identify the most pressing needs and address challenges
affecting future development prospects. We recommended that the State
Department work with Iraqi ministries to develop an integrated energy
plan. State commented that the Iraqi government, not the U.S.
government, should act on our recommendations. Given the billions of
dollars provided to rebuild Iraq's energy sector and the limited
capacity of Iraqi ministries, I believe that our recommendations to
State are still valid.
DOD and State have taken action to implement some, but not all, of
our recommendations, increasing the risk that past mistakes or lapses
in accountability will be repeated and undermining efforts to enable
Iraq to assume greater responsibility for rebuilding its nation. In
doing so, DOD and State miss opportunities to improve outcomes and
enhance accountability.
BACKGROUND
Several entities and U.S. agencies have played important roles in
U.S. efforts to rebuild and stabilize Iraq. From May 2003 through June
2004, the Coalition Provisional Authority (CPA) \3\ was responsible for
overseeing, directing, and coordinating rebuilding efforts. After its
dissolution, the Secretary of State assumed responsibilities for the
supervision and general direction of reconstruction efforts in Iraq.
DOD, including the U.S. Army Corps of Engineers, and United States
Agency for International Development (USAID) have had responsibility
for managing and overseeing specific reconstruction projects.
---------------------------------------------------------------------------
\3\ Established in May 2003 and led by the United States and the
United Kingdom, the CPA was the United Nations-recognized coalition
authority responsible for the temporary governance of Iraq.
---------------------------------------------------------------------------
Contractors have largely carried out reconstruction efforts in
Iraq. For example, in early 2004, the CPA, through various military
organizations, awarded seven contracts to help provide overall
direction, coordination, and oversight of 12 large design-build
contractors. In turn, these 12 design-build contractors were
responsible for the design and execution of construction activities in
various sectors such as electricity, oil, and public works and water.
In addition, DOD has made extensive use of contractors to support
its deployed forces. The scale of contractor support DOD relies on
today in locations such Iraq and elsewhere amounts to billions of
dollars worth of goods and services each year, underscoring the need to
effectively manage and oversee contractor efforts. Contractors provide
interpretation, intelligence analysis, and security services, as well
as weapon systems maintenance and base operations support. The
significance of such contracts is illustrated by the fact that the Army
reported obligations of over $4.5 billion in fiscal year 2007 on its
single-largest support contract, the Logistics Civil Augmentation
Program (LOGCAP).
The collective effort of military, civilian, and contractor
personnel in Iraq has been complicated by the country's security
environment. The CPA's original reconstruction plan was premised on the
assumption that a permissive security environment would enable the
United States to restore Iraq's essential services to prewar levels.
The CPA also assumed that the Iraqi government and the international
community would help finance Iraq's development and that Iraqi oil
revenues could help pay for reconstruction costs. None of these
assumptions has materialized.
In February 2007, we reported that the security situation was
continuing to deteriorate, impeding the management and execution of
reconstruction efforts. As shown in figure 1, the security situation
generally deteriorated through the summer of 2007, with the number of
attacks increasing to about 180 per day in June 2007.
Figure 1.--Enemy-Initiated Attacks against the Coalition and Its Iraqi
Partners
However, since then, the number of enemy-initiated attacks has
decreased by about two-thirds, to the levels of early 2005.
Specifically, the average number of daily attacks decreased from about
180 in June 2007 to about 60 in January 2008--a nearly 70 percent
decrease--as the number of attacks against coalition forces in
particular fell considerably. The number of attacks on Iraqi security
forces and civilians also declined from June 2007 levels. While
security has improved in Iraq, a permissive security environment has
yet to be achieved.
POOR CONTRACTING OUTCOMES AND ACCOUNTABILITY HINDER U.S. EFFORTS IN
IRAQ
Our work over the past 5 years has shown that one or more of the
elements essential for achieving good acquisition outcomes--well-
defined requirements matched with adequate resources, sound business
arrangements, and the capacity to properly manage and oversee
contractor performance--were often missing during specific
reconstruction efforts, in contracts to support deployed forces, and in
our efforts to equip Iraqi security forces. The absence of these
elements often contributed to unmet expectations, schedule delays, or
higher-than-necessary costs, underscoring both the need to hold
agencies and contractors accountable for outcomes, and the challenges
of doing so. Such issues are not unique to Iraq but reflect some of the
long-standing and systemic issues confronting DOD. They are, however,
magnified in a contingency situation such as Iraq or Katrina. Further,
we found that unclear DOD guidance resulted in poor accountability over
190,000 weapons provided to the Iraqi security forces.
Mismatch between Requirements and Resources
A prerequisite to good outcomes is a match between well-defined
requirements and available resources. Shifts in overall priorities and
funding, even those made for good reasons, invariably have a cascading
effect on individual contracts, making it more difficult to manage
individual projects to successful outcomes and complicating efforts to
hold agencies and contractors accountable. After the State Department
assumed responsibility for U.S. reconstruction efforts in 2004, it re-
examined the priorities and programs initiated by the CPA, with the
objective of reprioritizing funding to key, high-impact projects. State
increased support for security, law enforcement efforts, and oil
infrastructure enhancements. These reallocations, affecting billions of
dollars of planned work, led to the cancellation of some projects in
the electricity and water sector.
At the contract level, the lack of well-defined requirements
resulted in schedule delays and the United States potentially paying
more than necessary. For example, in September 2005, we reported that
difficulties in defining the cost, schedule, and work to be performed
on projects in Iraq's water and sanitation sector contributed to
project delays and reduced scopes of work.\4\ We found that agreement
between the U.S. government and contractors on the final cost,
schedule, and scope of 18 of the 24 task orders valued at $873 million
had been delayed. These delays occurred, in part, because Iraqi
authorities, U.S. agencies, and contractors could not agree on scopes
of work and construction details.
---------------------------------------------------------------------------
\4\ GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts Need
Improved Measures for Assessing Impact and Sustained Resources for
Maintaining Facilities, GAO-05-872 (Washington, D.C.: Sept. 7, 2005).
---------------------------------------------------------------------------
Previously, in July 2004, we reported that a disagreement between
the LOGCAP contractor and the DCAA on how to bill for services to feed
soldiers in Iraq involved at least $88 million in questioned costs.\5\
The disagreement regarded whether the government should be billed on
the camp populations specified in the statement of work or on the
actual head count. A clearer statement of work, coupled with better DOD
oversight of the contract, could have prevented the disagreement and
mitigated the government's risk of paying for more services than
needed.
---------------------------------------------------------------------------
\5\ GAO, Military Operations: DOD's Extensive Use of Logistics
Support Contracts Requires Strengthened Oversight, GAO-04-854
(Washington, D.C.: July 19, 2004).
---------------------------------------------------------------------------
Business Arrangements that Increased Risk
To award contracts and begin reconstruction efforts quickly, DOD
used business arrangements that often increased DOD's risk of paying
higher costs than it might have otherwise. Such arrangements often
allowed contractors to begin work before key contract terms and
conditions, such as the scope of the work and its price, were fully
defined. For example, in a September 2006 report, we found that DOD
contracting officials were less likely to remove the costs questioned
by auditors if the contractor had already incurred these costs before
the contract action was definitized.\6\ In contrast, in the few
instances in which the government negotiated the terms before starting
work, the portion of questioned costs removed from the proposal was
substantial. For example, in three audits related to a logistics
support contract, DCAA questioned $204 million. Since the government
and the contractor negotiated the terms prior to the onset of the work,
the contractor had not incurred any costs at the time of negotiations.
DCAA calculated that $120 million of the $204 million in questioned
costs were removed as a result of its findings.
---------------------------------------------------------------------------
\6\ GAO, Iraq Contract Costs: DOD Consideration of Defense Contract
Audit Agency's Findings, GAO-06-1132 (Washington, D.C.: Sept. 25,
2006).
---------------------------------------------------------------------------
We subsequently issued a report in July 2007 that focused on the
U.S. Army Corps of Engineers' $2.5 billion contract to Kellogg Brown &
Root to restore Iraq's oil infrastructure and ensure an adequate fuel
supply within Iraq.\7\ DCAA reviewed the contract's 10 task orders and
questioned $221 million in contractor costs. While DOD considered
DCAA's audit findings and performed additional analysis, the lack of
timely negotiations contributed significantly to DOD's decision on how
to address the questioned costs. In this case, all 10 task orders were
negotiated more than 180 days after the work commenced and the
contractor had incurred almost all its costs at the time of
negotiations. These circumstances influenced DOD's decision to pay
nearly all of the $221 million in questioned costs.
---------------------------------------------------------------------------
\7\ GAO, Defense Contract Management: DOD's Lack of Adherence to
Key Contracting Principles on Iraq Oil Contract Put Government
Interests at Risk, GAO-07-839 (Washington, D.C.: July 31, 2007).
---------------------------------------------------------------------------
Poor Management and Oversight of Contractor Performance
Managing contractors in an unstable contracting environment means
greater attention to oversight, which relies on having a capable
government workforce. Having personnel who are trained to conduct
oversight and who are held accountable for their responsibilities is
essential for effective oversight of contractors. If oversight is not
conducted, not sufficient, or not well documented, DOD is at risk of
being unable to identify and correct poor contractor performance. On
multiple occasions, we and others have reported on deficiencies in
DOD's oversight; for example:
--In December 2006, we reported that DOD did not have sufficient
numbers of contractor oversight personnel at deployed
locations, which limited its ability to obtain reasonable
assurance that contractors were meeting contract requirements
efficiently and effectively.\8\
---------------------------------------------------------------------------
\8\ GAO, Military Operations: High-Level DOD Action Needed to
Address Long-standing Problems with Management and Oversight of
Contractors Supporting Deployed Forces, GAO-07-145 (Washington, D.C.:
Dec. 18, 2006).
---------------------------------------------------------------------------
--In October 2007, the report of the Commission on Army Acquisition
and Program Management in Expeditionary Operations stated that
the Army lacked the leadership and military and civilian
personnel to provide sufficient contracting support to either
expeditionary or peacetime missions. According to the
Commission, Army contracting personnel experienced a 600-
percent increase in their workload and were performing more
complex tasks, while the number of Army civilians and military
in the contracting workforce had remained stagnant or declined.
As a result, the Commission found that the vital task of
postaward contract management was rarely being done. It
recommended that the Army increase the number of civilian and
military personnel in its contracting workforce by 1,400
individuals.
--Our recent analysis of five types of vehicles presented to the Army
as ready for acceptance from July 2006 through May 2007 found
that 18 to 31 percent of the vehicles failed government
inspection.\9\ Some equipment presented to the Army failed
inspection multiple times, sometimes for the same deficiency.
Rework on equipment that failed inspections since May 2005
wasted $4.2 million.
---------------------------------------------------------------------------
\9\ GAO, Defense Logistics: The Army Needs to Implement an
Effective Management and Oversight Plan for the Equipment Maintenance
Contract in Kuwait, GAO-08-316R (Washington, D.C.: Jan. 22, 2008).
---------------------------------------------------------------------------
Such issues are not unique to Iraq but often reflect the long-
standing and systemic issues DOD faces. Since 1992, we have identified
DOD contract management to be high risk due to its vulnerabilities to
fraud, waste, abuse, and mismanagement. In a report issued in July
2006, we concluded that, because awards to contractors were large and
growing, DOD would continue to be vulnerable to contracting fraud,
waste or misuse of taxpayer dollars, and abuse.\10\
---------------------------------------------------------------------------
\10\ GAO, Contract Management: DOD Vulnerabilities to Contracting
Fraud, Waste, and Abuse, GAO-06-838R (Washington, D.C.: July 7, 2006).
---------------------------------------------------------------------------
Insufficient Accountability over U.S.-Funded Equipment Provided to
Iraqi Security Forces
In July 2007, we reported that DOD could not fully account for
Iraqi security forces' receipt of U.S.-provided equipment.\11\ Three
factors contributed to this lapse in accountability. First, DOD had not
specified which DOD equipment accountability \12\ procedures, if any,
applied to the train-and-equip program for Iraq. Congress funded the
train-and-equip program for Iraq outside traditional security
assistance programs, which, according to DOD officials, allowed DOD a
large degree of flexibility in managing the program. These officials
stated that, since the funding did not go through traditional security
assistance programs, the DOD accountability requirements normally
applicable to these programs did not apply. For example, under
traditional security assistance programs, DOD regulations specify
accountability procedures for storing, protecting, transporting, and
registering small arms and other sensitive items transferred to foreign
governments.
---------------------------------------------------------------------------
\11\ GAO, Stabilizing Iraq: DOD Cannot Ensure That U.S.-Funded
Equipment Has Reached Iraqi Security Forces, GAO-07-711 (Washington,
D.C.: July 31, 2007).
\12\ DOD defines accountability as the obligation imposed by law,
lawful order, or regulation accepted by an organization or person for
keeping accurate records, to ensure control of property, documents, or
funds, with or without physical possession.
---------------------------------------------------------------------------
Second, DOD did not maintain a centralized record of all equipment
distributed to the Iraqi security forces from June 2004 until December
2005. At that time, DOD established a consolidated property book system
to track the issuance of equipment to the Iraqi security forces and was
attempting to recover past records. Our analysis found a discrepancy of
at least 190,000 weapons between data reported by the former
Multinational Security Transition Command- Iraq (MNSTC-I) commander and
the property books (see figure 2). Former DOD officials stated that
this lapse was due to an insufficient number of staff and the lack of a
fully operational network to distribute equipment, among other reasons.
Figure 2.--Discrepancies of MNSTC-I Reports of Selected Equipment
Issued to Iraqi Security Forces, June 2004 through September 2005
Third, since the beginning of the program, DOD has not consistently
collected supporting documents that confirm when the equipment was
received, the quantities of equipment delivered, or the Iraqi units
receiving the equipment. Since June 2006, the command has placed
greater emphasis on collecting this documentation. However, our review
of the 2007 property books found continuing problems with missing and
incomplete records. Further, the property books consist of extensive
electronic spreadsheets, which are an inefficient data management tool
given the large amount of data and limited personnel available to
maintain the system.
In our July 2007 report, we recommended that the Secretary of
Defense (1) determine which DOD accountability procedures apply or
should apply to the program, and (2) after defining the required
accountability procedures, ensure that sufficient staff, functioning
distribution networks, standard operating procedures, and proper
technology are available to meet the new requirements. DOD concurred
with our recommendations but, as of March 3, 2008, had not determined
which accountability procedures apply to the program.
LONG-STANDING PROBLEMS HINDER DOD'S MANAGEMENT AND OVERSIGHT OF
CONTRACTORS SUPPORTING DEPLOYED FORCES
Several long-standing and systemic problems continue to hinder
DOD's management and oversight of contractors at deployed locations,
including the failure to follow planning guidance, an inadequate number
of military and civilian contract oversight personnel, failure to
systematically collect and distribute lessons learned, and the lack of
comprehensive training for military commanders and contract oversight
personnel. The recurring nature of these issues underscores the need
for DOD leadership to ensure implementation of and compliance with
existing guidance within the department. In prior reports, we made a
number of recommendations aimed at strengthening DOD's management and
oversight of contractor support at deployed locations, and the
department has agreed to implement many of those recommendations.
However, our prior work has found that DOD has made limited progress
implementing some key recommendations. Our work on contracts to support
deployed forces in Iraq has identified instances where poor oversight
and management of contractors led to negative financial and operational
impacts.
DOD Has Not Followed Long-standing Planning Guidance Regarding the Use
of Contractors to Support Deployed Forces
Our work has shown that DOD has not followed long-standing planning
guidance, particularly by not adequately factoring the use and role of
contractors into its planning. For example, DOD guidance stresses the
importance of fully integrating into logistics plans and orders the
logistics functions performed by contractors along with those performed
by military and government personnel. However, we noted in our 2003
report that the operations plan for the war in Iraq contained limited
information on contractor support.\13\ Similarly, DOD policy requires
planning for contractor-provided services during crisis situations to
provide a reasonable assurance of the continuation of services and to
prepare a contingency plan for obtaining services from alternate
sources if needed. Our review found that essential contractor services
for deployed troops had not been identified and backup planning was not
being done. Without firm plans, there is no assurance that the
personnel needed to provide essential services will be available when
needed.
---------------------------------------------------------------------------
\13\ GAO, Military Operations: Contractors Provide Vital Services
to Deployed Forces but Are Not Adequately Addressed in DOD Plans, GAO-
03-695 (Washington, D.C.: June 24, 2003).
---------------------------------------------------------------------------
In addition, we reported in 2004 that the Army did not follow its
planning guidance when deciding to use the Army's LOGCAP contract.\14\
Army guidance stresses the need for the clear identification of
requirements and the development of a comprehensive statement of work
early in the contingency planning process. Because this Army guidance
was not followed, the plan to support the troops in Iraq was not
comprehensive and was revised seven times in less than 1 year,
generating a significant amount of rework that would have been avoided
had the planning guidance been followed.
---------------------------------------------------------------------------
\14\ GAO-04-854.
---------------------------------------------------------------------------
We have also found that DOD has not reviewed contractor support to
identify the essential services provided and the department lacked
visibility over the totality of contractor support to deployed forces.
This information is essential in incorporating contractor support into
planning efforts. For example, senior military commanders in Iraq
stated that, when they began to develop a base consolidation plan for
Iraq, they had no source to draw upon to determine how many contractors
were on each installation.
DOD has taken some actions to address this challenge. For example,
DOD is developing a database of contractors who deploy with U.S.
forces. According to senior DOD officials familiar with the database,
as of February 2008, the database had about 80,000 records. DOD is
working with State to include new DOD contractors, including private
security contractors, in the database. This effort responds to
recommendations we made in 2003 and 2006 to enhance the department's
visibility over contractors in locations such as Iraq and
Afghanistan.\15\ In addition, Joint Contracting Command Iraq/
Afghanistan has created the Theater Business Clearance process that
reviews and approves all contracts for work in Iraq or Afghanistan.
Joint Contracting Command Iraq/Afghanistan officials stated that this
has helped military commanders know ahead of time when contractors are
coming to work on their bases and to ensure sufficient facilities are
available for them. According to senior DOD officials, DOD is also
developing a cadre of contracting planners to ensure that contractor
support is included in combatant commanders' planning.
---------------------------------------------------------------------------
\15\ GAO-07-145.
---------------------------------------------------------------------------
DOD Lacks Adequate Numbers of Trained Contract Oversight Personnel
Having the right people with the right skills to oversee contractor
performance is crucial to ensuring that DOD receives the best value for
the billions of dollars spent each year on contractor-provided services
to support deployed forces. However, several reviews by GAO and other
organizations have consistently found deficiencies in DOD's oversight
of contractors due to an inadequate number of trained military and
civilian personnel to carry out these duties.
Such concerns are not new, and we continue to find that poor
oversight contributes to poor outcomes and wasted resources. For
example, we reported in 2004 that DOD did not always have enough
contract oversight personnel in place to manage and oversee its
logistics support contracts such as LOGCAP and the Air Force Contract
Augmentation Program (AFCAP). As a result, the Defense Contract
Management Agency (DCMA) was unable to account for $2 million worth of
tools that had been purchased using the AFCAP contract. In 2006, a
LOGCAP Program Office official stated that the office did not prepare
to hire additional contract oversight personnel in anticipation of an
increased use of LOGCAP services due to Operation Iraqi Freedom.
According to the official, if adequate staffing had been in place
early, the Army could have realized substantial savings through more
effective reviews of the increasing volume of LOGCAP requirements.
In January 2008, we reported that the Army was inadequately staffed
to conduct oversight of an equipment maintenance contract in Kuwait, a
contract with cumulative obligations of more than $500 million.\16\
Vacant oversight personnel positions included a quality assurance
specialist, a property administrator, and two quality assurance
inspectors. According to Army officials, such shortfalls meant that
surveillance was not being performed sufficiently, and the Army was
less able to identify trends in contractor performance and begin
corrective action. For example, a review of property accountability
reports found that the contractor reported a total of $2.4 million in
government-furnished property; however, two of the eight property
listings alone totaled more than $2 million. Without adequate oversight
of government property, the Army cannot be certain that duplicate
supplies have not been ordered and that government property is not
misplaced or misused.
---------------------------------------------------------------------------
\16\ GAO-08-316R.
---------------------------------------------------------------------------
DOD has taken some actions to address the challenge of a less-than-
adequate number of contract oversight personnel. For example, in
February 2007, the Deputy Assistant Secretary of the Army (Policy and
Procurement) issued guidance that required, among other actions,
contracting officers to ensure that a quality assurance surveillance
plan be prepared and implemented for service contracts exceeding
$2,500. Joint Contracting Command Iraq/Afghanistan officials stated
that they are in the process of adding about 39 personnel to provide
additional contractor oversight. Similarly, DCMA has deployed 100 more
personnel and plans to deploy another 150 to provide contract oversight
and administration to both ongoing and future contracts in Iraq. DCMA
is providing oversight for DOD's private security contracts and other
theater-wide contracts. Additionally, senior DOD officials stated that
the department has created a task force to address the recommendations
of the October 2007 report by the Commission on Army Acquisition and
Program Management in Expeditionary Operations.
DOD Does Not Systematically Collect and Distribute Lessons Learned
DOD does not systematically ensure that lessons learned regarding
the use of contractors to support deployed forces are shared with
military personnel at deployed locations. Although DOD has a policy
requiring the collection and distribution of lessons learned to the
maximum extent possible, we found in our previous work that, with
regard to contractor support to deployed forces, no procedures were in
place to ensure lessons learned were being collected and distributed.
For example, the Army regulation that establishes policies,
responsibilities, and procedures for the implementation of the LOGCAP
program makes customers that receive services under the LOGCAP contract
responsible for collecting lessons learned. However, we have repeatedly
found that DOD is not systematically collecting and sharing lessons
learned on the use of contractors to support the deployed forces. We
have made several recommendations in the past that DOD implement a
department-wide lessons learned program for contractor support to
deployed forces. However, we have previously reported that DOD has not
established any procedures to systematically do this. We also found a
failure to share best practices and lessons learned between units as
one redeploys and the other deploys to replace it. As a result, new
units essentially start at ground zero, having to resolve a number of
difficulties until they understand contractor roles and
responsibilities.
DOD Does Not Adequately Train Military Commanders and Contract
Oversight Personnel
DOD does not routinely incorporate information about contractor
support for deployed forces in its predeployment training of military
personnel, despite the long-standing recognition of the need to provide
such information. Our work has shown the need for better predeployment
training of military commanders since the mid-1990s. DOD policy states
that personnel should receive timely and effective training to ensure
they have the knowledge and tools necessary to accomplish their
missions.
We have made several recommendations that DOD improve its
contractor support-related training. In each instance, DOD concurred
with our recommendation. However, our previous work has found limited
evidence that improvements have been made in terms of how DOD trains
military commanders and contract oversight personnel on the use of
contractors to support forces prior to deployment. We have found that
limited or no predeployment training on the use of contractor support
has caused a variety of problems for military commanders in deployed
locations.
As we reported in 2006, several military commanders with limited or
no predeployment training stated that they were not able to adequately
plan for the use of those contractors.\17\ According to the commanders,
their predeployment training provided them with insufficient
information on how much support contractors would be providing in Iraq.
The commanders were therefore surprised by the substantial number of
personnel they had to use to perform missions such as on-base escorts
for third-country and host-country nationals, convoy security, and
other force protection support to contractors.
---------------------------------------------------------------------------
\17\ GAO-07-145.
---------------------------------------------------------------------------
We have found instances in which limited or no predeployment
training for military commanders on the use of contractor support to
deployed forces resulted in confusion about their roles and
responsibilities in managing contractors. In some cases, concerns rose
over the potential for military commanders to direct contractors to
perform work outside the scope of the contract, which they lack the
authority to do. As Army guidance makes clear, this can result in
modifications to the contract that would involve additional costs and,
in some cases, be in violation of competition requirements. For
example, in 2006, a contractor stated that he was instructed by a
military commander to release equipment the contractor was maintaining
even though this action was not within the scope of the contract. The
issue ultimately had to be resolved by the contracting officer.
In a 2005 report on the use of private security contractors in
Iraq,\18\ we found that commanders received no training or guidance on
how to work with private security providers in Iraq. To highlight the
lack of training and guidance, representatives from one unit stated
they did not know private security providers were in their battle space
until the providers called for assistance.\19\
---------------------------------------------------------------------------
\18\ GAO, Rebuilding Iraq: Actions Needed To Improve Use of Private
Security Providers, GAO-05-737 (Washington, D.C.: July 28, 2005).
\19\ In response to an incident in September 2007 in which 17
Iraqis died, the Department of State and DOD signed a memorandum of
agreement in December 2007 outlining actions needed to improve
oversight of private security contractors. GAO is currently reviewing
U.S. agencies' use of private security contractors in Iraq.
---------------------------------------------------------------------------
We also found that contract oversight personnel such as contracting
officers' representatives continue to receive limited or no
predeployment training regarding their roles and responsibilities in
monitoring contractor performance. Contracting officers'
representatives are typically drawn from units receiving contractor-
provided services and are not normally contracting specialists.
However, DOD's acquisition regulations require that contracting
officer's representatives be qualified through training and experience
commensurate with their delegated responsibilities.
We have found that limited or no predeployment training of contract
oversight personnel has caused a variety of problems in deployed
locations.
The lack of training can affect the quality of service that
contractors are providing at deployed locations. In a December 2006
report, officials from a corps support group in Iraq stated that, until
they were able to get a properly trained contracting officer's
representative in place, they experienced numerous problems regarding
the quality of food service LOGCAP provided.
The lack of sufficient training also can lead to the inefficient
use of military personnel. In the 2006 report, officials with a Stryker
brigade stated that a lack of training hindered their ability to
resolve staffing issues with a contractor conducting background
screenings of third-country and host-country nationals. In this case,
shortages of contractor-provided screeners forced the brigade to use
its own intelligence personnel to conduct screenings. As a result,
those personnel were not available for their primary intelligence-
gathering responsibilities.
DOD and its components have made some improvements in providing
training to military commanders and contract oversight personnel on the
use of contractors to support deployed forces prior to their
deployment. In DOD's response to our 2006 report, the Director of
Defense Procurement and Acquisition Policy stated that the Army is
making changes to its logistics training programs that would
incorporate contracting officers' representatives training into its
basic and advanced training for its ordnance, transportation, and
quartermaster corps.\20\
---------------------------------------------------------------------------
\20\ GAO-07-145.
---------------------------------------------------------------------------
In addition, the Defense Acquisition University has updated its
contingency contracting course to include a lesson on contractors
accompanying the force. DCMA is adding personnel to assist in the
training and managing of contracting officers' representatives.
However, training of military commanders and contract oversight
personnel remains a challenge. For example, the 2007 report of the
Commission on Army Acquisition and Program Management in Expeditionary
Operations found that combatant commands do not recognize the
significance of contracts and contractors in expeditionary operations.
The report concluded that the Army needs to educate and train
commanders on the important operational role of contracting.
LACK OF ADEQUATE STRATEGIC PLANNING IMPEDES U.S. EFFORTS TO DEVELOP
CAPACITY IN IRAQI MINISTRIES AND IMPROVE OUTCOMES IN IRAQ'S ENERGY
SECTOR
U.S.efforts to increase the Iraqi government's capacity to invest
in its own rebuilding are undermined by strategic planning shortfalls
in two critical areas--developing the capacity of the Iraqi ministries
to effectively execute their responsibilities and integrating oil and
electricity development into a unified plan. In the energy sector,
developing a comprehensive and integrated strategic plan is essential
to meeting energy production and export goals, which in turn will help
Iraq meet its future financial needs. In both cases, U.S. assistance in
developing these plans will help ensure that future U.S. expenditures
in rebuilding Iraq will result in long-term benefits.
Department of State Has Not Developed a Comprehensive and Integrated
Strategy to Develop Transparent and Accountable Iraqi
Ministries
U.S. efforts to strengthen Iraqi ministries lack a strategic plan
to integrate efforts, address challenges within the ministries, and set
clear priorities.\21\ Over the past 4 years, U.S. efforts to help build
the capacity of the Iraqi national government have been characterized
by multiple U.S. agencies leading individual efforts, without
overarching direction from a lead entity that integrates their efforts,
and shifting time frames and priorities in response to deteriorating
security and the reorganization of the U.S. mission in Iraq.
Consequently, U.S. efforts to date have not resulted in key Iraqi
ministries having the capacity to effectively govern and assume
increasing responsibility for operating, maintaining, and further
investing in reconstruction projects.
---------------------------------------------------------------------------
\21\ To help Iraq develop the capability of its ministries, the
United States has provided about $300 million between fiscal years 2005
to 2007.
---------------------------------------------------------------------------
The Iraqi ministries also face several challenges that pose a risk
to their success and long-term sustainability.\22\ First, our October
2007 report found that Iraqi ministries lack personnel with key skills,
such as budgeting and procurement. Second, sectarian influence over
ministry leadership and staff complicated efforts to build a
professional and nonaligned civil service. Third, pervasive corruption
in the Iraqi ministries impeded the effectiveness of U.S. efforts.
Fourth, poor security limited U.S. advisors' access to their Iraqi
counterparts, preventing ministry staff from attending planned training
sessions and contributing to the exodus of skilled professionals to
other countries.
---------------------------------------------------------------------------
\22\ GAO, Stabilizing and Rebuilding Iraq: U.S. Ministry Capacity
Development Efforts Need an Overall Integrated Strategy to Guide
Efforts and Manage Risk, GAO-08-117 (Washington, D.C.: Oct. 1, 2007).
---------------------------------------------------------------------------
While recognizing these challenges, U.S. efforts to help build the
capacity of the Iraqi ministry suffered from the lack of coordination
and shifting priorities. First, no single agency was in charge of
leading U.S. ministry capacity development efforts. State, DOD, and
USAID have led separate efforts at Iraqi ministries, investing about
$169 million in funds in 2005 and 2006 for these efforts. As of mid-
2007, State and USAID were providing 169 capacity development advisors
to 10 key civilian ministries; DOD was providing 215 to the Ministries
of Defense and Interior. Although State took steps to improve
coordination in early 2007, coordination between the agencies remains
problematic. For example, although State, USAID, and DOD tried to
develop a common set of metrics to measure ministry capacity in 2005,
the agencies have now developed separate sets of metrics.
Second, the focus of U.S. capacity development efforts had shifted
from long-term institution-building projects, such as helping the Iraqi
government develop its own capacity development strategy, to an
immediate effort to help Iraqi ministries overcome their inability to
spend their capital budgets and deliver essential services to the Iraqi
people. However, as we reported in January 2008, it is unclear if Iraq
is spending its $10.1 billion capital budget since U.S. and Iraqi
reports show widely disparate rates for Iraqi government spending in
2007.\23\ Citing unofficial Ministry of Finance data, the
administration's September 2007 Benchmark Assessment Report stated that
the Iraqi ministries had spent 24 percent of their capital projects
budgets, as of July 15, 2007. The report concluded that, compared with
2006, the government of Iraq was becoming more effective in spending
its capital projects budget. However, the administration's report is
not consistent with Iraq's official expenditure reports, which show
that the central ministries had spent only 4.4 percent of their
investment budget, as of August 2007. The lack of consistent and timely
expenditure data limits transparency over Iraq's execution of $10.1
billion 2007 budget for capital projects and reconstruction. The most
recent expenditure data show a capital expenditure rate of 7 percent
for the central ministries, as of November 2007.
---------------------------------------------------------------------------
\23\ GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq's
Budget Execution, GAO-08-153 (Washington, D.C.: Jan. 15, 2008).
---------------------------------------------------------------------------
The U.S. government is beginning to develop a comprehensive and
integrated strategy for U.S. capacity development efforts in Iraq,
although agencies have been implementing separate programs since 2003.
GAO's previous analyses of U.S. multiagency national strategies
demonstrate that such a strategy should integrate the efforts of the
involved agencies with the priorities of the Iraqi government, and
include a clear purpose and scope; a delineation of U.S. roles,
responsibilities, and coordination with other donors, including the
United Nations; desired goals and objectives; performance measures; and
a description of benefits and costs. U.S. efforts to develop Iraqi
ministry capacity have included some but not all of these components.
For example, agencies are working to clarify roles and
responsibilities. However, U.S. efforts lack clear ties to Iraqi-
identified priorities at all ministries and information on how
resources will be targeted to achieve the desired end-state.
In October 2007, we recommended that State, in consultation with
the Iraqi government, complete a comprehensive and integrated strategy
for U.S. capacity development efforts. State recognized the value of an
integrated strategy but stated that it may hinder efforts to tailor
capacity development efforts to the priorities of each ministry. GAO's
recommendation does not preclude tailoring capacity development efforts
to meet each ministry's unique needs. A strategy ensures that a U.S.-
funded program has consistent overall goals, clear leadership and
roles, and risks that are assessed.
Similarly, in January 2008, we recommended that to help ensure more
accurate reporting of the government of Iraq's spending of its capital
projects budget, the Secretary of the Treasury work with the government
of Iraq to ensure the reporting of accurate and reliable expenditure
data. The Department of the Treasury agreed with our recommendation to
ensure accurate and reliable reporting of Iraqi expenditure data and is
working to implement it.
Lack of Adequate Strategic Planning Impedes U.S. and Iraqi Efforts to
Restore Iraq's Energy Sectors
Despite the United States' investment of about $6 billion to
rebuild Iraq's oil and electricity sectors, production in both sectors
has consistently fallen below U.S. program goals of 3 million barrels
per day and 6,000 megawatts of electrical peak generation capacity. As
we reported in May 2007, it is difficult to identify the most pressing
future funding needs, key rebuilding priorities, and existing
vulnerabilities and risks within the sectors given the absence of an
overarching strategic plan that comprehensively assesses the
requirements of the energy sector as a whole.\24\ While the Iraqi
government has crafted a multiyear strategic plan for Iraq's
electricity sector, no such plan exists for the oil sector. Given the
highly interdependent nature of the oil and electricity sectors, such a
plan would help identify the most pressing needs for the entire energy
sector and help overcome the daunting challenges affecting future
development prospects.
---------------------------------------------------------------------------
\24\ GAO, Rebuilding Iraq: Integrated Strategic Plan Needed to Help
Restore Iraq's Oil and Electricity Sectors, GAO-07-677 (Washington,
D.C.: May 15, 2007).
---------------------------------------------------------------------------
As shown in figure 3, Iraq's oil production and exports, despite
recent improvements, continue to fall below U.S. goals. As of December
2007, Iraq produced about 2.5 million barrels of oil per day and
exported nearly 2 million barrels per day, compared with the U.S. goals
of 3 million barrels and 2.2 million barrels, respectively.\25\
---------------------------------------------------------------------------
\25\ According to State, revenues generated from Iraqi oil exports
increased from $31 billion in 2006 to $41 billion in 2007 (Iraq Weekly
Status Report, Feb. 6, 2008).
Figure 3.--Oil Production, Exports, and U.S. Goals, June 2003 to
December 2007
In addition, U.S. goals for electricity remain unmet. The problem
is compounded by increasing demand that outstrips supply. As of
February 2008, demand for electricity was twice as high as the supply.
In addition, available power in Baghdad was 9 hours per day, compared
with 17 hours per day in Basra. As we previously reported in May 2007,
one of the challenges in developing the electricity sector was the U.S.
government's decision to install natural gas turbine engines despite
the absence of a natural gas distribution network. Of the 35 engines
installed, 16 were using diesel or crude oil rather than natural gas.
As a result, maintenance was three times as costly and electricity
generated decreased by 50 percent.
Billions of dollars are still needed to rebuild, maintain, and
secure Iraq's oil and electricity infrastructure, underscoring the need
for sound strategic planning. The Ministry of Electricity's 2006-2015
Electricity Master Plan estimates that $27 billion will be needed to
reach its goal of providing reliable electricity across Iraq by 2015.
According to DOD, investment in Iraq's oil sector is ``woefully short''
of the absolute minimum required to sustain current production, and
additional foreign and private investment is needed. Moreover, U.S.
officials and industry experts estimate that Iraq would need $20
billion to $30 billion over the next several years to reach and sustain
a crude oil production capacity of 5 million barrels per day.
We recommended that the Secretary of State, in conjunction with
relevant U.S. agencies and international donors, work with Iraqi
ministries to develop an integrated energy strategy. State commented,
however, that the Iraqi government, not the U.S. government, is
responsible for taking action on GAO's recommendations. We believe that
the recommendations are still valid given the billions of dollars made
available for Iraq's energy sector, the limited capacity of the Iraqi
ministries, and the U.S. government's influence in overseeing Iraq's
rebuilding efforts.
CONCLUSION
U.S. efforts in Iraq are expansive: combating insurgents, training
local security forces, shaping government institutions, reconstructing
infrastructure, and enhancing public services. These efforts
demonstrate a substantial commitment to most aspects of nation
building. However, nation building is costly, particularly in the
absence of a permissive security environment. Since 2001, Congress has
appropriated about $700 billion for military and diplomatic activities
in support of the global war on terrorism; the majority of this amount
has supported U.S. actions in Iraq. This large expenditure of resources
and the enormous task at hand heightens the levels of risk and offers
the potential for fraud, waste, abuse, and corruption.
But, as GAO's audits point out, these risks are further heightened
when U.S. programs lack sound strategic planning, well-defined
requirements, adequate oversight and accountability, and sufficient
training for personnel. Future investments in Iraq will require
decision makers not only to assess the outcomes achieved thus far but
also the outcomes that could have been achieved with more efficient and
effective use of appropriated dollars. It will also require decision
makers to consider difficult trade-offs as the nation faces increasing
fiscal challenges on the home front. Nonetheless, continuing oversight
by Congress and the accountability organizations is needed to ensure
that opportunities for waste, fraud, abuse, and corruption are
minimized.
In prior reports, GAO recommended that, to improve accountability
and minimize opportunities for fraud, waste, and abuse of U.S. funds,
(1) DOD adopt sound business processes in its acquisition strategies,
such as definitizing contracts in a timely fashion and strengthening
accountability procedures; (2) DOD leadership ensure implementation of
and compliance with existing guidance to improve its management and
oversight of contractors supporting deployed forces; and (3) U.S.
agencies work with Iraq to develop strategic plans for key sectors.
DOD and State have taken action to implement some, but not all, of
our recommendations. Given the billions of dollars that the United
States has spent in Iraq to help rebuild its infrastructure, improve
security, support our forces, and improve the capacity of the
ministries, I believe our recommendations, if fully implemented, would
improve accountability and outcomes. Whether they are fully
implemented, however, will depend on the leadership at each agency to
set the appropriate tone, ensure that existing guidance is effectively
implemented, take actions to prevent mistakes from being repeated, and
seize opportunities to ensure that the efforts to help rebuild and
stabilize Iraq achieve their intended results.
Mr. Chairman, this concludes my statement. I would be pleased to
answer questions that you or other Members have at this time.
Senator Leahy. General Kicklighter.
STATEMENT OF HON. CLAUDE M. KICKLIGHTER, INSPECTOR
GENERAL, DEPARTMENT OF DEFENSE
General Kicklighter. Senator Leahy, Senator Cochran,
distinguished members of the Senate Appropriations Committee,
thank you very much for the opportunity to appear before you
this morning, and address corruption, fraud, waste, and abuse
in Iraq. This testimony will cover the accomplishments of the
Department of Defense Office of the Inspector General and other
organizations in DOD, that have the mission to combat illegal
and improper expenditures and improve accountability of DOD
resources that support operations in Iraq.
To date, $492 billion has been appropriated to Defense for
Operation Iraqi Freedom. The U.S. military presence in Iraq is
aimed at providing a secure environment which will enable the
Iraqi people to establish a stable and strong Government that
upholds the rule of law, good governance, and helps keep this
Nation on a path to freedom. Corruption greatly undermines the
effort of both the United States and Iraq, in establishing
effective institutions of Government.
As this committee knows, better than most, the DOD
Inspector General has the primary responsibility within
Defense, for providing oversight of Defense programs and funds
appropriated to the Department, at home and around the world,
and especially in southwest Asia.
To accomplish our oversight mission, we have adopted a
strategy that is based on maintaining an adequate presence in
theater, but recognizing that much of the work can be done--and
in some cases, should be done--outside of Iraq.
A very important part of our effort is ensuring inter-
service and inter-agency coordination and collaboration, as Mr.
Walker just talked about. We chair a quarterly Southwest Asia
Joint Planning Group, which includes all the agencies that work
together on this mission, and the DOD military organizations,
to ensure coordination and collaboration and integration of our
effort.
In December 2005, our office received a hotline complaint
that alleged that a single U.S. Army officer was receiving
illegal gratuities from a DOD contractor. This evolved into an
extensive and ongoing criminal investigation, involving
millions of dollars in bribes, and a large number of U.S.
military officers, non-commissioned officers, DOD civilians,
and contractor personnel.
In December 2006 and January 2007, we began to receive
allegations from the Turkish National Police, and the Turkish
Minister of Defense that weapons and explosives that were
shipped to the Iraqi Security Forces were crossing their
border, and finding their way into the hands of insurgents,
terrorists, and criminals in Turkey.
Around the same time, we were also beginning to find some
of the weapons that the United States had supplied to the Iraqi
Security Forces in the hands and control of insurgent groups,
and U.S. security contractors in Iraq.
With this information, we briefed the senior leadership in
Defense, and those briefings resulted in the Secretary and the
Chairman requesting that we send an assessment team to Iraq to
review accountability, and also making sure that we kept the
Secretary and the Chairman informed of our findings, but also
making sure that we kept Congress fully informed, promptly, on
this situation.
We briefed the chairmen and the ranking members of our
oversight committees. In this committee, we briefed Senator
Inouye and Senator Stevens. The general request from Congress
was that we get a team on the ground rapidly, and check to make
sure that the barn door had no cracks in it, and if it did,
make sure that it was nailed up promptly.
We assembled an inter-agency, multidiscipline munitions
assessment team, composed of subject matter experts, and
deployed to Iraq and southwest Asia, in general.
Our preliminary findings were that DOD and the Iraqi
Security Forces currently had a system in place for controlling
and accounting for weapons and ammunition being supplied to the
military and police units. However, there still remained work
to be done.
Weapons were lost, early on, in large part due to battle
losses on the battlefield, police stations being overrun,
desertions, disintegration of untrained units--sometimes when
they were committed to combat--some police and military
personnel, and largely police, were selling their weapons, and
poor recordkeeping. We also have an intensive investigation
ongoing, looking into pilferage out of storage facilities.
The assessment team will return to Iraq in April to review
progress and assess the current status of munitions
accountability. They will also be looking at foreign military
sales operations, progress in helping the Iraqis build their
own logistics sustainment base, so that they can take over and
conduct more independent operations, and take over more battle
space.
As a result of our closed and ongoing investigations in
southwest Asia, 18 Federal criminal indictments have been
handed down, 26 Federal criminal informations have been issued,
three hearings were conducted under Article 32, Uniformed Code
of Military Justice, and in total, 25 people have been
convicted of felony crimes, resulting in a total of 34 years of
confinement, 35 years of probation, nine individuals and three
companies were de-barred from contracting with the U.S.
Government, 12 companies and 13 persons have been suspended
from contracting with the United States Government. Two
contractors have signed settlement agreements with the U.S.
Government--a total of $11.1 million has been paid to the
United States in restitution, recoveries--$365,000 was levied
in fines and penalties, $1.76 million was forfeited back to the
Government and $2.2 million was seized from the bank accounts
of some of the companies involved.
In addition, we currently have 102 Iraqi-related
investigations still ongoing. In November 2007, we realigned
the internal core mission assets to support southwest Asia
audit operations, by establishing an expeditionary audit
division, comprised of highly skilled, 30 audit personnel.
Currently, we have 196 audit personnel, conducting audits
related to Iraq and southwest Asia operations.
In April 2008, approximately 25 auditors will be redeployed
in support of OIF and Operation Enduring Freedom (OEF), with an
additional 30 in reserve, to be called forward, if needed.
We have 24 ongoing Iraqi-related audit projects, and as a
result of the findings and recommendations, we in the
Department have identified more than $840 million in funds that
could be put to better use.
We are dedicating more resources to this mission in Iraq on
control and accountability, acquisition, contracting,
corruption, waste, fraud, abuse, and expanding our footprint in
all of southwest Asia, in some part, due to the support of this
committee.
We will continue to evaluate the lessons learned, and do
our best to minimize the mistakes of the past. We will keep
Congress and our leadership fully and promptly informed as we
make--as we conduct these audits and investigations, and we
will assist to build a stronger inner-agency and DOD oversight
team, as we go forward.
Sir, thank you for the opportunity of being here today, and
I stand ready to try to answer your questions.
[The statement follows:]
Prepared Statement of Claude M. Kicklighter
Mr. Chairman, Senator Cochran, and distinguished members of this
committee, thank you for the opportunity to appear before you this
morning and address corruption, fraud, waste, and abuse in Iraq. This
testimony will cover the accomplishments of the Department of Defense
Office of the Inspector General (DOD IG) and the other DOD
organizations that have the mission to combat illegal and improper
expenditures and to improve accountability of DOD resources that
support operations in Iraq. To date, $655 billion has been appropriated
to the Department of Defense in support of the men and women of our
Armed Forces in Southwest Asia and the fight against terrorism, of
which $492 billion has been appropriated to support Operation Iraqi
Freedom \1\. The U.S. military presence in Iraq is aimed at providing a
secure environment which will enable the Iraqi people to establish a
stable government that upholds the rule of law and good governance.
Corruption undermines the efforts of both the Iraqi people to establish
effective institutions of government and undermines the United States
ability to support this effort.
---------------------------------------------------------------------------
\1\ Congressional Research Service report, ``The Cost of Iraq,
Afghanistan, and Other Global War on Terror Operations Since 9/11,''
dated February 8, 2008. The numbers listed are DOD funds.
---------------------------------------------------------------------------
As this committee knows, the DOD IG has the primary responsibility
within the Department of Defense for providing oversight of the defense
programs and the funds appropriated to the Department at home and
around the world, to include Southwest Asia. In this role, the DOD IG
office oversees, integrates, and attempts to ensure there are no gaps
in the stewardship of DOD resources. We spearhead the DOD oversight
community in auditing, investigating, and inspecting accountability
processes and internal controls, in areas such as contracting,
logistics, and financial management. Collectively, the community has
dedicated over 470 auditors and over 190 investigators that have
reviewed a wide range of issues pertaining to Southwest Asia. We also
work in close partnership with other oversight organizations, such as
the Government Accountability Office (GAO), the Special Inspector
General for Iraq Reconstruction (SIGIR), the Department of State, and
the U.S. Agency for International Development. In addition, we provided
the core staff for the Coalition Provisional Authority IG, and later
assisted the stand-up of the SIGIR. Since 2003 the OIG has provided 141
full or part-time personnel in support of both organizations.
Adequate management controls and oversight to verify that proper
safeguards are in place and working as intended are essential in the
fight against corruption, fraud, waste, and abuse. Conditions where
internal controls are severely lacking or proper oversight is minimal
create opportunities for corruption, fraud, waste, and abuse.
Additionally, individuals must be held accountable for violating laws
and regulations and mismanagement of DOD resources.
OIG STRATEGY
To accomplish our oversight mission, we have adopted a strategy
that is based on maintaining the right size presence in-theater but
which also recognizes that much of our work can be done out of Iraq. An
important part of our oversight effort is to improve inter-service and
interagency coordination and collaboration to minimize duplication of
effort and ensure that we have only the staff needed in-theater to
accomplish the mission.
IN THEATER PRESENCE
We have adopted an expeditionary workforce model to support efforts
throughout all of Southwest Asia. We have core staff forward deployed
at all times. The core contingent is comprised of individuals serving
between 6 and 12 month deployments. Expeditionary team members will
deploy for as long as needed to complete the task, but no longer. The
actual number of auditors, investigators, and inspectors in Southwest
Asia and Iraq fluctuates on a daily basis depending on requirements.
We are increasing our presence in Southwest Asia and currently have
279 personnel dedicated to Southwest Asia operations and are deployable
as mission requirements dictate. Currently we have 22 people deployed
to Southwest Asia. Utilizing both domestic and in theater assets we
have 28 ongoing Iraq related audits and inspections and 102 ongoing
Iraq related investigations.
COORDINATION
We have jointly established and chair an interagency Southwest Asia
Joint Planning Group (JPG) that meets quarterly and provides oversight
of fraud, waste, abuse, and criminal activities in the Southwest Asia
region. The JPG provides unity of effort of the organizations engaged
in this effort, including the Military Inspectors General and Auditors
General, the Government Accountability Office, the Department of State
and the U.S. Agency for International Development Inspectors General,
the SIGIR, and the Combatant Commands Inspectors General. The mission
of the JPG is to better coordinate and integrate oversight activities
in the region. The Southwest Asia JPG leads the coordination and
oversight required to identify and recommend improved mission support
to military units conducting operations.
DETAILS ON MUNITIONS ACCOUNTABILITY
One example of the expeditionary model is the ongoing work
regarding munitions control and accountability. In December 2005, our
office received a Hotline complaint and other allegations that a senior
U.S. Army officer received illegal gratuities from a DOD Contractor.
This evolved into extensive and ongoing DOD criminal investigations,
involving millions of dollars in bribes and a large number of U.S.
military officers, non-commissioned officers, and civilian personnel.
In December 2006, and January 2007, we began to receive allegations
from the Turkish National Police and the Turkish Ministry of Defense
that weapons and explosives that were shipped to the Iraqi Security
Forces (ISF) were crossing the border and finding their way into the
hands of insurgents, terrorists, and criminals in Turkey. In response,
we sent two special agents to Turkey in January 2007, to follow-up on
the allegations. Around this time, we were also beginning to find some
weapons that the United States had supplied to the ISF, in the hands
and control of insurgent groups and U.S. security contractors in Iraq.
Additional concerns regarding the accountability and control of
U.S. provided weapons and ammunition to ISF were also identified by
SIGIR and GAO. In October of 2006, SIGIR identified materiel management
control weaknesses regarding the accountability of weapons and the
registration of weapons' serial numbers. In July 2007, GAO reported
that DOD and Multi National Forces--Iraq could not fully account for
weapons reported as previously issued to the Iraqi forces.
With this information, we briefed the Secretary of Defense; the
Chairman, Joint Chiefs of Staff; and the senior Defense team. Those
briefings resulted in the Secretary and Chairman requesting that we
send an assessment team into Iraq to review accountability and control
of munitions being supplied by the United States to ISF. In addition,
the Secretary of the Army was asked to do an assessment of contracting
in Southwest Asia. The Secretary of Defense and the Chairman requested
they be kept fully informed and also that we keep Congress fully
informed. We briefed the Chairmen and Ranking Members of our primary
oversight committees to include the Chairman and Ranking Member of the
Senate Appropriations Subcommittee on Defense (Senators Inouye and
Stevens). The general request from Congress was to get on-the-ground
post-haste, see if the barn door had a crack, and if so, nail it shut.
As a result, we assembled an interagency, multi-disciplinary
Assessment Team on Munitions Accountability composed of twenty-two
subject matter experts from the Office of Inspector General, U.S.
Central Command, Army Audit Agency, Army Criminal Investigation Command
(Army CID), Army Corps of Engineers, Air National Guard (who happened
to be an Assistant U.S. Attorney General from Justice), Department of
State, and the Department of Justice Bureau of Alcohol, Tobacco,
Firearms and Explosives.
The assessment team's objectives were to:
--Determine whether DOD currently has adequate accountability and
control over U.S.-purchased munitions before formal turnover to
the ISF. Specifically, this included munitions from the time of
arrival at selected Iraq ports of entry until formal turnover
to ISF; and to
--Determine whether the ISF currently have adequate accountability
and controls over U.S.-purchased munitions under their control.
Specifically, this included munitions from the time of formal
transfer to ISF through their subsequent issuance to selected
Iraq military and police units.
Prior to our arrival in Iraq, we examined two additional related
areas that are very important to the ability of the United States and
ISF to account for and control munitions. One is establishing an
effective Foreign Military Sales (FMS) program to support ISF, and the
other is assisting the ISF to build their logistics sustainment base,
for both military and police. The team did a lot of work in CONUS
before they departed.
To better understand the overall CENTCOM theater logistics
operations, we spent several days in Kuwait evaluating accountability,
control and onwards shipment of ammunition. We also looked at contract
operations. The team also spent a week in Afghanistan looking at
munitions accountability and control, contracting, and the Afghanistan
National Security Forces logistics base.
The assessment team then spent five weeks in Iraq examining the
current U.S. and ISF supply chain operations, including transportation,
delivery, storage and distribution. The assessment began at the port of
entry, through all the supply nodes until the issuance of weapons and
ammunition to Iraqi military and police units at the end of their pipe
line.
While in Iraq, the assessment team conferred with the U.S.
Ambassador and staff, and the respective Commanders and staff of the
Multi-National Force--Iraq (General Petraeus), the Multi-National
Corps--Iraq (Lieutenant General Odierno), and the Multi-National
Security Transition Command--Iraq (MNSTC-I) (Lieutenant General Dubik).
The team also met with the U.S. Joint Contracting Command--Iraq/
Afghanistan, U.S. Army Corps of Engineers, Gulf Region Division (to
include the Logistics Movement Coordination Center and U.S. Warehouse
at Abu Ghraib), MNSTC-I's Security Assistance Office (which manages FMS
in Iraq), and many other officials with the Coalition Forces and U.S.
Embassy Baghdad.
In addition, the team conferred with numerous Government of Iraq
officials from the Ministry of Defense, the Ministry of Interior, the
Inspectors General of the ministries, and various Iraqi Army units and
police forces.
Our preliminary finding is that DOD and ISF have a system currently
in place for controlling and accounting for weapons and ammunition
being supplied to the ISF; however, there still remains work to be
done. Many weapons were lost early on due in large part to battle loss,
police stations being overrun, desertion, disintegration of untrained
units, some police and military personnel selling their weapons, and
poor record keeping. We also have an ongoing investigation into
pilferage of storage facilities.
The U.S. supply of munitions to Iraq is shifting to FMS. The United
States needs to put FMS on a war-time footing while also continuing to
assist the ISF in building their logistics sustainment base. Both of
these actions are underway and will greatly enhance the control and
accountability of munitions. As reported by CENTCOM, a great deal of
progress has already been made. Continued improvements in these two
critical areas will also greatly enhance the ISF's ability to conduct
independent operations and in taking over more battle space.
Since the Assessment Team's return in late October 2007, we have
briefed the Secretary of Defense; the Deputy Secretary of Defense; the
Chairman, Joint Chiefs of Staff; and other senior leaders. Further, we
briefed our primary oversight committees. We are drafting the report
and upon completion will provide it to CENTCOM and other DOD
organizations for review and official comment. The report is expected
to be released in April 2008. This will complete Phase I.
The Assessment Team is planning a follow-up trip (Phase II) to Iraq
in April 2008, to review the status of actions taken on the report's
recommendations and to assess the current status of munitions
accountability and control, the FMS program, the development of their
logistics sustainment base for the ISF, and contract operations in
general. We will also spend time working with the Iraq Ministries of
Defense and Interior Inspectors General.
DETAILS ON INVESTIGATIONS
The Defense Criminal Investigative Service (DCIS), the criminal
investigative arm of the DOD Inspector General, has been engaged in
investigating waste, fraud, abuse, and corruption pertaining to the
Iraqi theater since the start of the war. Pursuant to the Inspector
General Act of 1978, DCIS has broad criminal investigative jurisdiction
regarding DOD programs and operations. However, effectively countering
fraud in Southwest Asia requires the cooperative efforts of other DOD
investigative agencies and Federal law enforcement partners as well as
the audit community. Investigative jurisdiction for fraud offenses
involving DOD, to include offenses pertaining to Southwest Asia, are
established in DOD Instruction 5505.2, ``Criminal Investigations of
Fraud Offenses.'' The instruction establishes policies,
responsibilities, and procedures for determining which of the DOD
Criminal Investigative Organizations (DCIOs)--Defense Criminal
Investigative Command (DCIS), the U.S. Army Criminal Investigation
Command (Army CID), the Naval Criminal Investigative Service (NCIS),
and the Air Force Office of Special Investigations (AFOSI)--are
conducting investigations of fraud offenses under the United States
Code and/or Uniform Code of Military Justice. DCIS has primary
jurisdiction over matters involving most contract and procurement
actions awarded by Defense Agencies, OSD components, and field
activities. Additionally, DCIS has jurisdiction over, ``any allegations
[involving DOD] that the IG DOD considers appropriate for investigation
by DCIS.'' This broad authority affords DCIS the ability to easily
partner with other agencies in an effort to protect the integrity of
the entire DOD procurement and acquisition process--from countering
fraud impacting initial research and development, to investigating
fraud during contract execution, to ensuring appropriate disposal of
products no longer needed by DOD components. The Service-specific
Military Criminal Investigative Organizations (Army CID, NCIS, and
AFOSI) typically focus upon allegations involving contract and
procurements that their respective military department awards.
Significant non-DOD partners in Iraq include the SIGIR, which
investigates fraud involving Iraq reconstruction programs; and the FBI,
which has overarching authority to investigate violations of various
Federal statutes relating to fraud and corruption. Other organizations,
such as the U.S. Department of State, Office of the Inspector General;
and the U.S. Agency for International Development, Office of the
Inspector General, partner with DCIS and other agencies when alleged
fraudulent activity impacts their respective departments.
From May 2003 through October 2004, DCIS deployed teams of two to
three agents to Baghdad. From October 2004 to present, the DCIS
European Post of Duty and multiple CONUS DCIS offices have conducted a
wide variety of investigations related to Iraq. In September 2006, DCIS
established a permanent presence in Iraq by deploying four special
agents to the theater--two special agents are currently assigned to
Iraq and two special agents are assigned to Kuwait. An additional
special agent has been temporarily deployed to Iraq to support a
special cell investigating issues relating to weapons accountability.
Two additional special agents will soon deploy to Afghanistan. These
in-theater agents are the forward-deployed elements of the
approximately 64 DCIS special agents in CONUS and OCONUS participating
in Southwest Asia investigations.
DCIS protects America's warfighters by vigorously investigating
alleged and suspected procurement fraud, corruption, and other breaches
of public trust that impact critical DOD programs. Our investigations
focus on matters such as bribery, theft, procurement fraud, illegal
receipt of gratuities, bid-rigging, defective and substituted products,
and conflicts of interest. DCIS' presence in the region has identified
corrupt business practices, loss of U.S. funds through contract fraud,
and theft of critical military equipment destined for the ISF.
DCIS plays a significant and pivotal role in both the National
Procurement Fraud Task Force (NPFTF) and the International Contract
Corruption Task Force (ICCTF). Under the auspices of the Department of
Justice, the NPFTF was created on October 10, 2006, to promote the
prevention, early detection, and prosecution of procurement fraud
nationwide and abroad. This multi-disciplinary and multi-agency (e.g.,
Federal Inspectors General, U.S. Attorneys, Federal law enforcement
agencies such as the FBI) coalition has been extremely effective in
fostering and better coordinating procurement fraud investigations. The
ICCTF, an offshoot of the NPFTF, was formed in November 2006, to
specifically target fraud and corruption involving Southwest Asia. The
primary goal of the ICCTF is to combine the resources of multiple
investigative agencies to effectively and efficiently investigate and
prosecute cases of contract fraud and public corruption related to U.S.
government spending in Iraq, Kuwait, and Afghanistan. The participating
agencies in the ICCTF are DCIS; the U.S. Army Criminal Investigation
Command's Major Procurement Fraud Unit; the Office of the Inspector
General, U.S. Department of State; the Office of the Inspector General,
U.S. Agency for International Development; the Federal Bureau of
Investigation (FBI); and the SIGIR. The ICCTF created a Joint
Operations Center (JOC) in furtherance of achieving maximum interagency
cooperation. The JOC, which is located in Washington, D.C., serves as
the nerve center for the collection and sharing of intelligence
regarding corruption and fraud relating to funding for the Global War
on Terror (GWOT). The JOC coordinates intelligence-gathering, de-
conflicts case work and deployments, disseminates intelligence, and
provides analytic and logistical support \2\ for the ICCTF agencies to
enhance criminal prosecutions and crime-prevention. The JOC is the
vital link into the entire intelligence community and provides a
repository from which to disseminate intelligence indicative of
criminal activity. Case information and criminal intelligence are
shared, and accomplishments are reported jointly. The agency heads meet
regularly to collectively provide policy, direction, and oversight.
---------------------------------------------------------------------------
\2\ Logistics support can include, but is not limited to,
laboratory services, polygraphs, and specialized equipment (e.g., GPS
phones).
---------------------------------------------------------------------------
In addition to investigating allegations of fraud, waste, and
abuse, DCIS launched a proactive project which will analyze over $10
billion in payment vouchers related to U.S. Army purchases in Iraq. The
vouchers are currently stored at the Defense Finance & Accounting
Service (DFAS), Rome, NY. The project is being coordinated with DFAS,
the DOD IG's Audit component, the Defense Contract Audit Agency, the
U.S. Army Audit Agency, and the FBI. The project will attempt to
identify fraudulent activity related to the war effort in Iraq and
Afghanistan through utilization of data mining techniques. While the
initiative is in its infancy, several questionable transactions have
been identified and referred for further investigation. In addition to
these analytical efforts to develop cases, the investigative team
assigned to the project is also supporting ongoing investigations
involving fraud and corruption in Iraq.
To pursue investigative leads concerning weapons accountability in
Iraq, DCIS is participating in a multi-agency Weapons Investigative
Cell. Other participants include Army CID and the Bureau of Alcohol,
Tobacco, Firearms and Explosives. The Weapons Investigative Cell is
working with the International Zone Police Department and Government of
Iraq officials to conduct weapons and munitions accountability
investigations. In addition, the Weapons Investigative Cell is
coordinating its activities with other affected U.S. and foreign
agencies, and is attempting to determine if there is any evidence of
weapons leaving Iraqi warehouses and being diverted or sold to
unauthorized sources.
As previously mentioned, investigations conducted in Southwest Asia
are cooperative efforts. A total of sixty-four DCIS special agents
(CONUS and OCONUS) are working the majority (97 percent) of these
investigations in conjunction with one or more law enforcement partner
agencies. DCIS' primary partner in countering DOD-related fraud in
Southwest Asia is the Major Procurement Fraud Unit (MPFU), a component
of Army CID. The MPFU conducts investigations into allegations of fraud
associated with the Army's major acquisition programs. The MPFU is
responsible for conducting Army-related investigations of allegations
of fraud, defective pricing, corruption, kickbacks, antitrust
violations and miscellaneous other incidents involving procurement
fraud. Since June 2005, the MPFU has deployed 46 agents on rotational
assignments to work in the region. The MPFU presently has 13 agents in
offices in Iraq, Kuwait, and Afghanistan, and has initiated 146
investigations, of which 92 investigations are ongoing.
To date, DCIS has completed 25 investigations that are related to
Southwest Asia. In addition, DCIS currently has 102 open investigations
relating to the Iraqi theater. The majority of these investigations are
being jointly investigated with one or more law enforcement partners.
Of these 102 investigations, 16 are being conducted by agents deployed
throughout Southwest Asia; the other 86 investigations are being
conducted by special agents in the United States and Germany. DCIS
attempts to transfer investigations developed in Southwest Asia to an
appropriate CONUS venue as soon as practical so as to ensure we
maximize the best use of our in-theater investigative resources and to
begin and facilitate prosecution efforts.
DETAILS ON AUDITS
Our OIG expeditionary model combined with our regional strategy in
approaching our work in Iraq raises issues that often require solutions
at the systemic level, as already illustrated by the munitions
assessment team findings and recommendations. Further, we continue to
evolve our comprehensive plan for audits of contracts, subcontracts,
and task and delivery orders in support of coalition forces in Iraq and
Afghanistan. Given that Army Audit Agency is focusing on the
Commander's Emergency Response Program (CERP) and contracts for basic
life support activities and that SIGIR focus is on reconstruction
contracts, we have begun and will to continue to conduct a series of
audits and report on financial and contracting systems in Iraq that
support Coalition Forces and Iraq operations including contracts for
maintenance service, transportation, and fuel.
Additionally, we continue to focus on the training and equipping of
the Iraqi military and police mission, acquisitions of key operational
support assets such as body armor, fielding of mine resistant ambush
protected vehicle, medical equipment, use of GWOT supplemental funds,
controls over cash, monitoring of sensitive equipment, and out of
country payments to name a few.
In November 2007, we realigned internal core mission assets to
support SWA audit operations by establishing an expeditionary audit
division comprised of about 30 people. This audit division is
complemented by other work conducted by U.S. based teams. In total, we
have 196 personnel conducting audits related to Iraq and Southwest Asia
operations. In April 2008, approximately 25 people will be deployed in
support of OIF/OEF with an additional 30 in reserve. We will also have
about 16 additional personnel deployed in support of the Munitions
Assessment Team, FMS processes, and the progress being made to
establish an effective Government of Iraq logistics process to support
the ISF.
We have 24 on-going Iraq-related audit projects reviewing mission-
critical support functions that directly impact the warfighter, such
as: contract surveillance, contract payments, resetting of returning
U.S. forces equipment, and acquisition of armored vehicles. Our audits
also include oversight of cash and other monetary assets within Iraq as
well as the execution of supplemental funds to train and equip the Iraq
Security Forces. A complete list of completed reports, on-going
projects, and planned projects is attached to this statement.
We plan to issue a final audit report on controls over payments in
support of Iraqi operations, which amounted to $10.7 billion for
February 2003, to June 2006, and have already referred 28 vouchers
totaling $35.1 million to DCIS for potential investigation.
The following will be some key completed, ongoing, and planned
audits.
COMPLETED AUDIT WORK
In our report D-2007-107, ``Procurement Policy for Armored
Vehicles,'' issued June 27, 2007, we addressed inquiries made by
Congresswoman Louise M. Slaughter. We identified the following:
--The Marine Corps Systems Command awarded sole-source contracts for
body armor and armored vehicles even though officials knew
other sources were available for competition.
--Acquisition officials continued to award contracts for armored
vehicles even though the contractor repeatedly failed to meet
contractual delivery schedules for getting vehicles to the
theater, and
--The government did not execute the liquidated damages clause of the
contract to collect appropriate fees from the contractor.
In November 2006, we reported on the Army's small arms program
including the availability, maintainability, and reliability of the
small arms support for the warfighter. We found that the Army equipped
its deployed forces in support of Operation Iraqi Freedom with the
small arms necessary to meet Combatant Commanders requirements.
However, to accomplish these requirements the deploying unit obtained
some of the small arms from other sources, such as nondeployed units.
As a result, the nondeployed units faced a potential shortage of small
arms and may not have had the ability to adequately train and maintain
equipment and personnel readiness at an acceptable level. We also
determined that implementing and monitoring the Army Force Generation
Program, as well as, developing an overarching Army training strategy
will ensure that the unit's readiness is not degraded. We agreed with
the Army that outlining requirements and developing a plan for small
arms distribution will avert future small arms shortages.
We also found that the Army generally had adequate controls for
maintainability and reliability of small arms fielded to the
warfighter. As a result of the Army's proactive approach to maintenance
and reliability, the warfighter is provided with reliable small arms
capabilities to sustain operations in varying environments but we also
agreed with the Army that following up on findings and recommendations
made by the Soldier Weapons Assessment Team will address small arms
maintainability risks identified. We determined that ongoing
initiatives and management actions were responsive to our initial
concerns and we agreed with the actions the Army took.
Another key report classified report, ``Equipment Status of
Deployed Forces within the U.S. Central Command,'' issued January 25,
2007. We reported that service members experienced shortages of force-
protection equipment, such as up-armored vehicles, electronic
countermeasure devices, crew-served weapons, and communications
equipment. As a result, Service members were not always equipped to
effectively complete their missions. Also, the Request for Forces
process did not always ensure that Service members performing
nontraditional missions, such as Provincial Reconstruction Teams (PRTs)
and detainee operations (i.e. In Lieu Of units \3\), received the
equipment necessary to perform their wartime mission. As a result,
Service members performed missions without the proper equipment or
postponed missions while waiting to receive equipment. As a result of
this review, the Under Secretary of Defense for Personnel and Readiness
issued interim policy on training and equipping In Lieu Of units. A
follow-on audit on equipping units in Iraq in accordance with mission
requirements is currently being conducted in conjunction with the
Multi-National Forces-Iraq Inspector General.
---------------------------------------------------------------------------
\3\ Service members who perform wartime missions that are not
traditionally organized, trained, and equipped to perform are called
``In Lieu Of'' (ILO) forces.
---------------------------------------------------------------------------
Last week on March 6, we issued a report on a review of the use of
supplemental funds for medical support of GWOT. We performed this
review in response to Office of the Assistant Secretary of Defense
(Health Affairs) concerns over the reporting and use of GWOT
supplemental funding by the Military Health System (MHS). The Military
Department Surgeons General did not consistently report obligations of
GWOT supplemental funds by mission as required by the TRICARE
Management Activity. Without accurate and consistent reporting of GWOT
supplemental fund obligations, DOD has no assurance that the Military
Health System used funds for the missions for which they were
requested. Additionally, DOD cannot ensure that the amounts reported in
the fiscal year 2006 Defense Health Program Cost of War report are
accurate and complete.
ONGOING AUDIT WORK
One of highest priority ongoing reviews is an assessment of the
procurement, distribution, and use of body armor in DOD. This audit is
being performed at the request of Congresswoman Louise M. Slaughter.
The objective of the audit was to evaluate the procurement history and
practices for body armor and the effect that the Army's decision to ban
the use of personally purchased body armor has on the safety of Service
members. The audit team is reviewing 35 contracts and 5 Federal Supply
Schedule orders, valued at more than $5.2 billion, awarded by the Army
and Marine Corps between January 2004 and December 2006 for body armor
components. The team will determine whether the contracts and orders
for body armor components, such as the outer tactical vest, enhanced
side ballistic inserts, small arms protective inserts, and deltoid and
auxiliary protectors, were awarded in accordance with the Federal
Acquisition Regulation.
Another review relates to the protection of the Forces. We are
assessing procurement and delivery of joint service armor protected
vehicles. The objective is to determine whether the Mine Resistant
Ambush Protected (MRAP) vehicle program office is effectively procuring
armored vehicles in accordance with the Federal Acquisition Regulation
and DOD requirements. Specifically, we will review MRAP program
administration to determine whether the program office is taking
appropriate actions to accelerate vehicle delivery to users. An
additional objective is to review the Services' requirements for MRAP
and High Mobility Multipurpose Wheeled Vehicles.
We have two on-going audits related to Common Access Cards (CAC)
issued to contractors. The first will determine whether controls over
Common Access Cards (CACs) provided to contractors are in place and
work as intended: specifically, whether DOD officials issue CACs to
contractors, verify the continued need for contractors to possess CACs,
and whether cards are being revoked or recovered from contractors in
accordance with DOD policies and procedures. The importance of this
series of reviews is to also ensure we are not providing contractors
access to benefits that are not called for in specific contracts such
as over compensating by providing a contractor daily expenses for basic
life support items and by issuing an improper CAC providing these same
life support items free. The team visited 67 sites, identified with the
greatest number of contractor CACs, to test processes for the
contractor CAC lifecycle. The audit team also obtained contractor CAC
data from the Defense Manpower Data Center and tested a sample of the
data to evaluate the reliability of controls over the issuance,
periodic verification of continued need, revocation, and recovery of
contractor CACs. The team anticipates issuing a draft report in April
2008. The second project will address specifically the controls over
the contractor CACs in Southwest Asia was announced on January 24,
2008.
We also are looking at the management and controls over selected
funds to ensure proper use of and/or the support of payments in the
following reviews:
--Internal Controls Over Out-Of-Country Payments.--The objective is
to determine whether internal controls over out-of-country
payments supporting GWOT provide reasonable assurance that
payments are properly supported and recorded. DFAS Rome is the
field accounting office for contingency disbursing in Iraq,
Afghanistan, Kuwait, Saudi Arabia, and Egypt.
--Funds appropriated for Afghanistan and Iraq processed through the
Foreign Military Sales Trust Fund.--The overall objective is to
determine whether the funds appropriated for the security,
reconstruction, and assistance of Afghanistan and Iraq and
processed through the Foreign Military Sales Trust Fund are
being properly managed. Specifically, we will determine whether
the transfer of appropriated funds from the Army's accounts
into the Foreign Military Sales Trust Fund was properly
authorized, accounted for, and used for the intended purpose.
In addition, we will verify whether the appropriated funds are
properly reported in DOD financial reports.
--Operations and Maintenance Funds Used for GWOT Military
Construction Contracts.--The objective is to determine whether
DOD components followed requirements for using operations and
maintenance funds for GWOT military construction. Specifically,
we will determine whether DOD followed proper procedures for
administering, executing, and reporting the use of operations
and maintenance funds on GWOT military construction contracts.
--Small arms ammunition fund management in support of GWOT.--
Specifically, we will determine whether financial management
officials fully supported and properly incurred obligations and
expenditures. We will also determine whether funds for small
arms ammunition were accurately recorded in financial systems
for reporting to the Office of the Secretary of Defense.
--Internal controls over the Army, General Fund, Cash and other
monetary assets held in Southwest Asia.--To accomplish this
review, we will verify the existence of cash reported by
disbursing officers to the U.S. Treasury; inspect physical
controls over cash; confirm collection and payment documents to
insure adequate internal controls over disbursing officer
accountability documents; and determine the source and use of
cash. We anticipate conducting site visits from April to June
of 2008 in Iraq, Afghanistan, Kuwait, Saudi Arabia, and Egypt.
PLANNED AUDIT WORK
We have attached a list of our current planned audits for SWA
including Iraq and Iraq-related. We have also modified our planning
process to include the specifics required by the National Defense
Authorization Act for Fiscal Year 2008, January 28, 2008. Section 842
of the Act, ``Investigation of waste, fraud, and abuse in wartime
contracts and contracting processes in Iraq and Afghanistan,'' requires
the Inspector General of the Department of Defense to develop a
comprehensive plan for a series of audits of contracts, subcontracts,
and task and delivery orders for the support of coalition forces. The
group developing this plan consists of the most experienced and senior
executives in our audit organization.
To develop the plan the group is: reviewing completed and ongoing
audits and inspections; analyzing contract actions; researching the
appropriations and expenditures; examining the contracting processes
and systems; obtaining information from Iraq and Afghanistan;
evaluating the related accounting and financial systems; and studying
contracting problems that occurred in prior wars.
The group is identifying areas or gaps in need of audit coverage.
Examples of areas that may require audit work are: maintenance service
contracts; security service contracts; air transportation contracts;
DOD financial systems used in Iraq and Afghanistan; and staffing and
training of contract oversight personnel.
We want audits in the plan that will identify abuses and defects in
contracts, systems and processes that can be promptly remedied. The
plan will help us expand and refocus our audit efforts to support the
war fighters. The plan will be coordinated through existing councils
with the cognizant Inspectors General and Audit Chiefs.
DETAILS ON ANTICORRUPTION ACTIVITIES
We continue to play a key role in developing and promoting the
establishment of effective oversight and security organizations in
Afghanistan and Iraq. As we stated earlier, until recently, we provided
two full-time IG advisors to the Multi-National Security Transition
Command--Iraq (MNSTC-I) Transition Teams in Baghdad to assist the
Offices of the Inspectors General for the Ministry of Defense, Joint
Headquarters (JHQ), and the Ministry of Interior. Prior to reassigning
these advisors back to Washington D.C., we facilitated the
establishment of a new MNSTC-I billet for an ``IG Integration
Officer.'' The billet was approved and filled in July 2007 and is
making a difference. The IG DOD will continue to provide assistance and
advice as required.
While in Iraq, with the munitions assessment team, we visited with
the Inspector General for the Ministry of Defense and staff and the
Deputy Inspector General, Ministry of Interior and were impressed with
their progress. We also met with all Inspectors General from all
ministries at a central meeting.
In July 2007, we initiated a project to document the lessons
learned during our 3-year experience in assisting in establishing and
developing a viable, sustainable, effective IG system in Iraq. This
project will capture the concepts, strategies, options, and practical
applications establishing a Federal IG system may be appropriate in
nation building missions and as an instrument to combat fraud, waste,
abuse, and corruption in developing nations. The expected completion
date for the lessons learned report is April 2008.
The OIG works with DOD agencies to prevent corruption, fraud,
waste, and abuse by keeping all informed, to include Defense agencies
and military commanders, of vulnerabilities detected within their
systems; providing mission briefings which address the impact of fraud,
waste, and abuse on DOD programs and operations; and by documenting
deficiencies in DOD internal management controls when discovered during
the course of an investigation.
Since the initiation of Operation Enduring Freedom and Operation
Iraqi Freedom, we have acted in collaboration with the military
services and the Defense Logistics Agency to pursue administrative
remedies, such as suspensions and debarments from government
contracting, against U.S. contractors and their personnel. We ensure
investigations are coordinated with central points of contact, and we
engage agency fraud counsels and suspension and debarment authorities
to prevent repeat losses to DOD caused by unscrupulous contractor
activities.
We are also a member of the U.S. Department of Justice Asset
Forfeiture Program. Our participation in this program results in
seizure of fraud proceeds from criminals who have targeted DOD. The
intent of the program is to deter criminal activity, punish offenders,
and dismantle criminal organizations. Forfeitures related to fraud and
corruption in Iraq are soon expected to exceed $5.1 million in funds
and property. It is anticipated that considerable additional funds and
property will be seized in the future as ongoing cases are resolved.
PANEL ON CONTRACTING INTEGRITY
The John Warner National Defense Authorization Act of 2007 (Public
Law 109-364) directed the DOD to convene a panel of senior leaders to
conduct Department-wide reviews of progress to eliminate areas of
vulnerability of the defense contracting system that allow fraud,
waste, and abuse to occur. The panel was to review the report of the
Comptroller General required by the National Defense Authorization Act
of 2006 (Public Law 109-163) related to these areas of vulnerability,
and to recommend changes in law, regulations, and policy deemed
necessary.
The DOD IG representative is a member of the overall Panel on
Contracting Integrity, a member of the subcommittee on Adequate
Pricing, and is Chairperson of the Procurement Fraud Indicators
subcommittee. The Procurement Fraud Indicators subcommittee is
identifying what these indicators are and how they should best be
addressed and used for the contracting/acquisition workforce.
As part of the Senior Steering Group for GWOT, DOD OIG
representatives will meet monthly, beginning in March, to discuss ways
to improved finance, accounting and procurement in Iraq. The group will
determine needed tasks and timeframes; identify lead organizations and
resource requirements to complete the tasks; determine whether an
expeditionary finance and accounting capability is needed and if so,
what would it look like, how it would be staffed, and how it would be
funded; and discuss any changes needed in guidance to ensure the tasks
can be completed efficiently and effectively. While it is imperative
that solutions are implemented quickly, the group's focus is to propose
and implement solutions that most benefit the warfighter and make the
best use of the taxpayer's funds.
SIGNIFICANT ACCOMPLISHMENTS
Of the 102 ongoing DCIS investigations, 41 investigations involve
public corruption offenses (bribery, gratuities, and conflicts of
interest); 47 investigations involve procurement fraud offenses (false
claims and statements, undelivered products, defective products, cost/
labor mischarging); 13 investigations involve theft and technology
protection offenses (theft of funds, property, equipment, supplies; and
export violations involving U.S. technology and vehicles), and one
terrorism-related case.
To date, DCIS' ongoing Iraq related investigations have identified
229 subjects consisting of 22 U.S. Government employees, 53 military
personnel, 17 foreign nationals, 68 U.S. Government contractors, 23
U.S. Government sub-contractors, 6 dependents of military personnel,
and 40 others with no known affiliation to the government.
As a result of closed and ongoing investigations in Southwest Asia,
18 Federal criminal indictments and 26 Federal criminal informations
\4\ have been issued, and 3 hearings have been conducted under Article
32 of the Uniform Code of Military Justice. In total, 25 persons have
been convicted of felony crimes, resulting in a total of approximately
34 years of confinement and 35 years of probation; 9 individuals and 3
companies were debarred from contracting with the U.S. Government; 12
companies and 13 individuals were suspended from contracting; and 2
contractors signed settlement agreements with the U.S. Government. A
total of $11.1 million was paid to the United States in restitution;
$365,725 was levied in fines and penalties; $1.76 million was
forfeited; and $2.2 million was seized.
---------------------------------------------------------------------------
\4\ ``Information'' is a criminal charge brought by a prosecutor
without using a Grand Jury to get an indictment. The ``Information'' is
filed in court and serves to notify the court and the accused of the
charges. The ``Information'' must be in writing and must be supported
by evidence submitted by the prosecutor, usually in the form of
affidavits. The name is derived from the prosecutor providing
information to the court to justify a prosecution.
---------------------------------------------------------------------------
As a result of our audit work since fiscal year 2003, we made 64
recommendations to improve financial management, logistics, contract
administration, and accountability with DOD GWOT operations. Defense
management took sufficient actions in implementing 48 of the 64
recommendations. As a result, our records show 48 recommendations
closed, 16 remain open. Additionally, as a result of our findings and
recommendations, we and the Department have identified over $840
million in funds that could be put to better use. We anticipate
additional potential monetary benefits or improved financial management
in the ongoing audits of controls over payments made in support of DOD
Iraq operations, and internal controls over cash and other monetary
assets. We also are working in partnership with the Defense Finance and
Accounting Service on establishing minimum accountability requirements
for payments made in support of DOD Iraq operations.
CLOSING
Thanks to Congressional support, we are now dedicating more
resources to provide oversight on munitions control and accountability,
acquisition, corruption, waste, fraud, abuse, and expanding our
footprint in all of Southwest Asia. We will continually evaluate the
lessons learned and do our best to prevent the mistakes of the past. We
will continue to keep Congress and our leadership fully and promptly
informed.
Thank you for the opportunity to appear before the committee today
to address our ongoing oversight work regarding Iraq.
Senator Leahy. And we will have questions--just one thought
occurs to me, I just wanted to make sure I understand, of the
number of auditors going in there, how many speak the language?
General Kicklighter. Sir, I would say very few, if any.
Senator Leahy. Thank you. I was afraid of that.
Mr. Bowen.
STATEMENT OF STUART W. BOWEN, JR., SPECIAL INSPECTOR
GENERAL FOR IRAQ RECONSTRUCTION
Mr. Bowen. Thank you, Senator Leahy. And just, on that
point, I have three auditors and one investigator on my staff
who speak Arabic. Their presence has enhanced our capacity to
provide oversight and engage with the Iraqis.
Senator Leahy. Thank you.
General Kicklighter. We have one.
Senator Leahy. Thank you.
Mr. Bowen. Thank you, Senator Leahy, Ranking Member
Cochran, and members of the committee for this opportunity to
appear before you today to discuss important issues facing the
United States' continuing support for relief and reconstruction
in Iraq.
The central matter before the committee today is the
effectiveness of U.S. efforts to combat fraud, waste, abuse,
and corruption in Iraq. This matter has two significant facets:
fraud and waste within the U.S. program, and the problem of
corruption within the Government of Iraq.
Two days ago, I returned from my 19th trip to Iraq since my
appointment 4 years ago as Special Inspector General. During my
15-day stay, I had informative meetings on the many challenges
confronting the program--the relief and reconstruction
program--with former Prime Ministers Jaafri and Allawi, Deputy
Prime Minister Barham Salih, and the current chair of the
Baghdad Services Committee, Dr. Ahmed Chalabi.
I also met with the leaders of the two primary anti-
corruption agencies in Iraq, Dr. Abdul Basit, who heads the
board of supreme audit, and the new commissioner of what's now
called the commission on integrity, formerly the commission on
public integrity, Judge Rahim al-Ugaili.
Dr. Basit recounted to me during our visit that his current
audits reveal a continuing and serious problem of corruption
within Iraqi ministries. Judge Rahim, the new commissioner on
integrity, admitted and acknowledged the current weakness of
his investigators' capacity to fight corruption in Iraq--a
symptom of, frankly, a rule of law system that's in need of
much repair.
U.S. ANTICORRUPTION PROGRAMS INSUFFICIENT
Over the past 5 years, U.S. programs to bolster anti-
corruption institutions in Iraq have been inconsistent,
suffering from poor coordination, weak planning, and limited
resources. SIGIR has completed several audits looking at these
efforts and has found that the programs have yet to meet their
goals.
But the U.S. Embassy is making progress on the
recommendations, as evidenced in our most recent audit, and
we're following that up with another review that will be
published this spring to give more detail on that progress.
The Congress established SIGIR 4 years ago to provide
oversight and relief of reconstruction funds in Iraq. Today,
SIGIR has 36 auditors on the ground in Iraq--inspectors and
investigators, as well--and we expect to expand our team to 46
to meet our newly expanded mandate.
FRAUD IN IRAQ RECONSTRUCTION
To date, SIGIR has issued 216 audits and inspections and
addressed myriad problems within programs and projects of the
U.S. reconstruction effort. Our investigative work has
identified a number of instances of egregious fraud that have
led to five convictions to date. In fact, this morning, jury
selection has begun in the trial of three more persons arrested
as a result of SIGIR investigations.
We currently have----
Senator Leahy. Juries here? In the United States?
Mr. Bowen. Yes, in New Jersey, in the Federal District
Court in New Jersey.
Senator Leahy. Okay.
Mr. Bowen. We currently have over 50 cases ongoing, 30 of
them under management at the Department of Justice. The real
challenge in the U.S. program--as Comptroller General Walker
noted--is the problem of waste with respect to the oversight
and management execution of almost $50 billion in relief and
reconstruction funds. The fraud has been egregious; but as a
relative matter to the total investment, it's a small
percentage.
WASTE IN IRAQ RECONSTRUCTION
Waste is another problem. It has diminished over time, as
lessons learned have been applied, but it continues to be an
issue, as our audits and inspections reveal.
SIGIR has found pervasive weakness in program and contract
management. Our inspections found a wide array of problems at
construction sites.
As requested by the committee, I've submitted, for the
record, a number of examples from our auditors' inspections
that identify vulnerabilities to fraud, waste, and abuse. Let
me just highlight two in the interest of time.
The Baghdad Police College, which we first reported on 18
months ago, was a $72 million program. Really, this is a very
critical single project, in my view, with respect to security,
because it is where every Iraqi police officer is trained or is
supposed to be trained.
I visited there, again, last week, to see what progress had
been made resolving the many problems uncovered in that initial
inspection. Those problems included plumbing that didn't work
at all, resulting in breakdowns and seepage, which rendered
certain barracks unusable.
Progress has been made. There are still problems with the
plumbing, but I noted that the barracks are in better
condition. Importantly, this program has expanded
significantly, from that original $72 million program, and
another $75 million will be spent--in phase II and phase III--
that will result in a significantly greater capacity to train
12,000 Iraqi police officers.
The audit I want to mention is our review this last quarter
of the design-build contract that was awarded to Parsons, Inc.
in March 2004. Of the 11 task orders issued under this
particular contract--which involved buildings and health--only
3 were completed. We've addressed some of the programs and
projects before, most notably the primary health care clinic
program. I think this is one of the single biggest failures of
all of the programs in Iraq--one that would have provided
clinics all across the country. It was a $186 million program,
and when the contract was terminated, only six health clinics
were complete.
Now the Corps of Engineers has made significant progress,
direct-contracting the completion of a number of the remaining
clinics. About 75 are complete today, and about 50 are open.
The Parsons design-build contract, frankly, is emblematic
of a poor choice of a contracting vehicle to engage in the kind
of work anticipated. We'll come out with the second review of
Parson's this spring, looking at security and justice programs.
SUSTAINMENT OF RECONSTRUCTION EFFORT
The other key issue with respect to fraud, waste, and
corruption in Iraq is sustainment. As you noted, Mr. Chairman,
about $47 billion has been invested in Iraq. The success of
that investment, regardless of how much has been accomplished
to date, is contingent upon an effective program, operated by
the Iraqis, funded by the minister of finance, overseen by the
ministries, to sustain what we've provided.
Absent that, frankly, the biggest waste is yet to come,
because those are enormously significant projects. Let me note
one--the Nasiryah water treatment facility--which we're
inspecting now. It is the most expensive project that the
United States has undertaken, at a cost of $300 million. It is
supposed to provide 600,000 persons in central Iraq with clean
water, but it's operating at less than 50 percent capacity
right now, because of poor operations and maintenance and lack
of power. That inspection report will be out in the spring
detailing the issues. To its credit, the Embassy is responding
to this matter, and Ambassador Crocker will visit Nasiryah soon
to help further those efforts along. But sustainment is key to
this waste issue.
Let me say that we continue to carry out our lessons
learned program, with proposals for the Congress to consider
that will improve how the U.S. manages contingency operations.
I think if there's one overarching lesson learned, it's that
reform is essential in this particular province in order to
protect American interests abroad.
So, let me close by thanking you for this opportunity to
testify, Senator Leahy, and for the opportunity to address
these important matters. I look forward to your questions.
[The statement follows:]
Prepared Statement of Stuart W. Bowen, Jr.
INTRODUCTION
Chairman Byrd, Ranking Member Cochran, and members of the
Committee, thank you for this opportunity to appear before you today to
discuss important issues facing the United States' continuing support
for the relief and reconstruction efforts in Iraq. The central issue
that I will address is the effectiveness of U.S. efforts to combat
fraud, waste, abuse, and corruption in Iraq. The efficacy of these
efforts is essential to ensuring that the investment of billions in
taxpayer dollars in relief and reconstruction activities in Iraq is
protected and preserved.\1\
---------------------------------------------------------------------------
\1\ See Appendix I for a definition of fraud, waste, and abuse
developed by GAO, SIGIR, and the Inspectors General of the Departments
of Defense and State.
---------------------------------------------------------------------------
The Office of the Special Inspector General (SIGIR) began as the
Coalition Provisional Authority Inspector General, starting work soon
after my appointment in January 2004. SIGIR, which was formed in
October 2004, reports to the Congress and jointly to the Secretaries of
State and Defense. It is our mission to keep the Congress, the
Administration, and the American people transparently informed about
the results of our oversight, which have been both positive and
negative, and to provide recommendations for improvement and lessons
learned. During its short lifespan, SIGIR has issued 216 audit and
inspection reports that address myriad programs and projects related to
U.S. reconstruction efforts in Iraq. Our investigative work has
identified a number of instances of egregious fraud that have led to
five convictions to date, several trials that will begin this week, and
pending indictments stemming from active cases.
Our audit and inspection reports document a number of challenging
situations that we have examined and investigated in Iraq. As a
preliminary matter, it is important to note that the reconstruction
program in Iraq is unlike any other in history in that it has been
carried out virtually under fire. Thus, it is fundamentally different
from reconstruction in a stable environment and our findings should be
viewed in that light.
The security challenges in Iraq, however, do not supersede the
applicable rule governing the use of taxpayer dollars, and, in fact,
the difficult environment increases the need for comprehensive on-the-
ground oversight. Thus, SIGIR has been and remains committed to
maintaining a robust operational presence in Iraq to provide effective
oversight and real-time review. Our collective reporting to date
reveals a simple axiom: effective quality assurance programs carried
out by the government and complemented by effective quality control
programs performed by contractors will yield successful programs and
projects. Where good quality assurance and quality control programs
have been applied in Iraq, success has been achieved. SIGIR's
inspection reports document that the majority of the projects we have
visited have met contract expectations and are being used per their
original intentions. However, of the 50 construction project
assessments that were deemed a success, eight had inadequate design
submissions, four had some form of inadequate construction, and two
lacked sufficient attention to sustainability issues. Despite these
findings, the overall rate of success is notable given the high
security risks that have afflicted the program in Iraq.
Since SIGIR's inception, an essential element of our approach to
oversight has been to rapidly identify problem areas and work with
management to develop improvement plans. I instruct my auditors to
produce audits that provide solutions to any findings and to be
transparent with management throughout the audit process. This approach
has worked. Most of SIGIR's published audits have provided
recommendations with which management concurred and agreed to
implement. This approach has promoted positive change in the program
through the application of lessons learned along the way.
While the fraud we have found in Iraq has been egregious, it has
also been limited in scope relative to the overall investment of
taxpayer dollars in Iraq. However, SIGIR reporting has found that
waste, while difficult to quantify in gross numbers, has been present
in a wide variety of U.S.-funded Iraq reconstruction projects and
programs. The problem of waste has diminished since the inception of
the program as managers have applied lessons learned (e.g., moving from
expensive design-build cost-plus contracts to direct, fixed-price
contracts).
Regarding the preservation of the U.S. investment in Iraq, SIGIR
has found weaknesses in plans and processes governing the transfer of
U.S.-funded projects and assets to the Government of Iraq (GOI). We
raised a red flag on this issue (in an audit released last July),
noting that much of the U.S. reconstruction investment is at risk
unless these issues are effectively addressed by the GOI.
Our investigative work and capacity are increasing, particularly
with regard to using forensic capabilities to review allegations of
contract fraud like double billing. We also are strengthening
investigative coordination through expanded participation in various
Iraq fraud task forces.
As our previous audits have noted, the U.S. support for GOI for
anticorruption programs has been relatively limited and less effective
than necessary. The GOI continues to face a plethora of problems
arising from corruption within its governmental institutions, a reality
that the GOI has begun to face publicly as evidenced in its three-day
anticorruption conference in early January 2008. Taking seriously the
fight against corruption--a burden shared by the GOI and the U.S.
Mission in Iraq--is an essential element to the ultimate success of the
fledgling Iraqi democracy. Success on this front is key to preserving
the U.S. investment in Iraq's relief and reconstruction.
I returned two days ago from Iraq. It was my 19th trip over the
past four years. During my 15-day stay, I had informative dialogues
with a number of Iraqi officials about the past and present U.S.
reconstruction programs. I met with former Prime Ministers Jaafri and
Allawi, the current Deputy Prime Minister, Dr. Barham Salih, the Chair
of the Baghdad Services Committee, Dr. Ahmed Chalabi, the President of
the Board of Supreme Audit--Dr. Abdul Basit, and the new Commissioner
of the Commission on Integrity. Judge Rahim al-Ugaili.
My discussions with Dr. Basit and Judge Rahim focused on the
current state of corruption in the GOI. Dr. Basit acknowledged that
corruption within a number of ministries continues to restrict their
progress. Judge Rahim, who has been in his new position for just under
two months, concurred that Iraq and, specifically, his Commission must
improve its collective anticorruption investigative capacity through
training, better coordination with U.S. investigators, and expanded use
of technical tools and expertise. Prime Minister Maliki has designated
2008 as the Year of Reconstruction and Anticorruption. While this is a
signal and welcome recognition within the Iraqi government of the
importance of addressing this continuing problem, it is essential, as
Dr. Basit related to me, that the GOI substantiate its welcome rhetoric
with robust rule of laws actions.
I also met with Ambassador Crocker, General Petraeus, and the
leaders of the primary U.S. reconstruction management offices,
collectively finding continued progress toward improving processes for
managing the U.S. investment in Iraq.
SIGIR BACKGROUND
My testimony is based on the audit reports that SIGIR has issued,
in accord with Generally Accepted Audit Standards, and the SIGIR
inspections and investigations, which have been completed in accord
with standards established by the President's Council on Integrity and
Efficiency (PCIE). Our continuing oversight work is summarized every
three months in SIGIR's comprehensive Quarterly Reports--of note, we
are the only IG required to produce quarterly reports to the Congress.
We have also produced three lessons learned reports--on personnel,
contracting, and program oversight--which have led to improvements
through legislative and regulatory reforms. We are at work on a fourth
cumulative lessons learned report scheduled for release this summer.
By maintaining a significant oversight presence on the ground in
Iraq, SIGIR is uniquely and robustly positioned to review U.S.
reconstruction programs through its cross-jurisdictional mandate
authority and capacity derived from four years of institutional
experience. We conduct, supervise, and coordinate audits and
investigations of the treatment, handling, and expenditure of amounts
made available for the reconstruction of Iraq. We do so in order to
ensure the independent and objective leadership of oversight; to
promote economy, efficiency, and effectiveness; and to prevent and
detect waste, fraud, and abuse in Iraq programs.
The Congress has assigned SIGIR the responsibility for conducting
audits and investigations relating to expenditures from a set of
accounts specified in law, including the Iraq Relief and Reconstruction
Fund, the Iraq Security Forces Fund, the Commander's Emergency Response
Program, the Economic Support Fund, and a variety of smaller funds. In
addition, Congress has assigned SIGIR the duty to provide reporting on
amounts appropriated or otherwise made available ``for assistance for
the reconstruction of Iraq . . . under any other provision of law.''
\2\
---------------------------------------------------------------------------
\2\ Sec. 3001(m)(2)(B) of Public Law 108-106 as amended by Sec.
1221, National Defense Authorization Act for Fiscal Year 2008 (Public
Law 110-181).
---------------------------------------------------------------------------
We regularly coordinate our work with other audit and investigative
agencies with whom we share overlapping jurisdiction through a variety
of mechanisms, including the Iraq Inspectors General Council, which I
formed four years ago, and through joint audits with our sister
agencies. Because of our unique mandate, SIGIR can take a multi-agency
approach to the problems of Iraq reconstruction, comparing, for
example, the Department of State's Provincial Reconstruction Teams and
the Department of Defense's Commander's Emergency Response Program.
These programs at times have similar goals but have also upon occasion
used conflicting practices and procedures. SIGIR closely coordinates
its work with the Government Accountability Office.
The enactment of the fiscal year 2008 National Defense
Authorization Act (NDAA) in late January 2008 provided SIGIR with new
responsibilities. Specifically, the NDAA give SIGIR expanded oversight
of funds in the Iraq Security Forces Fund, the Commander's Emergency
Response Program, and the Economic Support Fund. Section 842 of the
NDAA directs SIGIR to develop a comprehensive audit plan for a series
of audits of Federal agency contracts, subcontracts, and task and
delivery orders for the performance of security and reconstruction
functions in Iraq. This will require a level of effort beyond SIGIR's
already extensive focus on contract audits of reconstruction
activities. The legislation requires SIGIR to play a significant
leadership role in planning and coordinating these audits with other
relevant inspector general organizations, including the DOD IG, the DoS
IG, and USAID IG.
Along with the work required under our new mandate, SIGIR continues
its ongoing emphasis on detailed reconstruction contract review.
Specifically, we continue work on our extant mandate to complete a
final forensic audit report on all amounts appropriated or otherwise
made available for the reconstruction of Iraq. To fulfill this
requirement, SIGIR is executing a series of focused contract audits of
large Iraq reconstruction contracts and will culminate this work with
capping reports. Our focused financial audits have examined overall
IRRF contract administration and oversight, contract outcomes, and have
included assessments of vulnerabilities to fraud, waste, and abuse.
Future contract audit coverage will be expanded to include contracts
across additional reconstruction funding appropriations, years of
funding, programs, and include construction as well as non-construction
contracts.
AUDITS
Over its four-year existence, SIGIR's Audit Directorate has issued
108 audit reports that provide 315 recommendations. These
recommendations cover a wide range of issues that have contributed to
improvements in agency operations in Iraq reconstruction. SIGIR audits
have been directly responsible for $58 million in savings and $40
million that has been put to better use. SIGIR has challenged $7.5
million in payments. The vast majority of our recommendations have been
agreed to by the agencies to whom they were addressed, with many
corrective actions underway or completed.
INSPECTIONS
As of January 2008, the SIGIR Inspections Directorate has issued
108 project assessment reports that cover reconstruction project sites
in Iraq valued at over $1.265 billion. To date, SIGIR has conducted 84
construction assessments and 24 sustainment assessments. The
assessments have yielded a variety of results, ranging from noting
well-constructed projects to finding projects with serious
deficiencies.
The projects with deficiencies are largely the result of
insufficient government oversight and inadequate contractor
performance. Of the 84 construction assessments, 34 had significant
deficiencies preventing the project from meeting its original
objectives. These deficiencies resulted from inadequate design,
construction, quality control, government quality assurance, and
planning for sustainment.
INVESTIGATIONS
SIGIR's investigative work has produced 14 indictments, 14 arrests,
5 convictions, 9 individuals pending trial (several of whom go on trial
this week), and over $17 million in fines, forfeitures, and
restitution. We currently have 50 ongoing investigations into fraud,
waste and abuse involving funds for the reconstruction of Iraq. From
its inception, SIGIR has had a strong investigative presence in Iraq.
Currently, we are expanding our capability throughout the continental
United States, to areas where much of the information and many
potential subjects are currently located.
SIGIR Investigations continues to work with a wide range of U.S.
agency partners in its pursuit of allegations of fraud, waste, and
abuse in Iraq relief, reconstruction, and infrastructure building.
SIGIR's investigative partners include: U.S. Army Criminal
Investigation Command, Major Procurement Fraud Unit (CID-MPFU); Defense
Criminal Investigative Service (DCIS); Federal Bureau of Investigation
(FBI); U.S. Agency for International Development, Office of Inspector
General (USAID OIG); and U.S. Department of State, Office of Inspector
General (DoS OIG). Our partnerships with other Federal law enforcement
agencies have enhanced interagency cooperation and maximized our
investigative resources through investigative case coordination and
deconfliction.
SIGIR supports the ongoing national initiatives and task forces,
such as the Defense Finance and Accounting Service invoice review
project in Rome, New York. DCIS initiated the project to detect fraud
involved with payments made by the U.S. Army to support the war effort
in Iraq. Next week, two SIGIR agents will deploy to Rome, New York, to
work with the task force in furtherance of this investigative effort.
SIGIR continues to participate in the National Procurement Fraud
Task Force (NPFTF) and the International Working Committee (IWC), a
subcommittee of the NPFTF. In October 2006, the Department of Justice
(DoJ) Criminal Division created the NPFTF to promote the early
detection, prevention, and prosecution of procurement fraud associated
with increased contracting activity for national security and other
government programs. The IWC links DoJ and Federal law enforcement
agencies and provides a venue to address prosecutorial issues resulting
from fraud investigations conducted in an international war zone.
While SIGIR agents in Iraq concentrate on American targets and work
with our investigative partners and the DoJ, our special agents also
continue to develop close relationships with Iraq's Commission on
Integrity (CoI, formerly known as the Commission on Public Integrity)
and the Board of Supreme Audit (BSA). My agents and I met with the head
of the CoI during my recent visit to Iraq, and I am pleased to report
that the close relationship that we previously had with the CoI will be
continued under the CoI's new leadership. Thus, our agents in Iraq will
be able to continue to assist Iraqi authorities in their investigations
of Iraqi contractors who engaged in fraud potentially involving U.S.
dollars.
A key component of SIGIR's investigative program has been the
strategic development of investigative task forces that enable
synergistic collaboration among law enforcement agencies pursuing Iraq
fraud cases. SIGIR formed the first Iraq fraud task force in spring
2005. This initiative, the Special Investigative Task Force on Iraq
Reconstruction (SPITFIRE), combined the efforts of SIGIR with
investigative assets from the Internal Revenue Service, the Department
of Homeland Security's Office of Immigration and Customs Enforcement,
the Federal Bureau of Investigation, and the Department of State's
Office of Inspector General. SPITFIRE succeeded in effectively pursuing
the investigation of the Bloom-Stein conspiracy, the first major fraud
prosecution in Iraq. SIGIR investigators developed allegations
uncovered during a SIGIR audit, which revealed an egregious criminal
conspiracy in Hilla, Iraq, involving tens of millions of dollars in
fraudulent contracts, bribes, and kickbacks. Nine individuals
(military, civilian, and contractors) were indicted, four convicted and
five are pending trial; several others will go on trial start this
week.
SIGIR is not limiting its efforts just to addressing contractor
misconduct through the criminal and civil justice system. We also refer
cases to the U.S. Army Legal Services Agency, Procurement Fraud Branch,
for adjudication under the administrative suspension and debarment
process. Since December 2005, SIGIR and its partner agencies have
worked closely with the Army's Procurement Fraud Branch to suspend and
debar contractors for fraud or corruption within the Army, including
those involving Iraq reconstruction or Army support contracts in Iraq.
In June 2003, the Department of Defense designated the Department
of the Army as the executive agent for contracting support to the
Coalition Provisional Authority. As a result, the Army's suspension and
debarment authority leads the effort to ensure the integrity of
contractors performing these contracts. The goal of this program is to
ensure that these contracts are awarded to, and performed by,
contractors who are honest and ethical and who have the ability to
successfully perform this important work. The Procurement Fraud Branch
has also taken a leading role within the Army and at joint contracting
organizations to train contracting officers to aid in the prevention
and early detection of contractor fraud in Iraq reconstruction and
support contracts. As reflected in SIGIR's last Quarterly Report to the
United States Congress, the Army Procurement Fraud Branch reported that
it had suspended 32 individuals or companies, proposed 30 for
debarment, and debarred 20 based on allegations of fraud and misconduct
connected to Iraq reconstruction and contractor fraud.
RECONSTRUCTION PROGRAM VULNERABLE TO FRAUD, WASTE, AND ABUSE
Systemic contracting and management problems, corruption, and the
general lack of security in Iraq are major factors that have made
reconstruction programs in Iraq vulnerable to fraud, waste and abuse.
With the limited resources available, agencies often did not
effectively administer or implement reconstruction contracts. This was
particularly the case when it involved government oversight of the work
performed and government review of invoices. Poor security exacerbated
these problems by frequently making it too dangerous to provide
oversight of reconstruction activities, to transport needed materials
to construction sites, or to allow quality assurance personnel to visit
sites. Our audits found pervasive weaknesses in program and contract
management and our inspections uncovered many problems at construction
sites. However, there have also been a number of successes in the
program, and executive agencies have largely been responsive to our
observations and recommendations, applying lesson learned along the
way. As requested by the Committee, the following litany provides
selected examples from our audits and inspections wherein we identified
vulnerabilities to fraud, waste, and abuse.
Police Academy, Hilla, Iraq (SIGIR Inspection PA 05-032 issued January
31, 2006)
At the direction of the Coalition Provisional Authority, the Joint
Contracting Command--Iraq awarded a contract to SBIG Logistics and
Technical Services, Inc. for the construction and support for an
addition to the Al Hillah (Hilla) Police Academy. The total contract
price was $23.6 million, of which $9.1 million was specifically for the
additional building. The SIGIR inspection identified numerous
deficiencies with the construction project. Overall, the U.S.
government did not implement a quality assurance program and it did not
ensure the design requirements were met. Even though the statement of
work clearly required design submittals from the contractor for the
major components of the police academy addition, the contractor did not
provide them for review. In addition, SIGIR found significant cracks in
the walls, inadequate backup power capability, poorly constructed
sidewalks, a poorly designed wastewater system, evidence of roof leaks,
and inadequate security systems. The contractor did not deliver or
install the two back-up generators that were required by the contract.
In addition, one other generator that was removed for overhaul was not
returned. The two remaining generators that were on site were not
capable of sustaining the academy in case of a power outage.
Border Posts (SIGIR Inspections PA 05-021 thru PA 05-024 issued January
31, 2006)
USACE awarded a contract valued at $36.5 million in March of 2004
to Parsons, Inc., to build border posts at Iraq's border crossings. The
contractor did not prepare a properly designed facility and did not
obtain written approval from USACE for the design before construction.
Projects were not consistent with the original objective to complete
and commission border denial posts. The border forts were not
constructed with the perimeter security requirements. The jail
facility, generator units, fuel tanks, and water system were not
secured, and there were no physical restrictions preventing access to
the walls of the border posts.
During the design phase the contractor proposed replacing steel-
reinforced concrete columns and beams with structural steel I-beams.
There was no record that USACE reviewed or approved the design changes.
During construction, USACE personnel observed that the horizontal I-
beams supporting the roof were deflecting under the weight of the
roofing material, and that some of the I-beams were improperly
installed. A retrofit to reinforce the installed undersized I-beams was
required.
U.S. Agency for International Development's (USAID) Management of the
Basrah Children's Hospital Project (SIGIR Audit 06-026 issued
July 31 2006)
USAID was tasked with constructing a pediatric hospital with an
estimated ceiling cost of $50 million. In August 2004, USAID awarded a
contract to Bechtel National, Inc., to build the hospital. However,
early decisions to increase the size of the facility, design flaws,
contract delays, poor construction and site security ultimately
increased the price to between $149.5 and $169.5 million. USAID was
required by Public Law 108-106 to report on the progress of
construction and its incurred costs to the Congress. However, USAID's
accounting systems and management processes were inadequate and failed
to identify either construction progress or accurate contract costs. To
stay within the cost limits, USAID stopped reporting indirect costs
that may have totaled $48 million that should have been assigned to the
contract. Further, based on cost data obtained from USAID, SIGIR
estimated the new completion price to be between $149.5 and $169.5
million. Compounding these problems was a lack of effective program
management and oversight by USAID and the Department of State. SIGIR
observed that at the time of the audit, there was one contracting
officer, one administrative contracting officer and one cognizant
technical officer along with a few support staff who were responsible
for management and oversight of $1.4 billion in construction activities
including the Basrah Children's Hospital. Construction management was
taken over by the U.S. Army Corps of Engineers (USACE). USACE says that
completion of the hospital is now scheduled for mid-2008 with a planned
opening of early 2009.
Baghdad Police College (SIGIR Inspections PA 06-078 and 06-079.2 issued
January 29, 2007)
USACE awarded two task orders totaling $72.2 million to Parsons,
Inc., to renovate portions and construct other portions of the Baghdad
Police College. The contractor did not provide--and the government did
not review--the required number of design drawings, USACE did not
review the contractor's daily quality control reports and it also was
unaware of significant construction deficiencies at the project site.
SIGIR identified significant construction deficiencies, such as poor
plumbing installation, expansion cracks, problems with the quality of
the concrete, exposed rebar, and poor brickwork. Also, the construction
and equipment installation were performed at a low level of workmanship
by the contractor and did not comply with the international standards
required in the contract. In addition, SIGIR found that the completed
barracks buildings had significant plumbing failures and there were
massive expansion cracks on the interior and exterior of the buildings
that will leave the Iraqis with continual maintenance issues.
Finally, in an effort to complete the project, which was
experiencing significant cost overruns and schedule slippages, 24 items
were removed from the scope of work under the contract. During this
inspection, SIGIR inspectors found indications of potential fraud and
referred these matters to SIGIR Investigations for appropriate action.
On February 25, 2008, the SIGIR inspections staff initiated a
follow-up assessment to determine the current status of the Baghdad
Police College. During my recent trip to Iraq, I and my inspection team
visited the Baghdad Police College as part of the new assessment. We
found that, in addition to ongoing efforts to correct previous
deficiencies (noted in our January 2007 report), the Multinational
Security Transition Command--Iraq (MNSTC-I) is undertaking significant
additional construction work. MNSTC-I estimates that current repair
work will amount to $9 million and new construction contracts will
amount to $42 million. Additional contracts to further expand training
capabilities may add another $24 million to costs. The quality of the
repair and construction work we observed on the initial return to the
Baghdad Police College was decidedly better than the work that we
previously reported on.
DynCorp International Task Order for the Iraqi Police Training Program
Support (SIGIR Audit 06-029 issued January 30, 2007)
Under this task order issued in June 2004, the Department of
State's Bureau for International Narcotics and Law (INL) contracted
with DynCorp International for training services for international
police liaison officers, training support equipment, and construction
of a residential camp on the Adnan Palace grounds in Baghdad to house
training personnel. The contract value was $188.7 million. Poor
contract oversight resulted in millions of dollars being put at risk,
and inadequate accounting of property acquired under the contract.
Between July 2004 and June 2006, the Department of State paid about
$43.8 million for manufacturing and temporary storage of a residential
camp, including $4.2 million for unauthorized work associated with the
camp. As of October 2007, INL has reached agreement for use of all the
trailers for either the Embassy or a camp to be established at the
Baghdad International Airport. In addition, the Department of State may
have spent another $36.4 million for weapons and equipment, including
armored vehicles, body armor, and communications equipment that cannot
be accounted for.
Relief and Reconstruction Funded Work at the Mosul Dam (SIGIR
Inspection PA 07-105 issued October 29, 2007)
The United States Army Corps of Engineers selected CH2Mhill/Parsons
as the Sector Project and Contracting Office Contractor. It was
responsible for engineering analysis and technical consulting,
requirements management, quality assurance, contract administration,
procurement, and logistics support. 21 contracts valued at $27 million
were let to foreign companies. The SIGIR inspection found numerous
problems at the site. There were no design drawings and specifications
for large silos for holding concrete or for the construction of a
grout-mixing plant. In addition, the foundation bolts of the stationary
silos were so poorly installed that in 43 of 144 cases (30 percent),
there were few, if any, bolt threads for the nuts to twist on. The
government's quality assurance program did not adequately ensure
correct delivery and construction of materials and equipment.
Further, many contractor invoices lacked supporting details for
materials and equipment claimed. For example, one contractor's invoice
claimed the delivery of 4 contract-specified submersible pumps with 54-
m\3\/hour and 20-meter lift capability, but the pumps actually
delivered had only 36-m\3\/hour and 17.5-meter lift capability. In
addition, the contractor delivered two 30-m\3\/hour concrete mixing
plants instead of the two 30-m\3\/hour grout mixing plants specifically
required.
Contract file documentation showed that the contracting officer
attempted to modify the delivered concrete mixing plants into grout
mixing plants at the expense of the U.S. government, instead of
enforcing the Federal Acquisition Regulation clause in the contract
that requires the contractor to replace or repair them at no increase
in price.
Approximately $19.4 million worth of equipment and materials
delivered to the Mosul Dam for the implementation of the grouting
operations did not provide benefit to the Ministry of Water Resources
and may have been wasted. During this inspection, SIGIR found
indications of potential fraud and referred these matters to SIGIR
investigations.
Department of State, Bureau of International Narcotics and Law
Enforcement Affairs (INL), Management of DynCorp International,
LLC, Contract for the Iraqi Police Training Program (SIGIR
Audit 07-016 issued October 23, 2007)
INL awarded a contract to DynCorp International in February 2004,
to provide housing, food, security, facilities, training support
systems, and a cadre of law enforcement personnel to support the Iraqi
civilian police-training program. As of August 23, 2007, INL had
obligated about $1.4 billion and paid about $1.2 billion. INL's prior
lack of management and financial controls created an environment
vulnerable to waste and fraud and a situation whereby INL does not know
specifically what it received for most of the $1.2 billion in
expenditures. Although training has been conducted and equipment
provided under the contract, INL officials report that (1) invoices and
supporting documents submitted by DynCorp were in disarray, but are
being organized; (2) INL had not validated the accuracy of the invoices
it received prior to October 2006; INL personnel in Iraq and in
Washington, D.C. are in the process of validating past invoices; and
(4) INL lacks confidence that Department of State accounting records
accurately capture the purpose for most disbursement. INL had taken
action and continues to take action to improve its contract management
in general and its management of the DynCorp contract in particular.
According to INL officials, it will take three to five years to
complete a 100 percent review and reconciliation of the invoices and a
validation of the property records. To date, SIGIR's reviews of DynCorp
contracts with INL have resulted in about $4.1 million in potential
savings to the U.S. government. SIGIR plans to follow up its work on
this contract later this year.
Outcome, Cost, and Oversight of Iraq Reconstruction Contract W914NS-04-
D-0006 (SIGIR Audit 08-010 issued January 28, 2008)
In March 2004, USACE issued a contract to Parsons, Inc., with a
ceiling price of $500 million to repair, renovate, or construct Iraqi
ministry buildings and hospitals and to construct primary healthcare
facilities. Of 11 task orders issued, only 3 were completed. The other
8 task orders were terminated for the convenience of the government
with the work at most of the sites only partially completed. The
projects were between 78 and 98 percent complete at the time.
USACE terminated these contracts because Parsons had poor control
of its subcontractors, poorly managed and supervised the projects, and
failed to control its costs. Parsons made infrequent trips to the
project sites and as a result there was an overall lack of knowledge
regarding conditions at the sites and in reporting construction
progress. On the government side, SIGIR observed numerous management
weaknesses, including high turnover of personnel, contracting office
personnel with limited contact experience, a failure to enforce
contract requirements for monthly cost reports, and a failure to review
contractor invoices before payment to assure that the work was
performed.
U.S. Agency for International Development's (USAID) Efforts to
Implement a Financial-Management Information System in Iraq
(SIGIR Audit 08-007 issued January 25, 2008)
In 2003, USAID contracted with BearingPoint to develop and
implement an Iraqi financial management information system. By October
2007, the system, which had achieved limited functionality, was shut
down due to security issues and a lack of support by the Government of
Iraq. At that point about $26 million had been expended for the system
under broad-based contracts that included numerous other tasks related
to economic and financial reforms for Iraq. Although deteriorating
security conditions and competing demands for funds under the contracts
no doubt adversely impacted the system's development, there was also a
lack of clear direction based on user requirements. Neither the
contracts nor BearingPoint's work plans provided that direction. As a
result, information was not available to clearly assess progress on the
system in relation to available benchmarks, making it difficult for
USAID to assess BearingPoint's performance. In mid-January 2008, the
Iraqi Minister of Finance and Acting Mission Director at USAID signed a
Memorandum of Understanding to restart the system.
THE CHALLENGE IN QUANTIFYING WASTE
I am often asked: ``What is the total amount that has been wasted
in the U.S. reconstruction effort in Iraq?'' To answer the total waste
question, SIGIR would have to audit and inspect many more programs,
projects, and contracts than we are able. I have 22 auditors in Iraq, 6
inspectors, and 5 investigative staff. Thus, our oversight targets are
necessarily judgmentally selective, developed through strategic
planning that aims to provide the widest review possible. The foregoing
litany of oversight reporting illustrates the scope of issues arising
from our reviews of Iraq reconstruction contracts. This variety makes
it impossible to calculate now what the precise total waste figure
might be. But our collection of audits and inspections provide an
episodic story of waste, as we have defined it with the GAO (see
definition at Appendix I).
One episode of waste is evidenced by our audit of the Iraq
Financial Management System. The system is not being used and it does
not appear that the GOI wants to use it. Thus, if the system ultimately
falls into permanent disuse, then the entire U.S. investment, amounting
to tens of millions of dollars, could be counted as waste. Other
contracts we reviewed have uncovered decisions to reduce, descope, or
terminate work because of cost overruns, changing needs, or security
conditions. While some of these causes may be unavoidable others entail
factors that point to waste. Despite these difficulties, I have
directed my auditing team to continue to identify waste to the extent
practical. We intend to do that principally through the forensic audit
process. The bottom line is that our reporting demonstrates that
waste--rather than fraud--has been the chief problem in the Iraq
reconstruction program. But both the waste and the fraud issues could
pale in comparison to the problem of ensuring that the GOI sustains the
programs and projects funded by U.S. taxpayer dollars.
GOVERNMENT OF IRAQ (GOI) ACCEPTANCE AND SUSTAINMENT OF U.S.-FUNDED
INFRASTRUCTURE CRUCIAL TO ENSURING U.S. ASSISTANCE IS NOT WASTED
SIGIR audits have revealed that the U.S. investment is vulnerable
to additional waste if construction projects are not properly
maintained. To realize the maximum benefit of reconstruction
investments, the assets must be effectively maintained and operated.
However, the U.S. government and the GOI have yet to implement
effective programs and plans to ensure proper asset transfer and
maintenance. Planning for the effective management of these assets,
from small health clinics to complex electrical generation plants, is
critical for the economic and political recovery of Iraq and the
security of U.S. interests in Iraq.
SIGIR oversight has identified deficiencies related to the transfer
of U.S. funded assets to the control of the GOI. Our audits and
inspections identified that the U.S. and Iraqi governments need to
improve the asset transfer process, and the GOI must address its
shortfalls in sustaining U.S. funded projects to ensure that
reconstruction funds are not wasted. Overall, SIGIR determined that the
inability of U.S. agencies to agree on one common asset transfer
process, compounded by reluctance from Iraqi government officials at
the national level to formally accept projects, has hindered the
effective turnover of U.S. funded reconstruction projects.
U.S. TRANSFER PROCESS NEEDS IMPROVEMENT
SIGIR has issued five reports \3\ on the transfer process, and we
are currently working on a sixth. As explained in our July 2007 report,
the asset transfer process is essential to both the United States and
Iraq for two main reasons. First, it allows the GOI to recognize its
ownership of the project. Asset recognition is the point at which the
GOI officially agree that the project is complete, that all necessary
project-specific documentation is in place, and that the U.S.
government has provided the necessary training and orientation to the
local Iraqi staff that will be responsible to manage, operate and
maintain the new or refurbished facility. Second, it validates that the
GOI is now responsible for project operation and maintenance and
capital replacement. A formalized, unified asset transfer process
allows the GOI to plan for and fund the operations and maintenance of
U.S. funded construction projects.
---------------------------------------------------------------------------
\3\ GRD-PCO Management of the Transfer of IRRF-funded Assets to the
Iraqi Government, (SIGIR 05-028, January 24, 2006); Multi-National
Security Transition Command--Iraq Management of the Transfer of Iraq
Relief and Reconstruction Fund Projects to the Iraqi Government, (SIGIR
06-006, April 29, 2006); U.S. Agency for International Development
Management of the Transfer of Iraq Relief and Reconstruction Fund
Projects to the Iraqi Government, (SIGIR 06-007, April 29, 2006);
Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi
Government, (SIGIR 06-017, July 28, 2006); Transfering Iraq Relief and
Reconstruction Fund Capital Projects to the Government of Iraq, (SIGIR-
07-004, July 25, 2007).
---------------------------------------------------------------------------
SIGIR's audits have made recommendations to USACE, MNSTC-I, and
USAID to complete, in coordination with the asset transfer focal point
organization in the Embassy, the development of a common policy
facilitating the transfer of competed projects to the GOI. SIGIR follow
up reviews recommended that the Embassy develop a single uniform
process for asset recognition and transfer for all agencies. In July
2007, SIGIR again assessed the progress and recommended that the U.S.
Ambassador to Iraq provide senior level support to finalize a
Memorandum of Understanding (MOU) between the United States and Iraq on
asset transfer.
SIGIR is currently in the process of updating our previous asset
transfer reports and we are seeing some improvements. Since we began
our reviews of asset transfer, SIGIR has been consistent in emphasizing
the need to standardize the process for transferring assets to the GOI.
Most recently, the Embassy, specifically the Asset Transfer and
Recognition Working Group, has drafted an Interagency Agreement to
formalize the asset transfer process among all U.S. partners. However,
our preliminary evaluation indicates that the agreement still allows
each agency to use its own procedures, and covers only projects funded
by the Iraq Relief and Reconstruction Fund (IRRF). We will be following
up with the Embassy on these issues for further clarification.
SIGIR recommended last July that the Embassy execute an Asset
Transfer MOU or Bilateral Agreement with the GOI. The working group
drafted an MOU with the aim of achieving a consensus on each side's
intentions with respect to the transfer of assets. Mission officials
recently informed us that, although the MOU was delivered to the Deputy
Prime Minister in November 2007, there has been no progress by the GOI
regarding the pending MOU. Moreover, our current work suggests that the
MOU, even if signed, may have only limited impact: it again relates
only to IRRF, and the MOU stipulates that all agreements in the MOU are
nonbinding. Embassy officials informed us that the most important
aspect of the MOU is in the naming of an Iraqi point of contact to
serve as a central point of contract within the Deputy Prime Minister's
office on issues relating to asset transfer.
SIGIR INSPECTIONS AND AUDITS INDICATE PROBLEMS IN GOI SUSTAINMENT OF
U.S. FUNDED PROJECTS
SIGIR audits and inspections have demonstrated that the GOI has had
some successes but has experienced notable difficulties in sustaining
transferred U.S. assets. To illustrate, SIGIR's Inspections staff
conducted 24 sustainment assessments and found that 12 had significant
deficiencies.\4\ SIGIR's inspections indicate that some projects now
under Iraqi control are not being adequately maintained, posing threats
to the condition and durability of the facilities and to the health and
safety of those who work at them. Comprehensive Operations and
Maintenance programs and effective training are key to improving
prospects for sustainment.
---------------------------------------------------------------------------
\4\ However, the number of poorly sustained sites may be larger
because several sites could not be visited due to security concerns. As
a result, the assessment team relied upon a review of the contract and
photos taken at the time the projects were completed. Thus, actual
sustainment is not known.
---------------------------------------------------------------------------
Here are examples of what our inspections and audits found:
--Erbil Maternity and Pediatric Hospital, Erbil, Iraq (SIGIR
Inspection PA-06-94, April 19, 2007).--In January 2007 SIGIR
inspectors assessed the condition of this $6.8 million project
that had been turned over to the GOI. At that time, SIGIR
determined that long-term sustainability and serviceability of
hospital equipment had been reduced because of the absence of
effective operations and maintenance and parts-management
programs. To illustrate, the hospital sewer system has
occasionally clogged, causing wastewater to back up through
floor drains into some sections of the hospital where patients
receive care. This may have occurred because of the improper
disposal of medical waste materials. SIGIR observed large
quantities of medical waste in the sewer system's traps,
manholes, and septic tank. Some mechanical equipment installed
during renovation was inoperable either because operations and
maintenance practices had been ineffective or because hospital
workers chose not to use the new equipment. For example, SIGIR
observed that a new incinerator installed during renovation was
not used because the people initially trained to operate the
incinerator were no longer employed at the hospital. Also a
sophisticated new oxygen generator and distribution system was
used only as a back-up system while hospital staff continued to
use oxygen tanks that were not properly protected and secured.
One of three new boilers was not operating, possibly because of
a fire, and it was being used for parts. Critical water
purification equipment did not function because weekly
maintenance checks to observe and drain moisture traps were not
performed.
SIGIR recommended that U.S. reconstruction officials engage with
the appropriate Iraqi government officials to ensure
sustainment of this U.S. taxpayer investment. They responded
that our recommendations exceeded the contract requirements and
their purview to address.
--Recruiting, Babel Volunteer Center, Hilla, Iraq (SIGIR Inspection
PA-06-089, April 17, 2007).--In January 2007, we inspected the
Al Hilla (Hilla) Recruitment and Training Center which cost
$1.8 million to repair. Our inspectors identified numerous
problems in its maintenance. For example, two bathroom floors
had buckled, which caused damage to concrete and tiles. Because
the tenants never evacuated the sewage holding tank, effluent
backed up in the drain lines and leaked into the ground beneath
the floors. The problem would have been mitigated if the sewage
holding tank had been properly evacuated; however, force
protection barriers and internal walls prevented pumping trucks
from accessing the tanks.
Wiring appeared to have short-circuited and ignited an electrical
box, which has been replaced. The SIGIR inspection noted that
bathrooms were not clean, there were no beds for the Iraqi
soldiers stationed at the facility, and electrical wiring had
been improperly pieced-together to either repair burned-out
circuits or to add lighting. The wastewater holding tank was
full and channeling raw sewage onto the adjacent property,
which eventually drains into the Hilla River. At the time of
the inspection, SIGIR determined that if maintenance continued
at its current level, the useful life of the facility would be
significantly shortened and health hazards would persist.
Insufficient funding was identified as the cause of inadequate
maintenance.
--West Baghdad International Airport Special Forces Barracks,
Baghdad, Iraq (SIGIR Inspection PA-07-100, April 24, 2007).--
The Special Forces Barracks was a $5.2 million reconstruction
project which SIGIR inspected in March 2007. The four 150
kilovolt (kV) electrical generators installed under the
contract, valued at approximately $50,000 each, were not
operational. SIGIR could not determine when or why the
generators became inoperative, but observed that batteries were
missing and the levels of engine oil were inadequate. Some
bathroom floor drains in company barracks were plugged or
drained very slowly, which caused flooding in the bathrooms.
The roofs of at least three barracks leaked in several places
where water accumulated around drain basins.
In this case, U.S. reconstruction managers were responsive to
SIGIR recommendations and indicated they would work with the
Iraqi government to develop the capacity necessary to sustain
projects constructed with U.S. funds.
--Doura Power Station, Units 5 and 6, Baghdad, Iraq (SIGIR Inspection
PA-07-103, July 18, 2007).--In June 2007 SIGIR inspected the
Doura Power Station which cost $90.8 million to construct and
an additional $80 million to provide for operations and
maintenance and training for the Ministry of Electricity. SIGIR
determined that sustainable operations at full capacity after
start-up of Units 5 and 6 could not be reasonably assured
unless the Ministry of Electricity's operations and maintenance
practices improved. To illustrate, SIGIR observed that the
ministry improperly operated or insufficiently maintained
equipment in environments where equipment failure was likely.
For example, in April 2007, dust and oil film accumulated in
critical parts, which caused the complete failure of Unit 5.
Bypassing and intentionally overriding automatic controls
caused a system imbalance and catastrophic failure of power
plant equipment. Electricity was being illegally tapped
directly from the power plant using ad hoc cable taps
throughout the facility. SIGIR assessed, however, that a
planned contract for operations and maintenance and to
implement a local training program should result in the
prevention of future similar type deficiencies. We will be
assessing progress in the future.
--Iraqi C-130 Base, Baghdad, Iraq (SIGIR Inspection PA-07-099, July
24, 2007).--This $30.8 million air base was inspected by SIGIR
in May 2007. During the inspection, SIGIR observed that
numerous generators were not functional. Moreover, SIGIR
observed flaws in the sewage system. For example, the nearby
storm-water collection pond and connected drainage ditch
contained sewage. The holding tank design allows sewage removal
only by pump. Therefore, it appeared that the waste-removal
truck pumped the sewage from the collection tanks into the
drainage ditch. SIGIR noted a number of documented malfunctions
of the reverse osmosis (RO) system. Regular filter changes had
not been performed, chlorine dosing did not meet requirements,
and the RO system pressures were not within the recommended
range. Additionally, filters, anti-scaling, testing kits, and
other various maintenance items were not available on site.
SIGIR inspectors worked with MNSTC-I management during this
project and identified that a master plan was under development
that would address the problems identified.
SIGIR's audits on Commander's Emergency Response Program (CERP)
projects have identified further sustainment problems. SIGIR reviewed
the CERP program in 2006, 2007, and 2008.\5\ Overall, SIGIR found that
despite some improvements, continuing challenges in planning for the
transition of completed projects to the Iraqi people and in fostering
long term sustainment of completed projects. We also found instances of
lack of coordination between the CERP program and programs managed by
the Provincial Reconstruction Teams. While PRT programs tended to try
to induce Iraqis to devise and solve their own problems, CERP programs
tended to quickly ``fix'' problems identified by local commanders.
Occasionally, the two programs were acting at cross-purposes. In
addition, the CERP program has gotten involved in much larger projects
over time, such as complex water projects, and its managers lack many
of the necessary resources to carry such projects forward.
---------------------------------------------------------------------------
\5\ Commander's Emergency Response Program in Iraq Funds Many Large
Scale Projects, (SIGIR-08-006, January 25, 2008); Management of the
Commander's Emergency Response Program in Iraq for Fiscal Year 2006
(SIGIR-07-006, April 26, 2007); Management of the Commander's Emergency
Response Program for Fiscal Year 2005 (SIGIR-05-025, January 23, 2006).
---------------------------------------------------------------------------
RESULTS OF SIGIR INVESTIGATIONS
In our U.S. office, SIGIR investigators have historically worked
from one central location in Arlington, Virginia; however, we recently
expanded our investigative presence in the United States by opening
offices in Florida, Texas, and Pennsylvania, with an additional office
soon to be opened in Ohio. The agents assigned to these offices are
conducting SIGIR's investigative work in their areas--where much of the
records and witnesses are located, as well as providing SIGIR's
investigative expertise to local task forces that are investigating
allegations of fraud in U.S. funded programs and operations in Iraq.
Pursuing allegations of criminal fraud in Iraq has been a high
priority for me ever since my appointment as Inspector General four
years ago, and I remain committed to ensuring SIGIR continues its
rigorous investigation program. SIGIR's robust oversight efforts to
date have helped deter fraud, yet much work remains to be done.
SIGIR's investigative work to date has resulted in the following
convictions and indictments--noting that criminal indictments are only
charges and not evidence of guilt and a defendant is presumed innocent
until and unless proven guilty:
--On February 2, 2006, Robert Stein, the former CPA Comptroller and
Funding Officer in Hilla, Iraq, pleaded guilty to conspiracy,
bribery, money laundering, possession of machine guns, and
being a felon in possession of a firearm. Stein was the primary
co-conspirator with Philip Bloom funneling numerous fraudulent
contract payments to Bloom in exchange for kickbacks and
bribes. Stein also admitted to facilitating the purchase and
possession of at least 50 weapons, including machine guns, gun
barrel silencers and grenade launchers with misappropriated CPA
funds. On January 29, 2007, Stein was sentenced to nine years
in prison and three years of supervised release. Additionally,
he was ordered to pay $3.6 million in restitution and forfeit
$3.6 million in assets.
--On March 9, 2006, Philip Bloom, a U.S. citizen, who resided in
Romania and Iraq, pleaded guilty to conspiracy, bribery, and
money laundering in connection with a scheme to defraud the
CPA. Bloom admitted that from December 2003 through December
2005, he, along with Robert Stein and numerous public
officials, including several high-ranking U.S. Army officers,
conspired to rig bids for federally-funded contracts awarded by
the CPA-South Central Region (CPA-SC) so that all of the
contracts were awarded to Bloom. The total value of the
contracts awarded to Bloom exceeded $8.6 million. Bloom
admitted paying Stein and other public officials over $2
million from proceeds of the fraudulently awarded contracts and
an additional at least $2 million in stolen money from the CPA.
On February 16, 2007, Bloom was sentenced to 46 months in
prison and two years of supervised release. Additionally, he
was ordered to pay $3.6 million in restitution and forfeit $3.6
million in assets.
--On August 4, 2006, Faheem Mousa Salam, an employee of a government
contractor in Iraq, pleaded guilty to a violation of the
Foreign Corrupt Practices Act for offering a bribe to an Iraqi
police official. Salam is a naturalized U.S. citizen employed
by Titan Corporation and was living in Baghdad, Iraq. According
to court filings, Salam offered a senior Iraqi police officer
$60,000 for the official's assistance with facilitating the
purchase by a police training organization of approximately
1,000 armored vests and a sophisticated map printer for
approximately $1 million. On February 2, 2007, Salam was
sentenced to three years in prison, two years of supervised
release and 250 hours of community service.
--On August 25, 2006, Bruce D. Hopfengardner, a Lieutenant Colonel in
the United States Army Reserve, pleaded guilty to conspiracy to
commit wire fraud and money laundering in connection with the
Bloom-Stein scheme. In his guilty plea, Hopfengardner admitted
that while serving as a special advisor to the CPA-SC, he used
his official position to steer contracts to Philip H. Bloom, a
U.S. citizen who owned and operated several companies in Iraq
and Romania. In return, Bloom provided Hopfengardner with
various items of value, including $144,500 in cash, over
$70,000 worth of vehicles, a $2,000 computer and a $6,000
watch. Hopfengardner and his coconspirators laundered over
$300,000 through various bank accounts in Iraq, Kuwait,
Switzerland and the United States. Finally, Hopfengardner
admitted that he stole $120,000 of funds designated for use in
the reconstruction of Iraq from the CPA-SC and that he smuggled
the stolen currency into the United States aboard commercial
and military aircraft. On June 25, 2007, Hopfengardner was
sentenced to 21 months in prison followed by 3 years supervised
release, and ordered to forfeit $144,500.
--On February 7, 2007, U.S. Army Colonel Curtis G. Whiteford, U.S.
Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler and
civilians Michael Morris and William Driver were indicted for
various crimes related to the Bloom-Stein scheme in Hilla,
Iraq. Whiteford, who was Stein's deputy in the comptroller's
office, was charged with one count of conspiracy, one count of
bribery and 11 counts of honest services wire fraud. Harrison,
at one time the acting Comptroller at CPA-SC who oversaw the
expenditure of CPA-SC funds for reconstruction projects, was
charged with one count of conspiracy, one count of bribery, 11
counts of honest services wire fraud, four counts of interstate
transport of stolen property, one count of bulk cash smuggling,
four counts of money laundering and one count of preparing a
false tax form. Wheeler, an advisor for CPA projects for the
reconstruction of Iraq, was charged with one count of
conspiracy, one count of bribery, 11 counts of honest services
wire fraud, one count of interstate transport of stolen
property and one count of bulk cash smuggling. Morris, who
worked for Bloom, was charged with one count of conspiracy and
11 counts of wire fraud. Driver, who is Harrison's husband, was
indicted on four counts of money laundering. The trial for
Whiteford, Morris and Wheeler starts on March 11, 2008. The
trial for Harrison and Driver has been postponed and a date has
not yet been scheduled.
--On February 16, 2007, Steven Merkes, a former U.S. Air Force Master
Sergeant working for the Department of Defense in Germany,
pleaded guilty in U.S. District Court for accepting illegal
bribes from Phillip Bloom. Merkes accepted the bribes in
exchange for furnishing Bloom with sensitive contract
information prior to awarding contracts to Bloom. Merkes was
sentenced on February 16, 2007, to 12 months and one day in
prison and ordered to pay restitution of $24,000.
--On July 23, 2007, U.S. Army Major John Cockerham, his wife Melissa
Cockerham, and his sister Carolyn Blake, were arrested on a
criminal complaint, and on August 22, 2007, they were charged
with conspiracy to defraud the United States and to commit
bribery, conspiracy to obstruct justice, and a money laundering
conspiracy. Major Cockerham was also charged with three counts
of bribery. According to the indictment, from late June 2004
through late December 2005, Major Cockerham was deployed to
Camp Arifjan, Kuwait, serving as a contracting officer
responsible for soliciting and reviewing bids for Department of
Defense (DOD) contracts in support of operations in the Middle
East, including Operation Iraqi Freedom. The contracts were for
various goods and services to DOD, including bottled water
destined for soldiers serving in Kuwait and Iraq. Major
Cockerham, Melissa Cockerham, Blake, an unidentified co-
conspirator, and others allegedly accepted millions of dollars
in bribe payments on John Cockerhams' behalf, in return for his
awarding co-conspirator contractors and others DOD contracts,
including those for bottled water, through a rigged bidding
process. Cockerham allegedly guaranteed that a contractor would
receive a contract in return for the payment of money. Cash
bribes paid to the defendants and other co-conspirators
allegedly totaled $9.6 million. The indictment also alleges
that Melissa Cockerham and Carolyn Blake received millions of
dollars from these contractors, and that the conspirators
deposited the money in bank accounts and safe deposit boxes in
Kuwait and Dubai.
--On November 15, 2007, Terry Hall was arrested on a criminal
complaint charging bribery. Subsequently, on November 20, 2007,
a federal grand jury indicted Hall for soliciting bribes. The
indictment alleged that Hall paid money and other things of
value to a U.S. military contracting officer to influence the
actions of the officer, including the award of more than $20
million in military contracts. Hall operated companies that had
contracts with the U.S. military in Kuwait, including Freedom
Consulting and Catering Co., U.S. Eagles Services Corp., and
Total Government Allegiance. According to the indictment, those
companies received more than $20 million worth of military
contracts for providing, among other things, bottled water to
the U.S. military in Kuwait.
ANTICORRUPTION: U.S. PROGRAMS AND IRAQI EFFORTS
In our January 2008 Quarterly Report to the Congress, we noted that
the prevailing view among Iraqis about corruption in their country is
not an optimistic one. Iraqis recognize the complex pattern woven from
Iraq's long list of challenges--from its limited personnel and
government capacity, to the fractious nature of politics, and all of
those persisting in a still dangerous security environment. Corruption
in Iraq, and for that matter in any country in transition, is not a
problem that can be solved by simply creating a commission or by
passing a law. It will take many long years of sustained effort,
combined with political will, before the people of Iraq are assured
that they are the beneficiaries of the oil riches and the full economic
potential of their country.
Today, corruption remains endemic in Iraq. Unless checked, it is
doubtful that many U.S. funded reconstruction efforts will be able to
achieve their intended purpose. Furthermore, as SIGIR pointed out in
its most recent Quarterly Report to Congress, Iraq is facing a windfall
in potential oil revenues in 2008--over $50 billion that is highly
vulnerable to corruption.
THE NATURE OF CORRUPTION
I testified in October 2007 \6\ that corruption in Iraq is a second
insurgency because it directly harms the country's economic viability.
In very real terms, corruption stymies the construction and maintenance
of Iraq's infrastructure, deprives people of goods and services,
reduces confidence in public institutions, and potentially aids
insurgent groups reportedly funded by graft derived from oil smuggling
or embezzlement. Corruption discourages hope, devalues America's
contributions to Iraq, and strengthens the appeal of our opponents.
---------------------------------------------------------------------------
\6\ Testimony of Stuart W. Bowen, Jr., Special Inspector General
for Iraq Reconstruction, ``Assessing the State of Iraqi Corruption'',
House Committee on Oversight and Government Reform.
---------------------------------------------------------------------------
Surveys of Iraq's citizens continue to reveal a common belief that
corruption is pervasive within their national government. Transparency
International conducts annual surveys within countries on individuals'
perceptions of the degree of public sector corruption. Their scores
range from 10 for highly clean to 0 for highly corrupt. Out of 180
countries, Transparency International ranks Iraq at 178 with a score of
1.5. This data, while not conclusive, provides a grim independent
assessment of corruption in Iraq.
Effective anticorruption programs must include a broad range of
approaches to address the issue. Activities to address corruption may
include establishing specific government entities which attack existing
corruption. In Iraq, this includes the Commission on Integrity, which
is the primary agency charged with investigating accusations of
official corruption and bringing alleged offenders to court. It is
analogous to the FBI. The Board of Supreme Audit is Iraq's analogue to
the U.S. Government Accountability Office, and Iraq's system of
Inspectors General parallels U.S. agency IGs. Additionally, U.S.
efforts address the broad spectrum of conditions facilitating
corruption by identifying deficiencies in investigative techniques and
improving local governance capacity.
U.S. EMBASSY PROGRESS IN SUSTAINING HIGH LEVEL LEADERSHIP AND
COMPREHENSIVE APPROACH
In January of this year, SIGIR issued its fourth review on U.S.
support to Iraq's anticorruption efforts. SIGIR found that the U.S.
Embassy in Iraq has taken action or has planned steps to address
SIGIR's previous concerns. If effectively implemented, these actions
would address all recommendations contained in earlier SIGIR
reports.\7\ Most notably, the Ambassador has identified actions to
improve the oversight and coordination of the U.S. anticorruption
effort and in December 2007 proposed to the Secretary of State a
reorganization of personnel and assets to elevate the importance of
anticorruption programs.
---------------------------------------------------------------------------
\7\ U.S. Anticorruption Efforts in Iraq: Sustained Management
Commitment is a Key to Success, (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
The Embassy has recognized the need to design and implement a
comprehensive, integrated anticorruption strategy to assist the GOI and
the Iraqi people in combating the corruption permeating government
agencies, private business, and other institutions of Iraqi society.
SIGIR supports these actions but notes that past efforts to revitalize
and coordinate U.S. anticorruption efforts have been largely
ineffective and suffered from a lack of management follow through. The
success of these new efforts will, therefore, depend in large part on
sustained management commitment, particularly in terms of day-to-day
leadership and senior-management oversight.
At this time, preliminary observations from our ongoing work
indicate that the Embassy is moving forward on its December plan,
albeit slowly. To illustrate, the new Anticorruption Coordinator's
Office has been established and initially staffed with six positions.
An Acting Anticorruption Coordinator has been temporarily assigned
until the position can be filled by a senior level U.S. government
official. The State Department informed us that a preliminary selection
has been made for this is position with a formal announcement imminent.
The Anticorruption Working Group has convened several times and
seven sub-groups have been established in order to better manage/
achieve specific goals and objectives. The sub-groups have been
assigned specific areas to coordinate such as: (1) implementing and
monitoring anticorruption reforms, (2) establishing standards to
evaluate U.S. government anticorruption assistance, and (3) maintaining
and accurate inventory of U.S. anticorruption assistance programs to
prevent duplication of efforts among U.S. civilian and military
entities. Several sub-groups have met and actions are underway in
several areas, many of which stem from recommendations in prior SIGIR
reports.
GOVERNMENT OF IRAQ ANTICORRUPTION EFFORTS: CHALLENGES AND PROGRESS
I would like to address some of the challenges that I raised in my
October 4, 2007 testimony on corruption in Iraq \8\ and the steps the
GOI is taking to fight this corruption.
---------------------------------------------------------------------------
\8\ SIGIR 07-015T October 4, 2007 ``Assessing the State of Iraqi
Corruption'' Testimony presented to the House Oversight and Government
Reform Committee.
---------------------------------------------------------------------------
Security
Security concerns throughout Iraq severely limit the transparency
of government although as SIGIR as reported in our January 2008
quarterly report, violence has decreased and there is continuing
progress in the capacity and size of the Iraqi Security Forces.
Nevertheless, violence, or threats of violence as well as political
influence over many of Iraq's public institutions remain. To
demonstrate the impact of such conditions, I previously testified that
Commission on Integrity investigators have been forced to reveal the
details of their cases to the ministries and officials they were
investigating, placing witnesses and anticorruption officials in
danger. At least 39 employees of the Commission have been murdered.
Judges and judicial investigators have also been intimidated or killed.
Political Leadership and the Rule of Law
The absence of ability within the Iraqi judicial system to
prosecute corruption cases effectively and fairly is a major obstacle
to tackling the pervasive corruption in the country. These weaknesses
stem from many factors: from the shortage of reliable judges,
courtrooms and detention facilities, to political interference and the
resulting culture of impunity. Article 136(b) of Iraq's Criminal Code
is a notorious structural obstacle impeding Iraq's anticorruption
efforts. This provision allows any Iraqi minister to grant, by fiat,
complete immunity from prosecution to any ministry employee accused of
wrongdoing.
In addition, an order issued by the Prime Minister in the spring of
2007 requires Iraqi law enforcement authorities to obtain permission
from the Prime Minister's office before investigating current or former
ministers. Although an Embassy official informed us that the head of
the Commission on Integrity stated that the 2007 order had not impeded
his recent activities, we continue to believe that these actions are
incompatible with a well-functioning anti-corruption program.
Capacity
Iraq's anticorruption agencies, as well as government ministries
charged with managing Iraq's financial resources and providing
necessary services to its people, face significant capacity and
resource shortfalls. Enormous shortfalls exist in the areas of
investigations, audit and management. Moreover, our review of efforts
to implement a financial management information system discussed
earlier in this testimony demonstrated the vulnerabilities of current
conditions. In 2003, the Coalition Provisional Authority and the
International Monetary Fund conducted assessments that found that the
GOI financial structure provided limited ability to monitor Iraqi
ministerial budgets and expenditures, leaving the ministries vulnerable
to fraud, waste and abuse.
Government of Iraq Efforts
SIGIR continues to monitor GOI anticorruption efforts. The first
Anticorruption Conference was held in Baghdad on January 3, 2008.
Organized by Deputy Prime Minister Baram Saleh, the conference
announced that 18 initiatives, recommended by the Prime Minister, would
begin as part of a National Campaign for Fighting Administrative
Corruption. These initiatives are broad and address a wide range of
issues. To illustrate, the plan calls for the adoption of data systems
to provide transparency over public fund management and the execution
of projects and plans. Moreover, addressing laws and regulations is an
integral component of the plan; drafting a law on administrative
corruption and review existing laws and regulations affecting money
laundering are included as steps that must be taken. The Conference
announcement also provided completion dates for each of the 18
initiatives. No later than April 1, 2008, for example, the Ministry of
Foreign Affairs must implement the United Nation's agreement in
fighting administrative corruption which Iraq agreed to join. Moreover,
to support its anticorruption efforts, the GOI has created two groups:
the Joint Anticorruption Council and the Council of Representation
Committee on Integrity.
CORRUPTION EFFORTS MUST BE SUSTAINED
Just as it is critical that the Government of Iraq (GOI) develop
effective sustainment measures for the ``hard'' construction projects,
so must it develop effective sustainment plans for ``soft'' programs--
corruption being foremost among them. Efforts to improve government
processes, increase transparency, strengthen the civil service system,
bolster training, and hold individuals accountable--are even more
important. In the area of corruption fighting--ensuring that entities
such as the Board of Supreme Audit remain independent, resourced and
politically supported, are also critical. We recognize that this will
not be an easy task. In Iraq, as in many countries in transition,
corruption presents a very complex challenge.
SIGIR LESSONS LEARNED AND RECOMMENDATIONS
In concluding, SIGIR has identified the following lessons learned
that relate to the issues we have discussed today.
Strategy and Planning
Include contracting and procurement personnel in all planning
stages for post conflict reconstruction operations.
Clearly define, properly allocate, and effectively communicate
essential contracting and procurement roles and responsibilities to all
participating agencies.
Emphasize contracting methods that support smaller projects in the
early phases of a contingency reconstruction effort.
Generally avoid using sole-source and limited competition
contracting actions. These exceptional contracting actions can be used
in exceptional cases, but the emphasis must always be on full
transparency in contracting and procurement.
Policy and Process
Establish a single set of simple contracting regulations and
procedures that provide uniform direction to all contracting personnel
in a contingency environment.
Develop deployable contracting and procurement systems before
mobilizing for post-conflict efforts and test them to ensure that they
can be effectively implemented in contingency situations.
Definitize contracts as early in the process as possible. SIGIR
Audit 06-019 found that there was a lack of clarity regarding
regulatory requirements for definitization of task orders issued under
contracts classified as Indefinite-Delivery/Indefinite Quantity (ID/
IQ).
Designate a single unified contracting entity to coordinate all
contracting activity in theater. JCC-I/A has recently been designated
the coordinating agency.
Ensure sufficient data collection and integration before developing
contract or task order requirements.
Avoid using expensive design-build contracts that have unclear
requirements and are awarded on a cost-plus basis, especially for
simpler projects when standard structures are needed in large numbers
over a wide geographical area such as for schools and clinics.
Use operational assessment teams and audit teams to evaluate and
provide suggested improvements to post-conflict reconstruction
contracting processes and systems.
SIGIR, made the following recommendations in our Contracting
Lessons Learned Report to improve contingency contracting:
--Explore the creation of an enhanced Contingency Federal Acquisition
Regulation (CFAR). We observed that agencies have developed
agency specific regulations implementing the government-wide
Federal Acquisition Regulation (FAR). For example, the Army
notes that the Department of State, which has unique
capabilities important to expeditionary situations, has
developed FAR implementing procedures that differ from DOD's.
--Pursue the institutionalization of special contracting programs
such as the CERP which we noted before have unique roles in
post-conflict reconstruction.
--Include contracting and program management staff at all phases of
planning for contingency operations.
--Create a deployable reserve corps of contracting personnel who are
trained to execute rapid relief and reconstruction contracting
during contingency operations.
--Develop and implement information systems for managing contracting
and procurement in contingency operations.
--Pre-compete and pre-qualify a diverse pool of contractors with
expertise in specialized reconstruction areas.
OPTIONS FOR CONGRESS TO CONSIDER
The Senate, in S. 680, has taken a number of steps to improve post-
conflict contracting.\9\ Moreover, the Army has initiated its own
review, with the Commission on Army Acquisition issuing an excellent
report on the subject. We generally support the Commission report's
recommendations and note that many of these recommendations are tied
directly to areas of concern that SIGIR identified. We look forward to
seeing their implementation.
---------------------------------------------------------------------------
\9\ Statement of Stuart W. Bowen, Jr. before the United States
Senate Committee on Homeland Security Subcommittees, ``Improving
Contracting and Government Oversight of Contractors Performing Work in
Contingency Operations'', January 24, 2008.
---------------------------------------------------------------------------
We suggest that the Congress consider requiring any civilian
agencies contracting in a contingency environment, most notably DoS and
USAID, conduct their own comprehensive studies of their contracting
operations to identify deficiencies and corrective actions.
Specifically, we suggest these studies address their contracting and
program and project management requirements, the status of their
efforts to hire, train and ensure the speedy deployment of contingency
contracting staff, and polices and procedures to manage and oversee
contracts and contractors.
Given the critical need for coordination and collaboration, we
further suggest these studies also address how the agencies will work
with their civilian, as well as military, counterparts in contingency
operations. In this regard, I would also suggest that specific
timeframes be established for identifying contracting and contract
management problem areas and reporting to Congress their proposed
solutions, including implementation plans with identified priorities of
specific tasks and completion dates.
Lastly, I would suggest to the Committee and to other committees
that have oversight of U.S. reconstruction funding in Iraq that they
press the various agencies which come before them during the budget
cycle about the agency's own plans to deal with the problems we have
discovered in specific and systemic terms, and in both the medium and
short terms.
CLOSING
Let me close by thanking you for the opportunity to testify before
you today on these important matters. On behalf of all of my
colleagues, who carry out the important mandate you have assigned
SIGIR, I extend thanks for your support of our work by providing us the
resources we need to get the job done. This completes my statement for
the record, and I look forward to responding to your questions.
APPENDIX I.--WHAT ARE FRAUD, WASTE AND ABUSE?
Definitions.--Fraud, waste, and abuse generally relates to the U.S.
taxpayers not receiving the full value of government funded activities.
Fraud is an illegal action by a government or contractor officials for
personal gain. Waste represents a transgression that is less than fraud
and abuse and most waste does not involve a violation of law. Rather,
waste relates primarily to conditions that could result in waste such
as mismanagement, inappropriate actions or inadequate oversight. Waste
involves the taxpayers as a whole not receiving reasonable value for
money in connection with any government funded activities due to an
inappropriate act or omission by players with control over or access to
government resources (e.g., executive, judicial or legislative branch
employees, contractors, grantees or other recipients.) Examples of
waste in the acquisitions and contracting area include the following:
--Unreasonable, unrealistic, inadequate or frequently changing
requirements.
--Proceeding with development or production of systems without
achieving an adequate maturity of related technologies in
situations where there is no compelling national security
interest to do so.
--Failure to use competitive bidding in appropriate circumstances.
--Over-reliance on cost-plus contracting arrangements where
reasonable alternatives are available.
--Payment of incentive and award fees in circumstances where the
contractor's performance, in terms of cost, schedule and
quality outcomes, does not justify such fees.
--Failure to engage in selected pre-contracting activities for
contingent events (e.g., hurricanes, military conflicts).
--Congressional directions (e.g. earmarks), and agency spending
actions where the action would not otherwise be taken based on
an objective value and risk assessment and considering
available resources.
Abuse of authority or position involves decisions made for personal
financial gains or for immediate or close family member or business
associate. Abuse does not necessarily involve fraud or violation of
law.\10\
---------------------------------------------------------------------------
\10\ GAO Letter to Congressman Ike Skelton on behalf of GAO, and
the Inspectors General of SIGIR, DOD-IG and DOS-IG. February 7, 2007.
Senator Leahy. Thank you very much.
I have one question for all of you. But before I start,
just to go back, General Kicklighter in your testimony you
mentioned the diversion of U.S. weapons to Iraqi insurgents and
your efforts to stop it. Are you confident today that U.S.
weapons are not being diverted and used to kill and wound
Americans?
General Kicklighter. Senator, I am confident that both the
United States--the coalition forces and the Iraqi Security
Forces have put in place procedures to prevent that--accounting
for weapons down to the company level, by serial number. And we
went and looked at a lot of the nodes and down at police
stations, and companies, and here's what the estimate is--is
that all of the weapons coming through the system today, there
is a major attempt to capture those weapons, and control them
by serial number, and by weapons card down in the police
station and down to the units.
Senator Leahy. I'm thinking of the very large number of
handguns that went unaccounted for, some even showed up in
Turkey.
General Kicklighter. Yes, sir.
Senator Leahy. Are you confident that none of the American
weapons today are being diverted and used against us?
General Kicklighter. Yes, sir.
I can't say 100 percent that, you know, that any system is
100 percent, but I believe there is a good system in place that
is getting better day by day, and there is not a major leakage
of weapons going into the hands of the insurgents, or to the
black market.
Senator Leahy. Not a major leakage?
General Kicklighter. No, sir. And, but there is a----
Senator Leahy. That's not awfully comforting. And I'm not
trying to quibble words here, but obviously the first weapons
went out with no adequate way of checking them. We had the
problem after the invasion that large ammunition dumps weren't
even secured.
If you're a family member of one of our brave men and women
who are over there fighting, you'd be concerned if, among the
weapons they're facing, are weapons that came from the United
States. I think you'd agree, from your own military background,
that's something we should all be concerned about.
General Kicklighter. We should be extremely concerned about
tight controls of weapons, and ammunition. Making sure they
don't fall into the wrong hands.
Senator Leahy. Let me ask this question and I'll begin with
Mr. Walker. Five years after we invaded Iraq, after spending
$44 billion to rebuild the country, do you believe that there
are effective controls in place today to prevent the theft and
loss of U.S. taxpayer funds, and Iraqi Government funds?
Mr. Walker. Senator Leahy, I think things are much better
today than they were, but they're clearly not good enough. And
I think there is a bigger picture question--the Iraqis have a
budget surplus. We have a huge budget deficit.
Senator Leahy. I'm going to be going into that, but go
ahead.
Mr. Walker. All right. One of the questions is, who should
be paying?
Senator Leahy. Well, they have $4 billion a month in oil
revenues, that's about $50 billion a year. The President's
asking for billions more in an emergency supplemental for the
Iraqi reconstruction funds--any reason why we can't use some of
that $50 billion a year of their oil revenues?
Mr. Walker. Part of the problem, Senator Leahy, is that my
information I have from my very capable staff is that for the
calendar year that ended on 2007, from January through
November, the Iraqis had spent less than 10 percent of their
budget for several of the major ministries.
At the same point in time, we're all painfully aware of
what is happening with crude oil prices. So, irrespective of
what they budget, it's not being spent for various reasons,
and, needless to say, revenues are going up.
Senator Leahy. Which bothers me, because we're told in this
country we can't spend money to fix our infrastructure, as bad
as it is, we can't spend money to have our airports run well,
we can't spend money to do research on cancer and Alzheimer's
and diabetes and everything else, because of the war in Iraq.
It seems if we ask for billions of dollars more for them, at
some point, they ought to be able to pay for some of this
themselves.
General Kicklighter, could they be doing more? And covering
more of their own reconstruction costs than they do?
General Kicklighter. Sir, I think that they are beginning
to do more, and I know that they're doing more in the area of
paying for their own military equipment. They are investing in
foreign military sales now, and bringing weapons systems into
the country that they are paying for. And I think that's
certainly the trend that we should be following. As time goes
on, they should pick up more and more of the expenses of their
defense.
Senator Leahy. Including reconstruction?
General Kicklighter. Yes, sir.
Senator Leahy. Mr. Bowen--first, do you believe that there
are effective controls to prevent the theft and loss of U.S.
taxpayer funds, and Iraqi Government funds?
And second, should the Iraqi Government be paying more of
these reconstruction costs?
Mr. Bowen. As to the first question, I agree with what
Comptroller General Walker said: ``The controls have gotten
better.'' It's something that we've focused on since 2004,
reporting on the challenges during CPA of the lack of controls
and the need to improve.
My biggest concern on the control front is the issues
related to direct contracting with Iraqi firms. It's an
emphasis that the United States Joint Contracting Command--Iraq
has pushed--I think, properly--forward, in order to employ more
Iraqis and build capacity and promote capital growth.
However, those are Iraqi firms executing projects involving
U.S. funds, and I continue to raise questions about that.
Senator Leahy. During these past 5 years, has there been
anyone from the Iraqi Government held accountable for the theft
or loss of U.S. taxpayer funds?
Mr. Bowen. That issue has not come to the fore. My concern
on prosecution of Iraqis is there haven't been any, to speak
of. The largest one----
Senator Leahy. There hasn't been any corruption, or there
hasn't been any prosecution?
Mr. Bowen. Prosecution.
Senator Leahy. I wanted to make sure.
Mr. Bowen. Prosecution.
Senator Leahy. As a former prosecutor, I know the
difference.
Mr. Bowen. Yes. The most notable case came to court 1 week
ago in Baghdad, involving the deputy minister of health. There
was significant evidence related to the sale of prescription
drugs on the black market that had been ongoing within that
ministry. The case was dismissed, because witnesses had been
intimidated and did not show. That's the sign of a rule of law
system that is not strong. Frankly, the corruption issue is a
symptom of that weak rule of law system.
Senator Leahy. Well, it's also costing American taxpayers a
great deal of money, because they won't police their own
corruption. It creates a real problem here.
Mr. Bowen. Well, that's right. With respect to the oil
revenue, that was the leading issue pointed out in our latest
quarterly report that this windfall, as a result of this last
quarter's maximum production level since the invasion, the
maximum export level since the invasion, and the highest oil
prices in history, all of these coalesced into an enormous
revenue windfall for the Iraqi Government. They estimated
revenues of $35 billion last November, and it's estimated to be
closer to $60 billion. And that certainly gives them resources
to carry forward with an extensive reconstruction plan.
Also, it makes it all the more important that Prime
Minister Maliki carry forward since he's declared the year 2008
to be the year of reconstruction and anti-corruption on both of
those fronts.
Senator Leahy. I want more than decoration, I'd like to see
them actually do it. Because we have to spend more for our aid
because of the oil prices, they ought to be able to use some of
their oil revenues to pay these costs, and not keep sending the
bill to the United States.
Senator Cochran.
Senator Cochran. Mr. Chairman, thank you. I gather from the
testimony of David Walker, that U.S. operations are not nearly
as troublesome in terms of breaking down the system,
procurement, safeguarding property, and all the rest.
I wondered if you have heard about the fact that the Army
is moving to upgrade its oversight capabilities, and whether or
not you had an opportunity to look into what they're doing.
Mr. Walker. Well, first, Senator Cochran, let me clarify. I
believe what I said was, was that with regard to fraud and
corruption, that is a major problem with regard to the Iraqi
Government and Iraqi funds. There is some with regard to U.S.
personnel and U.S. funds, but not significant. The real problem
is waste.
With regard to the issue that you raise, yes. In response
to GAO recommendations, in response to the Gansler report,
which undoubtedly, you're familiar with, the Army and the
Department of Defense had started to send more contracting
personnel and to try to add training and additional oversight
capability. They've still got a ways to go, but they are taking
steps.
Senator Cochran. And, Mr. Kicklighter, the Secretary of the
Army specifically responded to the need to improve contracting
work and established a commission to review these efforts. And
I'm told the work of the Army's contracting forces activities
were put under very close scrutiny.
And they announced last week that they were establishing a
new contracting command, headed by a two-star general. What's
your impression of the effort that's being made by the Army? Do
you think these efforts will achieve the results that are
intended?
General Kicklighter. The short answer, sir, is that they
will. The Army has had both the Gansler Commission, and they've
also had a task force headed up by Lieutenant General Ross
Thompson, and Kathy Condon, a deputy commander at Army Material
Command.
These two independent bodies looked at how well we were
organized to oversee and support contract operations around the
world, but particularly in southwest Asia.
And those two bodies, which we kind of over-watched, came
up with very similar recommendations. The Army has moved out,
smartly. But a lot of the problems will not be able to be
corrected overnight.
For example, they were woefully understaffed in personnel.
That report calls for, I think, an additional thousand career
civilians to be put against this problem, and 400 military, to
bring military in the process much earlier in their career.
Better training for both military and civilians--they have
really moved out, but it will take some time to do the kinds of
thing that are necessary, in my opinion.
Senator Cochran. Mr. Bowen, your office has prepared a
series of ``lessons learned'' reports, in the areas of human
capital management, contracting and procurement, and program
and project management. Is there evidence that they have led to
reducing incidents of fraud and waste?
Mr. Bowen. Yes, there is evidence, in this regard. Our
early audits revealed the contracting process during CPA was in
disarray. Our audits, I think, helped lead to the formation of
the Joint Contracting Command--Iraq, which gave a centralized
point for the oversight of $13 billion in hard construction
contracts, and several billion dollars more in nonconstruction
spending which was part of the Iraq Relief and Reconstruction
Fund.
We also recommended that the CERP doctrine be
institutionalized, and be formalized, and be provided more
oversight. That has begun to happen. CERP has expanded along
the way, as well, and I think more attention in that regard
would be helpful.
Our chief recommendation on contracting was the
implementation of an enhanced contingency Federal acquisition
regulation, and the Office of Federal Procurement Policy
acknowledged that it would be useful. It also adopted a number
of our recommendations on Federal contracting across the board,
and I think those have been salutary events.
Senator Cochran. Your most recent quarterly report
describes 2008 as ``the Year of Transfer'' of Iraq, as the
Government of Iraq assumes greater responsibility for the
financing and management of reconstruction efforts, are you
working with them to help ensure that they benefit, also, from
the lessons learned that your agency has documented?
Mr. Bowen. The U.S. mission in Iraq is doing that and is
seeking to build capacity. I think capacity-building is the
point of the support spear, if you will, in Iraq, with respect
to how the ministries operate. And it's all the more compelling
an issue now, in light of this windfall in oil revenues.
I think the Year of Transfer involves transferring
responsibility for planning, executing, and funding
reconstruction and relief operations, and transferring
responsibility for the remaining nine provinces, to Iraqi
security control--nine have already transferred--and
transferring responsibility. I've said this before, today the
sustainment of what we build is to ensure that, collectively,
the fledging Iraqi democracy can continue to grow.
Senator Cochran. Thank you very much.
Thank you, Mr. Chairman.
Senator Leahy. Thank you, Senator Cochran.
Senator Murray, you were next, but I----
Senator Murray. Well, Mr. Chairman, Senator Dorgan has done
an incredible amount of work on this, and I know the Byrd rule
on seniority, but I would prefer to let Senator Dorgan ask his
questions first, now.
Senator Leahy. Certainly, Senator Dorgan has spent a lot of
time working on this. He's been an extremely strong voice for
accountability of Iraq Reconstruction funds.
Senator Dorgan, we'll yield to you, and then after the next
Republican, we'll go to Senator Murray.
Senator Dorgan. Mr. Chairman, I thank the Senator for the
courtesy. I'm not going to ask questions so much of this panel.
I'm going to ask a lot of questions of the next witness. I want
to thank all three who have come today. This is a lot of good
work. I've met with Mr. Bowen in my office, and talked about
SIGIR and the work you're doing. I had an opportunity to spend
some time with Mr. Kicklighter. In fact, he just released an IG
report yesterday that I think is very important. And of course,
Mr. Walker has done, just terrific work in these areas.
So, I want to thank all of you. You are so important to us
at this point.
I want to make a couple of comments, if I might. I really
appreciate this hearing being held. I think for 5 years,
frankly, Congress has done a miserable job of oversight, just a
miserable job. And we've just shoveled money out the door, and
it is the greatest waste, fraud, and abuse in the history of
this country, I'm convinced. I'm convinced the American
taxpayers have been stolen blind.
Let me give you just a couple of examples. I hold up a
chart that shows a comment by Mr. Will Granger. He was in
charge of all water quality for Iraq. We paid him for that. He
worked for KBR, the Halliburton Corporation, they had a
contract to provide water to military bases.
This is from an internal memorandum of the Halliburton
Corporation that I was able to get a hold of. In it, he talks
about the problems--they weren't testing water.
And Mr. Granger--this is an employee of Halliburton--says,
``This event should be considered a near miss, as the
consequences of these actions could have been very severe,
resulting in mass sickness or death.''
This is a 21-page internal report by the company that was
paid to test water, and didn't do it.
The company denies this happened, and the Pentagon didn't
care much about it, regrettably.
Mr. Kicklighter, thank you for the inspector general report
that finally tells us, this is a set of facts that's very
important.
Let me just also hold up Ms. Greenhouse's testimony. She
talks about when the LOG/CAP and the RIO projects were
originally given. This is the highest civilian contracting
officer in the U.S. Army Corps of Engineers. She came to the
Congress and she said, ``I can unequivocally state that the
abuse related to the contracts awarded to KBR represents the
most blatant and improper contract abuse I've witnessed during
the course of my career.'' This is the highest civilian
official at the Corps of Engineers. You know what she got for
that honesty? Demoted. And, of course, now for 4 years, 3
years, that's been kicking around in the Pentagon.
Frank Willis, let me show you Frank Willis. He came
forward. He was in a building in Iraq, and he showed us how
money was saran-wrapped into football-sized packets. He said
they used to throw them around. This money went to Custer
Battles Corporation. They were told to ``bring a bag, because
we pay cash.'' This happens to be $2 million in $100 bills. And
Frank Willis told us the way money was distributed, and he said
it was the most unbelievable waste that he'd ever seen.
Now, let me show you a tiny little example. Mr. Henry
Bunting showed up. I held 12 hearings in the Senate Democratic
Policy Committee, because other committees weren't holding
them. Henry Bunting showed up with this towel. This towel, as
you see, is a white towel. Henry Bunting worked for KBR, he was
supposed to order towels for the military, because now we
contract everything out, even the buying of towels. So, he made
an order for a towel, ordered a white towel.
The supervisor said, ``No, you can't do that, you need to
order a towel with KBR embroidered on it.'' He said, ``The
problem is, that will triple or quadruple the price.'' His
supervisor says, ``It doesn't matter, this is a cost-plus
contract, taxpayers pay for that.''
So, this is the towel the troops got, with ``KBR''
embroidered on it.
Now this is a tiny little issue. The fact is, this wouldn't
be part of any investigation that's going on. But it's just a
profound waste of taxpayers money.
And let me also say, that today we will hear from a
witness, of the next panel, in which we will hear that U.S. tax
dollars--stolen through corruption in Iraq--are funding the
forces that have killed American soldiers. We'll hear that
directly from someone who was in Iraq, and involved in this
issue.
We'll hear from a witness who said that he showed up and
was given $11 million in cash--$11 million in cash--and all he
had to do was to give them a name, a photo ID, and an address.
That's less documentation than you need to give to cash a $25
check in this country. $11 million which was, by the way, later
stolen.
So, you know, we see these things--there was a question, I
think, about are the Iraqis paying now, beginning to pay for
their own defense equipment? We'll have testimony today, as
well, that says, ``Well, yeah, they are. In fact, they're
ordering new tanks and planes and so on, some of which are
never delivered, some of which are delivered as old equipment.
And the former minister of defense cannot account for--and he's
now gone, of course, with substantial property holdings in
London--cannot account for $4 billion--$4 billion--that went
through his hands. But I know where some of it is.
If I sound upset by this--I think what's happening here is
unbelievable.
Mr. Kicklighter, the inspector general's report you
released yesterday describes, I think, an undermining of our
solders, even as the American taxpayers are being fleeced. And
we don't have nearly the resources that we need.
Inspector General Bowen, this is your third quarter report
from last year, I've kept it on my desk, now, for 4 months. We
have 967 water projects, right now that we're funding in Iraq.
We have 478 electricity projects--you've done some awfully good
work, delineating exactly what projects are ongoing, that are
being funded with American tax dollars. And I appreciate your
coming today to talk about them. We are a country that's up to
its neck in debt, shoveling billions of dollars out the door,
sending $100 bills over by C-130s on pallets. We are finally,
at long, long, last, maybe going to give the taxpayer some
feeling that there's some accountability and oversight? I
wonder. I'm not certain of that, but I wonder.
This hearing is a very important hearing, it's the tip of
the iceberg, and the three of you have done really excellent
work.
I'm sorry to use my time just to talk, because you've got a
lot to say, and I know that and I've read your reports and have
kept pretty close track of this, having done 12 hearings. But,
the next witness, I'm going to ask a lot of questions of the
next witness. And I think this ought to be the first of a dozen
or two dozen hearings, at which we put the--all the spotlights
on the same spot, and demand on behalf of the America taxpayers
and demand on behalf of soldiers, who strapped on body armor
this morning, and went out and risked their lives--demand
accountability. Because I think we have been cheated. And
Congress needs to do and can do much, much better.
One final point. The Truman Committee that was established
at the start of the Second World War--they held 60 hearings a
year. They started with $15,000, they saved $15 billion for
this country. They held 60 hearings a year, demanding
accountability, and this Congress for 5 years, has been asleep.
So, Mr. Chairman, thank you for recognizing me.
Senator Leahy. I would tell the Senator from North Dakota
that the reports that he's brought out have been invaluable to
this Senator.
I should also note, for those who think there may be any
question of partisanship--the Truman Committee, which you
talked about, was conducted by then-Senator Truman of Missouri,
during a Democratically controlled Congress, with a Democratic
President, in a war that had far more support in the United
States than the current war does.
They still raised the questions, because--whether you
support the war or are opposed to the war--Americans would like
to think that money is spent wisely, and spent well. For those
who have had family members serving there, or who have served
there themselves, they want to make sure that it's done well.
I felt that way when my son was in the Marine Corps and got
called up for Desert Storm. I feel that same way today, even
though I have no family member there.
Senator Craig, you're next.
Senator Craig. Well, Mr. Chairman, thank you very much. I
totally agree that these kinds of oversight hearings are
critical, there should be more of them, as detailed as we can
possibly become by the information available to us, I think is
important.
General Kicklighter, you mentioned the need for employees
to do the work at hand, and you mentioned numbers of 1,000-plus
accountants or auditors or that type--is it possible to find
them, and do they want to go to Iraq? Or will they go to Iraq?
General Kicklighter. I think the problem is recruiting,
training and preparing, and I think once that's been done, that
there is a willingness to go serve. And 1,000 of these will be
Department of Defense career civilians.
I've been to Iraq, I think, 11 or 12 times since the
beginning, and every time that I've been there, I've been so
impressed by the quality and the dedication and the commitment
of both the military and the civilians that are there, and the
civilians, in large part, are there because they want to be
there, and they volunteer, but that's not always the case.
But, I think, Senator, once we've recruited, trained, and
prepared these people, they will go, and they will provide the
oversight we need, and the acquisition in the contracting
world.
Senator Craig. I keep hearing there is a concern about
civilians who are there. Can they do the kind of work necessary
from inside the green zone? I would have to think they would
have to be out on the ground?
General Kicklighter. Sir, they do have to be out on the
ground, and they're all over the country.
Senator Craig. Okay.
General Kicklighter. They're in provincial reconstruction
teams, they're in maintenance teams, they're in teaching teams,
they're in engineer groups. And they do share risk, similar to
what our troops do, our career civilians do.
But, to the extent possible, the same security that we can
provide our military and our civilians, we're attempting to do
that. But there are risks involved.
Senator Craig. Yes.
Both the chairman and the ranking member have expressed
concern about oil revenues, and effective use of those oil
revenues. I think many of us felt, as we funded the war, that
the money that we fund goes to the troops. And in the very
beginning, we talked about the potential and the capability of
the Iraqi people, of funding--in large part--their own
reconstruction.
Mr. Walker, first of all, thank you for your service, I
understand you're leaving us, soon, and going into private
life. Manana?
Mr. Walker. Tomorrow's my last day.
Senator Craig. Tomorrow is your last day.
Mr. Walker. As Comptroller General, correct.
Senator Craig. Well, first and foremost, thank you for your
service, it has been greatly appreciated.
In those concerns about the potential billions of dollars
that are now coming into Iraq, and the unwillingness or the
inability to expend them and, of course, the possible waste
that could occur there, based on the fraud and abuse that we're
now beginning to hear about, you mentioned the need for a
strategic plan of implementation, I believe in the energy
sector.
So the Iraqis want one? Are they willing to accept it? Do
they know what we're talking about in that respect? And do they
comprehend the need for a path forward that is both strategic,
realistic, implementable, and therefore accountable?
Mr. Walker. Well, Senator Craig, the Iraqis have a much
more serious capacity problem than we do. There was a flight of
talent from Iraq that occurred a number of years ago. Some
individuals have come back, but not in adequate quantities to
be able to address the skills and knowledge gap.
I think the simple fact is, that if they want our money--
which presumably they do--and if we want to make sure that the
taxpayers are getting a good return on investment, then we need
to insist on it. And, you know, one of those things that has
been mentioned before is, where is the accountability?
Senator Craig. Well, we need to insist on it. Are we
insisting on it, to that degree?
Mr. Walker. Well, our recommendation to the State
Department was that they needed to develop a strategic and
integrated plan with respect to the energy sector, as well as
capacity building for the Iraqi ministries. Their comeback to
us, was, ``Well, the Iraqis ought to do that,'' and our
comeback is, ``No, it should be a shared responsibility,
because it involved both U.S. taxpayer funds, and Iraqi funds,
and we stand by that.''
Senator Craig. And that's where it stands at the moment?
Mr. Walker. That's where it stands right now.
Senator Craig. There's a disagreement, so it's not going
forward?
Mr. Walker. Well, we'll see. Right now, there's a
disagreement, and as you know, under our Constitution, we can't
force people to adopt our recommendations. We rely upon you and
other members to encourage the executive branch to do the right
thing.
Senator Craig. Mr. Walker, General Kicklighter, Mr. Bowen--
lessons learned. It's my understanding that we're supposed to
see a compilation of those soon.
What are some of the lessons learned that are bringing
about the implementation that lessens the opportunity for
fraud, waste, and abuse? All three of you, a couple of those
that you have clearly learned and you have now effectively
implemented?
Mr. Bowen. On the contracting front?
Senator Craig. Yes.
Mr. Bowen. First, ensuring that there is a single database
for contracts in theater. That has been an extremely difficult
endeavor, something we've focused on through our reviews over
the last 3 years. It's still not possible to go to a single
source and find out all of the projects and all of the
contracts--that, to me, is a basic building block of
accountability.
Second, ensuring that there is an understood and agreed-
upon set of rules for contracting in theater. There are a whole
variety of agencies contracting, and they have a whole variety
of rules, which is a challenge for contractors operating in-
country.
Third, on the personnel front, ensuring that the right
people are selected for the right jobs, for an extended period.
During the CPA tenure, there was constant turnover, and that
turnover problem has gotten better, but it's still an issue.
We have documented situations where a certain contract has
had--the Parsons contract, for example, has had 16 different
contracting officers, in just over 3 years. And that is simply
a weakness in oversight that leads to waste.
Mr. Walker. Senator Craig.
Senator Craig. Yes.
Mr. Walker. With regard to Iraq, one of the critical needs
is to have more on the ground oversight capability that's
forward deployed, on the ground.
But second, I'd like to provide for the record, with the
permission of the chairman, a listing of the 15 longstanding,
systemic, acquisition and contracting problems that exists
within the Department of Defense. They've been there for years,
they result in billions of waste every year, and that waste is
accentuated, and increased, when you're dealing with
contingency operations. And Iraq is a contingency operation,
just as Katrina was one, for domestic natural disaster, in the
Department of Homeland Security.
Senator Craig. I'm sure the chairman will accept those for
the record, it will be important for us to see.
[The information follows:]
Systemic Acquisition Challenges at the Department of Defense
Service budgets are allocated largely according to top line
historical percentages rather than Defense-wide strategic
assessments and current and likely resource limitations.
Capabilities and requirements are based primarily on
individual service wants versus collective Defense needs (i.e.,
based on current and expected future threats) that are both
affordable and sustainable over time.
Defense consistently overpromises and underdelivers in
connection with major weapons, information, and other systems
(i.e., capabilities, costs, quantities, and schedule).
Defense often employs a ``plug and pray approach'' when
costs escalate (i.e., divide total funding dollars by cost per
copy, plug in the number that can be purchased, then pray that
Congress will provide more funding to buy more quantities).
Congress sometimes forces the department to buy items
(e.g., weapon systems) and provide services (e.g., additional
health care for non-active beneficiaries, such as active duty
members' dependents and military retirees and their dependents)
that the department does not want and we cannot afford.
DOD tries to develop high-risk technologies after programs
start instead of setting up funding, organizations, and
processes to conduct high-risk technology development
activities in low-cost environments, (i.e., technology
development is not separated from product development). Program
decisions to move into design and production are made without
adequate standards or knowledge.
Program requirements are often set at unrealistic levels,
then changed frequently as recognition sets in that they cannot
be achieved. As a result, too much time passes, threats may
change, or members of the user and acquisition communities may
simply change their mind. The resulting program instability
causes cost escalation, schedule delays, smaller quantities and
reduced contractor accountability.
Contracts, especially service contracts, often do not have
definitive or realistic requirements at the outset in order to
control costs and facilitate accountability.
Contracts typically do not accurately reflect the
complexity of projects or appropriately allocate risk between
the contractors and the taxpayers (e.g., cost plus,
cancellation charges).
Key program staff rotate too frequently, thus promoting
myopia and reducing accountability (i.e., tours based on time
versus key milestones). Additionally, the revolving door
between industry and the department presents potential
conflicts of interest.
The acquisition workforce faces serious challenges (e.g.,
size, skills, knowledge, and succession planning).
Incentive and award fees are often paid based on contractor
attitudes and efforts versus positive results (i.e., cost,
quality, and schedule).
Inadequate oversight is being conducted by both the
department and Congress, which results in little to no
accountability for recurring and systemic problems.
Some individual program and funding decisions made within
the department and by Congress serve to undercut sound
policies.
Lack of a professional, term-based Chief Management Officer
at the department serves to slow progress on defense
transformation and reduce the chance of success in the
acquisitions/contracting and other key business areas.
Senator Craig. Are you saying that these problems that
you're proposing to us as examples, or as realities, still
exist today?
Mr. Walker. They still exist today, to differing degrees.
And, in fact, this afternoon, I'm testifying before the full
Senate Armed Services Committee, and that will be one of the
issues that I will talk about this afternoon.
Senator Craig. Thank you.
General Kicklighter, last one, he's following up on a
question, general?
General Kicklighter. Thank you, sir. That's an excellent
question, and let me just tell you, one of those things that
we're doing to capture the lessons learned--we're going through
all of the investigations, the audits, the inspections that
have been done since the beginning.
And I think that by next month, we will have done an
evaluation of what are the themes and the lessons that we've
learned from this war, and we'll make sure, Senator, that you
get a copy of that, and this committee gets a copy of that when
we finish that report.
But, it's going to be extremely valuable, and it will
answer the kind of question that you answered.
Let me just add two points to that, and I think it
reinforces what my colleagues have said.
One is that I think the problems that we had in contracting
is that where we had poor oversight, where we had poor
leadership, where we had the lack of the proper level of
leadership, and the fact that we didn't have administrative
support is what caused a lot of the problems for corruption and
waste in the contracting world. And I think we've learned that
lesson, and that reinforces what my two colleagues have said.
The other thing I'd like to reinforce, what Mr. Walker
said, and that is the value of a strategic plan that integrates
all of the effort out there. This is not only a kinetic war,
but it's--the non-kinetic part is extremely important, in
finishing this up.
And so the lesson, I think, is that a strategic plan that
integrates all of our effort, and Senator Leahy talked about
this in the beginning, about all of the ministries and so
forth, an integrated plan that's updated frequently, that gives
us a path for the future, I think, is a lesson that we've
learned, as well.
Senator Craig. Thank you, Mr. Chairman.
Gentlemen, thank you for your service.
Senator Leahy. Senator Feinstein.
Senator Feinstein. Mr. Chairman, I just want to begin by
thanking Senator Dorgan for the work he has done. You know, he
spoke with an alarm in his voice, and I really hope you three
gentlemen take note of this.
I think that we feel that this is the greatest instance of
fraud, waste, and abuse that any of us have ever, ever seen.
And it really deserves some kind of extra governmental effort.
Let me just take one of his instances, and I guess it was
the AP that reported that dozens of U.S. troops have become ill
from unmonitored and potentially unsafe water supplied by KBR.
Another report suggests that the company has avoided paying
hundreds of millions of dollars in Federal Medicare and Social
Security taxes by hiring workers through offshore entities
based in the Cayman Islands.
Is that true or false? Whoever wants to answer it?
General Kicklighter. Let me answer the water question.
Senator Feinstein. General, thank you.
General Kicklighter. That question is absolutely correct,
and that problem was brought to this office by Senator Dorgan.
He brought it to our attention.
Senator Feinstein. Right, respectfully, I know it was
correct.
General Kicklighter. And it was absolutely correct. I do
not know the answer to the other part of your question, but I
will be happy to look into that, and report back to you.
Senator Feinstein. All right, do either of the two of you
know the answer to that question? True or false is the answer,
Mr. Bowen?
Mr. Bowen. I don't know the answer. I am aware from my many
visits to Iraq of KBR's use of third country nationals to carry
out a significant amount of their work.
Senator Feinstein. To avoid taxes.
Well, it seemed to me that would be something that you
ought to look at. I mean, they get top dollar times 100 for
what they're doing, and it seems to me the very least they can
do is pay taxes.
Well, let me ask you another one. It is believed that the
Pentagon has known that KBR has exploited this loophole since
at least 2004, even as the company has amassed an estimated $16
billion in contracts in Iraq. Is this true or false?
General Kicklighter. I do not know the answer to that,
Senator, but I will look into it and get back to you.
[The information follows:]
Use of Overseas Companies by Kellogg, Brown and Root (KBR)
The Department of Defense Office of the Inspector General
has not reviewed this issue. Under current law the practice is
not illegal; however, the Defense Contract Audit Agency (DCAA)
has conducted audits to ensure that contractors have not billed
government contracts for taxes that were not incurred.
Recently both the House and Senate have introduced
legislation, which if enacted would prevent this type of
situation from reoccurring. H.R. 5602 and S. 2775, ``Fair Share
Act of 2008,'' have been introduced to amend the Internal
Revenue Code of 1986 and the Social Security Act to treat
certain domestically controlled foreign persons performing
services under contract with the United States Government as
American employers for purposes of certain employment taxes and
benefits.
Senator Feinstein. Okay. It has been reported that $8.9
billion of Iraqi oil has been essentially corrupted--in other
words, put in somebody's pocket. Is that true?
Mr. Bowen. I don't know the answer to that number. The fact
is that corruption has afflicted the Iraqi oil sector,
particularly up at the Baiji Refinery with respect to the
smuggling of refined fuels, and that was a symptom of the
subsidy program that created an incentive for smuggling. And I
know that continues to be a problem today based on my recent
visits with Iraqi authorities.
Mr. Walker. Senator Feinstein, corruption has been a
problem, in particular with regard to the energy sector. That's
where the money is, that's their most valuable asset.
I might note one thing that I think is important. There are
two pots of money--there is U.S. taxpayer money, and there's
Iraqi money. And there was widely reported roughly $9 billion
worth of money that disappeared, that was improperly accounted
for. That was Iraqi money. And, in fact, the picture that you
have there--even though it was U.S. currency, it was probably
Iraqi deposits.
Here's the important point. Those funds were the
responsibility of U.S. citizens. And so, even though they were
Iraqi funds, we still have responsibility and should have
accountability. And I've worked with my counterpart, Dr. Abdul
Basit, who is chairman of the board of supreme audit in Iraq,
to try to make sure he has access to the records, to be able to
do audit work to hold people accountable.
So, even though it's Iraqi money, we should be concerned
about it because we were responsible.
Senator Feinstein. Absolutely, thank you.
Some American officials have estimated that as much as one-
third of what they spend on Iraqi contracts and grants, end up
unaccounted for or stolen, with a portion going to Shia or
Sunni militias, true or false?
Mr. Walker. I can't attest to the percentage--it is
significant.
Senator Feinstein. Anybody else like to add to that?
Mr. Bowen. I can't attest to that percentage, either, but
it is a significant problem.
This is the issue I alluded to earlier, with respect to the
move toward direct contracting with Iraqi firms. That presents
a challenge because of the U.S. dollars, and they are paying a
company that we have limited insight into and oversight of.
Senator Feinstein. Mr. Bowen, in your 2006 assessment of
the Basrah Children's Hospital Project, you noted that USAID
had only one contracting officer, and one technical officer to
oversee 20 projects, worth $1.4 billion. Do any United States
agencies today have sufficient numbers of monitoring personnel
on the ground? I've heard what's been said. But, my question
is, is it sufficient today?
Mr. Bowen. A couple of things. First, as a result of those
audits, the agencies responded by significantly expanding their
presence and their oversight. For instance, the DynCorp
contract is a parallel to the Bechtel contract, also a $1
billion contract, one that we reported had a significant
shortfall in persons overseeing it. They had two persons. That
simply doesn't pass the faintest muster.
But, they now have--I met the director of INL last week--14
persons here, in Washington, working on that contract, and 8 in
Iraq. So, it's a several orders of magnitude increase.
Then to your real question, is this sufficient? I think
more oversight's always better, and when you're talking about
extraordinarily large sums of money being spent in a war zone
that's very difficult to move around in----
Senator Feinstein. Well, my question is, is it sufficient
today?
Mr. Bowen. Right.
Senator Feinstein. And you're sort of skirting around the
question.
Mr. Bowen. Well, we have an ongoing audit that will update
those previous reviews, that will specifically address that
matter.
Senator Feinstein. So, is the answer you don't know? Is it
no? What is the answer?
Mr. Bowen. The answer is that we don't know whether the
improvements that they've made are adequate to oversee the
current contracts, but our reviews, which will be out this
spring, will provide details on it.
Senator Feinstein. Thank you very much. My time is up.
Thank you very much, Mr. Chairman.
Senator Leahy. Thank you.
And, Senator Lautenberg.
Senator Lautenberg. Yeah, Mr. Chairman, the litany that we
hear here is of such a nature that you wonder--what kind of
behavior dictated the theft and dishonesty with which this
country of ours was dealt during this Iraq war? And Senator
Dorgan has done substantial work, to his credit, it brought us
face-to-face with some of the problems that exist.
And I served on the Department of Homeland Security
Subcommittee, and tried to get oversight hearings. And Mr.
Chairman, I want to congratulate you for holding this hearing.
I tried to get oversight hearings in the Department of Homeland
Security Subcommittee, and sent nine letters begging for
oversight hearings, and was told that it wouldn't be necessary,
because it would only be duplicative.
And when you see the list of things that have happened, and
I point out--what a coincidence it is that Vice President
Cheney has un-exercised options that he had--got when he was
the CEO of Halliburton.
Now, I come out of the corporate world, and I understand
fully what options are, and what they mean, and even though
they're supposedly going to be given to a university, to accept
them, I think is a little less than appropriate.
And when we look at Halliburton's behavior, and the things
that they neglected to do--water tested positive for e. coli,
coliform bacteria, they allowed our troops in Iraq to shower,
bathe, sometimes brush their teeth with that water--charged--
Halliburton charged taxpayers for services it never provided,
and tens of thousands of meals it never served--outward theft.
You know, I served in a different war. And everybody's
conscience drove them to be as frugal, as careful, as they
could be. And if you deviated from full and honest support for
your country, it was considered traitorous, that you were a
traitor to the cause. And when we see that there have been sham
corporations opened in the Caribbean and the Cayman Islands,
and then shifted to Dubai--and by the way, we heard in the last
year or so, that Halliburton was thinking of moving its
headquarters to Dubai--and helping, from that office, helping
Iran derive revenues from its oil, which they, in turn, spent
to send people to kill our troops. It's something really rotten
here, to develop a theme from another time in a play.
I want to ask Mr. Walker--the United States Senate
Governmental Affairs Committee from 2003 to 2006, held only one
oversight hearing on Iraq contracting, with only one witness.
Was that a sufficient amount of oversight of this multibillion
dollar program?
Mr. Walker. Well, it's not enough oversight, Senator
Lautenberg, the question is, which committee of jurisdiction or
committees of jurisdiction should be holding it? I would
respectfully suggest that with respect to Senate Homeland
Security and Governmental Affairs, clearly they had
responsibility for Katrina, which was a domestic contingency.
Yes, they have authority to look at Government contracting,
Government-wide. The question is, was anybody else doing it?
Senator Lautenberg. Well, if we get to this point, and we
find out that there's still questions being asked, there's
still unanswered questions, then at what point does it get
duplicative? At what point do we say, ``Well, some other
committee is doing it?'' That's an old dodge, to hide behind
another committee's jurisdiction, to say, ``Well, I thought
they were doing it.'' In good conscience, each one of us ought
to be interested in what was taking place. And what's happened
to the millions and billions of dollars that was wasted.
Mr. Walker. Senator Lautenberg, if I can, real quickly.
There wasn't enough oversight, in general, during that period
of time.
Senator Lautenberg. Thank you very much.
Mr. Bowen, the Washington Post raised concern about a trip
that you took in January to Maine. They said it was interpreted
as political. It quoted a State Department official who
reviewed your activity as saying, ``This is the kind of thing
we're taught not to do.''
Did you check with the Office of Special Counsel to
determine if this trip was an appropriate use of taxpayer
funds?
Mr. Bowen. No, I didn't. But I am invited to speak on Iraq
reconstruction issues, and I was invited by Husson College up
there, and I traveled up to speak to them.
Senator Lautenberg. Who were--who invited you?
Mr. Bowen. Husson College, in Bangor, Maine.
Senator Lautenberg. Husson. Did you hold press conferences
there? Did you do editorial board meetings?
Mr. Bowen. I was invited to discuss our work by the
editorial board.
Senator Lautenberg. By the editorial board?
Mr. Bowen. Yes.
Senator Lautenberg. Were you accompanied to the editorial
board meetings?
Mr. Bowen. Yes, I was.
Senator Lautenberg. By whom?
Mr. Bowen. By Senator Collins.
Senator Lautenberg. By Senator Collins? I see. And they
review the kinds of questions that we're discussing here today?
Mr. Bowen. It was just a review of our continuing work,
oversight work, in Iraq.
Senator Lautenberg. Mr. Kicklighter--the troops who became
sick from using unsafe water, do they have any recourse against
Halliburton for its negligence?
General Kicklighter. Senator, I don't know the answer to
that, but we certainly are looking into what our recourse will
be against Halliburton for not performing the contract as so
specified.
Senator Lautenberg. I have a question here that I wanted to
review with either Mr. Walker or Mr. Kicklighter.
On January 28 of this year, I sent a letter to the GAO
asking for an investigation into a suspicious e-mail exchange
indicating that the Army Audit Agency was told by the Army to
not answer questions about whether the cost of closing Fort
Monmouth was higher than the Army indicated. The GAO passed the
investigation to the Department of Justice, who passed it on to
you, Mr. Kicklighter, and my question for you is, will you do
this investigation, Mr. Kicklighter?
General Kicklighter. Sir, we will. We had a meeting the
other night, and we are in the process of looking into it, as
we speak.
Senator Lautenberg. Thank you.
And one last thing, the Pentagon auditors have classified
as ``questionable'' over $1 billion from Halliburton cost-plus
log cap contract. Now, given this, should the Defense
Department be permitted to continue to enter into cost-plus
contracts which provide little incentive for a contractor to
keep costs down?
Mr. Walker. Senator Lautenberg, I think we need to reduce
the number of cost-plus contracts. And I think that to the
extent that we enter into a cost-plus contract, it is
absolutely essential that the Government do its part to be very
specific with regard to what type of products and services do
we expect, in what quantities, in what timeframe, in what
locations.
In the absence of doing that--which occurs all too
frequently--you are essentially writing a blank check to the
contractor. And that is wholly inappropriate.
Senator Lautenberg. Do you agree, Mr. Kicklighter?
General Kicklighter. I totally agree. And to the extent
possible, contracting should be free and open competition.
Senator Lautenberg. And I just quote from Senator
Feinstein's comment about--this is the greatest instance,
perhaps, in the history of this country--of fraud, waste, and
abuse, at a time when people are so concerned about our mission
there, and the wisdom in the first place, and the carrying on
of this war that has demoralized this country, is
incomprehensible.
Thank you, Mr. Chairman. And I appreciate the--your
patience in letting me go beyond that time.
Senator Leahy. Of course, Senator Lautenberg.
I think we can probably wrap up this panel fairly quickly.
Mr. Bowen, let me ask you--according to Judge al-Radhi, who
will testify shortly, there are more than 3,000 pending
corruption investigations in Iraq, involving more than $18
billion that may have been lost to fraud. Only 300, one-tenth,
of these cases have been resolved. The Iraqi Government has
passed laws and taken steps to immunize a number of officials.
In 2006, you made 12 recommendations to improve the State
Department's anticorruption efforts in Iraq. A year later, you
found little progress had been made. The State Department only
implemented two of your recommendations as of last July. In
January of this year, a couple of months ago, 10
recommendations remained unaddressed. Am I correct in assuming
we have a serious problem of corruption in Iraq?
Mr. Bowen. Yes, Senator Leahy, you are. We have a two-fold
problem--the problem of corruption in Iraq, and the problem of
supporting Iraq's anticorruption institutions effectively.
Senator Leahy. You've opened hundreds of investigations in
cases of fraud, waste, and abuse and there are currently more
than 55 open, active investigations, many of which have been
referred to the Department of Justice.
According to your records, the Justice Department has only
brought charges against about 14 individuals, and recovered
only $17 million in fraud. Do you believe the Justice
Department has moved aggressively enough? Should we turn this
over to some good local sheriff's departments that might be
more aggressive?
Mr. Bowen. Well, we're working with----
Senator Leahy. Sorry, that last may have been uncalled for,
but I'm wearing my other hat as chairman of the Judiciary
Committee.
Mr. Bowen. Yes.
Senator Leahy. I'm just wondering--it doesn't seem like
we're getting an awful lot out of them?
Mr. Bowen. We have some significant cases that are pending,
that I can't address, of course. I would say that the effort by
the Justice Department has improved over time, which is a
continuing theme in the course of this hearing. I think that
we'll see the fruit of those prosecutions this summer.
Senator Leahy. Do DOD and Department of State still enter
into cost-plus contracts in Iraq?
Mr. Bowen. Yes, they do. And I think S. 680 is a good
reform measure to help circumscribe the overuse of cost-plus
contracts. It's clear--as our audits documented--that, for
example, overhead was an extraordinarily high percentage of
these cost-plus contracts. We have a report coming out this
quarter that will show that overhead on one cost-plus contract
was about 50 percent of the total cost of the contract. That's
unacceptable.
Senator Leahy. You've testified before in the Judiciary
Committee in favor of the War Profiteering Prevention Act. Do
you still support that?
Mr. Bowen. Yes, sir, I do. I think strengthening oversight
and prosecutions of contractors and Government officials who
engage in corrupt practices is a good thing.
Senator Leahy. Sometimes the idea that you might go to jail
and not just get a fine might focus one's mind?
Mr. Bowen. Focuses the mind, yes, sir.
Senator Leahy. I found that when I was in law enforcement.
Senator Cochran, do you have any further?
Senator Cochran. Mr. Chairman, I think your convening this
hearing has been very important, and also ensures that everyone
will know that we're anxious to see that the funds that are
appropriated by this Congress are spent for the purposes that
we approved them, and without any culpability for fraud, abuse,
or waste. And I think the gentlemen who have appeared before
our committee today have convinced me that the best efforts in
their offices are being made to achieve that goal. To ferret
out waste, fraud, and abuse where it exists, and see that those
who are guilty of it are brought to justice. And we appreciate
your service in those ways. Thank you.
Senator Leahy. I noted in my introduction of the
Comptroller General, Mr. Walker, that he has a 15-year term.
He's about two-thirds of the way through that, at almost 10
years, but he's going to be leaving tomorrow, if I'm correct,
after 10 years of service. Service that I've been privileged to
see. I've seen his candor, his commitment to the Congress, and
the American people, and the ability of both Republicans and
Democrats alike to rely on what he's said.
I wish you well in your new career, but I might say, Mr.
Walker, your service has been in the best of what one would
expect of somebody serving our great country, and I commend you
for that, and I suspect you'd find that virtually everybody
else would agree.
Mr. Walker. Thank you so much, Senator Leahy. It's been an
honor and a privilege to serve.
Senator Dorgan. Mr. Chairman?
Senator Leahy. Yes, Senator Dorgan?
Senator Dorgan. Two things, just in 30 seconds.
Let me also say, I think Mr. Walker has been an
extraordinary public servant. He's provided just great service
to this country. I regret he's leaving, but I understand the
circumstances and wish him well. But, I thank him for his
service.
Inspector General Bowen, our next witness is going to be
Judge Radhi. We don't know Judge Radhi, but I understand you
do. You have said this about him, and I want you at least for
the committee's purposes, to respond.
You have said, ``Judge Radhi is an honorable man and an
effective crime fighter in Iraq,'' saying, ``it's a loss he's
no longer there.'' This is the man who was the head of the
Commission on Public Integrity in Iraq. Twice his opponents
have tried to kill him. He comes to this committee at some
risk, to speak openly, but is that still your view of Judge
Radhi?
Mr. Bowen. Yes, Senator Dorgan, it is. I met with him
during every trip that I took to Iraq and was sad to see him
go.
Senator Dorgan. Well, it's a very courageous man who shows
up here to be our next witness, and I just wanted the committee
to understand that he doesn't come to us out of the blue--he
comes to us as a very courageous man in Iraq who has risked his
life to do good. Regrettably, he lost the battle, in many ways,
there. But he's going to describe some things today that are
very unusual, and very disturbing.
Inspector General Bowen, and Inspector General Kicklighter,
thanks again for your service, as well.
Senator Leahy. I thank you all.
Thank you, Mr. Walker, General Kicklighter, Mr. Bowen. We
will recess for 5 minutes while we reset the table, thank you.
We're back in order.
Our next witness--may I have order, please.
Our next witness is Judge Radhi Hamza al-Radhi.
He served as Iraq's highest ranking anticorruption officer,
Commissioner of the Iraqi Commission on Public Integrity, CPI,
from 2004 to 2007. Under his tenure, CPI successfully
investigated 3,000 corruption cases in courts for adjudication,
241 of the cases have been prosecuted and resulted in guilty
verdicts.
Judge al-Radhi graduated from the Judicial Institute in
Iraq in 1979, he has worked in legal affairs since. During the
Iran-Iraq war, he was Director of Funds for Iraqi orphans.
The Judge resigned as Commissioner of CPI in September
2007, citing death threats against him, and political pressure
from the Iraqi Government. CPI is one of those institutions in
Iraq created to provide governmental oversight. Unfortunately,
the Prime Minister, Nouri al-Maliki, has refused to recognize
the independence of CPI.
I should also note that we have a translator from the State
Department, Nina Behrans, thank you.
Then Judge, it's great to have you here, welcome to the
United States, not that you're a stranger here. Please go
ahead, sir.
Senator Dorgan. Mr. Chairman?
Senator Leahy. Yes.
Senator Dorgan. Before the Judge responds, I'd like to just
make about two comments, and ask that we put, at this point, in
the record, an article in Portfolio Magazine dated April 2008,
that's this current month's magazine. It's titled, ``The
Betrayal of Judge Radhi: He fled missile attacks in Baghdad and
came to the United States, and now he's on the run--how America
turned its back on the top fraud cop in Iraq.''
The reason I wanted to mention this is because this man has
twice been the victim of attacks on his life, he's in this
country, the State Department has been none too pleased with
what he has said, because he hasn't painted the most wonderful
picture of what's happening in Iraq. And if you don't paint a
wonderful picture, those that want that mosaic painted don't
want to listen to you much, so they're pretty upset with Judge
al-Radhi, but I really appreciate his willingness and his
courage to come forward, and I'm anxious to ask him a series of
questions.
[The information follows:]
[From Conde Nast Portfolio, April 2008]
The Betrayal of Judge Radhi
He fled missile attacks in Baghdad and came to the United States.
Now he's on the run.
how america turned its back on its top fraud cop in iraq
(By Christopher S. Stewart)
On an ordinary evening in early January, Judge Radhi Hamza al-Radhi
shuffles through the tile-and-glass canyons of the Springfield Mall in
Northern Virginia. No one notices him. He doesn't exactly look like a
wanted man. He is a bespectacled 63-year-old Iraqi with receding white
hair, a clipped mustache, a burn scar from childhood on his crooked
nose, and distinctive black eyebrows. Smelling faintly of Aramis
cologne, he shambles along, searching for something to do. In his tweed
coat and brown shoes, he looks more like a college chemistry professor
than the hardened crime fighter he was before everything went wrong and
he had to run.
The judge comes here daily, sometimes twice a day--it's a three-
minute walk from his new suburban hideout. He spends the time walking,
gazing into the storefronts, observing faces, but mostly he's lost in
thought. Occasionally, his eyes flicker up to the mall's second floor,
as if he's looking for his enemies. But they are not there.
We stop at a western-wear shop, where he likes a tall, black
Stetson hat, and stroll through Target, his favorite store because it
has what he needs for his new life and, as he says, ``there are so much
sales.'' We stand near a blinking carousel and watch it turn.
After an hour or so, he enters a Brookstone store and falls into a
massage chair. As the mechanical nubs knead his back, he recalls the
way his life was in Iraq, 6,300 miles away, where he mingled with world
leaders and fought the most important battle of his life. ``It seems so
long ago,'' he says. ``I never thought it would end this way.''
Before he fled Iraq, Radhi was the head of Iraq's Commission on
Public Integrity, where he policed the country's government and
investigated its biggest cases of bribery and financial chicanery. Set
up and paid for, in part, by the United States, the agency was Iraq's
F.B.I., and Radhi was compared to Eliot Ness, who took down the Chicago
Mob in the 1930s. Stuart Bowen, the U.S. special inspector general for
Iraq reconstruction, described Radhi as his ``most reliable partner . .
. in Iraq,'' and Chuck Grinnell, a senior C.P.I. adviser, remembers,
``He was one of the good guys, one of the few in Iraq.''
The judge was appointed to the post by Ambassador Paul Bremer in
the summer of 2004, almost a year after the U.S.-led invasion. At the
time, Iraq was a free-for-all, with competing gangs and criminals
gunning for a seemingly endless flow of reconstruction cash. The
prevailing view held that the C.P.I. was vital to the advancement of
the near-broke country, a sentiment reflected by President Bush in a
2005 speech to the Council on Foreign Relations. ``Listen,'' he told a
crowded ballroom at the Omni Shoreham Hotel in Washington, ``the Iraqi
people expect money to be spent openly and honestly, and so do the
American people.'' He would tout the C.P.I. again a month later, in a
speech to the Veterans of Foreign Wars.
The judge's job was, simply put, to figure out where the money was
going. Billions of dollars were being wasted or stolen outright in
Iraq, including $8.8 billion that went unaccounted for in 2003 and
2004. Many of Iraq's leaders were either directly participating in the
thievery or quietly supporting it through hired guns, who later waged
sectarian wars in the streets. Radhi was supposed to track down the
criminals, stanch the hemorrhaging of money, and put an end to the
corruption that was dubbed the ``second insurgency'' by Bowen and
considered a principal source of funding for the terrorist groups that
the U.S. military was trying to crush.
The Ministry of Interior, for instance, resembled a Mafia
organization. Instead of working to guarantee the country's security,
many of its officials, the judge discovered, were engaged in bribery,
contract killing, and kidnapping. Hundreds of ghost workers collected
wages that totaled more than $1 million a month. Meanwhile, the Mahdi
Army, a Shiite militia devoted to cleric Moktada al-Sadr, had fully
commandeered the ministries of health, trade, and transportation. Its
soldiers, with the tacit approval of ministry employees, stole food and
medical supplies, among other things, and resold them to fund the
insurgency against the Americans and the Sunnis, the minority that
still held power after Saddam Hussein's ouster. Over time, ambulances
ferried weapons and mercenaries, while hospitals became integral to the
militia's sectarian killing machine. Shiite soldiers executed Sunni
patients and then killed family members listed in their medical files.
The Oil Ministry had many of the same problems. After the invasion,
President Bush claimed that oil revenues would pay for most of Iraq's
reconstruction. But even with the United States investing huge sums in
oil projects, revenues weren't and still aren't covering costs, though
$3 billion has been spent to date. Aging infrastructure and insurgents'
attacks on pipelines were part of the trouble. But the biggest
challenge was that criminal groups were stealing from depots and
hijacking transport trucks, sometimes in collusion with ministry
officials. Monthly, the state oil industry lost up to $90 million, and
the judge claims that more than half of the smuggling profits went
straight into local terrorism.
Although Radhi was officially in charge of investigating how the
Iraqi government spent its budget, his work also uncovered how millions
of American tax dollars were being diverted and used to bolster militia
groups. The most visible way those American tax dollars ended up in the
hands of the bad guys in Iraq was through U.S. capacity-building
programs meant to help train ministry officials in everything from
budgeting to delivering basic government services.
A recent Government Accountability Office report shows that the
United States invested $169 million in these programs at about half a
dozen of the most critical ministries in 2005 and 2006. Because the
militias infiltrated most, if not all, of these ministries, the
capacity-building money is, by extension, helping build the militias.
In other words, by funding ministries, we are working against
ourselves.
The amount of American tax money that has gone to the Iraqi
militias is impossible to nail down, though Radhi says it could be
tens, if not hundreds, of millions. So far, the United States has spent
about $48 billion on Iraq reconstruction, with a notable chunk of that
money passing through the agencies Radhi was investigating. Chris King,
a former adviser to the judge at the State Department, says, ``The
worst elements in Iraq smile at us and take our money, but we're
getting played. I went to the Justice Department guys and said, `You
are funding and training death squads. You can't say no one told you. I
told you. You are funding death squads.' I have no doubt that U.S.
reconstruction cash is funding militias.''
Those death squads eventually targeted the judge. As his team built
cases against some of the country's most powerful people--businessmen,
clerics, politicians, warlords--threats came back. Grim voices muttered
over cell phones, ``Stop your investigations now'' and ``Do you know
who you are messing with?'' Soon his investigators and their families
were dying: one body full of bullets, another hung on a meat hook,
another disfigured with a power drill. There were sniper attacks and
suicide bombers. Government officials blocked his investigations.
Sometimes he spent the night at safe houses with friends, who
increasingly worried that he would be killed.
The United States, strangely enough, did not step in. Some said the
United States was afraid to take sides, wary of alienating its allies
in the Shiite-dominated government. Others suggested that Radhi's
probes were becoming an embarrassment to the Bush administration,
highlighting yet more trouble for a U.S. war effort that was already
under siege. ``There was a lack of due attention, political will, and
support in the senior levels of the U.S. government,'' King says.
Still, the judge didn't waver. He worked through the interim and
transitional Iraqi governments and through the rise of a newly
sovereign Iraq. By the summer of 2007, even as his close advisers
``focused solely on his survival,'' as one says, Radhi had launched
almost 3,000 corruption cases. The accused included shady American
companies and entrepreneurs, Iraqi ministers, and at least one member
of Prime Minister Nuri al-Maliki's family. The total haul: $18
billion--a number as mind-boggling and damning to Iraqi politicians as
it was to the Bush administration.
It was around this time that the missile came for Radhi.
It came hurtling out of the still-dim morning sky as the judge
stood in a bath towel on the first floor of his walled compound at the
edge of Baghdad's Green Zone. Around 6 a.m., the scorching late-July
sun was just creeping over the mortar-scarred city's horizon. His
family and bodyguards were still asleep in the two-story house.
Everything was silent, except for some birds singing in the garden's
olive trees.
When it hit, the missile made a huge thump that obliterated the
morning quiet and convulsed the house like an earthquake. The memory of
it still consumes the judge. He closes his eyes and tells me, ``I
thought I was dead.'' The missile, launched from a truck and believed
to be about nine feet long, was meant to kill him and end his
investigations. Most everyone agreed on this point. Yet somehow he
survived. As the noise of the blast diminished, he stood in the hall,
unshaven and barefoot, shards of glass and debris on the floor. The
missile had hit an empty house across the street, now a smoldering pile
of rubble. There were prayers of thanks to a gracious God, but the
near-hit made the judge wonder if he had pressed things too far. The
missile strike wasn't the last; a few weeks later, another arrived,
destroying the empty house behind his, signaling to him that it was
only a matter of time before the next rocket would hit its mark.
He decided he couldn't go back. He had a family--a wife and a
daughter, who was eight months pregnant. The idea of being driven away
by his enemies ate at him, but he felt he had no choice. ``Radhi didn't
leave for himself,'' Grinnell, the C.P.I. adviser, says. ``He would
have died in Iraq. But it became too much, and he left so that his
family could survive.''
After a trip to Washington last summer, Radhi resigned his C.P.I.
job and asked the U.S. government for asylum. He had a couple of bags,
a small amount of cash, and no idea where he would go.
In October, the judge began his move from a world he knew into much
more uncertain terrain. Appearing before the House Committee on
Oversight and Government Reform on Capitol Hill, he testified about his
findings of corruption that reached all the way to the prime minister's
office.
It was a huge story. Many people called the judge a hero, but
others--particularly officials in the State Department, which had
helped create him--distanced themselves. Documents detailing Iraqi
corruption were retroactively classified, and staff members were
instructed not to talk about the judge's allegations against the Maliki
government. According to people involved in his case, the
administration didn't know what to do with a man who was painting a
negative picture of its efforts in Iraq, where it wanted people to
believe that the situation was improving.
Things only got worse for Radhi. Soon after his arrival in the
United States, the Iraqi government called for his arrest and
prosecution, citing smuggled documents, corruption, and libel, and his
pension was cut off. He shacked up in a budget hotel in a Virginia
suburb but ran out of money after two weeks. An acquaintance kindly
lent him an unfurnished townhouse. After his family and that of his
security chief--11 people in all--were evacuated from Iraq, they joined
him in Virginia. They shared three queen-size mattresses on the floor
and coexisted amid a sad shipwreck scene of plastic lawn furniture, TV
tables, pillows that served as couches, secondhand clothes, and donated
food, most of which was shipped in by local Quakers, who had taken an
interest in the refugees.
His asylum proceedings stalled as the State Department instructed
employees not to support the judge in his flight from Iraq. ``Team, I
have ordered our current C.P.I. staff not to write any letters in
support of Judge Radhi,'' one email read. When I called the State
Department, no one wanted to comment on the judge. Once a key U.S.
partner in rebuilding Iraq, Radhi had implausibly become both a wanted
man and a castaway.
At night, he lay awake next to his wife on a mattress on the floor
wondering what had gone wrong. He had suddenly become a man without a
country. I first meet the judge a couple of weeks after his
congressional hearing. He sits upright in a white plastic lawn chair
with a cardboard box of old personal documents next to him. Except for
the two bags of clothes, the box was nearly all he'd carried with him
from Baghdad. It contains just about the only items that testify to his
existence--family photo albums, resumes, diplomas, and report cards
from as far back as grade school. As Radhi pages through the files, he
speaks through a translator, sometimes pausing to put a finger to his
forehead as if in search of a distant memory. He wears a desert-brown
suit with a yellow tie, and dark rings sag around his hard brown eyes.
Though he looks as if he hasn't slept in weeks, he is surprisingly
upbeat. ``Things will get better,'' he tells me. ``I'm hopeful.''
This says a lot.
The judge, a secular Shiite, was born in 1945, the second-youngest
of 10. Hamza Radhi al-Ketany, his father, was a successful seed
merchant; his mother, a homemaker. The family lived in a cramped house
in downtown Kut, a river city of about a half-million in eastern Iraq.
After high school, he traveled to Beirut, Lebanon, for college, then
returned to Iraq for law school at Baghdad University.
It was there, in the summer of 1968, that he caught his first
glimpse of Saddam Hussein, a rising force in the Baath Party, which had
recently seized power in a bloodless coup. Standing in front of about
1,000 law students in an auditorium, Hussein pulled out a pistol and
began firing. Windows shattered and students ran.
Although some at the time hailed the Baath Party--baath is Arabic
for renaissance--as the future of Arab unity and socialism, people who
didn't join began to disappear, and fear infected the country.
Intelligence agents were everywhere, and one night in 1970, at around
midnight, they arrived at the 25-year-old Radhi's house in Kut, where
he had a private law firm.
Radhi says that he was forced into a black Volkswagen sedan,
blindfolded, and transported to the Palace of the End prison in
Baghdad. There, he was asked why he had not joined the party. Radhi
replied that he was not political. He was tied up, beaten with bats,
hung upside down from a steel ceiling fan, given electric shocks, and
thrown into a cell the size of a coffin. All night, he heard screams
and moans emanating from prisoners in the hundreds or thousands of
other cells around him.
After 100 days, he was released. His keepers told him not to speak
of the place, though he would always have jagged white scars on his
arms and back, as well as a soft spot about the size of a quarter on
his skull, where the bats had done their work. He attempted to return
to his life. Marriage helped to some extent. He wedded his cousin, a
pretty brown-haired woman with whom he had grown up in Kut, and they
had three children.
Later, Radhi joined the Ministry of Labor, where he inspected
working conditions at regional factories and gained a reputation as a
diligent and honest investigator. Seven years later, in 1977, he
enrolled in the prestigious Judicial Institute, a two-year training
program for the country's top judges and attorneys general.
Most of the students there were aligned with the Baath Party. Radhi
still wasn't, which was why police returned when he was a year into the
program, arrested him again, and interrogated him for another 10 days.
Hussein officially came to power in the summer of 1979. The next
year, the country went to war with Iran. Radhi was appointed to a
social post, where he spent the next eight years finding housing and
schooling for children whose parents were battlefield casualties. In
1984, two of the judge's cousins disappeared after they were deemed to
be communists; a third cousin, who refused to serve in the army, was
executed by firing squad.
Despite being on the political and social fringe, the judge was
eventually hired by the Ministry of Justice as an attorney for a job
handling mainly civil cases. As most of his colleagues were Baath Party
members, Radhi says the position began to wear on him. He heard about
disappearances and deaths of ``traitors.'' After three years, he quit,
and for the next decade, he disappeared from the public sector.
During the next few years, Radhi kept a small law practice and
lived as if politics didn't exist. He traveled to Yemen and Jordan
searching for work, spending months at a time away. Nothing panned out,
and his family struggled to get by. But then American soldiers arrived
in March 2003, and after almost two decades, his hope returned. ``I
believed things were about to change,'' he says. ``The bombing
happened, and Saddam was gone. And I thought that I could help rebuild.
I dreamed of a different place.''
In November 2003, Bremer and his team devised the C.P.I. and began
searching for the right person to fill its top post. Grinnell, the
C.P.I. adviser, interviewed more than a dozen Iraqi candidates. With so
much money at stake, the Americans knew it would probably be the most
dangerous job in Iraq, pitting an unelected official earning $5,000 a
month against the country's strongest political players--some of whom
commanded death squads.
Many candidates dropped out, but Radhi was undeterred. ``When we
told him about the danger, he said to me--and I remember this vividly--
`God will not take me one second before he is ready to see me,' ''
Grinnell says. Even though what Radhi said was a common phrase in
Arabic, Grinnell says, ``that shocked me about Radhi, because when you
look at him, he doesn't look physically strong. But he has a presence
that is felt.''
The C.P.I. was charged with tracking Iraq's $30 billion to $40
billion annual budget through the murky channels of government and
determining how much of it went into reconstruction and how much was
wasted or stolen. To get the agency off the ground, the United States
invested between $7 million and $12 million in it. As with most of
Iraq's burgeoning institutions, a handful of adventurous Americans
served as advisers. In this case, they came from the Coalition
Provisional Authority and later the State Department. At first, the
C.P.I. had only a few investigators, but its team in Baghdad even
tually expanded to include 180 employees, with about 700 supplemental
work ers and several offices sprinkled around the country.
And so it began. After a three-week training session, which took
Radhi to the United States for the first time, he and his family moved
into a protected house in Baghdad's Green Zone, and an office was
assembled in a crumbling concrete building. Almost immediately, people
began referring to the office as the Zoo, because it and five other
C.P.I. properties occupied the city's former zoo grounds, now devoid of
animals and overgrown with weeds. On the border with the Red Zone, as
the rest of the city is ominously known, the Zoo was so far removed
from the other buildings in the Green Zone that one American adviser,
former New Hampshire Superior Court judge Arthur Brennan, described it
as a ``lonely outpost'' suffused with a ``Doctor Zhivago sense of
bleakness and tragedy and inexplicable hope.''
The days were long, starting at 6 a.m. and sometimes stretching
well past midnight. Radhi would head home just as the Army snipers up
in a nearby roost began burning their nightly fire to stay warm in the
desert chill. The judge says he drank a lot of tea to stay alert, and
the TV in his office, always tuned to CNN, supplied a constant
soundtrack. The work was immensely complicated and was focused on
Iraq's ministries, staffed for the most part by people who had never
run a government agency.
It's difficult to investigate financial corruption under the best
circumstances. But in Iraq, where some ministries were armed to the
teeth and potential witnesses were either complicit, beholden to
someone, or too terrified to speak, the investigations took on another
layer of difficulty. Expectations of basic investigative work didn't
take into account the ugly reality on the ground: armed bandits
prowling the streets, sectarian militias battling for territory,
insurgent warfare coming alive, droves of people disappearing daily,
and most forms of trust nonexistent.
Almost immediately, the responsibilities of the detective job
sucked up most of Radhi's time. He moved slowly, telling his men,
``Shway, shway'' (Step by step). Through interviews, audits, and
official documents, the judge and his staff uncovered an anarchic and
opaque world. Contracts were vague; nepotism and bribery abounded;
budgets were filed the old-fashioned way, on paper; and cash by the
truckload was vanishing abroad into private bank accounts or being
funneled to militias. If you had a brain and some political
connections, you could walk away from Iraq a millionaire. ``Corruption
was everywhere,'' the judge says. ``Everywhere.''
It took about a year for Radhi to collect enough evidence to begin
passing his cases to the investigative court. And then rulings and a
slew of arrest warrants put criminals on notice. Among the most
stunning of the cases was a billion-dollar heist from the Ministry of
Defense, where the Americans had handpicked the leaders, Defense
Minister Hazem Shaalan and his deputy, Ziad Tariq Cattan. Before the
U.S.-led invasion, the two men had been exiles from Hussein's Iraq:
Shaalan was a real estate agent in London; Cattan lived in Poland and
sold used cars. Following Hussein's ouster, the men returned to their
homeland and became high-ranking officials, commanding large budgets
and charged with equipping the new Iraqi army.
Months into their appointments, according to official documents,
the men asked the Iraqi interim government, led by Prime Minister Ayad
Allawi, a Shiite, for $1.2 billion. They claimed it was for new
military equipment. But the equipment that eventually arrived, the
judge says, was cheap, old, and mostly unusable: run-down helicopters,
knockoff machine guns, defective bulletproof vests, and ammunition that
was on the verge of self-detonating. The judge found nebulous contracts
with fake companies, with money flowing from the ministry into secret
bank accounts abroad. More than $360 million worth of Polish-made Sokol
helicopters, contracted through a ``storefront company,'' were not
delivered at all.
In September 2005, arrest warrants were issued for Shaalan and
Cattan, but the men had already vanished with an alleged $850 million.
Although both were later convicted of corruption and sentenced to
dozens of years in prison (21 others were eventually charged in the
case), they remain abroad, beyond the reach of Iraqi courts. Both
Shaalan and Cattan have denied any wrongdoing. Cattan has even put up a
website in hopes of clearing his name. But no money has yet been
recovered.
The judge kept digging. By December 2005, months after a
transitional Iraqi government led by Prime Minister Ibrahim al-Jaafari
took over for Allawi, Radhi and his investigators had opened 800 cases,
with more than 30 senior government officers appearing in criminal
court and 91 cases scheduled to be brought before a judge.
Around this time, the backlash against the C.P.I. began. There were
threats against Radhi and his crusaders, and in March, a suicide bomber
strolled into the C.P.I.'s Mosul office and set off his device, killing
himself and one of the agency's lead investigators, who had been
looking into oil theft. Not long after, a C.P.I. security chief was
executed on a Baghdad street along with his wife, who was seven months
pregnant.
Iraqi ministries, meanwhile, started to shut their doors to Radhi's
probes. It didn't help that the Jaafari government, following Allawi's
lead, had restored a Hussein-era law that empowered the prime minister
to exempt his cabinet from prosecution and gave ministers the authority
to exempt their employees as well. Although Bremer had suspended the
law when he created the C.P.I., the interim Iraqi government now
claimed that the judge's cases were becoming politically motivated and
had to be stopped.
When I ask Radhi about it, he laughs. ``No one wanted us to
investigate. If I investigated Kurds, the Kurds would say, `You are
biased. You are Arab.' If it was a Shia case, they would say, `It's
political.' If Sunni, they would say, `You are Shia. You don't like
us.' The people we were chasing wanted to stop us.''
Amid this mayhem, investigators occasionally ran into Americans who
sought to make dirty deals with Iraqi opportunists. The judge's lead
investigator, Salam Jaddoa Adhoob, describes them as cowboys. ``These
guys operated with no rules. They came to Iraq to make fast money, and
then they left with their pockets full,'' Adhoob tells me one night at
his own safe house in a remote Virginia town, where he's lived since
fleeing death threats more than six months ago.
According to Adhoob, one American business, the Hummer manufacturer
AM General, signed a $59 million contract with the Iraqi Defense
Ministry to provide the army with 500 armor-plated trucks. (General
Motors bought the Hummer name in 1999, though AM General continues to
manufacture the vehicle.) However, only 167 trucks arrived. Later, the
AM General case and others involving Americans were, in accordance with
a new policy, handed over to the inspector general's office. A
government official concedes that a number of investigations are under
way but wouldn't comment about AM General specifically except to say
that ``they are on everyone's radar.'' When I ask AM General about the
allegations, Craig MacNab, a company spokesman, claims that he hasn't
heard anything about them but cites a complex production process, made
more difficult by turnover within the Iraqi Ministry of Defense. The
remaining trucks are due to begin arriving in the spring of 2008--more
than three years after the initial contract was signed.
In May 2006, following the country's parliamentary elections,
Maliki became prime minister of the newly sovereign and Shiite-
dominated Iraq. After two transitional governments and a lot of
violence and lost money, Maliki promised transformation, though Radhi
would come to see the ensuing months as particularly troublesome.
While Maliki spoke publicly about eradicating corruption, privately
he began lobbying to bring Radhi's agency under his command. Maliki
reenacted the controversial get-out-of-jail-free law. As a result,
between September 2006 and February 2007, various ministers blocked at
least 48 corruption cases involving a total of $35 million--not that
the judge had the firepower to enter the ministries anyway. For those
two years, Transparency International, the Berlin-based anticorruption
watchdog, listed Iraq as the most corrupt country in the Middle East.
Meanwhile, more suspected criminals fled, including 15 ministers, while
more than 20 corruption-case judges were assassinated.
The tipping point for Radhi came when the imam who led the Iraqi
Parliament's Shiite coalition demanded a meeting a few days after
Saddam Hussein was executed, at the end of 2006. His name is Jala
Alsaghir, but some call him the Lion. ``He was the Lion because of his
jaw that juts out,'' Radhi says, ``and he is a very dangerous man.''
In a dimly lit room, the Lion, surrounded by a dozen or so
bodyguards, told Radhi, ``Your cases are touching high-level Shia
people. It is time for you to stop your job,'' Radhi recalls. The judge
took Alsaghir's words as a threat on his life. A week or so later,
Alsaghir stood in front of Parliament and accused Radhi of corruption.
Though nothing was officially done about the allegations, Radhi says
that Alsaghir's words opened the floodgates of violence. ``The people I
was investigating realized that I was determined to keep investigating
them and pursuing the rule of law,'' he explains.
By the end of 2006, 18 of Radhi's men were dead, and by the middle
of 2007, another 10 were gone. The Maliki government, which had shored
up power over the minority Sunnis, moved to further diminish Radhi's
independence. First, the prime minister summoned the judge to his
office to talk about his investigations of the oil and defense
ministers and demanded that he fire Adhoob. After Radhi refused to
comply with Maliki's demand, an order was issued directing the judge to
``stop the pursuit of previous and current ministers, unless done
through the prime minister's office.'' Another official letter
dismissed a corruption case against Maliki's cousin, Salam al-Maliki,
the transportation minister.
It appeared that Maliki, whose party now dominated the country's
most moneyed and powerful ministries, was squeezing out the judge.
Vance Jochim, an American adviser to the C.P.I., urged the United
States to intervene. ``I kept bringing this up to the embassy,'' Jochim
says. ``Tell the Iraqis we won't give them something. Take away the
free gasoline in the Green Zone. But the embassy would never do that.''
That's because the State Department itself appeared to be backing
away from the judge. ``Judge Radhi went where angels feared to tread
and thought he would be protected, but he wasn't,'' explains Ali
Allawi, the Iraqi finance minister at the time. ``The United States
decided to abandon him once his gangbusting began to affect a large
number of people who were U.S. allies--all the ministers and top-level
Iraqi players. He was a very courageous man, but he went after too many
friends of the United States, and that got him in trouble.''
Allawi said that if Radhi was intent on cracking down on the
kingpins, ``he should have built some political support around him. But
he did not do that. He went after everyone at once, and that got him
bombed.''
Late in the spring of 2007, charges ranging from petty corruption
to complicity in murder were leveled against Radhi in criminal court.
Although the cases were ultimately dismissed, a radical Shiite cleric
named Sheik Sabah al-Saadi, who had political ties to Prime Minister
Maliki and oil-smuggling rings, pushed for a vote in Parliament to
impeach Radhi.
In July, the U.S. embassy circulated a sensitive but unclassified
report detailing the judge's alarming accounts of Iraqi corruption and
greed, giving credence to his tale of the country's meltdown. By late
summer, talk of his impeachment grew louder, and then the missile came
gunning for him.
At the end of August, Radhi headed to Washington for training at
the Justice Department. When he left for the airport, he kissed his
wife and told her that things would be okay, though he feared that they
would only get worse. As summer heat pummeled Baghdad, a missile struck
the house behind his, nearly killing his family.
On October 4, Radhi testified in front of the House Committee on
Oversight and Government Reform. Sitting at a long table, behind
microphones and bottles of water, he recounted the story of the crimes
his team had uncovered to members of the investigative committee. He
told them about the rampant corruption among U.S. allies, including the
Maliki government, and the theft of billions of dollars. He explained
that reconstruction had almost stopped, that the lost money was
propping up a terrorist movement that was ripping his country apart,
and that the current government could not be trusted. ``I have led my
life governed by these few words: `Law is above all. No one is above
the law,' '' he declared.
Comptroller General David Walker, Bowen, and Larry Butler, a deputy
assistant secretary of state, also testified. Although Butler refused
to discuss much of anything related to the judge's findings, Walker and
Bowen spoke openly about Iraq's corruption problem. During his
testimony, Bowen explained to the packed chamber that the loss of the
judge was ``a real blow to anticorruption efforts in Iraq. He was the
most prominent corruption enforcer.'' Christopher Griffith, a C.P.I.
adviser at the Zoo, echoed this during a prehearing interview, calling
the judge ``the most honest government-of-Iraq official that I have met
in my 21 months in the country.''
There was some antagonism in the room when Republican
representative Dan Burton, of Indiana, questioned Radhi's authenticity.
Referring to the ``Saddam Hussein regime,'' under which the judge
worked as a state lawyer, Burton wondered, ``How did you get those
jobs?'' The judge, who spoke calmly through several hours of testimony,
replied that he had been given the job based on his ``hard work'' but
that he'd refused to follow orders and then quit. He reminded Burton
that the Baath regime put him in prison and, as he put it, ``broke my
head.''
The testimony was a blow to General David Petraeus, the commander
of the multinational forces in Iraq, and Ryan Crocker, the U.S.
ambassador to Iraq, who had testified three weeks earlier about signs
of progress in the current military surge, which began in January 2007
with an infusion of 30,000 troops. Following Radhi's testimony, there
was a lot of talk in Washington about what the death of 3,800 U.S.
soldiers and the spending of $450 billion had actually accomplished in
Iraq. Alluding to the judge's testimony in a Los Angeles Times
editorial, Representative Henry Waxman, of California, the Democratic
chairman of the House Oversight Committee, wondered, ``Is Maliki's
corruption worth American lives?''
And even when the violence in Iraq began to ebb--which the judge
warns is only a strategic pause--the biggest question remained:
Considering Radhi's evidence, can we really trust the people in power
in Iraq?
When Secretary of State Condoleezza Rice was pressed in a
subsequent oversight hearing about Iraq, she evaded numerous questions
about the judge's testimony. For instance, she declined to comment on
the specific allegation that the prime minister had obstructed a probe
into a cousin's business dealings and claimed that she didn't know
about Maliki's secret immunity order, which had been circulated in
Rice's office weeks before her testimony, though she admitted that such
an order would be ``deeply concerning.''
Asylum for Radhi could come through in six weeks or six months. It
is hard to know, especially considering the order prohibiting State
Department employees from supporting the judge's efforts. In a further
twist, Bowen's Office of the Special Inspector General for Iraq
Reconstruction, one of the judge's most prominent supporters, is now
under investigation for overspending and mismanagement.
In the meantime, the judge and his family can't work or apply for
benefits and must rely on others for almost everything--money, food,
and transportation.
Shortly after the judge's testimony, the Iraqi government gave his
old job to a Maliki crony, a man alleged to be an oil mobster, who
immediately began an investigation into Radhi's work. Since then, many
say that the C.P.I. has fallen into disarray, with no clear mandate.
The judge, for now, remains a wanted man in Iraq.
I visit Radhi for the last time in early January, just after his
relocation to a new two-bedroom condominium. His daughter and son-in-
law also have their own place, right down the hall, as does his
security chief's family.
Today, his life has slowed down, almost to a glacial pace. He
spends stretches of the day watching a flat-screen TV, seeking news
from Iraq. He also reads from a dictionary to improve his English and
emails friends back home.
His new existence is hard on him. He doesn't enjoy depending on the
$2,000 a month donated to him and his family by friends. His life has
always been one of independence and dignity. As the months pass, a
creeping feeling of isolation swells in his mind, though he doesn't
complain. Sitting in his living room, which is outfitted with
secondhand furniture and items from Target, he mostly talks about how
grateful he is that his family got out of Iraq alive. Asked if he is
angry about anything that happened, he shakes his head. ``I believe I
did the right thing,'' he tells me.
Next to asylum, his biggest concern for the future is finding work.
When I speak to Ali Allawi, Iraq's former finance minister, he says
that this is exactly why the judge's case is tragic. A great and
courageous man in his home country, Radhi is now a foreigner whose
inability to speak English fluently renders his skills virtually
useless. ``It's sad,'' Allawi says. ``He could end up sweeping floors
on the late shift at a place like Wal-Mart.''
During one of my conversations with the judge, I can't resist
asking a dumb question: ``Did you ever think about stealing just a
little bit of money for yourself?''
He looks at me funny, like I've made a bad joke. There was so much
money floating around over there, I say. Wasn't he at all tempted to
reach into the pot and take a little for himself?
At first, he's not sure if he heard me correctly. So I ask him
again, and he sort of smiles before he becomes serious and says, ``The
temptation was there. Lots of money was offered to forget cases. But I
am not that man.''
This is the point. If he were that man, he would be somewhere else.
Baathists wouldn't have tortured him, and he wouldn't have been forced
out of his country. That man wouldn't be sitting on a donated brown
couch.
So what about the $18 billion? I wonder if any of it will be
recovered. The judge says no. It is lost. He says militias are still
active in many Iraqi ministries, which continue to receive millions of
dollars in U.S. taxpayer money.
As he sits here, he knows he still has many enemies. But he is safe
now, he believes. ``I don't think there will be rockets coming for
me.''
Later, we go to the mall. It's my last night with him. He takes me
on a tour of his daily haunts. When we exit, it is late and dark. As we
walk toward his apartment, through a nearly empty and silent parking
lot, a low-flying helicopter suddenly and violently disrupts the
suburban quiet.
For a moment, the judge's head angles skyward, his eyes opening
wider than I've seen them. ``That is the sound of Iraq,'' he says over
the noise. He nods happily.
I ask him, ``Do you ever miss it, Iraq?''
``Sometimes,'' he responds, as he watches the helicopter pass
overhead before it disappears, leaving silence again. ``I miss my
country. I miss my work of helping my country. But this is home now.''
Senator Leahy. Judge, we are delighted that you're here.
Please, go ahead with your statement.
STATEMENT OF JUDGE RADHI HAMZA aL-RADHI, FORMER
COMMISSIONER, COMMISSION ON PUBLIC
INTEGRITY, REPUBLIC OF IRAQ
Judge al-Radhi. I am Judge Radhi Hamza al-Radhi, former
commissioner of the Commission on Public Integrity, CPI,
Republic of Iraq.
It is an honor to be here and to thank the American people
who have sacrificed their lives and money in order to achieve
noble goal in Iraq of ending the suffering, and supporting
democracy, thank you thousands of times.
In my written testimony, I highlighted the reasons for the
Commission on Public Integrity, my appointment as a
Commissioner and my background and I summarized much of our
historic work.
Corruption in Iraq today is rampant across the Government,
costing tens of billions of dollars, and has infected virtually
every agency and ministry, including some of the most powerful
officials.
Corruption has been part of the failure of the Government
of Iraq to control the militia that control parts of
government. Unfortunately, today in Iraq, corruption has
infected our biggest source of money, oil. Corruption has
infected those who have the guns to restore law and order. And
corruption has infected the very government officials who
promise a new, better Iraq. Corruption keeps millions of Iraqis
in inhumane living conditions, and it funds the killing of
United States and Iraqi forces.
I have lived my life governed by these few words: ``Law is
above all, no one is above the law.'' This guiding principle
should apply to all government departments and ministries,
neutrally, fully, and without regard to sect, ethnicity, party
affiliation, tribe or religion.
Unfortunately, we have been met with major problems. Since
the establishment of the CPI, more than 31 employees have been
assassinated, as well as at least an additional 12 family
members.
In a number of cases, my staff and their relatives have
been kidnapped or detained and tortured prior to being killed.
Many of these people were gunned down at close range. This
includes my staff member Mohanned Abd Salif, who was gunned
down with his 7-month pregnant wife.
One of my staff members was protected by my security staff,
but his father was kidnapped because his son worked at CPI.
This staff member's father was 80 years old. When his dead body
was found, a power drill had been used to drill his body with
holes.
My head of our Mosul branch was killed by a suicide bomber
in his office. Two weeks ago, one of my attorneys was shot and
he is now fighting for his life. Just Friday, the body of one
of my investigators was found in a Baghdad trash dump.
These are just a few examples--there are many more. And,
personally, my family's home has been attacked by missiles, and
I by both missiles and snipers.
Justice loses, and corruption wins. Further, the prime
minister and his government have refused to recognize the
independence of the commission to appoint qualified people in
the ministries, and foster honesty. Worse, the government has
formally blocked actions against the presidency, the council of
ministers and former and current ministers, used the law to
empower ministries and the prime minister to stop specific
corruption cases, and promoted sectarian agendas. Importantly,
it has been impossible for CPI to safely and effectively
investigate oil corruption where Sunni and Shia militias have
control of the metering, transport, and distribution of Iraqi
oil. This has resulted in the ministry of oil effectively
financing terrorism through these militias.
I am afraid that the commission itself will now be used as
a tool of corruption. I fear that the bravest and honest
members of my CPI staff in Iraq are now facing a purge and
being pressured into silence. My heart, my prayers are with
them.
Let me share with you my situation. My case for asylum is
currently pending. Just as my family's safety was at risk in
Iraq, because of my work, now my words, including my words to
you today, may add to my risk. Following my testimony before
the U.S. House, the Iraqi prime minister himself threatened me
with prosecution.
I come before you with faith and confidence that any
service to my country and to all like you who stand against
corruption will not cause any punishment in the United States.
For here in America, without protection or plan, I am but a
feather in the wind.
But as a Judge and crime fighter, I know that even a
feather can be stronger than greed and violence.
Thank you so much.
[The statement follows:]
Prepared Statement of Judge Radhi Hamza al-Radhi
To Our Distinguished Chairman and Respected Members of the United
States Senate, Ladies and Gentlemen:
GREETINGS
I am Judge Radhi Hamza al-Radhi, former Commissioner of the
Commission on Public Integrity (``CPI''), Republic of Iraq. It is an
honor to be here among you today to discuss with you the most important
problems facing Iraq after the recent change. The change which led the
United States and its allies in Iraq to eliminate the highest
dictatorship in the world, that of Saddam Hussein. The dictatorship he
built on the corpses, money and the suffering of Iraqis. I want to
thank the American people who have sacrificed their life and money in
order to achieve noble goals that are worthy of respect. The goal for
Iraqi's rights, for the ending of their suffering and for the spread of
democracy throughout Iraq, which is the key to progress and growth.
Thank you thousands of times to everyone who participated and
sacrificed for these noble goals.
REASONS FOR AN IRAQI COMMISSION ON PUBLIC INTEGRITY
Iraq is a rich country; however its infrastructure is essentially
nonexistent and much work needs to be done.
Building democracy requires transparency from the Government in
order for that government to manage socio-economic matters.
The Iraqi people are smart and hard working and are looking for
progress. For that they deserve a fair and honest government.
Transparency and the presence of an effective Commission on Public
Integrity as well as The Board of Supreme Audit and the Inspectors
General will encourage foreign investment in Iraq.
The existence of these bodies dedicated to public oversight,
especially CPI, would protect funds, and these funds would be devoted
to public services for Iraqi people, leading to welfare and prosperity
for them. This in turn would bring internal stability and would have
positive impacts on regional and international stability.
The legal authorities for these anticorruption organizations are
derived from the Coalition of Provisional Authorities orders including
Order No. (55) establishing the Commission on Public Integrity, Order
No. (57) establishing the office of Inspector General in each ministry
and Order No. (77) Continuing the Board of Supreme Audit which was
established in 1927.
APPOINTMENT AS COMMISSIONER
For these important reasons Iraq established the Commission on
Public Integrity. I was honored to be named the Commissioner of CPI.
The Iraqi Judicial Council selected three candidates for this position.
Ambassador Bremer chose me to lead CPI because I graduated from the
Judicial Institute in 1979 and I have 39 years of experience in legal
affairs. Additionally, I was director of funds for Iraqi orphans during
the Iraq-Iran war. While I consider myself an honest technocrat and
judge, some have speculated that other credentials included the fact
that I am Shia and that I was jailed and tortured by Saddam Hussein for
refusing to join the Baath Party. According to the law, future
commissioners will be selected from three candidates chosen from the
Higher Juridical Council. The Prime Minister must pick one of these
candidates and the Parliament must confirm this candidate. A
Commissioner can only be fired for cause by a two-thirds vote of the
Parliament. Therefore the responsibility of this power and the need for
integrity in this office is great.
OPERATION OF CPI
This Commission on Public Integrity started in June 2004. American
experts have had a great impact in providing advice and guidance to
this magnificent Commission. The American experts helped us by
establishing training courses from day one until now. They have spent a
great amount time and of money to hold this Commission accountable to
disseminate and promote the ethics of integrity for my country.
The functioning of CPI had been outstanding even under very
difficult circumstances. It was able to build several important
departments or directorates within 3 years, such as:
--The Directorate General of Prevention and Transparency, which
prepared a Code of Conduct for all Iraqi government employees
and has also prepared a Financial Disclosure program to
disclose the financial interests of senior employees such as
the general director and superior officers.
--The Directorate General for Non-Governmental Organization
relations, which contacted most NGOs in Iraq in order to
motivate them to achieve their objectives and solve their
problems honestly. Some of these organizations have played a
significant role in my country to develop morals and contribute
to the reconstruction of Iraq and also to put pressure on the
Government to provide better services to the Iraqi people.
--The Directorate General for Education, which worked to educate
government employees on their duties and responsibilities,
including promoting the Code of Conduct, educating Iraqi public
on their rights and responsibilities as well as promoting the
Hotline. In conjunction with the Ministry of Education, it
worked to develop a curriculum for Iraqi school children to
promote public service and ethics. It had a public affairs
department to work with international and domestic news media
organizations.
In addition, the Directorate General for Investigations
investigated corruption in government departments and ministries.
RESULTS
During these three years, there have been many results produced for
an organization so young and new to my country. I will briefly expand
on many of the areas above such as our work with educating the
government ministries in the Code of Conduct, work on Financial
Disclosure, the establishment of an INTERPOL liaison office, printing
and distribution of educational materials for children, a Civil Service
Reform conference and NGO conference, Investigation Department has
expanded with the establishment of a Forensics Division, an
Investigative Research Division, a Witness Protection Program and
facilities, the establishment of a Statistics Division in the
Administration Department which promulgates annual reports to the Iraqi
government and the Iraqi people on the activities of CPI, the initial
establishment of a Public Integrity and Ethics Institute to
professionalize the civil service and provide training for CPI, the
Board of Supreme Audit and the Inspectors General, the establishment of
an anticorruption Hotline to receive calls from Iraqi citizens for the
first time in Iraq's history, the printing and distribution Hotline
promotional materials and other CPI materials.
For the first time, perhaps in Middle East history, a government
minister was arrested, in accordance with the Rule of Law in a non-
political, non-sectarian manner, on corruption charges. This case came
early in our investigation process, before the full force of opposition
to CPI was organized. Unfortunately, of the 3,000 corruption cases we
successfully investigated and forwarded to the courts for adjudication,
according to my records, only 241 cases to date were adjudicated with
guilty sentences ranging between six months and one hundred and twenty
years. However, the cost of corruption that my Commission has uncovered
so far across all ministries in Iraq has been estimated to be as high
as $18 billion.
Broken down by Iraqi government ministry, that $18 billion was
distributed in this way:
------------------------------------------------------------------------
Ministry Total Money
------------------------------------------------------------------------
Defense.............................................. $5,000,000,000
Trade................................................ 3,000,000,000
Electricity.......................................... 3,000,000,000
Transportation....................................... 2,000,000,000
Health............................................... 2,000,000,000
Interior............................................. 1,000,000,000
Communications....................................... 1,000,000,000
Housing.............................................. 1,000,000,000
Finance.............................................. 500,000,000
Oil.................................................. 500,000,000
------------------------------------------------------------------------
This data represents my estimate based only on cases before the
courts as of late 2007. It does not break the numbers down by U.S. tax
dollars or Iraqi dinar. While U.S. tax dollars may be of greater
interest to this Committee, such a break down is very hard for me to
determine. It also does not distinguish between degree of crime such as
funds stolen and funds poorly spent due to mismanagement. It does not
represent the cases that never made it to the courts or cases dismissed
at the court, some of which were dismissed after judges were threatened
or assassinated. In particular, it does not reflect the full extent of
oil corruption, including metering fraud, theft, and smuggling. My
small group of heroic investigators did not have the capacity to
investigate all of the oil smuggling. In addition to theft by militias
and government employees, I had received evidence of widespread
smuggling including the reestablishment of the smuggling routes that
Saddam Hussein's regime used to circumvent United Nations resolutions
including the Oil for Food Program.
In addition, based on the end of year 2005 data available to me, I
have attached for the Committee six graphs detailing how corruption was
reported, our CPI caseload by ministry, the percentage of corruption
cases by ministry, the disposition of cases, the corruption cases by
kind and the demographics of the top 35 senior indicted officials.
GUIDING PRINCIPLE
I have led my life governed by these few words, ``Law is above all,
no one is above the law.'' This guiding principle applies to all
government departments and ministries neutrally, fully and without
regard to sect, ethnicity, party affiliation, tribe or religion.
MAIN OBSTACLES
The main obstacles to our work are:
--Violence, intimidation and personal attacks. Since the
establishment of the Commission of Public Integrity, more than
31 employees have been assassinated as well as at least an
additional 12 family members. In a number of cases, my staff
and their relatives have been kidnapped or detained and
tortured prior to being killed. Many of these people were
gunned down at close range. This includes my staff member
Mohanned Abd Salif who was gunned down on the street with his
seven month pregnant wife. My Security Chief on my staff was
repeatedly threatened with death, and his father was recently
kidnapped and killed because of his son's work at CPI. His body
was found hung from a meat hook. One of my staff members who
performed clerical duties was protected by my security staff,
but his father was kidnapped because his son worked at CPI.
This staff member's father was 80 years old. When his dead body
was found, a power drill had been used to drill his body with
holes. My head of our Mosul branch was killed by a suicide
bomber in his office. Two weeks ago one of my attorneys was
shot in the neck and in the chest, and is now fighting for his
life. Just Friday the body of one of my investigators was found
in a Baghdad trash dump. These are just a few examples, there
are many more which were directed to my staff, me and our
families. Personally, for example, my family's home has been
repeatedly attacked by missiles, virtually destroying all
around me. I have had a sniper bullet striking near me as I was
outside my office. We know the corrupt will stop at nothing.
They are so corrupt that they will attack their accusers and
their families with both guns and meat hooks as well as counter
charges of corruption. So that the accusers become the accused
in a deadly game that all of us have witnessed.
--The Prime Minister and his government have refused to recognize the
independence of the Commission on Public Integrity, even though
the Iraqi Constitution sets forth the independence of CPI in
point No. 102, 103.
--The interference of the Iraqi Government in Commission matters;
officials and agencies in the Iraqi Government sent us formal
letters forbidding us to take any action against the
presidency, council of ministries and former and current
ministers.
--The use of Article 136, Section B of the Criminal Procedures Law
No. 23 of 1971, which prevented us from transmitting many
corrupt employees' cases to court until we received permission
from the minister of the agency we were investigating. This
presented obvious problems. The same thing applied to corrupt
ministers: We could not take any action until we could get the
permission of the Prime Minister. Based on that, many
corruption cases have been closed by the ministers and the
Prime Minister, at an estimated worth of one hundred billion
Iraqi dinar. In addition to the obstacles of Article 136, there
was pressure put on the judiciary not to prosecute cases on
behalf of individuals. Many of Iraq's judges live in fear of
torture and assassination of themselves and their family
members if they adjudicate cases of senior government
officials.
--The Executive, Legislative and Judicial branches of the Iraqi
Government did not work as required to promote the Rule of Law
and fight corruption in Iraq. The executive branch often
protected corrupt employees and actively attempted to eradicate
or control the Commission. The legislative branch did not
revise the anticorruption laws. The judiciary branch often
succumbed to pressure and did not adjudicate corruption cases.
--The government did not appoint leaders, particularly ministers and
Inspectors General that would fight corruption within
ministries.
--In order to promote sectarian agendas, professional technocrats who
were qualified to perform vital government services and
administration were not appointed.
--Importantly, it has been impossible for the Commission on Public
Integrity to safely and adequately investigate oil corruption
where Sunni and Shia militias have control of the metering,
transport and distribution of Iraqi oil. This has resulted in
the Ministry of Oil effectively financing terrorism through
these militias.
--Additionally, my small group of investigators investigated the
largest number of cases in the Ministry of Defense and Ministry
of Interior. As you might imagine, investigating the security
forces of Iraq is very difficult, but necessary for an Iraqi
future of transparency and the Rule of Law.
THE FUTURE
As the committee can appreciate, this is not an easy situation to
resolve and it will not be resolved quickly or completely. Obviously
the Government of Iraq, with the help of the U.S. government, needs to
resolve the specific obstacles that I have listed above.
Further, the people who were dedicated and honest under my tenure
at the Commission on Public Integrity need to be protected and
supported and those who infiltrated the Commission for sectarian
political reasons must be re-staffed with people who are truly
committed to its mission and its guiding principle that ``No one is
above the law.'' If this does not happen, I am afraid that the
Commission itself can be used as a tool of oppression as well as a tool
of the corrupt to further corruption, sectarianism and an illegal
consolidation of power through targeted purges of political enemies.
Finally, the people of Iraq must see advances by the Iraqi
Government on the political level, on economic reconstruction, on basic
services, amenities and infrastructure, and on the rule of law. The
Government of Iraq will fail and the Iraqi and American people will
continue to suffer if the militias and militia controlled parts of the
Iraqi government, including the security forces, are not brought under
control. Sectarian corruption has eroded the work of the American and
Iraqi people to build a better future for Iraq and the region.
CONCLUSION
Let me share with you my situation--at the least to the extent I am
able right now. I and a staff delegation from the Commission on Public
Integrity of the Republic of Iraq came to the United States on August
24, 2007, for forensics and evidence training with the U.S. Department
of Justice. During our visit, threats against me and my family in Iraq
escalated to a point where, together with the immense pressure of the
last two years from the highest levels of the Iraqi Government,
regretfully and painfully caused me to seek appropriate U.S. Government
protection for my family. My family's safety became paramount.
My case for asylum was filed October 3, 2007, and is currently
pending. Just as my family's safety was at risk in Iraq because of my
work, now my words, including my words to you today, may add to my
risk. Following my testimony before the United States House on October
4, 2007, the Iraqi Prime Minister himself threatened me with
prosecution. Further, I am told that my former agency now has been
directed to simply pursue charges against me and my staff and ignore
the corruption in the Iraqi Government.
My staff and their families, I and my family, know too well that
honesty, democracy and justice are not purchased without a price. While
those ideals are praised loudly, the people who fight for them daily--
the law enforcers, the anti-corruption fighters, the whistleblowers and
their advocates--are too often met with violence, persecution, false
allegations, and indifference. I have the greatest respect for the
work, courage and sacrifice that the American people have made on
behalf of Iraq. I come before you with faith and confidence that my
service to my country and to all like you who stand against corruption
will not cause any retaliation in the United States. This is not the
case in Iraq today, where I and my Commission have been politically,
legally, financially and physically attacked.
Now, here in America, without protection or plan, I am but a
feather in the wind. I am a judge and a crime fighter. I don't know
politics. I worked my life for my country. I love and I very much miss
my country, but if I return, I will be killed. I look forward to the
day when my status is secure and my family and I can begin to rebuild
our life.
I see my work in uncovering billions of dollars of corruption as
promoting democracy, public integrity and the rule of law in Iraq and
look forward to working with all who will aid in this effort.
Thank you for your attention and patience, and please feel free to
ask any questions.
Senator Leahy. Judge, thank you very much. That was some of
the most moving testimony that we've had in this room, and I
appreciate that a great deal.
You've reported about the 3,000 pending corruption
investigations in Iraq, and again, I applaud your courage in
being willing to go forward with those investigations and all
of us regret so very, very much the loss of lives of those who
worked with you, and their family members.
You said those cases involved more than $18 billion lost to
fraud. How much of that $18 billion, approximately, would you
estimate came from the United States Government?
Judge al-Radhi. Thank you, Mr. Chairman. I repeat in
Arabic, because there is so much information, you know.
Senator Leahy. Go ahead.
Judge al-Radhi [spoken in Arabic]. With respect to monies
that enter Iraq, whether from revenues from oil, or from United
States sources or other foreign monies, we consider these
monies to be Iraqi monies, and we do control--provide control,
oversight on these monies.
If the one who is playing with these monies is an Iraqi
citizen, we do prosecute that Iraqi citizen and we send him for
trial in whatever courts he is due.
And if it's a foreign person, we refer him then to Mr.
Bowen's committee, because the law under Ambassador Bremer
prevented us from prosecuting a non-Iraqi citizen.
And our investigations since the outset, until the day I
arrived in the United States has been related to 3,000 cases,
accounting for $18 billion, distributed among the various
ministries. These cases are not being actively pursued in front
of the relevant tribunals or courts. And this, from the first,
undermines the oversight entities in Iraq.
Senator Leahy. Do you know if any of the money that came
from the United States that was stolen has now been recovered
and returned to the United States?
Judge al-Radhi [spoken in Arabic]. It entered into the
pockets of the corrupt.
Senator Leahy. Okay, that's what I thought. It's obvious to
me, Judge, that you cannot continue your--or that nobody could
continue the work you're doing, unless they were given complete
and total security. Am I correct in that?
Judge al-Radhi [spoken in Arabic]. Yes, sir, you are
correct in that. I am surprised by what was put forth by the
representative of DOD minutes ago, that he had requested the
increase of the number of U.S. investigators. In Iraq we have
three main oversight entities.
The first one, the first entity is the commission on public
integrity, that has the power to refer to courts.
And the second one, the board of supreme audit, that
oversees the financial issues of the ministries.
And the third body being the inspector general offices in
each of the ministries in Iraq.
Why were these three entities weakened? Why were these
three entities weakened when they were undertaking good
performance?
Senator Leahy. Thank you.
Senator Cochran.
Senator Cochran. Thank you very much for appearing before
our hearing, we appreciate your courage.
Senator Leahy. If you could just hold for just one moment,
Senator Cochran. I'm going to go to another meeting.
Senator Dorgan who began all of this will fill in for me.
But, I must say--I'm going to set the clock again for Senator
Cochran--but I must say, Judge, I admire your courage, and I
admire the courage of those who work with you. I think they
want to see a better Iraq, and someday let us hope there will
be. Thank you.
Senator Cochran.
Judge al-Radhi. Thank you, Mr. Senator.
Senator Cochran. Judge, you heard the testimony of the
witnesses, I assume, who preceded you at this hearing today
talk about the effort that's being made through agencies of our
Government, to be sure that funds that are appropriated and
spent for Iraqi freedom and reconstruction are handled in ways
that are legal, and for which purposes have been approved by
the countries that are donating, and making available these
resources.
My question--one question that comes to my mind is that, do
you know of any countries other than the United States who are
trying to be helpful to Iraq, who are making any efforts to
ensure that your anticorruption efforts, the Iraqi Government's
efforts to deal with corruption are being supported and
strengthened. Is anybody helping you, other than the United
States?
Judge al-Radhi [spoken in Arabic]. Thank you for your
praise for my work. And I came here to thank the Americans for
their great assistance to the Iraqis. However, Your Excellency,
you have heard about the great mistakes that have been
committed, and about the large amounts of money that have been
wasted.
Sir, the infrastructure in Iraq is equal to zero. You heard
in previous testimony about the increase in usable water. I
wonder, is there no regular, usable water in Iraq for us to
speak about?
Half of Baghdad, and I'm talking here about the region of
Rasalfi, and it is a populous--a large area accounting for
about 4 to 5 million people living in it--lives in the summer
with no water. If there's no water, how can we speak about
increases in usable water? This doesn't even account for the
rural areas or remote areas that are located away from Baghdad,
and their lack of water.
If you visited Baghdad, you would see for yourself that
there is no water, no electricity, no sewage systems, no
streets--everything is destroyed. If this is the case in
Baghdad, then, what would be the case of other provinces?
The problem is that this government has failed in
performing, in doing its duties for many reasons. One of these
reasons is that this government has relied on blocs of
sectarian cultures, if you will. It has distributed the
ministries according to the various sects and groupings.
Instead of employing the help of technocrats, they named to the
various critical posts, politicians from these various blocs,
political blocs. And you may be surprised if I tell you that
many of these appointees have false degrees, fake college
degrees, or bought degrees. And those who are governing Iraq
today are doing it only to benefit their blocs, their various
blocs.
Senator Cochran. Thank you very much.
I wonder, in your experience, observing the U.S. efforts to
help reconstruct and rebuild and recover, do you notice the
same kind of corruption among contractors who are actually
given money directly from the United States to U.S.-owned
firms, and U.S.-operated firms--do you see any evidence of
corrupt practices among those companies, or are you talking
about strictly those that are being supported by the Iraqi
regime.
Judge al-Radhi [spoken in Arabic]. Corruption is
corruption. And the various entities have failed in undertaking
the reconstruction process. And the fraudulent contracts into
which they entered are all contracts which violate the laws.
The contract is usually written by a crook who manipulates
the contract requirements. For example, the former defense
minister, who was originally an instructor or a teacher, went
to Pakistan and Poland and entered into contracts, and doesn't
know anything about the technical aspects and requirements of
contracts, but monies were paid for a contract amounting to
$113 million and another contract for the same amount, $113
million, and a third contract amounting to $167 million--all to
purchase airplanes for Iraq. The monies were paid to the
foreign companies, and the aircrafts were not delivered to
Iraq.
When we brought that case in front of the courts, senior
officials from the Defense Ministry of Iraq were witnesses. The
crooks also entered in contracts to acquire ambulances, but
these ambulances were not delivered either.
Nothwithstanding these problems, still in 2007, the
Ministry of Defense in Iraq sent us a letter that the ministry
of defense does not have a technical committee to inspect the
weapons that are supposed to be received. So, no one takes a
look at how many or quality of equipment comes to Iraq, and
what does come is not inspected. And this is only a simple
example.
Senator Cochran. Thank you. Thank you very much.
Senator, my time is expired.
Senator Dorgan [presiding]. Mr. al-Radhi, Judge al-Radhi,
you indicated that you uncovered $18 billion worth of misspent
funds in Iraq. Is it true that the majority of those funds came
from the United States Government?
Judge al-Radhi [spoken in Arabic]. Yes. That is correct,
because most of these monies came from the DOD, so it is
correct.
Senator Dorgan. Judge al-Radhi, you indicated that some of
the same money that this committee, this Appropriations
Committee, has appropriated to help rebuild Iraq, had been
funneled to the insurgents and the militias that have killed
American soldiers. How does that funneling of money happen, so
that you believe money appropriated by this committee ends up
in the hands of insurgents with which to kill American
soldiers?
Judge al-Radhi [spoken in Arabic]. When the ministry of
defense buys not usable weapons, but bad weapons, how can the
Iraqi army defend itself with such weapons?
Ms. Behrans. And sir, the interpreter, for the record,
would like to tell you that the mention, the previous mention
about the ministry of defense, relates to ministry of defense
and not DOD. The interpreter got an explanation.
Senator Dorgan. I understand.
Ms. Behrans. Thank you, sir.
Judge al-Radhi [spoken in Arabic]. This is on one hand. The
other aspect is that the oil is being smuggled in Beiji from
the Sunni militias and in Basrah, through the Shiite militias.
And, of course, they will use this to purchase weapons. And, of
course, these monies will target the killing of Iraqis and
Americans.
Senator Dorgan. Judge al-Radhi, when you uncovered
information about waste and fraud and abuse, did you share it
with U.S. officials in Iraq, and if so, what was their
response?
Judge al-Radhi [spoken in Arabic]. Yes, we did share a lot
with the U.S. officials about such discussions, because we--
there is a U.S. representative or technical expert in each of
the ministries. And I have wished for those experts to tell us
if these ministers were corrupt, or to try to give us advice to
end the corruption as we uncovered it.
However, the opposite happened. One of those experts came
to me and did the opposite, he tried to defend the corrupt
Iraqi minister. Likewise, in the ministry of reconstruction and
population, this expert came and defended those corrupt within
the ministry. However, I must not generalize here, because some
of the experts were very good people. However, this is what
happened in some instances.
Senator Dorgan. But you are saying in your testimony that
your personal knowledge is that some U.S. officials or advisors
were given evidence of corruption by you, and they did not take
action, or they actually defended the corruption, is that your
testimony?
Judge al-Radhi [spoken in Arabic]. Yes, correct.
Senator Dorgan. And is that because they didn't want to
offend any of the ministries in the Iraqi Government, as they
were trying to put ministries together?
Judge al-Radhi [spoken in Arabic]. Many reasons. I cannot
really define exactly, and precisely, the motive. However, some
of them are corrupt, some of them wanted to steal money and to
benefit from the reconstruction, and some of them had
procedures that did not go along with Iraqi laws.
Senator Dorgan. Judge al-Radhi, my understanding is that
you were given $11 million cash to start the commission on
public integrity? You were told that the resources to start
this commission on public integrity would be made available,
you showed up, and they were made available in cash? You signed
for the cash. Apparently you had a couple of people helping you
load it into a car, took it home, had $11 million in cash in
your home overnight, and then deposited it in a bank the next
morning. My understanding is that $11 million disappeared while
in a bank account. Can you describe that circumstance to us?
And this, incidentally, was $11 million of U.S. taxpayers'
money.
Judge al-Radhi [spoken in Arabic]. $11 million, and this
happened toward the end of the time when Ambassador Bremer was
there.
Advisors and experts told the Ambassador to provide this
money to the commission on public integrity to create an
academy that would enable the creation of studying the ethics
and integrity. And indeed, I went to this financial entity, a
U.S. financial entity when they were in Iraq and I received a
check for over $11 million. And I signed it with my name,
because I was the head of the CPI in Iraq.
And in the same building of that entity, I went to the
cashier's office, and I signed for the check and he paid the
money to me. And I had four to five bodyguards, we transferred
the amount, the monies, in a Suburban car, and this happened in
the afternoon of that day.
So, I placed it at the directorate, at my office, and I
slept in front of the door, that same night, along with the
protection that was provided to me.
The next morning, early in the morning, we took the monies
to the bank, and it was recorded under the name of our
directorate in the Rafidain Bank.
After a lapse of time, the council of ministers issued an
order and they retrieved all the monies in hard currency--
foreign currency--from all the directorates, and one of these
directorates was ours.
We told them, if you don't approve of the hard currency,
give us instead of this foreign money, Iraqi currency for the
academy project. We were answered with the following answer:
that the minister of finance did not approve or give consent to
give us the money. And I have a letter here, showing that they
received the money--away from the CPI, and receipts that the
money was received by the Central Bank, and by the ministry of
finance.
[The information follows:]
In the Name of God the most Gracious, Most Merciful
Republic of Iraq
Ministry of Finance
Office: Accounting
Section: Cashing
No: 17/53
AH date:3286
CE date: 19/2/2006
To: Commission of Public Integrity /Financial Office
Subject: A Client Account
With reference to your book No: 193 of 6/2/2006 we confirm that the
amount of $11,988.871/-eleven million, nine hundred and eighty eight
thousand, and eight hundred and seventy one dollars has been in our
account since 30/1/2005 according to the Central Bank notice No: 34548
enclosed.
With Appreciation
Muhib Abdul Razak Abdul Aziz,
General Director of the Accounting Office.
19/2/2006
CC to:
--Accounting Office/none Central System Office
--Accounting Office/cashing.
--Out put Section
certification of translation competence
I, Tona Rashad, hereby certify that I am fluent in both written and
oral English and the Arabic languages, and that I have translated the
foregoing documents from Arabic to English to the best of my skill and
ability and that the translation is a true, accurate translation of the
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
______
In the Name of God the most Gracious, Most Merciful
Republic of Iraq
Ministry of Finance
Office: Accounting
Section: Vouchering
No: 902/21/1
AH date:13074
CE date: 21/9/2005
To: Al Rafedein Bank/Accounting Section
Subject: Closing Foreign Currency Accounts
According to your book No. 2108 of 2/7/2005 where you request the
approval to exclude the Commission of Public Integrity from the
procedures to close foreign currency accounts.
We would like to inform you that we did not get the Minister's
approval for that exclusion and we should depend working on item No.
3920 of 5/4/2005 to close all open accounts in dollars for all (Al
Rafedein) Bank Offices.
With appreciation...
Fuad Abdullah,
Ministry of Finance Agent.
19/9/2005
CC to:
--Commission of Public Integrity . . . to be informed . . . with
appreciation
--Office of Accounting/cashing
certification of translation competence
I, Tona Rashad, hereby certify that I am fluent in both written and
oral English and the Arabic languages, and that I have translated the
foregoing documents from Arabic to English to the best of my skill and
ability and that the translation is a true, accurate translation of the
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
______
REPUBLIC OF IRAQ
PRIME MINISTER'S OFFICE
Ref.: m.r.n/s/7/914
Date: 04/01/2007
(Personal, Confidential and very Urgent)
To/The General Commission of Integrity
8569
743
Subject/Referral
Peace, mercy and blessings of Allah be upon you!
It has been decided not to refer any of the following parties to
the court until approval of His Excellency, the Prime Minister, is
obtained:
1. Presidential office
2. Council of Ministers
3. Current and previous ministers
With appreciation
Signed by Dr. Tariq Najim Abdullah,
Prime Minister's Office Manager.
04/01/2007
A copy to/
--Presidential office-Diwan/Please be informed . . . With
appreciation
--Both Prime Minister Deputies/Please be informed . . . With
appreciation
--Ministers' Cabinet Secretary General's Office/Please be informed .
. . With appreciation
--Organizing unit
--Follow up
--Issued correspondence file
certification of translation competence
I, Tona Rashad, hereby certify that I am fluent in both written and
oral English and the Arabic languages, and that I have translated the
foregoing documents from Arabic to English to the best of my skill and
ability and that the translation is a true, accurate translation of the
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
______
REPUBLIC OF IRAQ
PRIME MINISTER'S OFFICE
Ref.: m.r.n/s/7/923
Date: 04/02/2007
(Personal, Confidential and very Urgent)
To/The General Commission of Integrity
[Stamp of the General Commission of Integrity]
8568
743
Subject/Directive
[Stamp of the Investigations office]
Ref.: 6348
Date: 04/12/2007
Peace, mercy and blessings of Allah be upon you!
Your letter ref. no. s/78 dated 03/01/2007.
His Excellency, the Prime Minister, directed to emphasize our
attached letter with ref. no. m.r.n./s/7/914 dated 04/01/2007, which
directs to stop the pursuit of previous and current ministers, unless
done through the Prime Minister's office, and our attached letter no.
m.r.n./s/7/282 dated 02/04/2007, which refers to the authorization from
the Prime Minister's office for ownership.
With appreciation
Attachments:
--The two above mentioned letters from the Prime Minister's Office
Signed by Prime Minister Nori Kamil Al-Maliki's office
Dr. Tariq Najim Abdullah,
Prime Minister's Office Manager,
04/02/2007
A copy to/
--Organizing unit
--Follow up
______
Republic of Iraq
Office of the Prime Minister
Number: M. R. N / S / 7 / 282
Date: 4/2/2007
[Stamp: Office of the Deputy Chairman of the Commission; Incoming;
Number 686; Date 7/2/2007]
[Stamp: Commission of Public Integrity; (illegible) Iraq; (illegible)
226; (illegible) 7 2 7]
(Private and Confidential)
To: Commission of Public Integrity
Re: Transfer of Ownership
May the Peace, Mercy and Blessings of God be upon you.
His Excellency, the Prime Minister, has given the order that the
Office of the Prime Minister has no objection to the procedures in
place for the transfer of ownership of the residential housing owned by
the Iraqi Ports Company, among which is the house registered in the
name of Mr. Salam Audah Faleh, the former Minister of Transportation,
on the basis of the acceptance of the General Secretariat of the
Council of Ministers, as stated in its letter numbered Qaf/2/1/25/13796
of 20/9/2005 and pursuant to which transfer of ownership operations
were properly conducted.
Regards.
Enclosures:
--Aforementioned Letter of General Secretariat of the Council of
Ministers
--Record of Sale (Transfer of Ownership) of house number 190 Ajnadin
Street
Office of Nouri Kamel Al-Maliki,
Prime Minister.
Dr. Tarek Nijm Abdallah,
Director of the Office of the Prime Minister.
4/2/2007
Our Office/Urgent
To be referred to the Basra Branch (private and confidential).
A copy thereof is to be kept with us along with the enclosures.
(signature)
CC to:
--Ministry of Transportation--Office of the Minister For your
information. Regards.
--General Secretariat of the Council of Ministers--Office of the
Secretary/Your above letter. Regards.
--Honorable Mr. Salam Audah Faleh/Former Minister of Transportation/
For your information. Regards.
--Outgoing letters file.
To: Office of the Judge
______
NO: Q/2/1/39/14708
Date: 3/9/2007
Ministries/Minster Office
Offices not related to Ministry/Office of Chief of Unite
Subject/Commission of Public Integrity
The Commission on Public Integrity's area of expertise is limited
according to Order 55 of 2004 including the following:
1. Investigation of corruption cases and it has to be exposed to
the Investigate Judge.
2. Refer all information related to possible violations of the code
of conduct where either the violating employee or the one they suspect
in him to the Minster, the Chief of Office not related to the Ministry
to the Inspector General.
3. Publish structured lists to have officials reveal their
financial assess.
4. Propose legislation related to anti corruption.
5. As a result, the Commission cannot request information, files or
any other thing, yet they can investigate the Management and Corruption
after it happens and when evidences presented against the accused. It
could also refer all the received information about the information
related to possible violations of the code of conduct to the Minister,
the Chief of Office not related to the Ministry or the Inspector
General where either the violating employee or the one they suspect for
purposes of making an Investigation. And it doesn't have the right to
stop or prevent it from happening if it related to the Ministry under
investigation or the Office of the Inspector General.
We hope observance . . . with appreciation
Dr. Farhad Nema Allah Hussein,
Secretarial General of the Ministries Council.
30/8/2007
CC:
--Prim Minister Office/to be informed . . . with appreciation.
--Office of Secretarial General of the Ministries Council/to be
informed . . . with appreciation.
--The Commotion of Public Integrity/Chief of Office/according to your
book numbered T/detective/548//2007/4888 in 14/8/2007 for
mentioned purpose . . . with appreciation.
CERTIFICATION OF TRANSLATION COMPETENCE
I, Tona Rashad, hereby certify that I am fluent in both written and
oral English and the Arabic languages, and that I have translated the
foregoing documents from Arabic to English to the best of my skill and
ability and that the translation is a true, accurate translation of the
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
Senator Dorgan. Judge al-Radhi, that was $11 million of
American taxpayer's money--do you have any notion of how it was
spent?
Judge al-Radhi [spoken in Arabic]. The council of ministers
took that money, and it was spent in a waste--in a public money
waste fashion.
Senator Dorgan. My understanding, Judge al-Radhi, is that
the American money that was given in large quantities to all of
the ministries, was something called capacity building money.
And you have indicated that, because virtually all of the
ministries have been infiltrated by some of the militia, that
so-called ``capacity building'' funding from the United States
is the funding that has ended up, and been diverted into the
militia's hands, is that correct?
Judge al-Radhi [spoken in Arabic]. That is correct because
the ministries were distributed according to the various
political parties.
For instance, the ministry of health portfolio was given to
one of the Shiite parties, so if there was an ill person from a
different sect, ill and residing in a hospital, staying in a
hospital, that ill person would be kidnapped from that
hospital.
And this led to the loss of monies through such practices.
The officer himself would sell his gun. And just as you have
heard from the previous panel that testified minutes ago, such
weapon have reached the frontier of Turkey.
And this is one of the reasons that undermined and weakened
our institution, because we did track down the corrupt and we
did give a diagnosis for corruption in the country, and for the
first time, our institution, the CPI, for the first time in the
Middle East, it would refer ministers to the courts for
prosecution for nonpolitical reasons, but for the reasons of
corruption.
Senator Dorgan. Judge al-Radhi, I want to hold up a chart
that has the copy of a letter that I believe you received, it
is in Arabic, and then translated to English. My understanding
is it's a letter that came from the prime minister's office,
and it says to you, ``Peace, mercy and blessings of Allah be
upon you, it has been decided not to refer any of the following
parties to the court, until approval of his excellency, the
prime minister, is obtained, presidential office, council of
ministers, current and previous ministers, with the previous
appreciation.''
What, apparently, this means--you might confirm it--what,
apparently, this means is as you began digging in to crime and
corruption, and as I want to refer again to the description by
the special inspector general who said you are an honorable man
and an effective crime fighter in Iraq. As you began to dig
into corruption and understand that some of the ministries were
corrupt and misusing money, the prime minister's office said to
your office, you are not able to refer any parties dealing with
corruption to a court, unless the prime minister would give
approval, is that correct?
Judge al-Radhi [spoken in Arabic]. That is correct, and
that directive violates the constitution, because we are
considered an independent entity, based on article 102 of the
Iraqi constitution.
Senator Dorgan. And do you believe this happened because
you started talking about, well, for example, Mr.--I believe it
was Mr. Hussan, the minister of defense where $4 billion was
unaccounted for, I mean, they couldn't account for $4 billion
of spending. Do you believe that because you were digging into
that, the prime minister's office then came up with a letter of
this type, to stop what you were doing?
Judge al-Radhi [spoken in Arabic]. Yes, because of our
investigations that included investigating practices from the
ministry of oil, and the ministry of defense. Accordingly, we
received this letter.
Senator Dorgan. Judge al-Radhi, let me conclude today by
thanking you for being here. I must say to you, I'm embarrassed
at the attendance of this committee, this committee room is
full when we appropriate money. There seems to be less
enthusiasm for oversight to determine how that money is spent.
I appreciate the Senators who did attend, and my colleague,
Senator Cochran, has been here for the whole period, and former
chair and others, so I appreciate those who came.
But, frankly, this is a very significant issue. It should
command a great deal of attention by this Congress, and I
regret it has not.
I know they have tried to kill you, personally, you do this
at great risk. And I also want to say one other thing. I'm very
unhappy with the U.S. State Department, and the way that you
have been treated, personally, since you came to this country.
The State Department, I believe, has sort of set you loose over
here with no help and guidance, and apparently no action on
your asylum request, and your message is not in accordance with
the message that some tell us about.
I think there are good things going on in Iraq and
improvements going on in Iraq, and I think there's a lot of
corruption and fraud and abuse--I think both represent an
accurate story. The story you tell is not--is not welcomed by
some. They don't want to hear those facts, and that
interpretation and that information, so I believe you have not
been treated well by the U.S. State Department, and I think
that's a shame. I hope that one of these days the State
Department will do what it should do for a man of your courage
and your integrity.
Taking on the job as head of the commission on public
integrity in a country in Iraq where so many have been
assassinated and murdered, and their families have been
threatened. And I read the account, by the way, of you standing
in your house when a missile hit in that neighborhood and your
house collapses around you and you were fortunately unhurt. But
you're a man of great personal courage I believe, and there
came a time when you couldn't continue to do your job in Iraq.
And you come to this country and tell us what you see and what
you know, that I think is very helpful to our United States
Congress. And as one Member of the United States Senate, I want
to tell you how much I appreciate your courage, your work, and
your willingness to come today.
Thank you very much.
Judge al-Radhi. Thank you so much.
ADDITIONAL COMMITTEE QUESTIONS
Senator Dorgan. Any members wishing to submit questions to
the witnesses may do so and they will all be printed in the
record.
[The following questions were not asked at the hearing, but
were submitted to the witnesses for response subsequent to the
hearing:]
Questions Submitted to David M. Walker
Questions Submitted by Senator Robert C. Byrd
Question. Mr. Walker, a recent State Department report stated that
in early 2006, the Iraqi oil ministry estimated that ten percent of the
$4-5 billion in fuel imported for public consumption in Iraq at
subsidized rates in 2005 was smuggled internally and out of the country
for resale at market rates. Further, approximately ten percent of all
oil smuggling profits were estimated to go to insurgents.
Conservatively, those facts suggest that insurgents in Iraq have
approximately $100 million per year available to them from that single
source. Should we be concerned about this and can you estimate for us
the total revenues available to the insurgents?
Answer. Yes. Congress should be concerned. GAO has previously
reported that corruption is widespread and a problem for the Iraqi
government. We do not have an estimate of the amount available to
insurgents from petroleum-related corruption, but our report
``Stabilizing Iraq: Armed Groups in Iraq Rely on Resources Generated in
Iraq to Sustain High Levels of Violence'' (GAO-07-782C) provides
further information. The report title is unclassified but the body of
the report is classified. A copy of this report is available to the
Committee.
Question. Mr. Walker, since March 2004, experts have been urging
Iraq to install control systems to measure and account for the amount
of oil pumped out of Iraqi oil fields and processed at Iraqi
refineries, as the best way to prevent corruption and the diversion of
oil and oil revenues to insurgents and other unauthorized individuals.
As recently as February 2008, such control measures were still being
recommended. Why have control systems not been installed?
Answer. The lack oil metering in Iraq has been a problem since 1996
when the United Nations first cited the issue during the Oil for Food
Program. In 2004, the Coalition Provisional Authority took steps to
install a metering system, but lack of security stopped completion of
this work. In 2006, the Iraqi government took steps to establish,
within the next 2 years, a measuring system for Iraq's oil, gas, and
related products within Iraq and export and import operations. However,
we reported in 2007 that security continued to pose a challenge to
Iraq's oil and electricity sectors and has led to project delays and
increased costs. As of February 2008, the International Advisory and
Monitoring Board (IAMB) reported that some metering at oil terminals
had been installed, but there is an absence of a comprehensive system
of metering, including no metering in the oil fields.\1\
---------------------------------------------------------------------------
\1\ The IAMB is an independent audit oversight body for the
Development Fund for Iraq (DFI) established pursuant to U.N. Security
Council Resolution 1483 to help ensure that the DFI is used in a
transparent manner for the benefit of the people of Iraq and export
sales of petroleum products are made consistent with international best
practices. The IAMB's terms of reference, approved in October 2003,
allow it to oversee the completeness of deposits into the DFI, the
management of the funds in the DFI and the use of DFI resources in the
spending ministries, together with the power to complete special
audits.
---------------------------------------------------------------------------
Question. Mr. Walker, do you feel that there are sufficient
controls over the accountability of the weapons the United States
provides to Iraqi security forces? Please explain.
Answer. No. As of March 2008, the Department of Defense (DOD) had
not implemented GAO's recommendations to improve accountability over
the U.S. program to train and equip Iraqi security forces.\2\ We
recommended that the Secretary of Defense determine which DOD
accountability procedures apply or should apply to the program. We also
recommended that after defining the required accountability procedures,
DOD ensure that sufficient staff, functioning distribution networks,
standard operating procedures, and proper technology are available to
meet the requirements.
---------------------------------------------------------------------------
\2\ GAO, Stabilizing Iraq: DOD Cannot Ensure that U.S.-Funded
Equipment Has Reached Iraqi Security Forces, GAO-07-711 (Washington,
D.C.: July 31, 2007).
---------------------------------------------------------------------------
Question. Mr. Walker, do we have confidence that the use of
Development Fund for Iraq deposit accounts can be reconciled with
income and spending?
Answer. GAO cannot determine the extent to which the Iraqi
government is spending its $10.1 billion capital projects budget for
2007 because of wide discrepancies between Iraq and U.S. reports on
Iraqi expenditures. The discrepancies highlight the uncertainty about
Iraqi expenditures.\3\ In addition, U.S. agencies, the World Bank, and
independent auditors report serious internal control weaknesses in
Iraqi government accounting procedures. For example, the World Bank
reported that reconciliation of government of Iraq accounts is
impossible. GAO plans to review issues related to Iraqi income and
spending under the authority of the Comptroller General, based on a
request from the Senate Armed Services Committee.
---------------------------------------------------------------------------
\3\ GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq's
Budget Execution, GAO-08-153 (Washington, D.C.: Jan. 15, 2008).
---------------------------------------------------------------------------
Question. Mr. Walker, is Iraq in possession of financial assets not
accounted for in the Development Fund for Iraq accounts, and if so,
where are these resources and do discrepancies exist in these accounts?
Answer. GAO has not examined whether the Iraq government has
financial assets not accounted for in the Development Fund for Iraq
(DFI). However, IAMB is responsible for overseeing the completeness of
deposits into the Development Fund for Iraq. IAMB reported that
auditors will finalize the 2007 audit of the DFI and report to IAMB
during 2008.
Question. Mr. Walker, have there been any discrepancies noted
between the Development Fund for Iraq balance reports and actual bank
holdings, and if so, where?
Answer. GAO has not examined any potential discrepancies between
the DFI balance reports and actual bank holdings. However, the
International Monetary Fund reported in January 2008 that audits of the
DFI noted large un-reconciled differences regarding oil extraction,
production, and export sales. Also, the World Bank has reported that
the government of Iraq lacks consolidated information on the exact
number of government bank accounts it has and the balances in them. As
part of a future GAO review referred to under question 8, GAO is
planning to address some of these issues.
Question. Mr. Walker, is Iraq holding gold or other monetary assets
that might not be accounted for in their deposit accounts?
Answer. GAO has not examined whether the government of Iraq is
holding gold or other monetary assets not accounted for in DFI deposit
accounts.
Question. Mr. Walker, I am concerned about what happens from year-
to-year regarding unobligated funds due to Iraq's reported budget
execution problems. If unobligated funds are rolled over from year to
year, what is the confidence level that such funds are actually
available for obligation and execution?
Answer. GAO cannot determine how much the Iraqi government has
actually spent because U.S. and Iraqi reports show widely disparate
spending data. Moreover, the IAMB, International Monetary Fund, and
World Bank have concerns about whether Iraq government accounts can be
reconciled. As a result, it is uncertain whether unused funds approved
by Iraq's budget laws are actually available for obligation and
execution the following year.
______
Questions Submitted by Senator Dianne Feinstein
Question. On March 6, 2008, the Boston Globe ran a story entitled
``Top Iraq Contractor Skirts U.S. Taxes Offshore.'' In the story, the
authors noted that ``more than 21,000 people working for KBR in Iraq--
including about 10,500 Americans--are listed as employees'' of two
shell companies for KBR registered in the Caribbean. The story also
states: ``the Defense Department has known since at least 2004 that KBR
was avoiding taxes by declaring its American workers as employees of
Cayman Islands shell companies, and officials said the move allowed KBR
to perform the work more cheaply, saving Defense dollars.'' However,
the article estimates a roughly $500 million shortfall in lost Social
Security and Medicare revenue as a result of the practice.
Many employees did not know that they were employed by the shell
companies, not KBR, and those employees have lost eligibility for
Social Security, unemployment, and other government services as a
result of these practices. KBR has amassed an estimated $16 billion in
contracts in Iraq. On March 13th, Senator John Kerry (D-MA) introduced
legislation to treat foreign subsidiaries of U.S. companies performing
services under contract with the United States government as American
employers for the purpose of Social Security and Medicare payroll
taxes.
Can you comment on whether or not the Government Accountability
Office has reviewed this issue and any findings that have come as a
result of the review? If not, does the GAO plan to review the issue?
Answer. We have not reviewed KBR's hiring of personnel through
companies registered in the Caribbean and have no ongoing work
specifically related to this issue. We have, however, previously
reported on issues associated with federal contractors with offshore
subsidiaries. For example, we reported in February 2004 that 59 of the
100 largest publicly traded federal contractors in fiscal year 2001,
including Halliburton (then the parent company of KBR), reported having
a subsidiary in a tax haven country.\4\ We subsequently reported in
June 2004 that large tax haven contractors were more likely to have a
tax cost advantage in federal contracting than large domestic
contractors.\5\
---------------------------------------------------------------------------
\4\ GAO, International Taxation: Information on Federal Contractors
With Offshore Subsidiaries, GAO-04-293, (Washington, D.C.: Feb. 2,
2004).
\5\ GAO, International Taxation: Tax Haven Companies Were More
Likely to Have a Tax Cost Advantage in Federal Contracting, GAO-04-856,
(Washington, D.C.: June 30, 2004).
---------------------------------------------------------------------------
Question. With the multitude of reports raising questions about
KBR's performance as a contractor in Iraq, why is the U.S. military
still doing business with the company?
Answer. DOD may be in a better position to address its use of
specific contractors or how it used past performance information when
awarding specific contracts. We would like to note, however, that
contracting is important to how many agencies accomplish their
missions, and therefore it is critical that agencies focus on buying
the right things the right way. This includes ensuring that contracts
are awarded only to responsible contractors, and that contractors are
held accountable for their performance. As we noted in July 2007, the
use of contractor performance information is a key factor in doing
so.\6\
---------------------------------------------------------------------------
\6\ GAO, Federal Contracting: Use of Contractor Performance
Information, GAO-07-1111T, (Washington, D.C.: July 18, 2007).
---------------------------------------------------------------------------
Question. What actions has the GAO taken to address past problems
with KBR and can you name the instances where the DOD has cancelled a
large contact in Iraq due to mismanagement?
Answer. GAO has made multiple recommendations in previous reports
aimed at improving DOD's oversight and management of contractors
supporting deployed forces, including KBR. For example, GAO issued a
report in July 2004 addressing the need for DOD to strengthen oversight
of logistics support contracts such as the Army Logistics Civil
Augmentation Program (LOGCAP).\7\ In March 2005, GAO issued a report
calling for high-level DOD coordination to improve the management of
the LOGCAP contract.\8\ And in December 2006, GAO issued a
comprehensive report on contractor support to deployed forces that
called for high-level DOD action to address long-standing problems with
DOD's management and oversight of contractors supporting deployed
forces.\9\
---------------------------------------------------------------------------
\7\ GAO, Military Operations: DOD's Extensive Use of Logistics
Support Contracts Requires Strengthened Oversight, GAO-04-854
(Washington, D.C.: July 19, 2004).
\8\ GAO, Defense Logistics: High-Level DOD Coordination Is Needed
to Further Improve the Management of the Army's LOGCAP Contract, GAO-
05-328 (Washington, D.C.: March 21, 2005).
\9\ GAO, Military Operations: High-Level DOD Action Needed to
Address Long-standing Problems with Management and Oversight of
Contractors Supporting Deployed Forces, GAO-07-145 (Washington, D.C.:
Dec. 18, 2006).
---------------------------------------------------------------------------
We do not have complete information on the extent to which DOD may
have cancelled a large contract in Iraq due to mismanagement. We are
aware of several instances in which DOD cancelled or terminated, at
least in part, contracts or task orders for work in Iraq due to poor
management and higher than expected costs For example, in May 2006, the
U.S. Army Corps of Engineers announced that the contract with Parsons
Global Services to build primary health care centers was partially
terminated due to insufficient progress and escalating costs.
In a January report to Congress, the Congressional Research Service
(CRS) recommended that Congress consider requiring that ``the Defense
Department use more fixed-price contracting in Iraq, task and delivery
orders [be matched to] certain dollar constraints, and larger contracts
be divided into smaller contracts, with better-defined discrete
tasks.''
Question. In your opinion, does the size of the contracts used in
Iraq inhibit proper oversight of those contracts?
Answer. The size of a contract can be a factor in determining the
extent and nature of oversight required, but in and of itself does not
inhibit proper oversight. Rather, we and others have reported that DOD
simply does not have a sufficient number of acquisition and contracting
personnel to provide effective oversight over the range of contracts
and contractors it employs in Iraq, thereby limiting its ability to
obtain reasonable assurance that contractors were meeting contract
requirements efficiently and effectively.
Question. Would a system similar to the one outlined by CRS help
increase oversight of Iraq contracts?
Answer. While we have not specifically assessed the options
proposed by CRS in its January 2008 report, our work provides insights
into some of the underlying issues that these proposals attempt to
address. For example, we have reported that reconstruction and support
contracts are often cost-reimbursement type contracts, which allow the
contractor to be reimbursed for reasonable, allowable, and allocable
costs to the extent prescribed in the contracts. Such contracts are
generally used when uncertainties involved in contract performance,
such as when the government's requirements or needs are not well-
defined, do not allow the work to be priced on a fixed-price basis. In
some cases, we found that the lack of well-defined requirements
resulted in DOD using business arrangements that increased the
government's risk, such as by allowing contractors to begin work before
key contract terms and conditions, such as the scope of the work and
its price, were fully defined.\10\ Consequently, the extent that DOD is
able to better define its requirements should enable it to increase its
use of fixed-price contracts and enable it to definitize its contracts
on a more timely basis.
---------------------------------------------------------------------------
\10\ See, for example, GAO, Defense Contract Management: DOD's Lack
of Adherence to Key Contracting Principles on Iraq Oil Contract Put
Government Interests at Risk, GAO-07-839 (Washington, D.C.: July 31,
2007) and Iraq Contract Costs: DOD Consideration of Defense Contract
Audit Agency's Findings, GAO-06-1132 (Washington, D.C.: Sept. 25,
2006).
---------------------------------------------------------------------------
The increased use of fixed-price contracts and the more timely
definitization of contracts, however, does not obviate the need for
effective management and oversight. In other words, if contracts are
not effectively managed and given sufficient oversight, the
government's risk is likely to increase. In that regard, DOD still
needs to improve its capacity to manage and oversee contractor
performance, including assuring that it has sufficient contract
oversight personnel to provide effective oversight. We have made a
number of recommendations aimed at strengthening DOD's management and
oversight of contractor support at deployed locations, and the
department has agreed to implement many of those recommendations.
However, we have found that DOD has made limited progress implementing
some key recommendations.
Question. What other barriers prevent the GAO or Inspectors General
from improving oversight of these contracts?
Answer. Despite improvement since last year, the security situation
in Iraq continues to hamper contract oversight. Operating within this
environment, we and the other accountability organizations will
continue to coordinate our oversight efforts to avoid duplication and
leverage our resources.
______
Questions Submitted by Senator Judd Gregg
Question. Has the Prime Minister or any other senior Iraqi
government official taken any action to interfere with GOI
investigations into cases of corruption? If so, please describe in
detail the circumstances.
Answer. GAO has not examined allegations of senior Iraqi government
officials interfering with government of Iraq investigations of
corruption.
Question. What factors limit the ability of the CPI, the Board of
Supreme Audit, and respective Ministry IGs from investigating and
prosecuting cases of corruption?
Answer. Violence, intimidation, and attacks against staff are a
major obstacle to investigations according to the former head of the
Commission on Public Integrity (CPI). Aggravating this situation, we
have reported that corruption within the ministries is widespread and
the Iraqi civil service remains hampered by staff with political and
sectarian loyalties. Also, Iraqi law is an obstacle. Article 136(b) of
Iraq's Criminal Code allows any Iraqi minister to grant complete
immunity of prosecution to any ministry employee accused of wrongdoing.
These factors create a difficult environment to investigate charges of
corruption.
Question. Have any documents in the possession of the U.S. Mission
been altered by U.S. Government officials by removing the names of
Iraqi leaders because the documents implicate those leaders in cases of
corruption?
Answer. GAO has not investigated this issue.
Question. Has the U.S. Mission ever retroactively classified
anticorruption or rule of law reports after Congress has requested such
reports?
Answer. The U.S. Mission retroactively classified rule of law
reports and documents GAO used as a source in our report ``Stabilizing
and Rebuilding Iraq: U.S. Ministry Capacity Development Efforts U.S.
Ministry Capacity Development Efforts Need an Overall Integrated
Strategy to Guide Efforts and Manage Risk'' (GAO-08-117). We
subsequently had to remove text and information from our unclassified
report and reissue the report so it would remain unclassified.
______
Questions Submitted to Claude M. Kicklighter
Questions Submitted by Senator Robert C. Byrd
Question. General Kicklighter, the Department of Defense, through
the Commander's Emergency Response Program, administers the Concerned
Local Citizen program in Iraq. Reportedly, within that program there
are about 80,000-90,000 individuals being paid about $350 per month;
that amounts to about $30 million in total per month. Can you tell me
how that money is distributed and what audit controls are in place to
ensure that each individual actually exists and receives the amount
intended to go to them?
Answer. The DODIG has not specifically reviewed the CERP program in
Iraq. However, on February 28. 2007, we issued DOD IG report D-2007-
0064, ``Implementation of the Commanders' Emergency Response Program in
Afghanistan.'' The overall objectives of the audit were to evaluate
management's administration of the Commanders' Emergency Response
Program (CERP), and determine whether the internal controls set up for
the CERP in the Afghanistan area of responsibility protect DOD assets.
We found that the Commander, Combined Forces Command Afghanistan
established controls over the CERP; however, they were not effective in
all cases. As a result:
--Of the 16 pay agents, 15 did not have appropriate physical security
for storing cash, the sixteenth pay agent did not hold cash
because she is collocated with a finance office. Of the 16 pay
agents, 2 inappropriately disbursed cash.
--Some of the projects we reviewed did not fully achieve the intent
of the CERP.
--Weaknesses in administrative processes led to inconsistent program
implementation, unnecessary requirements, and insufficient
documentation.
Question. General Kicklighter, do you believe that effective risk
mitigation measures are in place to prevent the flow of funds from
corrupt practices from reaching insurgents and militias and if not,
what recommendations can you make to correct the problem?
Answer. We are conducting numerous audits that review the controls
of funds. However, those reviews examine the control of funds from the
time the funds are appropriated until the time those funds are
obligated and expended. When funds are provided to the Iraq Security
Forces (ISF), we do not review controls after the transfer of the funds
to the ISF and therefore cannot comment on risk mitigation standards
from that point onwards. Within DOD, we have found numerous instances
of a lack of controls over funding, especially when funds used are
cash. There is always a high risk of corruption when dealing with cash.
Because there is not a sophisticated financial infrastructure in Iraq,
many transactions are conducted with cash. I do not believe we will be
able to effectively mitigate the risks of funds from corrupt practices
reaching insurgents and militias until there is a sophisticated funding
infrastructure in Iraq. In the meantime, we will review cash controls
to ensure the most effective mitigation measures possible at this time
are in use.
We will continue our investigative mission to identify and
investigate corrupt practices with an anticipated result of prevent the
``flow of funds'' to anywhere other than their intended contractual
purposes.
Question. General Kicklighter, how many actual Department of
Defense audit and investigative employees, not counting contractors,
but from the office of the Inspector General, are actually stationed in
Iraq?
Answer. As of March 11, 2008, the Department of Defense Office of
the Inspector General had 5 core staff auditors and 2 agents forward
deployed in Iraq. Three auditors are located in the International Zone
and two are located in Camp Victory. In addition, we had 2 agents in
Kuwait and will soon have 2 agents in Afghanistan.
To accomplish our oversight mission, we have adopted a strategy
that is based on maintaining the right size presence in-theater but
which also recognizes that much of our work can be done out of Iraq. We
have adopted an expeditionary workforce model to support efforts
throughout all of Southwest Asia. We have 20 core staff forward
deployed at all times. The core contingent is comprised of individuals
serving between 6 and 12 month deployments. Expeditionary team members
will deploy for as long as needed to complete the task, but no longer.
The actual number of auditors, investigators, and inspectors in
Southwest Asia and Iraq fluctuates on a daily basis depending on
requirements.
We are increasing our presence in Southwest Asia and currently have
279 personnel dedicated to Southwest Asia operations and are deployable
as mission requirements dictate. Currently we have 22 people deployed
to Southwest Asia. Utilizing both domestic and in theater assets we
have 28 ongoing Iraq related audits and inspections and 102 ongoing
Iraq related investigations.
Question. General Kicklighter, there have been reports of ``ghost
employees'' within the Ministry of the Interior that may total up to
20-30 percent of the force. Since that ministry, ironically, executes
the law enforcement functions in Iraq, what is the extent of the
problem and what steps are underway within Iraq to reconcile salary
payments with physical employees?
Answer. The oversight responsibilities of the Office of the
Inspector General extend to DOD appropriated funds in support of
Defense operations to include Operation Iraqi Freedom. Our office has
not done work regarding the employment records of the Iraq Ministry of
Interior because our oversight authority does not include oversight of
the Iraqi government.
Question. General Kicklighter, has a weapons accountability system
been established to track weapons and other military equipment
transferred from the United States to Iraq and if so, have weapons
provided for prior to 2005 been located or otherwise accounted for?
Answer. The objectives of the DODIG Assessment Team on Munitions
Accountability are to:
--Determine whether the DOD currently has adequate accountability and
control over U.S.-purchased munitions before formal turnover to
the ISF.
--Determine whether the ISF currently has adequate accountability and
controls over U.S.-purchased munitions under their control.
The team is chartered to review the current situation on the ground
not what occurred in the past. The team concluded the DOD and the ISF
currently have a system in place for controlling and accounting for
weapons and ammunition being supplied to the ISF; however, there still
remains work to be done. As the U.S. supply of munitions to Iraq shifts
to Foreign Military Sales (FMS), the United States needs to put the FMS
program on a war-time footing while also assisting the ISF in building
their logistics sustainment base.
--FMS systems and processes provide increased levels of
accountability and control over munitions.
--U.S. military transition teams are working with their Iraqi
military and police counterparts to strengthen ISF logistics,
and related munitions accountability and control.
--Both these actions are underway and will greatly enhance the
control and accountability of munitions.
The assessment report is currently being staffed for management
comments. In addition, the assessment team deployed back to Iraq to
review the status of corrective actions taken on the report's
recommendations, and assess the current status of munitions control and
accountability, FMS, and the Iraqi Logistics Sustainment base. They
will return to Washington, DC in the late May/early June timeframe.
Question. General Kicklighter, does the Iraqi Ministry of Defense
have a physical inventory system in place to track physical assets
purchased with or provided by the United States or Development Fund for
Iraq funds and have there been problems with inventory loss?
Answer. We have not and do not look at the methodology of tracking
assets after those assets have been transferred to a foreign
government. Report No. D-2008-026, ``Management of the Iraq Security
Forces Fund in Southwest Asia--Phase III,'' November 30, 2007 found
that the Multi-National Security Transition Command--Iraq had problems
accounting for physical inventory purchased with ISF funds before the
transfer of those assets to ISF. Those problems are currently being
addressed and we plan to conduct a follow-up audit early next year.
Question. General Kicklighter, in hearings last month, we learned
that as of December 31, 2007, there were 163,540 private contractors in
Iraq, and that 17 percent of those were Americans, with the rest being
local nationals or Third Country Nationals. At the same hearing,
Ambassador Kennedy testified that security contractors in Iraq receive
an average of $1,222 per day, for an average yearly salary of $445,000.
Recognizing that not all contractors are security personnel; can you
provide the Committee with the total amount spent on contractors last
year and the average daily and annual compensation rates for different
categories of contract jobs?
Answer. We have not conducted an audit that would validate the
number of private security contractors, the nationality breakdown of
security contractors in Iraq, or average salary of security contractors
in Iraq. We plan to begin an audit of private security contractors used
in support of OIF. The overall objective will be to determine whether
private security services contracts have clearly defined requirements
and whether those requirements are being fully met by contractors.
Specifically, we will determine whether contract statements of work
were clear, definite, and certain, and whether the contract terms and
conditions for private security services were clearly defined in the
contracts. Within the scope of that audit, we can address the average
salaries of security contractors working on the judgmental sample of
contracts that will be reviewed but will not be able to project those
amounts to all Iraqi contracts. We simply do not have the resources to
review all security contracts in Iraq or a statistical sample of Iraqi
security contracts.
The Federal Procurement Data System shows that in excess of $315
billion was spent on DOD contracting in fiscal year 2007. We are not
aware of a reliable source for average daily and annual compensation
rates for different categories of contract jobs.
Question. General Kicklighter, some previous testimony from former
private contractors and other sources suggests that Third Country
Nationals hired as private contractors in Iraq by U.S. companies are
not always paid or provided benefits on par with those provided to
American contract personnel. Do you have any evidence to prove or
disprove these reports and if true, is that payment differential
reflected in the payments to the contracting company?
Answer. We have heard allegations on this issue but have not
conducted audits or planned to conduct audits that would address the
issue. This is not an area that contains clear criteria on the
responsibilities of contractors. Many legal issues regarding
international law and labor rates would have to be addressed before a
substantive audit could be conducted. In addition, because many Third
Country Nationals are hired as subcontractors, the legal issue of
contract privity between DOD and the subcontractors would be a major
issue.
Question. General Kicklighter, do you believe that effective risk
mitigation measures are in place to prevent corruption in the use of
U.S. and Iraqi funds, and if not, what recommendations can you make?
Answer. Effective risk mitigation requires a combination of efforts
to include the oversight provided by the DOD IG, GAO, State IG, USAID
IG, and SIGIR. In addition to the oversight community, the honesty and
integrity of the federal and contractor workforces also play a large
role in effective risk mitigation. However, no matter how many controls
are put in place corruption will still exist. It is our mission to work
with the resources provided by the Congress to assess risk and place
our resources in areas that help to minimize that risk.
Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime
Contracts and Contracting Processes in Iraq and Afghanistan,'' of the
Act (Public Law 110-181) requires the DOD IG to conduct, ``thorough
audits . . . to identify potential waste, fraud, and abuse in the
performance of--Department of Defense contracts, subcontracts, and task
and delivery orders for the logistical support of coalition forces in
Iraq and Afghanistan.'' As a result of these concerns and due to the
complex operational environment in Southwest Asia, we have established
an Office for Strategic Plans and Operations for the Global War on
Terror (GWOT). The new component is focused on GWOT and other high
value, high visibility assessment missions. The establishment of this
new office will supplement the efforts currently being undertaken by
DOD IG components. This initiative is part of an ongoing Organizational
Development Project that was initiated in January 2008 to assess
corporate-level strategies, organizational alignments, geographical
locations, personnel development, business practices, culture, and
performance to best position the DOD IG to execute current, emerging
and future missions.
Another initiative was the realignment of internal core mission
assets within the Office of the Deputy Inspector General for Auditing
to form the Joint and Overseas Operations Directorate to support
Southwest Asia audit operations. This expeditionary audit directorate
was formed in November 2007 to address corruption, fraud, waste, and
abuse in Southwest Asia; combat illegal and improper expenditures; and
improve accountability of DOD resources that support operations in
Southwest Asia. To accomplish this mission, we expanded our presence in
Qatar, Afghanistan, and Iraq; established a field office in Korea; and
are establishing field offices in Germany and Hawaii.
Senate Report 110-77, to accompany the National Defense
Authorization Act (NDAA) for Fiscal Year 2008, addresses funding for
the Office of the Inspector General, Department of Defense (DOD IG)
stating that, ``The committee is concerned that funding levels for this
important independent audit and investigative function is not keeping
pace with the demands for Inspectors' General services in the global
war on terror.'' The report also directs the IG to, ``provide to the
defense committees, by March 31, 2008, an analysis of the current and
future personnel, organization, technology, and funding requirements of
the OIG'' to include, ``a comprehensive and detailed master plan, with
annual objectives and funding requirements, that provides the fastest
possible increase in audit and investigative capabilities.'' This
report was provided to the congressional Defense oversight committees
on April 14, 2008.
Based on our analysis, the funding requirement for the DOD IG for
fiscal year 2009 is $25.24 million above the level provided in the
President's budget for fiscal year 2009. That $25.24 million is
directly linked to requests by Congress to increase both audit and
investigative efforts regarding Southwest Asia and the Global War on
Terror. In fiscal year 2009, we estimate that the President's budget
will allow for an increase to 1,474 FTEs. This would account for 37 of
the 481 FTEs outlined in our DOD IG growth plan through fiscal year
2015, closing the gap for the desired end state to 444 FTEs, but
falling 134 short of the 1,608 FTEs that we require for fiscal year
2009 in order to provide the fastest possible increase in our audit and
investigative capabilities. Additional fiscal year 2009 funding will
allow us to continue to increase our oversight efforts related to GWOT,
contract management and acquisitions; and would support DOD IG audits
conducted in response to Sec. 842 of the fiscal year 2008 NDAA, as
mentioned above.
This growth, if supported by Congress, will enable us to perform
our statutory duties and to provide additional coverage of the high
risk and high impact areas of DOD contracting, major weapons system
acquisitions, information technology, information security, human
capital, charge cards, personnel and medical readiness, financial
management, and homeland security. It will also allow for enhanced
investigative support to Joint Terrorism Task Forces (JTTFs) located
throughout the United States; establishment of new offices in
geographic locations that have been previously neglected due to limited
staffing; enhanced investigative support to the GWOT; and increased
emphasis on investigating crimes in areas that have dropped in priority
and have been largely neglected because of the new demands of today's
environment.
______
Questions Submitted by Senator Dianne Feinstein
Question. On March 6, 2008, the Boston Globe ran a story entitled
``Top Iraq Contractor Skirts U.S. Taxes Offshore.'' In the story, the
authors noted that ``than 21,000 people working for KBR in Iraq--
including about 10,500 Americans--are listed as employees'' of two
shell companies for KBR registered in the Caribbean. The story also
states: ``the Defense Department has known since at least 2004 that KBR
was avoiding taxes by declaring its American workers as employees of
Cayman Islands shell companies, and officials said the move allowed KBR
to perform the work more cheaply, saving Defense dollars.'' However,
the article estimates a roughly $500 million shortfall in lost Social
Security and Medicare revenue as a result of the practice.
Many employees did not know that they were employed by the shell
companies, not KBR, and those employees have lost eligibility for
Social Security, unemployment, and other government services as a
result of these practices. KBR has amassed an estimated $16 billion in
contracts in Iraq. On March 13th, Senator John Kerry (D-MA) introduced
legislation to treat foreign subsidiaries of U.S. companies performing
services under contract with the United States government as American
employers for the purpose of Social Security and Medicare payroll
taxes.
Can you comment on whether or not the DOD Inspector General's
office has reviewed this issue and any findings that have come as a
result of the review? If not, does the office plan to review the issue?
Answer. The Department of Defense Office of the Inspector General
has not reviewed this issue. Under current law the practice is not
illegal; however, the Defense Contract Audit Agency (DCAA) has
conducted audits to ensure that contractors have not billed government
contracts for taxes that were not incurred.
As you know, recently both the House and Senate have introduced
legislation, which if enacted would prevent this type of situation from
reoccurring. H.R. 5602 and S. 2775, sponsored by Senator Kerry, ``Fair
Share Act of 2008,'' have been introduced to amend the Internal Revenue
Code of 1986 and the Social Security Act to treat certain domestically
controlled foreign persons performing services under contract with the
United States Government as American employers for purposes of certain
employment taxes and benefits.
Question. With the multitude of reports raising questions about
KBR's performance as a contractor in Iraq, why is the U.S. military
still doing business with the company?
Answer. The decision to contract with a specific company is made by
the Department and the DOD IG has no input into that decision.
The Federal Acquisition Regulations state that the prior
performance of a company must be considered when awarding a new
contract. However, there are no specifics on how to judge the prior
performance of a large defense contractor. KBR has not been debarred
from Federal contracts and absent such action, there is no reason for a
contracting officer not to consider KBR proposals for contract awards.
Question. What actions has the Pentagon taken to address past
problems with KBR and can you name the instances where the DOD has
cancelled a large contact in Iraq due to mismanagement?
Answer. The DODIG has no information on this topic and no knowledge
of any instances of DOD cancelling a large contact in Iraq due to
mismanagement because we have not conducted audits involving either of
these situations.
______
Questions Submitted to Stuart W. Bowen, Jr.
Questions Submitted by Senator Robert C. Byrd
Question. Mr. Bowen, we have heard accounts which suggest that
during the Coalition Provisional Authority period, projects were paid
in full, up front, in cash, before work was begun on projects. Is this
true, and was it commonplace?
Answer. From August to December 2004, the Inspector General of the
Coalition Provisional Authority (CPA) audited the Control of Cash
Provided to South-Central Iraq (Report Number 05-006). The auditors
encountered instances in which one contractor was paid in full up
front, in cash, before work was begun on projects. In that case at
least 8 contracts worth $1,978,810 were paid in full up front. In
addition, at least 23 grants, including 2 worth $950,000 each, were
paid up front to the grant recipient prior to services being rendered
or expenses incurred.
These instances involved the use of cash from the Development Fund
for Iraq (for the most part this money was a combination of Seized and
Vested assets and proceeds from the sale of Iraqi oil), and not from
U.S. appropriated funds. The instances mentioned above involved
contracts awarded to Mr. Phillip Bloom (contractor) and paid by Mr.
Robert Stein (CPA employee). Our investigation of this anomaly resulted
in Mr. Bloom and Mr. Stein pleading guilty to conspiracy, bribery, and
money laundering in connection with a scheme to defraud the CPA. Both
are currently in prison.
In our work to date, SIGIR has not encountered any instances
involving U.S. appropriated funds in which contractors were paid in
full, up front, in cash, before work was begun on projects
During the previously-mentioned audit of the Control of Cash
Provided to South-Central Iraq, we also encountered instances in which
local contractors were paid half of contract amounts up front before
work was begin on projects. This practice was commonplace in the South-
Central Region at the time. We believe that it was a factor in the
overall poor value received for contracts awarded by the South-Central
Region at that time.
In our work to date, we have encountered no instances involving
U.S. appropriated funds in which contractors were paid half of contract
amounts up front before work was to begin on projects.
Question. Mr. Bowen, have investigations or audits been performed
to establish that the recipients of these U.S. funds are legitimate
contracting entities such as builders, contractors, engineers, and so
forth, and are such investigations standard procedure?
Answer. SIGIR has not performed audits with the issue discussed in
the question as a particular objective. However, in each contract audit
we focus on potential fraud, waste and abuse. In so doing, we have not
to date identified the conditions you describe in any of our audits.
Question. Mr. Bowen, since the end of the tenure of the Coalition
Provisional Authority in 2004, have investigations or audits been
performed by U.S. or Iraqi entities to establish that the recipients of
U.S. funds are legitimate contracting entities such as builders,
contractors, engineers, and so forth, and if not, why?
Answer. SIGIR established an Inspections Directorate in the summer
of 2005 to address these and other concerns.
As of our January 2008 Quarterly Report to Congress, the
Inspections Directorate had visited and reported on 108 reconstruction
sites throughout Iraq. Since then, the Inspections Directorate has
visited an additional 10 sites and will be reporting on those sites in
the future.
The Inspections Directorate has assessed contracted work of U.S.
and non-U.S. contractors, large and small contractors, contractors in
all reconstruction sectors, as well as on-going and completed
construction work.
While the Inspections Directorate has found numerous instances of
poorly designed and performed contracted work, no instances have been
detected in which builders, contractors, engineers, and so forth were
not legitimate entities or did not exist.
The Inspections Directorate notes that prime contractors frequently
subcontract a portion of project work. For example, electrical or
plumbing subcontractors have been encountered on sites. But in such
instances, the subcontractors have existed and been on site performing
work. It should also be noted that contractors have been encouraged to
use subcontractors as a means of employing larger numbers of Iraqis.
In addition, in each contract audit we focus on potential fraud,
waste and abuse. We have not identified the conditions described in the
question in any of our audits.
Question. Mr. Bowen, do you believe that effective risk mitigation
measures are in place to control corruption in the use of U.S. and
Iraqi funds and if not, what measures would you suggest?
Answer. Regarding the effectiveness of risk mitigation measures, we
need to differentiate clearly funds that are under U.S. control and
funds that are under Iraqi control. SIGIR has testified that we have
found little fraud when the United States has been managing its funds.
In our audits, waste has been the much bigger problem but has
diminished as managers have applied lessons learned (e.g., moving from
expensive design-build cost-plus contracts to direct, fixed-price
contracts). Nonetheless, SIGIR has identified serious lapses in U.S.
government oversight that create a significant risk of fraud in those
contracts.
To mitigate the risk from corruption within the Iraqi government,
the United States provides only small amounts of U.S. funding directly
to Iraqis and primarily through small grants or micro-loans.
Furthermore, when U.S. awards contracts to Iraqi entities, U.S.
government entities maintain oversight responsibility for the
applicable funds.
Question. Mr. Bowen, oil production metering has been recommended
consistently since at least March 2004. What are the obstacles to fully
implementing a comprehensive metering system? What are the estimates of
revenue loss due to the lack of a comprehensive metering system?
Answer. SIGIR's Inspections Directorate has reviewed this issue in
Baghdad and reports that the Government of Iraq (GoI) has a plan to
implement a comprehensive metering system and is in the process of
implementing the plan. The GoI plan calls for the acquisition of meters
in 2007 and 2008 and installation of the meters in 2009. The Ministry
of Finance, recognizing the significance that meters play in
controlling the significant GoI revenue involved, has created a
Department of Metering to administer and regulate meters.
Obstacles to the GoI's plan include:
--The difficulties that the GoI has in making acquisitions. In
reaction to allegations of corruption, the GoI has instituted
an extremely bureaucratic acquisition process requiring an
exhaustive number of approvals. This bureaucratic approval
process is exacerbated by the number and complexity of meters
required to implement a comprehensive metering system.
--A comprehensive metering system requires accurate meters throughout
the entire production and distribution system. The GoI has
effective meters at the Al Basrah Oil Terminal (ABOT) where oil
produced in the south is sold. It also has effective meters at
the Ceyhan Facility in Turkey where oil produced in the north
is sold. However, it does not have effective meters to
determine how much oil is produced or whether oil is being lost
or stolen as it is transmitted through dozens and dozens of
processing points and hundreds of miles of pipelines to
refineries or to the ABOT and Ceyhan sales facilities. To
effectively control its oil, the GoI needs accurate meters at
each of its Gas Oil Separation Plants, pumping stations,
pressure monitoring stations, pipe connections, refineries etc.
--The meters that are currently in use by the GoI are manual, not
electronic meters. The manual meters require that GoI personnel
visit remote locations to obtain meter readings. In Iraq this
is an inherently dangerous practice. Equally, if not more
importantly, the manual readings do not provide the real time
information that electronic meters would provide and that is
needed throughout the system to detect leaks, thefts of oil,
and malfunctioning equipment that result in loss of oil as it
flows through the system. The GoI needs to implement its plan
to acquire new electronic meters and tie them into central
control facilities.
--The GoI has to acquire, keep calibrated, and protect hundreds of
expensive meters. As previously noted the meters are at remote
locations subject to tampering, theft and destruction.
Without an effective metering system, it is not possible to
estimate the loss of revenue to the GoI. The GoI only knows how much
oil it is selling, it does not have accurate information on the amount
of oil it produces, uses internally, or loses due to leaks, inefficient
processing, and malfunctioning equipment.
Question. Mr. Bowen, is there reason to believe that smuggled and
or stolen oil resources might have been diverted to militias or other
insurgent forces?
Answer. I testified before the Committee that ``. . . corruption
has afflicted the Iraqi oil sector, particularly up at the Baiji
refinery, with respect to the smuggling of refined fuels. . . . I know
that that continues to be a problem today, based on my recent visits
with Iraqi authorities.'' The smuggling and corruption problems often
involve the use or threat of violence and, although we do not have
specific findings, it is possible that such resources might have been
diverted to militias or insurgents not part of Iraq's security forces.
Oil is a commodity that has been relatively easy for criminals to
acquire illicitly and dispose of.
Question. Mr. Bowen, Prime Minster Maliki last year ordered Iraqi
security forces, backed up by U.S. forces, to replace the security
force at the Baiji refinery with a new civilian force. Reportedly,
corruption is ``down significantly.'' Can you further characterize this
situation, in terms of production increases or significant reductions
in the volume of fuel being diverted to insurgents, or if not, why not?
Answer. Assessing the security situation or diversion of assets to
insurgents is beyond the scope of SIGIR's legislative authority. I do
not have any additional information beyond what I provided in response
to question 6.
Question. Has a system that electronically tracks funds and
projects been established and fully implemented in Iraq or to what
degree is it in place?
Answer. DOD agencies in Iraq track funds and monitor the status of
their projects in the Iraq Reconstruction Management System (IRMS); the
Department of State and U.S. Agency for International Development
monitor contract status in their own internal systems. The need to
track such information was recognized in 2004 when the then-existing
Project and Contracting Office (PCO) initiated an information
technology management reporting system. By mid 2005, however, the
system was only partially operational and not being utilized by all of
the agencies receiving amounts from the Iraq Relief and Reconstruction
Fund account. In response, in September 2005 the U.S. Army Corps of
Engineers, Gulf Region Division (GRD) and PCO officials recommended
consolidating information from multiple sources into a single database,
namely the IRMS. This system is in place today. Nevertheless, SIGIR
reported in April 2006 that agencies inputting the data lacked internal
controls to ensure the accuracy of the data they were providing, and
civilian agencies maintain their own data systems. An audit that will
be released this quarter looking at Terminations for Convenience and
Terminations for Default will also address ongoing shortfalls in the
electronic tracking of projects and U.S. funds for Iraq Reconstruction.
Question. Mr. Bowen, do you know what the unreconciled difference
is between the $13 billion in Coalition Provisional Authority project
money, money from U.S. taxpayers, provided to the Iraqi government and
evidence of project completion?
Answer. In January 2005 SIGIR reported that the Coalition
Provisional Authority (CPA) internal controls over approximately $8.8
billion in Development Fund for Iraq (DFI) monies disbursed to Iraqi
ministries through the CPA's national budget process failed to provide
sufficient accountability for the use of those funds. These monies were
not U.S. taxpayer funds--they were Iraqi funds in the hands of CPA
officials.
Question. Mr. Bowen, is there evidence that any Coalition
Provisional Authority funds or resources purchased with these U.S.
funds were diverted to private or insurgent use? Can you provide
details or estimates?
Answer. SIGIR's investigative work involving CPA funds was
initiated as a result of the Audit work performed under the ``Audit of
Cash Controls Over Disbursing Officers in Southern Iraq,'' Audit Number
D2004-DCPAAF-0034. These funds were Development Fund for Iraq (DFI)
funds, that is, they were Iraqi funds in the hands of CPA officials.
(We are not aware that any of those funds have been diverted to
insurgents.)
SIGIR's investigative work involving these CPA funds resulted in
the following indictments and convictions:
--On February 2, 2006, Robert Stein, the former CPA Comptroller and
Funding Officer in Hilla, Iraq, pleaded guilty to conspiracy,
bribery, money laundering, possession of machine guns, and
being a felon in possession of a firearm. Stein was the primary
co-conspirator with Philip Bloom, funneling numerous fraudulent
contract payments to Bloom in exchange for kickbacks and
bribes. Stein also admitted to facilitating the purchase and
possession of at least 50 weapons, including machine guns, gun
barrel silencers and grenade launchers with misappropriated CPA
funds. On January 29, 2007, Stein was sentenced to nine years
in prison and three years of supervised release. Additionally,
he was ordered to pay $3.6 million in restitution and forfeit
$3.6 million in assets.
--On March 9, 2006, Philip Bloom, a U.S. citizen, who resided in
Romania and Iraq, pleaded guilty to conspiracy, bribery, and
money laundering in connection with a scheme to defraud the
CPA. Bloom admitted that from December 2003 through December
2005, he, along with Robert Stein and numerous public
officials, including several high-ranking U.S. Army officers,
conspired to rig bids for federally-funded contracts awarded by
the CPA-South Central Region (CPA-SC) so that all of the
contracts were awarded to Bloom. The total value of the
contracts awarded to Bloom exceeded $8.6 million. Bloom
admitted paying Stein and other public officials over $2
million from proceeds of the fraudulently awarded contracts and
an additional at least $2 million in stolen money from the CPA.
On February 16, 2007, Bloom was sentenced to 46 months in
prison and two years of supervised release. Additionally, he
was ordered to pay $3.6 million in restitution and forfeit $3.6
million in assets.
--On August 4, 2006, Faheem Mousa Salam, an employee of a government
contractor in Iraq, pleaded guilty to a violation of the
Foreign Corrupt Practices Act for offering a bribe to an Iraqi
police official. Salam is a naturalized U.S. citizen employed
by Titan Corporation and was living in Baghdad, Iraq. According
to court filings, Salam offered a senior Iraqi police officer
$60,000 for the official's assistance with facilitating the
purchase by a police training organization of approximately
1,000 armored vests and a sophisticated map printer for
approximately $1 million. On February 2, 2007, Salam was
sentenced to three years in prison, two years of supervised
release and 250 hours of community service.
--On August 25, 2006, Bruce D. Hopfengardner, a Lieutenant Colonel in
the United States Army Reserve, pleaded guilty to conspiracy to
commit wire fraud and money laundering in connection with the
Bloom-Stein scheme. In his guilty plea, Hopfengardner admitted
that while serving as a special advisor to the CPA-SC, he used
his official position to steer contracts to Philip H. Bloom, a
U.S. citizen who owned and operated several companies in Iraq
and Romania. In return, Bloom provided Hopfengardner with
various items of value, including $144,500 in cash, over
$70,000 worth of vehicles, a $2,000 computer and a $6,000
watch. Hopfengardner and his coconspirators laundered over
$300,000 through various bank accounts in Iraq, Kuwait,
Switzerland and the United States. Finally, Hopfengardner
admitted that he stole $120,000 of funds designated for use in
the reconstruction of Iraq from the CPA-SC and that he smuggled
the stolen currency into the United States aboard commercial
and military aircraft. On June 25, 2007, Hopfengardner was
sentenced to 21 months in prison followed by 3 years supervised
release, and ordered to forfeit $144,500.
--On February 7, 2007, U.S. Army Colonel Curtis G. Whiteford, U.S.
Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler and
civilians Michael Morris and William Driver were indicted for
various crimes related to the Bloom-Stein scheme in Hilla,
Iraq. Whiteford, who was Stein's deputy in the comptroller's
office, was charged with one count of conspiracy, one count of
bribery and 11 counts of honest services wire fraud. Harrison,
at one time the acting Comptroller at CPA-SC who oversaw the
expenditure of CPA-SC funds for reconstruction projects, was
charged with one count of conspiracy, one count of bribery, 11
counts of honest services wire fraud, four counts of interstate
transport of stolen property, one count of bulk cash smuggling,
four counts of money laundering and one count of preparing a
false tax form. Wheeler, an advisor for CPA projects for the
reconstruction of Iraq, was charged with one count of
conspiracy, one count of bribery, 11 counts of honest services
wire fraud, one count of interstate transport of stolen
property and one count of bulk cash smuggling. Morris, who was
alleged to have worked for Bloom as a middle-man in the
criminal scheme, was charged with one count of conspiracy and
11 counts of wire fraud. Driver, who is Harrison's husband, was
indicted on four counts of money laundering. The trial for
Whiteford, Morris and Wheeler was scheduled to start on March
11, 2008; however, it has been rescheduled to begin in
September 2008. It is anticipated that Harrison and Driver will
be added to the list of defendants in this trial. In this
connection we note that an indictment is merely an allegation.
Defendants are presumed to be innocent until proven guilty.
--On February 16, 2007, Steven Merkes, a former U.S. Air Force Master
Sergeant working for the Department of Defense in Germany,
pleaded guilty in U.S. District Court for accepting illegal
bribes from Phillip Bloom. Merkes accepted the bribes in
exchange for furnishing Bloom with sensitive contract
information prior to awarding contracts to Bloom. Merkes was
sentenced on February 16, 2007, to 12 months and one day in
prison and ordered to pay restitution of $24,000.
Question. Mr. Bowen, since the end of the tenure of the Coalition
Provisional Authority in 2004, what is the unreconciled difference
between the project money provided to Iraq and the evidence of project
completion?
Answer. Very little in the way of U.S. appropriated funds have been
provided directly to Iraq. Rather, appropriated funds have for the most
part been allocated on specific contracts for specific projects and
managed by one or more U.S. agency. In these cases, SIGIR has reported
instances where monies were spent and projects were incomplete, such as
for Primary Healthcare Centers. Recently, the United States has put in
place a new strategy to provide modest sums of money for discrete
purposes to local governmental entities and private individuals
through, for example, the Commander's Emergency Response Program (CERP)
and microloan programs. Through the end of fiscal year 2007, Congress
had appropriated about $2.3 billion for CERP activities. The microloan
program was funded at about $40 million as of January 2008.
Question. Mr. Bowen, since the end of the tenure of the Coalition
Provisional Authority in 2004, is there evidence that any U.S. funds or
resources purchased with these funds were diverted to private or
insurgent use?
Answer. The United States has not turned substantial U.S. funds
over to the Iraqi government (for example, in the form of cash
assistance for balance of payments support, as is done for some
countries). In almost all cases the United States purchases goods or
services and makes them available for the purpose of developing Iraq.
Once those goods and services are made available to the Iraqi
government, the United States sees them as property of Iraq and as
Iraq's responsibility to safeguard.
SIGIR has helped the U.S. Department of Justice bring charges
against individuals for diversion of U.S. resources to private use
prior to those resources having been transferred to Iraq's government.
In additional cases, we believe corruption has occurred but
insufficient evidence was available to make a case in U.S. courts.
Other investigations are ongoing.
SIGIR has not determined via any of its audits that U.S. funds or
resources purchased with these funds were diverted to insurgent use. We
respectfully suggest this question can be best addressed by the Multi-
National Forces-Iraq and U.S. intelligence agencies. Nevertheless, a
SIGIR 2006 audit on weapons provided the GoI with U.S. funds found that
not all weapons were properly accounted for by either DOD or the GoI,
which raised security concerns.\1\
---------------------------------------------------------------------------
\1\ Iraqi Security Forces: Weapons Provided by the U.S. Department
of Defense Using the Iraq Relief and Reconstruction Fund (SIGIR-06-033,
October 28, 2006).
---------------------------------------------------------------------------
Question. Mr. Bowen, has there been any effort, to your knowledge,
from the United States to hold anyone from the Iraqi government
accountable for the diversion or loss of U.S. taxpayers' funds since
the beginning of the post-war period?
Answer. We have no knowledge of any actions holding anyone from the
Iraqi Government accountable for the diversion or loss of U.S.
taxpayers' funds. SIGIR's investigations have primarily focused on
contracting irregularities in connection with the expenditure of U.S.
funds.
Question. Mr. Bowen, do you believe that effective risk mitigation
measures are in place to prevent funds derived from corrupt practices
from reaching insurgents and militias, and if not, what recommendations
can you make?
Answer. I have repeatedly stated that corruption is tantamount to a
second insurgency in Iraq. Moreover, the Government of Iraq is not
poised to address the problem sufficiently as it lacks the training,
staff, and in some cases the political will to do so. SIGIR has
consistently addressed the need for the U.S. assistance program to
pursue more aggressively its anticorruption program and made a series
of recommendations to improve coordination and elevate the importance
of its efforts. In January 2008 SIGIR reported that the Embassy had
taken some specific steps to reinvigorate and improve the coordination
of its diverse anticorruption activities which range from training
judges to institutionalizing anticorruption entities such as the Board
of Supreme Audit and Commission on Integrity.\2\
---------------------------------------------------------------------------
\2\ U.S. Anticorruption Efforts in Iraq: Sustained Management
Commitment is a Key to Success, (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
______
Questions Submitted by Senator Frank R. Lautenberg
Question. What was the schedule and complete itinerary for your
trip to Maine in January 2008?
Answer. My schedule/itinerary for the Maine trip was as follows:
----------------------------------------------------------------------------------------------------------------
Schedule Itinerary
----------------------------------------------------------------------------------------------------------------
Wednesday, January 2, 2008
10:10-11:45 AM...................... USAir flight #3902 from Washington National to Portland, ME (coach class)
12:55-2:00 PM....................... Lunch with Sen. Collins, Mac's Grill, Auburn, ME
2:15 PM-3:15 PM..................... Maine Watch taping, MPBN Studio, Lewiston
6:30 PM-8:00 PM..................... Dinner with Bill Beardsley, President of Husson College, Mrs. Beardsley,
and Sen. Collins at Perri House Restaurant, Bangor
RON................................. Sheraton Four Points Bangor, Bangor (government rate)
Thursday, January 3, 2008
7:05 AM............................. Call to WVOM Radio
7:30-9:00 AM........................ Husson Business Breakfast, Husson College, Bangor
9:30-10:00 AM....................... Bangor Daily News Editorial Board Meeting, Bangor
12:10-1:30 PM....................... Lunch with Senator Collins and David Offer (retired Editorial Director/
contributing columnist, Kennebec Journal), Vignola's, Portland
1:45-2:15 PM........................ Portland Press Herald Editorial Board Meeting, Portland Press Herald,
Portland
5:06-6:52 PM........................ Depart Portland on USAir flight #3477 from Portland to Washington National
(coach class)
----------------------------------------------------------------------------------------------------------------
Question. Please individually specify with what funds the following
costs were paid with on the trip: Lodging, travel, and food.
Answer. Travel and Lodging were paid with SIGIR funds.
Food was paid for as follows:
--(1) On January 2, 2008, I purchased my lunch.
--(2) On January 2, 2008, the President of Husson College paid for my
dinner.
--(3) On January 3, 2008, breakfast was provided at Husson College,
as the presentation was part of a breakfast meeting sponsored
by the College.
--(4) On January 3, 2008, Senator Collins paid for my lunch.
The meals mentioned above are the only meals I had during my trip.
In accordance with government travel rules, I claimed a pro-rata
share of my per diem reimbursement for the lunch I purchased on January
2, 2008. I did not claim reimbursement from the government for any of
the other meals.
The other meals fall within exceptions to the gift rule
restrictions, i.e., employees may accept meals that are provided on the
day they are speaking in their official capacity (5 CFR 2635.204(g)(1))
(meal 3) and gifts of less than $20 (5 CFR 2635.204(a)) (meal 2).
Moreover, the lunch purchased by Senator Collins (meal 4) does not
fall under the gift statute, as she is not a prohibited source. (5 CFR
2635.203(d)).
Question. Did the SIGIR General Counsel clear your trip to make
sure that it complied with the Hatch Act, 5 U.S.C. 7321-7326?
Answer. The Designated Agency Ethics Officer reviewed the
invitation from Husson College and the draft itinerary; he approved the
trip. Office of General Counsel staff advised me before my trip that I
should not participate in any political activity during my visit to
Maine, pursuant to Hatch Act requirements. My activities were analyzed
by Office of General Counsel staff after my return, and I was advised
that there were no Hatch Act violations.
Question. Have you debriefed the SIGIR General Counsel on your
activities during the trip to verify that you complied at all times
with the Hatch Act and other applicable laws? If not, will you?
Answer. Upon my return from Maine, I reported on my activities to
SIGIR's Office of General Counsel and, specifically, that I did not
engage in any political activity during the trip. I provided specific
information about the trip to the Designated Agency Ethics Officer to
ensure compliance with ethical restrictions regarding gifts. SIGIR's
Office of General Counsel advised that there were no violations of the
Hatch Act.
Question. Who informed you of the opportunity to speak at Husson
College?
Answer. Senator Collins.
Question. Who invited you to speak at Husson College?
Answer. I received a written invitation from William H. Beardsley,
President of Husson College.
Question. What newspaper editorial boards did you speak with on the
trip?
Answer. Bangor Daily News and The Portland Press Herald.
Question. Who invited you to speak before those editorial board(s)?
Answer. The boards' invitations were conveyed from Senator
Collins's staff to my staff.
Question. Were you asked to speak to other members of the media? If
so, by whom?
Answer. Yes. Senator Collins' staff conveyed invitations to my
staff for me to be interviewed on ``Maine Watch'', on WVOM radio, and
by a columnist for the Kennebec Journal.
Question. Please identify similar domestic trips that you have
taken during your time as SIGIR.
Answer. I have spoken at the following colleges or universities:
The George Washington University Law School, Washington, DC; The
University of Texas at Austin, Lyndon B. Johnson School of Public
Affairs, Austin, TX; St. Vincent College, Latrobe, PA; The University
of the South, Sewanee, TN; and St. Mary's University School of Law, San
Antonio, TX.
In addition, I have given presentations to numerous industry and
public interest groups.
Question. How many speeches have you given across the country
similar to your event at Husson College? Please provide specifics.
Answer. See above.
______
Questions Submitted by Senator Judd Gregg
Question. To date, what concrete accomplishments have been achieved
by the U.S. Mission's Anti-Corruption Working Group in combating
corruption in Iraq?
Answer. The Mission's Anticorruption Working Group (ACWG) is a
coordinating entity whose function is to provide direction and strategy
to the numerous anticorruption-related programs managed by U.S.
agencies in Iraq. Since 2006, SIGIR has reported in several reviews
that the ACWG has lacked sustained management commitment and oversight,
that efforts to revitalize and coordinate U.S. anticorruption efforts
have been largely ineffective and suffered from a lack of management
follow-through, and that the Embassy has lacked a comprehensive,
integrated strategy that ties anticorruption support to the overall
strategy of the U.S. Embassy in Iraq, with metrics to measure progress.
As of January 2008, only two of SIGIR's 12 previous recommendations to
improve management of the anticorruption program have been implemented.
For example, the ACWG does not maintain an adequate inventory of
ongoing anticorruption programs nor does it have established metrics to
evaluate results.
In our January 2008 audit report reviewing United States Embassy's
anti-corruption programs, SIGIR concluded that a December 2007 Mission
plan to reinvigorate the ACWG and other anticorruption efforts appeared
on a positive track but we cautioned that, as with previous efforts,
the new approach needs sustained management commitment to leadership,
additional resources, and program oversight to succeed.
Question. Given reported infiltration of certain Iraqi Ministries
by elements hostile to U.S. interests, is there any evidence that the
current leadership or offices of the Commission on Public Integrity
(CPI), the Board of Supreme Audit or respective GOI Offices of
Inspector General have been compromised by such elements?
Answer. SIGIR regularly meets with the leadership of the Board of
Supreme Audit and the Commission on Integrity (COI, as the CPI is now
known), and we have played an intermittent role in providing advice and
direction to the several Iraqi Inspectors General. Neither the
President of the BSA nor the Commissioner of the COI has ever evinced
concerns about infiltration of their respective offices by elements
hostile to the United States. Both of these entities are particularly
receptive to U.S. support and SIGIR's relations with both have been
exceptionally good. Unfortunately, elements hostile to the United
States helped force out Judge Rahdi al Rahdi, the previous CPI/COI
Commissioner. Over 30 CPI/COI employees have been killed over the past
four years by hostile elements. The Iraqi IGs are a mixed bag, and
SIGIR believes that there could be a potential problem with
infiltration in the IG offices at ``Sadrist ministries'' (e.g.,
Ministry of Health).
The U.S. Embassy in Iraq has responsibilities concerning each of
these entities and thus a question to the Embassy staff on this issue
could be beneficial.
Question. How many CPI employees, including family members, have
been murdered as a result of efforts to combat corruption in Iraq, and
what steps are the GoI and the U.S. Mission taking to provide physical
security for CPI employees and their family members?
Answer. In our meetings with the CPI/COI, SIGIR has learned that
over 30 CPI personnel and family members have been killed over the past
five years. The U.S. Embassy in Iraq has responsibilities concerning
each of these entities and thus a question to the Embassy staff on this
issue could be beneficial.
Question. What is the current role of the U.S. Mission's Office of
Transparency and Accountability (OTA) in combating corruption in Iraq?
Answer. The Office of Accountability and Transparency (OAT) was
subsumed into the Anticorruption Coordination Office in January 2008 as
part of the Ambassador's new anticorruption strategy.\1\ SIGIR reported
that the OAT had been established to strengthen the Iraqi
anticorruption institutions--the Board of Supreme Audit (BSA), the
Office of the Inspector General (IG) at each ministry, and the then-
Commission on Public Integrity (CPI)--and had accomplished a number of
noteworthy achievements. These accomplishments included: providing a
full-time advisor for the Iraqi IGs, providing a full-time advisor for
the Board of Supreme Audit, and assisting in the development of a
charter for the Joint Anticorruption Council. The new Anticorruption
Coordination Office is now responsible for all for all anticorruption
activities.
---------------------------------------------------------------------------
\1\ U.S. Anticorruption Efforts in Iraq: Sustained Management
Commitment is a Key to Success (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
Question. What is the anticipated future role of OTA in combating
corruption in Iraq?
Answer. OAT's role is covered in our response to the question
above.
Question. Has the Prime Minister or any other senior Iraqi
government official taken any action to interfere with GOI
investigations into cases of corruption? If so, please describe in
detail the circumstances.
Answer. SIGIR has received reports that investigations into
corruption allegations within the GOI have been subject to political
influence, but we do not have definitive proof of such influence having
been asserted. In March 2007, the Prime Minister's Office issued an
order requiring that any proposed investigation of any GOI minister or
former minister must first obtain the permission from the Prime
Minister's Office before proceeding. This directive apparently is still
in effect today. This problematic directive augments the problematic
statute in Iraqi Law, Article 136b, which provides that any minister
can, by fiat, exempt any ministry employee from investigation for
corruption. The CPI/COI discussed with SIGIR the widespread use and
abuse of this provision to protect potentially guilty ministry
employees.
Question. What factors limit the ability of the CPI, the Board of
Supreme Audit, and respective Ministry IGs from investigating and
prosecuting cases of corruption?
Answer. There remains much to be done on the legislative front to
ensure a harmonized set of laws under which the Iraqi government can
effectively prosecute cases of corruption. Amending Article 136b and
revoking the Prime Minister's March 2007 directive are two needed
reforms. In addition to these legal challenges, there are also
implementation and capacity challenges, e.g., ensuring that the CPI/COI
investigators have weapons permits; ensuring that the Iraqi IGs receive
sufficient training and resources to do their jobs; and providing the
BSA with access to the information it needs to provide adequate
oversight. The U.S. Embassy and international organizations, such as
the World Bank, are working to provide technical assistance to the GOI
to improve its investigative and prosecutorial capabilities, but more
needs to be done. The new CPI/COI Commissioner told me during my
February visit with him that his investigators need more training
before they are ready to really assume responsibly for full-blown
investigations.
Question. Have any documents in the possession of the U.S. Mission
been altered by U.S. Government officials by removing the names of
Iraqi leaders because the documents implicate those leaders in cases of
corruption?
Answer. It has been widely reported that certain draft documents
internal to the U.S. Embassy addressing the issue of corruption, which
included the names of Iraqi officials, have been revised due to
diplomatic concerns. It should also be noted that the accuracy of any
statements contained in such documents developed by U.S. advisors is
potentially unverifiable. SIGIR has not performed a detailed study of
this issue, however, and is unable to speak authoritatively on all
documents. To the extent that we review specific documents related to
corruption in our audits, our findings are contained within our audits.
A new audit on anti-corruption efforts will be released at the end of
April and copies will be provided to this committee as well as to the
other committees to which we report.
Question. Has the U.S. Mission ever retroactively classified
anticorruption or rule of law reports after Congress has requested such
reports?
Answer. SIGIR is aware of reports that draft documents were made
available to the media and that subsequently drafts were marked as
classified. SIGIR has not formally reviewed these incidents, however,
and we would encourage the committee to discuss the issue with the U.S.
Mission.
______
Questions Submitted by Senator Larry Craig
Question. You estimated that Iraq will have upwards of a $50
billion windfall in the coming year, even as the Comptroller General
estimates that Iraq spent as little as 24 percent of its capital
project budgets and 4.4 percent of its investment budgets in 2007. As
the United States and Iraq continue the ``Year of Transfer,'' where is
Iraq most capable of assuming financial control of reconstruction
projects?
Answer. Given the current price of oil and record levels of Iraqi
exports, the GOI is poised to realize over $60 billion in revenue for
2008, well above the $35 billion that Iraq estimated it would receive
when it developed its $48 billion 2008 budget. In addition, there is
$30 billion in reserves in the Central Bank of Iraq and at least $7
billion rolled over in unspent funds from 2007. Regarding these funds,
there exists a continuing question about the government's capacity to
obligate and expend that money on capital projects. There have been
recent improvements in Iraq's procurement and contracting regulations
aimed at enhancing the GOI's ability to invest in reconstruction. Some
progress has been reported by U.S. officials on Iraq's willingness and
ability to assume an increased role in funding its own needs.
It is important to also note that SIGIR inspections and audits
generally find that projects that are jointly funded and administered
are better quality and have a higher sustainment probability.
Question. If the United States began a targeted decrease in certain
types of reconstruction funding, would the Iraqi government be able to
balance that decrease with its own funds effectively?
Answer. The key issue is one of unmatched priorities. The Iraqi
government has its own internal set of priorities concerning how it
wants to spend its money. If the United States were to cease funding a
particular project, the Iraqi government may in principle have the
money to take over the funding, but may not want to invest in that
particular project. The question then becomes how strategically
important does the United States view that project and what are the
chances that Iraq also sees that project as strategically important.
______
Questions Submitted to Judge Radhi Hamza al-Radhi
Questions Submitted by Senator Robert C. Byrd
Question. Judge Radhi, do you believe that effective risk
mitigation measures are in place to control corruption in the use of
Iraqi funds and if not, what actions would you suggest?
Answer. There are effective risk mitigation measures with CPI, the
Board of Supreme Audit and Inspectors General Offices. However, these
agencies lack the independence mandated under Iraq's constitution.
Furthermore, corruption mitigation requires cooperation between these
three agencies and the various local and national government
organizations. This cooperation allowing the three public integrity
organizations to function effectively is largely absent at the present
time.
Question. Judge Radhi, do you believe that effective risk
mitigation measures are in place to prevent funds from corrupt
practices from reaching insurgents and militias and if not, what
recommendations can you make to improve the situation?
Answer. No arrangements exist to prevent funds gained through
corrupt practices from reaching insurgents and militias. Therefore, you
can see the Sunni insurgents and militias controlling roads in the West
areas. They are stealing and looting Ministry of Oil trucks and
Ministry of Trade food trucks. Likewise, you can see Shee's Militias
smuggling in the South areas.
Millions of dollars are stolen monthly due to smuggling according
to our information from collation forces. My suggestion, difficult as
it may be, is to remove weapons from militias while going through the
lengthy process of removing sectarian influences from the Ministry of
Interior and Ministry of Defense.
Question. Judge Radhi, the Third Interim Report of the
International Advisory and Monitoring Board (IAMB) on Iraq, covering
the year 2007, notes that the IAMB is scheduled to conclude its
oversight role of the financial positions of the Development Fund for
Iraq (DFI) by mid-December 2008. The IAMB will hand off its oversight
role to the Committee of Financial Experts (COFE), established by the
Council of Ministers in October 2006. The COFE is led by the President
of the Board of Supreme Audit and includes two independent experts
``chosen by and reporting to the Council of Ministers.'' Based on your
experience as the head of the Commission on Public Integrity, do you
believe that the COFE will be able to operate effectively,
independently, and securely in such a critical oversight position, and
if not, what would you recommend to strengthen it?
Answer. No. While the sectarian distribution exists, these
oversight agencies cannot work independently. The executive branch of
the Iraqi government consistently interferes in the duties and limits
the authority of oversight bodies and the judiciary. Article 136 is a
clear example of this interference.
Question. Judge Radhi, has the United States and the international
community put sufficient energy and resources behind the establishment
and operation of Iraqi oversight and audit bodies and if not, what
recommendations would you make to improve the situation?
Judge Radhi, in previous testimony, you have obliquely referred to
corruption with non-governmental organizations operating in Iraq. In
your testimony before the House of Representatives last October, you
noted that the CPI established a Directorate General for Non-
Governmental Organization Relations, ``which contacted most non-
governmental organizations in Iraq in order to motivate them to achieve
their objectives and solve their problems honestly.'' What problems
have you observed within the non-governmental organizations in Iraq,
and what recommendations, if any, do you have?
Judge Radhi, do you have any further recommendations to make in
order to ensure the effective functioning of Iraq's oversight bodies?
Answer. The United States and the international community put a lot
of sufficient energy and resources behind the establishment and
operation of Iraqi oversight and audit bodies. These audit and
oversight bodies have hundreds of good officials who are technocrats
and non-sectarian. These technocrats manage their work, but are
consistently blocked and face strong interference from the executive
government. Additionally, these oversight bodies are not able to
function sufficiently due to the terrorists and militias. For example,
in 2004, the president of Board of Supreme Audit was killed by
terrorists. The professional cadre of this agency was effectively
intimidated and sufficient transparency has not appeared in this
agency.
Question. Judge Radhi, during your tenure, the Commission on Public
Integrity (CPI) uncovered $18 billion worth of misspent funds. A
majority of these funds came from the U.S. government, with additional
contributions from Iraq oil sales, and contributions from other
nations. It was CPI's mission to monitor the Iraqi government's use of
these funds and investigate any related instances of waste, fraud, or
abuse. Is that all correct? Please explain.
Answer. CPI's job was to follow the law as laid out in Order 55. I
refer you to that document.
CPI started their work in 2004. Eventually 30 teams were formed to
investigate each specific ministry and governmental body. Our
investigations were launched after carefully evaluating information
provided to CPI via our corruption hotline, informants, the Inspectors
General offices, Parliament and occasionally from citizens walking into
our offices.
Investigtions were evaluated and prioritized by my Director General
for Investigations who met with me daily on the status of
investigations and management of his department. Once CPI determined
that a case had merit and had developed a sufficient level of evidence,
this case was forwarded the courts. Under the Iraqi legal system, an
investigative judge was then supposed to be assigned who was
responsible for the court investigation, interviewing of witnesses,
issuance of arrest warrants, and other aspects relating to the
prosecution of a case. This investigative judge would then bring the
corruption case before a trial judge who would determine guilt or
innocence and penalties as appropriate. and prosecution of the case.
had developed a case in consultation with me.
CPI presented 3,000 cases to investigative judges. Trial judges
presided over 250 cases. Some cases were closed by investigative judges
citing a lack of sufficient evidence. However, the majority or cases
were formally or informally closed by the Prime Minister. Additionally,
many investigative and trial judges were under severe pressure and
threats to close cases. Also many accused of crimes escaped the country
due to the weakness, indifference or neglect by the Ministry of
Interior.
CPI and the judiciary received many letters and received many
visitors from the Prime Minster's office for preventing investigations
of current and former ministers, minister's council or presidency
council. Ultimately, CPI's work was completely stopped preventing
follow up on cases included the 18 billion U.S. dollars.
Question. Judge Radhi, during its existence, the Coalition
Provisional Authority (CPA) managed the distribution of funds for
reconstruction contracts to the Iraqi government. An American finance
office in the CPA handled each of the Iraqi government's requests for
money. The CPA would often give cash to individual Iraqi ministries for
operations and to complete reconstruction projects. Is that correct?
Please explain.
Answer. That is correct. CPA managed the distribution of funds for
reconstruction contracts to the Iraqi government. CPA managed the
distribution of funds by providing checks to the officials responsible
in each ministry. These checks were exchanged for cash inside the CPA's
financial office. This process resulted in a lot of money being stolen
or handled in a corruption manners. Given the situation as it existed,
CPI's position was that all funds should be transferred to the Ministry
of Finance for further distribution in accordance with the schedule
written by the Ministry of Planning.
Question. Judge Radhi, after the CPA dissolved, the U.S. Embassy
was responsible for distributing funds to the Iraqi government. Some of
these funds came from the State Department's office in the U.S. Embassy
and some came from Department of Defense's office in the Embassy. Each
Iraqi ministry office had an American ``expert'' from the U.S. Embassy
who served as a liaison to these offices. Is it your understanding that
most of these experts knew that the ministries had corruption but you
are not aware of any examples of the U.S. government cutting off funds
to an Iraqi entity due to corruption?
Answer. This information is correct. We did not see oversight done
by some experts at the time the funds were distributed by the U.S.
embassy. Some of these experts were good, others were not active, and
the third kind would stand with the corrupted ministers.
Question. Judge Radhi, on the last day of its existence, the CPA
gave you funds to establish an academy to train Iraqis to investigate
corruption, is that correct? Can you tell us how that payment was made?
Answer. An American expert came to me at the last days before CPA
dissolved. He informed me that $11 million was to be transferred to CPI
to establish an academy to train Iraqis to work in corruption
investigation. I went to the CPA financial office in the Green Zone the
cash this check. The funds were locked in my office and I personally,
with a team of armed guards, protected these funds until it could be
transported and deposited in the Al-Rafideen Bank the next morning. I
ensured that I received an accurate receipt from the bank to document
that the entire amount was deposited. Later, the Minister's Council
ordered the Ministry of Finance to transfer all government budgets
containing U.S. dollars to a central fund. CPI was one of these
ministries whose funds were taken. The Ministry of Finance refused our
exclusion request and later refused our second request to exchange the
same amount of funds for Iraqi dinars for the establishment of the
Public Integrity and Ethics Institute.
Question. During its existence, the Coalition Provisional Authority
(CPA) managed the distribution of funds for reconstruction contracts to
the Iraqi government. An American finance office in the CPA handled
each of the Iraqi government's requests for money. The CPA would often
give cash to individual Iraqi ministries for operations and to complete
reconstruction projects. Is that correct? Please explain.
Answer. That is correct. My understanding is that most ministries
spent the funds illegally and in a corrupt manner.
Question. Judge Radhi, it is my understanding you told U.S.
officials that direct payments to the ministries and cash transactions
were the wrong way to disburse money in Iraq. And you recommended
instead that it was better for all American funds to go to the Ministry
of Finance instead of directly to each individual ministry. Is that
correct? Please explain. Do you believe the other ministries did the
same due diligence with their cash payments? Are you aware of any
follow-up by the U.S. government to make sure that similar steps were
taken by other ministries? Are you aware of any oversight of CPA's
funds once they were distributed?
Answer. Absolutely Not. I do not believe that CPA could control or
monitor funds after cash payments were made. If there was any
monitoring of CPA funds, the situation only further deteriorated after
the disestablishment of CPA.
Question. Judge Radhi, besides Iraqi Prime Minister Nouri Al-
Maliki's continued threats of prosecution, have you or your CPI staff
ever been threatened personally by Prime Minister Nouri Al-Maliki?
Answer. Yes. I was personally threatened by Prime Minister Nouri
Al-Maliki. I was personally threatened by the head of the coalition
bloc, Sheik Jala Al-deen Al-Sagher. I was also personally threatened by
Sabah Al-Sa'ady, a member of Al-Fadila party. Additionally, I received
a phone threat from Sheiaa militia when we started our investigation
into oil smuggling in Basra. Furthermore I received a direct phone
threat from Al-Qaida. My staff received many more threats. Finally, we
lost 32 investigators and other CPI officials.
Question. Judge Radhi, your asylum case has been pending for over
five months since October 3, 2007. How are you doing in the United
States?
Answer. I am awaiting the decision on my asylum case.
Question. Judge Radhi, you have told us that many additional cases
against government officials were not prosecuted because the government
would not allow it. And that because of corruption, despite billions
and billions of American dollars, Iraq has completed less than one-
tenth of its reconstruction projects. Is that true? Please explain.
Answer. That is correct. An American expert came to me one day and
asked me why I was investigating the Ministry of Defense but not
following up the Ministry of Oil issues in Beji. He traveled to Beji
with big convoys. We did investigate the Ministry of Oil, but how could
I send my small number of unarmed investigator to that place?
Question. Judge Radhi, is it true that the various militias also
benefit from reconstruction funds, often taking resources by force?
That in the area of Beiji, Sunni militias commandeer Iraqi government
oil tankers and the militias then sell the oil on the black market,
buying weapons with the proceeds?
Answer. I simply highlight that Shia and Sunni militias benefited
by the actions of Ziad Al-Qatan and Naier Al-Jumaily. The latter was
the last link between Al-Qaida and the defense ministry under the
former minister Hazim Al-Shallan. Naier Al-Jumaily, who is also related
to the current defense ministry, transferred millions of dollars to
Jordan and Lebanon. The current minister is there to continue what
Hazim did.
The Ministry of Defense purchased weapons made in 1975 with $1.6
billion. This amount far exceeds the actual value of the weapons. One
senior American officer correctly observed that Iraqi forces can not
successfully fight against well armed militias with old weapons.
The Shiaa militias do not have the same problems as the Sunni
militias however since their leaders control the Iraqi government and
support them with money and weapons.
Question. Judge Radhi, is it true that millions and millions of
dollars from the Iraqi government have been funneled to the militias?
Judge Radhi, are there problems or corruption at the Ministry of
Electricity? Please explain.
The Ministry of Electricity has been given millions and millions of
dollars but still provides less than 10 percent, maybe only 5 to 6
percent of the country's needed electricity. Is that correct? Please
explain.
The Minister of Electricity, Aiham Alsammarae, did not register all
of the funds he received, which is why the Bureau of Supreme Audit
wrote 13 ``comments'' about him and the CPI filed a case against
Alsammarae. When the court convicted him, the American security company
responsible for his protection smuggled him out of the country to the
United States. Is that correct? Please explain.
Answer. Questions of electricity ministry.
Three ministers led this ministry and spent billions of dollars on
electricity. The result is no power for Iraqi citizens beyond, perhaps,
an average of three hours a day.
CPI received information from the Board of Supreme Audit which
prompted CPI to start investigations against Ayham Al-Samarai and
Muhsin Shalash. The courts prosecuted and found them guilty. Ayham Al-
Samarai escaped Iraq with the help of an American security company.
Shalash also escaped Iraq. Both cases were referred to Interpol.
Question. Judge Radhi, is the Minister of Finance, Bayan Jabr,
involved in corruption? Please explain.
Judge Radhi, does Minister Jabr also head the militant wing of the
al-Dawa party? When the United States recommended to the Ministry that
it set up a modern accounting system, did Jabr prevent it from being
established and when the Iraqi parliament asked Jabr to account for
funds from the 2007 budget, he was unable to provide accurate
information. Is that your understanding? Please explain in as great
detail as possible.
Answer. Bayan Jabur the current finance minister is an engineer. A
decision to appoint him as housing and constructor minister would
therefore have been more understandable. His political position and his
Sheaa abilities were paramount in being chosen for the finance position
by the Shia coalition bloc despite not being otherwise technically
qualified for the position.
Ministry of Finance failed to promote of the Iraqi dinar despite
Iraq's oil riches. They failed in adhering to a budget and in making
that budget reflect the needs of Iraq.
The Minister of Finance is corrupted since he couldn't give the
parliament any reason for missing the 2007 budget. He uses his power
instead of using his knowledge.
One example illustrating the problems in the Ministery of Finance
under the current minister has to do with the ``e-system.'' It is a
good system that was brought by the Americans. It provides efficiency
and transparency. The ministry shut down the e-system. Excuses were
made that the system failed due to the advisor being kidnapped even
though hundreds of people had been trained on the system.
Finally, a huge problem occurred with a mysterious fire that burned
all of the central bank official papers. Now nobody can explain the
spending schedule of the Iraqi money. The fire was quickly registered
as an accident.
There is no integrity without transparency.
Question. Does former Iraqi Minister of Defense, Hazim Sha'lan
provide an example of the nature of government corruption in Iraq?
Please explain.
Judge Radhi, is it true that Minister Sha'lam and his friends would
establish front companies to bid on Ministry projects. Is that correct?
Please explain in detail.
Judge Radhi, one example you recounted to the Committee prior to
the hearing was the al-Ain al-Jariya (Flowing Spring) company, which
received contracts to provide military equipment from Poland to the
Iraqi government. The company was owned by a relative of the Deputy
Prime Minster, Roz Nouri Shawis, and stole money from these contracts
with the support of Ministry staff. Is that correct? Please explain.
Judge Radhi, you also recounted that the Deputy Prime Minister's
brother-in-law laundered the money from these transactions to banks in
Jordan from Iraq. Millions of dollars went missing from the Ministry,
and Sha'lan was unable to account for $4 billion worth of expenditures.
Sha'lan was eventually charged with fraud, but fled to London before
being prosecuted. Shal'an's former deputy is now Minister of Defense.
Is that all true? Please explain.
Answer. These statements are correct. Hazim Al-shalan is corrupt.
His actions caused the loss of defense ministry money during a time
when he should have been working to protect the Iraqi people. U.S.
forces came to Iraq to free our people from a dictator regime. Al-Qaeda
then fought against Iraqi and U.S. forces. While this was happening,
defense ministry officials transferred reconstruction money to Jordan
and Lebanon. Some of this money was transferred by Nori Shawees in his
own brief case. The Secretary General is the brother of the vice
president. Furthermore Ziad Al-Qatan and Nair Al-Jumaily are related to
the current defense minister. Abdulhameed Mirza is Nori Shawes's
brother in law. Abdulhameed helped this corruption as the Director
General of Al-Ayeen Al-Jaria construction company. Later they rebuilt
the scheme under the Sifeen Company. They built all these companies to
make their defense contracts appear to be legal, while functioning as
an intermediary between Poland and Ministry of Defense. The Ministry of
Defense, using contracts to these companies, bought useless airplanes,
tanks and ambulances from Hungary. The total purchase funds were
provided in the beginning of the contracts. However, the equipment
never received, useless or overpriced.
The court prosecuted and found guilty 26 officials for this
corruption. However, the Iraqi government helped them to escape the
country. Hazim Al-Shalan is a U.K. citizen. Ziad Al-qatan he is in
Paris living like a prince.
It appears that the current minister of defense will finish what
Hazim started. He formally worked as a body guard Saddam's son-in-law,
Hussain Kamil. He spent time in jail for theft. He is totally
corrupted.
Question. Judge Radhi, prior to the hearing, you have told us the
Ministry of Defense also received inferior equipment from contractors.
There were three contracts for Iraqi Army planes, the first two for
$113 million and the third for $170 million. General Babekar al-Zibari,
an Iraqi Army commander, later testified that the proper planes were
never delivered. A report issued by a technical committee in the
Ministry of Defense stated that among other things, the company was
delivering old tanks to the Ministry of Defense and even old planes
from the 1960s. Is that correct? And these weapons deals were
engineered by former Ministry of Defense procurement office Ziad
Cattan, who has since fled the country, is that also correct? Please
explain in as much detail as possible.
Answer. That is correct. Babikr Zebari, as Forces General Chief,
sent an official letter to the Prime Minster explaining this in detail
including the names of the corrupt officials involved. This letter,
sent in March 2008, was published on the internet.
All what I said is notary public in the criminal court and the
CCCI.
COMMITTEE RECESS
Senator Dorgan. This hearing is recessed.
[Whereupon, at 1:10 p.m., Tuesday, March 11, the committee
was recessed, to reconvene subject to the call of the Chair.]
EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT CORRUPTION,
WASTE, FRAUD, AND ABUSE IN IRAQ
----------
WEDNESDAY, JULY 23, 2008
U.S. Senate,
Committee on Appropriations,
Washington, DC.
The committee met at 10:40 a.m., in room SD-106, Dirksen
Senate Office Building, Hon. Robert C. Byrd (chairman)
presiding.
Present: Senators Byrd, Leahy, Murray, Dorgan, Feinstein,
Cochran, Craig, and Allard.
OPENING STATEMENT OF SENATOR ROBERT C. BYRD
Chairman Byrd. The committee will come to order.
We meet, today, to examine the adequacy of Defense contract
oversight in Iraq and Afghanistan and to hear testimony from
the Deputy Secretary of Defense, Gordon England, Acting
Inspector General for the Department of Defense (DOD), Gordon
Heddell, and commanding officer of U.S. Army Materiel Command,
General Benjamin Griffin.
Before we begin, I wish to recognize a special observer at
today's hearing, Mr. Michael Thibault, the co-chairman of the
new Commission on Wartime Contracting. Co-chairman Thibault has
a special interest in today's hearing, given his Commission's
2-year charter to study wartime contracting in Iraq and
Afghanistan.
Secretary England, General Griffin, and Mr. Heddell, thank
you for appearing before the committee today. Each of you is
responsible for organizations charged with carrying out,
managing, or auditing the massive contracts to companies that
supply our forces in the field with everything from ammunition
and fuel right down to barracks and food. These companies also
carry out reconstruction projects throughout Iraq and
Afghanistan.
This is the second hearing of the full Appropriations
Committee this year on the topic of fraud, waste, abuse, and
corruption in Iraq and Afghanistan. In the first hearing, we
examined the scope and the scale of the problem, which is
appalling, frankly. Appalling. Tens of billions of taxpayer
dollars have been lost--gone. Worse, some of those funds and
unaccounted for weapons are believed to have made their way to
insurgent groups that have used them against our soldiers.
Now, Benjamin Franklin once observed that ``a little
neglect may breed mischief.'' In this case, I'm afraid neglect
has bred a lot of mischief.
The Department of Defense and the Department of Justice
have failed to aggressively investigate, and failed to
prosecute, fraud and abuse. And I know that my colleagues have
specific questions about specific cases. Hopefully, our
witnesses are prepared to answer these questions fully so that
we can learn from these specific examples how to avoid similar
mistakes in the future.
My own concerns include specific examples of neglect, but I
also want to know how the system broke down, and where the
system broke down, and how and why the oversight processes that
were in place failed to operate.
Now, many have rightfully blamed President Bush and
Secretary of Defense Donald Rumsfeld and the Director of
Reconstruction and Humanitarian Assistance for Postwar Iraq,
Paul Bremer, for the unexpectedly difficult occupation of Iraq.
But, Army commanders, as well as those in the other services,
also deserve serious criticism for failing to grasp the
strategic situation in Iraq and for failing to plan properly to
implement the massive logistical requirements associated with
sustained combat and postcombat operations.
It was General Dwight Eisenhower who said, ``You will not
find it difficult to prove that battles, campaigns, and even
wars have been won or lost primarily because of logistics.''
The ability to keep troops well supplied is absolutely critical
to every campaign.
If appropriate plans had been in place before we went to
war, we would not have witnessed the scramble to support our
troops with drivers, cooks, fuel, armored vehicles, bulletproof
vests, and other tools. Commanders in Iraq should not have had
to invent, on the spot, the networks of assistance for the new
Iraqi Government. Had better planning been done, we might not
have had to sign huge, open-ended, cost-plus contracts with
civilian companies whose eyes must always be first on profits
and dividends for stockholders before service to the troops and
thrift for the taxpayer.
Because that planning was not done, we found ourselves--
and, yes, we continue to find ourselves--totally dependent upon
profit-oriented companies for even the day-to-day basics of
feeding and housing our troops, as well as for carrying out a
myriad of other functions of the mission, including security.
These kinds of contracts open the door for every manager to
game the system in order to maximize profits. Had better
planning been conducted, and had better oversight been
instituted from the very beginning, we might not be holding
this hearing today.
Secretary England, in your prepared testimony, you focus on
the progress that has been made. But, a report issued by the
inspector general's office, just 5 days ago, on July 18, 2008,
says, and I quote, that ``the DOD oversight community and the
Government Accountability Office (GAO) continue to report that
longstanding problems continue to hinder DOD oversight of
contractors at deployed locations.''
In another report, released just 2 months ago, the Defense
Criminal Investigative Service found that there had been only
limited review of the completeness, the accuracy, and the
propriety of contingency payment vouchers, and that there
existed the potential--a great potential for fraud, waste, and
abuse.
Now, failing to come to grips with the scope and the
magnitude of this problem and failure to recognize the urgency
of this problem points to a lack of leadership.
It is evident that our oversight resources have been
strained past the breaking point. Army contracting dollars and
actions have increased more than 350 percent over the last 11
years, while the contracting workforce has decreased by more
than 50 percent. Too few auditors and too few contract managers
are being asked to oversee too many contracts. Some individuals
are responsible for contracts totaling in the billions of
dollars. That's not shutting the barn door after the horses are
gone, that's like taking the barn doors off the hinges and
starting a stampede and saying, ``Go to it. Yeah, man.'' This
lack of planning on the part of the services, not only puts our
treasure, but it also put our troops, in peril.
Too few investigators are being tasked with bringing
perpetrators of fraud, perpetrators of waste, and perpetrators
of corruption to justice and with recovering the billions of
dollars that have been stolen from the American taxpayers.
There are individuals living high on the hog, in the United
States and in the cities of the Middle East, on these stolen
funds.
The Federal Bureau of Investigation (FBI) has a grand total
of five investigators in Iraq and Afghanistan working these
cases. Five. As a result of our hearing in March, we included a
significant increase for FBI investigators, in the supplemental
appropriations act, to address these problems. But, for too
long the barn door has been wide open. This is a failure of
leadership.
As a result of the lack of enforcement actions, more
individuals think that they can get away with bilking the U.S.
Government or the Iraqi Government, embezzling funds, taking
and making bribes, and substituting inferior goods or inferior
workmanship, or just plain, old-fashioned stealing. This
illegal activity takes money directly away from pressing needs
of our troops and the needs of the Iraqi and the Afghan people.
We need to make ``collars and dollars,'' our motto--more
arrests, more indictments, and more funds recovered. We need to
be more aggressive about minimizing the waste, fraud, and the
corruption associated with these wars. If that requires a
reallocation of resources or if it requires new legislation, I
am certainly open to hearing from each of you about what is
needed, as long as it results in prosecutions and the recovery
of the hard-earned dollars that have been stolen from the
American people.
Members will be recognized for statements and questions for
up to 7 minutes in order of seniority.
I now turn to my distinguished friend and very able and
learned colleague Senator Thad Cochran for any opening remarks
he may wish to make.
STATEMENT OF SENATOR THAD COCHRAN
Senator Cochran. Mr. Chairman, thank you very much. I'm
pleased to join you in welcoming our distinguished panel of
witnesses this morning. We are interested in learning more
about what the Department of Defense and related agencies are
doing to make sure that our contracting efforts in support of
the global war on terrorism, and specifically our activities in
Iraq and Afghanistan, are successful.
The United States is engaged in a serious conflict. It's
very different from nation-against-nation war that many of us
grew up understanding. But, in this new era, our forces have
had to work with emerging governments, and, in some cases, in
the absence of governments, in countries that are besieged with
terrorism and graft and unusual challenges. They've had to rely
on the support of commercial vendors, in many cases, to provide
everything our soldiers and civilian employees there need--
daily hotel, food services, even military equipment,
maintenance services, construction assistance, transportation,
personal security. These efforts have been carried out in a
very dangerous area of the world, and they've been enormously
challenging for the Department of Defense. And I think we need
to acknowledge that right away.
Last year, there was a report by the Gansler Commission
that concluded--after the great struggle with the Soviet Union,
it was assumed that Defense budgets would decrease, urgency
would decrease, and hence, a drawdown in acquisition
capabilities could be made. But, then 9/11 changed all that.
The Department of Defense had to add quickly to the workforce.
In 1990, there were 500,000 people in the Department's
workforce for acquisition, but that has decreased by more than
half.
During the last few years, the need for those skills has
grown exponentially. In fact, the Defense Department has
executed almost 98,000 contracts in Iraq alone. There's been an
expertise shortage. Mistakes have been made. Problems have
arisen. A small number of people have been identified as just
plain crooks. Some have been unscrupulous and have violated
trust. There has been cheating of our servicemen and women. The
American taxpayer and the citizens of our Nation, however, are
supporting our military efforts to restore peace and
opportunity in that troubled part of the world and to help
protect our own national security interests in the process.
I think the Department of Defense and the Department of
Justice have gotten together now, trying to determine the best
ways to root out corruption and fraud, put an end to it,
prosecute those who have profited illegally. There's still much
work to be done, and I'm confident we'll learn more about that
at this hearing.
And, for that, we're grateful for your willingness to be
here, the work you're doing, and we are anxious to hear your
views about what our Congress can do to help support you more
fully.
You know, our committee was scheduled to mark up two fiscal
year appropriations bills tomorrow, as well as a second
supplemental bill. We need to do our work, too. And we are now
learning that that's been put off, postponed indefinitely.
Markup has been canceled. I don't want to change the topic for
debate today, but I need to express my personal disappointment
that we're not meeting in this committee to do our work, as we
were scheduled to do tomorrow. Bills that we were supposed to
mark up, very important to our Nation's well-being and to the
success of our efforts in the war on terrorism.
But, I am, again, grateful for the witnesses being here and
telling us what their reactions are to some of the things that
are happening in the region that are under their responsibility
and that are the subject of the hearing today.
Thank you very much.
Chairman Byrd. Thank you, Senator Cochran.
I share the view that the committee ought to do its work.
That's exactly why I insisted on the committee marking up the
war supplemental, and we've marked up 9 of the 12 fiscal year
2009 bills to date. That's why the committee has had multiple
hearings on the President's budget and on his supplemental
request and on fraud and corruption in Iraq.
Regrettably, the House of Representatives has not passed a
single appropriations bill. Not one. As a result, it was
necessary to delay the Thursday markup. But, I will continue to
work with the House and Senate leadership so that we can mark
up the supplemental and the three remaining 2009 bills.
I now turn to our witnesses--the Deputy Secretary of
Defense, Gordon England, Acting Inspector General for the
Department of Defense, Gordon Heddell, and commanding officer
of the Army Materiel Command, General Benjamin Griffin--for
their testimony.
I thank each of the witnesses.
Secretary England.
STATEMENT OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF
DEFENSE, DEPARTMENT OF DEFENSE
ACCOMPANIED BY SHAY ASSAD, DIRECTOR, DEFENSE PROCUREMENT, DEPARTMENT OF
DEFENSE
Mr. England. Chairman Byrd, I thank you for the opportunity
to be here----
Chairman Byrd. We've spent billions of dollars on going to
the Moon, putting a man on the Moon, and we haven't been able
to come up with a good public address system.
Mr. England. Let's try again, here, Mr. Chairman, now that
the--I think the other mikes are off here on the table. Maybe
that'll be better and we'll be able to proceed.
Chairman Byrd. Yes, all right.
Mr. England. So, I do thank you, and I thank the
distinguished members of the committee, for the opportunity to
be here. I mean, hopefully we can answer your questions
clearly, and also provide a perspective on an update of the
progress, both how we got here, a little bit, and also an
update of the progress that we're making regarding our
contracting activities and the oversight of those activities,
particularly in Iraq.
As you commented, I am pleased to have my distinguished
colleagues with me. Gordon Heddell, from the Department of
Defense, the Acting IG, will be able, I think, as part of his
opening statement, to give you some specific statistics, in
terms of convictions and investigations underway, so we are
holding people accountable. He will cover that for you.
I'm also pleased that the commanding general of the U.S.
Army Materiel Command, General Ben Griffin, is with us, and
also Mr. Shay Assad, who's the Director of Defense Procurement.
I believe those gentlemen also--we have representatives, at
your request, from the Defense Contract Audit Agency and the
Defense Contract Management Agency with us, so I'm hopeful we
will be able to address your issues and concerns, many of which
you've already raised.
I do have a written statement for the record, and, of
course, we're all prepared to answer your questions now.
As you are aware, and as you commented, the Department has
struggled with our expeditionary contracting and the oversight
of that contracting. Our expeditionary contracting overseas--in
this case, specifically, in Iraq--we have struggled with that.
And by way of perspective, since January 2003 we've obligated
approximately $71 billion through those contracts. And, as was
commented, there's been 98,000 expeditionary contract actions
since 2003. And, unfortunately, this extraordinarily large
volume of activity was not anticipated. The Department's
hindsight today is much better than was its ability to predict,
back in 2003, not to mention, of course, that much of this work
was performed in a war zone, a dangerous and a very difficult
environment.
Now, that said, the Department takes our contract
accountability and contract oversight responsibilities very
seriously. Multiple Department of Defense (DOD) agencies have
engaged in literally thousands of aggressive reviews, audits,
and oversight, and, in so doing, they have, indeed, uncovered
instances of fraud and abuse. Those reviews have also led to
recommended meaningful corrective actions, coupled with holding
people accountable, and along with structural organizational
changes. Now, many of those changes are centered in the Army
and in our agencies, and you'll be hearing about them during
this hearing.
Now, the Department will continue to improve the
effectiveness and the efficiency of our contracting across the
entire enterprise, but I do need to comment that it will take
time to rebuild our acquisition and contracting workforce. As
was commented, these personnel were dramatically reduced during
the 1990s--some by congressional direction; I expect, some from
Department initiatives. And these professional personnel are
hard to replace. It's a lengthy training time involved to bring
them up to their professional status. So, even today, it will
likely take a few more years before all of these critical
skills are fully replenished.
Looking back, we have learned that there are many demands
on an expeditionary force. As you will recall, many of the
discussions regarding length of deployments and dwell times for
our military, well, those same considerations are applicable to
our military and civilian contracting personnel. A deployable
rotational force presents unique challenges and significantly
more personnel than was anticipated back in 2003.
Now, the Department is certainly wiser today. We have
benefited from our own experience, from independent studies,
and from the results of the thousands of audits that I
mentioned earlier. And I can assure you that we will continue
to be aggressive in the pursuit of excellence, and, as you
said, we owe no less to the American people.
Now, yesterday was another step forward in this process.
Yesterday, I did have the pleasure and opportunity to swear in
the new special inspector general for Afghanistan
reconstruction, Major General Arnie Fields, United States
Marine Corps (retired). I'm confident Arnie Fields will help to
do in Afghanistan for the Departments of Defense and State what
Stu Bowen has been able to accomplish over the past several
years in Iraq as part of his special investigative status.
So, Mr. Chairman and members of the committee, I do thank
you for your support of the outstanding men and women who wear
the cloth of our Nation, and their families. I also want to
thank the people who deployed, and who are deployed today, who
do this contracting work for America. While the Department has
problems with some of its processes, we are extraordinarily
grateful to the brave men and women who deploy to Iraq to
accomplish this very difficult mission.
And so, I do look forward to your questions, and hopefully
we can provide some more visibility during this hearing, Mr.
Chairman and members.
Chairman Byrd. Thank you.
[The statement follows:]
Prepared Statement of Gordon England
Chairman, Members of the Senate Committee on Appropriations, we
deeply appreciate your concern and steadfast support of our military
and welcome the opportunity to appear here today to provide an update
on progress and improvements being made to the oversight of defense
contracts for Operation Iraqi Freedom (OIF). We are pleased to report
that while much work remains to be completed, meaningful progress has
been made.
This is now the ninth congressional hearing in which the Department
has participated on this subject, in addition to five briefings and six
interviews. Additionally, the Department has submitted almost 250,000
pages of documentation to the various oversight committees. This
committee is to be commended for the extraordinary amount of time and
attention you have given to this very important issue.
We're delighted to have with us Department of Defense Acting
Inspector General Gordon Heddell, Commanding General, U.S. Army
Materiel Command, General Ben Griffin, and Director of Defense
Procurement, Acquisition Policy and Strategic Sourcing, Mr. Shay Assad.
Also, at the request of this committee, I'm joined by representatives
from the Defense Contract Audit Agency and the Defense Contract
Management Agency.
In addition to this statement for the record, the DOD Acting
Inspector General, Mr. Gordon Heddell will be submitting a copy of the
Department of Defense Inspector General's (DOD IG) Report No. D-2008-
086, summarizing 302 Operations Enduring and Iraqi Freedom-related
audit reports and testimonies issued by the Defense oversight
community--including the DOD OIG, the Army Audit Agency, the Naval
Audit Service, the Air Force Audit Agency, the Special Inspector
General for Iraq Reconstruction (SIGIR), and the Government
Accountability Office (GAO)--beginning fiscal year 2003 through fiscal
year 2007.
OVERSIGHT OF DOD CONTRACTS FOR OIF
Since January 2003, DOD has obligated over $450 billion in support
of OIF \1\. The majority of these funds have been spent on non-contract
related items, such as personnel costs. However, of this total amount,
approximately $78.8 billion has been obligated through 103,000 contract
actions.\2\ The Department of Defense (DOD) has obligated over 90
percent of these funds--roughly $71 billion--through nearly 98,000
contract actions.
---------------------------------------------------------------------------
\1\ Source: Defense Finance and Accounting Service, Cost of the
Global War on Terror Monthly Report as of May 2008.
\2\ Contract actions include: contract awards, modifications, and
purchase/delivery orders above $25,000.
---------------------------------------------------------------------------
Obviously, the volume and complexity of contracts have increased
with the war, and DOD takes the accountability and oversight of these
contracts very seriously. The Department's approach has been to conduct
and support thorough reviews and investigations of programs and
operations, to rapidly identify problem areas, and develop and
implement improvement plans. As such, multiple DOD agencies have
engaged in aggressive reviews and oversight, uncovering instances of
fraud, waste, and abuse--as well as recommending corrective actions.
Since the start of the war in 2003, the Defense oversight community and
GAO have performed over 300 audits related to the Global War on Terror
(GWOT). To date, DOD has implemented or is in the process of resolving
most of the more than 980 proposed recommendations. In addition, the
largest DOD audit operation--the Defense Contract Audit Agency (DCAA)
has performed in excess of 2,500 GWOT-related contract audits, taking
exception to $12 billion as either not acceptable or not supported. The
monetary result has been savings and restitutions in excess of $1.3
billion.
DEPARTMENT OF DEFENSE INSPECTOR GENERAL'S REPORT
The DOD IG's report summarizes 302 reports and testimonies issued
by the Defense oversight community and GAO, detailing the systemic
challenges that have been identified, and prospectively summarizing
corrective actions taken and still pending, as well as other management
initiatives taken or underway that impact DOD operations supporting
Operation Enduring Freedom (OEF) and OIF.
SYSTEMIC CHALLENGES BY FUNCTIONAL AREA
The DOD IG's report categorizes the systemic challenges into four
areas: Contract Management, Logistics, Financial Management, and Other.
Contract Management--the Defense oversight community and GAO all
reported on the challenges DOD has experienced with the lack of
adequate oversight over contractors in both OEF and OIF.
Logistics--the Defense oversight community and GAO all reported on
the challenges DOD has experienced with the logistics operations
(accountability and visibility of assets, properly equipping forces,
etc.) supporting OEF and OIF.
Financial Management--DOD experienced numerous challenges in
providing accurate and reliable cost reporting for OEF and OIF
operations.
SYSTEMIC CHALLENGES ACROSS FUNCTIONAL AREAS
Aside from challenges in each functional area, the DOD IG's report
also identified common challenges across functional areas.
Specifically, training and policy and procedure challenges were
identified in more than one of the functional areas: Contract
Management, Logistics, and Financial Management.
DOD INITIATIVES
The Department has initiated many actions to address contract-
related challenges in OEF and OIF. These initiatives included
establishing and revising guidance, fielding a new contractor
accountability system, adding new contingency contracting training at
DOD academic institutions, and looking at contracting challenges
through commissions and task forces. Additional details are available
in the DOD IG report.
DOD AUDIT COMMUNITY INITIATIVES
The Defense oversight community has also instituted its own
initiatives to address the challenges presented to DOD in OEF and OIF
operations. These initiatives include focused workforces, focused
coordination groups, and comprehensive and coordinated oversight plans
in response to statutory requirements. Additional details are available
in the DOD IG report.
DEFENSE CONTRACT AUDIT AGENCY (DCAA)
DCAA is an integral part of the oversight and management controls
instituted by DOD to ensure integrity and regulatory compliance by
contractors performing on government contracts. DCAA's services include
audits and professional advice to acquisition officials on accounting
and financial matters to assist them in the negotiation, award,
administration, and settlement of contracts. Decision-making authority
on DCAA recommendations resides with contracting officers within the
procurement organizations who work closely with DCAA throughout the
contracting process.
DCAA is the largest DOD audit operation and has, on average, 24
temporary duty personnel stationed in Iraq and Kuwait. To carry out its
audit mission, DCAA established an office in Iraq in May 2003 and
performs Iraq reconstruction audits at over 60 CONUS office locations.
DCAA anticipates completing nearly 400 audits in fiscal year 2008,
using approximately 100 work-years, to support Iraq Reconstruction
efforts.
As mentioned earlier, to date, DCAA has performed in excess of
2,500 GWOT-related contract audits, taking exception to $12 billion as
either not acceptable or not supported. As of March 30, 2008, DCAA is
responsible for auditing contracts at 105 contractors. These
contractors hold 226 prime contracts with obligated funding of over $51
billion. The monetary result has been savings and restitutions in
excess of $1.3 billion.
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION (SIGIR)
The SIGIR, was created by Congress to provide oversight of the Iraq
Relief and Reconstruction Fund (IRRF) and all obligations,
expenditures, and revenues associated with reconstruction and
rehabilitation activities in Iraq. SIGIR oversight is accomplished via
independent audits, field inspections, and criminal investigations into
potential fraud, waste, and abuse of funds.
Currently, SIGIR has 13 auditors (5 additional auditors are in-
processing), 5 inspectors (3 additional inspectors are in-processing),
and 4 investigators (1 additional investigator is in-processing) in
Iraq. To date, SIGIR has produced over 230 audits and inspections that
have uncovered instances of waste and inefficiency.
SIGIR auditors report on every major fund supporting the Iraq
reconstruction program including the Commanders' Emergency Response
Program (CERP), IRRF, Iraq Security Forces Fund (ISSF), and Economic
Support Fund (ESF). SIGIR inspectors also travel across Iraq to provide
on-site reports of project progress.
SIGIR made the following recommendations in its Contracting Lessons
Learned Report to improve contingency contracting:
--Explore the creation of an enhanced Contingency Federal Acquisition
Regulation (CFAR). SIGIR observed that agencies have developed
agency specific regulations implementing the government wide
Federal Acquisition Regulation (FAR).
--Pursue the institutionalization of special contracting programs
such as the CERP which SIGIR noted before have unique roles in
post conflict reconstruction.
--Include contracting and program management staff at all phases of
planning for contingency operations.
--Create a deployable reserve corps of contracting personnel who are
trained to execute rapid relief and reconstruction contracting
during contingency operations.
--Develop and implement information systems for managing contracting
and procurement in contingency operations.
--Pre-compete and prequalify a diverse pool of contractors with
expertise in specialized reconstruction areas.
actions stemming from sigir contracting lessons learned recommendations
SIGIR recommendations were key to informing the development of
updating Emergency Acquisition guidance issued by the Office of
Management and Budget Office of Federal Procurement Policy in May 2007.
The guide is designed to help agencies prepare the acquisition
workforce for emergencies and includes a number of management and
operational best practices that should be considered in planning
related to contingency operations, anti-terrorism activities, and
national emergencies. SIGIR lessons learned directly contributed to the
development of the guide.
In addition, the recently passed fiscal year 2008 Supplemental
Appropriations bill includes three provisions requiring improvements in
Iraq reconstruction programs that were recommended in SIGIR Audits,
namely: Improvements in Asset Transfer processes and coordination with
GOI, provisions to strengthen development and implementation of a
comprehensive anti-corruption strategy, and development of a longer-
term strategy to guide the future of Provincial Reconstruction Teams in
Iraq.
GANSLER COMMISSION REPORT
On September 12, 2007, the Secretary of the Army established an
independent Commission on Army Acquisition and Program Management in
Expeditionary Operations, headed by former USD (AT&L) Jacques Gansler.
Dr. Gansler released the Gansler Commission Report on November 1, 2007.
Subsequently, the Department, led by Under Secretary of Defense
(AT&L), established the DOD Task Force for Contracting and Contract
Management in Expeditionary Operations to pursue the Commission
recommendations so that future military operations achieve greater
effectiveness, efficiency, and transparency. The DUSD (A&T) then
established a Steering Committee of Senior Leaders from OSD, the
Military Departments, the Joint Staff, and the JCC-I/A to provide
visibility, oversight, and to ensure timely completion of Task Force
initiatives. The Task Force evaluated the applicability of the
recommendations and developed long-term, enterprise-wide solutions.
Today, in order to maintain the momentum achieved to date, the Steering
Committee continues to oversee and monitor the work of the Task Force.
Also, to ensure accomplishment of the stated efforts/milestones, the
Task Force is exchanging information every two weeks on the current
status of efforts, roadblocks to accomplishment, and changes in
reported estimated completion dates.
DOD and the Army reported to Congress on June 2, 2008, providing
implementation plans and status for the recommendations--many of them
long-term efforts--provided in the Gansler Commission Report. To date,
DOD and the Army have completed almost half of the 40 total
recommendations, including the addition of military and civilian
structure and senior leadership oversight. Recommendations being
implemented include the following:
--On January 30, 2008, the Army decided to establish a new two-star
level Army Contracting Command under the Army Materiel Command.
The new Command (Provisional stood-up March 31, 2008) includes
two subordinate commands:
--Expeditionary Contracting Command
--Mission and Installation Contracting Command
--The Army established a new task force on February 29, 2008 to
insure full analysis and fielding of long-term solutions to
Army contracting. The work of this Task Force is ongoing and
will continue as part of the Army Contracting Campaign Plan.
--The Army conducted an intensive review of more than 18,000 contract
actions executed in Kuwait from 2003-2006 resulting in the
settlement of claims that saved the Government over $10.4
million.
--AMC deployed a team of contracting professionals to review
contracts at the U.S. Contracting Command Southwest Asia-Kuwait
issued between 2003 and 2006 to determine if there may be any
additional fraudulent activity. Several contract actions were
referred to the Army CID for further evaluation.
Progress towards completing the remaining Gansler Report
recommendations is ongoing, including some recommendations requiring
Congressional action, such as the authority to acquire products and
services produced in a contingency theater of operations outside the
United States.
defense contract management agency (dcma)
DCMA's mission is to perform Contract Administration Services for
DOD, other Federal Agencies, foreign governments, and authorized
international organizations. As the eyes and ears of the Department in
contractor facilities, and as a Combat Support Agency, DCMA is
responsible for ensuring the integrity of the government contracting
process and providing a broad range of acquisition management services.
DCMA services include acquisition planning support, contract
management, quality assurance and product acceptance, engineering
support services, software acquisition management, and property
management. DCMA's contract management mission provides acquisition
life-cycle support to our military services worldwide, as well as
contingency contract support in Iraq and Afghanistan.
In fiscal year 2008 alone, DCMA has conducted over 14,500 on-site
quality assurance visits in Iraq and Afghanistan, discovering 13,000
quality defects and issuing 128 corrective reports.
Based on recommendations by the Gansler Commission, DOD is re-
examining DCMA's staffing to determine if they are appropriately
resourced to manage the current level of activity and their expanded
role in support of contingency contracting.
EXCELLENCE IN THE PURSUIT OF PERFECTION
There is one point that I would like to emphasize in this statement
for the record. The Department of Defense, consisting of our military
Services and inter-agency and industry partners, constitutes one of the
largest and most complex enterprises in the world. So, despite our best
efforts, it is inevitable that problems will occur and people will make
mistakes--intentionally or otherwise. Nevertheless, our goal is to
achieve excellence in the pursuit of perfection. So, we very much
appreciate the many, dedicated people who spend countless hours
carefully performing audits to help identify issues and problems that
must be resolved and recommending actions to be taken. Without
question, the audit process makes our system better.
We also appreciate the hard work of the hundreds of people who
administer contracts on behalf of the Department of Defense. These
individuals have a responsibility to serve the warfighting needs of our
men and women in uniform, while protecting the best interests of the
American taxpayers. By having DOD auditors work in partnership with
these contracting officers as they negotiate, administer, and settle
contracts we're better able to ensure all charges and claims are valid.
COMBATING CORRUPTION, WASTE, FRAUD, AND ABUSE IN IRAQ
Unfortunately, in an imperfect world--there will be people who will
attempt to abuse the system through fraud, corruption, theft, or other
criminal behavior. But, what is important is that the Department has a
system and a process in place that ensures we are alerted to any
violations and we are able to identify, prosecute, and convict the
offenders.
Investigations of possible offenses are conducted by DOD IG's
Defense Criminal Investigative Service (DCIS) and partnering federal
enforcement agencies, including Air Force Office of Special
Investigations (AFOSI), Army Criminal Investigation Command (CID), U.S.
Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), FBI,
Immigration and Customs Enforcement (ICE), IRS-CID, Naval Criminal
Investigative Service (NCIS), SIGIR, USAID-OIG, and USDA-OIG.
In total, since May 2003, there have been over 160 criminal
investigations resulting in 22 indictments, 32 informations, and 32
convictions. 124 of those investigations are currently ongoing within
DOD IG and its partner enforcement agencies. The majority of
investigations were performed jointly with other enforcement agencies,
including Army CID and SIGIR.
In accordance with Generally Accepted Government Auditing
Standards, DCAA auditors have a responsibility to refer matters that
raise a reasonable suspicion of fraud to the appropriate investigative
agency. DCAA takes this responsibility very seriously and has
established comprehensive procedures to report all potential instances
of fraud. In addition, DCAA auditors support fraud investigations.
During the first nine months of fiscal year 2008, DCAA auditors were
involved in 84 completed investigations which resulted in DOD
recovering $97 million.
While the cases of fraud found in Iraq have been deplorable, their
discovery and the subsequent indictments and convictions of offenders,
sends a clear message that abuse of this kind will not be tolerated.
CONCLUSION
Overall, the many lessons learned in the areas of human capital
management, contracting and procurement, and program and project
management have led to significant process and organizational
improvements across the Department.
On today's modern battlefield, ``contracting'' has clearly become
one of many Battlefield Operational Systems. Improving the quality of
this system is not just the responsibility of contracting officers,
auditors, and investigators; rather it's the responsibility of all
officers and military planners. To this end we are placing increased
emphasis in our schools on every officer's knowledge of and
responsibility for ensuring a quality contracting system.
DOD has increased oversight and accountability of deployed
contractors and project requirements in expeditionary operations. The
formation of the Joint Contracting Command-Iraq (JCC-Iraq) has provided
a centralized point for the oversight of $13 billion in hard
construction contracts and several billion more in non-construction
spending that was part of the Iraq Relief and Reconstruction Fund.
Other contractor-related initiatives have included establishing an
Executive Director for LOGCAP--a more than $30 billion Services
program--to provide program management oversight of logistical support.
In an effort to expand transparency, the Department has also granted
SIGIR direct access to JCC-Iraq's electronic contractual documents,
thus allowing for real-time review and oversight of contractual
actions. In February 2007, I--as Deputy Secretary of Defense,
established the Cost of War Senior Steering Group to oversee the timely
resolution of policy, system, and procedural issues that impact the
reporting of the cost of war. The objective is to improve the
credibility, transparency, and timeliness of Cost of War reporting, to
include the Commanders' Emergency Response Program (CERP). The
Department has also deployed finance support teams to assist forward-
deployed DOD elements, and we're reviewing and revising our federal
financial management regulations to ensure proper and sufficient
oversight and accountability of funds.
The Department continues to strive for excellence. In pursuit of
this goal, the Department has made meaningful progress in efforts to
address the challenges posed by oversight of defense contracts. We will
continue to make improvements to ensure better effectiveness,
efficiency, and accountability of resources and efforts across U.S.
forces.
Chairman, Members of the Committee, thank you again for your
continued and generous support of the outstanding men and women of our
armed forces and their families. We look forward to your questions.
Chairman Byrd. Mr. Heddell.
STATEMENT OF HON. GORDON S. HEDDELL, ACTING INSPECTOR
GENERAL, DEPARTMENT OF DEFENSE
ACCOMPANIED BY MARY UGONE, DEPARTMENT OF DEFENSE
Mr. Heddell. Yes, sir, Mr. Chairman and distinguished
members of this committee. Thank you for the opportunity to
appear before you this morning.
My name is Gordon Heddell, and I am, as of last week, the
Acting Inspector General for the Department of Defense.
The magnitude and complexity of the Department of Defense
requires nothing less than a full-time effort. We are in a time
of war, and our work not only saves taxpayer dollars, but also,
and much, much more importantly, the lives of U.S.
servicemembers.
The Department of Defense Inspector General has the primary
responsibility within the Department of Defense for providing
oversight of programs and appropriated funds. We spearhead the
DOD oversight community in auditing, investigating, and
inspecting accountability processes and internal controls. We
work in close partnership with other oversight organizations,
such as the Government Accountability Office, the Special
Inspector General for Iraq Reconstruction, the Department of
State, and the U.S. Agency for International Development.
The global war on terror, especially operations in
Southwest Asia, continues to be a top priority of the DOD
inspector general. We have 238 ongoing or completed projects
that provide oversight of various functions and activities,
such as acquisition, contracts and contract fraud, readiness,
logistics, funds management, accountability, theft, corruption,
and intelligence efforts.
IG STRATEGY
We have adopted an expeditionary workforce model to support
efforts throughout Southwest Asia. We have core staff forward
deployed to our field offices in Iraq, Afghanistan, Qatar, and
Kuwait.
Expeditionary team members deploy to complete reviews. The
number fluctuates on a daily basis depending on requirements.
During April, May, and June, we had an average of 55 personnel
in theater supporting Operation Iraqi Freedom (OIF) and
Operation Enduring Freedom (OEF), and at one point during May,
we had over 100 personnel in theater. As inspector general, I
will evaluate our current and planned staff levels for our
presence in Southwest Asia, and will make adjustments as
necessary.
The goals of our expeditionary model are to minimize
disruption to the warfighter, facilitate timely reviews and
reports, and minimize risk to personnel.
We have completed, or are conducting, audit oversight
efforts that cover approximately $158.9 billion related to DOD
efforts in Iraq. Currently, we have 38 ongoing Iraq-related
audit projects reviewing mission-critical support functions.
As of June 30, 2008, the Defense Criminal Investigative
Service (DCIS) had 124 ongoing investigations related to
Southwest Asia. These investigations involved 286 subjects.
Thirty-two of these DCIS investigations have been adjudicated,
resulting in 22 Federal criminal indictments, 32 Federal
criminal informations, and 32 felony convictions. The
adjudications have resulted in 54 years confinement, 44 years
probation, debarment of 10 individuals and four companies, and
suspension of 28 persons. The U.S. Government has accepted
three settlement agreements, received $13.5 million in
restitution, levied $374,125 in fines and penalties, received
$1.76 million in forfeitures, and seized another $2.65 million
in assets.
SECTION 842
On June 18, 2008, my office released the Comprehensive
Audit Plan for Southwest Asia. The plan was facilitated by the
DOD IG Joint Planning Group Southwest Asia, and includes the
individual audit plans of my office and the inspectors general
of the Department of State and USAID, as well as the Special
Inspector General for Iraq Reconstruction, the Army Audit
Agency, the Air Force Audit Agency, and the Defense Contract
Audit Agency. The audits in the plan will help to identify
abuses and defects in contracts, systems, and processes. The
plan will be updated on a periodic basis.
LESSONS LEARNED AND INITIATIVES
On July 18, 2008, we issued a reported entitled
``Challenges Impacting OIF and OEF Reported by Major Oversight
Organizations Beginning in Fiscal Year 2003 Through Fiscal Year
2007.'' We compiled 302 reports and testimonies, given or
issued, by the Defense oversight community and GAO.
Our analysis identified that, over the course of OIF and
OEF, the Department of Defense experienced recurring challenges
in contract management, logistics, and financial management.
We also captured many of the initiatives that DOD has
underway, such as issuing updates to the Federal acquisition
regulations and DOD policies regarding the oversight of
deployed contractors, increasing the oversight of contractors
performing logistical support work, deploying Defense finance
and accounting service personnel to Southwest Asia to support
personnel in financial operations, and assessing which business
operations can be removed from in theater.
I would like to submit these two reports for the record.
In closing, thanks to your budgetary support, we are able
to dedicate more resources to fight waste, fraud, and abuse.
The office is on a firm footing to provide the necessary
oversight. We look forward to working with this committee, and
we will continue to keep Congress and our leadership fully and
promptly informed.
Thank you for the opportunity to appear before the
committee today to address our ongoing oversight work regarding
Iraq.
Chairman Byrd. Thank you.
[The information follows:]
Prepared Statement of Gordon S. Heddell
Mr. Chairman, Senator Cochran, and distinguished members of this
committee, thank you for the opportunity to appear before you this
morning and address corruption, fraud, waste, and abuse in Iraq. This
testimony will cover the accomplishments of the Department of Defense
Office of the Inspector General (DOD IG) and the other DOD
organizations that have the mission to combat illegal and improper
expenditures and to improve accountability of DOD resources that
support operations in Iraq. Since February 2003, the United States has
obligated an estimated $435 billion in support of Operation Iraqi
Freedom \1\. The U.S. military presence in Iraq is aimed at providing a
secure environment which will enable the Iraqi people to establish a
stable government that upholds the rule of law and good governance.
Corruption undermines the efforts of both the Iraqi people to establish
effective institutions of government and undermines the United States
ability to support this effort.
---------------------------------------------------------------------------
\1\ Source: Defense Finance and Accounting Service, Cost of the
Global War on Terror Monthly Report as of May 2008.
---------------------------------------------------------------------------
As this committee knows, the DOD IG has the primary responsibility
within the Department of Defense for providing oversight of defense
programs and funds appropriated to the Department at home and around
the world, to include Southwest Asia (SWA). In this role, the DOD IG
office oversees, integrates, and attempts to ensure there are no gaps
in the stewardship of DOD resources. We spearhead the DOD oversight
community in auditing, investigating, and inspecting accountability
processes and internal controls, in areas such as acquisition,
contracting, logistics, and financial management. Collectively, the
community has dedicated over 470 auditors and over 190 investigators
that have reviewed a wide range of issues pertaining to SWA. We also
work in close partnership with other oversight organizations, such as
the Government Accountability Office (GAO), the Special Inspector
General for Iraq Reconstruction (SIGIR), the Department of State, and
the U.S. Agency for International Development (USAID). In addition, we
provided the core staff for the Coalition Provisional Authority IG, and
later assisted the stand-up of the SIGIR. Since 2003 the DOD IG has
provided 141 full or part-time personnel in support of both
organizations.
Adequate management controls and oversight to verify that proper
safeguards are in place and working as intended are essential in the
fight controls are severely lacking or proper oversight is minimal
create opportunities for corruption, fraud, waste, and abuse.
Additionally, individuals must be held accountable for violating laws
and regulations and for mismanagement of DOD resources.
OIG STRATEGY
To accomplish its oversight mission, the DOD IG has adopted a
strategy that is based on maintaining the optimal presence in theater,
but which also recognizes that much of our work can be done away from
the war zones. This strategy minimizes disruption to the warfighter
ensuring they can meet their primary mission to fight and win the war,
facilitates timely reviews and reporting of results in theater, as well
as ensures the safety of personnel. An important part of our oversight
effort is to improve inter-service and interagency coordination and
collaboration to minimize duplication of effort and ensure that we have
only the staff needed in theater to accomplish the mission.
The DOD IG has adopted an expeditionary workforce model to support
efforts throughout all of SWA. The DOD IG has core staff forward
deployed at all times. The core contingent is composed of individuals
serving between 6 and 12 month deployments. Expeditionary team members
deploy on temporary duty orders for as long as needed to complete
reviews. The actual number of auditors, investigators, and inspectors
in SWA fluctuates on a daily basis depending on the requirements. In
June 2008, the DOD IG had 46 personnel in theater supporting OIF/OEF.
To provide a more effective and efficient oversight role, the DOD
IG has established field offices in strategic SWA locations and
continues key placement of DOD IG personnel in SWA. Our SWA field
offices have been extremely active in supporting the personnel deployed
into theater as well as their own assignments being performed.
In Iraq, our full time staff are working a joint audit with the
Multi-National Force--Iraq Inspector General on Equipment Status for
deployed forces. The auditors in Iraq also provide support to DOD IG
teams based in the continental United States performing oversight
related to Iraq such as the Munitions Assessment Team--II, management
of contractor issues within SWA, and the validation of contracted
construction projects.
In Afghanistan, our full time staff have been working two audits as
well as providing support to our other teams coming into the country to
perform other oversight work in areas such as Afghanistan Security
Forces Funds, Controls over Army Cash and Other Monetary Assets,
Contractor Common Access Cards in SWA, and Medical Equipment.
The following is a discussion of our SWA field offices.
Iraq Field Offices
In coordination with the Commanding General, Multi-National Force--
Iraq and the U.S. Central Command, the DOD IG established field offices
in Iraq at Camp Victory and the International Zone. The Iraq offices
are staffed with up to five auditors at a time. In addition, the DOD IG
has assigned auditors in Iraq to provide the Defense Criminal
Investigative Service (DCIS) support for ongoing criminal
investigations pertaining to contract fraud. The DCIS has established a
permanent presence in Iraq. Two special agents are currently assigned
to Iraq. An additional special agent has been temporarily deployed to
support a special cell investigating issues relating to weapons
accountability.
Afghanistan Field Office
In coordination with the U.S. Central Command, the DOD IG
established a field office in Afghanistan at Bagram Air Base. The DOD
IG Afghanistan Field Office is staffed by three full time auditors,
who, along with expeditionary teams conduct projects in Afghanistan.
One Special Agent was deployed to Afghanistan in April 2008. Two
additional special agents will be deployed to Afghanistan in August of
2008. These agents will work alongside partner agencies, such as the
U.S. Army Criminal Investigation Command and the Federal Bureau of
Investigation to investigate fraud, waste, and abuse impacting theater
operations.
Qatar Field Office
The DOD IG established a field office in Qatar collocated with the
U.S. Central Command Air Forces on Al Udeid Air Base, Qatar. The Qatar
office provides administrative operations support to the DOD IG SWA
field offices. The Qatar office can also conduct audits as required in
Iraq, Afghanistan, or throughout the U.S. Central Command area of
responsibility. Additionally, the Qatar office staff facilitates, and
may augment, other teams that require temporary travel in theater to
conduct specific reviews.
Kuwait Field Office
The DOD IG field office in Kuwait is staffed by two DCIS special
agents who are focused on contract fraud and other potential criminal
activities in Kuwait that impact SWA efforts.
NEW OIG INITIATIVES
GWOT, especially operations in SWA, continues to be a top priority
of the DOD IG and its five operational components. Our Auditing,
Investigations, Intelligence, Policy and Oversight, and Special Plans
and Operations components have 238 ongoing or completed projects; 84 in
Auditing, 124 in Investigations, 13 in Intelligence, 13 in Policy and
Oversight, and 4 in Special Plans and Operations,. Those 238 projects
provide oversight of various functions and activities such as contracts
and contract fraud, readiness, logistics, funds management,
accountability, theft, corruption, and intelligence efforts. DOD IG has
completed or is conducting audit oversight efforts that cover
approximately $158.9 billion related to DOD efforts in SWA.
Establishment of the Special Plans and Operations Component
Our support to the Department of Defense involves a complex
operational environment that includes changing requirements and the
need for rapid and focused responses to challenging issues. As a
result, we established a new Component, the Office for Special Plans
and Operations (SPO) to augment the GWOT work being currently conducted
by the DOD IG components. The new component is headed by the Principal
Deputy Inspector General, who also serves as the Special Deputy
Inspector General for SPO. The component focuses on the Global War on
Terror and other high-value, high-visibility assessment missions as
assigned. This office performs quick-assessment missions on critical,
time-sensitive national security issues identified by the Secretary of
Defense, Deputy Secretary of Defense, Chairman of the Joint Chiefs of
Staff, and other members of the senior DOD leadership, as well as
members of Congress. The goal of SPO is to focus on issues of critical
importance to management and in a relatively short time provides
answers to questions regarding a specific issue such as ``What is the
status?'' and ``What is going on right now?''
SPO was established by realigning current OIG resources and is
composed of twenty interdisciplinary staff, evenly divided between
civilian and military personnel. SPO has completed one project and
currently has two others ongoing. The Inspector General and the
Principal Deputy Inspector General have both been actively involved in
the work being performed by SPO. The completed and ongoing work within
the SPO directorate is discussed later in the testimony.
Section 842
The fiscal year 2008 National Defense Authorization Act requires
the DOD IG and the Special Inspectors General for Iraq Reconstruction
and Afghanistan Reconstruction to develop comprehensive plans for a
series of audits respective to their outlined areas of oversight
responsibilities in Iraq and Afghanistan (Public Law 110-181, Section
842, ``Investigation of Waste, Fraud, and Abuse in Wartime Contracts
and Contracting Processes in Iraq and Afghanistan'').
In response to this statutory requirement, on June 18, 2008, the
DOD IG, on behalf of the member Federal and DOD oversight agencies
included in the plan, released the ``Comprehensive Audit Plan for
Southwest Asia.'' The plan was facilitated by the DOD IG Joint Planning
Group--SWA and includes the individual audit plans of my office and the
Inspectors General the Department of State and USAID and SIGIR. It also
includes the planned audit work of the Army Audit Agency, Air Force
Audit Agency, and Defense Contract Audit Agency because their major
contributions to improve the efficiency and effectiveness of support to
the military.
The audits in the plan will help to identify abuses and defects in
contracts, systems and processes that can be promptly remedied.
Developing the plan has enabled us to expand and refocus our audit
efforts to support the war fighters. The plan will be updated on a
periodic basis. Updates will include the Special Inspector General for
Afghanistan Reconstruction plan.
The group identified areas or gaps in need of audit coverage.
Examples of areas that require audit work are: maintenance service
contracts, security service contracts, air transportation contracts,
DOD financial systems used in Iraq and Afghanistan, and staffing and
training of contract oversight personnel.
With the development of the Section 842 plan, our number of planned
GWOT related audits increased 96 percent (from 27 planned projects in
fiscal year 2008 to 53 planned projects identified in response to
Section 842). However, since issuing the comprehensive Section 842
plan, other external factors have caused us to defer nine Section 842
projects. External factors include performing statutory requirements
(such as the continuation of reviews on Interagency Purchases) and
Congressional requested projects (such as DOD and DOD Contractor
Efforts to Prevent Sexual Assault/Harassment Involving Contractor
Employees in OEF/OIF), and performing the necessary audit work to opine
on DOD financial statements (such as the Defense Information Systems
Agency General Fund and Working Capital Fund Balance Sheets as of
September 30, 2007). We deferred five planned Section 842 projects to
assign 50 DOD IG auditors to perform the audit field work necessary to
opine on the Defense Information Systems Agency financial statement.
Lessons Learned and Initiatives
On July 18, 2008, the DOD IG issued a summary report entitled,
``Challenges Impacting Operations Iraqi Freedom and Enduring Freedom
Reported by Major Oversight Organizations Beginning fiscal year 2003
through fiscal year 2007.'' The summary effort compiles 302 reports and
testimonies given by the Defense Oversight Community and GAO. Our
analysis identified that over the course of conducting Operations
Enduring and Iraqi Freedom, DOD experienced, at times, significant and
recurring challenges in contract management; logistics; and financial
management. These areas have been reported as challenges within DOD
since the early 1990s so it is not surprising that DOD is experiencing
these challenges in Iraq and Afghanistan.
We also have captured many of the initiatives that DOD has underway
that we believe address the challenges DOD is experiencing in its Iraq
and Afghanistan operations. These DOD initiatives include issuing
updates to the FAR and DOD policies regarding the oversight of deployed
contractors, increase in oversight of contractors performing logistical
support work, deploying DFAS personnel to Iraq, Afghanistan, and Kuwait
to support the deployed personnel in financial operations, and
assessing which business operations can be removed from the dangerous
areas in theater and be performed outside of the dangerous areas.
ONGOING OVERSIGHT WORK
Investigations
The DCIS, the criminal investigative arm of the DOD Inspector
General, has been engaged in investigating waste, fraud, abuse, and
corruption pertaining to the Iraqi theater since the start of the war,
and will continue to prioritize investigations involving the SWA
theater. While the Inspector General Act of 1978 provides DCIS with
broad criminal investigative jurisdiction regarding DOD programs and
operations, effectively countering fraud in SWA requires the
cooperative efforts of other DOD investigative agencies, Federal law
enforcement partners, and the audit community.
DCIS has primary jurisdiction over matters involving most contract
and procurement actions awarded by Defense Agencies, Office of the
Secretary of Defense components, and field activities. Additionally,
DCIS has jurisdiction over, ``any allegations [involving DOD] that the
IG DOD considers appropriate for investigation by DCIS.'' This broad
authority affords DCIS the ability to easily partner with other
agencies in an effort to protect the integrity of the entire DOD
procurement and acquisition process--from countering fraud impacting
initial research and development, to investigating fraud during
contract execution, to ensuring the appropriate disposal of products no
longer needed by DOD components. The Service-specific Military Criminal
Investigative Organizations--the Army Criminal Investigation Command
(USACIDC or Army CID), the Naval Criminal Investigative Service (NCIS),
and the Air Force Office of Special Investigations (AFOSI) typically
focus upon allegations involving the award of contract and procurement
actions of their respective military department. Non-DOD law
enforcement partners in Iraq include the FBI, which has overarching
authority to investigate violations of various Federal statutes
relating to fraud and corruption; U.S. Department of State, Office of
the Inspector General; the SIGIR; and the USAID Office of the Inspector
General.
DCIS protects America's warfighters by vigorously investigating
alleged and suspected procurement fraud, corruption, and other breaches
of public trust that impact critical DOD programs. Our investigations
focus on matters such as bribery, theft, procurement fraud, illegal
receipt of gratuities, bid-rigging, defective and substituted products,
and conflicts of interest. DCIS' investigative activities in the region
have identified corrupt business practices, loss of U.S. funds through
contract fraud, and theft of critical military equipment. For example,
DCIS is a participating agency in a task force operation, initiated in
January 2004, which investigates matters pertaining to the LOGCAP III
contract awarded to Kellogg Brown and Root (KBR) in December 2001. This
is a 10-year contract, administered by the Army Containment Command in
Rock Island Arsenal, Illinois, that incorporates various task orders
for support of Operation Iraqi Freedom. The task force is comprised of
DCIS, FBI, Army CID, Internal Revenue Service, Defense Contract Audit
Agency, U.S. Attorney's Office for the Central District of Illinois,
and the Department of Justice Criminal and Civil Divisions. The task
force is organized into five major categories: kickbacks; food service;
reutilization of Iraq oil or RIO; qui tams; and other allegations. The
task force has processed approximately 50 separate matters for
investigation and initiated approximately 30 investigations resulting
in 9 criminal indictments, 6 criminal informations, and 10 convictions.
The convictions have resulted in approximately 6 years confinement and
14 years probation.
DCIS works closely with other components of the IG DOD and our
federal and military partners to oversee ongoing operations in SWA
relative to fraud and corruption. DCIS plays a significant and pivotal
role with partner agencies in the National Procurement Fraud Task Force
(NPFTF) and the International Contract Corruption Task Force (ICCTF).
Under the auspices of the Department of Justice, the NPFTF was created
in October 2006 to promote the prevention, early detection, and
prosecution of procurement fraud nationwide and abroad. This multi-
disciplinary and multi-agency coalition comprised of agencies from the
Federal Inspectors General, U.S. Attorneys Offices, and Federal law
enforcement agencies such as the FBI, has been extremely effective in
fostering and better coordinating procurement fraud investigations.
The ICCTF, an offshoot of the NPFTF, was formed in November 2006,
to specifically target fraud and corruption involving SWA. The primary
goal of the ICCTF is to combine the resources of multiple investigative
agencies to effectively and efficiently investigate and prosecute cases
of contract fraud and public corruption related to U.S. Government
spending in Iraq, Kuwait, and Afghanistan. The participating agencies
in the ICCTF are DCIS; Army CID's Major Procurement Fraud Unit; the
FBI; the Department of State Office of the Inspector General, USAID
Office of the Inspector General, and SIGIR. Formation of the ICCTF has
resulted in unprecedented cooperation in detecting, investigating, and
prosecuting corruption and contract fraud. The ICCTF established a
Joint Operations Center (JOC) in furtherance of achieving maximum
interagency cooperation.
The JOC, which is located in Washington, D.C., serves as the nerve
center for the collection and sharing of intelligence regarding
corruption and fraud relating to funding for the GWOT. The JOC
coordinates intelligence-gathering, de-conflicts case work and
deployments, disseminates intelligence, and provides analytical and
logistical support, such as laboratory services, polygraphs, and
specialized equipment. The JOC is the vital link into the intelligence
community and provides a repository from which to disseminate
intelligence indicators of criminal activity. Case information and
criminal intelligence are shared without reservation, and statistical
accomplishments are reported jointly. The agency heads meet regularly
to collectively provide policy, direction, and oversight.
In addition to investigating allegations of fraud, waste, and
abuse, DCIS launched a proactive project which will analyze over $14
billion in payment vouchers related to U.S. Army purchases in Iraq. The
vouchers are currently stored at the Defense Finance & Accounting
Service (DFAS), Rome, NY. The project is being coordinated with DFAS,
the DOD IG's Audit component, the Defense Contract Audit Agency, the
U.S. Army Audit Agency, and the FBI. The project will attempt to
identify fraudulent activity related to the war effort in Iraq and
Afghanistan through data mining techniques. To date, more than 90,000
payment vouchers, amounting to $1.5 billion, have been scanned into a
searchable database, representing 11 percent of the total 800,000
records that will be reviewed for fiscal completeness or propriety. The
recent hiring of 60 temporary DFAS employees to scan documents will
eliminate the accumulated historical records at DFAS--Rome, NY, while
current documents are being scanned in theater. While the initiative is
in its infancy, several questionable transactions have been identified
and referred for preliminary review or further investigation. In
addition to these analytical efforts to develop cases, the
investigative team assigned to the project is also supporting ongoing
investigations involving fraud and corruption in Iraq.
From May 2003 through October 2004, DCIS deployed teams of two to
three agents to Baghdad. From October 2004 to present, the DCIS
European Post of Duty and multiple CONUS DCIS offices have conducted a
wide variety of investigations related to Iraq and the SWA theater. In
September 2006, DCIS re-established a permanent presence in Iraq by
deploying four special agents to the theater--two special agents are
currently assigned to Iraq and two special agents are assigned to
Kuwait. A special agent has been deployed to Iraq to lead a special
cell investigating issues relating to weapons accountability with a
second agent identified to report in September. One special agent is
currently deployed to Afghanistan and will be replaced by two special
agents in August/September 2008. These in-theater agents are the
forward-deployed elements of the 85 DCIS special agents in CONUS and
OCONUS participating in SWA investigations.
As of June 30, 2008, DCIS has 124 ongoing investigations related to
SWA; 12 are being investigated by agents in theater; and 112 are being
investigated by DCIS offices in CONUS and Germany. DCIS attempts to
transfer investigations developed in SWA to an appropriate CONUS venue
as soon as practical to maximize the best use of in-theater
investigative resources and to facilitate prosecution efforts.
As previously mentioned, investigations conducted in SWA are
cooperative efforts. Of the 85 DCIS special agents working on SWA
investigations, 78 special agents (CONUS and OCONUS) are jointly
working the majority (97 percent) of these investigations in
conjunction with one or more law enforcement partner agencies. DCIS'
primary partner in countering DOD-related fraud in SWA is the Army
CID's Major Procurement Fraud Unit (MPFU). The MPFU conducts
investigations into allegations of fraud associated with the Army's
major acquisition programs. The hiring of an additional 43 special
agents and 5 staff has provided DCIS the opportunity to plan for
expanded operations in theater with our U.S. Army partners.
DCIS is currently investigating 286 subjects, both U.S. and foreign
personnel. Thirty-two DCIS investigations have been adjudicated,
resulting in 22 federal criminal indictments, 32 federal criminal
informations, and 32 felony convictions. The adjudications have
resulted in a total of 54 years confinement and 44 years probation. Ten
individuals and four companies have been debarred from contracting with
the U.S. Government, and twenty-eight persons have been suspended from
contracting with the Government. The U.S. Government has accepted three
settlement agreements, received $13.5 million in restitution, levied
$374,125 in fines and penalties, received $1.76 million in forfeitures,
and seized another $2.65 million in assets. Much more is anticipated as
investigation ready for prosecution mount.
Investigations in a war zone are affected by countless challenges,
such as the complexity of the fraud or corruption scheme, the
prevalence of conspiracies, the multi-national and multi-cultural
aspect of investigations involving foreign contractors, working with
foreign governments and foreign security forces, operational tempo
requirements and insurgent activity, translation and evaluation of
foreign evidence, and precautionary transportation restrictions imposed
by the U.S. Forces. Despite these challenges, DCIS aggressively pursues
its important mission to investigate DOD-related criminal activity
concerning fraud and public corruption and to devote substantial
resources to projects and investigations designed to proactively
identify potential fraud, waste, and abuse relating to SWA operations.
AUDIT
Our expeditionary model combined with our regional strategy in
approaching our work in Iraq raises issues that often require solutions
at the systemic level, as already illustrated by the munitions
assessment team findings and recommendations. Further, we continue to
evolve our comprehensive plan for audits of contracts, subcontracts,
and task and delivery orders in support of coalition forces in Iraq and
Afghanistan. Given that the Army Audit Agency is focusing on the
Commander's Emergency Response Program and contracts for basic life
support activities and that SIGIR focus is on reconstruction contracts,
we have begun and will to continue to conduct a series of audits and
report on financial and contracting systems in Iraq that support
Coalition Forces and Iraq operations including contracts for
maintenance service, transportation, and fuel.
Additionally, we continue to focus on the training and equipping of
the Iraqi military and police mission, acquisitions of key operational
support assets such as body armor, fielding of mine resistant ambush
protected vehicles, medical equipment, use of GWOT supplemental funds,
controls over cash, monitoring of sensitive equipment, and out-of-
country payments to name a few.
In November 2007, we realigned internal core mission assets to
support SWA audit operations by establishing an expeditionary audit
division comprised of about 30 people. This audit division is
complemented by other work conducted by U.S. based teams. In total, we
have 218 personnel conducting audits related to Iraq. In June 2008, we
had 32 audit personnel deployed in support of OIF/OEF.
We have 38 ongoing Iraq-related audit projects reviewing mission-
critical support functions that directly impact the warfighter, such
as: contract surveillance, contract payments, resetting of returning
U.S. forces equipment, and acquisition of armored vehicles. Our audits
also include oversight of cash and other monetary assets within Iraq
and Afghanistan as well as the whether the funds processed through the
foreign military trust fund are managed properly. A complete list of
completed reports, on-going projects, and planned projects is attached
to this statement.
The following are examples of significant completed and ongoing
planned audits supporting DOD SWA operations.
Completed
Internal Controls Over Payments Made in Iraq, Kuwait and Egypt (D-
2008-098). Contract and vendor payments lacked minimum supporting
documentation and information for proper payment. When payments were
not properly supported, the Army lacked assurance that funds were used
as intended. On May 20, 2008 we testified on this project before the
Committee on Oversight and Government Reform United States House of
Representatives.
Management of the Iraq Security Forces Fund in Southwest Asia--
Phase III (D-2008-026). The Multi-National Security Transition
Command--Iraq was not able to demonstrate proper accountability for and
management of the Iraq Security Forces Fund and could not always
demonstrate that the delivery of services, equipment, and construction
was properly made to the Iraq Security Forces. As a result, the Multi-
National Security Transition Command--Iraq was unable to provide
reasonable assurance that Iraq Security Forces Fund achieved the
intended results, that resources were used in a manner consistent with
the mission, and that the resources were protected from waste and
mismanagement. On May 20, 2008 we testified on this project before the
Committee on Oversight and Government Reform United States House of
Representatives.
Potable and Nonpotable Water in Iraq (D-2008-060). We identified
deficiencies in water operations and government oversight at three
contractor-operated facilities and two military-operated facilities.
Contractors provided bottled drinking water and bulk water to U.S.
forces. Military water purification units only provided bulk water.
From March 2004 to February 2006, the quality of water provided by
contractors, through treatment or distribution at three of the sites we
visited, was not maintained in accordance with field water sanitary
standards as specified in Department of Army guidance. Although
required, KBR did not maintain the quality of the water it distributed
to point-of-use storage containers at Camp Ar Ramadi, Camp Q-West, and
Camp Victory.
Additionally, at Camp Q-West, KBR improperly provided chlorinated
wastewater from its Reverse Osmosis Water Purification Unit to personal
hygiene facilities. Specifically, operators of the military water
production sites we visited were not performing all required quality
control tests nor did they maintain appropriate production, storage,
and distribution records.
Because of corrective actions taken, contractor processes for
providing potable and nonpotable water were adequate as of November
2006 when internal quality control procedures and DOD oversight were in
place to provide quality assurance for the processes of water
production, production site storage, distribution, and storage at
point-of-use facilities. However, military water purification units at
LSA Anaconda and Camp Ali did not perform required quality control
tests and did not maintain appropriate records of water produced,
stored, and issued during the period reviewed. Therefore, water
suppliers exposed U.S. forces to unmonitored and potentially unsafe
water. Although there was no way to determine whether water provided by
the contractors and military water purification units caused disease,
contractors and military units responsible for water operations must
always ensure that water provided to the forces meets all established
standards and is safe to use.
Ongoing
Controls Over the Contractor Common Access Card Life Cycle in
Southwest Asia. We have two ongoing audits related to Common Access
Cards (CAC) issued to contractors. The first CAC audit is being
performed in the United States to determine whether controls over CACs
provided to contractors are in place and work as intended.
Specifically, we will determine whether DOD officials issue CACs to
contractors, verify the continued need for contractors to possess CACs,
and whether cards are being revoked or recovered from contractors in
accordance with DOD policies and procedures. The team has visited 67
CAC-related sites in the United States.
The second audit on the Contractor CAC lifecycle was conducted in
Iraq, Afghanistan, Kuwait and Qatar. The objective is to determine if
CAC issued to contractors were done in accordance with policies and
instructions as set forth by DOD and Federal Regulations. This audit
also includes a review of the Contractor Verification System, the
system set forth as the DOD way of implementing Homeland Security
Presidential Directive-12. Prior to returning to the United States, the
staff provided memorandums to the commanders in the field addressing
issues we found present in SWA.
The importance of this series of reviews is to also ensure we are
not providing contractors access to benefits that are not called for in
specific contracts. For example, over compensating contractors by
providing them daily expenses for basic life support items and
simultaneously issuing them an improper CAC providing the same life
support items for free.
War Reserve Materiel.--From April 28, 2008 through May 30, 2008, we
deployed an 8 person team (6 auditors and 2 investigators) to Oman,
Qatar, Bahrain, and Kuwait to examine whether Air Force contracting
officials managed and administered the DynCorp International War
Reserve Materiel contract (valued at over $600 million) in accordance
with Federal and DOD contracting policies. The War Reserve Materiel
contract ensures U.S. Air Force Central Command readiness to support
deployed forces by pre-positioning, maintaining, reconstituting,
deploying and supporting war reserve materiel required to support U.S.
Central Command operational plans and contingencies. The audit was
initiated based on issues identified during a DCIS investigation. The
team has visited U.S. Air Force Central Command headquarters, the Air
Force contract oversight officials in Oman, the DynCorp program office
in Oman, and two war reserve materiel storage facilities in Oman.
Additionally, they visited war reserve materiel storage facilities in
Qatar, Bahrain, and Kuwait. The team is continuing to focus on the
administration and oversight of the contract by the Air Force.
Medical Equipment Used to Support Operations in Southwest Asia.--
From April 23, 2008 through May 24, 2008, we deployed a four person
team to SWA to evaluate the internal controls over medical equipment
used to support operations in SWA. Specifically, we are determining
whether controls are in place for acquiring mission-essential medical
equipment and whether the recording and reporting of medical equipment
are accurate and complete. The scope of this audit not only includes
the medical equipment necessary for our military and coalition forces,
but also the medical equipment necessary for detainees. During
deployment, our auditors made site visits to medical facilities in
Baghdad, Balad, Mosul, Al Taqaddum Iraq; Bagram, Afghanistan; as well
as to a detainee medical facility in Baghdad, Iraq. Additionally, we
visited medical logistics sites in Baghdad and Balad, Iraq; Bagram,
Afghanistan, and Qatar. The team continues to work issues related to
the audit objectives, and inconsistencies noted during site visits in
the procurement, inventory, and maintenance processes. Additionally, we
will focus on the incompatibility between the information systems used
by the military departments to support the management of medical
equipment and those processes.
Funds Appropriated for Afghanistan and Iraq Processed Through the
Foreign Military Sales Trust Fund Funds appropriated for Afghanistan
and Iraq processed through the Foreign Military Sales Trust Fund.--The
overall objective is to determine whether funds appropriated for the
security, reconstruction, and assistance of Afghanistan and Iraq and
processed through the Foreign Military Sales Trust Fund are being
properly managed. Specifically, we will determine whether the transfer
of appropriated funds from the Army's accounts into the Foreign
Military Sales Trust Fund was properly authorized, accounted for, and
used for the intended purpose. In addition, we will verify whether the
appropriated funds are properly reported in DOD financial reports.
Assignment and Training of Contracting Officer's Representatives at
Joint Contracting Command-Iraq/Afghanistan.--This audit is being
accomplished by our auditors forward-deployed in Iraq. The DOD IG is
determining whether personnel assigned to the Joint Contracting
Command--Iraq/Afghanistan as Contracting Officer's Representatives have
the training and expertise to perform their duties. There are
approximately 825 Contracting Officer's Representatives performing
contractual efforts within Iraq. The audit team will review the process
for assigning Contracting Officer's Representatives to the Joint
Contracting Command in Iraq. We will review their records to determine
what training they completed and whether they had prior experience as
Contracting Officer's Representatives. The team will conduct audit
fieldwork within the Victory Base Complex and the International Zone in
Iraq.
Afghanistan Security Forces Fund Phase III Air Force Real Property
Accountability.--The initial DOD IG Expeditionary Team was in
Afghanistan from February 23 to June 28, 2008. The team is conducting
the third phase of a multiphase audit in response to Public Law 109-
234, which directed the Inspector General to provide oversight of the
Afghanistan Security Forces Fund (ASFF). The objective is to determine
whether organizations in SWA that the U.S. Central Command assigned
with the responsibility for managing the ASFF properly accounted for
the goods and services purchased for the Afghanistan Security Forces
(ASF) using the ASFF and whether the goods and services were properly
delivered to the ASF. Based out of Camp Eggers and accompanied by staff
from the Command, the team visited forward operating bases in Bagram,
Gardez, Herat, Kandahar, Mazir-e-Sharif and Shindan, Afghanistan. We
reviewed construction projects from three of the five Public Laws (109-
13, 109-234, and 109-289) that appropriated about $4.7 billion to the
ASF Fund. We reviewed 44 contract sites totaling $524.7 million. In
addition, we reviewed the accountability of vehicles, communication
equipment including computers and radios, and weapons. The senior U.S.
military commanders were briefed on the preliminary findings and
recommendations and we intend to issue the draft reports in the Fall.
Class III Fuel Procurement and Distribution in Southwest Asia.--The
second DOD IG Expeditionary Team is scheduled to be in SWA from August
2008 to December 2008. The DOD IG is determining whether fuel used for
ground operations in SWA to support Operations Iraqi Freedom and
Enduring Freedom is procured and distributed efficiently and
effectively. The audit team is reviewing 29 Defense Energy Supply
Center contracts used to procure fuel in support of operations in SWA.
The team will determine whether fuel is procured at fair and reasonable
prices, whether fuel is distributed economically and efficiently to
operational commands, and whether fuel supply points maintain accurate
inventories. The team will conduct audit fieldwork in Kuwait,
Afghanistan, Iraq and select forward operating locations.
POLICY AND OVERSIGHT
Beginning in November 2003, the DOD IG assigned Policy and
Oversight inspectors and evaluators as advisors to Iraq--first to
augment the Coalition Provisional Authority, then to support the SIGIR
operation, then to facilitate the Embassy's Iraqi Reconstruction
Management Office mission, and since July 2005, to provide resources
for the Multi-National Security Transition Command--Iraq (MNSTC-I)
transition teams. The advisors detailed to MNSTC-I assisted the Iraqi
Ministers of Defence and Interior to establish, coordinate and develop
a viable, self-sustaining Inspector General system--which was designed
to help combat corruption, fraud, waste, and mismanagement. During this
long-term effort, the advisors facilitated training for the respective
IG staffs and mentored their leadership in the development of operating
policies and procedures. In addition, the Inspections and Evaluations
Directorate established a ``Reach-Back'' office to support the in-
country advisors.
The following are examples of significant completed and ongoing
planned audits supporting DOD SWA operations.
Completed
In addition to the deployment of advisors to Iraq, the Policy and
Oversight component completed eight projects in support of the U.S.
mission in SWA. Most of these projects were interagency engagements or
included augmentees and subject matter experts external to the DOD IG
organization. Overall, our partnerships with other departments and
agencies served to promote U.S. security interests through improved
coordination, planning, and implementation for reconstruction and
stabilization assistance for OIF and OEF. The following project titles
provide an overview of the scope and breadth of these completed
assessments:
--Interagency DOD-DOS IG Assessment of Iraqi Police Training;
--Combined Forces Command--Afghanistan Management Decision Model [for
the Afghanistan National Army];
--Evaluation of Support to Mobilized Army National Guard and U.S.
Army Reserve Units;
--Interagency DOD/DOS Assessment of Afghan National Police;
--Interagency [DOD, DOS, DOJ] Assessment of the Counternarcotics
Program in Afghanistan;
--Review of the Investigative Documentation Associated with the Death
of Army Corporal Stephen W. Castner in Iraq;
--Observations and Critique of the DOD Task Force on Mental Health;
--DOD/VA Care Transition Process for Service Members Injured in OIF/
OEF; and
--Review of an Army investigation into a shooting by U.S. Forces in
Baghdad that injured a Reuter's cameraman and killed a Reuter's
driver.
Overall, these reports included over 110 recommendations to improve
DOD strategies and program processes.
Ongoing Projects
Policy and Oversight has four ongoing projects related to DOD's
activities in SWA and the global war on terrorism.
Assessment of the Section 1206 of the National Defense
Authorization Act, Global Training and Equipment Program.--Requested by
the Joint Staff and Office of the Under Secretary of Defense for
Policy, the purposes of this project are to examine management's
compliance with the legislation and identify recommendations for
program improvements. Section 1206 authorized DOD to obligate up to
$200 million in fiscal year 2006 and $300 million annually in fiscal
years 2007 and 2008 to help partner nations combat terrorism or to
cooperate with the U.S. military in stabilization or other military
operations. As of fiscal year 2007, 44 countries are participating in
the Section 1206 program.
Examination of Allegations Involving Outreach Efforts by the DOD
Public Affairs Office.--The allegations were reported in the New York
Times on April 20, 2008, and the review was requested by members of
Congress. We are examining the allegations that the DOD Public Affairs
Office gave special treatment to retired military personnel who
provided media commentary on Global War on Terror policies and
strategies. We are also investigating the allegation that these
personnel were employed by Defense contractors and their special access
to Pentagon leaders gave them a competitive advantage.
Review of Contracting Actions Relating to an Electrocution Fatality
in Iraq.--This review was requested by the Deputy Under Secretary of
Defense for Acquisition and Technology, in response to a memo from
Congressman Jason Altmire. The fatality occurred on January 2, 2008,
when the soldier was taking a shower. Our review will examine the
relevant facility management, contracting, and maintenance actions
prior and subsequent to the electrocution. We have also reviewed
investigations conducted by service investigative agencies into
electrocution deaths of other service members.
Evaluation DOD Management of Sexual Assault Complaints in Combat
Areas.--The objectives are to determine whether DOD policies and
procedures are adequate to respond to sexual assault complaints
involving U.S. contractors and to ensure complaints are properly
processed and referred for investigation.
SPECIAL PLANS AND OPERATIONS
The SPO Component has completed one assessment and is currently
working on two additional reviews. The two ongoing reviews will result
in three separate reports. The following are descriptions of the
completed and ongoing planned SPO work supporting DOD SWA operations.
Completed Project
Assessment Team on Munitions Accountability I (MAT I).--From
September 4, 2007 through October 22, 2007, the twenty-two person,
interagency Assessment Team on Munitions Accountability deployed to
Afghanistan, Kuwait, Qatar and Iraq to review the accountability and
control of munitions being supplied by the United States to the Iraq
Security Forces. While in Iraq, the team also reviewed the development
of the Iraqi logistics sustainment base and the U.S.-managed Foreign
Military Sales program.
This assessment was triggered, in part, by a Hotline complaint that
a senior U.S. Army officer was receiving illegal gratuities and
allegations from the Government of Turkey that munitions we had
supplied the Iraq Security Forces were finding their way into the hands
of terrorists, insurgents and criminals in Turkey. Subsequently, the
Secretary of Defense and Congress requested that the DOD IG review the
current state of arms and ammunition accountability and control in
Iraq.
The team visited the Multinational Forces--Iraq, Multinational
Security Transition Command--Iraq, Multinational Corps--Iraq, and
elements of the Iraqi Ministry of Defense and the Iraqi Ministry of
Interior. Members visited Abu Ghraib warehouse, Taji National Depot,
Baghdad International Airport, the Baghdad Police College, the
Logistics Management Control Center and several Iraqi Army and police
units and installations.
A key finding was that DOD and the Iraq Security Forces have a
system in place for controlling and accounting for weapons and
ammunition being supplied to the Iraq Security Forces; however, there
still remains work to be done. As the team deployed, it out-briefed
senior in-country leadership who initiated immediate corrective actions
in response to the preliminary observations and recommendations. The
team's report was signed by the Inspector General on July 3, 2008 and
copies were provided to the Secretary, Deputy Secretary, Chairman of
the Joint Chiefs, and Under Secretaries for Policy and AT&L. It
included 45 recommendations, with which management concurred with 42
(91 percent) of those recommendations. Progress has been made
implementing all in-country recommendations.
Ongoing Projects
Munitions Assessment Team II (MAT II).--At the request of the
Secretary of Defense, the Munitions Assessment Team returned to Iraq
and Afghanistan from April 5 to May 25, 2008 to conduct a six-month
follow-up. Specifically, the team reviewed the status of corrective
actions initiated by management in response to MAT I's preliminary
observations and recommendations in the areas of the current status of
munitions accountability and control in Iraq and Afghanistan, the
Foreign Military Sales program in Iraq and Afghanistan, and the
development of the logistics sustainment bases, including the status of
medical logistics capability for the security forces in Iraq and
Afghanistan. The team out-briefed senior U.S. military commanders in
both Iraq and Afghanistan upon its departure. The team continues to
analyze the data collected and is preparing two draft reports covering
approximately 50 observations and more than 100 recommendations.
Pakistan Assessment Team I.--The Pakistan Assessment Team visited
Pakistan from April 16-26, 2008 to assess certain DOD funded programs
supporting the Government of Pakistan. Congressional concern has been
raised, reinforced by press reporting, that U.S. security assistance
programs were not sufficiently well-focused to advance U.S. counter-
terrorism interests in Pakistan and its Federal Administered Tribal
Area (FATA) along the border with Afghanistan. In response to requests
from the Secretary of Defense, U.S. Ambassador to Pakistan, Chairman,
Joint Chief of Staff, USD(P), USD(C), and the Commander, U.S. Central
Command, the DOD IG deployed an assessment team to Pakistan. The team
assessed a number of DOD funded and managed bilateral assistance
programs that support Pakistan's security development. Specifically,
this included Coalition Support Funds, the Section 1206 Global Train
and Equip program, Section 1206-like Train and Equip program for the
Frontier Corps, International Military Education and Training, Foreign
Military Financing, Counterterrorism Fellowship Program, and
Counternarcotics. The team also reviewed the organizational
capabilities and structure of the Office of Defense Representative--
Pakistan, which is the umbrella organization for most DOD elements in
Pakistan. The Secretary, Deputy Secretary and Chairman of the Joint
Chiefs have been briefed on the preliminary findings and
recommendations. The report is in the final stage of drafting.
INTELLIGENCE
The Office of Intelligence has organized multiple, narrowly focused
GWOT evaluation projects around one core objective. That core objective
is to assess how the DOD intelligence community is supporting the
warfighter in Operation Enduring Freedom and Operation Iraqi Freedom.
The plan is dynamic and may be readily modified based on changing
national priorities (including taskings from Congress) and the
operations tempo in the respective areas of operation.
We have 5 ongoing GWOT-related intelligence projects reviewing
mission-critical functions that directly impact the warfighter, such
as: intelligence collection activities, intelligence resources, and
analytic and language training programs.
INTERAGENCY OVERSIGHT
The DOD IG is the lead oversight agency for accountability in DOD,
and as such, is committed to maintaining an effective working
relationship with other oversight organizations to minimize duplication
of efforts and to provide more comprehensive coverage. Effective
interagency coordination, collaboration, and partnerships within the
oversight community are essential to providing comprehensive reviews of
wartime expenditures to identify whether critical gaps exist, and then
to recommend actions to fix those gaps.
Southwest Asia Joint Planning Group
The DOD IG has jointly established and chairs an interagency SWA
Joint Planning Group that meets quarterly and provides oversight of
fraud, waste, abuse, and criminal activities in the SWA region. The JPG
provides a chance for collaboration and teamwork with the organizations
engaged in this effort, including the military inspectors general and
service auditors general, combatant commands inspectors general, the
Defense Contract Audit Agency, the Defense Finance and Accounting
Service, the Defense Contract Management Agency, the Inspectors General
of State and the USAID, and the SIGIR. The mission of the JPG is to
better coordinate and integrate oversight activities in the region. The
SWA JPG leads the coordination and oversight required to identify and
recommend improved mission support to military units conducting
operations.
In conjunction with the SWA Joint Planning Group, the DOD IG also
participates in the Afghanistan Working Group and the Iraq Inspectors
General Council.
--The Afghanistan Working Group was established by the DOD IG, along
with the Government Accountability Office, the Department of
State Inspector General, and the USAID, established a working
group on oversight activities in Afghanistan to minimize the
impact on forward command operations, eradicate overlapping and
duplicate oversight requests, and facilitate the exchange of
oversight information. The DOD IG, as the Department of Defense
representative of the group, also incorporates the ongoing and
planned Afghanistan-related oversight efforts of the Service
Auditors General into the working group.
--The Iraq Inspectors General Council chaired by the SIGIR, was
established to minimize the impact on forward command
operations, deconflict overlapping and duplicate oversight
requests, and facilitate the exchange of oversight information
unique to Iraq.
GWOT Cost of War Senior Steering Group
The DOD IG is an invited observer to the GWOT Cost of War Senior
Steering Group that DOD established on February 26, 2007, to improve
and standardize cost of war reporting. Attending the meetings helps the
DOD IG remain apprised of DOD efforts for cost of war reporting and
furthers its oversight regarding financial aspects of GWOT to ensure
timeliness and value to the DOD. DOD IG representatives attended the
December 2007 and March 2008 meetings. In December 2007, the DOD IG was
invited by the Under Secretary of Defense (Comptroller) to perform
quick-look reviews of the execution of GWOT funding patterns. Our
support efforts were included in the Comptroller overall focused
analysis of execution of funding. According to Comptroller officials,
Comptroller personnel now perform monthly analysis of DOD execution of
funding and reports the results to the Comptroller. The monthly
analysis provides timely awareness of funding trends and potential
funding execution concerns to the attention of the Comptroller.
Panel on Contracting Integrity
The DOD IG participates in the Panel on Contracting Integrity which
was established under Section 813 of the National Defense Authorization
Act for Fiscal Year 2007. The Panel is chaired by the Deputy Under
Secretary of Defense for Acquisition, Technology, and Logistics to
conduct reviews of DOD progress in eliminating vulnerabilities in the
Defense contracting systems that allow fraud, waste, and abuse and
affect Operations Iraqi and Enduring Freedom. The DOD IG representative
is a member of the overall Panel on Contracting Integrity, a member of
the subcommittee on Adequate Pricing, and is Chairperson of the
Procurement Fraud Indicators subcommittee. The Procurement Fraud
Indicators subcommittee is identifying what these indicators are and
how they should best be addressed and used for the contracting/
acquisition workforce.
Joint Investigative Partnerships
DCIS works jointly with other federal law enforcement agencies,
participates in various working groups and has agents assigned to FBI
Joint Terrorism Task Forces throughout the nation. Examples of
partnerships between DCIS and other agencies include:
--Joint cases with the Federal Bureau of Investigation; Immigrations
and Customs Enforcement; United States Secret Service; United
States Marshals Service; Alcohol Tobacco and Firearms; United
States Postal Inspection Service; and various IGs including
National Aeronautics and Space Administration; General Services
Administration; Health and Human Services; Veterans Affairs;
Department of Transportation; Department of State; Housing and
Urban Development; and the Military Criminal Investigative
Organizations including the United States Army Criminal
Investigation Command; Naval Criminal Investigative Service;
and Air Force Office of Special Investigations.
--Member of the National Procurement Fraud Task Force, created in
October 2006 to promote the prevention, early detection and
prosecution of procurement fraud.
--Member of the International Contract Corruption Task Force with
full time agent assigned to the Joint Operations Center.
--Member of the Defense Enterprise Working Group.
--Excellent working relationships with agencies in the SWA theater of
operations.
CLOSING
Thanks to Congressional support, we are dedicating more resources
to provide oversight on munitions control and accountability,
acquisition, corruption, waste, fraud, abuse, and expanding our
footprint SWA. We will continually evaluate the lessons learned. We are
providing effective and meaningful oversight that assists DOD to
address its challenges in conducting operations, safeguarding and
deterring taxpayer monies from waste, fraud, and abuse, and most
importantly, ensuring our brave military, civilian, coalition,
contractors and the Iraqi and Afghanistan citizens supporting a free
and sovereign democratic state are as safe as possible. We recognize
there is a vast and important mission to support DOD's efforts and are
proud to be part of this historic and important effort. This office is
on firm footing to provide the necessary oversight. We look forward to
working with this Committee. We will continue to keep Congress and our
leadership fully and promptly informed.
Thank you for the opportunity to appear before the committee today
to address our ongoing oversight work regarding Iraq.
______
Comprehensive Audit Plan for Southwest Asia
June 2008.
Additional copies of this Audit Plan can be obtained by contacting:
Office of the Deputy Inspector General for Auditing, Attn: Corporate
Planning Branch, Room 801, 400 Army Navy Drive, Arlington, VA 22202-
2884. (703) 604-9142 (DSN 664-9142)
This plan is also available on our Web site at: http://
www.dodig.mil/audit
If you need additional information for the following agencies,
please contact them directly.
Inspector General, Department of State
(202) 663-0378
http://oig.state.gov/
Inspector General, U.S. Agency for International Development
(202) 712-1020
http://www.usaid.gov/oig
Special Inspector General for Iraq Reconstruction
(703) 428-1058
www.sigir.mil
U.S. Army Audit Agency
(703) 681-8178
www.hqda.army.mil/aaaweb
Air Force Audit Agency
(703) 696-7904
www.afaa.hq.af.mil
Defense Contract Audit Agency
(703) 767-2236
www.dcaa.mil
FOREWORD
The Fiscal Year 2008 National Defense Authorization Act Section
842, ``Investigation of Waste, Fraud, and Abuse in Wartime Contracts
and Contracting Processes in Iraq and Afghanistan,'' January 28, 2008,
requires the Inspector General of the Department of Defense to develop
a comprehensive plan for a series of audits of Department of Defense
contracts, subcontracts, and task and delivery orders for the
logistical support of coalition forces in Iraq and Afghanistan. The Act
also requires that the Special Inspector Generals for Iraq
Reconstruction and Afghanistan Reconstruction develop a comprehensive
plan for a series of audits of Federal agency contracts, subcontracts,
and task and delivery orders for the performance of security and
reconstruction functions in Iraq and Afghanistan.
We have expanded this audit plan beyond the statutory mandate to
show all of the audit work for Iraq and Afghanistan, including other
key issue areas, such as financial management, systems contracts, and
human capital for contract administration. This plan incorporates the
planned audit work of the Inspectors General of the Department of State
and the U.S. Agency for International Development and the Special
Inspector General for Iraq Reconstruction. It also includes the planned
audit work of the Army Audit Agency, Air Force Audit Agency, and
Defense Contract Audit Agency because of the major contributions they
make to improve the efficiency and effectiveness of support to the
military. We continue to coordinate audit plans through existing
working groups and councils.
INSPECTOR GENERAL, DEPARTMENT OF DEFENSE
PLANNED PROJECTS
Third Quarter Fiscal Year 2008 Start
Award of Urgent Procurements for Linguistics in Support of the
Global War on Terror. Objective: To review whether the awards of urgent
procurements for linguistics were properly justified and whether prices
were appropriately established as fair and reasonable.
Contract Award and Administration of Security Services Contracts
for Afghanistan. Objective: To determine whether security services
contracts for Afghanistan are awarded and administered in accordance
with the Federal Acquisition Regulation.
Contracting for Clothing Requirements for Civilian and Contractor
Personnel Deployed to Iraq and Afghanistan. Objective: To determine how
much the Central Issuing Facilities contracts fulfill the clothing
requirement for both DOD civilian and contractor personnel deployed to
Iraq and Afghanistan; how contract requirements, terms, and conditions
were developed; and the adequacy of cost controls.
Contractor Reimbursement for Medical Care Provided by the Military
in Southwest Asia. Objective: To examine the monetary burden on the
military medical community in country to provide health care for
contractor personnel as well as review contracts to determine whether
reimbursement arrangements are addressed when contracts are bid and
awarded. There are more civilians, particularly contractor personnel,
than military personnel in Iraq and Afghanistan, and if these persons
are injured and require medical attention or require refills for their
medicines, those medical needs are provided by the military hospitals
and trauma centers.
Contractors Indebted to the U.S. Government Performing Work in
Support of the Global War on Terror. Objective: To review the DOD
contractor debt collection process and the controls associated with the
List of Contractors Indebted to the United States who are performing
work in support of the Global War on Terror. Specifically, we will also
identify if the Government is in a position to collect monies due to
the Government prior to making any contract payments.
Controls over Contractor Common Access Cards in the U.S. Central
Command. Objective: To evaluate the controls over the issuance,
revocation, reverification, and recovery of contractor common access
cards in the U.S. Central Command area of responsibility. We also plan
to determine whether the CAC database will be a good source to identify
the number of contractors in-country.
Defense Finance and Accounting Service Personnel Support for the
Global War on Terror. Objective: To determine whether the current level
of Defense Finance and Accounting Service personnel assigned to support
the mission in Iraq, Afghanistan, and Kuwait is adequate to ensure
accurate and timely accounting and contract payments.
Deferred Maintenance on DOD Weapon Systems as a Result of the
Global War on Terror. Objective: To assess the extent and causes of
deferred maintenance that result from the Global War on Terror.
DOD Compliance with Federal Tax Reporting Requirements for
Contractors Supporting Global War on Terror. Objective: To determine
whether payments to contractors and individuals performing work in
support of the Global War on Terror were properly reported to the
Internal Revenue Service.
Equipment Repairs and Maintenance Contracts in Support of Operation
Iraqi Freedom and Operation Enduring Freedom. Objective: To evaluate
the development of contract requirements, award of contracts and task
orders, and the administration of the contracts and task orders for
equipment repairs and maintenance within Iraq and Afghanistan.
Funds for Iraq Processed through the Security Assistance Program.
Objective: To determine whether funds for Iraq processed through the
Security Assistance Program and the Foreign Military Sales Trust Fund
are properly managed.
Information Assurance of the Outside the Continental United States
Navy Enterprise Network as it Relates to the Global War on Terror.
Objective: To assess the integrity, confidentiality, and availability
of the Outside the Continental United States Navy Enterprise Network
particularly as it is used in Global War on Terror deployments. The
information assurance testing will include examining continuity,
enclave boundary defense, identification and authentication, personnel,
security design and configuration, enclave computing environment,
vulnerability and incident management, and physical and environmental
information assurance control subject areas.
Marine Corps Military Pay in Support of the Global War on Terror.
Objective: To determine whether Marine Corps military payroll disbursed
in support of the Global War on Terror is paid in accordance with
established laws and regulations.
Requirements Determination at the Defense Supply Center Columbus.
Objective: To determine whether quantities of items being purchased by
the Defense Supply Center Columbus matched anticipated Global War on
Terror requirements and whether internal management controls over the
determination of the procurement requirements were effective.
Review of Funds Transferred to Iraq and Afghanistan Security Forces
through the State and Justice Departments. Objective: To evaluate the
DOD oversight procedures over funding for the Iraq and Afghanistan
Security Forces made through the Department of Justice and the State
Department.
Transition Planning for the Logistics Civil Augmentation Program IV
Contract. Objective: To determine whether the Army properly planned for
acquisition transition from Logistics Civil Augmentation Program III
contract to the Logistics Civil Augmentation Program IV contract.
Fourth Quarter Fiscal Year 2008 Start
Accounting Systems Used in Southwest Asia. Objective: To determine
the adequacy of the accounting systems used in Southwest Asia to
include capability for processing properly supported and recorded
transactions.
Acquisition Workforce at the Defense Contract Management Agency.
Objective: To assess the amount of DOD civilian, military, foreign
national, and contracted support services within the Defense Contract
Management Agency devoted to support the Global War on Terror. We will
also evaluate whether the Defense Contract Management Agency
Acquisition Workforce is adequately trained and certified.
Army and Air Force Military Pay in Support of the Global War on
Terror. Objective: To determine whether the Army and Air Force military
payroll disbursed in support of the Global War on Terror is paid in
accordance with established laws and regulations.
Civilian Pay in Support of Global War on Terror. Objective: To
determine whether civilian pay disbursed in support of the Global War
on Terror is paid in accordance with established laws and regulations.
Controls Over the Funds to Refit Equipment at the Army Depots.
Objective: To evaluate controls over the funds to refit equipment at
the Army depots.
Controls Over Unliquidated Obligations on Contracts Supporting the
Global War on Terror. Objective: To determine the amount of
unliquidated obligations on contracts and whether DOD has established
adequate management controls over the unliquidated obligations.
DOD Counter Narcoterrorism Technology Program Office, Program and
Operations Support, Indefinite Delivery/Indefinite Quantity Contract.
Objective: To determine whether the DOD Counter Narcoterrorism
Technology Program Office support contract for Southwest Asia is
consistent with the Federal Acquisition Regulation.
Durability and Sustainability of Body Armor. Objective: To evaluate
the durability and sustainability of body armor. Specifically, we will
evaluate the life cycle management of body armor components to include
maintenance, repair, and durability.
Ground Standoff Mine Detection System Contract. Objective: To
evaluate the manner in which Ground Standoff Mine Detection System
contract requirements were developed, the procedures under which
contracts or task or delivery orders were awarded, and the efficiency
of DOD management and oversight of the contract.
High Mobility Multipurpose Wheeled Vehicle Contract. Objective: To
determine whether American General charged fair and reasonable prices
for noncommercial modifications under contract DAAE07-01-C-S001.
Internal Controls over Contract Systems Used in Southwest Asia.
Objective: To determine the adequacy of internal controls of
contracting systems used in Southwest Asia.
Logistics Support for the U.S. Special Operations Command.
Objective: To determine whether contracts providing logistics support
to the U.S. Special Operations Forces were properly awarded and
administered.
Military Construction Projects Executed Through the Army's
Logistics Civil Augmentation Program Contract. Objective: To survey the
military construction projects for Iraq and Afghanistan performed under
the Army's Logistics Civil Augmentation Program contracts and determine
which projects need reviews.
Mine Resistant Ambush Protected Repair and Maintenance Contracts.
Objective: To determine whether contracts for maintenance and repair of
Mine Resistant Ambush Protected vehicles were properly awarded and
administered.
Operation and Maintenance of Permanent Facilities in Afghanistan.
Objective: To review the award and administration of contract W912ER-
04-D-0003 task order 0015 for the operation and maintenance of
facilities in Afghanistan.
Purchasing and Leasing of Vehicles in Support of Operation Iraqi
Freedom and Operation Enduring Freedom. Objective: To examine contracts
and task orders for vehicles either purchased or leased to support
Operation Iraqi Freedom and Operation Enduring Freedom and to evaluate
the development of the requirements, award of the contract or task
order, the administration of the contract or task order, and the
reasonableness of the cost to DOD.
Quality Assurance Procedures for Kevlar Helmets. We are initiating
this project as a result of a Congressional request. Objective: To
determine whether DOD was aware of prior defects with Kevlar helmets
produced by Sioux Manufacturing, and whether DOD provided oversight to
ensure the contractor met quality standards.
Rapid Development and Fielding of Material Solutions Within the
Navy. Objective: To evaluate the management of the Navy process used to
rapidly develop and field material solutions to meet urgent needs in
support of the Global War on Terror.
Selection of Mode of Transportation of Materials in Support of
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To
examine contracts and task orders for ground, air, and sealift
transportation modes and evaluate how the shipping requirements were
determined, the procedures used to select the transporting company, the
terms of the contract and task orders, and the oversight provided.
Survey of Kellogg Brown and Root Services Logistics Support for
Contingency Operations. Objective: To determine the full extent of
Kellogg Brown and Root Services logistics efforts and associated DOD
costs in support of Contingency Operations.
Times and Material Contracts in Southwest Asia. Objective: To
determine whether time and material contracts were awarded and
administered in accordance with the Federal Acquisition Regulation.
U.S. Central Command Government Purchase Card Program. Objective:
To assess whether the U.S. Central Command's use of government purchase
cards complies with applicable laws and regulations. The audit helps
meet the statutory mandate to perform periodic audits of the Department
of Defense management of purchase cards per Title 10, United States
Code, Section 2784.
Use of Contractor to Provide Food Service or Food in Support of
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To
examine contracts and task orders awarded for the Army Subsistence
Program and evaluate whether the Defense Personnel Support Center,
Philadelphia, PA, properly defined the requirements, awarded the
contracts, and administered the contracts in support of Operation Iraqi
Freedom and Operation Enduring Freedom.
Use of Contracts to Provide Fuels in Support of the Warfighter.
Objective: To determine the extent to which contractors are providing
fuels instead of the Defense Energy Supply Center; how contract
requirements, terms and conditions were developed; and the adequacy of
cost controls.
Use of Other Transaction Authority for Prototypes. Objective: To
determine whether the Military Departments and Defense Agencies are
properly using the other transactions for prototypes to bring new
contractors into the Department to support the Global War on Terror
efforts.
First Quarter Fiscal Year 2009 Start
Contracting for Facilities Operations Support Services for
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To
examine contracts and task orders for facilities operations support
services (housekeeping, trash/garbage removal, landscaping, etc.),
development of contract requirements, award of contracts and task
orders, and the administration of the contracts and task orders.
Controls Over Contractor Common Access Cards in the U.S. European
Command. Objective: To evaluate the controls over the issuance,
revocation, reverification, and recovery of contractor common access
cards in the European theater.
Controls Over Unliquidated Obligations on U.S. Army Corps of
Engineers Contracts Supporting the Global War on Terror. Objective: To
determine the amount of unliquidated obligations on contracts and
whether the U.S. Army Corps of Engineers has established adequate
management controls over the unliquidated obligations.
Management and Accountability of Class III Bulk JP-8 Fuel
Supporting the U.S. Central Command Operations in Qatar. Objective: To
evaluate the management of Bulk Class III JP-8 fuel operations in Qatar
supporting U.S. Central Command Global War on Terror missions.
Medical Prime Vendor Contracts in Support of Operation Iraqi
Freedom and Operation Enduring Freedom. Objective: To examine contracts
and task orders under the Defense Supply Center-Philadelphia Medical
Prime Vendor Program for terms and conditions, price controls given
increased demand, and the ability of contractors to provide supplies in
a timely manner to the warfighter.
Private Security Contractors Use in Operation Iraqi Freedom.
Objective: To determine whether terms and conditions for private
security services are clearly defined in contracts, whether security
services are performed in accordance with the requirements of the
contract, and whether oversight of security contracts is adequate.
Use of Priority Air Cargo Transportation to Provide Materials and
Supplies in Support of Operation Iraqi Freedom and Operation Enduring
Freedom. Objective: To evaluate how the shipping requirement was
determined in the award and terms of contracts and delivery orders and
associated costs for the use of priority air transportation.
ONGOING PROJECTS
Reports Projected Third Quarter Fiscal Year 2008
Contingency Construction Contracting Procedures Implemented by the
Joint Contracting Command--Iraq/Afghanistan (D2007-D000LQ-0261 .000).
Objective: To determine the efficiency of contingency construction
contracting procedures implemented by the Joint Contracting Command--
Iraq/Afghanistan in the Afghanistan Area of Operations. Specifically,
we will review the effectiveness of practices related to solicitation,
award, quality assurance, oversight, and final acceptance of
constructions projects.
DOD Supplemental and Cost of War Execution Report Sections
Pertaining to Procurement and Research, Development, Test, and
Evaluation Funds (D2006-D000AE-0241.001). Objective: To determine how
effectively the Office of the Secretary of Defense and the DOD
Components prepared the DOD Supplemental and Cost of War Execution
Report for procurement and research, development, test, and evaluation
funds.
DOD Use of Global War on Terror Supplemental Funding Provided for
Procurement and Research, Development, Test, and Evaluation (D2006-
D000AE-0241.002). Objective: To evaluate the adequacy of the DOD
financial controls over use of Global War on Terror supplemental
funding provided for procurement and research, development, test, and
evaluation.
Internal Controls and Data Reliability in the Deployable Disbursing
System (D2007-D000FL-0252.000). Objective: To determine whether the
internal controls over transactions processed through the Deployable
Disbursing System are adequate to ensure the reliability of the data
processed. The audit will include financial information processed by
disbursing stations supporting the Global War on Terror and will also
include the recording of related obligations. This audit is a follow up
on our ``Audit of Internal Controls Over Out-of-Country Payments,''
D2006-D000FL-0208.000.
Summary of Issues Impacting Operations Iraqi Freedom and Enduring
Freedom Reported by Major Oversight Organizations Beginning Fiscal Year
2003 Through Fiscal Year 2007 (D2007-D000XA-0249.000). Objective: To
summarize contract, funds management, and other accountability issues
identified in audit reports and congressional testimonies that discuss
mission critical support to Operations Iraqi Freedom and Enduring
Freedom.
Reports Projected Fourth Quarter Fiscal Year 2008
Contracts for Supplies Requiring Use of Radio Frequency
Identification (D2008-D000AS-0022.000). Objective: To determine whether
DOD Components are complying with policies on radio frequency
identification. Specifically, we will determine whether DOD Components
have prepared and implemented plans to use radio frequency
identification. Additionally, we will assess whether DOD contracts
issued since January 1, 2005, include requirements for using passive
and active radio frequency identification tags and whether contractors
are complying with those requirements.
Controls Over the Contractor Common Access Card Life Cycle (D2007-
D000LA-0199.001). Objective: To determine whether controls over Common
Access Cards provided to contractors are in place and work as intended.
Specifically, we will determine whether DOD officials issue Common
Access Cards to contractors, verify the continued need for contractors
to possess Common Access Cards, and revoke or recover Common Access
Cards from contractors in accordance with DOD policies and procedures.
Defense Hotline Allegations Concerning Contracts Issued by U.S.
Army TACOM Life Cycle Management Command to BAE Systems Land and
Armaments, Ground Systems Division (D2007-D000CK-0256.000). Objective:
To review the allegations to the Defense Hotline concerning contracts
issued by U.S. Army TACOM Life Cycle Management Command to BAE Systems
Land and Armaments, Ground Systems Division. Specifically, we will
determine whether contract award and administrative procedures were in
compliance with Federal and DOD policy.
Distribution of Funds and the Validity of Obligations for the
Management of the Afghanistan Security Forces Fund--Phase II (D2007-
D000LQ-0161.001). Objective: To determine whether the distribution of
the $1.9 billion from the Afghanistan Security Forces Fund complied
with the 11 provisions of Public Law 109-234 and applicable
appropriations law. In addition, we will determine whether the
Afghanistan Security Forces Fund was obligated in accordance with
legislative intent and applicable appropriations law.
DOD Training for U.S. Ground Forces Supporting Operation Iraqi
Freedom (D2007-D000LH-0108.001). Objective: To determine whether U.S.
Ground Forces supporting Operation Iraqi Freedom are receiving training
necessary to meet operational requirements. This project is addressing
the adequacy of equipment levels at Army and Marine Corps combat
training centers and mobilization stations for ground forces units
deploying in support of Operation Iraqi Freedom.
Expeditionary Fire Support System and Internally Transportable
Vehicle Programs (D2008-D000AB-0091.000). Objective: To determine
whether contract competition and program administration for the United
States Marine Corps Expeditionary Fire Support System and Internally
Transportable Vehicle were in accordance with the Federal Acquisition
Regulation and supporting DOD guidance.
Funds Appropriated for Afghanistan and Iraq Processed Through the
Foreign Military Sales Trust Fund (D2007-D000FD-0198.000). Objective:
To determine whether the funds appropriated for the security,
reconstruction, and assistance of Afghanistan and Iraq and processed
though the Foreign Military Sales Trust Fund are being properly
managed. Specifically, we will determine whether the transfer of
appropriated funds from the Army's accounts into the Foreign Military
Sales Trust Fund was properly authorized, accounted for, and used for
the intended purpose. We will also determine whether Foreign Military
Financing funds granted to Afghanistan and Iraq are properly accounted
for and used for their intended purpose. In addition, we will verify
whether the appropriated funds are properly reported in DOD financial
reports.
Hiring Practices Used to Staff the Iraqi Provisional Authorities
(D2007-D000LC-0051.000). Objective: To evaluate the hiring practices
that DOD used to staff personnel to the provisional authorities
supporting the Iraqi government from April 2003 to June 2004.
Specifically, we will determine the Process DOD used to assign
personnel to the Office of Reconstruction and Humanitarian Assistance
and the Coalition Provisional Authority in Iraq.
Joint Follow-on Evaluation of Equipment Status (D2008-D000LQ-
0111.000). Objective: To determine whether forces deployed in support
of Operation Iraqi Freedom have the equipment to complete their
missions and to evaluate whether units completing combat missions had
the proper equipment in accordance with mission requirements.
Marine Corps' Management of the Recovery and Reset Programs (D2007-
D000LD-0129.000). Objective: To evaluate the effectiveness of the
Marine Corps' Recovery and Reset Programs for selected equipment.
Specifically, we will review how the Marine Corps met its equipment
requirements through the Reset and Recovery Programs, whether it
effectively repaired or replaced selected equipment, and whether the
Marine Corps used funds for their intended purpose.
Military Construction Funds Related to the Global War on Terror
(D2007-D000CK-0201.000). Objective: To determine whether DOD Components
followed requirements for using operations and maintenance funds for
Global War on Terror military construction. Specifically, we will
determine whether DOD followed proper procedures for administering,
executing, and reporting the use of operations and maintenance funds on
Global War on Terror military construction contracts.
Procurement and Delivery of Joint Service Armor Protected Vehicles
(D2007-D000CK-0230.000). Objective: To determine whether the Mine
Resistant Ambush Protected vehicle program office is procuring armored
vehicles in accordance with the Federal Acquisition Regulation and DOD
requirements. Specifically, we will review Mine Resistant Ambush
Protected program administration to determine whether the program
office is taking appropriate actions to accelerate vehicle delivery to
users. An additional objective will be to review the Services'
requirements for Mine Resistant Ambush Protected and High Mobility
Multipurpose Wheeled Vehicles.
Procurement and Use of Nontactical Vehicles at Bagram Air Field
(D2008-D000LQ-0063.000). Objective: To determine the effectiveness of
the process for procuring and leasing nontactical vehicles at Bagram
Air Field, Afghanistan. We will also review the cost of operating and
maintaining nontactical vehicles and determine whether the amount of
use complies with DOD guidance.
Security Over Radio Frequency Identification Information (D2008-
D000AS-0044.000). Objective: To determine whether DOD implemented
security controls to protect radio frequency identification
information. Specifically, we will assess the implementation and
effectiveness of those security controls over the information.
Small Arms Ammunition Fund Management in Support of the Global War
on Terror (D2008-D000FJ-0014.000). Objective: To determine whether the
Military Departments properly managed small arms ammunition funds in
support of the Global War on Terror. Specifically, we will determine
whether financial management officials fully supported and properly
incurred obligations and expenditures. We will also determine whether
funds for small arms ammunition were accurately recorded in financial
systems for reporting to the Office of the Secretary of Defense.
Reports Projected Fiscal Year 2009
Acquisition of Ballistic Glass Contracts for the High Mobility
Multipurpose Wheeled Vehicle Variants (D2008-D000CE-0187.000).
Objective: To determine whether the award and administration process of
the High Mobility Multipurpose Wheeled Vehicle ballistic glass
contracts comply with the Federal Acquisition Regulation.
Air Force Combat Search and Rescue Helicopter (D2008-D000AB-
0133.000). Objective: To determine whether changes to Combat Search and
Rescue Helicopter Key Performance Parameters were made in accordance
with applicable DOD and Air Force acquisition guidelines. Specifically,
we will determine whether key performance parameter changes were
properly designated and appropriately vetted through the Joint
Requirements Oversight Council. In addition, we will determine whether
key performance parameter changes will affect Air Force special
operations capabilities in the Global War on Terror.
Air Force Contract Augmentation Program in Southwest Asia (D2008-
D000JC-0202.000). Objective: To evaluate controls over Air Force
Contract Augmentation Program. We will determine what contracts have
been awarded, whether contracts were properly awarded, whether
contracted services were provided in accordance with the statement of
work and whether contract payments were appropriate.
Assignment and Training of Contracting Officer's Representatives at
Joint Contracting Command--Iraq/Afghanistan (D2008-D000JC-0203.000).
Objective: To determine whether personnel assigned as Contracting
Officer's Representatives to the Joint Contracting CommandIraq/
Afghanistan have proper training and expertise to perform their duties.
Class III Fuel Procurement and Distribution in Southwest Asia
(D2008-D000JC-0186.000). Objective: To determine whether fuel used for
ground operations in Southwest Asia to support Operations Iraqi Freedom
and Enduring Freedom is procured and distributed efficiently and
effectively. Specifically, we will determine whether fuel is procured
at fair and reasonable prices, whether fuel is distributed economically
and efficiently to operational commands, and whether fuel supply points
maintain accurate inventories.
Control Over the Reporting of Transportation Costs in Support of
the Global War on Terror (D2008-D000FI-0083.000). Objective: To
evaluate the effectiveness of controls over the reporting of
transportation costs related to the Global War on Terror.
Controls Over the Department of the Navy Military Payroll Disbursed
in Support of the Global War on Terror (D2008-D000FC-0189.000)
Objective: To determine whether the Department of the Navy is
disbursing military payroll in support of the Global War on Terror in
accordance with established laws and regulations. Specifically, we will
determine whether the Department of the Navy maintains adequate support
for payments related to deployments to an active combat zone.
Defense Emergency Response Fund for the Global War on Terror
(D2008-D000FE-0106.000). Objective: To determine if the Defense
Emergence Response Fund is used as intended and in adherence to the
Office of Management and Budget guidance for the use of the funds. We
will also determine if DOD has the ability to track the use of the
Defense Emergency Relief Fund.
Defense Logistics Agency Contracts for Combat Vehicle Parts in
Support of the Global War on Terror (D2008-D000FD-0214.000). Objective:
To determine whether the Defense Logistics Agency used appropriate and
effective contracting procedures to provide to customers the combat
vehicle parts to support the Global War on Terror.
Distribution of Funds and the Validity of Obligations for the
Management of the Afghanistan Security Forces Fund--Phase III (D2007-
D000LQ-0161.002). Objective: To determine whether organizations in
Southwest Asia that the U.S. Central Command assigned with the
responsibility for managing the Afghanistan Security Forces Fund
properly accounted for the goods and services purchased for the
Afghanistan Security Forces using the Afghanistan Security Forces Fund
and whether the goods and services were properly delivered to the
Afghanistan Security Forces.
Marine Corps Implementation of the Urgent Universal Need Statement
Process for Mine Resistant Ambush Protected Vehicles (D2008-D000AE-
0174.000). Objective: To determine whether the Marine Corps decision
making process responded appropriately and timely to Urgent Universal
Need Statements submitted by field commanders for Mine Resistant Ambush
Protected vehicles.
Organic Ship Utilization in Support of the Global War on Terror
(D2008-D000AB-0193.000). Objective: To evaluate the effectiveness of
policies and procedures used to ensure that activated Government-owned
and Government-chartered vessels are used to the maximum extent prior
to procuring commercial transportation to Southwest Asia.
Price Reasonableness for Contracts at U.S. Special Operations
Command (D2008-D000CG-0123.000). Objective: To determine whether
pricing of contracts at U.S. Special Operations Command complied with
Federal Acquisition Regulation requirements for determining price
reasonableness.
War Reserve Materiel Contract (D2008-D000CK-0161.000). Objective:
To determine whether Air Force contracting officials managed and
administered the DynCorp International War Reserve Materiel contract in
accordance with Federal and DOD contracting policies.
INSPECTOR GENERAL, DEPARTMENT OF STATE
PLANNED PROJECTS
Third Quarter Fiscal Year 2008 Start
Audit
Personal Security Detail Contracts--Blackwater (Iraq) (with the
Special Inspector General for Iraq Reconstruction)--(Financial Related
& Performance Audit)
New Embassy Compound Phase I (Performance Audit)
New Embassy Compound Phase II (Performance Audit)
Fourth Quarter Fiscal Year 2008 Start Audit
Economic Support Fund--Afghanistan (Financial Related Audit)
Middle East Regional Office
Personal Security Detail Contracts--Dyncorp and Triple Canopy--Iraq
(Performance Audit)
--Kennedy Report on Worldwide Personal Protective Services--Private
Security Contractors--Iraq (Program Evaluation)
--Role, Staffing, and Effectiveness of Diplomatic Security--Iraq
(Performance Audit)
First Quarter Fiscal Year 2009 Start
Audit
Property Inventory and Accountability at Embassy Baghdad
(Performance Audit) (concurrent w/Office of Inspections Inspection of
Embassy Baghdad)
Middle East Regional Office
Effectiveness of Worldwide Personal Protective Services contractors
in Jerusalem
Emergency Action Plan of Embassies Baghdad and Kabul (Program
Evaluation)
Second Quarter Fiscal Year 2009 Start
Audit
Personal Security Detail Contracts--Dyncorp and Triple Canopy
(Iraq) (Financial Related)
Middle East Regional Office
Personal Security Detail (Worldwide Personal Protective Services)
Contracts--Blackwater, Dyncorp, Triple Canopy Afghanistan
--Kennedy Report on Worldwide Personal Protective Services--Private
Security Contractors--Afghanistan
--Role, Staffing, and Effectiveness of Diplomatic Security--
Afghanistan (Financial Related and Performance Audit)
Third Quarter Fiscal Year 2009 Start
Inspection
De-mining Programs in Iraq and Afghanistan (Program Evaluation)
Fourth Quarter Fiscal Year 2009 Start
Audit
Economic Support Funds--West Bank
Logistics Civil Augmentation Program Task Order #100
Middle East Regional Office
Refugee Assistance and Human Rights in Afghanistan (Performance
Audit)
Governing Justly and Democratically in Afghanistan (Performance
Audit)
Embassy Baghdad/DOD Transition Plan (Joint with Inspector General,
DOD) (Program Review)
Future Starts
Iraq
Economic Support Funds--Iraq
Verbal Notices to Proceed (Task Orders)--Worldwide Personal
Protective Services
Diplomatic Security Armored Vehicle Procurement
Local Security Guard Program
Public Diplomacy Programs in Iraq
Democracy and Education Programs in Iraq
Follow-up Evaluations of Iraq Police Training
Follow-up Evaluations of Iraq Rule-of-Law Programs
Follow-up Evaluation of Anticorruption Programs in Iraq
Role, Function, and Effectiveness of Regional Embassy Offices in
Iraq
Rightsizing (Staffing) of Embassy Baghdad
Follow-up on Role and Effectiveness of Provincial Reconstruction
Teams in Iraq
Management of Iraq Security Programs
Review of Anti-Corruption Training and Development Programs in Iraq
Follow-up Review of Rule of Law Programs in Iraq
Review of Communications Security at Embassy Baghdad
Democracy Building: National Endowment for Democracy
Implementation of International Cooperative Administrative Support
Services--Iraq
Afghanistan
Public Diplomacy Programs in Afghanistan
Middle East Partnership Initiative
Follow-up Evaluation of Afghanistan Police Training
Follow-up Evaluation of Afghan Rule-of-Law Programs
Effectiveness of Counter Narcotic Programs in Afghanistan
Effectiveness of Security Assistance in Afghanistan
Management of Afghanistan Security Programs
Implementation of International Cooperative Administrative Support
Services--Afghanistan
Pakistan
Democracy and Education Programs in Pakistan
Federally Administered Tribal Areas in Pakistan
Effectiveness of Counter-narcotics Programs in Pakistan
Effectiveness of Security Assistance in Pakistan
Other
Middle East Partnership Initiative
Democracy and Education Programs in Lebanon
Security Assistance in Lebanon
ONGOING PROJECTS
Iraqi Special Immigrant VISA (Special Immigrant Visa) (Program
Evaluation)
Iraqi Refugee Processing (Program Evaluation)
INSPECTOR GENERAL, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
PLANNED AUDITS--IRAQ
Performance Audits
USAID/Iraq's Community Stabilization Program. Objectives: (1) Is
USAID/Iraq's Community Stabilization Program achieving its intended
result with regard to activities in the community infrastructure and
essential services component? (2) How has USAID/Iraq designed and
implemented its Community Stabilization Program to help ensure that
Iraqis continue to benefit from its activities after USAID involvement
has ended? (Completed. Audit Report No. E-267-08-001-P, issued March
18, 2008)
USAID/Iraq's Management of the Marla Ruzicka Iraqi War Victims
Fund. Objective: Is USAID/Iraq complying with provisions contained in
public laws to help ensure that funds appropriated for the Marla Fund
are used as intended? (Completed. Audit Report No. E-267-08-002-P,
issued April 3, 2008)
USAID/Iraq's Community Action Program II. Objectives: (1) Is USAID/
Iraq accurately measuring the jobs created by its community action
program activities? (2) Are USAID/Iraq's community action program
activities achieving intended results and what has been the impact?
USAID/Iraq's Monitoring and Evaluation Performance Program.
Objectives: (1) Is the Monitoring and Evaluation Performance Program,
Phase II program producing monitoring and evaluation reports that are
timely, relevant, and useful for performance management? (2) Is USAID/
Iraq using Monitoring and Evaluation Performance Program, Phase II
program results to manage its portfolio?
USAID/Iraq's Management of Its Official Vehicle Fleet. Objective:
Has USAID/Iraq acquired, utilized, and disposed of its official
vehicles in accordance with USAID's Automated Directives System?
Followup Audit of USAID/Iraq's Local Governance Activities.
Objective: Are USAID/Iraq's local governance activities achieving
intended results and what has been the impact?
USAID/Iraq's National Capacity Development Program. Objective: Is
USAID/Iraq's national capacity development program achieving its
intended results and what has been the impact of this program?
Followup Audit of Provincial Reconstruction Teams in Iraq.
Objectives: (1) Are USAID/Iraq provincial reconstruction team
representatives performing their roles as activity managers as
intended? (2) How is USAID/Iraq assisting the provincial reconstruction
teams in the transition to traditional USAID activities?
USAID/Iraq's Agribusiness Program. Objective: Is USAID/Iraq's
agribusiness program achieving intended results and what has been the
impact?
USAID/Iraq's Provincial Economic Growth Program. Objectives: (1)
Have USAID/Iraq's provincial economic growth activities created an
enabling environment for business operations and what has been the
impact? (2) Are USAID/Iraq's grant activities under its provincial
economic growth program achieving intended results and what has been
the impact?
Financial Audits
Objectives: Financial audit objectives include determining whether
(1) costs incurred and billed by the recipient are allowable, allocable
and reasonable, (2) the recipient's internal control structure is
adequate, and (3) the recipient complies with agreement terms and
applicable laws and regulations. Audits are performed by the Defense
Contract Audit Agency at the request of OIG, who then reviews and
issues the reports to USAID with applicable recommendations. The
following financial audits are planned for fiscal year 2008:
--Direct Costs Incurred and Billed by Research Triangle Institute
under Contract No. GHS-I-04-03-00028-00 from April 26, 2005 to
December 31, 2006. (Completed. OIG Report No. E-267-08-001-D,
issued October 4, 2007)
--Costs Incurred and Billed by Sallyport Global Services Ltd. under
its Subcontracts with The Louis Berger Group, Inc. under USAID
Contract Nos. 267-C-00-04-00417-00 for the Period September 27,
2004 through September 30, 2005 and 267-C-00-04-00435-00 for
the Period August 1, 2005 through March 31, 2007. (Completed.
OIG Report No. E-267-08-002-D, issued December 12, 2007)
--Costs Incurred and Billed by America's Development Foundation under
Contract No. GEW-C-00-04-00001-00 from October 1, 2006 through
June 30, 2007. (Completed. OIG Report No. E-267-08-003-D,
issued January 23, 2008)
--Costs Incurred and Billed by Creative Associates International,
Inc. under Contract No. EPP-C-00-04-00004-00 from July 1, 2005
through February 28, 2007. (Completed. OIG Report No. E-267-08-
004-D, issued February 4, 2008)
--Costs Incurred and Billed by Management Systems International under
USAID Contract No. AEP I-00-00-00024-00, Task No. 08, from June
26, 2003 through May 31, 2005. (Completed. OIG Report No. E-
267-08-005-D, issued February 4, 2008)
--Costs Incurred and Billed by Bechtel National, Inc. under Contract
Nos. EEE-C-00-03-00018-00 (Phase I) and SPU-C-00-04-0000 1-00
(Phase II) from November 1, 2006 to September 30, 2007.
(Completed. OIG Report No. E-267-08-006-D, issued February 12,
2008)
--Cost Incurred and Billed by IntraHealth International, Inc. under
its Subcontract No. 15-330-0208954 with Research Triangle
Institute Contract No. GHS-1-04-03-00028-00 for the Period
April 26, 2005 through December 31, 2006. (Completed. OIG
Report No. E-267-08-007-D, issued February 24, 2008)
--Costs Incurred and Billed by International Business and Technical
Consultants, Inc. (IBTCI) under Contract No. 267-C-00-05-00508-
00 from January 1, 2006 through December 31, 2006. (Completed.
OIG Report No. E-267-08-008-D, issued March 6, 2008)
--Costs Incurred and Billed by BearingPoint, Inc. under Contract No.
267-C-00-04-00405-00 for the Period October 1, 2006 through
September 30, 2007. (Completed. OIG Report No. E-267-08-009-D,
issued April 15, 2008)
--Costs Incurred and Billed by Agricultural Cooperative Development
International/Volunteers in Overseas Cooperative Assistance
under USAID Cooperative Agreement No. AFP-A-00-03-00003 for the
Period August 1, 2004 through March 31, 2007.
--Costs Incurred and Billed by the International Foundation for
Election Systems through the Consortium for Election and
Political Process Strengthening under [1] USAID Agreement No.
267-A-00-04-00405-00 for the period October 1, 2005 through
June 30, 2007, [2] USAID Agreement No. AFP-A-00-04-00014-00 for
the period July 9, 2004 through June 30, 2006, and [3] USAID
Agreement No. REE-A-00-04-0005 0-00 for the period July 26,
2004 through July 31, 2006.
--Costs Incurred and Billed by America's Development Foundation under
USAID Contract No. GEW-C-00-04-00001-05 for the Period October
1, 2006 through June 30, 2007.
--Costs Incurred and Billed by International Relief & Development,
Inc. under USAID Agreement No. AFP-A-00-03-0002-00 for the
Period November 1, 2005 through March 31, 2007.
--Costs Incurred and Billed by Cooperative Housing Foundation
International under USAID Agreement No. AFP-A-00-0300004-00 for
the Period August 1, 2005 through April 30, 2007 and under
USAID Agreement No. 267-A-00-06-00507-00 for the Period
September 30, 2006 through September 30, 2007.
--Costs Incurred and Billed by Mercy Corps under USAID Agreement No.
AFP-A-00-03-00001-00 for the Period August 1, 2004 through
March 31, 2007.
--Costs Incurred and Billed by Save the Children Federation under
USAID Agreement No. AFP-A-00-03-00005-00 for the Period August
1, 2004 through April 1, 2006.
--Agreed-upon Procedures Review of Direct and Indirect Costs Incurred
by Research Triangle Institute under USAID Contract Nos. EDG-C-
00-00010-00, 267-C-00-05-00505-00, and GHS-I-04-03-00028-00
Relating to Payments to Business Systems House during the
Period March 26, 2003 through September 30, 2007.
--Costs Incurred and Billed by International Relief & Development,
Inc. under USAID Agreement No. 267-A-00-06-00503-00 for the
Period May 29, 2006 through September 30, 2007.
--Costs Incurred and Billed by BearingPoint, Inc. under USAID
Contract No. 267-C-00-04-00405-00 for the Period August 1, 2005
through September 30, 2006.
--Costs Incurred and Billed by Louis Berger Group/The Services Group,
Inc. under USAID Contract No.267-C-00-04-00435-06 for the
Period October 1, 2006 through September 30, 2007.
--Costs Incurred and Billed by Management Systems International under
USAID Contract No. AEP-I-01-05-00221-00 for the Period July 27,
2006 through September 30, 2007.
--Agreed-Upon Procedures Review of Requests for Equitable Adjustments
Related to Excusable Delays by Bechtel National, Inc. under
USAID Contract No. SPU-C-00-04-00001-00 for the Period January
5, 2004 through March 31, 2007 and Contract No. EEE-C-00-03-
00018-00 for the Period April 17, 2003 through February 28,
2006.
--Costs Incurred and Billed by International Resources Group under
USAID Contract No. 517-C-00-04-00106-00 for the Period November
1, 2006 through December 31, 2007.
--Costs Incurred and Billed by Research Triangle Institute under
USAID Contract No. 267-C-00-05-00505-00 for the Period January
1, 2007 through December 31, 2007.
--Costs Incurred and Billed by Agricultural Cooperative Development
International/Volunteers in Overseas Cooperative Assistance
under USAID Cooperative Agreement No. AFP-A-00-03-00003 for the
Period August 1, 2004 through March 31, 2007.
--Costs Incurred and Billed by Louis Berger Group, Inc. for the
Period May 14, 2007 through May 13, 2008.
--Costs Incurred and Billed by the International Foundation for
Election Systems through the Consortium for Election and
Political Process Strengthening under USAID Agreement No. 267-
A-00-04-00405-00 from July 1, 2007 through June 30, 2008.
--Costs Incurred and Billed by International Business & Technical
Consultants, Inc. under USAID Contract No. 267-C-00-05-00508-00
for the Period January 1, 2007 through December 31, 2007.
PLANNED PROJECTS--AFGHANISTAN
Performance Audits
USAID/Afghanistan's Agriculture, Rural Investment and Enterprise
Strengthening Program. Objective: Was USAID/Afghanistan's Agriculture,
Rural Investment and Enterprise Strengthening Program achieving its
intended results and what has been the impact? (Completed. Audit Report
No. 5-306-08-001-P, issued January 22, 2008)
USAID/Afghanistan's Alternative Development Program--Southern
Region. Objective: Did USAID/Afghanistan's Alternative Development
Program/South achieve planned results, and what has been the impact?
(Completed. Audit Report No. 5-306-08-003-P, issued March 17, 2008)
USAID/Afghanistan's Accelerating Sustainable Agriculture Program.
Objective: Did USAID/Afghanistan's Accelerating Sustainable Agriculture
Program achieve planned results, and what has been the impact?
USAID/Afghanistan's Technical Assistance Services to Implement the
Small and Medium Sized Enterprise Development Activity in Afghanistan.
Objective: Did USAID/Afghanistan's Technical Assistance Services to
Implement the Small and Medium Sized Enterprise Development Activity
achieve planned results, and what has been the impact?
USAID/Afghanistan's Higher Education Project. Objective: Did USAID/
Afghanistan's Higher Education Project achieve planned results, and
what has been the impact?
USAID/Afghanistan's Local Governance and Community Development
Project in Northern and Western Regions of Afghanistan. Objective: Did
USAID/Afghanistan's Local Governance and Community Development Project
achieve planned results, and what has been the impact?
USAID/Afghanistan's Building Capacity Program. Objective: Did
USAID/Afghanistan's Building Capacity Program achieve planned results,
and what has been the impact?
USAID/Afghanistan's School and Health Clinic Buildings Completed
Under the Schools and Clinics Construction and Refurbishment Program.
Objective: Did USAID/Afghanistan's School and Health Clinic Buildings
Completed under the Schools and Clinics Construction and Refurbishment
Program achieve planned results, and what has been the impact?
Selected Activities Funded Under USAID/Afghanistan's $1.4 Billion
Infrastructure Rehabilitation Program. Objective: Did Selected
Activities Funded under USAID/Afghanistan's $1.4 billion Infrastructure
Rehabilitation Program achieve planned results, and what has been the
impact?
Financial Audits
Objectives: Financial audit objectives include determining whether
(1) costs incurred and billed by the recipient are allowable, allocable
and reasonable, (2) the recipient's internal control structure is
adequate, and (3) the recipient complies with agreement terms and
applicable laws and regulations. Audits are performed by the Defense
Contract Audit Agency or non-Federal auditors. The OIG reviews and
issues the reports to USAID with applicable recommendations. The
following financial audits are planned for fiscal year 2008:
--Local Costs incurred by the Louis Berger Group, Inc. to Implement
the Rehabilitation of Economic Facilities and Services Program,
USAID/Afghanistan Contract No. 306-C-00-02-00500-00, for the
Period from April 1, 2007, to June 30, 2007. (Completed. OIG
Report No. 5-306-08-001-N, issued November 27, 2007)
--Closeout Audit of the Project Titled ``Business Advisory Services
to Small and Medium-Sized Enterprises (SMEs) in Afghanistan,''
USAID/Afghanistan Cooperative Agreement No. 306-A-00-04-00570-
00, Managed by Acap Management Limited, for the Period from
September 30, 2004, to March 29, 2007. (Completed. OIG Report
No. 5-306-08-019-R, issued April 25, 2008)
--Costs Incurred by DEG (Deutsche Ivestitions
Entwicklungsgesellschaft mbH), USAID/Afghanistan Agreement No.
306-A-00-05-005 12-00, for the Period from February 3, 2005, to
August 2, 2008
--Costs incurred by Bearing Point, Inc. to Implement the Economic
Governance in Afghanistan (BP I), USAID/Afghanistan Contract
No. 306-C-00-03-00001-00, for the Period from November 17,
2002, to December 15, 2005
--Costs incurred by PTS (Program-e Tahkim-e Solh) to Implement the
National Commission For Peace and Reconciliation, USAID/
Afghanistan Agreement No. 306-PIL-07-3060004-00, for the Period
from April 1, 2007, to March 31, 2008
--Costs incurred by Bearing Point, Inc. to Implement the
Strengthening Private Sector through Capacity Building (BP
III), USAID/Afghanistan Contract No. GEG-I-00-04-00004-00, for
the Period from September 26, 2005, to December 31, 2007
--Costs incurred by AEAI-Advance Engineering Associates,
International to Implement the Afghanistan Energy Assistance
Project, USAID/Afghanistan Contract No. EPP-I-OO-03-00004-00,
for the Period ended December 31, 2007
--Quarterly Audits of Local Costs incurred by the Louis Berger Group,
Inc. to Implement the Afghanistan Infrastructure Reconstruction
Program (AIRP), USAID/Afghanistan Contract No. 306-I-00-06-
00517-00
PLANNED PROJECTS--REST OF ASIA
Performance Audits
USAID/Indonesia's Tsunami-Related Housing Construction Activities
Implemented by Cooperative Housing Foundation International. Objective:
Were USAID/Indonesia's tsunami-related housing construction activities
being implemented by the Cooperative Housing Foundation International
(CHF) achieving planned results? (Completed. Audit Report No. 5-497-08-
002-P, issued January 31, 2008)
USAID/Pakistan's Education Sector Reform Assistance Program.
Objective: Did USAID/Pakistan's Education Sector Reform Assistance
program achieve intended results and what has been the impact?
(Completed. Audit Report No. 5-391-08-004-P, issued March 28, 2008)
USAID/India's Greenhouse Gas Pollution Prevention Project.
Objective: Did USAID/India's Greenhouse Gas Pollution Prevention
Project achieve planned results, and what has been the impact?
USAID/Mongolia's Economic Policy Reform and Competitiveness
Project. Objective: Did USAID/Mongolia's Economic Policy Reform and
Competitiveness Project achieve planned results, and what has been the
impact?
USAID/Nepal's Health Program. Objective: Did USAID/Nepal's Health
Program achieve planned results, and what has been the impact?
Critical USAID/Philippines' Activities under its Growth with Equity
in Mindanao II Program Implemented by Louis Berger Group, Inc.
Objective: Did Critical USAID/Philippines'' Activities under its Growth
with Equity in Mindanao II Program achieve planned results, and what
has been the impact?
Financial Audits
Objectives: Financial audit objectives include determining whether
(1) costs incurred and billed by the recipient are allowable, allocable
and reasonable, (2) the recipient's internal control structure is
adequate, and (3) the recipient complies with agreement terms and
applicable laws and regulations. Financial audits are conducted
primarily of non-U.S. based organizations throughout the rest of Asia
by non-Federal auditors. Non-U.S. recipients are required to have
financial audits done if they spend more than $300,000 of USAID funds
during their fiscal year. Financial audit reports conducted by non-
Federal auditors are reviewed by the OIG office in Manila, Philippines,
and the reports transmitted with applicable recommendations to the
responsible USAID mission in the region. OIG expects to issue over 30
financial audit reports to USAID missions in the region, in addition to
Iraq and Afghanistan, during fiscal year 2008.
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
PLANNED PROJECTS
Third Quarter Fiscal Year 2008 Start
Follow-on Review of Iraq Security Forces Strength Accounting
Methodologies, Including Use of Automated Systems (8024).
Follow-on Review of the Transition of Iraq Reconstruction Projects
to the Government of Iraq (8022).
Iraq Reconstruction Management System (8027).
Progress and Plans to Transition Infrastructure Development for
Iraqi Security Forces to the Iraqi Government (8026).
Reconstruction Contracts/Task Orders Terminated for Convenience or
Default (8020) (follow-on to 7029).
Survey of Department of State and U.S. Agency for International
Development Contracts and Grants for Democracy Building Projects in
Iraq (8025).
Survey of Overall Economic Support Fund Programs Management and
Expenditures (8021).
Triple Canopy Private Security Contract--Department of State
(8028). Note: Assignment expected to identify agency unique focus on
security contracting issues related to Iraq reconstruction under
Section 842 legislation as well as identify issues that may require
more in-depth audit focus on a cross-agency basis once results of this
review are considered along with results from other ongoing reviews.
Start (To Be Determined)
Assessing Progress, Trends, and Cross-Program Coordination Related
to Economic Development in Iraq (include DOD economic development
efforts).
Individual U.S. Agency for International Development Democracy
Building Program (Program Effectiveness Reviews). Placeholder for
potential future program review of individual democracy building
programs that may be identified in ongoing survey of Department of
State and U.S. Agency for International Development contracts and
grants management of democracy building programs related to Iraq
reconstruction (see project code 8025)
Iraq Related Operating Expenses of U.S. Agencies Supporting Iraq
Reconstruction Ministerial Capacity Development Follow-on.
Progress in Improving Infrastructure Security Across Key Sectors
(oil, electricity, water, sewer, etc.).
Provisional Reconstruction Teams/Provisional Reconstruction Teams
Follow-on
Selected Commander Emergency Response Program Contracts.
(Placeholder for individual audits of selected contracts related to
construction and on-construction projects
Selected Gulf Region Division Economic Support Fund Contracts.
(Placeholder--priorities TBD based on results of project code 8025)
Selected Iraq Security Forces Fund Contracts. (Placeholder--
priorities TBD based on other ongoing Iraq Security Forces Fund
Contract work)
Selected Programs' Cash Controls and Cash Payments
Selected Security Contracts and Subcontracts. (Placeholder pending
developing of listing of contracts and subcontracts to develop a sample
of contracts and subcontracts to review)
Selected U.S. Agency for International Development Economic Support
Fund Contracts. (Placeholder--priorities TBD based on results of
project code 8025)
Survey of Present Use of Sole Source and Limited Competition in
Contracting.
Triple Canopy Private Security Contracts--DOD. Note: Assignment
expected to identify agency unique focus on security contracting issues
under Section 842 legislation related to Iraq reconstruction as well as
identify issues that may require more in-depth audit focus on a cross-
agency basis once results of this review are considered along with
results from other ongoing reviews.
Washington International and Black and Veatch Contracts--Water
Sector.
ONGOING PROJECTS
Aegis Private Security Contract (8017). Note: Assignment is
expected to be used to identify DOD/GRD unique security contracting and
subcontracting issues that will help frame future security contracting
reviews, particularly at the subcontractor level.
First 100 Audit Reports--Capping Report.
Joint SIGIR Department of State Inspector General Review of
Spending Under Blackwater Contracts (7018).
Spending and Performance Under Development Alternatives Inc. (DAI)
Contracts--Economic Development (7026).
Spending and Performance Under KBR Contracts--Oil Sector (8003).
Spending of United States Government Funds in Support of Iraq
Reconstruction: Fluor-AMEC Joint Venture in the Electric and Public
Works/Water Sectors (7022).
Spending of United States Government Funds in Support of Iraq
Reconstruction: Research Triangle Institute (7023).
Spending of United States Government Funds Under Parsons, Inc.,
Iraq Reconstruction Contracts (S&J) (8006).
Survey of U.S. Government Contracts Related to the Performance of
Security Functions in Iraq (8016). Note: Assignment expected to lead to
fuller identification of contractors and subcontractors--and data
needed to identify individual potential contract audits to be done
under the Section 842 legislation related to Iraq reconstruction--as
well as individual reviews of selected program and policy issues as may
be required.
U.S. ARMY AUDIT AGENCY
PLANNED PROJECTS
Third Quarter Fiscal Year 2008 Start
Army Reserve Post--Mobilization Training (A-2008-FFS-0504.000).
Objective: (1) Are post-mobilization training requirements adequately
identified and executed for the Army Reserve? (2) Are all necessary
unit and individual training requirements identified and completed
prior to deployment? (3) Did post-mobilization training requirements
unnecessarily duplicate pre-mobilization training?
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Kabul (A-2008-ALL-0401.000). Objective: Determine if goods
and services acquired under contract were properly justified, awarded,
and administered.
Follow up Audit of Logistics Civil Augmentation Program III Audits
(A-2008-ALL-0321.000). Objective: Determine if the Army implemented
agreed to recommendations and corrected the problems identified in the
previous audit.
Long Lead Items for Reset (A-2008-ALM-0102.000). Objective: Are
long lead items requirements valid and aimed at obtaining materiel just
in time to meet the Army's needs?
National Guard Post--Mobilization Training (A-2008-FFS-0505.000).
Objective: (1) Are post-mobilization training requirements adequately
identified and executed for the National Guard? (2) Are all necessary
unit and individual training requirements identified and completed
prior to deployment? (3) Did post-mobilization training requirements
unnecessarily duplicate pre-mobilization training?
Sustainment of Left Behind Equipment (A-2008-ALM-0247.000).
Objective: Did the Army effectively and efficiently manage
accountability and maintenance of its Continental United States left
behind equipment?
Fourth Quarter Fiscal Year 2008 Start
Class V Retrograde Operations (A-2008-ALL-0397.000). Objective: (1)
Determine if the Army has adequate processes and procedures in place to
properly retrograde ammunition from Southwest Asia. (2) Determine if
the Army has adequate accountability and visibility over ammunition.
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Fallujah (A-2008-ALL-0400.000). Objective: Determine if
goods and services acquired under contract were properly justified,
awarded, and administered.
Controls Over Logistics Civil Augmentation Program--White Property
(A-2008-ALL-0398.000). Objective: Determine if the Logistics Civil
Augmentation Program contractor properly managed and accounted for
government acquired property.
Controls Over Vendor Payments--Kuwait (A-2008-ALL-0501.000).
Objective: Evaluate the controls over vendor payments made on contracts
awarded in Kuwait.
Housing Contracts-Area Support Group--Kuwait (A-2008-ALL-0403.000).
Objective: (1) Determine whether the housing program in Kuwait is
properly managed. (2) Determine if property or assets provided by the
Government and acquired by the contractor are adequately managed.
Managing Reset, U.S. Army Pacific (A-2008-FFP-0506.000). Objective:
Evaluate development and execution of reset requirements.
Retrograde Exit Strategy (A-2008-ALL-0402.000). Objective: Evaluate
the Army's exit strategy to determine if high volume equipment and
supply retrograde operations were adequately planned and executable for
Southwest Asia.
First Quarter Fiscal Year 2009 Start
Single Channel Ground and Airborne Radio System Requirements (A-
2008-ALA-0468.000). Objective: Determine the proper alignment of Single
Channel Ground and Airborne Radio System requirements to short-term
needs; and modernization plans to transition to the Joint Tactical
Radio System.
Second Quarter Fiscal Year 2009 Start
Controls Over Vendor Pay--Joint Contracting Command (Iraq) (A-2008-
ALL-0399.000). Objective: Evaluate the controls over vendor payments
made on contracts awarded in Iraq.
Government Purchase Card Program in Southwest Asia. Objective:
Evaluate the effectiveness of management controls over the government
purchase card program. Specifically, determine if use of purchases
cards were in accordance with established guidance, and goods and
services acquired were adequately accounted for.
Information Assurance and Infrastructure in Southwest Asia.
Objective: Determine whether the Army's controls and procedures protect
and defend the integrity, confidentiality and availability of
information and information systems during a contingency operation.
Logistics Civil Augmentation Program Operations IV in Support of
Operation Enduring Freedom. Objective: To determine if services awarded
under Logistics Civil Augmentation Program IV in Afghanistan were
managed in a reasonable and cost-effective manner.
Logistics Civil Augmentation Program Operations IV in Support of
Operation Iraqi Freedom. Objective: To determine if services awarded
under Logistics Civil Augmentation Program IV in Iraq were managed in a
reasonable and cost-effective manner.
Requirements Validation for Continental United States Based
Mobilized Soldiers (A-2008-FFS-0443.000). Objective: (1) Determine if
Soldiers mobilized to support contingency operations outside of theater
continue to have valid mission essential requirements. (2) Determine
the force structure impacts of the continued use of Soldiers mobilized
to support contingency operations outside of theater operations.
Reserve Component Mobilization Strategy. Objective: Is the Reserve
Component training strategy viable to meet Army Force Generation goals
and the 12 month mobilization limitations?
Retrograde Exit Strategy--Continental United States. Objective:
Evaluate the Army's exit strategy to determine if high volume equipment
and supply retrograde operations were adequately planned and executable
for Southwest Asia.
Transition from Logistics Civil Augmentation Program Operations to
Sustainment Contracts--Iraq. Objective: Determine if the Army
implemented best business practices to transition work performed under
the Logistics Civil Augmentation Program contract to sustainment
contracts.
Unit Training to Defeat Improvised Explosive Devices (A-2008-FFF-
0081.000). Objective: Are units conducting appropriate training to
counter the Improvised Explosive Devices threat?
Use of Non-Tactical Vehicles--Iraq. Objective: Determine if the
Army effectively utilized its non-tactical vehicle fleet in a
contingency environment.
ONGOING PROJECTS
Reports Projected Third Quarter Fiscal Year 2008
Accounting for Seized and Developmental Fund--Iraq Fund Balances
(A-2007-FFM-0882.000). Objective: (1) What are the residual balances
for seized and Developmental Fund--Iraq funds? (2) Are the balances
reasonable and ready for transfer?
Advanced Training for Explosive Ordnance Disposal Soldiers (A-2008-
FFD-0098.000). Objective: (1) Has Improvised Explosive Device defeat
methods been fully integrated into advanced training for Explosive
Ordnance Disposal Soldiers? (2) Has training for new equipment fielded
during OIF/OEF been fully integrated into advanced training for
Explosive Ordnance Disposal Soldiers?
Battle Loss Computations (A-2007-ALM-0305.000). Objective: Did the
Army properly identify and adjust requirements and funding to replace
Operational losses?
Billing for Container Detention Penalties (A-2007-ALR-0259.002).
Objective: Are container detention charges relating to the Global War
on Terror billed to the responsible activity?
Body Armor Requirements (A-2007-FFD-0067.000). Objective: (1) Has
the Army established adequate quantitative requirements for the
procurement of body armor? Does the Army have an adequate fielding plan
for body armor?
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Baghdad (A-2007-ALL-0887.001). Objective: Determine if
goods and services acquired under contract were properly justified,
awarded, and administered.
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Victory (A-2007-ALL-0887.002). Objective: Determine if
goods and services acquired under contract were properly justified,
awarded, and administered.
Contract Operations U.S. Army Accessions Command--Southwest Asia--
Kuwait (A-2007-ALL-0329.000). Objective: (1) Evaluate the effectiveness
of contracting operations at U.S. Army Contracting Command Southwest
Asia-Kuwait. (2) Determine whether contracting operations were
performed in accordance with appropriate laws and regulations.
Followup Audit of Asset Visibility and Container Management (A-
2007-ALL-0081.002). Objective: Determine if the U.S. Central Command
implemented agreed to recommendations and fixed the problems identified
in the previous audit report.
Management and Use of Contractor Acquired Property Under the
Logistics Civil Augmentation Program Contract--Power Generators (A-
2007-ALL-0212.001). Objective: Determine if power generators (property)
acquired were effectively managed and used under the Logistics Civil
Augmentation Program contract.
Management of Shipping Containers in Southwest Asia--Afghanistan
(A-2007-ALL-0081.005). Objective: Determine if the Army maintained
adequate visibility over shipping containers to, within, and from the
Southwest Asia Theater of Operations.
Management of Shipping Containers in Southwest Asia--Continental
United States (A-2007-ALL-0081.006). Objective: Determine if the Army
maintained adequate visibility over shipping containers to, within, and
from the Southwest Asia Theater of Operations.
Management of Shipping Containers in Southwest Asia--Kuwait (A-
2007-ALL-0081.003). Objective: Determine if the Army maintained
adequate visibility over shipping containers to, within, and from the
Southwest Asia Theater of Operations.
Management of Shipping Containers in Southwest Asia--Summary (A-
2007-ALL-0081.000). Objective: Determine if the Army maintained
adequate visibility over shipping containers to, within, and from the
Southwest Asia Theater of Operations.
Retrograde Operations in Southwest Asia--Iraq (A-2006-ALL-
0397.000). Objective: (1) Determine whether retrograde operations in
the Southwest Asia area of operations are managed in an effective and
cost-efficient manner. (2) Determine whether adequate accountability
and visibility were maintained over retrograded materiel and equipment.
Retrograde Operations in Southwest Asia--Kuwait (A-2007-ALL-
0858.000). Objective: (1) Determine whether retrograde operations in
the Southwest Asia area of operations are managed in an effective and
cost-efficient manner. (2) Determine whether adequate accountability
and visibility were maintained over retrograded materiel and equipment.
Retrograde Operations in Southwest Asia--Kuwait (Rear Support) (A-
2007-ALL-0858.001). Objective: (1) Determine whether retrograde
operations in the Southwest Asia area of operations are managed in an
effective and cost-efficient manner. (2) Determine whether adequate
accountability and visibility were maintained over retrograded materiel
and equipment.
Temporary Change of Station Orders and Housing for Mobilized
Soldiers (A-2007-FFS-0917.000). Objective: (1) Are policy and
procedures governing the development of Temporary Change of Station
orders adequate to ensure valid travel entitlements and proper
authorizations? (2) Are policy and procedures governing the approval
for payment of travel vouchers adequate to ensure care and prudent use
of travel funds for mobilized Soldiers? (3) Do Army installations have
sufficient and cost-effective lodging to support Soldiers mobilizing to
the National Capital Region?
Theater Maintenance Processes in Europe (A-2008-ALE-0071.000).
Objective: Were theater maintenance processes structured and
administered to meet reset goals and provide the best value?
Use of Role Players at Combat Training Centers (A-2007-FFF-
0415.000). Objective: (1) Is the Army's process for acquiring role-
players for the Combat Training Centers effective and efficient? (2) Is
the logistical support provided for role-players at the Combat Training
Centers consistent and cost-effective? (3) Does the Army adequately
manage its role-players at the Combat Training Centers?
Reports Projected Fourth Quarter Fiscal Year 2008
Accountability of Contractors on the Battlefield (A-2007-FFS-
0553.000). Objective: (1) Has the Army established direct authority and
identified the roles and responsibilities for accountability of
contractors on the battlefield? (2) Does the Synchronized Predeployment
and Operational Tracker provide accurate, complete and relevant
information for functional management of deployed Army contractor
assets in theater? (3) Are the existing and proposed new processes and
procedures for accounting for Army contractors within Iraq and Kuwait
adequate?
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Bagram (A-2008-ALL-0320.001). Objective: Determine if
goods and services acquired under contract were properly justified,
awarded, and administered.
Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Balad (A-2008-ALL-0319.000). Objective: Determine if goods
and services acquired under contract were properly justified, awarded,
and administered.
Establishing Rates for Shipping Containers (A-2007-ALR-0259.001).
Objective: Are customer billing rates for break-bulk and container
shipments based on appropriate costs?
Follow Up of Offline Purchases (A-2008-ALL-0466.000). Objective:
Determine if the Army implemented agreed to recommendations and
corrected the problems identified in the previous audit.
Government Property Provided to Contractors--Kuwait Base Operations
(A-2008-ALL-0204.000). Objective: Determine whether the Army has
adequate management and visibility over Government property provided to
contractors for base support operations.
Impact of Mine Resistant Ambush Protected Vehicle Acquisitions on
Other Systems (A-2007-ALA-0978.000). Objective: Did the Army adequately
plan, assess, and adjust its requirements for new and existing vehicle
systems impacted by the acquisition and deployment of the Mine
Resistant Ambush Protected vehicle system?
Operational Purchases of Information Technology Equipment, Systems
and Services--Forces Command (A-2005-FFI-0487.000). Objective: (1) Were
controls over operational purchases and leases of information
technology and communications equipment, systems, and services by U.S.
Army Forces Command deploying units effective and operating? (2) Did
units utilize appropriate funding sources for information technology
and communications equipment purchases made in support of deployments?
Operational Purchases of Information Technology Equipment, Systems
and Services--Iraq and Kuwait (A-2005-FFI-0487.001). Objective: Were
controls over purchases and leases of information technology and
communications equipment, systems, and services in place and operating
effectively for units deployed in support of Operation Iraqi Freedom?
Reset Metrics (A-2007-ALM-0733.000). Objective: Did the Army have
adequate processes to accurately report the status of reset and
associated funding to Congress?
U.S. Army Corps of Engineer Contract Functions in Iraq (A-2008-ALL-
0318.000). Objective: (1) Determine if contract requirements were
correctly identified and resulted in acquisitions that met the needs of
the Army. (2) Determine if deliverables were monitored to ensure
products and services were provided in accordance with the terms of the
contract. (3) Determine if contract closeout practices for terminated
contracts were adequate and in the best interest of the Army. (4)
Determine if contract award fee practices were adequate.
Reports Projected First Quarter Fiscal Year 2009
Army Reserve Pre-mobilization Training (A-2008-FFS-0101.000).
Objective: (1) Are pre-mobilization training requirements adequately
identified and executed for the Army Reserve? (2) Are all necessary
unit and individual training requirements completed prior to
mobilization? (3) Are training requirements maximized at pre-
mobilization in order to minimize post-mobilization training?
Automatic Reset Items (A-2008-ALM-0312.000). Objective: (1) Is the
Automatic Reset Induction effectively supporting equipment requirements
in the Army Force Generation model?
Contracts for Reset (A-2007-ALM-0306.000). Objective: Did the Army
have adequate oversight of field level reset requirements to
effectively plan for contract maintenance support?
National Guard Pre-mobilization Training (A-2008-FFS-0353.000).
Objective: (1) Are pre-mobilization training requirements adequately
identified and executed for the National Guard? (2) Are all necessary
unit and individual training requirements completed prior to
mobilization? (3) Are training requirements maximized at pre-
mobilization to minimize post-mobilization training?
Property Book Unit Supply Enhanced, 3rd Infantry Division (A-2008-
ALR-0307.000). Objective: Determine if units used the Property Book
Unit Supply Enhanced system to properly account for equipment and
maintain accurate data.
Property Book Unit Supply Enhanced, 10th Mountain Division (A-2008-
ALR-0360.000). Objective: Determine if units used the Property Book
Unit Supply Enhanced system to properly account for equipment and
maintain accurate data.
Property Book Unit Supply Enhanced, I Corps (A-2008-ALR-0357.000).
Objective: Determine if units used the Property Book Unit Supply
Enhanced system to properly account for equipment and maintain accurate
data.
Property Book Unit Supply Enhanced; Summary Report (A-2008-ALR-
0039.000). Objective: Determine if units used the Property Book Unit
Supply Enhanced system to properly account for equipment and maintain
accurate data.
Rapid Fielding Initiative (A-2007-ALA-0410.000). Objective:
Validate: rapid fielding initiative requirements; the adequacy of the
process used to resource rapid fielding initiative acquisitions; and
plans to institutionalize rapid fielding initiative.
Use of Role Players Armywide (less Combat Training Centers) (A-
2008-FFF-0148.000). Objective: (1) Is the Army's process for
acquisition and use of Role-players for training cost-effective? (2) Is
the logistical support provided to Role-Players consistent and cost
effective? (3) Is the oversight and administration of Role-Player
contractors adequate?
Reports Projected Second Quarter Fiscal Year 2009
Army Foreign Language Program--Contracting (A-2007-ZBI-0344.003).
Objective: (1) Determine if the Army Foreign Language Program
adequately identifies and receives contracted linguists to support
mission requirements. (2) Determine if procedures and practices for
awarding and justifying language contracts were adequate and in the
best interest of the Army.
Directorate of Logistics Workload Supporting Reset (A-2008-ALM-
0311.000). Objective: Did Army garrisons have an adequate process in
place to identify and meet field level reset requirements in support of
the Army Force Generation model?
Management of the Prepositioned Fleet at Combat Training Centers
(A-2008-FFF-0044.000). Objective: (1) Are the pre-positioned fleets
adequately configured? (2) Are rotational units effectively using the
pre-positioned fleets? (3) Are the maintenance costs for the pre-
positioned fleets reasonable?
AIR FORCE AUDIT AGENCY
PLANNED PROJECTS
Third Quarter Fiscal Year 2008 Start
AFCENT Deployed Locations Information Technology Equipment
Accountability and Control (Project Number F2008-FD3000-0418).
Objective: To evaluate United States Central Command Air Forces
(AFCENT) information technology equipment accountability and control.
Specifically, evaluate equipment requirements determination;
accountability and control; and disposal.
AFCENT Management of Controlled Drugs (Project Number F2008-FD2000-
0411). Objective: To determine whether medical personnel properly
manage controlled drugs. Specifically, determine whether personnel
properly receive, issue, store, and protect controlled drugs.
AFCENT Area of Responsibility Construction (Project Number F2008-
FD1000-0419). Objective: To determine if AFCENT area of responsibility
construction efficiently and effectively meets mission requirements.
Specifically, determine if construction projects provide in-theater
benefits and meet desired mission capabilities; personnel utilize
existing, temporary, or movable facilities when possible; and personnel
properly program, authorize, and document operations and maintenance
funding for construction.
ONGOING PROJECTS
Reports Projected Third Quarter Fiscal Year 2008
AFCENT Aerial Port Operations (Project Number F2007-FD3000-0725).
Objective: To determine whether Air Force personnel effectively managed
aerial port operations within the CENTCOM area of responsibility.
Specifically, determine whether Air Force personnel efficiently
utilized airlift capacity, effectively managed cargo and passenger
travel reimbursements in the area of responsibility, and effectively
managed cargo and passenger movement.
AFCENT Civil Engineering Material Acquisition (Project F2007-
FD1000-0830). Objective: To determine whether AFCENT effectively
managed Civil Engineering material at deployed locations. Specifically,
determine whether Civil Engineering personnel properly approved
material purchases, obtained the most cost effective materials, and
accounted for materials.
Reports Projected Fourth Quarter Fiscal Year 2008
AFCENT Munitions Management (Project Number F2007-FD3000-0777).
Objective: To determine whether Air Force personnel properly manage
munitions in the AFCENT Area of Responsibility. Specifically, determine
whether personnel (a) properly account for, store and secure munitions
inventories; and (b) accurately forecast munitions requirements.
AFCENT Deployed Locations War Reserve Materiel (Project Number
F2007-FD3000-0781). Objective: To determine whether AFCENT personnel
effectively manage war reserve materiel in the AFCENT Area of
Responsibility. Specifically, determine whether AFCENT personnel
accurately maintain war reserve materiel quantities on-hand to meet
anticipated mission needs; appropriately use war reserve materiel
assets for intended purposes; and properly manage war reserve materiel
inventory by accounting for, maintaining, marking and storing on-hand
war reserve materiel assets.
Pallet Management (Project F2007-FC4000-0034). Objective: To
evaluate pallet management effectiveness. Specifically, evaluate
requirements computation accuracy and retrograde effectiveness.
DEFENSE CONTRACT AUDIT AGENCY
DCAA's services include professional advice to acquisition
officials on accounting and financial matters to assist them in the
negotiation, award, administration and settlement of contracts.
Customer Requested Audits:
Many of DCAA's audits are performed at the request of contracting
officers and are most commonly performed during the negotiation and
award phase. DCAA has no control over the number or timing of these
audits and must immediately respond to the audit requests as its top
priority. DCAA issued 57 of these reports between October 2007 and
March 2008. The major categories of audit services are described below.
Price Proposals.--Audits of price proposals submitted by
contractors in connection with the award, modification, or re-pricing
of Government contracts or subcontracts.
Agreed-Upon Procedures Price Proposal.--Evaluations of specific
areas, including actual labor and overhead rates and/or cost realism
analysis, requested by customers in connection with the award of
Government contracts or subcontracts.
Other Special Requested Audits.--Audit assistance provided in
response to special requests from the contracting community based on
identified risks.
Preaward Accounting Surveys.--Preaward audits to determine whether
a contractor's accounting system is acceptable for segregating and
accumulating costs under Government contracts.
Contract Required Audits:
DCAA's audits of cost-reimbursable contracts represent a continuous
effort from evaluation of proposed prices to final closeout and
payment. DCAA is able to plan the extent and timing of most of the
audits performed after the initial contract award. Audits of contractor
business system internal controls and preliminary testing of contract
costs are carried out to provide a basis for provisional approval of
contractor interim payments and early detection of deficiencies.
Comprehensive contract cost audits are performed annually throughout
the life of the contract and are used by the contracting activity to
adjust provisionally approved interim payments and ultimately to
negotiate final payment to the contractor. DCAA issued 81 of these
reports between October 2007 and March 2008. As of April 1, 2008 DCAA
had 285 audits in process and another 68 audits planned for fiscal year
2008.
------------------------------------------------------------------------
Fiscal year 2008
Description of audit area -------------------------------
In Process Planned
------------------------------------------------------------------------
Incurred Cost \1\....................... 70 6
Labor Timekeeping \2\................... 37 13
Internal Controls \3\................... 63 20
Purchase Existence and Consumption \4\.. 22 6
Cost Accounting Standards \5\........... 62 17
Other \6\............................... 31 6
-------------------------------
Total............................. 285 68
------------------------------------------------------------------------
\1\ Incurred Cost.--Audits of costs charged to Government contracts to
determine whether they are allowable, allocable, and reasonable.
\2\ Labor Timekeeping.--Audits to determine if the contractor
consistently complies with established timekeeping system policies and
procedures for recording labor costs.
\3\ Internal Controls.--Audits of contractor internal control systems
relating to the accounting and billing of costs under Government
contracts.
\4\ Purchase Existence and Consumption.--The physical observation of
purchased materials and services and related inquiries regarding their
documentation and verification of contract charges.
\5\ Cost Accounting Standards.--Audits of Contractor Disclosure
Statements and compliance with Cost Accounting Standards.
\6\ Other.--Significant types of other audit activities include
compliance with the Truth in Negotiations Act, and audits of economy
and efficiency of contractor operations.
______
Report No. D-2008-086
July 18, 2008
Inspector General, United States Department of Defense
Challenges Impacting Operations Iraqi Freedom and Enduring Freedom
Reported by Major Oversight Organizations Beginning FY 2003 Through FY
2007
ADDITIONAL INFORMATION AND COPIES
To obtain additional copies of this report, visit the Web site of
the Department of Defense Inspector General at http://www.dodig.mil/
audit/reports or contact the Secondary Reports Distribution Unit at
(703) 604-8937 (DSN 664-8937) or fax (703) 604-8932.
SUGGESTIONS FOR AUDITS
To suggest ideas for or to request future audits, contact the
Office of the Deputy Inspector General for Auditing at (703) 604-9142
(DSN 664-9142) or fax (703) 604-8932. Ideas and requests can also be
mailed to: ODIG-AUD (ATTN: Audit Suggestions), Department of Defense
Inspector General, 400 Army Navy Drive (Room 801), Arlington, VA 22202-
4704.
ACRONYMS AND ABBREVIATIONS
AAA--Army Audit Agency
AFAA--Air Force Audit Agency
CENTCOM--U.S. Central Command
CERP--Commanders' Emergency Response Program
DAU--Defense Acquisition University
DCAA--Defense Contract Audit Agency
DCMA--Defense Contract Management Agency
DFAS--Defense Finance and Accounting Service
DOD OIG--DOD Office of Inspector General
GAO--U.S. Government Accountability Office
GWOT--Global War on Terror
LOGCAP--Logistics Civil Augmentation Program
OEF--Operation Enduring Freedom
OIF--Operation Iraqi Freedom
OUSD(AT&L)--Office of the Under Secretary of Defense for
Acquisition, Technology, and Logistics
OUSD(C)--Office of the Under Secretary of Defense (Comptroller)
SIGIR--Special Inspector General for Iraq Reconstruction
SPOT--Synchronized Predeployment and Operational Tracker
UCMJ--Uniform Code of Military Justice
Inspector General,
Department of Defense,
Arlington, Virginia 22202-4704, July 18, 2008.
MEMORANDUM FOR DISTRIBUTION:
SUBJECT: Report on Challenges Impacting Operations Iraqi Freedom and
Enduring Freedom Reported by Major Oversight Organizations
Beginning FY 2003 Through FY 2007 (Report No. D-2008-086)
We are providing this report for your information and use. We did
not issue a draft report because this report summarizes material that
was already published. This report contains no recommendations;
therefore, no written response to this report is required.
Questions should be directed to Mr. Paul Granetto at (703) 604-8905
or Mr. J.T. ``Mickey'' McDermott at (703) 604-8903. The team members
are listed inside the back cover.
Mary L. Ugone,
Deputy Inspector General for Auditing.
Distribution:
Secretary of Defense
Deputy Secretary of Defense
Secretary of the Army
Secretary of the Navy
Secretary of the Air force
Under Secretary of Defense for Acquisition, Technology, and
Logistics
Director, Defense Procurement and Acquisition Policy
Under Secretary of Defense for Personnel and Readiness
Under Secretary of Defense for Policy
Under Secretary of Defense (Comptroller)/Chief Financial officer
Commander, U.S. Central Command
Commander, Multi-National force--Iraq
Commander, Multi-National Security Transition Command--Iraq
Commander, Joint Contracting Command--Iraq/Afghanistan Commander,
Combined Joint Task Force--101
Commander, Combined Security Transition Command--Afghanistan Chief,
National Guard Bureau
Assistant Secretary of Defense for Networks and Information
Integration/DOD CIO
Assistant Secretary of the Air Force (Financial Management and
Comptroller)
Director, Joint Staff
Director, Defense Contract Audit Agency
Director, Defense Contract Management Agency
Director, Defense Finance and Accounting Service
Director, Defense Logistics Agency
Director, Defense Security Cooperation Agency
Naval Inspector General
Auditor General, Department of the Army
Auditor General, Department of the Navy
Auditor General, Department of the Air force
Special Inspector General for Iraq Reconstruction
Office of Management and Budget
Government Accountability Office
Results in Brief: Challenges Impacting Operations Iraqi Freedom and
Enduring Freedom Reported by Major Oversight Organizations Beginning
Fiscal Year 2003 Through Fiscal Year 2007
WHAT WE DID
We summarized 302 Operations Enduring and Iraqi Freedom related
audit reports and testimonies issued by the Defense oversight community
and GAO beginning fiscal year 2003 through fiscal year 2007. Based on
the content of the reports and testimonies, we categorized the reports
and testimonies into four areas: Contract Management, Logistics,
Financial Management, and Other.
Within the four categories, we retrospectively identified systemic
challenges. We then prospectively summarized corrective actions taken
and still pending, as well as other management initiatives taken or
underway, within the identified functional areas that impact DOD
operations supporting Operations Enduring and Iraqi Freedom.
WHAT WE FOUND
Over the course of conducting Operations Enduring and Iraqi
Freedom, DOD experienced, at times, significant and recurring
challenges in the following functional areas:
--Contract Management: Contract Oversight and Resource Limitations;
--Logistics: Asset Accountability, Visibility, and Equipping the
Force; and
--Financial Management: Accuracy of Cost Reporting and
Accountability.
Further, there were challenges that were common in more than one of
the functional areas. Specifically, shortfalls in DOD training and
policy and procedures were challenges in more than one functional area.
DOD ACTION TAKEN
DOD took action to resolve Operations Enduring and Iraqi Freedom
Contract Management, Logistics, and Financial Management, and ``Other''
challenges reported by the oversight organizations.
--From fiscal year 2003 through fiscal year 2007, the Defense
oversight community and GAO issued 983 recommendations to
improve DOD operations in Operations Enduring and Iraqi
Freedom.
--DOD has resolved most of the recommendations as of September 30,
2007. We plan to report on progress made after September 30,
2007, in a future report.
DOD ONGOING INITIATIVES
Continuing action is underway to support various initiatives within
DOD to address the challenges DOD faces for operations supporting
Operations Enduring and Iraqi Freedom. For example, DOD has:
--Increased oversight and accountability over deployed contractors
and over assessing the needs of its contracting workforce in
expeditionary operations;
--Established an Executive Director to provide program management
oversight over contractor logistical support; and
--Deployed financial support teams to assist the theater Commanders
accountability over funds.
The DOD oversight community has restructured its workforce models
and developed a comprehensive oversight plan for Operations Enduring
and Iraqi Freedom which includes logistical support, financial
management, and contract administration.
Introduction
OBJECTIVES
The overall audit objective was to summarize Operation Enduring
Freedom (OEF) and Operation Iraqi Freedom (OIF) related audit reports
and testimonies issued beginning fiscal year 2003 through fiscal year
2007 by the Defense oversight community. This community includes the
DOD Office of Inspector General (DOD OIG), the Army Audit Agency (AAA),
the Naval Audit Service, the Air Force Audit Agency (AFAA), the Special
Inspector General for Iraq Reconstruction (SIGIR) and the Government
Accountability Office (GAO). Retrospectively, we identified systemic
challenges and prospectively, reported on the corrective actions taken
and still pending as well as other management initiatives within the
identified functional areas to improve DOD operations. See Appendix A
for a discussion of the scope and methodology and Appendix B for the
OEF and OIF related reports and testimonies we included in developing
this summary. See Appendix C for definitions used to categorize OEF and
OIF related report information.
BACKGROUND
Global War on Terror
The United States is engaged in a comprehensive effort to protect
and defend the homeland and defeat terrorism. After the terrorist
attacks of September 11, 2001, military operations began Operation
Enduring Freedom, which takes place principally in and around
Afghanistan, but also covers operations in the Horn of Africa, the
Philippines, and elsewhere. In 2003, DOD began Operation Iraqi Freedom,
which takes place in and around Iraq. According to GAO estimates, as of
December 2007, DOD total cumulative reported obligations for the Global
War on Terror (GWOT) were about $527 billion, of which about $406.2
billion is for operations for Operation Iraqi Freedom, and about $92.9
billion is for operations for Operation Enduring Freedom.\1\
---------------------------------------------------------------------------
\1\ GAO Report No. 08-557R.
---------------------------------------------------------------------------
Systemic Challenges Facing the Department
This report summarizes the most prevalent of the systemic
management and performance challenges facing the Department of Defense
as identified in the audit reports issued fiscal years 2003 through
2007. Annually, the DOD OIG summarizes what it considers the most
serious management and performance challenges. The DOD OIG summary and
a brief assessment of the Department's progress in addressing those
challenges are reported in the DOD Agency Financial Report.\2\ In the
fiscal year 2007 Agency Financial Report, the DOD OIG identified and
reported, as it has in previous years, contract management and
financial management as two challenge areas that have an impact on OEF
and OIF as well as on GWOT.
---------------------------------------------------------------------------
\2\ For fiscal year 2007, the Department has chosen to produce an
alternative to the consolidated Performance and Accountability Report
called the Agency Financial Report.
---------------------------------------------------------------------------
Contract Management.--In the fiscal year 2007 Agency Financial
Report, the DOD OIG reported that the Department continued to
experience the management challenge to provide required materiel and
services that are superior in performance, high in quality, sufficient
in quantity, and within the time frames needed by the warfighter while
balancing the cost concerns for the taxpayer. With the war, the volume
and complexity of purchases have obviously increased. DOD spending in
fiscal year 2007 (with supplementals) exceeded $600 billion, which is
more than double the spending from fiscal year 2000. The sheer number
of contracting actions and the pressures on contracting officials to
award procurements faster make the challenge of correcting the problems
more difficult.
Although the problems encountered in the contracting process are
not unique to the wartime environment, the risk of critical gaps in the
contracting process increases during contingency operations. The
challenge in a wartime environment is to mitigate these gaps. Gaps
occurred when: user requirements were not met, funds were not spent
appropriately and were unaccounted for, goods and services were not
properly accounted for, delivery of goods and services were not made
properly, individuals involved in the acquisition process lacked
integrity, and adequate documentation was not retained or prepared.
Financial Management.--In the fiscal year 2007 Agency Financial
Report, the DOD OIG stated that the Department faced financial
management challenges that are complex and long-standing, and pervade
virtually all its business operations. The DOD OIG had previously
identified and reported on several material control weaknesses that
reflect some of the pervasive and long-standing financial management
issues faced by DOD. These weaknesses, which also affect the
safeguarding of assets and proper use of funds and impair the
prevention and identification of fraud, waste, and abuse, include the
following: Inventory and Government-Furnished material and contractor
acquired material.
Logistics.--In the fiscal year 2005 Performance and Accountability
Report, the DOD OIG stated the challenge of logistics is to provide the
right force the right personnel, equipment, and supplies in the right
place, at the right time, and in the right quantity, across the full
range of military operations. The 2006 Quadrennial Defense Review
Report discussed efforts to improve visibility into supply chain
logistics costs and performance. It also stated that DOD sought to:
--establish a Defense Coalition Support Account to fund and, as
appropriate, stockpile routine defense articles such as
helmets, body armor, and night vision devices for use by
coalition partners;
--expand Department authority to provide logistics support, supplies,
and services to allies and coalition partners to enable
coalition operations with U.S. forces;
--expand Department authority to lease or lend equipment to allies
and coalition partners for use in military operations in which
they are participating with U.S. forces; and
--expand the authorities of the Departments of State and Defense to
train and equip foreign security forces best suited to internal
counterterrorism and counter-insurgency operations.
The 2006 Quadrennial Defense Review Report also outlined
initiatives to address challenges such as Radio Frequency
Identification technologies, which will play a key role in achieving
the Department's vision for implementing knowledge-enabled logistics
support to the warfighter through automated asset visibility and
management.\3\
---------------------------------------------------------------------------
\3\ Quadrennial Defense Review, February 6, 2006.
---------------------------------------------------------------------------
High-Risk Areas
Since 1990, the GAO has periodically reported on Government
programs and operations that it identifies as ``high risk.'' These
efforts bring focus to a targeted list of major challenges that impede
effective Government and cost the Government billions of dollars each
year. Since 1990, GAO has identified DOD Contract Management,
Logistics, and Financial Management as high-risk areas. Historically,
high-risk areas have been so designated because of traditional
vulnerabilities related to their greater susceptibility to fraud,
waste, abuse, and mismanagement. As the high-risk program has evolved,
the high-risk designation draws attention to areas associated with
broad-based transformations needed to achieve greater economy,
efficiency, effectiveness, accountability, and sustainability of
selected key Government programs and operations. The DOD has eight of
its own high-risk areas and shares responsibility for six Government-
wide high-risk areas.\4\
---------------------------------------------------------------------------
\4\ GAO Report No. 07-310, ``High-risk Series: An Update,'' January
2007.
---------------------------------------------------------------------------
Oversight
The Defense oversight community and GAO issued 314 reports and
testimonies between October 1, 2002, and September 30, 2007, that
support OEF and OIF. Of the 314 reports and testimonies, 12 reports are
classified and not included in this report.
We reviewed the 302 reports and testimonies (246 reports and 56
testimonies) and categorized them into three main functional areas
(Contract Management, Logistics, and Financial Management) \5\ based on
our review of the pertinent areas covered in the reports and the
subsequent recommendations. We identified 983 recommendations that
addressed one or more functional areas to improve operations that
support OEF and OIF. Table 1 shows the number of reports and
recommendations within the three main functional areas.
---------------------------------------------------------------------------
\5\ Reports and testimonies that were identified as outside
Contract Management, Logistics, and Financial Management functional
areas were categorized as ``Other.''
TABLE 1.--OEF AND OIF RELATED REPORTS AND TESTIMONIES(FISCAL YEAR 2003-
FISCAL YEAR 2007)
------------------------------------------------------------------------
Number of
Functional Area Reports and Recommendations
Testimonies \1\
------------------------------------------------------------------------
Contract Management................... 103 302
Logistics............................. 119 332
Financial Management.................. 133 264
Other................................. 73 119
------------------------------------------------------------------------
\1\ The total will exceed 302 because reports and testimonies may cover
multiple function areas.
Since fiscal year 2003, the Defense oversight community and GAO
have steadily increased their oversight of OEF and OIF operations (see
Table 2). The oversight community has provided a balanced review of
Contract Management, Logistics, and Financial Management areas
supporting OEF and OIF.
Recommendations
As of September 30, 2007, sufficient actions have been taken on 699
of the 983 recommendations (71 percent) and these recommendations are
considered completed. We did not report on any recommendations that
were closed after September 30, 2007, but will do so in a future
report. Of the 284 recommendations open as of September 30, 2007, 55
recommendations were to agencies and activities outside of DOD. Table 4
shows the overall status of recommendations as of September 30, 2007.
Initiatives
In addition to the actions on OEF and OIF related recommendations,
DOD has taken other actions, whether required by public law or self-
initiated, to address challenges in Operations Enduring and Iraqi
Freedom. For the purpose of this report, we focus on discussing
initiatives that DOD has reported to us that we believe should directly
help overcome DOD challenges in Contract Management, Logistics, and
Financial Management.
Chapter 1. Systemic Challenges During Wartime Contingency Operations
for Contract Management, Logistics, and Financial Management
Over the course of conducting Operations Enduring and Iraqi
Freedom, DOD experienced significant and recurring systemic challenges
in the following functional areas:
--Contract Management: Contract Oversight and Resource Limitations;
--Logistics: Asset Accountability, Visibility, and Equipping the
Force; and
--Financial Management: Accuracy of Cost Reporting and
Accountability.
Further, systemic challenges were common in more than one of the
functional areas. Specifically, shortfalls in training and in policy
and procedures were systemic challenges reported in more than one
functional area. The Defense oversight community and GAO have
identified hundreds of millions of dollars in assets that DOD was
unable to demonstrate adequate accountability for as well as more than
a billion dollars in inaccurate cost reporting.
CONTRACT MANAGEMENT
DOD has experienced challenges since fiscal year 2003 in providing
an adequate number of personnel to perform contractor oversight and in
providing adequate training to the personnel that were performing
oversight of contractors supporting Operations Enduring and Iraqi
Freedom. The DOD OIG, AAA, AFAA, SIGIR, and GAO all reported on the
challenges DOD has experienced with the lack of adequate oversight over
contractors in both OEF and OIF. As reported by the DOD oversight
community and GAO, DOD has taken action since fiscal year 2003 to
improve its guidance on the use of contractors to support deployed
forces. However, the DOD oversight community and GAO continue to report
that long-standing problems continue to hinder DOD oversight of
contractors at deployed locations.
Contract Oversight Personnel
DOD has experienced challenges in providing an adequate number of
personnel to perform contractor oversight for OEF and OIF. As reported
by GAO, a lack of adequate contract oversight personnel was a DOD-wide
problem; the problem was more severe for more demanding contracting
environments such as Iraq and Afghanistan, and it presented unique
difficulties. Without an adequate number of personnel to perform
oversight of the contractors, DOD increases its risks that contractors
are not meeting contract requirements.\6\
---------------------------------------------------------------------------
\6\ GAO Report No. 07-145.
---------------------------------------------------------------------------
For example, the DOD OIG identified the lack of adequate contractor
surveillance in fiscal year 2003 for 13 of 24 contracts, valued at $122
million. These contracts were awarded by the Defense Contracting
Command--Washington to support the Office of Reconstruction and
Humanitarian Assistance.\7\ In fiscal year 2004, the GAO also
identified that the lack of adequate staffing presented challenges to
several agencies and resulted in inadequate contractor oversight. GAO
stated that although agencies took action, some of these early contract
administration issues were not fully resolved.\8\ In fiscal year 2007,
AFAA identified that U.S. Air Forces Central personnel at three of four
locations in Southwest Asia did not adequately monitor contract
performance for seven (out of ten) contracts valued at $27.4
million.\9\ SIGIR discussed, in fiscal year 2007, the difficulty in
recruiting qualified Contracting Officer's Technical Representatives
for appointment in support of Logistics Civil Augmentation Program
(LOGCAP) Task Order 130. During the SIGIR audit, the Defense Contract
Management Agency (DCMA) did appoint 18 Contracting Officer's Technical
Representatives to oversee the task order.\10\ GAO also stated in
fiscal year 2007 that although DOD took action to improve its guidance
on the use of contractors to support deployed forces since fiscal year
2003, a number of long-standing problems continued to hinder DOD
management and oversight of contractors at deployed locations. Although
DOD issued the first DOD-wide instruction \11\ on the use of
contractors to support deployed forces, which addressed some of the
problems that were previously raised, there were concerns that DOD
Components were not implementing this instruction. Ultimately, while
DOD new guidance was a good first step towards improving the
Department's management and oversight of contractors, the Department
continued to face problems, including:
---------------------------------------------------------------------------
\7\ DOD OIG Report No. D-2004-057.
\8\ GAO Report No. 04-605.
\9\ AFAA Report No. F-2007-0005-FD3000.
\10\ SIGIR Report No. 07-001.
\11\ DOD Instruction 3020.41, ``Contractor Personnel Authorized to
Accompany the U.S. Armed Forces,'' October 2005.
---------------------------------------------------------------------------
--limited visibility over contractors and contractor activity,
--lack of adequate contract oversight personnel,
--limited collection and sharing of institutional knowledge, and
--limited or no information on contractor support in predeployment
training.\12\
---------------------------------------------------------------------------
\12\ GAO Report No. 07-145.
---------------------------------------------------------------------------
As stated by the DOD OIG, appropriate Government surveillance of
contractor performance is required to give reasonable assurance that
efficient methods and effective cost controls are being used.\13\
---------------------------------------------------------------------------
\13\ DOD OIG Report No. D-2004-057.
---------------------------------------------------------------------------
Contract Training
DOD experienced challenges to provide adequate training necessary
for contract oversight personnel to perform their respective oversight
functions. The DOD OIG reported that without adequate contract training
for personnel assigned oversight duties, DOD cannot be assured that it
paid fair and reasonable prices for goods and services purchased. For
example, the DOD OIG identified the lack of adequate training of
personnel in fiscal year 2003 at the Defense Contract Command--
Washington. Specifically, Defense Contract Command--Washington
personnel, who did not have contract backgrounds or contract-related
training, inappropriately approved 13 out of 24 contracts without
validating the cost data. The DOD OIG determined that Defense Contract
Command--Washington personnel approved and signed $7 million invoiced
by a contractor without verifying whether the Government received the
material.\14\ In another example, in fiscal year 2006, AAA identified
that although the LOGCAP Support Unit had taken sufficient actions to
improve training and its effectiveness, the training process did not
provide enough practical exercises on determining and validating
requirements and on preparing Statements of Work and Independent
Government Cost Estimates.\15\ In fiscal year 2007, AFAA identified
that quality assurance personnel were not provided necessary training
before they assumed quality assurance responsibilities.\16\
---------------------------------------------------------------------------
\14\ DOD OIG Report No. D-2004-057.
\15\ AAA Report No. A-2006-0018-ALL.
\16\ AFAA Report No. F-2007-0005-FD3000.
---------------------------------------------------------------------------
LOGISTICS
Before OEF and OIF, DOD experienced challenges in logistics
business processes capabilities and responsibilities. Specifically, DOD
logistics policies and procedures were inadequate to fully support the
OEF and OIF contingency operations. A lack of clear and focused
policies and procedures led to inconsistencies and inefficiencies
including challenges in accountability and visibility over DOD assets
and equipment destined for the sovereign governments of Afghanistan and
Iraq.
The Defense oversight community and GAO have all reported on the
challenges DOD has experienced with the logistics operations supporting
OEF and OIF. The Defense oversight community and GAO have identified
more than a billion dollars in assets that DOD was unable to
demonstrate adequate accountability or visibility over. Since the
1990s, DOD supply chain management has been identified as a high-risk
area because of high inventory levels and a supply system that was not
responsive to the needs of the warfighter.
Logistics Accountability and Visibility
DOD could not demonstrate adequate accountability for more than
$1.3 billion in deployed assets and could not demonstrate visibility
over $318 million in assets as reported by the Defense oversight
community. Accounting for location and disposition of assets, including
munitions-related assets, was a challenge during OEF and OIF. Logistics
accountability includes recommendations made to improve establishing or
maintaining records to identify, acquire, account for, control, store,
or properly dispose of assets.
ASSET ACCOUNTABILITY
DOD experienced challenges in demonstrating accountability over
DOD, Government-Furnished, and Iraq and Afghanistan assets. The DOD
oversight community and GAO identified about $1.3 billion in assets
that DOD did not demonstrate adequate accountability over.
DOD Assets.--In fiscal year 2004, AFAA identified that an air
expeditionary wing's accountability records did not include all weapons
on hand, did not reflect accurate serial numbers for weapons on hand,
but included weapons that were not on hand.\17\ In fiscal year 2004,
GAO identified a $1.2 billion discrepancy in supplies sent to theater
versus what DOD theater personnel reported.\18\ In fiscal year 2005,
AFAA discussed another air expeditionary wing that could not locate 14
equipment assets valued at $8.7 million and did not record more than
400 on-hand equipment assets on accountable records.\19\ In fiscal year
2006, AAA found that property records maintained by division units did
not always accurately account for left-behind equipment and equipment
returning from OEF and OIF. AAA also found that the property book
records for 99 out of 879 vehicles contained discrepancies.\20\ Again
in fiscal year 2007, AFAA identified that the Air Force did not
adequately account for deployed assets and that estimated activities
Air Force-wide lost accountability of 5,800 deployed assets valued at
$108 million.\21\ In fiscal year 2007, AAA found that 8 percent of
sampled returning equipment was not verified as accounted for on unit
property records because some Army Reserve unit and installation
personnel did not follow established procedures and best practices to
process equipment transactions during the mobilization, deployment,
demobilization, and redeployment process.\22\ The lack of asset
accountability impeded DOD visibility over deployed assets.
---------------------------------------------------------------------------
\17\ AFAA Report No. F-2004-0060-FDE000.
\18\ GAO Report No. 04-305R.
\19\ AFAA Report No. F-2005-0058-FDE000.
\20\ AAA Report No. A-2006-0188-ALL.
\21\ AFAA Report No. F-2007-0004-FC4000.
\22\ AAA Report No. A-2007-0061.
---------------------------------------------------------------------------
Government-Furnished Property and Equipment.--Contractors in
theater did not always properly account for Government-Furnished
property and equipment. In fiscal year 2006, AAA identified a systemic
problem with the accountability and visibility of Government-Furnished
equipment that the Army transferred to the LOGCAP contractor.
Specifically, the contractor's property administrator stated he did not
notify the Army when they removed an asset from their property
book.\23\
---------------------------------------------------------------------------
\23\ AAA Report No. A-2006-0083-ALL.
---------------------------------------------------------------------------
Government of Iraq and Afghanistan Assets.--DOD had a challenge
accounting for U.S.-provided equipment. Specifically, GAO reported that
DOD and Multi-National Force--Iraq may not be able to account for Iraqi
Security Forces receipt of about 90,000 rifles and about 80,000 pistols
that were reported as issued but were not recorded during the earlier
phases of training and equipping Iraqi Forces (2004 through 2006).\24\
GAO later reported that although DOD took action in December 2005 to
establish a centralized record of all equipment distributed to Iraqi
forces, DOD could not account for 190,000 weapons, 135,000 items of
body armor, and 115,000 helmets reported as issued to Iraqi forces as
of September 2005.\25\ In fiscal year 2006, SIGIR identified that DOD
did not have adequate accountability procedures in place over small
arms procured for Iraq Security Forces. Specifically, SIGIR identified
material weaknesses because not all weapons procured for the Iraq
Security Forces were properly accounted for. This may indicate physical
security concerns over weapons and the lack of accountability
procedures to track and maintain visibility of small arms, to include
those transferred.\26\ In fiscal year 2007, GAO indicated that the
overwhelming size and number of conventional munitions storage sites in
Iraq, combined with certain prewar planning assumptions that proved to
be invalid, resulted in U.S. Forces inadequately securing those sites
and in widespread looting, according to field unit, lessons learned,
and intelligence reports. Not securing these conventional munitions
storage sites was costly because, as Government reports indicated,
looted munitions were used to make Improvised Explosive Devices that
killed or maimed many people and would likely continue to support
terrorist attacks in the region. As of October 2006, according to
Multi-National Corps--Iraq, some remote sites were not revisited to
verify whether they posed any residual risk or whether they were
physically secured. DOD did not appear to have conducted (in fiscal
year 2007) a theater-wide survey and assessment of the risk that
unsecured conventional munitions represent to U.S. forces and
others.\27\ Internal sources other than our universe of completed
reports and testimonies show that in July 2007 the DOD OIG initiated
and led an effort to assess the status of the lack of accountability
over munitions in Iraq and Afghanistan.
---------------------------------------------------------------------------
\24\ GAO Report No. 07-308SP.
\25\ GAO Report No. 07-711.
\26\ SIGIR Report No. 06-033.
\27\ GAO Report No. 07-444.
---------------------------------------------------------------------------
As stated above in the accountability reports, the lack of
accountability over assets affects DOD visibility over these assets,
which can impact DOD ability to transfer equipment to units preparing
to deploy.
ASSET VISIBILITY
DOD had challenges in demonstrating asset visibility, including
visibility of about $318 million in assets. Without asset
accountability, asset visibility was compromised because records
identifying the location of equipment were not adjusted to reflect the
redisposition of the assets. Although major combat operations were
successful during the initial phases of OIF, there were substantial
logistics support problems. Asset visibility is achieved by using
timely and accurate information systems that track the distribution of
assets. Visibility begins at the point from which materiel is shipped
to the theater of operations and continues until it reaches the user.
Critical to visibility is the capability to update source data
dynamically with the near real-time status of shipments from other
combat service support systems until the shipments arrive at their
ultimate destinations. Units operating in the theater could not track
equipment and supplies adequately. The inaccurate records caused DOD
personnel to spend unnecessary time and energy locating equipment
needed for units preparing to deploy. According to AAA and AFAA
reports, higher-tiered asset systems did not contain asset visibility
data used by Army and Air Force decision makers.
For example, in fiscal year 2006 and fiscal year 2007, AAA found
that U.S. Army Forces Command used data recorded in asset visibility
tools, such as Command Asset Visibility and Equipment Redistribution
System, to identify and transfer equipment to units preparing to
deploy. This process was compromised because of the erroneous
supporting records.\28\ In fiscal year 2007, AFAA reported that Air
Force leaders did not have total asset visibility and were not always
able to determine whether the right assets were at the right locations
to meet mission requirements. AFAA estimated that activities Air Force-
wide incorrectly coded deployed locations for 15,373 assets, valued at
$213.2 million, and incorrectly reported the deployment status of 2,689
assets, valued at $104.7 million.\29\
---------------------------------------------------------------------------
\28\ AAA Report No. A-2006-0188-ALL; AAA Report No. A-2007-0061.
\29\ AFAA Report No. F2007-0004-FC4000.
---------------------------------------------------------------------------
The reports show that besides challenges in maintaining adequate
visibility over assets on-hand, DOD experienced some challenges in
providing its forces with the equipment necessary to conduct its
missions.
Equipping the Force
DOD faced challenges in properly equipping its forces supporting
OEF and OIF. Specifically, U.S. military forces experienced shortages
in supplying necessary amounts of equipment such as small arms, armor
for vehicles, and body armor. The DOD OIG and GAO highlighted various
challenges for equipping military forces.
For example, in fiscal year 2007, the DOD OIG identified that the
Army equipped its deployed forces in support of OIF with the small arms
necessary to meet Combatant Commanders requirements. However, before
deployment, some units were not fully equipped with the types of small
arms required to do their assigned mission and had to obtain those
small arms from other sources, such as nondeployed units. Nondeployed
units faced a potential shortage of small arms and may not have had the
ability to adequately train and maintain equipment and personnel
readiness at an acceptable level.\30\
---------------------------------------------------------------------------
\30\ DOD OIG Report No. D-2007-010.
---------------------------------------------------------------------------
In fiscal year 2007, the DOD OIG surveyed about 1,100 Service
members who supported OEF and OIF. The DOD OIG found that Service
members experienced shortages of force-protection equipment, such as
up-armored vehicles, electronic countermeasure devices, crew-served
weapons, and communications equipment. As a result, Service members
were not always able to effectively complete their missions; they had
to perform missions without the proper equipment, use informal
procedures to obtain equipment and sustainment support, and cancel or
postpone missions while waiting to receive equipment.\31\
---------------------------------------------------------------------------
\31\ DOD OIG Report No. D-2007-049.
---------------------------------------------------------------------------
DOD also experienced challenges in equipping its forces with
armored trucks and body armor. Acquisition-related issues caused
shortages in meeting DOD armored trucks and body armor requirements.
Specifically, DOD did not adequately leverage acquisition opportunities
between Army and Marine Corps truck armor procurements. In addition,
the increased requirement for new body armor exceeded the manufacturing
increased-production capabilities.
Armored and Tactical Vehicles.--GAO identified that U.S. military
forces in Iraq experienced shortages of truck armor. GAO also found
that although truck armor requirements were determined in November
2003, the Army did not produce all the armor kits until February 2005
and did not install the kits to meet the initial requirements until May
2005.\32\ In fiscal year 2007, the DOD OIG reported that the Marine
Corps Systems Command continued to award contracts for armored vehicles
to contractors who repeatedly failed to meet contractual delivery
schedules for getting vehicles to the theater. In addition, the DOD OIG
found that TACOM Life Cycle Management Command \33\ awarded a contract
for crew protection kits to another contractor that did not meet the
Federal Acquisition Regulation definition of a responsible prospective
contractor. Specifically, the contractor did not have the necessary
production control procedures, property control systems, and quality
assurance measures in place to meet contract requirements for crew
protection kits. As a result, the TACOM Life Cycle Management Command
received crew protection kits with missing and unusable components.
This increased the kit installation time and required additional kit
inspections.\34\
---------------------------------------------------------------------------
\32\ GAO Report No. 07-308SP.
\33\ Referred to in previous DOD Inspector General reports as the
Tank-Automotive and Armaments Command.
\34\ DOD OIG Report No. D-2007-107.
---------------------------------------------------------------------------
Body Armor.--DOD did not have an adequate supply of the new body
armor in support of its expanded body armor requirements for Operation
Iraqi Freedom. In fiscal year 2005, GAO reported that new Interceptor
body armor was not available in sufficient quantities to U.S. Military
forces in Iraq sometime between October 2002 and September 2004. But,
according to U.S. Central Command (CENTCOM) officials, all personnel in
Iraq had the new armor by January 2004. GAO also reported that because
of the shortages, CENTCOM officials stated they had prioritized the
issue of the new body armor to those who were most vulnerable. Body
armor was also not available for all support personnel, such as the
Army's 377th Theater Support Command, while insurgents were attacking
and interdicting supply routes in Iraq. GAO further stated that because
of the shortages, many individuals bought body armor with personal
funds. The Congressional Budget Office estimated that as many as 10,000
personnel purchased vests and as many as 20,000 purchased plates with
personal funds; it estimated the total cost to reimburse them would
have been $16 million in 2005.\35\
---------------------------------------------------------------------------
\35\ GAO Report No. 05-275.
---------------------------------------------------------------------------
FINANCIAL MANAGEMENT
DOD experienced numerous challenges in its processes for recording
and reporting its war-related costs. The challenges included long-
standing deficiencies in DOD financial management systems and business
processes, the use of estimates instead of actual cost data, and the
lack of adequate supporting documentation. DOD took some steps to
address these challenges, but problems remain. Without transparent and
accurate cost reporting, Congress and DOD will not have reliable
information on how much the war costs, sufficient details on how
appropriated funds are spent, and the historical data needed to
consider future funding needs. Reporting the cost of war, internal
controls over cash, and DOD budget and obligation requirements are
notable accountability challenges in Financial Management.
Accuracy of Cost Reporting
DOD experienced challenges in providing accurate and reliable cost
reporting for OEF and OIF operations. The inadequate processes for
recording and reporting GWOT costs raised concerns that these data may
not accurately reflect the true nature of the cost. Specifically,
neither DOD nor Congress can reliably know how much the war is costing
or know the details on how appropriated funds are being spent, or have
historical data useful in considering future funding needs. The Chief
Financial Officers Act of 1990 requires agencies to ``. . . develop and
maintain an integrated agency accounting and financial system,
including financial reporting and internal controls, which . . .
provides for the development and reporting of cost information.'' \36\
DOD Financial Management Regulation, volume 12, chapter 23, paragraph
230104, as of September 2007, requires that controls, accounting
systems, and procedures provide in financial records the proper
identification and recording of costs incurred in supporting
contingency operations.
---------------------------------------------------------------------------
\36\ Chief Financial Officers Act of 1990, Section 902.
---------------------------------------------------------------------------
For example, in fiscal year 2005, GAO found numerous problems in
DOD processes for recording and reporting costs for GWOT, raising
significant concerns about the overall reliability of DOD reported cost
data. Factors affecting the reliability of DOD reported costs included
long-standing deficiencies in DOD financial systems, the lack of a
systematic process to ensure that data were correctly entered into
those systems, inaccurately reported costs, and difficulties in
properly categorizing costs. In at least one case, reported costs may
have been materially overstated. Specifically, GAO reported that DOD
then-reported obligations for mobilized Army reservists in fiscal year
2004 were based primarily on estimates rather than actual information
and differed from related payroll information by as much as $2.1
billion. In addition, GAO found inadvertent double counting in the Navy
and Marine Corps' portion of DOD reported costs amounting to almost
$1.8 billion from November 2004 through April 2005. GAO also found some
incremental base operations costs that appeared, at best, incidental to
the support of GWOT. In summary, although GAO identified significant
data reliability problems, GAO did not determine the extent that total
costs were misstated because it was not feasible to examine all
reported costs.\37\
---------------------------------------------------------------------------
\37\ GAO Report No. 05-8 82.
---------------------------------------------------------------------------
In addition to the double counting GAO found, in fiscal year 2005,
the Naval Audit Service reported that 17 of the 44 Marine Corps System
Command contracts (valued at $93.3 million) from fiscal year 2003 and
fiscal year 2004 did not contain the proper Special Interest Codes. The
Special Interest Codes indicated that the contracts supported OIF,
would be reported as OIF-related expenses, and the Service would
receive reimbursement for the OIF-related expenses.\38\
---------------------------------------------------------------------------
\38\ Naval Audit Service Report No. N2005-0018.
---------------------------------------------------------------------------
In fiscal year 2006, SIGIR found that the U.S. Army Corps of
Engineers over reported its obligations by $362 million for Project and
Contracting Office obligations recorded in U.S. Army Corps of Engineers
financial records. The $362 million in obligations were recorded under
the vendor name ``Dummy Vendor,'' which does not constitute proper
obligations. This also is not consistent with a 1995 decision by the
Comptroller General of the United States on appropriations
availability, the GAO Appropriations Law Manual, and the DOD Financial
Management Regulation requirements for the recording and reviewing of
commitments and obligations. These funds would expire if proper
obligations actions were not taken by September 30, 2006.\39\
---------------------------------------------------------------------------
\39\ SIGIR Report No. 06-037.
---------------------------------------------------------------------------
Financial Accountability
DOD had challenges in demonstrating financial accountability in OEF
and OIF. The GAO, DOD OIG, and SIGIR have reported on accountability
challenges.
In fiscal year 2004, GAO reported its concerns over transparency
and accountability over DOD GWOT cost reporting. It also reported that
DOD cost reporting included large amounts of funds that were reported
as obligated in miscellaneous categories and thus provided little
insight on how those funds were spent. GAO highlighted that an earlier
fiscal year 2004 report \40\ identified that 35 percent of obligations
DOD reported in the fiscal year 2003 Operation and Maintenance account
were in ``other supplies and equipment'' and ``other services and
miscellaneous contracts.'' \41\
---------------------------------------------------------------------------
\40\ GAO Report No. 04-668.
\41\ GAO Report No. 04-915.
---------------------------------------------------------------------------
In fiscal year 2005, GAO reported that DOD modified its guidance to
define more clearly some of the cost categories and DOD took additional
steps to strengthen the oversight and program management of cost
reporting. GAO reported individual commands took steps to control costs
and DOD policy advised its officials of their financial management
responsibilities to ensure the prudent use of contingency funding.
However, GAO also had concerns that DOD did not systematically call for
all commands involved in GWOT to take steps to control costs, set
general parameters to guide cost-control efforts, and keep the Under
Secretary of Defense (Comptroller) informed of those steps and their
success. DOD agreed to most recommendations; however, it did not agree
to establish DOD-wide guidance on cost controls.\42\
---------------------------------------------------------------------------
\42\ GAO Report No. GAO-05-882.
---------------------------------------------------------------------------
In fiscal year 2007, GAO reported that DOD and the Military
Services took specific steps intended to improve the accuracy and
reliability of their reported GWOT obligation data; however, some
problems remained with transparency over certain costs and inaccuracies
in reported obligations. In August 2005, the DOD Comptroller issued
guidance to help DOD Components more accurately and consistently report
obligations for contingencies such as GWOT. It directed DOD Components
to perform a monthly variance analysis to review and validate that
their reported obligations were accurate and provided a fair
representation of ongoing activities. The DOD Comptroller also issued
guidance that directed submitting DOD Components to attest to the
accuracy of their monthly obligation data in DOD Supplemental and Cost
of War Execution Report and affirm that the report provided a fair
representation of ongoing activities. However, because these efforts
were in the early stages of implementation, GAO did not fully evaluate
the impact.\43\
---------------------------------------------------------------------------
\43\ GAO Report No. GAO-07-076.
---------------------------------------------------------------------------
Again, in fiscal year 2007, GAO reported on its concerns about the
lack of detail in accounting for obligations and expenditures in the
DOD procurement account. GAO stated the detailed accounting would
provide Congress with the visibility it needs to identify the types of
equipment procured with the reset funds it appropriates, such as
aircraft, vehicles, or communication and electronic equipment.\44\
---------------------------------------------------------------------------
\44\ GAO Report No. GAO-07-814.
---------------------------------------------------------------------------
Commanders' Emergency Response Program.--DOD experienced challenges
in CERP, such as maintaining program accountability over its CERP
funding. AAA, SIGIR, GAO, and DOD OIG identified accountability-related
challenges with the CERP program in Iraq and Afghanistan. The CERP
supports OEF and OIF by providing ground commanders a source of funds
to respond to urgent humanitarian relief and reconstruction
requirements in their areas of responsibility by carrying out programs
that immediately assist the local population. Table 3 shows the funds
appropriated or requested (fiscal year 2008) for CERP, in billions of
dollars.
TABLE 3.--FUNDING FOR COMMANDERS' EMERGENCY RESPONSE PROGRAM
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-------------------------------------------- GWOT
2005 2006 2007 2008 total
----------------------------------------------------------------------------------------------------------------
Iraq..................................................... .7 .7 .7 .8 2.9
Afghanistan.............................................. .1 .2 .2 .2 \1\ .8
------------------------------------------------------
Total.............................................. .8 .9 1.0 1.0 3.7
----------------------------------------------------------------------------------------------------------------
\1\ The apparent discrepancy for Afghanistan is due to rounding.
Source: CERP data as reported by the Deputy Secretary of Defense during testimony before the House Budget
Committee on July 31, 2007.
For fiscal year 2006 and fiscal year 2007, including DOD fiscal
year 2007 CERP supplemental increase of $.5 billion, the CERP programs
for OEF and OIF combined was about $1.9 billion.\45\ In fiscal year
2005, AAA reported challenges with Multi-National Security Transition
Command--Iraq documentation in the CERP files. It identified shortfalls
in documenting and maintaining results of coordination with others,
cost estimates from subordinates, Statements of Work, and requirement
requests.\46\ A followup report that AAA issued later in fiscal year
2005 showed that Multi-National Security Transition Command--Iraq had
implemented previous recommendations, but still had opportunities to
improve oversight of its CERP program.\47\ Also during fiscal year
2005, SIGIR issued similar findings; it concluded that while CERP-
appropriated funds were properly used for the intended purposes,
controls over the distribution of appropriated funds were not
consistently followed and required documents were not consistently used
to maintain accountability of projects.\48\
---------------------------------------------------------------------------
\45\ Fiscal Year 2007 Emergency Supplemental Request for the Global
War on Terror, DOD, February 2007.
\46\ AAA Report No. A-2005-0173-ALE.
\47\ AAA Report No. A-2005-0332-ALE.
\48\ SIGIR Report No. 05-0 14.
---------------------------------------------------------------------------
By April 2007, SIGIR found that while Multi-National Corps--Iraq
had improved its controls over fund accountability for CERP in Iraq,
project documentation was still a weakness.\49\ Also in fiscal year
2007, GAO reported that DOD needed to provide greater transparency on
the use of CERP funds for condolence payments by clarifying the
definitions as to what should be reported in the two CERP categories:
(1) condolence payments and (2) battle damage payments. GAO further
stated DOD needed to include document reference numbers for payments to
allow DOD to determine whether expenditures of CERP funds were
appropriately categorized and to permit DOD to obtain detailed
information for analysis and reporting, as appropriate.\50\ Further, in
fiscal year 2007, the DOD OIG reported that for CERP in Afghanistan, 15
of the 16 pay agents reviewed did not have appropriate physical
security for storing cash; the other pay agent did not hold cash
because she was collocated with a finance office. Of the 16 pay agents,
2 inappropriately disbursed cash.
---------------------------------------------------------------------------
\49\ SIGIR Report No. 07-006.
\50\ GAO Report No. GAO-07-699.
---------------------------------------------------------------------------
SYSTEMIC CHALLENGES ACROSS FUNCTIONAL AREAS
Aside from the challenges in each functional area previously
discussed, in summarizing this report we identified common challenges
across the functional areas. Specifically, from our review of the
Defense oversight community and GAO reports and testimonies, training
and policy and procedures challenges were identified in more than one
of these functional areas: Contract Management, Logistics, and
Financial Management.
Training
The Defense oversight community and GAO issued 39 reports and
testimonies that discuss various training challenges DOD faced in
conducting OEF and OIF operations. In the three functional areas, we
identified: 15 reports and testimonies that discuss Contract Management
training challenges; 15 reports and testimonies that discuss Logistics
training challenges; and 9 reports and testimonies that discuss
Financial Management training challenges.
Policies and Procedures
The Defense oversight community and GAO issued 121 reports that
discuss various policy and procedure challenges DOD faced in conducting
OEF and OIF operations. In the three functional areas, we identified:
29 reports that discuss Contract Management policy and procedure
challenges; 53 reports that discuss Logistics policy and procedure
challenges; and 39 reports that discuss Financial Management policy and
procedure challenges.
Chapter 2. Responsive Actions Taken by Management to Address
Recommendations
As of September 30, 2007, sufficient actions had been taken on 699
of the 983 recommendations (71 percent); these recommendations are
considered completed. We did not report on any recommendations that
were closed after September 30, 2007, but will do so in a future
report. Of the 284 recommendations open as of September 30, 2007, 55
recommendations were to agencies and activities outside of DOD. Table 4
shows the overall status of recommendations as of September 30, 2007.
TABLE 4.--OVERALL STATUS OF RECOMMENDATIONS
----------------------------------------------------------------------------------------------------------------
Percent Percent
Recommendations Closed Closed Open Open
----------------------------------------------------------------------------------------------------------------
Fiscal year:
2003................................... 28 27 96.4 1 3.6
2004................................... 105 96 91.4 9 8.6
2005................................... 257 211 82.1 46 17.9
2006................................... 282 220 78.0 62 22.0
2007................................... 311 145 46.6 166 53.4
--------------------------------------------------------------------
Total................................ 983 699 71.1 284 28.9
----------------------------------------------------------------------------------------------------------------
STANDARDS FOR FOLLOWUP ON RECOMMENDATIONS
Office of Management and Budget Circular A-50 ``Audit Followup,''
September 29, 1982, states that audit followup is an integral part of
good management and is a shared responsibility of agency management
officials and auditors. Each agency must establish systems to ensure
the prompt and proper resolution and implementation of audit
recommendations. These systems must provide for a complete record of
action taken on both monetary and nonmonetary findings and
recommendations.\51\
---------------------------------------------------------------------------
\51\ Office of Management and Budget Circular A-50, September 29,
1982.
---------------------------------------------------------------------------
Generally accepted government auditing standards prescribe followup
requirements for audit findings and recommendations. Accordingly, for
performance audits, generally accepted government auditing standards
state that auditors should evaluate whether the audited entity has
taken appropriate corrective action to address findings and
recommendations from previous engagements that are significant.
Auditors should use this information in assessing risk and determining
the nature, timing, and extent of current work, including determining
the extent to which testing the implementation of the corrective
actions applies to the current engagement objectives.\52\
---------------------------------------------------------------------------
\52\ GAO-07-731G Government Auditing Standards, July 2007, Chapter
7 ``Field Work Standards for Performance Audits,'' Section 7.36
``Previous Audits and Attestation Engagements.''
---------------------------------------------------------------------------
DOD Directive 7650.3, ``Follow-up on General Accounting Office
(GAO), DOD Inspector General (DOD IG), and Internal Audit Reports,''
October 18, 2006, provides guidance for GAO, DOD OIG, and other DOD
internal audit organizations. Followup is an integral part of good
management and is a responsibility shared by DOD managers and auditors.
Each agency implements its own followup program in accordance with the
prescribed standards. Further, as described by SIGIR officials, in
general, SIGIR attempts to follow up on open recommendations
semiannually to provide current data in the required semiannual reports
to Congress. According to the SIGIR Deputy Assistant Inspector General
for Audit, as of April 2008, SIGIR was developing an automated followup
tracking system.
Chapter 3. Initiatives Taken by DOD to Address Contract Management,
Logistics, and Financial Management Challenges
Besides taking action on OEF and OIF related recommendations, DOD
took other actions, whether required by public law or self-initiated,
to address challenges in Operations Enduring and Iraqi Freedom. For the
purpose of this report, we focus on discussing initiatives that DOD
reported to us that we believe should directly help overcome challenges
in DOD Contract Management, Logistics, and Financial Management in OEF
and OIF.\53\
---------------------------------------------------------------------------
\53\ We are not attesting to the adequacy or effectiveness of the
DOD initiatives reported.
---------------------------------------------------------------------------
CONTRACT MANAGEMENT INITIATIVES
DOD initiated many actions to address contract-related challenges
in OEF and OIF. These initiatives included establishing and revising
guidance, fielding a new contractor accountability system, adding new
contingency contracting training at DOD academic institutions, and
looking at contracting challenges through commissions and task forces.
Guidance on Oversight of Contractors.--DOD has issued additional
guidance to address contracting-related challenges in OEF and OIF,
which includes jurisdiction over contractors in contingency areas of
operations, tracking contractors performing work outside the United
States, as well as managing and integrating contractor support in joint
and contingency areas of operations.
--On October 17, 2006, the Uniform Code of Military Justice (UCMJ)
was amended to extend UCMJ jurisdiction over persons serving
with or accompanying U.S. Armed Forces in the field in times of
declared war or contingency operations. The Secretary of
Defense's March 10, 2008, memorandum, UCMJ Jurisdiction Over
DOD Civilian Employees, DOD Contractor Personnel, and Other
Persons Serving With or Accompanying the Armed Forces Overseas
During Declared War and in Contingency Operations, provides
additional guidance to commanders on exercising their UCMJ
authority over civilians and contractors during contingency
operations, including those supporting the GWOT.
--In November 2006, DOD issued implementation for Procedures,
Guidance and Information No. 225-74, ``Solicitation and Award
of Contracts for Performance in a Foreign Country or Delivery
to any Unified Combatant Command Theater of Operation.'' It
requires Combatant Command Contracting offices to establish and
maintain a Web page listing all prevailing regulations,
policies, requirements, host nation laws, Orders/Fragmentary
Orders, Combatant Commander's directives, unique clauses, and
other considerations necessary for soliciting and awarding
contracts for performance in or delivery to that Combatant
Command area of responsibility.
--In January 2007, the Deputy Under Secretary of Defense (Logistics
and Materiel Readiness) and the Deputy Under Secretary of
Defense (Program Integration) issued guidance instructing the
use of the Synchronized Predeployment and Operational Tracker
(SPOT) as the central repository for information on contractors
deploying with U.S. Forces. On March 19, 2007, the Director,
Defense Procurement and Acquisition Policy issued implementing
guidance and instructed the use of SPOT. On January 28, 2008,
the Director, Defense Procurement and Acquisition Policy issued
guidance that requires that DOD contractor personnel data be
entered into SPOT for the CENTCOM area of responsibility by
August 1, 2008.
--In October 2007, the acting Under Secretary of Defense for
Acquisition, Technology, and Logistics issued a memorandum with
procedures for contracting, contract concurrence, and contract
oversight for Iraq and Afghanistan. This memo and subsequent
policy, procedures, and guidance, issued by the Director,
Defense Procurement and Acquisition Policy, instructs
contracting officers to have the Joint Contracting Command--
Iraq and Afghanistan review and clear Statements of Work and
terms and conditions of all contracts requiring performance in
Iraq or Afghanistan before awarding a contract. Also, upon
award of any contract, the procuring contracting officer must
assign to the Joint Contracting Command--Iraq and Afghanistan
Federal Acquisition Regulation (FAR) Part 42 and Defense
Federal Acquisition Regulation Supplement (DFARS) Part 242
contract administration of the contract portions that relates
to performance in Iraq or Afghanistan.
--In March 2008, DOD issued DFARS 225.3, ``Contracts Performed
Outside the United States.'' It requires contracting officers,
when using the clause Federal Acquisition Regulation 52.225-19,
``Contractor Personnel in a Designated Operational Area or
Supporting a Diplomatic or Consular Mission Outside the United
States,'' to inform the contractor that SPOT is the appropriate
automated system to use for the list of contractor personnel
required by paragraph (g) of the clause.
--DOD drafted Joint Publication 4-10, ``Operational Contract Support
in Joint Operations,'' which contains detailed content on
contracting and contractor management in joint operations. The
draft joint publication defines key personnel involved in the
contracting process and includes a Contracting Support Plan
Checklist and a Contractor Integration Plan Checklist. The
Contracting Support Plan Checklist covers the key requirements
associated with orchestrating and managing contracting efforts
in a joint operations area, including a requirement to ensure
that there are adequately trained Contracting Officer
Representatives and Contracting Officer Technical
Representatives to assist in managing contract performance. The
Contractor Integration Plan checklist covers the key
requirements associated with managing contractor personnel in a
joint operations area and providing Government-Furnished
support, when such support is required. DOD expects to issue
the joint publication July 2008.\54\
---------------------------------------------------------------------------
\54\ Deputy Director, Program Acquisition and Contingency
Contracting, Defense Procurement and Acquisition Policy, April 28,
2008.
---------------------------------------------------------------------------
--DOD is updating DOD Instruction 3020.41, ``Integrating Operational
Contract Support into Contingency Operations'' (formerly
entitled ``Contractor Personnel Authorized to Accompany the
U.S. Armed Forces''). The update provides an authoritative and
comprehensive roadmap of policy and procedures applicable to
contractor personnel authorized to accompany the U.S. Armed
Forces. The revised version contains significant changes to the
existing instruction including incorporating lessons learned
from current operations, requirements for developing contractor
oversight plans, and requirements for adequate military
personnel needed to execute contract oversight.\55\
---------------------------------------------------------------------------
\55\ Ibid.
---------------------------------------------------------------------------
SPOT.--DOD developed SPOT, an automated system, to track
contractors. SPOT, hosted in the Army network domain (https://
spot.altess.army.mil/default.aspx) and operated by a contractor, has
been designated as the Joint Enterprise contractor management and
accountability system to provide a central source of contingency
contractor information in accordance with DOD Instruction 3020.41,
``Contractor Personnel Authorized to Accompany the U.S. Armed Forces,''
October 3, 2005. Contractor companies are required to maintain by name
(of each employee) accountability in SPOT while Government
representatives use SPOT for oversight of the contractors they deploy.
Contingency Contracting: A Joint Handbook.--Beginning the first
quarter of fiscal year 2008, DOD distributed Contingency Contracting: A
Joint Handbook (the Contingency Contracting Joint Handbook) to the
contingency contracting workforce.\56\ The Contingency Contracting
Joint Handbook, authorized by the Director, Defense Procurement and
Acquisition Policy and Strategic Sourcing, provides a consolidated
source of information for contingency contracting officers conducting
contingency contracting operations in a Joint environment. The hardcopy
book and accompanying DVD are intended to be used for training at home
stations, for reference during deployment, and for training while
deployed. The handbook and DVD provide useful tools, templates, and
training that enable the contingency contracting officer to be
effective in any contracting environment. The Contingency Contracting
Joint Handbook was prepared by the Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics (OUSD[AT&L]),
Defense Acquisition, Technology, and Logistics contingency contracting
staff, the Defense Acquisition University, and the Air Force Logistics
Management Agency.\57\
---------------------------------------------------------------------------
\56\ Panel on Contracting Integrity, Quarterly Progress Update,
March 31, 2008.
\57\ Contingency Contracting: A Joint Handbook.
---------------------------------------------------------------------------
Contingency Contract Training.--Under the fiscal year 2007 National
Defense Authorization Act, DOD has expanded contingency contracting
training modules through the Defense Acquisition University (DAU) as
required by Section 854 of the Act.\58\ DAU has redesigned the
contingency contracting curriculum to improve training supporting
``journeyman-level'' contingency contracting operations. This will
enable experienced contingency contracting officers to be deployable
worldwide and be effective immediately upon arriving at the site.\59\
One example of specific training DAU already provides is the
Construction Contract Management course prepared by DAU for the Joint
Contracting Command--Iraq and Afghanistan. DAU has revised the program
of instruction for the Joint Contingency Contracting Course, CON 234,
using the Joint Contingency Contracting Handbook.\60\ DAU is also
developing an advanced contingency contracting course.\61\
---------------------------------------------------------------------------
\58\ Mr. Gary Motsek, Assistant Deputy Under Secretary of Defense,
Office of Program Support, before the Subcommittee on Oversight and
Investigations, U.S. House of Representatives, on April 25, 2007.
\59\ Honorable James Finley, Deputy Undersecretary of Defense for
Acquisition and Technology, before the Subcommittee on Readiness and
Management Support, Senate Armed Services Committee, April 2, 2008.
\60\ Panel on Contracting Integrity, Quarterly Progress Update,
March 31, 2008.
\61\ Mr. John Young, Under Secretary of Defense for Acquisition,
Technology, and Logistics, before the House Committee on Armed
Services, on April 2, 2008.
---------------------------------------------------------------------------
DAU also hosts the Joint Contingency Contracting Community of
Practice on its Web site to facilitate collaboration and sharing of
learning and job support assets, which will result in improved
efficiencies and support. This initiative also serves as a repository
for policy and guidance information, predeployment information, tools,
and after action reports. This community of practice as a Web-based
tool enables connects the contingency contracting community to share
expertise and experience. Significant findings concerning contingency
contracting from staff assistant visits or internal self-inspection
programs, as well as after action reports and lessons learned, must be
posted to the DAU Web site.\62\ Additional information on DAU
contingency contracting related matters can be found at https://
acc.dau.mil/contingency.
---------------------------------------------------------------------------
\62\ Mr. Richard Ginman, Deputy Director, Program Acquisition and
Contingency Contracting, Defense Procurement and Acquisition Policy,
April 28, 2008.
---------------------------------------------------------------------------
Panel on Contracting Integrity.--On February 16, 2007, the
OUSD(AT&L) established the Panel on Contracting Integrity in accordance
with the requirements of Section 813 of the fiscal year 2007 National
Defense Authorization Act (Section 813).
As required by Section 813, the Panel is reviewing DOD progress to
eliminate areas of vulnerability that allow fraud, waste, and abuse to
occur. The Panel established 10 subcommittees to support the review of
contracting integrity issues: Current Structure of Contracting
Integrity; Sustained Senior Leadership; Capable Contracting Workforce;
Adequate Pricing; Appropriate Contracting Approaches and Techniques;
Sufficient Contract Surveillance; Contracting Integrity in a Combat/
Contingent Environment; Procurement Fraud Indicators; Contractor
Employee Conflicts of Interest; and Recommendations for Change. Each
subcommittee completed a formal report documenting the review of their
designated focus areas and presented recommendations to enhance
contracting integrity. The Panel reviewed the requirements of Section
813; the findings and 20 recommendations in the March 2005 Report of
the Defense Science Board; and the recommendations of GAO Report GAO-
06-838R, ``Contract Management: DOD Vulnerabilities to Contracting
Fraud, Waste and Abuse,'' July 7, 2006. In its first annual report to
Congress (December 2007), the Panel identified 21 initial actions in
2008 in the following areas.
--Reinforce functional independence of contracting personnel and
promptly fill contracting leadership positions with qualified
leaders of integrity who expect and enforce ethical behavior.
--Determine appropriate size of the contracting workforce and ensure
that it has the appropriate skills to effectively and
efficiently price, award, and manage more than $300 billion in
annual contracts.
--Develop a DOD-wide consistent contract policy-execution review
plan, strengthen contracting approaches, and reinvigorate
contract surveillance techniques.
--Improve planning and training for contracting in combat/contingent
environments.
On March 31, 2008, OUSD(AT&L) issued an internal quarterly progress
update. Additional internal quarterly updates on Panel initiatives are
scheduled to be issued through the remainder of 2008. The March issue
provided an update on the Panel and its subcommittees' efforts. The
overview and efforts of the subcommittees on Contracting Integrity in a
Combat/Contingent Environment and Procurement Fraud Indicators are
discussed below.
Contracting Integrity in a Combat/Contingent Environment
Subcommittee.--The Contracting Integrity in a Combat/Contingent
Environment subcommittee is chaired by the Director, Defense
Procurement and Acquisition Policy and Strategic Sourcing. For fiscal
year 2008, the Contracting Integrity in a Combat/Contingent Environment
subcommittee will improve training by leveraging Marine Corps and Air
Force training capabilities; improve training on how to run a
contracting office in a combat/contingent environment; and review Fraud
Indicator Training and Contracting Office Transition Plan. In the March
2008 Quarterly Progress Update, the subcommittee reported that the
Department has taken numerous steps forward in improving the quality of
training offered to contingency contracting workforce members in DOD.
For example, the Army revised its Functional Area 51 Contracting
Officer Leader Development program and developed a new training
strategy after closely reviewing the programs of instruction offered by
both the U.S. Marine Corps and Air Force. For Fraud Indicator Training,
the subcommittee reviewed the Contingency Contracting Joint Handbook
and reported that with the use of the handbook and DAU training
contracting officers will be able to identify specific indicators of
contract fraud found most prevalent in a contingency environment. The
subcommittee also reported that Chapter 4 of the Joint Contingency
Contracting Handbook provides the initial elements of training to
prepare the contingency contracting officer for transition planning.
Procurement Fraud Indicators Subcommittee.--The Procurement Fraud
Indicators Subcommittee is chaired by the Assistant Inspector General,
Acquisition and Contract Management, DOD OIG. The Executive Director
for the Panel on Contracting Integrity initiated this subcommittee to
identify what the procurement indicators are and how they should be
addressed. The increased level of DOD spending, especially in a
contingency or expeditionary environment and without a comparable
increase in procurement staffing levels, has increased procurement
risks. The March 2008 Quarterly Progress Update stated that recently
reported fraud cases have increased visibility in this area. The
membership of this subcommittee includes representatives nominated by
the Inspectors General of the Military Departments. Further, in its
update, the subcommittee reported it plans to evaluate previously
developed information on procurement fraud indicators both within and
outside of the Department and determine the best avenues for presenting
the information to the procurement community. The following are
examples of the subcommittee plans.
--Identify all relevant source material previously developed on
procurement fraud indicators and:
--determine the need for a Procurement Fraud Indicators handbook
for acquisition personnel similar to the IG Procurement
Fraud Indicators Handbook \63\ for auditors;
---------------------------------------------------------------------------
\63\ DOD OIG Handbook 7600.3, ``Handbook on Fraud Indicators for
Contract Auditors,'' March 31, 1993.
---------------------------------------------------------------------------
--review best practices from existing training courses to determine
the potential for a training module for insertion into DAU
training; and
--pursue the feasibility of an acquisition Web site.
--Conduct research and analysis by implementing the following.
--Subcommittee members will gather best practices from their own
and other organizations.
--Subcommittee will establish tasks necessary to review the best
available information, review the revised IG Procurement
Fraud Indicators Handbook, determine the need and contents
of a separate acquisition handbook, analyze existing
training segments, determine focus and content for DAU
training module, and determine the potential for a one-stop
acquisition Web site for procurement fraud indicators.
Commissions and Task Forces.--In an effort to improve its support
of OEF and OIF and for future contingency operations, DOD has
established many commissions and task forces. The following highlight a
few facts on key commissions and task forces.
Commission on Army Acquisition and Program Management in
Expeditionary Operations.--The Secretary of the Army established a 45-
day commission led by Jacques Gansler, former Under Secretary of
Defense for Acquisition, Technology, and Logistics (the Gansler
Commission). The Gansler Commission will ``. . . review the Army's
policies, procedures, and operations regarding acquisition and program
management in expeditionary operations and make findings and
recommendations as to their effectiveness and compliance with
applicable laws and regulations.'' In October 2007, the Commission
issued its report, ``Urgent Reform Required: Army Expeditionary
Contracting,'' which states:
--The expeditionary environment requires more trained and experienced
military officers and noncommissioned officers. As of October
2007, only 3 percent of Army contracting personnel were active
duty military, and Army contracting career General Officer
positions no longer existed.
--The Army's acquisition workforce was not adequately staffed,
trained, structured, or empowered to meet the Army needs of
21st-century deployed warfighters. Only 56 percent of the
military officers and 53 percent of the civilians in the
contracting career field were certified for their then-current
positions.
--In spite of a seven-Fold workload increase and greater complexity
of contracting, the Institutional Army did not support this key
capability (effective contract management).
--In spite of almost as many contractor personnel in the Kuwait/Iraq/
Afghanistan Theater as there are U.S. military personnel, the
Operational Army had not yet recognized the impact of
contracting and contractors in expeditionary operations and on
mission success.
--Contracting (from requirements definition, through contract
management, to contract closeout) was treated as an operational
and institutional side issue instead of as a core competence.
Task Force on Contracting and Contract Management in Expeditionary
Operations.--The Under Secretary of Defense for Acquisition,
Technology, and Logistics established the Task Force on Contracting and
Contract Management in Expeditionary Operations to address the specific
Gansler Commission recommendations and to integrate activities
responding to the Gansler Commission's recommendations with the many
other relevant activities already underway in DOD. The task force is
guided by senior leaders in the Acquisition, Technology, and Logistics
organization, including the Deputy Under Secretary (Acquisition and
Technology); the Director, Defense Procurement, Acquisition Policy, and
Strategic Sourcing; and his Principal Deputy. These senior leaders are
working closely with the Deputy Under Secretary (Logistics and Materiel
Readiness) and the Assistant Deputy Under Secretary of Defense (Program
Support). Membership of this task force includes representatives from
all of the Services, the DCMA, the Joint Staff, the Joint Contingency
Contracting cell for Iraq and Afghanistan, and various elements of the
Office of the Secretary of Defense. The task force meets weekly for
progress-tracking purposes, meets periodically with the Services and
DCMA to ensure a coordinated and consistent DOD approach, and meets
about once a month with Dr. Gansler to discuss any points of
clarification regarding the Gansler Commission's recommendations.
The task force actions implement Section 849 of the fiscal year
2008 National Defense Authorization Act, which directed the Secretary
of Defense, in consultation with the Joint Chiefs of Staff, to evaluate
the Gansler Commission's recommendations to determine the extent to
which such recommendations are applicable to the other Armed
Forces.\64\
---------------------------------------------------------------------------
\64\ Mr. John Young, Under Secretary of Defense for Acquisition,
Technology, and Logistics, before the House Committee on Armed
Services, on April 2, 2008.
---------------------------------------------------------------------------
Army Contracting Initiatives.--The Army has implemented several
initiatives to address contracting challenges. Specifically, in
February 2008, the Army announced the Army Contracting Campaign Plan to
address findings and recommendations from two previous independent
reviews from the Gansler Commission and the Army Contracting Task
Force. The Army Contracting Campaign Plan will enable the Secretary of
the Army to execute recommended improvements to Army contracting.
Further, the Secretary of the Army directed the establishment of the
Army Contracting Command as a major subordinate command of the Army
Materiel Command and the realignment of the Army Contracting Agency
under the Army Materiel Command. The Army Contracting Agency provides
contracting services for installation-level services and supplies, and
common-use information technology hardware, software, and services. The
realignment of Army Contracting Agency to Army Materiel Command places
the majority of the Army's contracting resources into one Army command,
which will provide a full range of contracting services.
LOGISTICS INITIATIVES
According to the Executive Director for LOGCAP, the following are
initiatives in the logistics support program.
In April 2007, the Army created the Executive Director for LOGCAP,
a more than $30 billion Services program, which reports to the
Commanding General of the Army Sustainment Command. Establishing this
position provides program management oversight of LOGCAP augmentation
to combat support/combat service support functions for supported units
in OEF and OIF. The Executive Director has overall executive
responsibility for LOGCAP, under which contractors from the private
sector provide a broad range of logistical and life support services to
U.S. and allied forces during combat operations. The Executive Director
also stated he provides liaison LOGCAP planners for Army Service
Component Command worldwide operation planning for support of
logistical and life support services.
As of March 2008, LOGCAP is supported by 66 reserve officer billets
from the LOGCAP Support Unit. One of the LOGCAP initiatives is to
increase this unit to 137 personnel, broken out into five detachments
for worldwide deployment. A detachment or its elements would deploy
with the newly established Army contract support brigades to assist in
developing requirements.
The program currently consists of Deputy Program Directors deployed
in Iraq, Afghanistan, and Kuwait supported by members of the LOGCAP
Support Unit, the DCMA, and from members of the LOGCAP support
contractor. According to the Executive Director, he also uses
continental U.S. assets to augment the requirements of the forward
deployed elements.
Development of Future Doctrine for Logistical Support.--Concurrent
to providing management support for logistic services, the program is
also developing planning doctrine on including contractor logistical
services in future contingency operations. The emphasis is ``How to
plan for, and include, LOGCAP services in operational support plans.''
The goal is to align LOGCAP operational planners with the contract
support brigades to assist the decision-making process for when to use
and in developing requirements for LOGCAP services.
Exercises and Deployment.--LOGCAP participates in military training
exercises to teach awareness of LOGCAP efforts. LOGCAP also provides
outreach support and awareness to logistics support personnel and DCMA
officers deploying in theater.
In-theater Support.--LOGCAP provides in-theater support to military
operations. LOGCAP personnel provide an overview of the program to
military commanders, the Joint Contracting Command--Iraq and
Afghanistan, regional contracting centers, and forward operating base
mayors. The LOGCAP program personnel meet with division and garrison
commands to educate them on the process used to seek the services of
LOGCAP when organic logistics services cannot be used. This includes
developing requirements, providing support for forward operating bases,
operating dining facilities, or providing a multitude of field
services.
Award Fee.--Because LOGCAP operates in different military
operations and world-wide, the program has established an initiative to
standardize the evaluation process across the various groups that
assess contractors' performances in Iraq, Afghanistan, and Kuwait. It
also includes an assessment of what efforts the contractors are making
to improve the quality of operations.
FINANCIAL MANAGEMENT INITIATIVES
DOD Components have implemented many initiatives to address
financial management challenges in wartime contingency operations such
as OEF and OIF. The Office of the Under Secretary of Defense
(Comptroller) (OUSD[C]) has implemented several initiatives such as
issuing additional financial guidance and focused funding execution
reviews, and establishing a senior steering group. The Director,
Defense Finance and Accounting Service (DFAS) has implemented several
initiatives such as deploying personnel in August 2007 to assist
forward-deployed DOD elements in preparing and maintaining supporting
documentation voucher transactions. In addition, DFAS initiatives
implemented includes reducing the burden on units in Iraq and Kuwait
and improve controls over documentation supporting commercial payments
and payments to foreign governments. For some of the DFAS initiatives,
the U.S. Army partnered with DFAS in implementing the initiative.
Under Secretary of Defense (Comptroller).--The OUSD(C) has
initiated several actions to address cost and execution of funds
challenges in OEF and OIF. Specifically, the OUSD(C) has issued
additional financial management related guidance for contingency
operations, performed focused analysis on funding monthly execution,
and established the Cost of War Senior Steering Group.
Additional Financial Management Guidance.--The OUSD(C) wrote that
because of recent reviews of commercial payments for goods and services
in Iraq and Afghanistan, in September 2007 the OUSD(C) published
guidance emphasizing the requirements for proper payments in
contingency operations. The OUSD(C) memorandum prescribes certification
guidelines for payments made in contingency operation areas including
11 types of information that certifying officers will typically use to
certify and make payments.\65\ In May 2008, the OUSD(C) updated the DOD
Financial Management Regulation to incorporate the certification
guidelines for commercial payments in contingency operations from the
September 2007.\66\
---------------------------------------------------------------------------
\65\ OUSD(C) Memorandum, ``Certified Commercial Payments in
Contingency Operations,'' September 14, 2007.
\66\ DOD Financial Management Regulation, Volume 10, Chapter 8
``Commercial Payment Vouchers and Supporting Documents,'' May 2008.
---------------------------------------------------------------------------
Monthly Funding Execution Analysis.--In December 2007, the OUSD(C)
initiated an effort to increase its overview of DOD execution of OEF
and OIF related funding. As part of this effort, to gauge whether DOD
can properly execute the funding requested for the specific fiscal
years, the Comptroller invited personnel from other DOD Components,
such as the DOD OIG, to perform quick-look reviews on the execution of
GWOT funding patterns. These support efforts were included in the
OUSD(C) overall focused analysis of execution of funding. According to
OUSD(C) officials, OUSD(C) now performs a monthly analysis of DOD
execution of funding and reports the results to the Under Secretary of
Defense (Comptroller). The monthly analysis provides timely awareness
of funding trends and potential funding execution concerns to the
attention of the Comptroller.
Cost of War Senior Steering Group.--In February 2007, the Deputy
Secretary of Defense established the Cost of War Senior Steering Group
to provide governance for the timely resolution of policy, system, and
procedural issues that impact the reporting of the cost of war. The
objective is to improve the credibility, transparency, and timeliness
of the Cost of War reporting, to include CERP. The Cost of War Senior
Steering Group is to: establish and charter the GWOT Cost of War
Project Management Office; evaluate and approve plans and
recommendations for the resolution of policy, system, and procedural
issues that impact the credibility of Cost of War reporting; facilitate
adoption of Cost of War reporting best business practices throughout
DOD; and provide oversight and direction to the GWOT Cost of War
Program Management Office on key metrics, trends, and initiatives that
measure the improvements in Cost of War reporting.\67\
---------------------------------------------------------------------------
\67\ See memorandum OSD 01647-07.
---------------------------------------------------------------------------
Defense Finance and Accounting Service.--The Director, DFAS has
initiated a proactive effort both in theater and in the continental
United States, to support the warfighter and mitigate challenges DOD
has in OEF and OIF operations. According to the DFAS GWOT Program
Management Office, since August 2007, DFAS has implemented the
following financial related initiatives.
The DFAS GWOT Program Management Office: mapped processes and
developed standard operating procedures for funding and reporting;
improved tracking of GWOT funds and budget execution by Services
leading to greater reliability of data incorporated in the GWOT Cost of
War report; documented Components' legacy GWOT reporting business
practices; implemented accuracy and compliance measures and scorecard;
implemented GWOT Cost of War Status of Funds reporting; achieved a
Green progress rating on the President's Management Agenda scorecard;
established proactive, aggressive communication channels for GWOT
audits; established a viable theater support program; and developed a
repeatable process for monitoring GWOT audits, which is considered a
``Best Practice'' in addressing GWOT and financial audits for DOD.
In-Theater Support:
--Worked with theater commanders \68\ to support finance operations
and have deployed support teams to: perform finance functions;
assist with in-depth reviews of commitments, obligations, and
disbursements;--assist with conducting joint reviews;
retrograde finance functions back to DFAS continental U.S.
operations and free soldiers to perform other missions; provide
training support on accounting, vendor pay, military pay
disbursing, and supporting systems; keep lines of communication
flowing between theater finance and DFAS to troubleshoot
problems; support audit inquiries; and provide supplemental
support during unit rotations.
---------------------------------------------------------------------------
\68\ Such as the Multi-National Corps--Iraq, Multi-National
Security Transition Command--Iraq, Combined Joint Task Force-82, and
336th Financial Management Company Kuwait.
---------------------------------------------------------------------------
--Included actions the Program Management Office performed in support
of GWOT operations in the theater: improved payment controls
and documentation in theater; implemented electronic imaging of
documents in the theater of operations to improve the
efficiency of reporting and to reduce risk to soldiers who
transport documentation; issued guidance and updated policy
regulations to improve the communication of requirements in the
theater; assisted commands in executing and reporting GWOT
budget execution; and participated in training units deploying
to the theater.
DOD AUDIT COMMUNITY INITIATIVES
In addition to actions taken by the DOD Components, the Defense
oversight community has instituted its own initiatives to address the
challenges presented to DOD in OEF and OIF operations. Some of the
initiatives within the Defense oversight community are focused
workforces, focused coordination groups, and comprehensive and
coordinated oversight plans in response to statutory requirements.
The Defense oversight community is increasing its partnerships and
providing support within the Defense community for oversight efforts.
For example, the DOD OIG and AAA are conducting a joint review of the
Joint Contracting Command--Iraq and Afghanistan. In addition, the U.S.
Army Corps of Engineers and AAA have provided personnel to support DOD
OIG oversight efforts. The Naval Audit Service and AFAA have provided
support to the DOD OIG munitions accountability assessment effort.
Audit Plan for Support of Coalition Forces in Iraq and
Afghanistan.--The fiscal year 2008 National Defense Authorization Act,
Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime
Contracts and Contracting Processes in Iraq and Afghanistan,'' January
28, 2008, requires the Inspector General of the Department of Defense
to develop a comprehensive plan for a series of audits of DOD
contracts, subcontracts, and task and delivery orders for the
logistical support of coalition forces in Iraq and Afghanistan. The Act
also requires that the Special Inspector General for Iraq
Reconstruction and the Special Inspector General for Afghanistan
Reconstruction develop a comprehensive plan for a series of audits of
Federal agency contracts, subcontracts, and task and delivery orders
for the performance of security and reconstruction functions in
Afghanistan and Iraq.
To show all of the audit work for Afghanistan and Iraq, the DOD OIG
has expanded the audit plan beyond the statutory mandate to include
other key issue areas for Afghanistan and Iraq, such as financial
management, and human capital for contract administration. The plan
includes the planned audit work of the Inspectors General of the
Department of State and the U.S. Agency for International Development
and the Special Inspector General for Iraq Reconstruction. The plan
also includes the planned audit work of the Army Audit Agency, Air
Force Audit Agency, and Defense Contract Audit Agency because of the
major contributions they make to improve the efficiency and
effectiveness of support to the military.
The Inspectors General of Department of Defense, Department of
State, Agency for International Development, and the Special Inspector
General for Iraq Reconstruction are coordinating their audit plans
through existing working groups and councils. Coordination will include
the Special Inspector General for Afghanistan Reconstruction when, and
if, one is appointed.
Workforce.--Within the Defense oversight community, the AAA, AFAA,
and DOD OIG have instituted an expeditionary workforce structure.\69\
The AAA and DOD OIG maintain a footprint of personnel on the ground in
Afghanistan, Iraq, and Kuwait, whereas the focus of the Special
Inspector General for Iraq Reconstruction is limited to Iraq. The AFAA
has no permanent presence in Southwest Asia; however, it uses about 10
percent of available auditors per year on GWOT-related audits in the
United States Air Forces Central overseas area of responsibility. The
audit work is accomplished by using 24 person temporary teams twice a
year to perform mobile audits for 7 to 8 weeks.
---------------------------------------------------------------------------
\69\ We define expeditionary workforce as mobile personnel
dedicated to a specific mission and deployable to worldwide locations
to conduct oversight to complement permanent workforce efforts.
---------------------------------------------------------------------------
Coordination Groups.--The DOD OIG is the lead oversight agency for
accountability in DOD and, as such, is committed to maintaining an
effective working relationship with other oversight organizations to
minimize duplication of efforts and to provide more comprehensive
coverage. Effective interagency coordination, collaboration, and
partnerships within the oversight community are essential to providing
comprehensive reviews of wartime expenditures to identify whether
critical gaps exist, and then to recommend actions to close those gaps.
SWA Joint Planning Group.--The DOD OIG has jointly established and
chairs an intra- and interagency Southwest Asia Joint Planning Group
that meets quarterly. The Group provides oversight of fraud, waste,
abuse, and criminal activities in the Southwest Asia region. The
Southwest Asia Joint Planning Group provides a chance for collaboration
and team work with organizations engaged in this effort, including the
Military Inspectors General and Service Auditors General, Combatant
Commands Inspectors General, DCAA, DFAS, DCMA, the Inspectors General
of State and the U.S. Agency for International Development, SIGIR, and
GAO. The mission of the Southwest Asia Joint Planning Group is to
better coordinate and integrate oversight activities in the region. The
Southwest Asia Joint Planning Group leads the coordination and
oversight required to identify and recommend improved mission support
to military units conducting operations.
Afghanistan Working Group.--A subgroup of the Southwest Asia Joint
Planning Group is the Afghanistan Working Group. The DOD OIG, along
with the GAO, the Inspectors General of State, and the U.S. Agency for
International Development, established the Working Group to minimize
the impact on forward command operations, deconflict overlapping and
duplicate oversight requests, and facilitate the exchange of oversight
information related to Afghanistan. The DOD OIG, as the DOD
representative, also incorporates the ongoing and planned Afghanistan-
related oversight efforts of the Service Auditors General into the
Working Group. The Afghanistan Working Group has convened to discuss
ongoing, planned, and completed projects that address issues related to
Afghanistan operations. This group has briefed congressional committees
and members of the ongoing, planned, and completed Afghanistan
oversight projects.
Iraq Inspectors General Council.--In conjunction with the Southwest
Asia Joint Planning Group, the DOD OIG also participates in the Iraq
Inspectors General Council chaired by SIGIR to minimize the impact on
forward command operations, deconflict overlapping and duplicate
oversight requests, and facilitate the exchange of oversight
information unique to Iraq.
The DOD OIG provides an overview of the DOD oversight community in
its Semiannual Reports \70\ to Congress. The DOD OIG Semiannual Report
includes a chapter on the DOD oversight community's efforts for GWOT
and Southwest Asia. Please see http://www.dodig.mil/sar/index.html for
our published Semiannual Reports to Congress, including DOD oversight
community's efforts on GWOT and Southwest Asia.
---------------------------------------------------------------------------
\70\ The DOD OIG issues the Semiannual Report to Congress in
accordance with the Inspector General Act of 1978, as amended.
---------------------------------------------------------------------------
DOD OIG INITIATIVES
The DOD IG is committed to supporting the GWOT and the needs of the
men and women fighting this war. Overall, the DOD IG is responsible for
providing oversight to more than $655 billion in funds dedicated for
the GWOT. The DOD OIG identifies and helps correct critical mission
support problems that impact OEF and OIF. The DOD IG has established
the following GWOT-related goals:
--Goal 1.--Increase the DOD OIG presence in Southwest Asia to work on
priority issues directly supporting efforts for OEF and OIF.
--Goal 2.--Expand coverage of the DOD GWOT-related programs and
operations by providing oversight in fundamental areas:
contract surveillance, financial management, accountability of
resources, as well as training and equipping of personnel and
developing a logistics sustainment base.
--Goal 3.--Increase efforts to prevent the illegal transfer of
strategic technologies and U.S. Munitions List items to
prohibited nations, terrorist organizations, and other criminal
enterprises.
Besides developing a comprehensive plan for a series of audits as
required by the fiscal year 2008 National Defense Authorization Act,
Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime
Contracts and Contracting Processes in Iraq and Afghanistan,'' January
28, 2008, the DOD OIG initiated several other actions to support OEF
and OIF. The DOD OIG established field offices in four countries in
Southwest Asia, created an expeditionary workforce, and participated in
interagency focus groups. To accomplish its oversight mission, the DOD
OIG has adopted a strategy that is based on maintaining the right-size
presence in theater but also recognizes that much of its work can be
done out of Iraq and Afghanistan. An important part of the DOD OIG
oversight effort is to improve interservice and interagency
coordination and collaboration to minimize duplication of effort and
ensure that DOD OIG has only the staff needed in theater to accomplish
the mission.
Southwest Asia Field Offices.--The DOD OIG has established field
offices in Afghanistan, Iraq, Kuwait, and Qatar and continues key
placement of DOD OIG personnel in Southwest Asia. DOD OIG presence
facilitates timely reviews and reporting of results in theater and
minimizes disruption to the warfighter.
Workforce.--The DOD OIG has adopted an expeditionary workforce
model to support efforts throughout all of Southwest Asia. The DOD OIG
has core staff forward deployed at all times. The core contingent is
composed of individuals serving deployments of 6 to 12-months.
Expeditionary team members deploy for as long as needed to complete the
review.
Panel on Contracting Integrity.--The DOD OIG participates in the
DOD Panel on Contracting Integrity. Established under Section 813 of
the fiscal year 2007 National Defense Authorization Act, the Panel is
chaired by the Deputy Under Secretary of Defense for Acquisition,
Technology, and Logistics to conduct reviews of DOD progress made in
eliminating areas of vulnerability in the Defense contracting system.
The DOD OIG is a member of the overall Panel on Contracting Integrity,
a member of the subcommittee on Adequate Pricing, and is Chair of the
Procurement Fraud Indicators subcommittee. The Procurement Fraud
Indicators subcommittee is identifying what these indicators are and
how they should best be addressed and used for the contracting/
acquisition workforce.
GWOT Cost of War Senior Steering Group.--The DOD OIG is an invited
observer to the GWOT Cost of War Senior Steering Group that DOD
established on February 26, 2007, to improve and standardize cost of
war reporting. Attending the Senior Steering Group meetings helps the
DOD OIG remain apprised of DOD efforts for cost of war reporting and
furthers its oversight regarding financial aspects of GWOT to ensure
timeliness and value to the DOD.
Federal Bureau of Investigation Joint Terrorism Task Forces.--As of
March 2008, the DOD OIG has personnel supporting more than 40 joint
terrorism task forces, full-time or part-time. These task forces were
formed to maximize interagency cooperation and coordination by creating
cohesive units capable of addressing both international and domestic
terrorism.
National Procurement Fraud Task Force.--The DOD OIG has been a
member of the National Procurement Fraud Task Force since 2006. This
task force promotes the prevention, early detection, and prosecution of
procurement fraud.
International Contract Corruption Task Force.--The DOD OIG is a
member of the International Contract Corruption Task Force. DOD OIG
personnel are assigned full-time to the task force's Joint Operations
Center. The International Contract Corruption Task Force was formed to
specifically target fraud and corruption involving Southwest Asia. The
primary goal of the task force is to combine the resources of multiple
investigative agencies and to partner with the Department of Justice to
effectively and efficiently investigate and prosecute cases of contract
fraud and public corruption related to U.S. Government spending in
Iraq, Kuwait, and Afghanistan.
DFAS-Rome, New York Project.--The DOD OIG initiated this proactive
effort to analyze more than $10 billion in payment vouchers related to
U.S. Army purchases in Iraq. The vouchers as of March 2008, were stored
at DFAS-Rome, New York. This DOD OIG effort includes the Defense
Criminal Investigative Service, DOD OIG Auditing, AAA, DCAA, and the
Federal Bureau of Investigation.
ARMY AUDIT AGENCY INITIATIVES
Since June 2002, AAA has been actively involved in audit work in
support of OEF and OIF. AAA maintains a significant presence in the
CENTCOM area of responsibility to assist commanders in GWOT and has
continuously had between 10 to 30 auditors deployed in Afghanistan,
Iraq, and Kuwait since May 2005.
Audits in theater have focused primarily on logistics and
contracting issues. Since the beginning of OEF and OIF, AAA has issued
31 reports addressing various aspects of Logistics Civil Augmentation
Program (LOGCAP) operations, and 40 other reports addressing issues
such as logistics, military pay, and fund management.
In June 2007, the AAA Auditor General accompanied a congressional
delegation to Iraq and Kuwait that assessed contracting operations in
theater. The delegation invited the AAA Auditor General because of the
Auditor General's testimony to the Senate Armed Services Committee on
April 19, 2007, about the AAA LOGCAP audit work. The delegation met
with top Army officials and key representatives from the oversight
community.
Currently, AAA is conducting audits in Afghanistan, Iraq, and
Kuwait of contracting operations, retrograde operations, container
management, and accountability of contractors on the battlefield. This
work in theater stems from requests from the Secretary of the Army; the
Commander, Multi-National Force--Iraq; U.S. Army Criminal Investigation
Command; the Commanding General, Third U.S. Army and U.S. Army Forces
Central Command; and the Commander, Joint Contracting Command--Iraq and
Afghanistan.
AAA has been proactive in helping senior Army leadership improve
contracting operations in Southwest Asia.
--At the request of the Secretary of the Army, AAA assessed
contracting operations at the Kuwait Contracting Office.
Essentially, AAA recreated contracting events associated with
the operation and oversight of the Office from fiscal year 2002
through fiscal year 2007. The review identified contracting
weaknesses and provided the Secretary with critical information
needed to assess whether personnel with oversight
responsibilities over the Office's operations performed their
duties properly. The Secretary used the results of the review
to initiate immediate corrective actions in Army contracting
operations for current and future wartime contingencies.
Moreover, the results were instrumental in the Secretary
establishing the Army Contracting Task Force.
--AAA materially assisted the operations of the Army Contracting Task
Force during fiscal year 2008. Task force members reviewed a
statistical sampling of contracts awarded by the Kuwait
Contracting Office between fiscal year 2003 and fiscal year
2006 that were valued at more than $25,000. To assist the task
force, AAA provided the sample size, evaluated the methodology
task force members used to review contracts and assess fraud
indicators, and provided task force members with training on
contract fraud and how to identify fraud indicators.
AAA has also been extremely active in assisting criminal
investigators and Federal attorneys in support of contract fraud cases
related to Southwest Asia operations.
--AAA provided, and continues to provide, extensive support to the
International Contract Corruption Task Force. This task force
includes members from U.S. Army Criminal Investigation Command,
Defense Criminal Investigative Service, DCAA, DOD OIG, the
Federal Bureau of Investigation, Department of Justice, and
SIGIR. To support this task force, AAA extracted data from Army
automated contracting and financial systems. AAA organized this
information into usable databases, provided memorandums
describing the scope and methodology used to extract the data
from the systems, and trained task force members on how to use
the contract and contract payment databases as an investigative
tool.
--AAA provided, and continues to provide, extensive support to the
Department of Justice's National Procurement Fraud Task Force
to help obtain indictments and prosecutions related to
procurement fraud cases in Southwest Asia. AAA obtained
documentary evidence and analyzed data needed to prosecute
several major procurement fraud cases. AAA also provided the
task force a compilation of all the contract and payment
information available in Army and DFAS automated systems to
support contract and payment amounts for multiple contracts.
These contracts were at the center of a nationally publicized
procurement fraud case involving about $14 million of kickbacks
allegedly paid to a military contracting officer.
--Currently, AAA is performing a major data-mining effort involving
vendor payments in Kuwait. This effort is geared to identify
potentially fraudulent payments and control weaknesses in
automated and manual contract payment processes. This work
supports both the International Contract Corruption Task Force
and the Army Task Force on Contracting.
Establishing the Expeditionary Support Audit Team.--In October
2007, AAA realigned its staff and established the Expeditionary Support
Audit Team to enhance audit support for overseas contingency
operations. Establishing the team enabled AAA to improve its efficiency
and responsiveness to Army leaders and combatant commanders on the
ground in Southwest Asia in support of OEF and OIF.
AAA built the team exclusively from volunteers willing to serve in
a deployed environment. The team consists of about 40 full-time (core)
members, half of whom are deployed to Southwest Asia at any given time.
The AAA continuously augments the core team with about 5 to 10
additional volunteers who deploy and work with the core members for
180-day assignments. This enables AAA to continuously operate with
about 25 to 30 deployed staff and provide timely, relevant audit
service in Southwest Asia. In fiscal year 2008 and fiscal year 2009,
the Expeditionary Support Audit Team will concentrate its efforts in
Southwest Asia on contracting and logistics operations.
Coordinating and Sharing with Other Oversight Activities.--Senior
AAA officials have actively participated in the DOD Southwest Asia
Joint Audit Planning Group since its inception. The planning group
provides a forum for DOD auditors, inspectors, and investigators to
share ideas and audit schedules to maximize coverage in the theater
while avoiding duplication of effort. The AAA has also loaned auditors
to assist the DOD OIG on several audit initiatives in Iraq. Likewise,
AAA has maintained close coordination with the SIGIR. AAA is an active
member of the Iraq Inspectors General Council that meets quarterly to
discuss and coordinate audit coverage in Iraq. AAA also routinely
shares audit information with senior Army officials, including U.S.
Army Corps of Engineers Gulf Region Division personnel in Iraq, through
regular teleconferences convened by the Assistant Secretary of the Army
(Acquisition, Logistics, and Technology).
Army Contracting Campaign Plan Task Force.--The Army Contracting
Campaign Plan Task Force is a proactive Army response to weaknesses
identified in Army acquisition and contracting processes and to the
findings and recommendations of the Gansler Commission on Army
Acquisition and Program Management in Expeditionary Operations and the
Army Contracting Task Force. The Army Contracting Campaign Plan Task
Force is led by the Assistant Military Deputy to the Assistant
Secretary of the Army (Acquisition, Logistics, and Technology). Its
mission is to operationalize and institutionalize Army Contracting to
provide an Army-wide standard for global contracting capability in
support of warfighter needs across the full spectrum of military
operations.
The Acting Under Secretary of the Army established the Army
Contracting Campaign Plan Task Force and the task force held its
``kick-off'' meeting on March 26, 2008. The task force is ongoing and
is supported by acquisition, contracting, and support personnel
participating in working-level and decision-making forums such as a
two-star General Officer Steering Committee, Council of Colonels, and
individual Implementation Planning Teams. AAA representatives have met
with the task force director and he has requested that AAA provide
independent and objective audit and attestation services as needed to
support the development and implementation of the Army Contracting
Campaign Plan. AAA personnel also attended the initial meetings of the
Implementation Planning Team and the Council of Colonels.
AIR FORCE AUDIT AGENCY INITIATIVES
Since October 2005, AFAA has taken several initiatives in support
of OEF and OIF. First, AFAA realigned branches of the Air and Space
Operations Division to assign a program manager and four audit managers
the responsibility to perform Air Force-wide audits focusing on
operations in the U.S. Air Forces Central area of responsibility. As of
April 2008, the branch has performed 11 multi-site audits focused
exclusively or primarily on U.S. Air Forces Central operations. This
branch also assisted other AFAA divisions in performing five multi-site
audits with U.S. Air Forces Central area of responsibility involvement
in functional areas such as health care, environmental and engineering,
and supply.
Second, AFAA developed expeditionary audit teams to provide audit
services in the U.S. Air Forces Central area of responsibility. The
AFAA deploys an expeditionary audit team of volunteer civilian auditors
into the U.S. Air Forces Central area of responsibility about twice a
year. The audit team, consisting of 12 to 16 auditors and 3 team
chiefs, deploys for about 45 days and performs audits at 5 to 7 area-
of-responsibility installations. The AFAA will deploy its fifth
expeditionary audit team in June 2008. Audits from the past four
expeditionary audit teams have resulted in 72 installation-level audit
reports and 17 Air Force audit reports, and have identified more than
$75 million in potential monetary benefits.
Finally, AFAA participates in the Southwest Asia Joint Planning
Group. The group's initial meeting was April 2007 and convenes
approximately quarterly. The Planning Group coordinates various audit
activities impacting Southwest Asia. During the meetings,
representatives from the GAO, DOD OIG, DCAA, SIGIR, and the Service
audit agencies, briefed recently completed, ongoing, and planned audits
pertaining to operations in the CENTCOM area of responsibility.
Attendees included the Combatant Command Inspectors Generals from
Special Operations Command, Pacific Command, and CENTCOM. Information
discussed during the meetings provided valuable input to AFAA audit
efforts in the U.S. Air Forces Central area of responsibility.
DEFENSE CONTRACT AUDIT AGENCY INITIATIVES
To better inform the contracting community on the services DCAA can
provide during contingency contracting operations, DCAA coordinated
closely with DAU representatives to revise DAU Course 234, Contingency
Contracting. DCAA also provided extensive support for coordinating the
draft Expeditionary Contracting Policy, which establishes uniform
policies and procedures for DOD contingency contracting officers
deploying to a contingent environment. In addition, DCAA provided input
and coordinated on the recently issued Joint Contingency Contracting
Handbook, a pocket-sized handbook and accompanying compact disk, that
provides the essential information and tools to operate and train
effectively in a contingency contracting environment.
SIGIR INITIATIVES
The Special Inspector General for Iraq Reconstruction has two
initiatives to assist in challenges in OIF. Specifically, SIGIR is
capturing its own lessons learned as well as performing capping
reports.
Lessons Learned.--SIGIR is carrying out an initiative to capture
the lessons learned in Iraq reconstruction. The initiative is designed
to enhance continuing work in Iraq and to inform future U.S.
reconstruction efforts. On each of these issues, SIGIR is gathering
information from extensive research and interviews, collating and
distilling the information into white papers, and gathering panels of
experts in three forums to evaluate the findings and make
recommendations. The Lessons Learned Initiative focuses on three key
subject areas:
--``Iraq Reconstruction: Lessons in Human Capital Management,''
February 2006, is the product of SIGIR audits, other research,
and the Lessons Learned Forum held in September 2005 at Johns
Hopkins University's Washington, D.C., campus. The document
identifies and discusses four key components of effective human
resource management: policy alignment, workforce planning,
recruitment, and continuity.
--``Iraq Reconstruction: Lessons in Contracting and Procurement,''
July 2006, begins by examining contracting activity early in
the Iraq program and traces its evolutionary development
through the effort's succeeding phases. The concluding section
lays out a series of key lessons followed by six
recommendations for improving the U.S. Government's capacity to
support and execute contracting and procurement in contingency
environments.
--``Iraq Reconstruction: Lessons in Program and Project Management,''
March 2007, focuses on program and project management during
the U.S.-led reconstruction mission, and tracks the evolution
of the three organizations responsible for providing the
strategic oversight and tactical direction of the
reconstruction effort: the Office of Reconstruction and
Humanitarian Assistance, the Coalition Provisional Authority,
and the U.S. Mission--Iraq.
Capping Reports.--As reported in its January 30, 2008, report,
SIGIR plans to present a series of performance audit capping reports
that summarize the accomplishments in each of these reconstruction
sectors: security and law enforcement; justice, public safety
infrastructure, and civil society; electric; oil; water resources and
sanitation; transportation and telecommunications; roads, bridges, and
construction; private sector development; and education, refugees,
human rights, democracy, and governance.
These reports will build on the information obtained in the focused
contracting reviews conducted in fiscal year 2008 and provide detailed
descriptions of the projects completed in each sector and the
associated costs. SIGIR will also assess how well the Iraqis are
maintaining the projects and assess the impact of each project on local
communities.
Appendix A. Scope and Methodology
The Defense oversight community--the DOD Office of Inspector
General (OIG), the Army Audit Agency (AAA), the Naval Audit Service,
the Air Force Audit Agency (AFAA), and the Special Inspector General
for Iraq Reconstruction (SIGIR)--and the Government Accountability
Office (GAO) issued 314 reports and testimonies (302 unclassified and
12 classified) beginning fiscal year 2003 through fiscal year 2007 that
support Operation Enduring Freedom (OEF) or Operation Iraqi Freedom
(OIF).
This non-audit service report summarizes 302 OEF and OIF related
reports and testimonies from fiscal year 2003 through fiscal year 2007
issued and given by the Defense oversight community and GAO. We
reviewed the OEF and OIF related reports and testimonies obtained, but
we did not review the supporting documentation for any of the reports.
Based on our review, we created functional areas (main categories) to
categorize the reports and testimonies. The categories resulting from
our review of the 314 OEF and OIF-related reports and testimonies
issued by the audit agencies are: Contract Management, Logistics,
Financial Management, and Other.
The team then reviewed the causes of the recommendations in the
unclassified reports in order to determine systemic challenges in the
reports. See Appendix C for the definitions the team used for each
category. The categories resulting from our review of causes of the
recommendations are as follows.
--Contract Management: Contract Administration; Policy and Procedure;
Sourcing; Requirements; and Other/Strategic.
--Logistics: Policy and Procedure; Accountability; Sustainability;
Requirements; and Other.
--Financial Management: Overall Financial Management; Internal
Controls; Obligations; and Execution.
--Other: Policy and Procedure; Planning; Accountability; and Other.
The audit team also counted the recommendations in each report and
determined the status of each recommendation. We obtained the status of
the DOD OIG and GAO recommendations from the Defense Automated
Management Information System; the AAA, AFAA, and Naval Audit Service
status from representatives at those agencies; and the SIGIR status
from the SIGIR January 30, 2008, quarterly report. The audit team also
validated the status of GAO recommendations obtained from the Defense
Automated Management Information System with GAO representatives.
We then sent the results of categorizing the causes of the
recommendations into issue areas, the number of recommendations in each
report, and the status of those recommendations to GAO, DOD OIG, AAA,
Naval Audit Service, AFAA, and SIGIR for them to verify. Based on the
other agencies' comments to our initial results, we updated our initial
categorizations of the causes, number of recommendations, and status of
the recommendations for the reports and testimonies.
Using the audit agencies' input of the categorization of the 302
unclassified reports and testimonies, the team reviewed the reports in
the respective categories to determine whether any systemic or
recurring challenges in the categorized areas exist. The team also
reviewed the status of the recommendations in those reports and
determined whether DOD took appropriate action to address the 983
recommendations by determining how many recommendations remain open at
the end of each fiscal year.
We sought out DOD initiatives regarding Contract Management,
Logistics, and Financial Management challenges in OEF and OIF. We
contacted the Office of the Deputy Under Secretary of Defense for
Acquisition, Technology, and Logistics; OUSD(C); Executive Director for
LOGCAP Program, Army Sustainment Command; DFAS GWOT Program Management
Office; and DCAA. We also sought out initiatives by the DOD oversight
community and contacted AAA, Naval Audit Service, AFAA, DCAA, and
SIGIR.
Use of Computer-Processed Data.--We relied on data that were
entered into the Defense Automated Management Information System to
determine the status of the DOD OIG and GAO report recommendations. We
did not perform any tests of the validity of the data manually entered
into the Defense Automated Management Information System by DOD OIG
personnel when compiling information for this report.
Appendix B. OEF and OIF Reports and Testimonies Fiscal Year 2003
Through Fiscal Year 2007
From fiscal year 2003 through fiscal year 2007, the Defense
oversight community and GAO have issued 314 reports and testimonies
that relate to Operations Enduring Freedom or Iraqi Freedom. Where
possible, hyperlinks to the complete reports are provided. The reports
and testimonies are listed by agency, by issue date. The twelve
classified reports are marked with an asterisk (*).
Army Audit Agency
The Army Audit Agency issued 77 audit reports or testimonies
pertaining to Operations Enduring Freedom and Iraqi Freedom. To obtain
copies of the Army Audit Agency reports, visit their Web site at
https://www.aaa.army.mil. The site is available only to military
domains and the Government Accountability Office. Other activities may
request copies of Agency reports by contacting the Army Audit Agency
Audit Coordination and Followup Office at 703-693-5679. Where possible,
hyperlinks to the complete Army Audit Agency reports are provided
below.
Army Audit Agency Report No. A-2007-0204-ALL, ``Audit of Defense
Base Act Insurance for the Logistics Civil Augmentation Program, Audit
of Logistics Civil Augmentation Program Operations in Support of
Operation Iraqi Freedom,'' September 28, 2007
Army Audit Agency Report No. A-2007-0215-FFS, ``Contractor Support
and Mobilization Stations--Ft. Bragg, North Carolina,'' September 18,
2007
Army Audit Agency Report No. A-2007-0210-FFS, ``Contractor Support
and Mobilization Stations--Ft. Carson, Colorado,'' September 10, 2007
Army Audit Agency Report No. A-2007-0191-FFM, ``Agreed-Upon
Procedures Attestation of the Results of the 2007 National Defense
Authorization Act Audit on Wounded in Action Soldier Pay Accounts,
Attestation Report,'' August 15, 2007
Army Audit Agency Report No. A-2007-0184-FFM, ``Civilian Pay in
Support of Operation Enduring Freedom and Operation Iraqi Freedom,''
August 15, 2007
Army Audit Agency Report No. A-2007-0190-ALM, ``Resource
Requirements for Reset (FOUO),'' August 8, 2007
Army Audit Agency Report No. A-2007-0149-ALL, ``Audit of the Army's
Theater Linguist Program in Afghanistan, Operation Enduring Freedom,''
July 23, 2007
Army Audit Agency Report No. A-2007-0152-ALR, Time-Sensitive
Report, Audit of Container Detention Billing for Global War on
Terrorism, June 14, 2007
Army Audit Agency Report No. A-2007-0131-ALA, ``Rapid Equipping
Force Initiative,'' May 18, 2007
Army Audit Agency Report No. A-2007-0126-ALL, ``Asset Visibility in
Support of Operation Iraqi Freedom and Operation Enduring Freedom--Army
Reserve Equipment,'' May 9, 2007
Army Audit Agency Report No. A-2007-0104-ALL, ``Summary Audit
Report on the Cost-Effectiveness of Transitioning Work Under the
Logistics Civil Augmentation Program Contingency Contract to
Sustainment Contracting, Audit of Logistics Civil Augmentation Program
Operations in Support of Operation Iraqi Freedom,'' March 23, 2007
Army Audit Agency Report No. A-2007-0093-ALL, ``Audit of the Cost-
Effectiveness of Transitioning Selected Functions Performed at the
Theater Distribution Center (Task Order 87) From Contingency to
Sustainment Contracting, Audit of Logistics Civil Augmentation Program
Operations in Support of Operation Iraqi Freedom,'' March 9, 2007
Army Audit Agency Report No. A-2007-0088-ALE, ``Reset of Aviation
Assets; U.S. Army Aviation and Missile Life Cycle Management Command
(FOUO),'' August 8, 2007
Army Audit Agency Report No. A-2007-0075-ALL, ``Asset Visibility in
Support of Operation Iraqi Freedom and Operation Enduring Freedom,''
February 15, 2007
Army Audit Agency Report No. A-2007-0071-ALE, ``Reconstitution of
Secondary Items,'' February 12, 2007
Army Audit Agency Report No. A-2007-0061-ALL, ``Asset Visibility in
Support of Operation Iraqi Freedom and Operation Enduring Freedom--Army
Reserve Equipment,'' January 30, 2007
Army Audit Agency Report No. A-2007-0053-ALE, ``Reconstitution--
Supply Management Operations in U.S. Army, Europe and Seventh Army,''
January 19, 2007
Army Audit Agency Report No. A-2007-0052-ALE, ``Reconstitution--
Direct Support and Below Maintenance in U.S. Army, Europe and Seventh
Army,'' January 17, 2007
Army Audit Agency Report No. A-2007-0040-ALL, ``Audit of Procedures
for Managing the Overaged Reparable Items List at the Tactical Wheeled
Vehicle Refurbished Center,'' January 16, 2007
Army Audit Agency Report No. A-2007-0039-FFP, ``Global War on
Terrorism Supplemental Funding,'' December 21, 2006
Army Audit Agency Report No. A-2007-0019-ALL, ``Distribution
Functions, Audit of Logistics Civil Augmentation Program Operations in
Support of Operation Iraqi Freedom,'' November 21, 2006
Army Audit Agency Report No. A-2007-0011-ALL, ``Nontactical Vehicle
Usage in the Iraq Area of Operations, Audit of Logistics Civil
Augmentation Program Operations in Support of Operation Iraqi
Freedom,'' November 16, 2007
Army Audit Agency Report No. A-2007-0015-ALE, ``Maintenance of Left
Behind Equipment in U.S. Army, Europe and Seventh Army,'' October 31,
2006
Army Audit Agency Report No. A-2007-0005-FFP, ``Audit of Logistics
Support for Operation Enduring Freedom--Philippines,'' October 12, 2006
Army Audit Agency Report No. A-2006-0254-ALL, ``Audit of Procedures
for Transferring Property During the Base Closure Process in Support of
Operation Iraqi Freedom,'' September 29, 2006
Army Audit Agency Report No. A-2006-0237-ALE, ``Funding Reset of
Aviation Assets in Europe,'' September 29, 2006
Army Audit Agency Report No. A-2006-0253-ALL, ``Cost-Effectiveness
of Transitioning the General Support Supply Activity (Task Order 87)
From Contingency to Sustainment Contracting, Audit of Logistics Civil
Augmentation Program Operations in Support of Operation Iraqi
Freedom,'' September 28, 2006
Army Audit Agency Report No. A-2006-0246-ALL, ``Cost-Effectiveness
of Transitioning Task Order 66--Kuwait Naval Base Camp Support From
Contingency to Sustainment contracting, Audit of Logistics Civil
Augmentation Program Operations In Support of Operation Iraqi Freedom--
Phase II (Kuwait),'' September 27, 2006
Army Audit Agency Report No. A-2006-0233-ALL, ``Clothing Issue
Facilities, Audit of Logistics Civil Augmentation Program Operations in
Support of Operation Iraqi Freedom,'' September 22, 2006
Army Audit Agency Report No. A-2006-0188-ALL, ``Asset Visibility in
Support of Operation Iraqi Freedom and Operation Enduring Freedom,''
August 11, 2006
Army Audit Agency Report No. A-2006-0168-ALL, ``Report on the
Subsistence Prime Vendor Contract, Audit of Logistics Civil
Augmentation Program Operations in Support of Operation Iraqi
Freedom,'' August 4, 2006
Army Audit Agency Report No. A-2006-0158-ALL, ``Report on Class IX
(Aviation) Warehouse Staffing, Camp Anaconda, Audit of Logistics Civil
Augmentation Program Operations in Support of Operation Iraqi
Freedom,'' July 11, 2006
Army Audit Agency Report No. A-2006-0136-ALL, ``Management Controls
Over Offline Purchases,'' June 13, 2006
Army Audit Agency Report No. A-2006-0077-ALE, ``Reconstitution--
General Support Maintenance Within U.S. Army, Europe and Seventh
Army,'' June 2, 2006
Army Audit Agency Report No. A-2006-0099-ALL, ``Audit of Program
Management in the Iraq Area of Operations, Audit of Logistics Civil
Augmentation Program Operations in Support of Operation Iraqi
Freedom,'' April 25, 2006
Army Audit Agency Report No. A-2006-0067-FFM, ``Military Pay for
Operation Enduring Freedom/Operation Iraqi Freedom--Active Component,''
April 5, 2006
Army Audit Agency Report No. A-2006-0091-ALL, ``Audit of Management
of the Theater Transportation Mission (Task Order 88), Audit of
Logistics Civil Augmentation Program Operations in Support of Operation
Iraqi Freedom,'' April 4, 2006
Army Audit Agency Report No. A-2006-0090-ALE, ``Followup Audit II
of the Commanders' Emergency Response Program and Quick Response
Fund,'' March 31, 2006
Army Audit Agency Report No. A-2006-0083-ALL, ``Audit of Retrograde
Operations (Task Order 87), Audit of Logistics Civil Augmentation
Program Operations in Support of Operation Iraqi Freedom,'' March 21,
2006
Army Audit Agency Report No. A-2006-0081-ALL, ``Audit of
Unliquidated Obligations, Audit of Logistics Civil Augmentation Program
Operations in Support of Operation Iraqi Freedom,'' March 17, 2006
Army Audit Agency Report No. A-2006-0073-ALL, ``Management of Force
Provider Modules: Logistics Civil Augmentation Program,'' March 20,
2006
Army Audit Agency Report No. A-2006-0046-ALA, ``Fund Accountability
for Fiscal Year 2004 Iraq Relief and Reconstruction Funds: Project and
Contracting Office, Washington, DC,'' January 31, 2006
Army Audit Agency Report No. A-2006-0047-ALL, ``Base Closure
Process in the Iraq Area of Operations,'' January 11, 2006
Army Audit Agency Report No. A-2006-0038-FFM, ``Reserve Component
Pay--OIF/OEF (FOUO),'' May 25, 2006
Army Audit Agency Report No. A-2006-0022-ALL, ``Logistics Civil
Augmentation Program: U.S. Army Materiel Command,'' November 28, 2005
Army Audit Agency Report No. A-2006-0018-ALL, ``Logistics Civil
Augmentation Program Support Unit Training: Logistics Civil
Augmentation Program Support Unit Headquarters Fort Belvoir,
Virginia,'' November 17, 2005
Army Audit Agency Report No. A-2005-0332-ALE, ``Followup Audit of
the Commanders' Emergency Response Program and Quick Response Fund:
Multi-National Security Transition Command--Iraq,'' September 30, 2005
Army Audit Agency Report No. A-2005-0264-FFP, ``Audit of Military
Pay in Support of Operation Enduring Freedom/Operation Iraqi Freedom,''
August 23, 2005
Army Audit Agency Report No. A-2005-0250-ALE, ``Class IX Spare
Parts--Operation Iraqi Freedom,'' August 15, 2005
Army Audit Agency Report No. A-2005-0197-ALE, ``Asset Visibility
and Container Management--Operation Iraqi Freedom,'' July 5, 2005
Army Audit Agency Report No. A-2005-0206-FFG, ``Validation of the
Statement of Accountability, Attestation of Disbursing Station Symbol
Number 8551: 336th Finance Command, Camp Arifjan, Kuwait,'' June 29,
2005
Army Audit Agency Report No. A-2005-0194-ALA, ``Program Management
in Support of Iraq Reconstruction: Project and Contracting Office,
Washington, DC,'' May 26, 2005
Army Audit Agency Report No. A-2005-0177-ALS, ``Internal Controls
Over Cargo Container Payments: Military Surface Deployment and
Distribution Command,'' May 12, 2005
Army Audit Agency Report No. A-2005-0173-ALE, ``Commanders'
Emergency Response Program and Quick Response Fund: Multi-National
Security Transition Command--Iraq,'' May 2, 2005
Army Audit Agency Report No. A-2005-0172-ALE, ``Functionality of
Logistics Automated Systems--Operation Iraqi Freedom,'' April 27, 2005
Army Audit Agency Report No. A-2005-0168-ALE, ``Theater
Distribution Capabilities--Operation Iraqi Freedom,'' April 26, 2005
Army Audit Agency Report No. A-2005-0078-FFG, ``Coalition
Provisional Authority Travel Process,'' March 2, 2005
Army Audit Agency Report No. A-2005-0095-FFG, ``Vested and Seized
Assets, Operation Iraqi Freedom,'' February 16, 2005
Army Audit Agency Report No. A-2005-0043-ALE, ``Logistics Civil
Augmentation Program in Kuwait,'' November 24, 2004
Army Audit Agency Report No. A-2005-0052-ALS, ``Validation of
Material Weakness In-transit Visibility Policies and Standards,''
November 23, 2004
Army Audit Agency Report No. A-2004-0463-FFC, ``Fiscal Year 2003
Supplemental Funds and Cash Flow,'' August 27, 2004
Army Audit Agency Report No. A-2004-0438-AML, ``Definitization of
Task Orders--Audit of Logistics Civil Augmentation Program,'' August
12, 2004
Army Audit Agency Report No. A-2004-0426-IMU, ``Audit of Base Camp
Commercial Communications,'' July 28, 2004
Army Audit Agency Report No. A-2004-0305-FFG, ``Time Sensitive
Report, Audit of Vested and Seized Assets, Operation Iraqi Freedom,''
May 18, 2004
Army Audit Agency Report No. A-2004-0271-IMU, ``Observations of
Mine Clearing Operations Made at Bagram Airfield, Afghanistan,'' May 3,
2004
Army Audit Agency Report No. A-2004-0243-IMU, ``Operation Enduring
Freedom--Base Camp Construction and Master Plan,'' April 15, 2004
Army Audit Agency Report No. A-2004-0156-IMU, ``Operation Enduring
Freedom--Logistics Civil Augmentation Program,'' February 27, 2004
Army Audit Agency Report No. A-2004-0066-IMU, ``Operation Enduring
Freedom--Management and Use of Shipping Containers,'' December 9, 2003
Army Audit Agency Report No. A-2004-0053-IMU, ``Operation Enduring
Freedom--Management of Class I Supplies,'' December 5, 2003
Army Audit Agency Report No. A-2004-0033-IMU, ``Management of
Resources,'' October 23, 2003
Army Audit Agency Report No. A-2004-0013-IMU, ``Audit of Operation
Enduring Freedom--Class IX Aviation Spare Parts,'' October 7, 2003
Army Audit Agency Report No. A-2003-0400-IMU, ``Audit of Operation
Enduring Freedom--Class IX Aviation Spare Parts,'' August 19, 2003
Army Audit Agency Report No. A-2003-0371-IMU, ``Audit of Operation
Enduring Freedom--Use of Automatic Identification Technology for In-
Transit Visibility,'' July 24, 2003
Army Audit Agency Report No. A-2003-0370-IMU, ``Audit of Operation
Enduring Freedom--In-Transit Visibility,'' July 24, 2003
Army Audit Agency Report No. A-2003-0324-FFF, ``Mobilization and
Pay Record Discrepancies in the Reserve Component,'' June 30, 2003
Army Audit Agency Report No. A-2003-0294-IMU, ``Operation Enduring
Freedom--Property Accountability,'' June 2, 2003
Army Audit Agency Report No. A-2003-01 10, ``Logistics Civil
Augmentation Program, A-2003 -011 0-IMU,'' December 31, 2002
Naval Audit Service
The Naval Audit Service issued one audit report pertaining to
Operations Enduring Freedom and Iraqi Freedom. To obtain copies of
Naval Audit Service reports, please contact the Naval Audit Service
FOIA Office at (202) 433-5757 or by e-mail to [email protected].
Naval Audit Service Report No. N-2005-0018, ``Marine Corps Systems
Command Contracts Supporting Operation Iraqi Freedom,'' December 22,
2004
Air Force Audit Agency
The Air Force Audit Agency issued 15 audit reports or testimonies
pertaining to Operations Enduring Freedom and Iraqi Freedom.
Unrestricted Air Force Audit Agency reports can be accessed at this Web
site address: https://www.afaa.hq.af.mil/afck/plansreports/
reports.shtml. Where possible, hyperlinks to the complete Air Force
Audit Agency reports are provided below. To obtain releasable copies of
Air Force Audit Agency reports, please fax your FOIA request to the Air
Force Audit Agency FOIA Manager at (703) 696-7776 or e-mail to
[email protected].
Air Force Audit Agency Report No. F-2007-0008-FD3000, ``Central
Command Air Forces Deployed Locations Government-Wide Purchase Card
Program,'' June 27, 2007
Air Force Audit Agency Report No. F-2007-0007-FD3000, ``Theater
Battle Management Core System--Unit Level,'' June 8, 2007
Air Force Audit Agency Report No. F-2007-0006-FD4000, ``Civilian
Deployments,'' March 15, 2007
Air Force Audit Agency Report No. F-2007-0006-FD3000, ``Central
Command Air Forces Deployed Locations Ground Fuels Management,'' April
27, 2007
Air Force Audit Agency Report No. F-2007-0005-FD3000, ``Central
Command Air Forces Deployed Locations Services Contract Management,''
April 20, 2007
Air Force Audit Agency Report No. F-2007-0004-FC4000, ``Deployed
Assets,'' January 26, 2007
Air Force Audit Agency Report No. F-2006-0007-FD3000, ``Central
Command Air Forces Deployed Locations Blanket Purchase Agreements,''
August 21, 2006
Air Force Audit Agency Report No. F-2006-0006-FD3000, ``Central
Command Air Forces Deployed Locations Cash Management,'' August 3, 2006
Air Force Audit Agency Report No. F-2005-0058-FDE000, ``Equipment
Accountability 380th Air Expeditionary Wing Al Dhafra AB, United Arab
Emirates,'' June 1, 2005''
Air Force Audit Agency Report No. F-2005-0053-FDE000, ``Blanket
Purchase Agreements 380th Air Expeditionary Wing Al Dhafra AB,'' United
Arab Emirates, June 1, 2005
Air Force Audit Agency Report No. F-2005-0043-FDE000, ``Equipment
Accountability 379th Air Expeditionary Wing Al Udeid AB, Qatar,'' April
1, 2005
Air Force Audit Agency Report No. F-2005-0035-FDE000, ``Blanket
Purchase Agreements 1st Expeditionary Red Horse Group Al Udeid AB,
Qatar,'' March 14, 2005
Air Force Audit Agency Report No. F-2005-0011-FB1000, ``Global War
on Terrorism Funds Management,'' June 20, 2005
Air Force Audit Agency Report No. F-2004-0060-FDE000, ``Small Arms
379th Air Expeditionary Wing Al Udeid AB, Qatar,'' July 1, 2004
Air Force Audit Agency Report No. F-2004-0057-FDE000, ``Blanket
Purchase Agreement 379th Air Expeditionary Wing Al Udeid AB, Qatar,''
June 22, 2004
DOD Inspector General
The DOD OIG issued 28 audit reports or testimonies pertaining to
Operations Enduring Freedom and Iraqi Freedom. To obtain electronic
copies of DOD OIG reports and testimonies, please visit http://
www.dodig.mil/Audit/reports/index.html. Where possible, hyperlinks to
the complete DOD OIG reports are provided below.
DOD OIG Testimony, ``Accountability During Contingency Operations:
Preventing and Fighting Corruption in Contracting and Establishing and
Maintaining Appropriate Controls on Materiel,'' September 19, 2007
DOD OIG Report No. D-2007-107, ``Procurement Policy for Armored
Vehicles,'' June 27, 2007
DOD OIG Report No. D-2007-105, ``United States Transportation
Command Compliance with DOD Policy on the Use of Commercial Sealift,''
June 21, 2007
DOD OIG Testimony, ``Trafficking in Persons,'' June 21, 2007
DOD OIG Testimony ``War Profiteering and Other Contractor Crimes
Committed Overseas,'' June 19, 2007
DOD OIG Report No. D-2007-090, ``Managing Prepositioned Munitions
in the U.S. European Command,'' May 3, 2007
DOD OIG Testimony, ``Investigations by the Office of the Inspector
General, Department of Defense, Concerning the Death of Corporal
Patrick Tillman and the Rescue of Private First Class Jessica Lynch,''
April 24, 2007
DOD OIG Testimony, ``Combating War Profiteering: Are We Doing
Enough to Investigate and Prosecute Contracting Fraud and Abuse in
Iraq,'' March 20, 2007
DOD OIG Report No. D-2007-064, ``Implementation of the Commanders'
Emergency Response Program in Afghanistan,'' February 28, 2007
DOD OIG Report No. D-2007-060, ``Management of the Iraq Security
Forces Fund in Southwest Asia--Phase II,'' February 12, 2007
DOD OIG Report No. D-2007-049, ``Equipment Status of Deployed
Forces Within the U.S. Central Command'' [CLASSIFIED, however, click
here for an unclassified summary] January 25, 2007
DOD OIG Testimony, ``Audit of Reconstruction and Support Activities
in Iraq,'' January 18, 2007
DOD OIG Report No. D-2007-030, ``Management of the Iraq Security
Forces Fund in Southwest Asia--Phase I,'' December 8, 2006
DOD OIG Report No. D-2007-010, ``The Army Small Arms Program that
Relates to Availability, Maintainability, and Reliability of the Small
Arms Support for the Warfighter,'' November 2, 2006
*DOD OIG Report No. D-2007-001, ``Information Operations Activities
in Southwest Asia'' [CLASSIFIED], October 6, 2006
DOD OIG Report No. D-2006-010, ``Contract Surveillance for Service
Contracts,'' October 28, 2005
DOD OIG Testimony ``Iraq Reconstruction, Governance and Security
Oversight,'' October 18, 2005
DOD OIG Report No. D-2006-007, ``Contracts Awarded to Assist the
Global War on Terrorism by the U.S. Army Corps of Engineers,'' October
14, 2005
DOD OIG Report No. D-2005-095, ``DOD Patient Movement System,''
July 27, 2005
DOD OIG Report No. D-2005-045, ``Emergency Supplemental Funding for
the Defense Logistics Agency'' (FOUO), May 9, 2005
DOD OIG Report No. D-2005-053, ``Fiscal Year 2004 Emergency
Supplemental Funding for the Defense Information Systems Agency''
(FOUO), April 29, 2005
DOD OIG Report No. D-2005-024, ``DOD Management of Navy Senior
Enlisted Personnel Assignments in Support of Operation Iraqi Freedom,''
December 15, 2004
*DOD OIG Report No. D-2004-090, ``Defense Hotline Allegations
Concerning C-130 Aircraft Use in the U.S. Central Command Area of
Responsibility'' [CLASSIFIED], June 17, 2004
DOD OIG Report No. D-2004-086, ``Management of Marine Corps
Enlisted Personnel Assignments in Support of Operation Iraqi Freedom,''
June 16, 2004
DOD OIG Report No. D-2004-057, ``Contracts Awarded for the
Coalition Provisional Authority by the Defense Contracting Command--
Washington,'' March 18, 2004
*DOD OIG Report No. D-2004-045, ``Coalition Support Funds''
[CLASSIFIED], January 16, 2004
DOD OIG Report No. D-2003-070, ``DOD Involvement in Export
Enforcement Activities'' (FOUO), March 28, 2003
*DOD OIG Report No. D-2003-028, ``Summary Report on Homeland
Defense, Chemical/Biological Defense, and Other Matters Related to
Counter-Terrorist Military Operations'' [CLASSIFIED], November 25, 2002
Special Inspector General for Iraq Reconstruction
The Special Inspector General for Iraq Reconstruction issued 91
audit reports or testimonies pertaining to Operations Enduring Freedom
and Iraqi Freedom. To obtain electronic copies of the reports or
testimonies, please visit http://www.sigir.mil/reports/audit.aspx.
SIGIR Report No. 07-005, ``Fact Sheet on Sources and Uses of U.S.
Funding Provided in Fiscal Year 2006 for Iraq Relief and
Reconstruction,'' July 27, 2007
SIGIR Report No. 07-008, ``Fact Sheet on the Roles and
Responsibilities of U.S. Government Organizations Conducting IRRF-
funded Reconstruction Activities,'' July 26, 2007
SIGIR Report No. 07-003, ``Cost-to-Complete Reporting for Iraq
Reconstruction Projects,'' July 26, 2007
SIGIR Report No. 07-014, ``Status of the Provincial Reconstruction
Team Program Expansion in Iraq,'' July 25, 2007
SIGIR Report No. 07-004, ``Transferring Iraq Relief and
Reconstruction Fund Capital Projects to the Government of Iraq,'' July
25, 2007
SIGIR Report No. 07-009, ``Review of Bechtel's Spending under Its
Phase II Iraq Reconstruction Contract,'' July 24, 2007
SIGIR Report No. 07-007, ``Status of U.S. Government Anticorruption
Efforts in Iraq,'' July 24, 2007
SIGIR Report No. 07-001, ``Logistics Civil Augmentation Program
Task Order 130: Requirements Validation, Government Oversight, and
Contractor Performance,'' June 22, 2007
SIGIR Report No. 07-012, ``Review of Iraq Relief and Reconstruction
Fund Unmatched Disbursements at the Department of State,'' April 26,
2007
SIGIR Report No. 07-006, ``Management of the Commander's Emergency
Response Program in Iraq for Fiscal Year 2006,'' April 26, 2007
SIGIR Report No. 07-002, ``Status of the Advanced First Responder
Network,'' April 25, 2007
SIGIR Report No. 06-045, ``Status of Ministerial Capacity
Development in Iraq,'' January 30, 2007
SIGIR Report No. 06-044, ``Fact Sheet on Major U.S. Contractors'
Security Costs Related to Iraq Relief and Reconstruction Fund
Contracting Activities,'' January 30, 2007
SIGIR Report No. 06-043, ``Review of Iraq Relief and Reconstruction
Fund Unmatched Disbursements,'' January 30, 2007
SIGIR Report No. 06-040, ``Improper Obligations Using the Iraq
Relief and Reconstruction Fund (IRRF 2),'' January 30, 2007
SIGIR Report No. 06-030, ``Status of Medical Equipment and Other
Non-construction Items Purchased for PHCs,'' January 30, 2007
SIGIR Report No. 06-029, ``Review of DynCorp International, LLC,
Contract Number S LMAQM-04-C-0030, Task Order 0338, for the Iraqi
Police Training Program Support,'' January 30, 2007
SIGIR Report No. 06-039, ``Review of USAID/Bechtel National, Inc.,
Property Management Controls for Contract SPU-C-00-04-00001-00,''
January 29, 2007
SIGIR Report No. 06-036, ``Follow-up on SIGIR Recommendations
Concerning the Development Fund for Iraq (DFI),'' January 29, 2007
SIGIR Report No. 06-034, ``Status of the Provincial Reconstruction
Team Program in Iraq,'' October 29, 2006
SIGIR Report No. 06-033, ``Iraqi Security Forces: Weapons Provided
by the U.S. Department of Defense Using the Iraq Relief and
Reconstruction Fund,'' October 28, 2006
SIGIR Report No. 06-032, ``Iraqi Security Forces: Review of Plans
to Implement Logistics Capabilities,'' October 28, 2006
SIGIR Report No. 06-031, ``Management of the Iraqi Interim
Government Fund,'' October 27, 2006
SIGIR Report No. 06-035, ``Interim Audit Report on Inappropriate
Use of Proprietary Data Markings by the Logistics Civil Augmentation
Program (LOGCAP) Contractor,'' October 26, 2006
SIGIR Report No. 06-028, ``Review of Administrative Task Orders for
Iraq Reconstruction Contracts,'' October 23, 2006
SIGIR Report No. 06-038, ``Unclassified Summary of SIGIR's Review
of Efforts to Increase Iraq's Capability to Protect Its Energy
Infrastructure,'' September 27, 2006
SIGIR Report No. 06-037, ``Interim Audit Report on Improper
Obligations Using the Iraq Relief and Reconstruction Fund (IRRF-2),''
September 22, 2006
SIGIR Report No. 06-026, ``Review of the U.S. Agency for
International Development's Management of the Basrah Children's
Hospital Project,'' July 28, 2006
SIGIR Report No. 06-025, ``Review of the Medical Equipment
Purchased for the Primary Healthcare Centers Associated with Parsons
Global Services, Inc., Contract Number W914NS-04-D-0006,'' July 28,
2006
SIGIR Report No. 06-023, ``Changes in Iraq Relief and
Reconstruction Fund Program Activities--January through March 2006,''
July 28, 2006
SIGIR Report No. 06-021, ``Joint Survey of the U.S. Embassy--Iraq's
Anticorruption Program,'' July 28, 2006
SIGIR Report No. 06-020, ``Review of the Advanced First Responder
Network,'' July 28, 2006
SIGIR Report No. 06-019, ``Review of the Use of Definitization
Requirements for Contracts Supporting Reconstruction in Iraq,'' July
28, 2006
SIGIR Report No. 06-017, ``Transition of Iraq Relief and
Reconstruction Fund Projects to the Iraqi Government,'' July 28, 2006
SIGIR Report No. 06-024, ``Joint Cash Count: Iraq National Weapons
Card Program,'' July 26, 2006
SIGIR Report No. 06-018, ``Survey of the Status of Funding for Iraq
Programs Allocated to the Department of State's Bureau of International
Narcotics and Law Enforcement Affairs as of December 31, 2005,'' July
2006
SIGIR Report No. 06-016, ``Interim Audit Report on the Review of
the Equipment Purchased for Primary Healthcare Centers Associated with
Parsons Global Services, Contract Number W914NS-04-D-0006,'' April 29,
2006
SIGIR Report No. 06-011, ``Management of the Primary Healthcare
Centers Construction Projects,'' April 29, 2006
SIGIR Report No. 06-007, ``U.S. Agency for International
Development: Management of the Transfer of Iraq Relief and
Reconstruction Fund Projects to the Iraqi Government,'' April 29, 2006
SIGIR Report No. 06-006, ``Multi-National Security Transition
Command--Iraq: Management of the Transfer of IRRF-funded Assets to the
Iraqi Government,'' April 29, 2006
SIGIR Report No. 06-015, ``Iraqi Armed Forces Seized Assets Fund:
Review of Contracts and Financial Documents,'' April 28, 2006
SIGIR Report No. 06-013, ``Briefing to the International Advisory
and Monitoring Board for Iraq: Management Controls Over the Development
Fund for Iraq,'' April 28, 2006
SIGIR Report No. 06-012, ``Development Fund for Iraq Cash
Accountability Review: Joint Area Support Group-Central/Falluja,''
April 28, 2006
SIGIR Report No. 06-010, ``Review of the Multi-National Security
Transition Command--Iraq Reconciliation of the Iraqi Armed Forces
Seized Assets Fund,'' April 28, 2006
SIGIR Report No. 06-009, ``Review of Task Force Shield Programs,''
April 28, 2006
SIGIR Report No. 06-008, ``Development Fund for Iraq--Cash
Accountability Review: Joint Area Support Group--Central,'' April 28,
2006
SIGIR Report No. 06-005, ``Follow-up on Recommendations Made in
SIGIR Audit Reports Related to Management and Control of the
Development Fund for Iraq,'' April 28, 2006
SIGIR Report No. 06-004, ``Changes in Iraq Relief and
Reconstruction Fund Program Activities--October through December
2005,'' April 28, 2006
SIGIR Report No. 06-003, ``Review of Data Entry and General
Controls in the Collecting and Reporting of the Iraq Relief and
Reconstruction Fund,'' April 28, 2006
SIGIR Report No. 06-001, ``Management of Iraq Relief and
Reconstruction Fund Program: The Evolution of the Iraq Reconstruction
Management System,'' April 24, 2006
SIGIR Report No. 06-002, ``Prompt Payment Act: Analysis of
Expenditures Made From the Iraq Relief and Reconstruction Fund,''
February 3, 2006
SIGIR Report No. 05-027, ``Methodologies for Reporting Cost-to-
complete Estimates,'' January 27, 2006
SIGIR Report No. 05-026, ``Issues Related to the Use of $50 Million
Appropriation to Support the Management and Reporting of the Iraq
Relief and Reconstruction Fund,'' January 27, 2006
SIGIR Report No. 05-029, ``Challenges Faced in Carrying Out Iraq
Relief and Reconstruction Fund Activities,'' January 26, 2006
SIGIR Report No. 05-028, ``GRD-PCO Management of the Transfer of
IRRF-funded Assets to the Government of Iraq 05-028,'' January 23, 2006
SIGIR Report No. 05-025, ``Management of the Commander's Emergency
Response Program for Fiscal Year 2005,'' January 23, 2006
SIGIR Report No. 05-024, ``Management of the Mansuria Electrical
Reconstruction Project,'' January 23, 2006
SIGIR Report No. 05-023, ``Management of Rapid Regional Response
Program Contracts in South-Central Iraq,'' January 23, 2006
SIGIR Report No. 05-020, ``Management of the Contracts, Grant, and
Micro-Purchases Used To Rehabilitate the Karbala Library,'' October 26,
2005
SIGIR Report No. 05-016, ``Management of the Contracts and Grants
Used To Construct and Operate the Babylon Police Academy,'' October 26,
2005
SIGIR Report No. 05-015, ``Management of Rapid Regional Response
Program Grants in South-Central Iraq,'' October 26, 2005
SIGIR Report No. 05-017, ``Award Fee Process for Contractors
Involved in Iraq Reconstruction,'' October 25, 2005
SIGIR Report No. 05-022, ``Managing Sustainment for Iraq Relief and
Reconstruction Fund Programs,'' October 24, 2005
SIGIR Report No. 05-021, ``Management of Iraq Relief and
Reconstruction Fund Programs--Cost-to-Complete Estimate Reporting,''
October 24, 2005
SIGIR Report No. 05-018, ``Acquisition of Armored Vehicles
Purchased Through Contract W914NS-05-M-1189,'' October 21, 2005
SIGIR Report No. 05-014, ``Management of Commanders' Emergency
Response Program for Fiscal Year 2004,'' October 13, 2005
SIGIR Report No. 05-019, ``Attestation Engagement Concerning the
Award of Non-Competitive Contract DACA63-03-D-0005 to Kellogg, Brown,
and Root Services, Inc.,'' September 30, 2005
SIGIR Report No. 05-013, ``Controls Over Equipment Acquired by
Security Contractors,'' September 9, 2005
SIGIR Report No. 05-011, ``Cost-to-Complete Estimates and Financial
Reporting for the Management of the Iraq Relief and Reconstruction
Fund,'' July 26, 2005
SIGIR Report No. 05-010, ``Interim Briefing to the Project and
Contracting Office--Iraq and the Joint Contracting Command--Iraq on the
Audit of the Award Fee Process,'' July 26, 2005
SIGIR Report No. 05-012, ``Policies and Procedures Used for Iraq
Relief and Reconstruction Fund Project Management Construction Quality
Assurance,'' July 22, 2005
SIGIR Report No. 05-009, ``Reconciliation of Reporting Differences
of the Source of Funds Used on Contracts After June 28, 2004,'' July 8,
2005
SIGIR Report No. 05-008, ``Administration of Contracts Funded by
the Development Fund of Iraq,'' April 30, 2005
SIGIR Report No. 05-007, ``Administration of Iraq Relief and
Reconstruction Fund Contract Files,'' April 30, 2005
SIGIR Report No. 05-006, ``Control of Cash Provided to South-
Central Iraq,'' April 30, 2005
SIGIR Report No. 05-005, ``Compliance with Contract No. W911S0-04-
C-003 Awarded to Aegis Defense Services Limited,'' April 20, 2005
SIGIR Report No. 05-004, ``CORRECTED--Oversight of Funds Provided
to Iraqi Ministries through the National Budget Process,'' January 30,
2005
SIGIR Report No. 05-003, ``Memorandum Report regarding audit of
Task Order 0044 of the Logistics Civil Augmentation Program III
Contract,'' November 23, 2004
SIGIR Report No. 05-002, ``Accountability and Control of Materiel
Assets of the Coalition Provisional Authority in Kuwait,'' October 25,
2004
SIGIR Report No. 05-001, ``Coalition Provisional Authority Control
of Appropriated Funds,'' October 22, 2004
SIGIR Report No. 04-008, ``Coalition Provisional Authority Control
Over Seized and Vested Assets,'' July 30, 2004
SIGIR Report No. 04-009, ``Coalition Provisional Authority
Comptroller Cash Management Controls Over the Development Fund for
Iraq,'' July 28, 2004
SIGIR Report No. 04-004, ``Task Orders Awarded by the Air Force
Center for Environmental Excellence in Support of the Coalition
Provisional Authority,'' July 28, 2004
SIGIR Report No. 04-013, ``Coalition Provisional Authority's
Contracting Processes Leading Up to and Including Contract Award,''
July 27, 2004
SIGIR Report No. 04-011, ``Audit of the Accountability and Control
of Materiel Assets of the Coalition Provisional Authority in Baghdad,''
July 26, 2004
SIGIR Report No. 04-007, ``Oil for Food Cash Controls for the
Office of Project Coordination in Erbil, Iraq,'' July 26, 2004
SIGIR Report No. 04-005, ``Award of Sector Design-Build
Construction Contracts,'' July 23, 2004
SIGIR Report No. 04-006, ``Corporate Governance for Contractors
Performing Iraq Reconstruction Efforts,'' July 21, 2004
SIGIR Report No. 04-003, ``Federal Deployment Center Forward
Operations at the Kuwait Hilton,'' June 25, 2004
SIGIR Report No. 04-002, ``Management of Personnel Assigned to the
Coalition Provisional Authority in Baghdad, Iraq,'' June 25, 2004
SIGIR Report No. 04-001, ``Coalition Provisional Authority
Coordination of Donated Funds,'' June 25, 2004
Government Accountability Office
GAO issued 102 reports or testimonies pertaining to Operations
Enduring Freedom and Iraqi Freedom. To obtain electronic copies of GAO
reports and testimonies, please visit http://www.gao.gov/docsearch/
featured/oif.html. Where possible, hyperlinks to the complete GAO
reports are provided below. To request hardcopies of GAO reports,
please visit http://www.gao.gov/cgi-bin/ordtab.pl, or call 202-512-6000
or fax to 202-512-6061.
GAO Report No. GAO-07-1048R, ``Enemy-Initiated Attacks in Iraq,''
September 28 2007
GAO Report No. GAO-07-814, ``DEFENSE LOGISTICS: Army and Marine
Corps Cannot Be Assured That Equipment Reset Strategies Will Sustain
Equipment Availability While Meeting Ongoing Operational
Requirements,'' September 19, 2007
GAO Report No. GAO-07-1235T, ``DOD CIVILIAN PERSONNEL: Medical
Policies for Deployed DOD Federal Civilians and Associated Compensation
for Those Deployed, September 18, 2007
GAO Report No. GAO-07-1195, ``SECURING, STABILIZING, AND REBUILDING
IRAQ: Iraqi Government Has Not Met Most Legislative, Security, and
Economic Benchmarks,'' September 4, 2007
GAO Report No. GAO-07-839, ``Defense Contract Management: DOD's
Lack of Adherence to Key Contracting Principles on Iraq Oil Contract
Put Government Interests at Risk,'' July 31, 2007
GAO Report No. GAO-07-711, ``STABILIZING IRAQ: DOD Cannot Ensure
That U.S.-Funded Equipment Has Reached Iraqi Security Forces,'' July
31, 2007
*GAO Report No. GAO-07-853C, ``Military Readiness: DOD Needs to Set
Forth an Action Plan, with Measurable Results, to Improve Army and
Marine Corps Unit Readiness,'' July 20, 2007
GAO Report No. GAO-07-836, ``Unmanned Aircraft Systems: Advance
Coordination and Increased Visibility Needed to Optimize
Capabilities,'' July 11, 2007
GAO Report No. GAO-07-759, ``Defense Acquisitions: Analysis of
Processes Used to Evaluate Active Protection Systems'' June 8, 2007
GAO Report No. GAO-07-801SP, ``Securing, Stabilizing, and
Reconstructing Afghanistan: Key Issues for Congressional Oversight,''
May 24, 2007
GAO Report No. GAO-07-699, ``Military Operations: The Department of
Defense's Use of Solatia and Condolence Payments in Iraq and
Afghanistan,'' May 23, 2007
GAO Report No. GAO-07-783R, ``Global War on Terrorism: reported
Obligations for the Department of Defense,'' May 18, 2007
GAO Report No. GAO-07-677, ``Rebuilding Iraq: Integrated Strategic
Plan Needed to Help Restore Iraq's Oil and Electricity Sectors,'' May
15, 2007
GAO Report No. GAO-07-832T, ``Defense Acquisitions: Improved
Management and Oversight needed to Better Control DOD's Acquisition of
Services,'' May 10, 2007
GAO Report No. GAO-07-827T, ``Stabilizing And Rebuilding Iraq:
Coalition Support and International Donor Commitments,'' May 9, 2007
GAO Report No. GAO-07-906R, ``GAO Findings and Recommendations
Regarding DOD and VA Disability Systems,'' May 5, 2007
GAO Report No. GAO-07-662R, ``Defense Logistics: Army and Marine
Corps's Individual Body Armor System Issues,'' April 26, 2007
GAO Report No. GAO-07-525T, ``Stabilizing And Rebuilding Iraq:
Conditions in Iraq Are Conducive to Fraud, Waste and Abuse,'' April 23,
2007
*GAO Report No. GAO-07-377C, ``Defense Management: A Strategic Plan
Is Needed to Guide the Joint Improvised Explosive Device Defeat
Organization's Efforts to Effectively Accomplish Its Mission,'' March
28, 2007
GAO Report No. GAO-07-639T, ``Operation Iraqi Freedom: DOD Should
Apply Lessons Learned Concerning the Need for Security Over
Conventional Munitions Storage Sites to Future Operations Planning,''
March 22, 2007
GAO Report No. GAO-07-637T, ``Stabilizing Iraq: Preliminary
Observations on Budget and Management Challenges of Iraq's Security
Ministries,'' March 22, 2007
GAO Report No. GAO-07-444, ``Operation Iraqi Freedom: DOD Should
Apply Lessons Learned Concerning the Need for Security over
Conventional Munitions Storage Sites to Future Operations Planning,''
March 22, 2006
GAO Report No. GAO-07-612T, ``Stabilizing Iraq: Factors Impeding
the Development of Capable Iraqi Security Forces,'' March 13, 2007
GAO Report No. GAO-07-582T, ``Operation Iraqi Freedom: Preliminary
Observations on Iraqi Security Forces' Logistical Capabilities,'' March
9, 2007
*GAO Report No. GAO-07-120C, ``Operation Iraqi Freedom: Preliminary
Observations on Iraqi Security Forces' Support Capabilities,'' March 7,
2007
GAO Report No. GAO-07-426T, ``Rebuilding Iraq: Reconstruction
Progress Hindered by Contracting, Security, and Capacity Challenges,''
February 15, 2007
GAO Report No. GAO-07-144, ``Defense Logistics: Improved Oversight
and Increased Coordination needed to Ensure Viability of the Army's
Prepositioning Strategy,'' February 15, 2007
GAO Report No. GAO-07-439T, ``Defense Logistics: Preliminary
Observations on the Army's Implementation of Its Equipment Reset
Strategies,'' January 31, 2007
GAO Report No. GAO-07-385T, ``Securing, Stabilizing, And Rebuilding
Iraq: GAO Audit Approach and Findings,'' January 18, 2007
GAO Report No. GAO-07-308SP, ``Securing Stabilizing, And Rebuilding
Iraq: Key Issues for Congressional Oversight,'' January 9, 2007
*GAO Report No. GAO-07-71C, ``Operation Iraqi Freedom: DOD Should
Apply Lessons Learned Concerning the Need for Security Over
Conventional Munitions Storage Sites to Future Operations Planning,''
December 20, 2006
GAO Report No. GAO-07-145, ``Military Operations: High-Level DOD
Action needed to Address Long-standing Problems with Management and
Oversight of Contractors Supporting Deployed Forces,'' December 18,
2006
GAO Report No. GAO-07-30R, ``Rebuilding Iraq--Status of DOD's
Reconstruction Program,'' December 15, 2006
GAO Report No. GAO-07-78, ``Afghanistan Drug Control: Despite
Improved Efforts, Deterioration Security Threatens Success of U.S.
Goals,'' November 15, 2006
GAO Report No. GAO-07-76, ``Global War On Terrorism: Fiscal Year
2006 Obligation Rates Are Within Funding Levels and Significant
Multiyear Procurement Funds Will Likely Remain Available for Use in
Fiscal Year 2007,'' November 13, 2006
GAO Report No. GAO-07-40, ``Rebuilding Iraq: Status of Competition
for Iraq Reconstruction Contracts,'' October 6, 2006
GAO Report No. GAO-06-1085, ``DOD Civilian Personnel: Greater
Oversight and Quality Assurance Needed to Ensure Force Health
Protection and Surveillance for Those Deployed,'' September 29, 2006
GAO Report No. GAO-06-1130T, ``Rebuilding Iraq: Continued Progress
Requires Overcoming Contract Management Challenges,'' September 28,
2006
GAO Report No. GAO-06-1132, ``Iraq Contract Costs: DOD
Consideration of Defense Contract Audit Agency's Findings,'' September
25, 2006
GAO Report No. GAO-06-1094T, ``Stabilizing Iraq: An Assessment of
the Security Situation,'' September 11, 2006
GAO Report No. GAO-06-928R, ``Defense Logistics: Changes to Stryker
Vehicle Maintenance Support Should Identify Strategies for Addressing
Implementation Challenges,'' September 5, 2006
*GAO Report No. GAO-06-673C, ``Briefing on Iraq Stabilization,''
July 27, 2006
GAO Report No. GAO-06-885T, ``Global War On Terrorism: Observations
on Funding, Costs, and Future Commitments,'' July 18, 2006
GAO Report No. GAO-06-953T, ``Rebuilding Iraq: More Comprehensive
National Strategy Needed to help Achieve U.S. Goals and Overcome
Challenges,'' July 11, 2006
GAO Report No. GAO-06-788, ``Rebuilding Iraq: More Comprehensive
National Strategy Needed to Help Achieve U.S. Goals,'' July 11, 2006
GAO Report No. GAO-06-274, ``Defense Logistics: Lack of
Synchronized Approach between the Marine Corps and Army Affected the
Timely Production and Installation of Marine Corps Truck Armor,'' June
22, 2006
GAO Report No. GAO-06-865T, ``Rebuilding Iraq: Actions Still Needed
to Improve the Use of Private Security Providers,'' June 13, 2006
GAO Report No. GAO-06-397, ``Post-Traumatic Stress Disorder: DOD
Needs to Identify the Factors Its Providers Use to make Mental Health
Evaluation Referrals for Service Members,'' May 11, 2006
GAO Report No. GAO-06-711T, ``United Nations: Oil for Food Program
Provides lessons for Future Sanctions and Ongoing Reform,'' May 2, 2006
GAO Report No. GAO-06-697T, ``Rebuilding Iraq: Governance,
Security, Reconstruction, and Financing Challenges,'' April 25, 2006
GAO Report No. GAO-06-330, ``United Nations: Lessons Learned from
Oil for Food Program Indicate the Need to Strengthen U.N. Internal
Controls and Oversight Activities,'' April 25, 2006
GAO Report No. GAO-06-604T, ``Defense Logistics: Preliminary
Observations on Equipment Reset Challenges and Issues for the Army and
Marine Corps,'' March 30, 2006
GAO Report No. GAO-06-160, ``Defense Logistics: Several Factors
Limited the Production and Installation of Army Truck Armor during
Current Wartime Operations,'' March 22, 2006
GAO Report No. GAO-06-428T, ``Rebuilding Iraq: Stabilization,
Reconstruction, and Financing Challenges,'' February 8, 2006
GAO Report No. GAO-06-134, ``Military Personnel: DOD Needs Action
Plan to Address Enlisted Personnel Recruitment and Retention
Challenges,'' November 17, 2005
*GAO Report No. GAO-06-217C, ``Rebuilding Iraq: DOD reports Should
Link Economic, Governance, and Security Indicators to Conditions for
Stabilizing Iraq,'' October 31, 2005
*GAO Report No. GAO-06-152C, ``Rebuilding Iraq: DOD Reports Should
Link Economic, Governance, and Security Indicators to Conditions for
Stabilizing Iraq,'' October 31, 2005
GAO Report No. GAO-06-179T, ``Rebuilding Iraq: Enhancing Security,
Measuring Program Results, and Maintaining Infrastructure Are Necessary
to Make Significant and Sustainable Progress,'' October 18, 2005
GAO Report No. GAO-05-819, ``Defense Transportation: Air Mobility
Command Needs to Collect and Analyze Better Data to Assess Aircraft
Utilization,'' September 29, 2005
GAO Report No. GAO-05-882, ``Global War On Terrorism: DOD Needs to
Improve the Reliability of Cost Data and Provide Additional Guidance to
Control Costs,'' September 21, 2005
GAO Report No. GAO-05-932R, ``Rebuilding Iraq: U.S. Assistance for
the January 2005 Elections,'' September 7, 2005
GAO Report No. GAO-05-872, ``Rebuilding Iraq: U.S. Water and
Sanitation Efforts Need Improved Measures for Assessing Impact and
Sustained Resources for Maintaining Facilities,'' September 7, 2005
GAO Report No. GAO-05-672, ``Radiological Sources In Iraq: DOD
Should Evaluate its Source Recovery Effort and Apply Lessons Learned to
Future Recovery Missions,'' September 7, 2005
GAO Report No. GAO-05-775, ``Defense Logistics: DOD Has Begun to
Improve Supply Distribution Operations, but Further Actions Are Needed
to Sustain These Efforts,'' August 11, 2005
GAO Report No. GAO-05-876, ``Rebuilding Iraq: Status of Funding and
Reconstruction Efforts,'' July 28, 2005
GAO Report No. GAO-05-742, ``Afghanistan Reconstruction: Despite
Some Progress, Deterioration Security and Other Obstacles Continue to
Threaten Achievement of U.S. Goals,'' July 28, 2005
GAO Report No. GAO-05-737, ``Rebuilding Iraq: Actions needed to
Improve Use of Private Security Providers,'' July 28, 2005
GAO Report No. GAO-05-575, ``Afghanistan Security: Efforts to
Establish Army and Police Have Made Progress, but Future Plans need to
be Better Defined,'' June 30, 2005
GAO Report No. GAO-05-293, ``Defense Management: Processes to
Estimate and Track Equipment Reconstitution Costs Can Be Improved,''
May 5, 2005
GAO Report No. GAO-05-280R, ``Defense Base Act Insurance: Review
Needed of Cost and Implementation Issues,'' April 29, 2005
GAO Report No. GAO-05-201, ``Interagency Contraction: Problems with
DOD's and Interior's Orders to Support Military Operations,'' April 29,
2005
GAO Report No. GAO-05-275, ``Defense Logistics: Actions Needed to
Improve the Availability of Critical Items during Current and Future
Operations,'' April 8, 2005
GAO Report No. GAO-05-328, ``Defense Logistics: High-Level DOD
Coordination Is Needed to Further Improve the Management of the Army's
LOGCAP Contract,'' March 21, 2005
GAO Report No. GAO-05-431T, ``Rebuilding Iraq: Preliminary
Observations on Challenges in Transferring Security Responsibilities to
Iraqi Military and Police,'' March 14, 2005
GAO Report No. GAO-05-392T, ``United Nations: Sustained Oversight
Is Needed for Reforms to Achieve Lasting Results,'' March 2, 2005
GAO Report No. GAO-05-125, ``Military Pay: Gaps in Pay and Benefits
Create Financial hardships for Injured Army National Guard and Reserve
Soldiers,'' February 17, 2005
GAO Report No. GAO-05-346T, ``United Nations: Oil for Food Program
Audits,'' February 15, 2005
GAO Report No. GAO-05-79, ``Army National Guard: Inefficient,
Error-Prone Process Results in Travel Reimbursement Problems for
Mobilized Soldiers,'' January 31, 2005
GAO Report No. GAO-05-120, ``Defense Health Care: Force Health
Protection and Surveillance Policy Compliance Was Mixed, but Appears
Better for Recent Deployments,'' November 12, 2004
GAO Report No. GAO-04-1031, ``Military Personnel: DOD Needs to
Address Long-term Reserve Force Availability and Related Mobilization
and Demobilization Issues,'' September 15, 2004
GAO Report No. GAO-04-1006, ``Foreign Regimes' Assets: The United
States Faces Challenges in Recovering Assets, but Has Mechanisms That
Could Guide Future Efforts,'' September 14, 2004
GAO Report No. GAO-04-915, ``Military Operations: Fiscal Year 2004
Costs for the Global War on Terrorism Will Exceed Supplemental,
Requiring DOD to Shift Funds from Other Uses,'' July 21, 2004
GAO Report No. GAO-04-854, ``Military Operations: DOD's Extensive
Use of Logistics Support Contracts Requires Strengthened Oversight,''
July 19, 2004
GAO Report No. GAO-04-609, ``Defense Infrastructure: Factors
Affecting U.S. Infrastructure Costs Overseas and the Development of
Comprehensive Master Plans,'' July 15, 2004
GAO Report No. GAO-04-953T, ``United Nations: Observations on the
Oil for Food Program and Areas for Further Investigation,'' July 8,
2004
GAO Report No. GAO-04-902R, ``Rebuilding Iraq: Resource, Security,
Governance, Essential, Services, and Oversight Issues,'' June 28, 2004
GAO Report No. GAO-04-880T, ``United Nations: Observations on the
Oil for Food Program and Iraq's Food Security,'' June 16, 2004
GAO Report No. GAO-04-869T, ``Contract Management: Contracting for
Iraq Reconstruction and for Global Logistics Support,'' June 15, 2004
GAO Report No. GAO-04-403, ``Afghanistan Reconstructions:
Deteriorating Security and Limited Resources Have Impeded Progress;
Improvements in U.S. Strategy Needed,'' June 2, 2004
GAO Report No. GAO-04-605, ``Rebuilding Iraq: Fiscal Year 2003
Contract Award Procedures and Management Challenges,'' June 1, 2004
GAO Report No. GAO-04-746R, ``Iraq's Transitional Law,'' May 25,
2004
GAO Report No. GAO-04-668, ``Military Operations: DOD's Fiscal Year
2003 Funding and reported Obligations in Support of the Global War on
Terrorism,'' May 13, 2004
GAO Report No. GAO-04-559, ``State Department: Issues Affecting
Funding of Iraqi National Congress Support Foundation,'' April 30, 2004
GAO Report No. GAO-04-730T, ``United Nations: Observations on the
Management and Oversight of the Oil for Food Program,'' April 28, 2004
GAO Report No. GAO-04-484, ``Operation Iraqi Freedom: Long-standing
Problems Hampering Mail Delivery need to be Resolved,'' April 14, 2004
GAO Report No. GAO-04-651T, ``United Nations: Observations on the
Oil for Food Program,'' April 7, 2004
GAO Report No. GAO-04-562T, ``Military Propositioning Observations
on Army and Marine Corps Programs During Operation Iraqi Freedom and
Beyond,'' March 24, 2004
GAO Report No. GAO-04-579T, ``Recovering Iraq's Assets: Preliminary
Observations on U.S. Efforts and Challenges,'' March 18, 2004
GAO Report No. GAO-04-305R, ``Defense Logistics: Preliminary
Observations on the Effectiveness of Logistics Activities during
Operation Iraqi Freedom,'' December 18, 2003
GAO Report No. GAO-03-1088, ``Military Operations: Fiscal Year 2003
Obligations Are Substantial, but May Result in Less Obligations Than
Expected,'' September 17, 2003
GAO Report No. GAO-03-980T, ``Foreign Assistance: Observations on
Post-Conflict Assistance in Bosnia, Kosovo, and Afghanistan,'' July 18,
2003
GAO Report No. GAO-03-792R, ``Rebuilding Iraq,'' May 15, 2003
Appendix C. Definitions Used for Categorization of OEF and OIF Reports
and Testimonies Fiscal Year 2003 Through Fiscal Year 2007
To categorize the 302 OEF and OIF reports and testimonies, we
developed definitions to categorize the causes that resulted in the
recommendations issued by the Defense oversight community and GAO. We
provided our definitions to the other oversight agencies when we vetted
our initial categorizations. Our goal was to create categories and
definitions that were simple and easily understood to provide common
reference points as follows:
Contract Management
Administration.--This category includes recommendations that
address oversight responsibilities, including Quality Assurance,
Performance Monitoring, and Results, to ensure that the contractor
provides the requirements requested. We consider this category as
Government specific function.
Policy and Procedure.--This category includes recommendations that
address implementing guidance, policy, and procedures for future
contracts and is not limited to one specific contract.
Sourcing.--This category includes recommendations that address
improving the negotiation and documentation of actions between the
Government (customer) and the contractor (developer). This function
involves both Government and contractor.
Requirements.--This category includes recommendations that address
the development of requirements (what is needed by the customer). This
function is Government specific with no contractor involvement in
developing the requirements.
Other.--This category includes recommendations that are more
general and address a more strategic approach to resolving systemic
challenges.
Logistics
Policy and Procedures.--This category includes the recommendations
made to improve the general goals and directives of a program, process,
or plan including the steps, activities, and decisions made to
accomplish those goals and directives.
Accountability.--This category includes recommendations made to
improve establishing or maintaining records to identify, acquire,
account for, control, store, or properly dispose of assets; including
whether the cause addressed equipment on hand or on order, the status
of the equipment, and the location of the equipment.
Sustainability.--This category includes recommendations to ensure
maintaining a certain level or state of a process, program, or
activity. It includes what needs to be done in order to keep a process,
program, or activity running smoothly and efficiently.
Requirements.--This category includes recommendations made in order
to improve determining the needs or conditions to meet a specific
outcome. This includes required equipment, storage facilities,
supplies, and personnel.
Other.--This category includes causes categorized as Other. (1) The
causes do not specifically relate to Policy and Procedures,
Accountability, Sustainability, or Requirements. (2) Many of the causes
were very specific to a certain program and could not be applied to any
other program. (3) Some of the recommendations were not tied to a
specific cause, so those recommendations were categorized as Other.
Financial Management
Overall Financial Management.--This category includes overall
financial management. The cause addressed by the recommendation covers
the category of financial management but the cause was not specific
enough to be classified in one of the other categories.
Internal Controls.--This category addresses anything that could
involve the lack of checks and balances in the system. The Yellow Book
describes internal controls as ``The extent to which internal controls
that are significant to the audit depend on the reliability of
information processed or generated by information systems.'' We used
this Yellow Book definition to guide our judgment.
Obligations.--This category addresses a cause that is directly
related to obligations or involved obligation type challenges, for
example, if a report spoke about command not doing a sufficient job of
planning for a known expenditure. We considered information from the
DOD Comptrollers office as it pertained to the Planning, Programming,
Budgeting, and Execution system. In particular, the Budgeting phase
(formulation and justification) as it provides a platform for a
detailed review of a program's pricing, phasing, and overall capability
to be executed on time and within budget. The budgeting process
addresses the years to be justified in the President's budget
(including the current and upcoming execution years) and provides a
forum to develop the Secretary's budget position.
Execution.--This category addresses the execution phase and
everything involved with the actual spending of funds.
Other
Policy and Procedures.--This category addresses a cause related to
general goals and directives of a program, process, or plan including
the steps, activities, and decisions made to accomplish those goals and
directives.
Planning.--This category includes a cause if it addressed providing
a framework for developing anything; including processes for setting
goals, developing strategies, and outlining tasks and schedules to
accomplish a goal.
Accountability.--This category includes a cause that addressed
establishing or maintaining records to identify, acquire, account for,
control, store, or properly dispose of assets; including if the cause
talked about equipment on hand or on order, the status of the
equipment, and the location of the equipment.
Other.--This category includes causes that do not specifically
relate to policy and procedures, planning, or accountability and causes
that were very specific to a certain program and could not be applied
to any other program.
TEAM MEMBERS
The Department of Defense Office of the Deputy Inspector General
for Auditing prepared this report. The following personnel of the
Department of Defense Office of Inspector General significantly
contributed to this report: Joseph S. Dobish, Michael J. Guagliano,
Cathy M. Mitchell, William G. Vannurden.
Additional contributors within the DOD OIG were: Jack L. Armstrong,
Donald. A. Bloomer, Bruce A. Burton, Erin S.-E. Hart, James L.
Kornides, Andrew L. McRell, Craig W. Michaels, Timothy E. Moore, Monica
Noell, David K. Steensma, Richard B. Vasquez.
Members from Southwest Asia Joint Planning Group also contributed
to this summary report: Mr. J.T. Mickey McDermott, Chair--Joint
Planning Group, Southwest Asia/GWOT; Mr. Joseph P. Mizzoni, U.S. Army
Audit Agency; Mr. John D. Lombardo, U.S. Army Audit Agency; Mr. James
Durbin, Naval Audit Service; Mr. Charles E. Atkinson, Jr., U.S. Air
Force Audit Agency; Mr. Joe Garcia, Defense Contract Audit Agency; Mr.
Greg Schmalfeldt, Defense Finance and Accounting Service.
Chairman Byrd. General Griffin.
STATEMENT OF GENERAL BENJAMIN S. GRIFFIN, COMMANDING
GENERAL, U.S. ARMY MATERIEL COMMAND
ACCOMPANIED BY:
JEFFREY PARSONS, EXECUTIVE DIRECTOR, U.S. ARMY MATERIEL COMMAND
LEE THOMPSON, PROGRAM DIRECTOR, LOGISTICS CIVIL AUGMENTATION
PROGRAM, U.S. ARMY SUSTAINMENT COMMAND
General Griffin. Yes, sir.
Chairman Byrd, Senator Cochran, and distinguished members
of the committee, thank you for the opportunity to be here
today with our Deputy Secretary of Defense, The Honorable
Gordon England, and other key members of the Department of
Defense, to discuss the adequacy of Defense contract oversight
for Operation Iraqi Freedom.
As you know, our Nation has been at war for over 6 years.
The length of the conflict and the operational requirements for
our forces have created significant challenges in sustaining
our warfighters.
I will state up front that we are not where we want to be
today, in terms of contracting, but we have made significant
progress.
We are committed to improve our ability and capability to
provide not only first-class expeditionary contracting, but
also to implement improvements across the entire contracting
system.
I want to assure you that we are continuously improving our
ability to meet the needs of our troops in conflict and are
implementing many of the recommendations identified by the
Gansler Commission and the Army Contracting Task Force.
As the commanding general of the U.S. Army Materiel Command
(AMC), my number one priority is support to soldiers, sailors,
airmen, and marines who are warfighters. In pursuit of that
goal, our contracting employees play a critical role in
supporting our Nation at war. We have never fought an extended
conflict that required such extensive reliance on contractor
support. This is not to say that we have not had contractors
since the Revolutionary War. We have extensive contract support
inside of the United States and overseas supporting the global
war on terrorism--food, maintenance, and security, a couple of
things you mentioned, Mr. Chairman. These dedicated people are
working 24/7 in Iraq and Afghanistan. Many have been severely
wounded, and some have made the ultimate sacrifice in service
to our Nation.
We are aggressively moving out to implement many of the
Gansler Commission's recommendations. AMC's most significant
action is the recent establishment of the Army Contracting
Command, which we stood up in March. And the new Director sits
to my left. The Army Contracting Command includes two
subordinate commands, a deployable, one-star-level
Expeditionary Contracting Command focused on support to
forward-deployed forces, and a one-star-level Installation
Contracting Command focused on support for Conus installations
and other missions support.
The Expeditionary Contracting Command will include our
contracting support brigades, contingency contracting
battalions, senior contingency contracting teams, and
contingency contracting teams. Our five major contracting
centers that support our Army Materiel Commands, Life Cycle
Management Commands, and other major subordinate commands will
also be realigned under this new command. All of this is
designed to improve contracting, Army-wide.
Additionally, Army Materiel Command will realign the
Logistics Civil Augmentation Program (LOGCAP) office as a
direct-report to the Army Contracting Command executive
director.
Today, the Army Sustainment Command has the following
structure in place to provide management and overwatch of
LOGCAP in Iraq and Afghanistan: a colonel in Iraq, a colonel in
Afghanistan, and a GS-15 on the ground in Kuwait, leading over
100 personnel in the oversight of LOGCAP. In addition, the
Defense Contracts Management Agency (DCMA) has 97 personnel,
primarily in Iraq and Afghanistan, performing LOGCAP contract
management. It has appointed over 500 contracting officer
representatives in Iraq and Afghanistan from operational
supporting units to assist in day-to-day oversight of
contractor performance.
We also assigned two senior executive service personnel to
further enhance our leadership and management of LOGCAP. One is
responsible for LOGCAP program management--Mr. Lee Thompson,
who sits to Mr. Parsons's left--and one is responsible for the
acquisition center that awards and manages the LOGCAP contract.
The alignment of the LOGCAP program under the new Army
Contracting Command places emphasis on a single advocate with
accountability and responsibility for contracting in theater
and for expanding our surge and contingency capability. I think
everybody here understands you need accountability,
responsibility, and authority.
Here with me today are Mr. Jeff Parsons, the executive
director of the newly established Army Contracting Command, and
Mr. Lee Thompson, the program director for the Logistics Civil
Augmentation Program, LOGCAP. These gentlemen are an integral
part of Army Materiel Command's contracting role in Iraq.
We are also working with the Department of the Army and the
Secretary of Defense in the implementation of other Gansler
Commission recommendations to improve doctrine, training, and
workforce development. To that end, we have developed a number
of training initiatives to better prepare our military and
civilian contract personnel, prior to their deployment, to
support the Joint Contracting Command in Iraq and Afghanistan.
We are capturing lessons learned as the soldiers and civilians
return from deployments in Iraq and Afghanistan, and are using
this feedback to improve our training.
I appreciate the Senate's support of our Army's efforts to
provide our Nation's warfighters and allies with quality
products and services. We need your support for our efforts to
increase the size, the structure, and the training of our
Government contracting workforce, both military and civilian,
as outlined in my written statement, which I respectfully
request be submitted for the record.
You have my commitment that we will continue to pursue
improvements in our contracting process and workforce. Our
warfighters and our taxpayers deserve no less.
I look forward to your questions.
Thank you.
Chairman Byrd. Without objection, the item will be included
in the record.
General Griffin. Thank you, sir.
[The statement follows:]
Prepared Statement of General Benjamin S. Griffin
Mr. Chairman, Senator Cochran, and members of the Committee, I
thank you for the opportunity to appear before you today to discuss the
adequacy of defense contract oversight for Operation Iraqi Freedom. To
do this, I will describe how AMC is addressing the issues identified by
the Commission on Army Acquisition and Program Management in
Expeditionary Operations, which released its final report, ``Urgent
Reform Required: Army Expeditionary Contracting,'' on October 31, 2007;
and by the Army Contracting Task Force which completed its work in
March 2008.
Before I begin, however, I would like to ensure that the Committee
understands the role of the Army Materiel Command's contract oversight
and authority in U.S. Central Command's theater of operations. As shown
in Table 1, Command authority flows from the Central Command (CENTCOM)
Commander to the Multi National Force--Iraq (MNF-I) Commander, to the
Joint Contracting Command Iraq-Afghanistan (JCC-I/A) Commander.
Contracting authority flows from the Secretary of the Army to the
Assistant Secretary of the Army, Acquisition, Logistics, and
Technology, designated as the Army Senior Procurement Executive to the
Head of the Contracting Activity.
The Army Heads of Contracting Activities engaged in the writing and
the execution of contracts in support of Operation Iraqi Freedom: the
Joint Contracting Command Iraq-Afghanistan (JCC-I/A); the Army Materiel
Command's Life Cycle Management Commands; the Army Materiel Command's
Army Sustainment Command; and the U.S. Army Corps of Engineers. Today,
neither the Army Materiel Command nor the Army Contracting Command has
contracting authority for any of these contracting activities.
Army Materiel Command's engagement in the CENTCOM theater of
contracting operations primarily consists of the management and
execution of the Logistics Civil Augmentation Program (LOGCAP) III
contract, managed by the Army Sustainment Command located at Rock
Island Arsenal, Illinois, a subordinate command of the Army Materiel
Command. Additionally, equipment, maintenance and repair contracts are
managed by the Army Materiel Command's Life Cycle Management Commands.
These 2-star commands receive their contracting authority and oversight
directly from the Assistant Secretary of the Army for Acquisition,
Logistics, and Technology who is also the Army Senior Procurement
Executive.
The Defense Contract Management Agency (DCMA), one of the Defense
Contracting Agencies under the authority of the Under Secretary of
Defense for Acquisition, Technology and Logistics has the
responsibility for contract management of task orders awarded by the
Army Sustainment Command under the LOGCAP III contract.
As you are aware, Secretary Geren chartered the Commission on Army
Acquisition and Program Management in Expeditionary Operations chaired
by Dr. Jacques Gansler, the former Under Secretary of Defense for
Acquisition, Technology and Logistics, on August 30, 2007. The Gansler
Commission provided an independent, long-term, strategic assessment of
the Army's acquisition and contracting system and its ability to
support expeditionary operations and sustain high operational demand in
an era of persistent conflict.
To complement the work of the Commission, the Army Contracting Task
Force was established in early September 2007, co-chaired by LTG N.
Ross Thompson III, Military Deputy to the Assistant Secretary of the
Army for Acquisition, Logistics and Technology and Ms. Kathryn Condon,
Executive Deputy to the Commanding General at the Army Materiel
Command. The task force mission was to take an intensive look at
current Army operations and future plans for providing contracting
support to contingency or other military operations. The task force
findings and recommendations were consistent with those of the Gansler
Commission. The Army Contracting Task Force final report was completed
on March 17, 2008 and was presented to the Secretary of the Army.
The details of the report were included in the Army's submission of
Section 849 of the National Defense Authorization Act for Fiscal Year
2008's report to Congress which also addresses all of the Army's
actions underway to address Gansler Commission recommendations.
Additionally, the report is being utilized by the Army Contracting
Campaign Plan Task Force, established by Secretary of the Army in
February 2008, to ensure that the Task Force and Gansler Commission's
finding and recommendations are implemented as quickly as possible
without the loss of momentum. This Army-wide contracting campaign plan
will improve doctrine, organization, training, leadership, materiel,
personnel and facilities. Achieving this objective will require
resources, time, and sustained leadership focus.
The Gansler Commission made four overarching recommendations to
ensure the success of future expeditionary operations: (1) increase the
stature, quantity, and career development of military and civilian
contracting personnel, particularly for expeditionary operations; (2)
restructure organizations and restore responsibility to facilitate
contracting and contract management; (3) provide training and tools for
overall contracting activities in expeditionary operations; and (4)
obtain legislative, regulatory, and policy assistance to enable
contracting effectiveness in expeditionary operations.
With regard to the first Gansler Commission recommendation--to
increase the stature, quantity, and career development of the Army's
contracting personnel--we have a number of initiatives underway. In
June 2006, the Army approved a new force design structure consisting of
19-person Contracting Support Brigades, 8-person Contingency
Contracting Battalions, 4-person Senior Contingency Contracting Teams,
and 4-person Contingency Contracting Teams composed of Active Duty,
Reserve, and Army National Guard personnel. Each Contracting Support
Brigade will be commanded by a colonel. These brigades oversee
Contingency Contracting Battalions commanded by lieutenant colonels,
and Contingency Contracting Teams in the execution of the Army Service
Component Commander's contracting support plan.
Prior to the Gansler Commission and the work of the Army
Contracting Task Force, AMC had already taken action to increase the
number of Contracting Support Brigades from four to seven; the number
of Contingency Contracting Battalions from six to eleven; the number of
Senior Contingency Contracting Teams from 15 to 18; and Contingency
Contracting Teams from 105 to 153. This represents a potential increase
of over 300 military personnel for a total of over 900 deployable
military officers and non-commissioned officers. Sourcing for the
proposed increases is currently being worked as part of the Department
of Army Total Army Analysis process. Based upon the scope of the
mission, we plan to augment the Contracting Support Brigades with
deployable civilian personnel, including support from Army Criminal
Investigative Division agents and Army Audit Agency officials to
enhance and improve our ability to execute and manage contracts for
expeditionary operations. Contracting Support Brigades will be located
in the United States and overseas supporting operations in Southwest
Asia, Korea, Europe, Africa, the Pacific, South America, and North
America.
This new contingency contracting structure will provide ample
professional development and growth opportunities for our military
officers and non-commissioned officers, allowing them to progress in
capability and experience from captains and sergeants, to colonels and
sergeants major. This structure did not exist prior to Operation
Enduring Freedom and Operation Iraqi Freedom. Not only will it enhance
the development of our military contracting personnel, but also
increase their stature once they are fully resourced.
Army Materiel Command has also identified the need to establish a
Contracting Warrant Officer Corps. The Department is currently
assessing this requirement. The technical expertise of Warrant
Officers, coupled with contracting training and experience, would make
them exceptionally qualified to fulfill the contract management and
oversight role. If approved, this Warrant Officer Corps will consist of
approximately 150 deployable military personnel with contracting
expertise.
When deployed, Contracting Support Brigades, Battalions, and Teams
will coordinate and integrate their plans with our seven Army Field
Support Brigades, located in Afghanistan, Iraq, Korea, Hawaii, Germany,
Fort Bragg, North Carolina, and Fort Hood, Texas, which provide
logistical equipment support to deployed commanders--Army Materiel
Command's face-to-the-field. These two brigade designs support the Army
modular force in the execution of acquisition support, logistics, and
technology activities needed to support and enable the full spectrum of
operations.
In terms of career development, plans are also underway to move the
accession point for contracting military officers two to three years
earlier immediately following their Branch qualification at the captain
level. This allows professional development and experience to begin
earlier. For contracting non-commissioned officers, the accession point
will occur upon achieving the rank of sergeant. We must also ensure the
requisite training is accomplished prior to deploying on an
expeditionary contracting mission, and it is our intent to defer
deployment of military members during their first year in contracting.
In keeping with the Gansler Commission's second recommendation--to
restructure Army contracting organizations and restore responsibility
to better facilitate contracting and contract management in
expeditionary and U.S. based operations--the Army Materiel Command,
based upon direction from Secretary Geren on January 30, 2008, took
action to establish a 2-star Army Contracting Command. At the same
time, the Secretary directed the realignment of the Army Contracting
Agency from the Assistant Secretary of the Army for Acquisition,
Logistics, and Technology to the Army Materiel Command to become part
of the Army Contracting Command. This new command is a major
subordinate command to the Army Materiel Command. On March 13, 2008,
the Army Contracting Command was activated in a provisional status, and
on July 15, 2008 the Department of the Army approved the concept plan
for the new command. When fully resourced, this plan will increase our
civilian personnel by more than 900 and our military personnel by more
than 500. We anticipate initial operational capability on October 1,
2008 with a goal of full operational capability on October 1, 2009.
Our challenge will be to quickly resource and fill these new
positions. This will take time. We are actively recruiting civilians
and increasing accessions of military officers and non-commissioned
officers into the Army Acquisition Corps. To enhance our hiring ability
of civilian contracting personnel, we are pursuing direct hire
authority from the Office of Personnel Management.
The Army Contracting Command includes two subordinate commands--a
deployable 1-star level Expeditionary Contracting Command focused on
support to forward deployed forces (including providing contracting
personnel support for the Joint Contracting Command--Iraq and
Afghanistan) and OCONUS installations; and a 1-star level Installation
Contracting Command focused on support for CONUS installations and
other mission support. The Expeditionary Contracting Command will
include our Contracting Support Brigades, Contingency Contracting
Battalions, Senior Contingency Contracting Teams, and Contingency
Contracting Teams. Our five major acquisition contracting centers will
be realigned under the Army Contracting Command to facilitate
appropriate training, manning and work force development.
Additionally, the Army Materiel Command will realign the LOGCAP
Program Office from the Army Sustainment Command to the Army
Contracting Command as a direct report to the Executive Director. This
realignment will place emphasis on a single advocate with the
accountability and responsibility for contracting in addition to
expanding our surge and contingency capability to resource staffing
requirements with trained, skilled, designated and responsive
expeditionary contracting capability.
The Army is moving out quickly to implement the third Gansler
Commission recommendation--to provide training and tools. The Army is
assessing opportunities to improve contingency contracting training at
our Combined Training Centers. In April 2008, one of our Contingency
Contracting Battalions participated in a situational training exercise
held at the Battle Command Training Center on Fort Lewis, WA. This
exercise focused on preparing military contingency contracting officers
for rotation and integration into the Joint Contracting Command--Iraq/
Afghanistan's current battle rhythm and contracting methodology.
Training included tasks such as preparing a contracting support plan,
coordinating with supported units, and the award, administration and
close-out of service contracts. Through this exercise, participants
gained ``cradle to grave'' knowledge of the contracting process in
theater. Detailed after action reports are conducted after each
training exercise and a survey is conducted 3-4 months after deployment
to capture lessons learned. Our intent is to institutionalize such
training in our Combined Training Centers and Battle Command Training
Programs.
Several training and doctrine initiatives are underway and have
continued to be a major focus for the Army. A final draft of the Joint
Publication 4-10, Operational Contract Support was completed. The
completion date for Field Manual Interim 4-93.42, Contract Support
Brigade, was accelerated. The Army also worked with the Department of
Defense to distribute the recently released ``Joint Contingency
Contracting Handbook.'' Leader education related to contracting and
contractor management was accelerated. Development of FM 4-10,
Commander's Guide to Contracting and Contractor Management was also
accelerated.
The Army is continuing to modify and expand its leadership
education curriculum related to the planning and management of
Operational Contract Support with an enhanced focus on expeditionary
operations. We have modified or added sixteen officer and non-
commissioned officer professional military education courses to improve
knowledge and skills in Operational Contract Support. The Army is also
developing a 2-week resident course to train selected staff members
(Brigade through Army Service Component Command levels) on how to plan
for and manage Operational Contract Support and how to develop
requirements packages.
To reduce knowledge gaps in training venues, the U.S. Army Training
and Doctrine Command has developed a concept plan to add acquisition
personnel to the Battle Command Training Program to support the Combat
Training Centers. This new collective training capability will
stimulate commanders and their staffs to solve expeditionary related
tactical problems, will apply emerging doctrine to these tactical
situations, and will promote a better appreciation of the challenge of
integrating contractor support into military operations for both the
Contingency Contracting Officer and the unit requiring the contract
support.
At present the Army has put into place an intensive training and
management program for our Contracting Officer Representatives which
requires all Army Contracting Officer Representatives to complete the
Defense Acquisition University's on-line continuous learning module,
``COR with a Mission Focus,'' prior to appointment. Army Materiel
Command is working with the Department of the Army to ensure
enforcement of this training.
In addition, Army Materiel Command has implemented a three-day
Contracting Officer Representative training course for deployed forces
in Kuwait. This training course requires nominated personnel to
complete the Defense Acquisition University on-line training prior to
attending onsite training. A performance assessment is conducted three
to four weeks after a Contracting Officer Representative's (COR)
appointment to evaluate how well he/she comprehends his/her roles and
responsibilities in contract performance oversight. Since October 1,
2007, 485 CORs have been trained in Kuwait and as of June 1, 2008, 100
percent of service contracts in Kuwait have trained and appointed CORs
providing contractor oversight.
To improve our contingency contracting training and doctrine, the
Army is formally interviewing units as they return from theater to
capture ``expeditionary contracting'' lessons learned and incorporate
the findings into doctrine, training guides, and user handbooks. We are
accelerating efforts to enhance leader education in contracting and
contractor management and re-examining the training curriculum and
timing for all newly accessed acquisition officers and civilians.
AMC is developing and fielding a Virtual Contracting Enterprise to
provide electronic, web-based tools to enable visibility and analysis
of our worldwide contracting mission.
In response to the fourth Gansler Commission recommendation
regarding legislative proposals, the Army worked with the staff of the
Office of the Secretary of Defense to develop legislative proposals to
improve contracting effectiveness in expeditionary operations,
including the Army's legislative proposal to establish five new general
officer positions. Army Materiel Command requested three of those
general officer positions for the Army Contracting Command; one, a
seasoned contracting expert, would serve as a Major General Commander.
This proposal will be presented to Congress during this session.
The work of the Army's Contracting Task Force has culminated in the
implementation of significant reforms and corrective actions to
eliminate deficiencies. These reforms and corrective actions resulted
in significant improvements in the Kuwait contracting operations.
Several new leaders are now in place; staffing was increased from 27 to
55 personnel through temporary duty assignment (TDY) augmentation and
volunteers, including dedicated lawyers; ten additional military
officers were sent to Kuwait for 90 days to review prior contracts; and
new internal control processes for effective checks and balances were
developed.
We also established a U.S. based office at the Army Materiel
Command's Army Sustainment Command, located in Rock Island, Illinois to
provide contracting support to Kuwait operations in the management and
execution of $800 million in active contracts. Army Sustainment Command
established a dedicated 15-member team, supported by legal
professionals, charged to assist in resolving a number of claims,
definitizing unpriced actions, and negotiating new contracts for
requirements in ways that will result in significant cost avoidance or
savings. The establishment of this capability leverages Army Materiel
Command leadership and expertise. Our work continues with the orderly
transfer of additional existing and future major contract actions from
Kuwait to the Army Sustainment Command and eventually to the Army
Contracting Command.
Finally, prior to the efforts of the Gansler Commission and the
Army Contracting Task Force, Army Materiel Command recognized the need
to make improvements in its contracting support to Operation Iraqi
Freedom and Operation Enduring Freedom. We have learned many lessons
from our early experiences with LOGCAP and are taking necessary steps
to improve the execution and management of LOGCAP.
In 2004, Army Materiel Command took aggressive action to increase
the number of personnel in the LOGCAP program office to better manage
and execute the program. This allowed us to eliminate billions in
unpriced task orders and reduce the cost risk to the Government.
In early 2005, the Army established a Senior Executive Service
position to serve as the contracting and program director and provide
overarching leadership/AMC established program offices in Iraq, Kuwait,
and Afghanistan that are managed by Deputy Program Directors, who are
all acquisition logistics professionals. In April 2007, the Army
established a second Senior Executive Service position to separate
contracting support from program management. This further enhanced our
ability to provide oversight.
Additionally, we worked with the Defense Contract Management Agency
to increase its support in theater. Today, there are 97 Defense
Contract Management Agency personnel deployed in Southwest Asia
augmenting our LOGCAP program offices with contract management
personnel. In addition to conducting reviews of the contractor's
purchasing, billing, estimating, procurement and property systems,
field personnel augment the program management teams with
administrative contracting officers, quality assurance representatives,
and property administrators whose responsibility it is to ensure
contract compliance with contract terms and conditions. We also took
action to deploy in excess of 50 U.S. Army Reserve Logistics Support
Officers who augment the program office by assisting supported command
units in developing their requirements. Furthermore, there are over 500
Contracting Officer Representatives, provided by the supported command
units, who provide daily oversight of contractor performance.
Award fee boards are conducted every six months evaluating the
contractor's performance, identifying areas for improvement, and
assessing overall performance as it is measured against the award fee
criteria. Board Membership consists of representatives from the
supported commands, the LOGCAP Deputy Program Directors and the Defense
Contract Management Agency. It is chaired by LOGCAP Program Director.
Besides the Award Fee Evaluation Boards conducted every six months,
there are monthly performance evaluation boards chaired by the
supported unit. The Department of the Army also established a
Contractor Acquired Property Review Board that ensures excess contract
property is distributed to needed locations.
Based on lessons learned under the LOGCAP III contract, the Army
developed a new acquisition strategy for LOGCAP IV that will utilize
the services of three performance contractors to execute LOGCAP
requirements and one contractor to support the LOGCAP Program Director
in the management of the program and to conduct worldwide planning.
LOGCAP IV contracts were awarded and task orders will be competed among
the three performance contractors to ensure competitive pricing for
required services. The award to three performance contractors provides
the Army with increased capacity to respond to other contingencies
foreign or domestic. The additional performance contractors minimize
risk and ensure combat support/combat service support capability is
responsive to worldwide contingencies.
In conclusion, while I primarily address the initiatives and
resources AMC is pursuing to improve our Expeditionary Contracting
capability, the success of future operations is a joint responsibility
and will require DOD solutions and resourcing. To this end, we continue
to work with our sister Services, the Joint Staff and other defense
agencies.
Expeditionary military operations in Iraq and Afghanistan have
placed extraordinary demands on our contracting system and the people
who make it work. The vast majority of our military and civilian
contracting personnel perform well in tough, austere conditions. We
know that the success of our warfighters and those who lead them is
linked directly to the success of our contracting workforce, and we are
working hard to ensure that contracting is a core competency within the
Army. The Army's focus on contracting is not just for contracting
professionals. Warfighters set requirements and help manage contract
execution--their involvement in the contracting process is critical.
My number one priority is support to our Soldiers, Sailors, Airmen
and Marines. Our contracting professionals are focused on supporting
these warfighters and inspiring the confidence and trust of the
American people. We must never lose sight of the outstanding work to
support the war in Iraq and Afghanistan that our contracting and
contractor personnel are doing 24/7. This support at times results in
the potential for and reality of loss of life and injury.
Our challenge is to ensure we have adequate structure, policy, and
personnel who are trained to do the job in the right place at the right
time--continually performing at an ethical standard that upholds Army
values. This will not be easy. It will take time, but getting it done
is essential. We cannot and will not fail--our warfighters and our
taxpayers deserve no less.
Thank you for providing us with this opportunity to address the
Army's oversight of contracting to support expeditionary operations. I
look forward to answering your questions.
WEAPONS MISPLACED IN IRAQ
Chairman Byrd. Secretary England, in a July 2007 report,
the Government Accountability Office found that unclear DOD
guidance, inadequate staff, and insufficient technology
resulted in poor accountability of over 190,000 weapons
provided to Iraqi security forces. DOD concurred with GAO's
recommendation to identify accountability procedures with a
program to train and equip the Iraqi security forces. However--
I stress this, and I want to speak loudly and clearly--however,
as of March 2008, DOD had not developed the necessary
procedures.
Can you tell the committee whether or not those procedures
have been developed and implemented yet? Have all the missing
weapons been accounted for? And what additional oversight is
planned to ensure that weapons accountability continues?
Mr. England. Chairman Byrd, as I recall, we started this
investigation, we turned it over to the DOD IG, because there
were some fundamental issues. We did work to put procedures in
place in parallel, but I can't tell you today exactly if they
went out or not, so I don't have the specific status; I will
have to get back with you on that.
[The information follows:]
The National Defense Authorization Act, 2008, Public Law
No. 110-181, Section 1228, requires the President to implement
a policy to control the export and transfer of defense articles
into Iraq, including the implementation of a registration and
monitoring system. The Department of Defense, through Multi-
National Force--Iraq (MNF-I) has implemented many policies and
procedures which will help meet the intent of this law as it
comes into effect in late July 2008. First, Multi-National
Security Transition Command--Iraq (MNSTC-I) implemented a
database tracking system for weapons accountability. Following
the Government Accountability Office (GAO) report of July 2007,
MNSTC-I requested that the Department of Defense Inspector
General (DODIG) conduct an inspection in October 2007. In
implementing GAO and DODIG recommendations, MNSTC-I reconciled
serial numbers of weapons and created a weapons database. All
small arms procured for the Government of Iraq (GoI) through
MNSTC-I, either from Iraqi Security Forces Fund (ISFF) or
Foreign Military Sales (FMS), are now registered by serial
number in this database, which is managed by MNSTC-I logistics
personnel. Additionally, 100 percent serial number inventories
were completed on all weapons held at Taji National Depot and
Abu Ghraib Warehouse, enabling reconciliation of the database.
MNF-I has worked to establish an unbroken chain of custody for
the accountability and control of munitions under U.S. control
from entry into Iraq to issuance to the ISF. The number of
logistics and property accountability specialists in country
(in MNSTC-I, in particular) has increased and increased
security procedures throughout the chain of custody have been
implemented. MNF-I has worked with the ISF to build their
property accountability systems and structures. In July 2007,
MNF-I partnered with the ISF to establish an M-16 Biometrics
Program that links individual soldiers to the particular
weapons they are issued. Prior to weapons issue, each soldier
is required to provide biometric data in the form of a retinal
scan, a voice scan, and fingerprints. In addition, soldiers'
personnel and payroll data are verified before a weapon is
issued. The final step in the process is to take a picture of
each soldier holding his new weapon with the serial number
visible. Similar biometric procedures have been implemented for
Iraqi police badge and weapon issue, as well, and the Ministry
of Interior requires policemen to present their identification
card and weapon in order to receive monthly pay. The fidelity
of data and level of detail captured in these accountability
procedures are significant.
In coordination with the Iraqi Ground Forces Command
(IGFC), MNSTC-I established an Iraqi/Coalition joint inspection
team in October 2007 to inspect and assess Iraqi Divisions'
equipment records and verify on-hand quantities. MNSTC-I was
able to establish a baseline of where weapons are located and
provide an operational snapshot of accountability in several
Iraqi divisions. This data was utilized to reconcile the
Coalition issue log with Iraqi hand receipts and assess the
effectiveness of ISF accountability procedures.
Contractor delivery of weapons in theater has been further
regulated. Since September 13, 2007, the Joint Contracting
Command Iraq/Afghanistan (JCC-I/A) has ensured that all weapons
contracts to procure and deliver munitions include a number of
clauses to increase accountability. Contracts now require
vendors and shippers to do the following: deliver munitions to
Iraq through U.S. controlled ports of entry within Iraq;
provide serial number lists electronically in advance of any
weapons shipments to Iraq; post serial numbers on the inside
and outside of weapons shipping containers; and provide en
route visibility of weapons and munitions, to include the
arrival dates and times of munitions cargo being delivered to
Iraq.
Mr. England. I do know there's a specific effort that was
underway by the DOD IG to look into this whole matter. The
impression I have is that we did take the corrective action to
track those, and we do have a requirement, I believe, now by
the National Defense Authorization Act (NDAA) to actually track
those individual weapons. So, I will get back with you on the
specific status, but I believe that was a requirement of last
year's NDAA, in terms of tracking of each individual weapon in
Iraq--not just pistols, but every kind of weapon. So, I will
get back with you, sir, on the specific status in complying
with that legislation.
Chairman Byrd. Do you know if the 190,000 weapons have been
recovered?
Mr. England. Mr. Chairman, I recall these conversations,
but, I'll tell you, I can't--I cannot tell you the specifics
right now. I mean, this is--I was--I'm just not prepared to
discuss that subject with you. That's not something I looked at
in preparation for this hearing. Maybe one of my colleagues
here has a specific on----
We'll just--I expect we'll have to get back with you on
this subject, unless somebody has a very detailed status today.
Chairman Byrd. Can somebody answer that question?
[No response.]
Mr. England. Looks like we'll have to get back with you on
that, Senator. So, we will close the loop with you after this
hearing.
Chairman Byrd. All right.
LOSS OF U.S. COALITION PROVISIONAL AUTHORITY FUNDS IN IRAQ
Secretary England, a few months ago the Appropriations
Committee held a hearing on fraud and corruption in Iraq.
Several issues were raised relating to missing Coalition
Provisional Authority (CPA) funds. But, DOD's responses to
these questions remain unclear. Unclear. There was the
suggestion that these funds were Iraqi funds and were no
concern to the Department of Defense. But, when these funds
disappeared, U.S. taxpayers were, and they continue to be,
called upon to pay for Iraqi reconstruction. Since, at the time
those funds disappeared, the Coalition Provisional Authority
was answerable to the Department of Defense, I want to ask you
to tell me the amount of Coalition Provisional Authority
assistance and reconstruction funds doled out prior to the
transition of power in Iraq that cannot be accounted for, and
who is responsible for ensuring that those funds are accounted
for, and what level of confidence is there that these funds did
not make their way into--to join insurgent groups or militias.
Mr. England. So, Mr. Chairman, I would tell you the person
best capable of answering that is Mr. Stu Bowen, the special
investigator for the Iraq reconstruction, so the SIGIR. And in
my discussions with Stu Bowen in my office, this is one of the
issues that they investigated in detail. And so, I would
recommend we have Stu Bowen address that in detail with you,
because that was specifically under his purview, and I
believe--that is covered in one of his reports. So, there's
been a number of reports by the SIGIR. I have to go back and
take a look at those reports, but I believe that that is one of
the issues that was covered by Stu Bowen, and I'll be happy to
talk to Stu Bowen and get that data together for you.
[The information follows:]
The Coalition Provisional Authority (CPA) funds to which
you refer are the $8.8 billion Development Fund for Iraq (DFI),
an account that includes oil export sales from Iraq, balances
from the U.N. Oil-for-Food Program, and frozen Saddam-era
funds. The CPA, operating in a high threat environment,
distributed DFI money to reconstruction projects and to Iraqi
ministries.
Since December 2003, under U.N. mandate, the International
Advisory and Monitoring Board (IAMB) has served as the
oversight body for the DFI. The IAMB's July 15, 2004 audit
report, after reviewing the CPA's management of DFI funds,
concluded that all known oil proceeds, reported frozen assets,
and transfers from the Oil-for-Food Program have been properly
and transparently accounted for in the DFI.
Acknowledging that CPA operated under challenging
circumstances, the IAMB report noted that the lack of oil
metering and other problems made it difficult to determine that
all DFI disbursements were made for the purposes intended.
Chairman Byrd. Senator Cochran.
Senator Cochran. Mr. Chairman, thank you.
General Griffin, last fall the Gansler report was released,
and it contained some recommendations for changes in personnel,
organization, and training of the Army's contracting forces. I
understand that, in response to this report, the Army recently
established a new Contracting Command that reports directly to
you. Can you tell us how this effort will improve the Army's
contracting oversight efforts?
ARMY CONTRACTING COMMAND
General Griffin. Yes, sir. There were four areas that the
Gansler Commission recommended: legislative, personnel,
structure, and training. The Secretary of the Army wrote a
letter transferring the Army Contracting Agency from the
Assistant Secretary of the Army (Acquisition, Logistics, and
Technology (ASA/ALT)) to AMC. With that transfer, we picked up
the Army Contracting Agency.
We stood up the command. It'll be led by a future two star.
Today, Mr. Parsons is the Senior Executive Service member who
sits in that leadership position. We have come back to the
Congress, now, asking for five general officer positions in the
area of acquisition and contracting. One of those positions
will be a two-star general officer who will follow Mr. Parsons.
In addition, we have two subordinate commands there, one in
charge of installation contracting and one in charge of
expeditionary contracting.
This organization will give us a leadership contracting
expertise level that we have not had before. We asked for 1,500
additional personnel; 900 of those are civilians and 500-and-
some military. It will give us noncommissioned officers,
officers, and now, for the first time, we've asked for warrant
officers, and we will bring in a warrant officer corps, which
will give us a technical level of expertise, not unlike what we
have in our aviation community, that we've not had in the past.
On the personnel side, we've asked for direct-hire
authority. That's now with the Office of Personnel Management
(OPM). We've asked for direct-hire authority to speed up the
process of bringing these folks onboard. But, we have a concept
plan that's been approved inside the Department of the Army,
which gets at the structure. The recommendation I made to the
Secretary of the Army, and he approved, was a 3-year plan,
which would bring the folks on, get them trained, and start
getting them into the field. That will tremendously augment the
capability we have around the world today, both Conus and
overseas, to augment our contracting.
Senator Cochran. One observation has been made, by someone
in the region, that a major problem was the lack of adequately
trained personnel. These are Army people who are involved in
contracting with individuals and concerns in Iraq and
Afghanistan. Do you have in place now a contracting process
that is staffed with people who are better trained, or who will
be? How have you addressed this concern?
ACQUISITION WORKFORCE TRAINING
General Griffin. Well, for the training aspect, which I
mentioned in my opening statement, we're capturing lessons
learned from units as they redeploy. What we're trying to do is
incorporate that into our training centers. We've expanded our
training program in Kuwait for contracting-officer
representatives who go into theater. I think we've trained in
the neighborhood of 500, now, of those personnel. We've
expanded some training at the Defense Acquisition University.
But, across the board, we've looked at training at each level
where we need the expertise.
What the Army Contracting Command will give us, which we've
not had in the past, is the expertise and the oversight and a
command structure for our acquisition workforce--for, really,
contracting folks, unlike we've had in the past. And it'll help
us, both from an expeditionary, as well as an installation,
because we have some challenges, from an installation
standpoint, as well in contractor oversight.
Senator Cochran. Secretary England, let me ask you if,
departmentwide, there has been an effort to look at lessons
learned, in terms of well-trained, capable contracting officers
in the region to deal with this issue across the Department of
Defense. Apparently, the Army has made changes, and is making
an effort to deal with some of these problems. What's being
done at the Department level?
Mr. England. So, Senator, as you comment, the primary
responsibility is in the Army, because they are the agent for
the Department of Defense to do that. So, almost all the
responsibility lies within the Army, but we have--in response
to the Army, adjust whatever policies we need to, to support
'em. So, for example, they need more general officer slots, and
so, legislation has come forward to the Congress to provide
those particular slots in the Army. So, whenever we need DOD
actions--we meet regularly on this subject--whenever there's
actions needed at the Office of the Secretary of Defense (OSD)
level, we work to support the Army, in terms of broader
policies or legislation. We will continue to do that. If we
need to expand--for example, IG or other organizations, DCMA or
organizations like that--then we handle--agree with that--we
handle the budget, we make sure they have slots available. So,
we do whatever we can to facilitate the actions that people
feel they have to do to have broader capability across the
Department. But, it is specifically within the Army, in this
case. And then the oversight, of course, are in many agencies,
including the investigative agencies, while our primary
investigative agency is the Defense investigative agencies--we
have those in the Air Force, in the Army, in the Navy--so, we
have a number of investigative services. They are also all
involved in this process, obviously, when we're going to have
convictions or investigations. So, however we can work across
that whole range of capabilities, we do so at the OSD level.
Senator Cochran. Great, thank you.
Thank you, Mr. Chairman.
Chairman Byrd. Senator Leahy.
Thank you. Thank you.
LACK OF OVERSIGHT OF U.S. CONTRACTS IN IRAQ
Senator Leahy. Thank you, Mr. Chairman.
Chairman, I'm a strong believer in the inspectors general
procedures in the various departments. When they work
effectively, I think they're very, very good.
Secretary England, I know you've expressed similar views.
And, seeing Mr. Heddell here, I have a couple of questions--
there's a recent audit by the Inspector General's Office that
examined more than $10 billion spent on various commercial
contracts related to the war in Iraq, found, out of those $10
billion, about $1.4 billion didn't have sufficient documents
showing how the money was spent, more than $7 billion failed to
meet the Defense Department's own requirements for payments.
They ended up referring 1 out of every 25 of them for criminal
investigations. And that's shocking enough, but that's on a
very small sample even, about 1 percent of the total payments.
And, according to the same audit, more than 180,000 similar
payments were never reviewed or audited, and those could
involve billions of dollars of losses. When will those
remaining payments be audited?
Mr. Heddell. Senator Leahy, any inspector general--and, I
think, particularly the inspector general for the Department of
Defense--would be very concerned about any of these. And, of
course, with Defense we're talking about extremely large
amounts. And we have a number of ongoing initiatives. Some are
in the criminal investigative arena, many others are in the
audit arena.
To give you a complete answer, referring to some of the
things that you specifically mentioned, I'm going to, with your
permission, ask Deputy Inspector General Mary Ugone----
Senator Leahy. And my----
Mr. Heddell [continuing]. To answer part of that----
Senator Leahy [continuing]. My basic----
Mr. Heddell [continuing]. If it's okay, but----
Senator Leahy [continuing]. My basic question is, Will
these others be audited?
Mr. Heddell. The answer to that is, yes, sir. We are
concerned about any issues that you mention, and they're
concerns to us.
[The information follows:]
Defense Finance and Accounting Service--Rome retains
approximately 800,000 vouchers pertaining to the contingency
expenditures for the military's activities in Iraq, Kuwait and
Afghanistan. These vouchers contain over 8 million pages of
records with an approximate value of $14 billion. The effort
that would be required to do a full audit of each voucher is
not practical. To perform a full audit of each voucher would
require an inordinate amount of our audit resources at the cost
of other ongoing projects. Instead of individually auditing
each voucher we will be utilizing digitized versions of the
records and applying data mining techniques, as well as
traditional investigative methods to review the records.
To accomplish this, we have initiated a cooperative effort
with the Defense Finance and Accounting Service. The Defense
Finance and Accounting Service is the documents. These records,
once scanned will be readily available for the Defense Criminal
Investigative Service (DCIS), the criminal investigative arm of
the DOD IG, and DOD IG auditors to review.
The Defense Finance and Accounting Service agreed that all
of these historical records need to be scanned into a
searchable database. This database is known as the Corporate
Electronic Data Management System. Scanning the documents is a
labor intensive process that is very time consuming. This
spring, DFAS hired 65 summer employees to prepare and scan the
vouchers into the Corporate Electronic Data Management System.
Once the vouchers are scanned, federal oversight
organizations (to include DCIS) will be able to search millions
of pages of records for information specific to subjects of
investigations and other reviews. The DOD IG auditors and the
Army Audit Agency are developing data mining protocols based
upon the experience of the agents in the field. These offices
are working together to avoid duplication of effort and to
increase the likelihood of detecting fraud. Once fully
developed the data mining protocols will be used by
investigative and audit organizations to identify suspect
vouchers and payments. The suspect vouchers will then be
reviewed for sufficiency and appropriateness of the payments.
All suspected illegal payments that are identified will be
investigated.
While we are not performing a 100 percent review of all the
vouchers, we feel our current approach is the best use of our
time and resources. DFAS is in the process of scanning all
voucher documentation which will allow oversight organizations
ready access to all support documentation and will also enable
the use of data mining protocols on a near real time basis.
This will enable oversight organizations to identify
potentially suspect payments much earlier in the process.
Senator Leahy. And how long was that going to take?
Mr. Heddell. Well, I'd have to look at each individual
issue. Mary, here, may be able to answer specifically on each
one, but these audits, I can tell you, generally take--from
beginning to end, you're talking at least 6 months. I know
that's a long time. It depends on the issues, the scope of the
audit, and what kinds of resources are available. But, these
are very important issues to us, and so, they would get top
priority.
Senator Leahy. But, your testimony today is that they all
will be completed.
Mr. Heddell. They will be, yes, sir.
Senator Leahy. Ms. Ugone, did you want to add anything to
that?
Ms. Ugone. I just wanted to say, the context of that audit,
it was started in May 2006 because the Defense Criminal
Investigative Service (DCIS) was concerned about $10.7 billion
of vouchers in a warehouse, Defense Finance and Accounting
Service (DFAS) room. And we came in to look at completeness and
accuracy. We drew a statistical sample, based on dollars, and
we had a 90-percent confidence level. But, we were still
working with our agents. The agents and DFAS are scanning every
voucher. That's going to take quite a bit of time, I think--if
you work two shifts, it might take--24 hours a day--it would
probably take 9 months to look at it. So, it's been a joint
effort.
And the issue with us was, these are commercial vouchers,
mostly, that we looked at that were out of Kuwait. We were
concerned with the supporting documentation to provide the
basis for a payment. So, we are going to be looking at it from
an Office of the Inspector General (OIG) standpoint, yes.
Senator Leahy. Do you need more----
Ms. Ugone. Scanning every payment voucher----
Senator Leahy. Do you need more investigators? I mean, if
we're talking about billions of dollars that may have been
wasted or lost in fraud, do you need more investigators?
Because I think most taxpayers would say it would be kind of
nice to find out who defrauded whom and that somebody should go
to jail.
Mr. Heddell. Senator Leahy, you know, any inspector general
is going to say that they need more resources. But, when you
look--I mean, the answer to your question is, yes, sir--but,
when you look at the responsibility that the inspector general
covers at the DOD, when you're talking about issues like
defective products, terrorism, technology transfer, healthcare,
financial crimes, the whole range of issues, those are just on
the criminal side----
Senator Leahy. Mr. Heddell, I'm--you know, I'm aware of
that. And I'm aware of how they--the criminal law works. I was
a prosecutor for 8 years, and I know that you can't cover every
single thing. But, if these audits show, already, the potential
of billions of dollars that's lost and defrauded, I'm far more
worried about that than I am that somebody who may have, at a
military base somewhere, topped off their personal car and--
although with the price of gas today, I guess that does mount
up. But, somebody who did that improperly--I'm far more
interested in these billions of dollars, I'm far more
interested if there were people, whether in the contractors or
individual subcontractors or whatever, thought they could get
away with it. And I'm far more interested in seeing some
people, not just have to pay back a fine, which they may
consider just a cost of doing business, but I'd like to see
some people go to jail. You know, again, I--maybe I'm putting
my own background of a prosecutor, but I always felt that, in
some of these major commercial frauds, people are very willing
to pay a fine, it's the cost of doing business; when they
actually thought they were going to spend some time behind
bars, they tightened up their procedure.
So, are we going to get to those kind of things?
Mr. Heddell. Well, I'd like to tell you yes, and I intend
to make it possible, Senator Leahy, but a lot of these
investigations are led by the United States attorneys' offices,
and so, the timelines, to some extent, are affected----
Senator Leahy. Well, then let me ask you----
Mr. Heddell [continuing]. By that.
EXTENDING THE STATUTE OF LIMITATIONS
Senator Leahy [continuing]. About that, because during past
wars, we found--World War I, World War II--we've been in Iraq
now longer than we were in World War II--but in World War I,
World War II, when Congress was afraid that auditors might not
be able to complete the investigation of contracting fraud in
time--remember the Truman Commission, things of that nature--
they passed a law to suspend the statute of limitations during
wartime, to make sure no one illegally profited by fraud. And I
have introduced, along with Senator Grassley, bipartisan
legislation, the Wartime Enforcement Fraud Act, S. 2892, that
would extend the statute of limitations, just as we've done in
past wars.
So, my question is, would such legislation give you enough
of a breather and give you more time to do your investigations?
Mr. Heddell. I'm aware of that legislation, sir. And
absolutely that proposal would be very beneficial to my office,
and probably other inspectors general.
Senator Leahy. Secretary England, do you agree?
Mr. England. Sounds appropriate--Senator, it sounds
appropriate to me. I mean, there's no question, we don't want
waste, fraud, and abuse, and if people are guilty of it, they
need to be prosecuted and indicted and convicted. So, whatever
facilitates that, I'll definitely support.
Senator Leahy. And I understand, in a war zone, it's not
easy to complete these, and that's why I want to give you more
time. Thank you.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Senator Patrick J. Leahy
Today, the Appropriations Committee continues rigorous
oversight of how the Defense Department has spent more than
$600 billion authorized for the wars in Iraq and Afghanistan.
The stories of billions lost to fraud, waste, and abuse during
these wars are now all too familiar. This Committee, as one of
the main checks on this administration's wasteful war spending,
must not only follow-up on these outrageous reports, but dig
deeper and ask tougher questions to make sure that those who
are responsible for this fraud, waste, and abuse are held
accountable under the law.
I want to thank Chairman Byrd for calling this hearing, and
I will continue to support his longstanding and consistent
efforts to make sure this Committee carries out its oversight
duties, particularly over wasteful wartime spending.
Just two months ago, the Defense Department's Inspector
General issued a new audit of $10.7 billion in payments on
basic commercial contracts during the wars in Iraq and
Afghanistan. This audit confirmed yet again that American
taxpayers have no clear picture of how billions of dollars have
been spent in Iraq and Afghanistan. This audit found that there
were no documents to show how $1.4 billion was spent, and more
than $7 billion was spent without following the law or the
Defense Department's rules. In some cases, there was no invoice
showing what services were provided; in other cases, there was
no record of who received the payment or for what purpose.
These individual contracts often involved millions of taxpayer
dollars, yet the Defense Department had no record of how the
money was spent. The findings were so serious that the
Inspector General referred one out of every 25 contracts for
criminal investigation. This is unacceptable, this is wrong,
and this is another example of this administration's
mismanagement of the wars in Iraq and Afghanistan.
We need to do more than ask tough questions. We need to
start holding those responsible for this fraud accountable, and
I hope our witnesses today will shed new light on the steps
being taken to investigate and prosecute those who improperly
received money or defrauded the government. I was particularly
concerned that this audit was based on a review of only a small
sample of contracts, less than 1 percent of the total.
According to the audit, there are still more than 180,000
similar contracts to review that would lead to more than 700
new criminal investigations involving hundreds of millions of
dollars. I hope that our witnesses today will explain what
efforts they have taken to carefully review all these remaining
contracts, particularly where there's such a high risk for
fraud.
I expect that we will also hear today how the task for
reviewing and investigating these contracts during times of war
is difficult and time-consuming. While this may be true, it is
no less important that we continue these reviews. I have
introduced legislation to give the government more tools to
address this problem. In the last three Congresses, I have
introduced the War Profiteering Prevention Act, which would
give prosecutors and investigators the ability to pursue war
profiteers overseas and those who take advantage of so-called
``cost plus'' contracts to defraud our Nation.
Along with Senator Grassley, I have also introduced the
Wartime Enforcement of Fraud Act, which would extend the
statute of limitation for contract fraud offenses during
wartime. In past wars, Congress has suspended the criminal
statute of limitations in order to give auditors and
investigators more time to complete their reviews of wartime
contracts. This bill would do the same thing for the wars in
Iraq and Afghanistan.
This bill is important to make sure that those who have
taken advantage of our nation during times of war shall not
escape unpunished.
I look forward to hearing from out witnesses today, and I
encourage them to redouble their efforts to combat fraud,
waste, and abuse in Iraq and Afghanistan, it continues to
undermine the efforts of our troops and to squander American's
hard earned money overseas.
Chairman Byrd. Senator Craig.
Senator Craig. Mr. Chairman, thank you.
ARMY REQUESTS ADDITIONAL GENERAL OFFICERS
General Griffin, our ranking member has discussed the
Gansler Commission and its recommendation, and you've
responded, speaking to the needed positions--five general
officers recommendations sent up and four other proposals that
you've mentioned. Let me fast-forward here. Given the
uncertainty of legislative movement on The Hill at this time,
and a near shutdown by Congress on any further activity this
year, would you fast-forward for me, Who are you working with?
I assume, the Armed Services Committee. And do you have any
commitments to move this forward? And what is the importance of
the timeliness of these actions so that you can proceed with
those recommendations?
General Griffin. Well, sir, the Secretary and the Chief
made a decision very early on to move some senior personnel to
the Army Contracting Command. So, those three leadership
positions inside of the Army Contracting Command are filled
today; one by a two-star equivalent SES, Mr. Parsons, one by a
colonel newly promotable acquisition contracting officer, and
one by a one-star SES equivalent acquisition contracting
expert. So, first I want to leave you with the idea that they
are, all three--very competent people there today.
The plan for the future, with the five general officer (GO)
positions, is to have a position where we will promote a
general officer into that two-star level that would be the
commander of the Army Contracting Command. And we're still
working this, in the specific allocations, but we envision two
other GO positions in that Army Contracting Command--two one-
star positions. Then, a fourth general officer position would
be in the ASA/ALT from the Office of the Army Staff, Assistant
Secretary of the Army (Acquisition, Logistics, and Technology)
and that would be a two-star position. And one, I believe the
plan is to put it in the Corps of Engineers. We submitted the
request through OSD, and it was sent over to the Office of
Management and Budget (OMB). And OMB now has passed it to the
Congress. But, sir, I don't know the status of it right now,
but we--I will come back to you. But, we are aggressively
working the resourcing of those five GO positions.
[The information follows:]
On March 14, 2008, the Secretary of the Army, Pete Geren
submitted a memorandum for the General Counsel of the
Department of Defense on submission of legislative proposal to
implement recommendations of the Commission on Army Acquisition
and Program Management in Expeditionary Operations (Gansler
Report).
This memorandum requested the establishment of five new
Army General Officer positions in the Active Component and
requested that it be staffed and submitted as a fiscal year
2009 legislative proposal. Prior to submission this request was
reviewed by the Office of the Judge Advocate General, Army, the
Officer of Army General Counsel, and coordinated with Army
leadership.
On June 27, 2008, Acting General Counsel of the Department
of Defense, Daniel J. Dell'Orto submitted formal correspondence
to the President of the Senate, the Honorable Richard B. Cheney
and Speaker of the House of Representatives, the Honorable
Nancy Pelosi that Congress enact the request for five new Army
General Officer positions as part of the National Defense
Authorization Bill for fiscal year 2009.
Senator Craig. Well, my point here is, as we shut down
for----
General Griffin. Yes, sir.
Senator Craig [continuing]. In late September----
General Griffin. Yes, sir.
Senator Craig [continuing]. Obviously, and we may not be
back----
General Griffin. Yes, sir.
Senator Craig [continuing]. Until early next year, or the
Congress may not, depending--I would hope that--if there is
some sense of urgency, it's expressed, and we can work with the
chairmen of the appropriate committees to make this happen.
General Griffin. Thank you. Thank you.
Senator Craig. Mr.--Heddell, is it?
Mr. Heddell. Yes, sir, it is.
CONSTRUCTION CONTRACTS IN AFGHANISTAN
Senator Craig. GAO cited serious problems with construction
contracts in Afghanistan as far back as 2005, buildings that
had not been started, had been left unfinished, even though the
contractor involved had been paid for a completed project.
Where I'm headed here is that, if we are moving personnel into
Iraq, if there is going to be an intensive--a more intensive
effort there, where are we with the facilities now? Where are
you going, or have you looked forward into that situation to
understand exactly where we might be--where these delays have
put us? And are we prepared to meet those needs?
Mr. Heddell. I appreciate that question, Senator Craig.
Being relatively new at the DOD, I'm aware of the issues that
you've mentioned. I'd like to ask, with your permission, Deputy
Inspector General Ugone, who is aware of that and can answer
that question.
Senator Craig. Thank you.
Please.
Ms. Ugone. Thank you, sir.
With respect to Afghanistan, we have ongoing coverage.
Particularly of importance to us is the Afghanistan Security
Forces Fund, which is used to equip the Afghan police and army
forces. We have ongoing work now. The team just redeployed back
to the States. They spent 4 months there, looking at various
types of issues, real property transfer, equipment
accountability, and we also coordinated with the munitions
assessment team on weapons accountability. And we think that's
a very important country in the region. We have a regional
strategy when we do our audit work, and we also are looking at
contractor common-access cards, which, frankly, give
contractors access to pretty much any facility here in the
States, as well as forward, and that's of importance to us, as
well.
So, there's quite a bit of initiatives that we're moving
into Afghanistan, and we plan to also increase in Iraq, as
well.
I hope that answers your question.
Senator Craig. Well, I--it may. You talk about what you're
doing. Where are the problems you now see that need to be
corrected if there are some that relate to a potential surge or
a substantial deployment of U.S. personnel additionally into
Afghanistan?
Ms. Ugone. Well, the issue that we have is similar to the
issues that we have identified in a summary report. And as
we've said before, we haven't reported out yet. We haven't
drafted our report. Our preliminary observations, we have
alerted the command in country, Combined Security Transition
Command. We've alerted them to some preliminary issues. And
those issues are not dissimilar to what we've already
identified in our summary report, lessons learned. We have not
yet drafted our report. Our team just returned at the end of
June, and they had been there 4 months.
Senator Craig. When do you expect that report to be drafted
and available?
Ms. Ugone. We're going to be doing a series of reports,
draft reports. Normally, what happens is, in accordance with
our standards, as well as to obtain management comments, there
will be a series of drafts, starting in July, then August, then
September; finals should be coming out beginning in, I believe,
September, for the real property transfer issue that we are
working on.
Senator Craig. Thank you.
Thank you, Mr. Chairman.
Ms. Ugone. Thank you, sir.
Chairman Byrd. Thank you.
Senator Murray.
ACCOUNTABILITY FROM U.S. CONTRACTORS
Senator Murray. Thank you very much, Mr. Chairman, for
holding this really critical committee hearing. Obviously, this
committee appropriates a lot of money, and we have a
responsibility for oversight, and I really appreciate your
taking the time to allow us to look at this closely.
I know my colleague Senator Dorgan has done an incredible
amount of work on the issue of electrocution, and is going to
focus on some of that in his questioning. And I want to thank
him publicly for his work on that. I look forward to his--your
responses to his questions.
But, let me ask a broader question to you, Secretary
England. And I understand that this contract oversight is very
difficult for our military. You're--you've been asked to fight
two wars in a period of immense transition, and I--we know the
military doesn't have the resources to carry out every task
associated with this conflict. And that is, of course, why we
do have contractors today.
Ideally, they provide a service for a cheaper amount for
taxpayers, and do it well. But, I think we're all deeply
concerned about the stories that we're hearing about tax
dollars being wasted on fraudulent billing, on dead-end
projects, on lack of accountability. And I understand that
Defense contractors don't have to respond to the same chain of
command as our servicemembers, and the oversight is difficult.
However, it's just difficult for me to believe that the DOD is
helpless in using any kind of leverage against these--in order
to secure favorable outcomes from them.
Can you tell us, or describe to this committee, what
processes or leverages you do have in order to have
accountability and make sure that tax dollars are being spent
more wisely than what we--what it appears we have been seeing?
Mr. England. Certainly, Senator.
Senator, first let me say--I mean, I firmly believe almost
all of our contractors are forthright, honest, and do a very
good job for us. The ones we hear about are the cases where
people do bad things, and that's the way it always is; you
always hear about the bad things, but there's a lot of good
things. And without the contractors, frankly, we couldn't do
these jobs that we do, in terms of DOD and for our military.
A comment about a lot of the functions that the contractors
do for us when our military is not as large as it was, but
also, it's now an All Volunteer Force, and, frankly, a lot of
these types of jobs contractors do, our military people did not
join the military to do these kind of jobs. They joined the
military to be fighters and do a military job. So, we have come
to rely on contractors. And, frankly, I believe that is
appropriate as an adjunct to an All Volunteer Force.
That said, there are always situations where people either
mis-bill--maybe deliberately, sometimes inadvertently--maybe
they don't have sufficient data. A lot of these cases are
looking for sufficient justification. It's not that they've
done something wrong, it's there's not sufficient
justification, so we need to have additional justification for
the billing.
But, we have contracts that we have DCMA, here, our audit--
not the audit agency, but our contracting, across the board,
that assists--and they can discuss this somewhat--that assists
all of our contract personnel. But, when people overbill, one,
we correct that, and we get those monies back. So, if there's
been an error, or even deliberate, we get that money back. So,
if there's an overbilling, it comes back to us.
Now, if people do something fraudulent--I mean, if they
break the law--and there are people who obviously break the
law, like they do in any other endeavor--then we do have
investigative agencies, starting with the Defense Criminal
Investigative Agency that comes under IG. And, as I've said, we
have those in all of our services.
Senator Murray. Well, yeah, I understand that. Is----
Mr. England. And we prosecute----
Senator Murray [continuing]. It is a problem--are you----
Mr. England. And we prosecute----
Senator Murray. And are we----
Mr. England [continuing]. Those people. It just----
AGRESSIVE PROSECUTION OF WRONGDOING
Senator Murray [continuing]. Aggressive about that? I mean,
I can see a case where the military is very reliant now on
private contractors to do an incredible amount of work, and
it's important--I can see a tendency for the military not to
aggressively prosecute or go after any of these contractors
because of the close reliant relationship. Should that be a
concern?
Mr. England. Senator, I hope it's not a concern. I mean,
when we know of cases of people who break the law, we have
investigations, and we work with the Department of Justice, and
we work to go prosecute those cases. I mean, I, somebody made
that comment--I guess, Senator Leahy--I mean, we do make
examples of people, so people understand that this system works
appropriately and properly. And so, we do prosecute people,
every opportunity, and when we have the information. I will
say, sometimes it's harder in a war zone, so maybe the data's
not--you know, it's harder to come by, in some circumstances.
But, I can tell you, all the discussions I've had--I mean, this
has been a very serious effort by all of our IG and
investigative agencies to make absolutely certain that we
prosecute people who have willfully done something wrong.
Senator Murray. Okay. Well, I--and I know Senator Dorgan's
going to ask about the electrical situation, but it seems like
when you've known something for that long, the question is,
Where has the aggressiveness been? But, I want to let him focus
on that question to you, unless you want to answer it really
quickly here.
Mr. England. No, I--I mean, we will talk about the--I think
Mr. Shay Assad is better qualified than I am. But, in the
electrical issue, I mean, the data is right, but not fully, I
think, understood. While there have been significant--well, 16
people electrocuted--I mean, it's for a variety of causes, and
I think it's important that we sit down and understand the
variety of causes. I mean, we do have the one case of a fellow
in the shower, but the cases are not people in showers. I mean,
people sometimes grabbing a hot electrical wire when they're in
their Humvee in the combat zone. There's people who literally
fall into electrical wires. There's people working on the
equipment. So, I think it's important to understand the source
of all that. Mr. Assad has more of that to deal with.
If there is criminal negligence, then we definitely follow
up on that. I mean, in most cases, when we investigate, we find
out----
Senator Murray. Yeah. And my question was to----
Mr. England [continuing]. That's not the case.
Senator Murray [continuing]. To the larger point, that
there's a very close relationship now between the military and
these private, very large companies, and your reliance on them
to provide essential services for our military. Does that put
the military in a tough situation in trying to prosecute any
fraud that occurs with those, because of that important
relationship?
Mr. England. Senator, I would say not. I would say that
companies themselves--they're like us, they do not want
fraudulent people on their payrolls. I mean, they want to do
the job right, because they're in business, most of these
companies, for a long time. I mean, they want to do business
with us, so they try to do a very high-quality, excellent job
for us every day. And when they have employees that break the
law or do inappropriate things, they have the same incentive we
have, to go prosecute those people. I mean, they do not want
people--I would say that's true with companies across America,
you do not want employees that are not honest and forthright,
in terms of doing their job every day. So, I think those
companies are aligned with us, in terms of prosecuting people
who break the law.
Senator Murray. Well, thank you, Mr. Chairman. My time is
up. I appreciate it.
Chairman Byrd. Senator Dorgan.
Senator Dorgan. Mr. Chairman, thank you. And thank you for
holding this hearing.
Chairman Byrd. Thank you.
Senator Dorgan. Mr. Secretary, thank you for being here,
and--appreciate all the witnesses.
POORLY EXECUTED CONTRACTS ENDANGER OUR TROOPS
I must say, I find all of this a pretty depressing
situation. We are shoveling money out the door, and have been
for a long while--almost three-quarters of $1 trillion, at this
point, with very little oversight. We've barely scratched the
surface on oversight. And the cases that I am well aware of--
you know, the--it gives me precious little confidence that
we're doing the right thing to address these issues. And I--
what I'd like to do is ask questions about several areas. I
don't know that we'll have sufficient time to get through them
all.
But, on the issue of electrocutions, two mothers came to a
hearing I held--I've held 17 hearings on these issues, only
because there are precious few oversight hearings--two mothers
came, whose sons were electrocuted in Iraq--one power-washing a
Humvee, the other taking a shower. Originally, the Army
suggested maybe the one taking a shower had taken a small
portable appliance into the shower with him. It turns out that,
of course, was not true. But, we had electricians, hired by the
company that was involved in the electrical contracting, who
left the company because they were upset about what the company
was doing. They indicated that Kellogg Brown & Root was hiring
people who were not qualified, didn't even know what basic
grounding was, and so on. The testimony was pretty depressing,
actually.
And so, it's clear that there was a lot of problems with
the electrical wiring, and the contractor that had that
contract--people have been electrocuted. And now, General
Petraeus has asked the contractor that is the subject of
allegations of shoddy work by employees who work for the
contractor--has asked that contractor to go back now and do a
review of all the wiring in Iraq.
Mr. Secretary, do you think that's an appropriate way to do
a review of what's happening, to have the contractor that's the
subject of the allegations go back and take a look at whether
the work is good work?
Mr. England. Senator, again, I'll let Mr. Assad cover this
in more detail, but my understanding is, we're not going to
just do that, we actually are going to have a group that will
go out and independently audit, at least on a sample basis, to
make sure that this work is being done appropriately. But, I
think it's also to under--I think we do need to understand,
maybe more fundamentally, how this whole system works with KBR
and also the facilities, et cetera, because they do not have
master electricians--I mean, everyone's not a master
electrician. I mean, typically the way they work anywhere--and,
I think, even here in housing and all--there would be a master
electrician, and people work for them.
That said, we are going to go audit this. We've also asked
our organizations to go off and look at other buildings and
start sampling other buildings in Iraq, not necessarily ones
that KBR contracted. A lot of the buildings were just there
when our military and personnel showed up. So, there is a lot
of independent auditing that will be accomplished to ensure the
safety of those buildings.
And perhaps I could have Mr. Assad say a few more words
about that.
But, I agree with you, we want to have absolute confidence
before our people use these facilities----
Senator Dorgan. Well----
Mr. England [continuing]. That they're safe.
Senator Dorgan. Well, was General Petraeus not--I mean, my
understanding is that General Petraeus made a decision and
issued an order that KBR should go back and do a review of all
the wiring contracted in Iraq. Is that not the case?
Mr. England. No, I believe that's the case, but I believe
that, also, the decision's been made that we will also then
have other people sample that work to make absolutely certain
it's been done correctly.
And so, can--someone else has more detail, I think, and----
Senator Dorgan. Well----
Mr. England [continuing]. Can you help me, Assad?
So, we will sample that work to make sure that it is
appropriate.
Mr. Assad. We're actually going to do two things: the
sampling that the Secretary talked about and ensuring that we
get more folks, from the Army Corps of Engineers and maybe Navy
Facilities Command, on the ground who, in fact, can oversee the
electrical work that is being done.
The principal work that KBR is doing, in the opinion of
DCMA, was that the most important thing to do was to get an
idea of what exactly was the total problem. And so, the most
immediate way to do that was to get the contractor who is
responsible for the maintenance of the buildings--most of the
buildings that KBR oversees, they didn't construct, nor have
they, frankly, done a lot of work in. They oversee the
maintenance, and the maintenance is done primarily on an on-
call basis. What we're doing is, we're changing that. In fact,
we're inspecting all of the buildings, ground up, not just for
electrical, but all safety issues, and then----
Senator Dorgan. Mr. Assad, my question--I apologize for
interrupting.
Mr. Assad. Yeah.
Senator Dorgan. I may only get one question asked, if this
is the case. My question was, Do you think it appropriate to
ask the contractor, whose own employees have turned
whistleblowers, saying that the contractor, among other things,
is hiring third-country nationals who can't do the work because
they don't know what to do, they're not skilled and qualified--
to ask that contractor to go back and review the work? I--it
just seem illogical to me.
Mr. Assad. I think it's appropriate to ensure that the
contractor has qualified folks to do that work. And then--it's
just as appropriate--and we will oversee what it is he's doing.
And, as the Secretary mentioned, on a sample basis, ensure that
those inspections that he did are, in fact, accurate.
AEY AMMUNITION CONTRACTS
Senator Dorgan. Let me go to another case, if I might. Let
me show a picture of Efraim Diveroli. This was an
embarrassment, regrettably, on the front page of the New York
Times, a 22-year-old chief executive officer of a company that
was--essentially had been a shell company of the man's father
in Florida, doing operations from behind a--an unmarked door in
Miami Beach. He's 22 years old. He's the CEO of the company. He
has a vice president that was a massage therapist, named David
Packouz, 25 years old. And so, these two folks got $300 million
in contracts. They're now--they've now been charged criminally.
But, I had Mr. Parsons in, in fact, with Mr.--with General
Mortensen, the previous Deputy Commanding General of the Army
Materiel Command, and the more I have looked at this, the more
disgusted I have become. In fact, Mr. Parsons, you indicated--
to me, I believe--that this company, AEY, looked good on paper,
and you look at companies, not individuals. In fact, you and
General Mortensen told me that even if the criminal charges
were dropped, the Army Sustainment Command could reinstate the
contract.
Let me ask a question about this. How is it that a $300
million set of contracts goes to a company that has a 22-year-
old CEO and a 25-year-old massage therapist as a vice
president, and they've done small contracting with the State
Department, and found to be unfit, and, at that point, they get
contracts for the Army Sustainment Command? Is that an
embarrassment? It should be, in my judgment.
Mr. Parsons. Sir, I'll address that. Yes, it is. After
taking more time, looking at the investigation of this, we did
find a flaw in the procurement process, in that we only require
contracting officers to do past-performance reporting on
contracts from $5 million. At the time, this company had held a
lot of smaller-dollar contracts, where they had not performed
well. That information was not in what we call our past-
performance information retrieval system. So, when the
contracting officer was making the selection of this
contractor, that poor-past-performance information was not
visible to her.
Now that we've seen that, we've seen that that is a--that's
a mistake--it's a flaw in the process. The Army has initiated
action, and so has the Office of the Secretary of Defense, to
fix that. In the future, regardless of the dollar value, if
somebody's performance results in a termination for default or
a determination for cause, that information will be, now,
included in the past-performance information retrieval system.
I'm confident that if the contracting officer had seen that
information, her decisions in that selection would have been
different.
Senator Dorgan. Well, that's a different answer than you
and General Mortensen gave to me in my office, is it not?
Mr. Parsons. Yes, it is, sir. After we had met with you, we
were still trying to gather additional data on AEY. That's when
we discovered they had a lot of small-dollar contracts. Many of
these were $3,000, $13,000, $200,000. And, again, because of
that reporting threshold requirement of only $5 million and
above, these things weren't annotated in our database.
Senator Dorgan. Yeah.
Mr. Parsons. And it is a flaw. And we appreciate your
interest in it. It identified the flaw we had in that system.
We've taken action to fix that in the future.
FAIR TREATMENT OF WHISTLEBLOWERS?
Senator Dorgan. And it just lacks common sense. I mean, it
seems to me you'd take a look at a record of a company. And
this just, on its face, looked foolish. I--you know, Mr.
Secretary, you indicated that there's a lot of investigation
going on, but, I have to tell you, I talked to you personally
about the Bunnatine Greenhouse case. We've since had a case
with Charles Smith. Bunnatine Greenhouse had the courage to
speak publicly. She said the original contracts that were
awarded over at the Corps of Engineers--she was the highest
civilian contract official in the Corps--it was the most
blatant contract abuse she had witnessed in her career.
And, incidentally, I called the person that hired her. She
was, by all accounts, a terrific contracting officer. I called
General Ballard, since retired, at home at night, and said to
him, ``General Ballard, tell me about Bunnatine Greenhouse,
because she's just lost her job for speaking publicly about
contracting abuse.'' And he said she was one of the finest
people that he had ever hired. She was replaced by a person
that had no contracting experience, and they had to send that
person to school at night to get some experience. So, she was
demoted because she spoke publicly about contracting abuse.
Now, 1 week ago--2 weeks ago, Charles Smith, who was the
contracting officer for LOGCAP III, told us he was demoted, he
lost his job--from General Johnson, by the way, who I'll
mention in a moment--he lost his job because he indicated there
was $1 billion of billing from Kellogg Brown & Root that was
unsupported, and he was going to hold up the billing. And the
folks from KBR said to him, ``That's not going to happen.'' The
next morning, he found he was demoted by General Jerome
Johnson.
So, do you understand why someone who looks----
Mr. England. So----
Senator Dorgan [continuing]. At all this and understands
it, and gets no responses, really, is----
Mr. England. So----
Senator Dorgan [continuing]. Concerned about it?
Mr. England. So, Senator--but, that's not the way I
remember it. Now----
Senator Dorgan. All right.
Mr. England [continuing]. I know you called me about the
young lady who was, at that time, talking--and I guess her name
was Greenhouse; this was, maybe, 2 years ago, I'm not sure
exactly--but, at your request, I did go back, and I had the
whole case investigated. It turns out that particular lady was
an SES, and 2 years prior to her testimony, she had gotten an
unsatisfactory or something rating. That requires, if you have
two or three of those ratings, that you be reduced to a GS-15
level. So, that action was before her testimony. I mean, it was
not as a consequence of a--reporting contract abuse. I mean, it
was before that incident.
But, I did ask the Army to investigate it. The Army IG
looked at the case. In addition, it was reviewed by another
party on--several times--because I wanted to make absolutely
certain that we were not taking action against somebody because
they were reporting issues. And I was convinced that what was
happening was fair and equitable, in terms of the ratings,
based on prior performance. So, I did not ever see a connection
between those cases. And, I'll tell you, I was very scrupulous,
in terms of working that with the Army at that time. So, I
mean, I understand we disagree on that subject, but, at least
from my point of view, I felt like we did investigate that
thoroughly to make sure there was no connection.
CHARLES SMITH ALLEGATIONS
Senator Dorgan. If I might--I know I'm taking some extra
time here; if you--if I might, I've seen all of those
performance evaluations, and they started--she had
``outstanding'' performance evaluations--they started turning
sour when the general who was heading the Corps of Engineers
had a--the top contracting officer say, ``You can't have these
companies in the room while you're talking about the kind of
contract you're going to construct for them. That's improper.''
And she began to blow the whistle. At that point, he began to
decide, ``You know what? We need to get her out of here, and so
I'll do that with bad performance reviews.''
But, even if one sets that aside, address the issue of
Charles Smith, also on the front page of the New York Times,
who was dismissed--in fact, never told he was dismissed, he
simply showed up at a meeting, and General Jerome Johnson had
replaced him overnight because he contested $1 billion in
billings he thought were inappropriate from Kellogg Brown &
Root.
General Griffin. Senator, based upon Mr. Smith's
allegations, which we take very seriously, the Department of
the Army IG is investigating that incident, and I would--I
would ask you that--once that investigation is complete, we'll
come back to you and update you on the status.
Senator Dorgan. General, I appreciate that. And if I might
just make two other comments.
As you know, we have contractors, that are doing work for
the Department of Defense, that are employing their employees
through the Cayman Islands. That is, U.S. employees being
employed through the Cayman Islands in order to avoid paying
payroll taxes. I wrote to the Secretary about that, and--I
mean, I don't know why we would hire contractors who decide
that they're going to have their employees paid through Cayman
Island subsidiaries, through a postal box, in order to avoid
paying payroll taxes. I think, simply, if I were running the
Defense Department, I'd say, ``You know what? You want to
contract with us? You hire Americans. You run' em through your
company in this country, and do it now.'' That ought to stop
immediately. That's also an embarrassment. And I just--I don't
understand why that continues.
And one more point. In this very room, General Jerome
Johnson sat at that table and testified to the Senate Armed
Services Committee that the issue--and this is just another
issue, one of a dozen or so--the issue of providing
contaminated water to the Army camps in Iraq--we know that
happened, by KBR, because of a 21-page internal report, and
that was done by Will Granger, who was in charge of that
function for the entire company, paid for by the taxpayer--he
said this was a near miss, could have caused mass sickness or
death, because they were providing water to the Army camps that
were twice as contaminated as raw water from the Euphrates
River. We had three whistleblowers from that company, an
internal report from the company, and the company--and the
Department of the Army said it never happened, it did not
happen.
So, the--we knew it happened, because we had the internal
document--in this case, from KBR--and three whistleblowers.
Never happened.
So, the Army sent General Jerome Johnson to come to that
table to tell the Senate Armed Services Committee it never
happened.
I asked the inspector general to investigate it. Took the
inspector general about 1\1/2\ years, and they issued the
report. They said it did happen, and soldiers got sick as a
result of it. And further, they said something very important.
They said, ``We notified the Department of Defense of our
interim report 3 weeks before General Johnson came to the--this
room to,'' apparently, deceive the Congress, saying it never
happened.
I don't understand all these things. I don't understand why
there wouldn't be a furious anger about contaminated water
going to the troops or about someone being electrocuted in a
shower because somebody forgot to ground a--I mean, I just--you
know, I--my point is, we are spending so much money, and we
need so much better work, in my judgment, both by the
Department of Defense and the United States Congress in
oversight. We just do. This not only fleeces the taxpayers,
what's happening, but I think it undermines and disserves our
soldiers.
You run a Pentagon, and you also--you've got a lot of folks
serving in uniform. We deeply admire them. You know, these
soldiers protect America. And I--my concern here, and my anger
about all this, is not directed at our soldiers, it is, I
think, a process that is undermining the work of our soldiers.
Mr. England. Yes, sir.
Senator Dorgan. It----
Mr. England. Senator, let me just say, I do not disagree. I
mean, look, I do not disagree. I mean, by and large, I think
all of our people and our contractors try to do what's right
for America, and there are instances where people don't do
what's right. And, in those cases, we do try, to the best of
our ability, to find out what the problem is, correct it, and
then put new processes in place so those problems won't happen
again. I think we diligently work at that, and we have an
enormous number of people who work that, in terms of our
oversight. I don't know how many tens and tens of thousands of
people just try to do that, to make this system better. I'll
tell you, that's why we're all here, to make the system better.
So, all I can tell you is, we work at this. It is our
fundamental responsibility to make the system work right. It
doesn't always work right, but we do try to fix the problems
when they are identified in a systemic way.
Senator Dorgan. But, in most cases, they deny--I mean, the
young woman whose son was killed taking a shower, she was so
upset, because they said, ``Well, maybe he took an electrical
appliance into the shower.'' That's not what happened to him.
He was killed because of bad wiring. And yet, the Army was the
one who said, ``You know, we think it was something else.''
And then, when I see General Johnson show up here and--so,
you understand my angst about this.
Mr. England. No, I understand. I mean, I hope you're
dealing with the exceptions, though, and not the way the
process works every day, Senator. I'm----
Senator Dorgan. Yeah, except that when Mr. Parsons tells me
the way they used to select companies for these contracts, and
you get a 22-year-old with precious experience, who's been
defaulting--I don't know, defaulting--but has been deemed not
to have been a good contractor on small contracts in the State
Department, and he gets a much bigger contract from DOD--I'm
saying the processes are broken and don't work, and we need to
do better.
Mr. England. And I'm telling--and I agree with you. I mean,
I think that is an embarrassment, that shouldn't happen. I
mean, I'm sort of shocked that that happened, frankly, that
that could happen in our system. And when something that
shocking happens, we take action to fix it, because it's a
great embarrassment and shock to us. I mean, look, I don't
disagree with you on that. When we have those kind of problems,
we absolutely have to fix them. And what I can tell you is, we
work every day to do that. I mean, we do work every day to do
that. I hope what you're hearing are the exceptions. By and
large, I believe the system works well, but there are
exceptions, and we work very hard to fix those.
Senator Dorgan. I think----
Mr. England. And we will continue to do that, Senator. I
mean, that's----
Senator Dorgan. When General Mortensen came to see me, I
mean, it was circle-the-wagons time, ``They did everything
right in this case. In fact, they'd do it again.'' And I said,
``Are you kidding me?'' That's unbelievable.
Mr. England. Senator, let me just make one comment. When I
was confirmed, in 2001 before the committee, I said, every
time, we will be forthright, honest, and direct with everybody
in every circumstance, and I tell this to everybody in the
Department of Defense every day--forthright, honest, and
direct, ``You have a problem, deal with it, and--just deal with
it. That's the way it is.'' So, I can tell you that is the way
we try to run this Department. If there's exceptions, we also
deal with that, because they're not acceptable to us.
Senator Dorgan. Well, you know that I like you and have
been happy to be supportive of your nominations, so it's not
about you. But, let me just--one final point.
Mr. Heddell, would you confirm that you all did the
investigation in which the Army and the contractor said nothing
happened, and, in fact----
KBR WATER ALLEGATIONS
General Griffin. We've--Senator, we've got the
investigation--I've got the--March 2007 memoranda, and I've got
it--answers to where actions were taken in each case. We've
also got the March 2008 final IG report. I've got that with me.
We've been through that.
General Johnson is being investigated by the DOD IG with
respect to your comments on his testimony. And then, at the end
of that investigation, then I would be able to tell you more
about that. But, we have the results of the IG inspection
you're talking about. I've got exactly what was done in
theater. And we've got, now, the latest report, as well.
Senator Dorgan. Mr. Chairman, thank you for holding this
hearing. Congress needs to do a lot more, and we need to expect
a lot more. And I think the Pentagon, the Army, and the
inspector general--Mr. Inspector General, you're new. You and I
have visited, but good luck on your work. We need your help
badly.
Mr. Heddell. Well, I appreciate that, Senator. And I
appreciate the conversation we had the other day. The issues
you brought to my attention, I consider very important, and I'm
addressing them.
Senator Dorgan. Mr. Secretary, thanks for your indulgence.
And, Mr. Chairman, I've well run out the clock, here, and
you and the Senator from Mississippi have been very good to let
me take the time.
Chairman Byrd. Thank you, Senator.
Mr. England. Senator, I do appreciate your comments. I do
appreciate 'em. They're helpful, and I appreciate your
comments. And I appreciate your good work. Thank you.
Chairman Byrd. By prior agreement, Secretary England needs
to leave at this time, but the other witnesses are prepared to
continue for any further questions.
Senator Cochran.
Senator Cochran. Mr. Chairman, I have no further questions.
Chairman Byrd. General Griffin, given the large dollar
amount of unaccounted-for expenditures, why has KBR been
permitted to continue to contract with the Department of
Defense?
LOGCAP IV ACQUISITION STRATEGY
General Griffin. Sir, I will attempt to answer that, and
then I will ask Mr. Parsons to also help me, here.
Chairman Byrd. All right.
General Griffin. As you're aware, we have--now have a
LOGCAP IV. And under LOGCAP IV, we have three major suppliers
of contract services. And so, we are not dependent upon a
single contractor for services, as we are today under LOGCAP
III.
We believe that, under LOGCAP IV, with three different
suppliers of services, we will be able to, number one, have a
different leverage with respect to the services that are
provided to us, and hopefully get a better product at a very
competitive price. But, we went at LOGCAP IV because of some of
the problems we were having in only having a single contractor
supplying those services.
With that, I will turn it over to Mr. Parsons, let him
specifically talk about KBR today.
Mr. Parsons. Sir, I would just add that, you know, anytime
one of these incidents is brought to our attention, where it
appears that there's some egregious act or some kind of an
issue going on with the LOGCAP contract, that we do take those
seriously and look into them.
What we tend to find when we really start peeling the
onionskin back is that there may not have been a real clarity
in the definition of the requirements, there's not always a
real clarity in the contract scope of work, in the statement of
work. And so, trying to, you know, find the KBR totally
accountable for some of these actions isn't always the case. In
fact, in many cases, it's a shared responsibility, because of
some of the work that we did on the Government side, getting
back to why we need to better train our people, we need to get
more people on board to execute this work.
And, as General Griffin said, you know, we initiated
action, back in late 2004, early 2005, to come up with a new
acquisition strategy so that we're no longer dependent upon one
single contractor. We're confident, in the future as we compete
these actions, that the competition will force better cost
control, better quality, and better performance.
Chairman Byrd. So, a good question to end on,
Senator Dorgan, you have another question?
Senator Dorgan. Mr. Chairman, just one additional question.
Maybe it's to Mr. Assad.
I described the issue of Mr. Peter--Mr. Smith, rather, who
was replaced by General Johnson the morning after the
Halliburton or KBR folks told him, ``Well, we will get this--we
will get this judgment changed.'' He was--he said there was
about a billion--$1 billion that was not justifiable, or at
least the evidence didn't--wasn't available for payment. And,
the next morning, he came to a meeting and discovered that he
was no longer in his position, he had been demoted. And it--he
discovered something else, and that was that the DCAA, the
audit agency, would also be replaced, and the auditing of that
would be done by a private contractor.
Who can tell me about why that would have happened? And my
understanding is, some of that still occurs on LOGCAP IV. But,
is the Defense Contracts Audit Agency (DCAA) not capable of
doing those audits? Why would a private company have--brought
in to do the audits, who----
RCI AUDIT ASSISTANCE
Mr. Parsons. Sir, I'll address that concern. I think you're
making reference to RCI/SERCO. They----
Senator Dorgan. Yes.
Mr. Parsons [continuing]. Did not replace DCAA in the
auditing of KBR's books. They were brought in to assist the
Government. They brought some technical expertise in to the
Government during that timeframe to determine, one, what should
a reasonable amount of money be paid for many of the costs that
had been incurred by KBR, but, more importantly, to come up
with an estimate for us, in the Government, help us develop an
estimate on what the estimate to complete that work was. So,
they did not replace DCAA, they came in to provide some
technical expertise that we just lacked in the Government,
again getting back to the importance of finding ways to
increase our personnel and increase our training so that we
develop that expertise in the future. And they're filling that
void, and, to some extent, filling that void today. But,
assuredly, we did not replace DCAA----
Senator Dorgan. I'm going to submit a list of questions on
that subject to DCAA and to you.
And we also had testimony from, oh, for example, a KBR
employee named Rory, who was a food service supervisor, saying
that they were charging for--his company was charging for
10,000 meals a day and serving 5,000 meals a day. You know, the
more public allegation, of 42,000 meals being charged every
day, when 14,000 meals were served--I don't know what the
disposition of that was, but that's 28,000-meals-a-day
overcharge.
You know, I don't--we have sent all of that over to the
DOD. Some of it goes in--I get letters back, saying, ``We're
looking into this. The Criminal Investigation Service is
looking into it.'' And some of this is 4 years old, 3 years
old, and you never hear back. And my hope is that, Mr.
Inspector General, you'll be able to take a look at some of
those older cases, because it seems to me that one of the
lessons here from Mr. Smith and Ms. Greenhouse, is, if you
speak up about this and complain about it, you're going to
quickly lose your job. And I think that's an awful lesson for
those in public service. I would hope we have people that have
the courage to say--you know what? If we've got sweetheart
contracts being awarded, we've got payments being made that
aren't supportable, I hope we've got people that are willing to
speak up. At least the two that have testified publicly did so
at the cost of their job, regrettably.
General Griffin. Senator, I would----
Mr. Parsons. Senator----
General Griffin [continuing]. Appreciate copies of anything
like that you get, and I promise you we'll sort out the
response and----
Senator Dorgan. I'll be happy to do that. And thanks--you
have just taken over the Army Sustainment Command, I believe.
Is that----
General Griffin. No, sir. Actually, General Radin took it
over, a year ago.
Senator Dorgan. Oh.
General Griffin. So, General Johnson changed command at
the--almost a year to date. So, General--Major General Radin
is----
Senator Dorgan. All right.
General Griffin [continuing]. Is the commander.
Senator Dorgan. Does General Mortensen report to you?
General Griffin. Sir, General Mortensen is--has also
retired.
Senator Dorgan. He's retired, yes.
General Griffin. And General Dunwoody replaced General
Mortensen.
Senator Dorgan. Mr. Chairman, thank you very much.
And I thank the witnesses.
General Griffin. Yes, sir.
Senator Dorgan. Thanks for being here.
Chairman Byrd. Thank you, Senator.
Mr. Heddell, in response to my second question, concerning
lost CPA funds, Secretary England referred the matter to Stuart
Bowen, our Iraq inspector general. It was Stuart Bowen who
testified before this committee in March about the lost funds.
Given that the CPA funds may have found their way into the
hands of insurgents who wish to do our soldiers harm, are you
committed to tracking down those lost funds?
Mr. Heddell. Absolutely, Mr. Chairman. That obviously--it
concerns me. I will say that, on that particular matter, the
special inspector general for Iraqi reconstruction is
investigating that. However, we're concerned about anything
along that line that we become aware of.
Now, the fact that they are looking at that, we would defer
to them to complete what they are doing so as not to confuse
the issue. But, yes, sir, we would take any action that we can
to save the American taxpayers' money; that shouldn't be
wasted, lost, stolen, or abused.
Chairman Byrd. All right.
I thank each of the witnesses for appearing before the
committee today. This committee cannot allow taxpayers' money
to be wasted or stolen, nor can we tolerate the diversion of
funds or weapons to insurgents or terrorists. Therefore, we
will continue to aggressively investigate the matter.
ADDITIONAL COMMITTEE QUESTIONS
I'd ask that all members of the committee submit statements
and questions for the record by close of business on Friday,
July 25, 2008.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Hon. Gordon England
Questions Submitted by Senator Robert C. Byrd
Question. Secretary England, in a July 2007 report, the Government
Accountability Office (GAO) found that ``unclear DOD guidance,
inadequate staff, and insufficient technology resulted in poor
accountability over 190,000 weapons provided to Iraqi security forces.
DOD concurred with GAO's recommendation to identify accountability
procedures for the program to train and equip the Iraqi security
forces. However, as of March 2008, DOD had not developed the necessary
procedures.'' Can you tell the Committee if those procedures have been
developed and implemented yet, have all of the missing weapons been
accounted for, and what additional oversight is planned to ensure that
weapons accountability continues?
Answer. The National Defense Authorization Act, 2008, Public Law
No. 110-181, Section 1228, requires the President to implement a policy
to control the export and transfer of defense articles into Iraq,
including the implementation of a registration and monitoring system.
The Department of Defense, through Multi-National Force--Iraq (MNF-I)
has implemented many policies and procedures which will help meet the
intent of this law as it comes into effect in late July 2008. First,
Multi-National Security Transition Command--Iraq (MNSTC-I) implemented
a database tracking system for weapons accountability. Following the
Government Accountability Office (GAO) report of July 2007, MNSTC-I
requested that the Department of Defense Inspector General (DODIG)
conduct an inspection in October 2007. In implementing GAO and DODIG
recommendations, MNSTC-I reconciled serial numbers of weapons and
created a weapons database. All small arms procured for the Government
of Iraq (GoI) through MNSTC-I, either from Iraqi Security Forces Fund
(ISFF) or Foreign Military Sales (FMS), are now registered by serial
number in this database, which is managed by MNSTC-I logistics
personnel. Additionally, 100 percent serial number inventories were
completed on all weapons held at Taji National Depot and Abu Ghraib
Warehouse, enabling reconciliation of the database. MNF-I has worked to
establish an unbroken chain of custody for the accountability and
control of munitions under U.S. control from entry into Iraq to
issuance to the ISF. The number of logistics and property
accountability specialists in country (in MNSTC-I, in particular) has
increased and increased security procedures throughout the chain of
custody have been implemented. MNF-I has worked with the ISF to build
their property accountability systems and structures. In July 2007,
MNF-I partnered with the ISF to establish an M-16 Biometrics Program
that links individual soldiers to the particular weapons they are
issued. Prior to weapons issue, each soldier is required to provide
biometric data in the form of a retinal scan, a voice scan, and
fingerprints. In addition, soldiers' personnel and payroll data are
verified before a weapon is issued. The final step in the process is to
take a picture of each soldier holding his new weapon with the serial
number visible. Similar biometric procedures have been implemented for
Iraqi police badge and weapon issue, as well, and the Ministry of
Interior requires policemen to present their identification card and
weapon in order to receive monthly pay. The fidelity of data and level
of detail captured in these accountability procedures are significant.
In coordination with the Iraqi Ground Forces Command (IGFC), MNSTC-
I established an Iraqi/Coalition joint inspection team in October 2007
to inspect and assess Iraqi Divisions' equipment records and verify on-
hand quantities. MNSTC-I was able to establish a baseline of where
weapons are located and provide an operational snapshot of
accountability in several Iraqi divisions. This data was utilized to
reconcile the Coalition issue log with Iraqi hand receipts and assess
the effectiveness of ISF accountability procedures.
Contractor delivery of weapons in theater has been further
regulated. Since September 13, 2007, the Joint Contracting Command
Iraq/Afghanistan (JCC-I/A) has ensured that all weapons contracts to
procure and deliver munitions include a number of clauses to increase
accountability. Contracts now require vendors and shippers to do the
following: deliver munitions to Iraq through U.S. controlled ports of
entry within Iraq; provide serial number lists electronically in
advance of any weapons shipments to Iraq; post serial numbers on the
inside and outside of weapons shipping containers; and provide en route
visibility of weapons and munitions, to include the arrival dates and
times of munitions cargo being delivered to Iraq.
Question. Secretary England, a few months ago, the Appropriations
Committee held a hearing on fraud and corruption in Iraq. Several
issues were raised relating to missing Coalition Provisional Authority
funds, but DOD's responses to these questions remain unclear. There was
the suggestion that these funds were Iraqi funds and of no concern to
the Department of Defense. However, when these funds disappeared, U.S.
taxpayers were--and continue to be--called upon to pay for Iraqi
reconstruction. Since at the time those funds disappeared the
Coalitional Provisional Authority was answerable to the Department of
Defense, I would like you to tell me the amount of Coalition
Provisional Authority assistance and reconstruction funds doled out
prior to the transition of power in Iraq that cannot be accounted for,
who is responsible for ensuring that these funds are accounted for, and
what level of confidence is there that these funds did not make their
way to insurgent groups or militias?
Answer. The Coalition Provisional Authority (CPA) funds to which
you refer are the $8.8 billion Development Fund for Iraq (DFI), and
account that includes oil export sales from Iraq, balances from the
U.N. Oil-for-Food Program, and frozen Saddam-era funds. The CPA,
operating in a high threat environment, distributed DFI money to
reconstruction projects and to Iraqi ministries.
Since December 2003, under U.N. mandate, the International Advisory
and Monitoring Board (IAMB) has served as the oversight body for the
DFI. The IAMB's July 15, 2004 audit report, after reviewing the CPA's
management of DFI funds, concluded that all known oil proceeds,
reported frozen assets, and transfers from the Oil-for-Food Program
have been properly and transparently accounted for in the DFI.
Acknowledging that CPA operated under challenging circumstances,
the IAMB report noted that the lack of oil metering and other problems
made it difficult to determine that all DFI disbursements were made for
the purposes intended.
Question. At what point does the development of information that
suggests that stolen funds may have found their way to the insurgents
or militias shift from an inspection mission to an operational issue?
Since in this case, the SIGIR can only point to their findings, it
would seem that at some point operational, intelligence, or enforcement
actions would fall to the Coalition military forces.
Answer. [Deleted].
Question. Secretary England, who specifically are the Iraqi and
U.S. officials responsible for ensuring that Iraqi oil and oil revenues
are not stolen and that oil production is metered and not diverted to
the insurgents, as has been reported by GAO and others?
Answer. The Iraqi Ministry of Interior (MoI) is responsible for
security at oil facilities. Over the past year, the MoI has
consolidated the disparate oil security entities--most recently the
Strategic Infrastructure Brigades--into as single Oil Protection Force.
This step, along with other ministry-wide reforms, will continue to
improve both professionalism and performance. In support, the Multi-
National Security Transition Command--Iraq (MNSTC-I) provides small
amounts of police equipment and training assistance.
Oversight of oil distribution and oil revenues is the
responsibility of the Iraqi Ministry of Oil (MoO) and the individual
state-owned operating companies. The MoO's metering department, which
is best positioned to identify theft and smuggling, receives training
in administration and financial accounting through USAID's ministerial
capacity building program.
Question. Secretary England, since smuggled oil may have been
funding both insurgents and terrorists over the last 5 years, I expect
that stopping this is a key priority in the Department of Defense and
therefore I expect that you should be able to answer this question:
When can we expect to see effective metering and accounting process in
place to ensure that all of the oil pumped from the ground in Iraq is
accounted for?
Answer. Oil metering is essential to achieve financial transparency
and accountability over oil resources in Iraq. The Iraqi Ministry of
Oil (MoO), which is responsible for oil metering policy, and the
individual state-owned companies, which install and use the metering
systems, all have developed timelines to install and use oil meters.
The Government of Iraq (GoI) is making slow but steady progress on
installing oil meters at terminals across the country. However, USG
advisors report that none of these timelines are being closely followed
and that it cannot be determined when all planned meters will be in
place and able to account for all of Iraq's oil.
Moreover, while the South Oil Company is using the metering system
in Al Basrah for fiscal purposes, most individual operating companies
use what meters have been installed monitor oil flow and not reconcile
accounts. The MoO gathers and summarizes reports from the individual
operating companies but does not verify the accuracy of the data or
reconcile the quantities with the records maintained by the companies.
To address these issues, USAID provides training in administration
and financial accounting to the MoO's metering department.
Question. Secretary England, because of the snail's pace at which
investigations are initiated or are moving, the statute of limitation
on many of the contracting offenses that have occurred in Iraq and
Afghanistan will soon expire. Do you support current Congressional
efforts to extend the statutes of limitation in cases involving these
war zones?
Answer. The Department of Defense strongly believes that persons
who commit crimes should be held accountable as appropriate. To the
extent that an applicable statute of limitations serves to impede that
effort, it should be extended to enable that effort to be successful.
Question. Secretary England, on July 18, 2008, just days after
Senator Dorgan held a hearing about the electrocution deaths of 13
American personnel in Iraq due to faulty electrical work, the New York
Times provided additional insight into the shoddy electrical work
performed by U.S. contractors in Iraq. The article, citing internal
Army documents, noted that in one six-month period from August 2006
through January 2007, at least 283 electrical fires destroyed or
damaged American military facilities in Iraq and killed at least 3
other soldiers. In addition to the 13 deaths by electrocution, many
more personnel have been injured, some seriously, by electrical shocks.
Internal Army reports said KBR did a study and found a ``systemic
problem'' with electrical work, although a KBR spokeswoman said the
company found no evidence of a link between its work and the
electrocutions. A Defense Contract Management Agency official, however,
testified in a sworn statement that KBR and Army officials were well
aware of the widespread electrical problems, including at the locations
where individuals were killed. How is it that these widespread problems
that rendered our troops unsafe in their own barracks were permitted to
continue for so long, and what are you doing to correct the problem,
jail those responsible for creating or permitting unsafe conditions to
exist, and recover the payments made for this defective work?
Answer. Facilities contracts for Iraq and Afghanistan that the Army
is responsible for are administered by three agencies: the Joint
Contracting Command--Iraq/Afghanistan; the Army Corps of Engineers; and
the Army Sustainment Command (a subordinate Command of the Army
Materiel Command). Each of these three contracting activities receive
their Contracting Authority from the Senior Procurement Executive, the
Assistant Secretary of the Army for Acquisition, Logistics and
Technology, Mr. Dean Popps. I have been asked to answer these questions
on behalf of the Army.
The overall responsibility for life, health and safety issues for
soldiers in Iraq within the U.S. Central Command's area of operations
(USCENTCOM AOR) rests with the Multi-National Force--Iraq (MNF-I).
AMC's involvement with electrical issues within the USCENTCOM AOR is
confined to the management of LOGCAP III contract with KBR (Kellogg
Brown and Root Services). Under that contract, KBR is responsible for
maintaining a multitude of facilities across Iraq in accordance with
the terms and conditions of the base contract and applicable Statements
of Work under specific Task Orders. The current Task Order, Number 139,
spells out the various maintenance levels for facilities to be
maintained by KBR. These levels of maintenance were established by the
customer, Multi-National Corps--Iraq (MNC-I).
Actions taken:
--As a result of SSG Maseth's tragic death, the LOGCAP Executive
Director in conjunction with DCMA (Defense Contract Management
Agency) coordinated the inspection and repair of a number of
facilities across the RPC (Radwaniyah Palace Complex).
--In addition, the LOGCAP Executive Director and the Army Sustainment
Command commander are actively engaged with MNF-I as a member
of Task Force SAFE (Safety Awareness for Fire and Electrical)
which was stood up in order to understand the electrical and
fire hazards in theater and develop the plan and critical tasks
to ensure the future safety of military and civilian personnel
in buildings and facilities in theater.
In order to ensure properly trained and certified personnel are
provided by KBR in the performance of their maintenance requirements,
the LOGCAP Procurement Contracting Officer modified the LOGCAP III
contract to clearly define the Army's expectations for properly trained
and certified personnel. This modification was issued on July 22, 2008.
Currently, there is not enough known information on defective work
on any LOGCAP contract to determine what remedies will be taken. As
current assessments are conducted, and it is determined there are
contract remedies that are appropriate these actions will be pursued.
We are working hard to document the audit trail of events that led
to these tragic events and will take appropriate action based on our
findings.
Question. Secretary England, in a recent article in the Journal of
Public Integrity, it was reported that the Army CID's Major Procurement
Fraud Unit concluded by late 2005 that for a number of reasons,
conditions in Iraq were highly conducive for fraud. Similarly, a
recently published Defense Criminal Investigative Service assessment
found that there had been only limited review of the completeness,
accuracy, and propriety of contingency payment vouchers and that there
existed the potential for fraud, waste, and abuse. While these reports
were just recently published, both examined periods of time prior to
June 2006. Over two years have passed. Can you explain what
specifically has been done in your organizations to change these
conditions and what is being done to identify and prosecute individual
cases of fraud that occurred during this period?
Answer. In June of 2006, a key problem was inconsistency by Field
Ordering Officers in the interpretation of authority for use of
Standard Form 44 purchase orders. In response, DCMA now works closely
with ordering officers to provide oversight and administration of the
contracting and ordering agreements process to include the
establishment of Task Force--Business and Stability Operations. This
Task Force reviews purchase orders on a monthly basis to ensure proper
use of and interpretation of contractual authorities.
Question. The Special Inspector General for Iraq Reconstruction
(SIGIR) has testified about one problem in contracting in which large
contracts are repeatedly ``descoped'' or scaled back by the government
so that projects can be declared complete and the contractor rewarded
although only a small percentage of the work originally envisioned has
been completed. The Army Corps of Engineers was responsible for a
number of these contracts. One notable case involved a $243 million
contract for 150 primary healthcare centers in Iraq awarded to Parsons
Global, Inc., in March 2004. By March 2006, despite the expenditure of
$186 million, only six centers had been completed and 135 were
partially constructed. The Army Corps of Engineers then issued a
``termination for convenience'' of the contract for 121 of the 135
partially completed centers, requiring the contractor to deliver only
20 of the original 150 centers, including the 6 that had already been
accepted. As of April 2007, only 15 of the now-planned 142 health
centers were completed, and only 8 were open to the public. Secretary
England, can you update the committee on the status of this program,
and can you estimate the loss to taxpayers for projects initiated in
Iraq but never completed?
Answer. We do not believe the facts show that contracts have been
repeatedly descoped or scaled back for the purpose of declaring
projects as complete or for the purpose of rewarding the contractor. In
the most part, projects have been descoped or scaled back to ensure
that projects remain within budgeted costs. In many cases, contracts
have been terminated so that more cost-effective alternatives can be
undertaken to achieve the goals of the program.
For the Primary Healthcare Centers (PHC) program, the Army Corps of
Engineers (COE) terminated Parsons for convenience due to cost overruns
caused by construction delays. The termination of Parsons has allowed
the U.S. Government to continue construction of the PHCs through firm
fixed price contracts with local Iraqi contractors.
As of August 7, 2008, COE has a new contract; 117 PHC have now been
completed and turned over to the Iraq Ministry of Health. Another two
PHCs are awaiting acceptance by the Iraq Ministry of Health. The final
target is to complete 132 centers. The last of these is expected to be
completed in September 2008. Ten centers have since been deprogrammed
due to security issues.
In a challenging and constantly changing environment such as Iraq,
there will inevitably be some projects that do not meet original goals
or cannot be completed by other means. In these cases, we work with
Iraqi officials to try to achieve the best outcome for U.S. taxpayers.
In a number of cases, the Iraqis have stepped up to complete projects
using Iraq funds. In such cases, we do not consider that they represent
a loss to the U.S. taxpayer.
Question. Secretary England, what is the number of contracts
awarded in connection with the wars in Iraq and Afghanistan that were
considered complete only because the original contract was
significantly descoped?
Answer. We have no way to readily determine to what extent, if any,
contracts awarded in connection with our operations in Iraq and
Afghanistan may have been considered complete as a result of a
reduction in scope. The Department of Defense uses the Federal
Procurement Data System--Next Generation (FPDS-NG), the database for
Federal procurement actions, to record contract actions. Unfortunately,
FPDS-NG, while collecting up to 200 separate data elements on each
contract, does not contain this specific information.
Question. Secretary England, can you tell the Committee how many
investigations are pending at the agencies you are responsible for, and
is this number the total of all investigations that have been referred
to these agencies, or just the number they can reasonably execute with
available resources?
Answer. It is my understanding that in fiscal year 2007, the DOD IG
through its Defense Criminal Investigative Service (DCIS) initiated 622
criminal investigative cases and projects. In fiscal year 2008, through
July 31, 2008, DCIS initiated 543. Presently, the DCIS has a total of
1,685 investigative actions pending, a number which closely follows
their historical trend.
Question. Secretary England, in October 2007, the report of the
Commission on Army Acquisition and Program Management in Expeditionary
Operations stated that the Army lacked the leadership and military and
civilian personnel to provide sufficient contracting support to either
expeditionary or peacetime missions. According to the Commission, Army
contracting personnel experienced a 600 percent increase in their
workload and were performing more complex tasks, while the number of
Army civilians and military in the contracting workforce had remained
stagnant or declined. As a result, post-award contract management was
rarely being done. The Commission recommended that the Army increase
the number of civilian and military personnel in its contracting
workforce by 1,400 individuals. Has the number increased, by how much,
and what more needs to be done to rectify this problem?
Answer. As a result of the Gansler Commission recommendations, the
Secretary of the Army directed the Army Materiel Command on January 30,
2008, to establish a two-star level Army Contracting Command (ACC). The
Secretary also directed the transfer of the Army Contracting Agency
from the Assistant Secretary of the Army (Acquisition Logistics and
Technology) to AMC. The ACC was established in a provisional status on
March 13, 2008 and a concept plan to implement the new command was
approved by the Army on July 15, 2008. That concept plan creates two
new commands: the Mission and Installation Contracting Command and the
Expeditionary Contracting Command which will be led by brigadier
generals and provide the leadership and focus necessary to support the
peacetime and expeditionary contracting missions. This concept plan,
when fully implemented, will provide an additional 921 civilians and
523 military personnel to improve contracting operations in contracting
organizations that execute 70 percent of all Army contracting dollars.
The ACC has established a three year plan to fill these new
requirements. To date, approximately 300 additional civilians have been
hired and the Army continues to fill authorized military positions with
the qualified personnel that are currently serving. In order to fill
the remaining military positions, we need to access additional military
personnel into the Acquisition Corps. A request for direct hire
authority is currently at OPM for consideration. The Department of
Defense has requested Congress to enact legislation that will provide
Direct Hire Authority to the Department of Defense for acquisition
personnel. The Department also requests Congressional support in
enacting legislation to authorize an increase of 5 General Officer
positions within the Army to fill contracting leadership positions. The
Department's legislative proposal for these General Officer positions
was submitted to Congress on June 27, 2008.
Question. Secretary England, I am aware of at least one case of a
U.S. company, Wye Oak Technologies, in which a U.S. contractor went to
Iraq, contracted with the Iraqi government for services amounting to
$25 million, performed the work, and never received payment. While the
contract involved Iraqi government, U.S. military officials acted as
advisors on the project. When the contract was completed, the payment
was made, in full, to an Iraqi intermediary assigned by the Iraqi
government who did not pass on any of the payment to the U.S. company.
When Wye Oak officials returned to Iraq to collect their payment, they
were murdered, and the Iraqi intermediary to whom the money had been
paid fled the country and is believed to be in Jordan.
How common is this situation, and what recourse do American
contractors have when they contract with the Iraqi government rather
than the U.S. government? Was there an investigation into this matter
and if not, why?
Answer. Wye Oak Technologies did not receive DOD funding and
therefore would not be under the Department's purview. The company in
question contracted directly with the Iraq government, who in turn
appointed the Iraqi intermediary.
Question. Secretary England, how many contractors, as a result of
their performance or practices, have been barred from future contracts
and what types of issues were involved?
Answer. Since 2005, the Army has suspended 50 individuals and
companies based on allegations of fraud and misconduct in Iraq in
accordance with Federal Acquisition Regulation (FAR) 9.407. In
addition, the Army has proposed 32 individuals and companies for
debarment under FAR 9.406, resulting in 18 finalized debarments at this
time. The Army is the Executive Agency for contracting in Iraq, and the
Army Procurement Fraud Branch monitors in-theater fraud investigations,
coordinates remedies with the Joint Contracting Command--Iraq/
Afghanistan and the Department of Justice, and recommends to the Army
Suspension and Debarment Official appropriate administrative remedies
for perfected fraud cases. The types of cases most frequently occurring
in Iraq relate to payment of bribes and kickbacks to U.S. military and
civilian personnel, theft, false claims, false statements, and
incomplete or deficient contract performance. The Procurement Fraud
Branch also has processed a limited number of product substitution
cases. Also notable are a number of actions involving the theft of fuel
by military personnel and local nationals and the payment of kickbacks
associated with management of warehouses for the Iraqi armed forces and
police, resulting in multiple suspension and debarment actions over the
past 12 months. The Department of the Navy's Acquisition Integrity
Office has placed one individual on the Excluded Parties List System
for offenses related to contracting in Iraq. That individual was a
Marine Gunnery Sergeant who entered a guilty plea at a Special Court-
Martial to two specifications of violations of Article 107 of the
Uniform Code of Military Justice (UCMJ) and three specifications of
violations of Article 134 of the UCMJ. The Air Force has debarred 11
companies and individuals. These relate to a company that was found to
have sham subsidiaries and used a non-existing company to submit
fraudulent invoices in furtherance of a scheme to overcharge the
Coalition Provisional Authority. It also includes one individual who
was found to have had a conflict of interest with respect to a
personal/business relationship with a U.S. Government contractor.
Defense Logistics Agency has had no cases involving conduct or
misconduct related to an Iraq contract.
Question. Secretary England, the recent AEY case represents all
that is wrong in defense contracting. A small, unqualified 3-person
firm with minimal experience in arms exports, either inaccurately or
fraudulently misidentified as a small disadvantaged business is awarded
a contract worth almost $300 million to supply ammunition to Afghan
security forces, even though its performance history was not very good.
AEY then goes through suspected arms traffickers to Albania to purchase
aged ammunition made in China, a clear violation of U.S. law, and
repackages it as Hungarian. It appears that the American ambassador to
Albania may have endorsed a plan to remove evidence of the Chinese
origin of the ammunition. AEY has been barred from future contracts,
and its president, Efraim Diveroli, has been indicted, but what further
efforts are underway to uncover and indict other individuals involved
in perpetrating this fraud and to improve the contractor review and
approval process?
Answer. During AMC's review of the AEY, Inc. contract award, AMC
discovered that the Procuring Contracting Officer (PCO) was not aware
of AEY, Inc.'s previous poor performance on other Government contracts.
This occurred because DOD policy did not require the reporting of a
contractor's performance on contract actions under $5 million. As a
result, there were numerous small dollar contracts where AEY, Inc. had
been terminated for cause that were not reported into the Contractor
Performance Assessment Reporting System which feeds the DOD Past
Performance Information Retrieval System. After AMC notified the
Department of the Army and the Director of Defense Procurement,
Acquisition Policy and Strategic Sourcing (DPAP) of this issue, DPAP
promulgated new policy guidance on July 23, 2008, that now requires
contracting officers to report all contracts terminated for cause or
terminated for default, regardless of dollar value, to the DPAP. This
policy change will allow a PCO to see all negative past performance
information for future actions regardless of dollar value. This was not
the case when the AEY contract was awarded.
In addition, in June 2008, the Department of Justice also indicted
three of Mr. Diveroli's business associates, including Mr. David
Packouz (Director and Vice President of AEY), Mr. Alexander Podrizki
(an agent of AEY stationed in Albania) and Mr. Ralph Merrill (a
business associate who provided financial and managerial assistance to
AEY). AMC began working with law enforcement agencies on AEY more than
12 months prior to these indictments.
To preclude some of these problems in the future, the Commander,
Joint Munitions and Lethality, Life-Cycle Management Command formed a
Non-Standard Ammo Task Force (NSA-TF), with members from all key
organizations, to implement policy and command guidance. To date we
have accomplished the following:
--Developed general specifications for non-standard ammunition that
provides among other things criteria for technical data package
identification, quality assurance requirements, reliability
thresholds, test requirements, and packaging/transportation
requirements. PEO Ammo also has created a database of technical
data (commercial & WARSAW specs), performance parameters,
sources of manufacture, etc. for Non-Standard Ammunition (NSA).
--The Defense Contract Management Agency (DCMA) is conducting Source
inspection at both CONUS and OCONUS sites. Point of inspection
can be either a depot/staging area or the place of manufacture.
The DCMA will have ``eyes on'' the NSA prior to it being
delivered into the theatre.
--We are conducting theater visits to work the new specifications/
standards/procedures with all the parties in the theater
involved.
--We held an industry day with over 20 companies to get industry
feedback on the generic specification concept and requirements.
--We created a database of all current NSA contracts specifying item,
delivery dates, location and place of manufacture ensuring
efficiency of inspection prior to shipment to theatre.
--We arranged for a team of subject matter experts (SMEs) to tour
Arsenal Inc., in Bulgaria who is a major supplier of NSA. The
TF will visit other major NSA suppliers as well.
--We are working to stand-up a Product Director's office within
Program Executive Office for Ammunition to manage NSA issues
and concerns. We expect this office to implement the
appropriate program discipline and execution that we have with
our US programs.
--We are working with outside agencies like DCMA, who provide QA/QC
before and after the contract, to share lessons learned.
Question. Secretary England, what changes have occurred in the
organizations under your command to improve contract management and
oversight, and do you require any legislative assistance to meet your
workload or to improve your operations?
Answer. The Department has taken a myriad of actions, spanning the
domains of policy, doctrine, organization, training, material,
leadership, education, and personnel, to better manage contracted
support in deployed operations. These efforts are being overseen at the
enterprise level, with broad participation of the Military Departments,
Defense Agencies, and Joint Staff, to ensure the Department derives
holistic solutions. Key actions are detailed in the report to Congress
on the Department of Defense Program for Planning, Managing and
Accounting for Contractor Services and Contractor Personnel during
Contingency Operations that was submitted in April 2008 in response to
section 854 of the National Defense Authorization Act for Fiscal Year
2007 (NDAA-07) and the report to Congress on the Department of Defense
Task Force on Contracting and Contractor Management in Expeditionary
Operations that was submitted in response to section 849 of NDAA-08.
In its October 2007 report, the Commission on Army Acquisition and
Program Management in Expeditionary Operations (the ``Gansler
Commission'') expressed concern about post-award contract management in
theater. At the time, in-theater contracting resources were focused on
awarding contracts, primarily due to staffing constraints. Since then,
the Department has made much progress on this issue. Based on a
December 2007 workload and resource analysis conducted by the Joint
Contracting Command--Iraq/Afghanistan (JCC-I/A) and the Defense
Contract Management Agency (DCMA), DCMA significantly increased its
personnel in-theater to meet the current contract management and
oversight needs. In June 2008, JCC-I/A and DCMA re-evaluated the
resources needed in theater to provide theater-wide contract
administration. A Joint Contracting Command Joint Manning Document has
been put into place, and the Military Departments are in the process of
taking over about half of those positions. In addition to resource
analysis, the Department has been working with key organizations
responsible for large (over $1 million) in-theater contracts for
services for purposes of sharing data, lessons learned, and business
rules to enable effective conduct of post-award administration in the
theater of operations.
Question. Secretary England, are you aware of any White House
involvement or queries in the Halliburton or KBR contract awards?
Answer. I am not aware of any White House involvement in the
Halliburton or KBR contract awards.
Question. Secretary England, we keep hearing that Halliburton and
KBR were the only companies with the necessary infrastructure to
perform the original massive Iraq support contracts. However, once
Halliburton and KBR were awarded the contracts, they then went out and
subcontracted or hired everyone to perform the contract. Could those
contracts have been bid as multiple smaller contracts, allowing more
qualified companies to participate?
Answer. In the case of LOGCAP III, MNC-I is the primary customer
for contract requirements generated in Iraq through their Joint
Acquisition Review Board (JARB). The JARB process is designed to find
alternate ways to satisfy requirements before resorting to LOGCAP. This
includes the execution of smaller ``theater'' level contracts issued by
the Joint Contracting Command--Iraq/Afghanistan. While many
requirements have been executed through ``theater'' level contracts,
MNC-I continues to rely upon LOGCAP in the execution of their larger
contract requirements, in part, because the LOGCAP prime contractor
plays a critical role by integrating and overseeing the complementary
efforts of many subcontractors. With the recent award of three
performance contracts in support of LOGCAP IV, the Army, working with
its customers, will begin executing new contract requirements through
the competition of task orders amongst three contractors. The size of
the requirements for each contract will still be determined by the
customer.
Question. Secretary England, we have received reports that
companies contracting with DOD are off-shoring their assets and hiring
to avoid providing benefits to U.S. citizens and paying payroll,
unemployment, Medicare, and income taxes. In many cases, these hiring
practices are deceptive, with the employee believing that he is working
for a U.S. company. We have also heard that DOD condones this practice
as a cost saving matter. The fiscal year 2009 National Defense
Authorization bill will make it unlawful for companies engaging in this
practice to receive an unfair competitive advantage because of this
practice. Other proposals would ban these companies from contracting
with DOD.
Do you support these legislative measures and if not, why?
Answer. While we understand the concern expressed by the committee
regarding the practice of U.S. companies using off-shore subsidiaries
to avoid certain taxes and costs, the manner in which a corporation
organizes itself for tax purposes is not within the control of the
Department of Defense. We note, however, that section 302 of the
``Heroes Earnings Assistance and Relief Tax Act of 2008,'' Public Law
110-245, enacted on June 17, 2008, closes many of the off-shore tax
``loopholes'' identified by the committee. Section 302 will require
that any foreign entity that is part of a U.S. ``controlled group'' (as
defined for tax purposes) and that has employees performing services
under a contract with the U.S. government, shall be treated as an
American employer for purposes of FICA and Social Security taxes.
Incorporating a subsidiary off-shore will no longer allow companies to
avoid these employment taxes on U.S. government contracts. This
provision should abrogate the necessity for language in the DOD
authorization legislation.
______
Questions Submitted by Senator Byron L. Dorgan
Question. At the hearing, you stated that you had determined that
Bunnatine Greenhouse's demotion stemmed entirely from poor performance
reviews that she received prior to her becoming a whistleblower.
Were you aware that that those poor performance reviews initiated
when Ms. Greenhouse began to internally challenge contracting
improprieties in the Pentagon, beginning in 2002?
Answer. Ms. Greenhouse was employed by the Army Corps of Engineers
and the Army is unable to respond to this question because this matter
is in active litigation at the Department of Justice.
Question. How do you reconcile Ms. Greenhouse's excellent
evaluations for years after her appointment by General Ballard to the
much different evaluations she received in the ramp-up to the Iraq war?
Answer. Ms. Greenhouse was employed by the Army Corps of Engineers
and the Army is unable to respond to this question because this matter
is in active litigation at the Department of Justice.
Question. In your consideration of Ms. Greenhouse's case, did you
consult with the officers who had written Ms. Greenhouse's excellent
performance reviews from 1999 to 2002?
Answer. Ms. Greenhouse was employed by the Army Corps of Engineers
and the Army is unable to respond to this question because this matter
is in active litigation at the Department of Justice.
Question. Quite apart from the question of whether Ms. Greenhouse
suffered retaliation for being a whistleblower, how do you respond to
her core allegations that KBR received inappropriate favoritism in the
awarding of the RIO contract, as described in her testimony of June 27,
2005?
Answer. There was no inappropriate favoritism exercised in the
awarding of the RIO contract and all requirements of the Federal
Acquisition Regulation (FAR) were strictly followed. KBR was determined
to be the only contractor in a position to provide the services within
the required timeframe given classified prewar planning requirements.
Both the acquisition strategy and the supporting source selection plan
were thoroughly reviewed and approved by various Army officials. In
separate reviews, both the Government Accountability Office (GAO) and
the Special Inspector General for Iraq Reconstruction (SIGIR) have
found that the sole source justification and approval was properly
conducted.
The RIO contract was always intended to be a bridge to a
competitive contract award arrangement and was structured accordingly.
In fact, the follow-on contracts were competitively awarded in January
2004. Task orders issued under the RIO contract were restricted to work
required in the near term, leaving as much as possible for performance
under the competitively awarded contracts. KBR's performance under the
RIO contract has no relationship with their efforts under the LOGCAP
contract.
Question. At the hearing, you testified that the Army would send
``a group that will go out and independently audit, at least on a
sample basis,'' the electrical work that KBR is doing. Mr. Assad added
that this would include personnel from the Army Corps of Engineers and
possibly Facilities Command.
Please state how many Army personnel you plan to send to Iraq and
Afghanistan to supervise the electrical work that KBR is assigned to
do.
Answer. For technical clarification, the Department of Defense does
not supervise the work effort of KBR personnel; this is the
responsibility of KBR management, acting in its capacity as an employer
to its personnel or as a contractor to its subcontractors. The
Department of Defense performs quality assurance oversight of KBR's
contract support operations under the Logistics Civil Augmentation
Program (LOGCAP) contract.
The Multi-National Force--Iraq (MNF-I) recently established Task
Force--SAFE (Safety Action for Fire and Electricity). The Task Force
(TF) SAFE mission is to assess and analyze fire and electrical safety
issues, and to direct action to reduce risk throughout the MNF-I area
of operations.
TF SAFE is developing action plans to reduce the risk of
electrocution, shocks, and electrical fires. Part of this effort
involves an assessment of resources needed to address overall fire and
electrical safety, which includes the numbers of government
representatives available to monitor electrical work performed by KBR
or other contractors in theater. The U.S. Army Corps of Engineers is
now working with MNF-I to quantify and furnish the projected resource
needs to support the overall TF SAFE mission. The Army expects to use
both internal personnel and contractor support to staff these resource
requirements.
Question. Please describe the sampling methodology being used for
this audit.
Answer. Task Force Safety Action for Fire and Electricity (SAFE)
will inspect all buildings to a point where a baseline is established
for proper applications of grounding and bonding procedures, and
adherence to electrical codes. The inspection sampling plan will be
based upon the relative occurrences of noted non-conformance and the
unit prioritization scheme while considering occupancy and operational
importance.
Question. Please quantify the ratio of KBR personnel doing
electrical work to Army personnel supervising that work.
Answer. For technical clarification, the Department of Defense does
not supervise the work effort of KBR personnel; this is the
responsibility of KBR management, acting in its capacity as an employer
to its personnel or as a contractor to its subcontractors. The
Department of Defense performs quality assurance oversight of KBR's
contract support operations under the Logistics Civil Augmentation
Program (LOGCAP) contract.
The fluid environment and changing requirements in Iraq render it
difficult to establish the ratio of government to contractor personnel
with accuracy. Additionally, as indicated in response to a previous
question, the U.S. Army Corps of Engineers is currently working with
the Multi-National Forces--Iraq (MNF-I) to quantify projected resource
needs to support the Task Force SAFE (Safety Action for Fire and
Electricity) mission with government and contractor personnel to
perform electrical and fire inspection oversight. Current information
indicates that KBR has approximately 847 electrical positions in the
U.S. Central Command (CENTCOM) area of responsibility.
Question. As I mentioned earlier in the hearing, the Department of
Defense Inspector General conducted a survey of U.S. troops in Iraq
with respect to water quality problems, which helped to determine that
KBR had improperly treated and tested water at multiple U.S. military
facilities in that theater. The IG visited four military installations
and conducted a survey of hundreds of troops.
Have you conducted, are you conducting, or do you plan to conduct a
similar survey of U.S. troops in Iraq to determine the incidence and
frequency of electrical shocks (whether fatal or non-fatal) experienced
by U.S. troops and civilians in Iraq?
Answer. It is my understanding that the Inspector General of the
Department of Defense is not currently engaged in nor are they planning
to conduct a survey to determine the incidences and frequency of
electrical shocks experienced by U.S. troops and civilians in Iraq.
Such a review would not be the best use of resources, because the risks
associated with the electrical infrastructure within Iraq is already
known.
The Department recognizes that additional work needs to be done to
correct these issues. We have initiated the following actions to
mitigate the risks to troops and civilians in Iraq:
(The DOD IG does not have a complete or current list of actions
initiated by the Department regarding electrocutions; however, we do
know that work is ongoing. Below are excerpts from testimony that
occurred last month, suggest contacting these organizations for updates
on what is ongoing.)
SAC, 7-23-2008
Part of a question raised by Senator Dorgan, during a SAC
hearing on contractor oversight in Iraq and
Afghanistan
``it's clear that there was a lot of problems with the electrical
wiring, and the contractor that had that contract--people have been
electrocuted. And now, General Petraeus has asked the contractor that
is the subject of allegations of shoddy work by employees who work for
the contractor--has asked that contractor to go back now and do a
review of all the wiring in Iraq.''
SAC, 7-23-2008
Deputy Secretary England response to a question raised by
Senator Dorgan regarding ongoing reviews of
electrical systems in Iraq.
``my understanding is, we're not going to just do that, we actually
are going to have a group that will go out and independently audit, at
least on a sample basis, to make sure that this work is being done
appropriately.''
``We've also asked our organizations to go off and look at other
buildings and start sampling other buildings in Iraq, not necessarily
ones that KBR contracted. A lot of the buildings were just there when
our military and personnel showed up. So, there is a lot of independent
auditing that will be accomplished to ensure the safety of those
buildings.''
SAC, 7-23-2008
Comments made by Shay Assad, Director, Defense Procurement
in further response to a question raised by Senator
Dorgan.
``We're actually going to do two things: the sampling that the
Secretary talked about and ensuring that we get more folks, from the
Army Corps of Engineers and maybe Navy Facilities Command, on the
ground who, in fact, can oversee the electrical work that is being
done.
The principal work that KBR is doing, in the opinion of DCMA, was
that the most important thing to do was to get an idea of what exactly
was the total problem. And so, the most immediate way to do that was to
get the contractor who is responsible for the maintenance of the
buildings--most of the buildings that KBR oversees, they didn't
construct, nor have they, frankly, done a lot of work in. They oversee
the maintenance, and the maintenance is done primarily on an on-call
basis. What we're doing is, we're changing that. In fact, we're
inspecting all of the buildings, ground up, not just for electrical,
but all safety issues . . .''
HOGR, 7-30-2008
Opening Remarks of Jeffrey P. Parsons, Executive Director,
Army Contracting Command, U.S. Army Materiel
Command during HOGR hearing on electrical
deficiencies in Iraq.
``We are also aware that there were previous contracts for the O&M
of this facility prior to the task order issued under LOGCAP III. The
U.S. Army Corps of Engineers awarded three previous contracts starting
in November 2003 that required the O&M of the facilities.
Knowing that there were additional contracts requiring O&M of
facilities in Iraq, we are in the process of identifying the scope of
their contractual requirements. This review should provide us with a
holistic picture. The electrical issues in Iraq involve more than just
the LOGCAP III contract.
As a result of our investigations, we have taken a number of
corrective actions. We are working with the U.S. Army Corps of
Engineers to obtain additional expertise in the oversight of electrical
work by our contractors.
Furthermore, we are working with the Corps of Engineers, DCMA, and
the customer to develop a plan to conduct inspection verifications of
those buildings recently inspected by KBR for life, health, and safety
issues. We will utilize a third party to validate those inspections.
The LOGCAP program director also met with KBR officials to discuss
their hiring practices and requirements for electricians to include
certification requirements. Following this meeting, the contracting
officer issued a contract modification to the LOGCAP III contract on
July 21, 2008, to more clearly specify personnel and certification
requirements.
KBR was also directed to submit a ``Trades Certificate and
Validation Plan'' to the government describing the process they will
use to recruit, train and retain qualified personnel. The plan must
address the criteria through which personnel, including non-U.S.
citizens, will be qualified and/or certified as a master, journeyman or
apprentice, and the proposed schedule for implementing the plan. This
requirement is also applicable to all subcontractors.''
Question. Are you conducting any such survey in Afghanistan?
Answer. It is my understanding that the Inspector General of the
Department of Defense is not currently engaged in nor are they planning
to conduct a survey to determine the incidences and frequency of
electrical shocks experienced by U.S. troops and civilians in
Afghanistan.
Question. You testified that KBR typically ``does not have master
electricians,'' and hires a number of lesser qualified electricians. We
understand that in the case of Staff Sergeant Ryan Maseth, the shower
facility in which he was electrocuted had been the subject of numerous
prior complaints of electric shocks. We further understand that KBR
sent third-country nationals to fix those problems, and that KBR and
the Army could not say whether these workers were certified
electricians or not.
Please describe the qualifications of each KBR employee who
performed electrical work at the camp where Sergeant Masseth was
electrocuted.
Answer. There were ten KBR electricians that worked on electrical
projects on the camp. The information received from KBR described the
electricians from the employee resumes as follows:
--Former work experience as an electrician.
--Texas Electrical License; Journeyman license; apprenticeship
program with Electrical Training Center.
--Attended Universal Technical Institute; former experience as
journeyman.
--U.S.C.G. Class A Electrician Mate School; former work experience as
an electrician.
--Certificate of 720 hours of basic electricity; former work
experience as an electrician.
--Master and journeyman license; graduated from a technical college;
possesses Electrical Contractor SC License; former work
experience.
--4 year apprenticeship; former work experience as journeyman.
--California state certified journeyman; graduated from Associated
Builders and Contractors; former work experience as an
apprentice and journeyman.
--Direction of studies--Technical Electrician, High Voltage. Former
work experience.
--High School degree. ``Electro-technical IV degrees''.
From this information it appears there was one Master Electrician,
four with ``journeyman'' experience and nine with former work
experience as an electrician.
Question. To the extent that KBR typically does not have master
electricians, please explain the basis for continuing to rely on KBR
for electrical maintenance in Iraq.
Answer. DOD continues to utilize KBR as one contractor to perform
electrical work in the AOR because they utilize experienced
electricians. Standard procedure in the United States, as well as in
Iraq, is to have one Master Electrician per site. Master Electricians
are supervisory and do not normally perform the hands-on electrical
work as this type of work is accomplished by Journeyman and Apprentice
Electricians. All ten employees performing electrical work at the camp
where Sergeant Masseth was electrocuted were electricians: A review of
the qualifications of the Apprentice Electricians indicated that they
were just as or more qualified than the normal Apprentice Electricians
utilized in the United States.
Question. Please identify how widely the Army distributed KBR's
February 10, 2007 report about electrical problems at U.S. facilities
in Iraq--specifying command levels and individuals notified.
Answer. We understand the question to refer to the KBR electrical
department technical inspection (TI) performed on the Radwaniyah Palace
D9. We are unable to identify distribution of this TI beyond the scope
of KBR, the Logistics Civil Augmentation Program (LOGCAP) contract
support operations within the Army Sustainment Command (ASC), the
Defense Contract Management Agency (DCMA), and most recently, the DOD
and Congressional investigative bodies looking into matters related to
the January 2, 2008 electrocution incident.
In general, technical inspection (TI) reports under the LOGCAP
contract cover electrical, heating/ventilation/air conditioning (HVAC),
plumbing, carpentry, and structural assessments. Technical inspections
are generally done on two occasions: new work and maintenance level
changes. When a unit requests support, the LOGCAP contractor prepares a
TI, which is the basis for a Project Planning Estimate (PPE). The PPE
is submitted to the requesting unit and the Army Sustainment Command
(ASC) Logistics Support Officer to support government approval and
funding determinations.
Question. To the extent that such notification has taken place,
please describe what steps U.S. troops and civilian personnel have been
advised to take in order to detect an electrical hazard.
Answer. Incoming military personnel receive required fire and
electrical safety and reporting procedures briefings upon checking in
at reception bases in theater. Training examples include do's and
don't's of electrical and fire safety, contact numbers and methods for
fire, police and ambulance assistance and specific safety issues unique
to each location. Training also includes essential personal safety
activities such as the safe use of power strips, reducing local
electrical loads when equipment is not in use, practices to reduce the
likelihood of fires due to electrical equipment failures and how to
recognize defective or counterfeit equipment. Currently there is a
theater-wide education program being simultaneously presented through
the chain of command and safety channels. Units are required to report
all electrical and fire incidents to a centralized group in order to
analyze the information and make corrective actions through education,
training, contracting, materiel, or command actions. Safety products
are presented to commanders as well as being presented on Armed Forces
Network (AFN) radio/TV, local newspapers (regular and special
editions), computer screen savers, placed in living and work areas as
well as dining facilities. The campaign will continue to mature as
root-cause analysis shows areas of improvement in behaviors, policies
or electrical construction.
Question. Provide examples of any such written notification.
Answer. The most recent examples are found in the August 22, 2008
Multi-National Force--Iraq (MNF-I) Safety Bulletin. A copy is provided.
Question. In hindsight, is there anything that the Pentagon would
have done differently with respect to the contracting out of electrical
maintenance at U.S. military facilities?
Answer. Hindsight will always allow room for improvement as further
assessment has proven regarding electrical safety issues. Based on the
discussion and analysis performed by the MNF-I established 2-star Task
Force (TF)--SAFE (Safety Action for Fire and Electricity) there are
various ways to reduce future risk.
The TF will continue to work on developing and implementing action
plans aimed at reducing the risk of electrical accidents. For instance,
the U.S. Army Combat Readiness Center from Fort Rucker, AL recently
deployed a team to promote an independent risk management assessment.
We are awaiting results and in the interim, MNF-I is taking action
along three lines of operation: Awareness; Plans, Policies and
Standards; and Facilities. Leaders at every level are focused on
finding and correcting conditions such as overloaded circuits.
Commitment to awareness on hazard mitigation will significantly reduce
risks. We are continuing to work on promoting safety tips focused on
fire and electrical safety to multiple media outlets, including Armed
Forces Network radio, unit newspapers and other Command Information
channels. We will continue to establish and eventually implement a
baseline electrical code for the theater. The Department is going to
continue to look for ways to promulgate future risk. We are committed
to government oversight capability and building an inspection system
focused on life-saving measures.
Question. In hindsight, were the 16 known deaths of U.S. military
and civilian personnel in Iraq due to electrocution preventable?
Answer. Based on initial DOD IG review, the 16 electrocutions were
preventable accidents. Nine of the 16 cases involved contact with power
lines during military or construction operations. In some of these
cases, the contact was inadvertent. In other cases, Servicemembers
moved obstructive power lines by hand, apparently without knowing that
the lines were electrified.
The remaining 7 electrocutions occurred while Service members were
making electrical repairs and/or resulted from improper grounding of
electrical equipment. In four of these cases, individuals were working
with or attempting to repair electrical appliances (e.g., air
conditioner, generator, power washer). In the remaining three cases,
systems became electrified due to equipment failure coupled with lack
of proper grounding. The DOD IG is still reviewing the circumstances of
these 7 cases at the request of the House Oversight and Government
Committee.
Question. Please identify the number of U.S. military and civilian
personnel in Afghanistan who have died due to electrocution.
Answer. There are no U.S. military and civilian personnel in
Afghanistan who have died due to electrocution.
______
Questions Submitted by Senator Frank R. Lautenberg
Question. Earlier this year, I wrote a law to establish a special
inspector general devoted to reviewing U.S. assistance to Afghanistan.
In May, President Bush appointed Major General Arnold Fields to the
post and last month, $7 million was appropriated for the office. Has
this office begun its work? If not, when will this office begin
operating?
Answer. The DOD OIG is working with the Special Inspector General
for Afghanistan Reconstruction in commencing its mission. The Special
Inspector General for Afghanistan Reconstruction will be included in
the next update of the Comprehensive Audit Plan for Southwest Asia. The
planned oversight work of the Special Inspector General for Afghanistan
Reconstruction will be included along with the planned work of the
respective oversight Agencies with Afghanistan related oversight
responsibilities. In addition, the Special Inspector General for
Afghanistan Reconstruction is invited to attend the August 20, 2008,
Southwest Asia Joint Planning Group, which will facilitate being
apprised of ongoing and planned Afghanistan related oversight efforts
as well as integrating the Special Inspector General for Afghanistan
Reconstruction into the future oversight of Afghanistan efforts.
Question. Last month, Charles Smith, a contracting official who was
removed from his position as the Director of the Army's field
Contracting Division after objecting to paying KBR over $1 billion in
questionable costs spoke out publicly for the first time. This is the
second high profile demotion of a whistleblower exposing KBR's
outrageous overcharges. Will you commit to ensure an environment at DOD
where employees are free to report waste, fraud and abuse without
putting their jobs at stake?
Answer. I support the effective implementation of whistleblower
protection laws. I am committed to creating an environment in which
service members, civilian employees, and contractors feel free to
report allegations of waste, fraud, and abuse without fear of reprisal.
I also support the role of the Inspector General to accept such
allegations and encourage anyone with knowledge of waste, fraud, or
abuse to report that to the Inspector General. Information can be
provided to Service Inspectors General or to the Inspector General of
the Department of Defense's Hotline at 800-424-9098 (e-mail:
[email protected]).
Question. What mechanisms are being implemented to ensure that
whistleblowers are not being retaliated against?
Answer. Our most effective means to prevent whistleblower
retaliation is to proactively expand awareness of the protections
available. The DOD Directives that implement 10 U.S.C. 1034 and 10
U.S.C. 1587 charge the Military Departments with the responsibility to
disseminate information regarding whistleblower protections; and we
recently requested that 10 U.S.C. 2409 be amended to include the
requirement to inform Defense contractor employees in writing of their
protections against retaliation for reporting wrongdoing. In addition,
the IG, DOD, distributes posters for display in IG offices service-wide
that provide contact information for reporting wrongdoing or
retaliation; and in every workshop we present on the standards for
conducing reprisal investigations, the IG, DOD also reminds the Service
IG representatives of their responsibilities to help their commanders
avoid even the appearance of retaliation.
The Inspector General, Department of Defense (IG, DOD) has the
statutory responsibility for conducting and overseeing whistleblower
reprisal investigations submitted by members of the Armed Forces (10
U.S.C. 1034), Defense contractor employees (10 U.S.C. 2409), and
nonappropriated fund employees (10 U.S.C. 1587). Although the majority
of military reprisal investigations are conducted by Service IGs, the
IG, DOD is the final approval authority and ensures the investigations
are thorough and unbiased.
For most civilian appropriated fund employees, the U.S. Office of
Special Counsel has jurisdiction for investigating whistleblower
reprisal complaints under Title 5 U.S.C. 2301 and 2302. However, Title
5 does not provide whistleblower protections for employees of certain
intelligence agencies. To provide whistleblower protections for
employees of DOD intelligence agencies, as well as for other DOD
civilian appropriated fund employees, the IG, DOD, has accepted
complaints for administrative investigation under Section 7 of the IG
Act, as amended (5 USC Appx. 7(a), (c)).
______
Questions Submitted by Senator Mitch McConnell
Question. Does the Navy stand by its fiscal year 2009 budget
request for the DDG 1000? If not, what are the reasons for the change
in the Navy's position (both from the perspective of cost and of
military requirements)?
Answer. The Navy's plan is to complete construction of the DDG 1000
ships currently under contract and the third DDG 1000 included in the
President's fiscal year 2009 budget submission. This plan will provide
stability for the industrial base and continue the development of
advanced surface ship technologies such as radar systems, stealth,
magnetic and acoustic quieting, and automated damage control.
Further, the Navy intends to reprogram funds to support DDG 51
class material procurement and related planning activities in fiscal
year 2009. This will provide the dual benefits of buying additional
spares at an economical price while also protecting future options for
restarting DDG 51 production.
Question. Does the DDG 1000 class destroyer have greater capability
than the current DDG 51 destroyer with regard to land attack
operations, integrated power systems, radar suites and other key
technologies?
Answer. The way ahead for surface combatant production in fiscal
year 2010 and beyond will be determined by the Department of Defense's
continuing assessment of existing and evolving threats, ensuring that
it delivers those capabilities best suited to meet our national
security needs both now and in the foreseeable future. This will
include, but not be limited to, defense against missile threats and the
challenging requirement to operate in littoral environments. As the
Department of Defense develops its fiscal year 2010-2015 budget, all of
these considerations will be weighed to ensure we build the right Navy
for the future.
Question. Concern has been expressed that cost overruns for DDG
1000 might adversely affect the Navy's shipbuilding plan, and that
restarting the DDG 51 program would pose less risk. Is that the Navy's
position? If so, how would the risk associated with the DDG 51 be less?
Answer. The Navy's plan is to complete construction of the DDG 1000
ships currently under contract and the third DDG 1000 included in the
President's fiscal year 2009 budget submission. This plan will provide
stability for the industrial base and continue the development of
advanced surface ship technologies such as radar systems, stealth,
magnetic and acoustic quieting, and automated damage control.
Further, the Navy intends to reprogram funds to support DDG 51
class material procurement and related planning activities in fiscal
year 2009. This will provide the dual benefits of buying additional
spares at an economical price while also protecting future options for
restarting DDG 51 production.
The way ahead for fiscal year 2010 and beyond will of course be
determined by the Department of Defense's continuing assessment of
existing and evolving threats, ensuring that it delivers those
capabilities best suited to meet our national security needs both now
and in the foreseeable future. This will include, but not be limited
to, defense against missile threats and the challenging requirement to
operate in littoral environments. Acquisition risk will also be an
important consideration. As the Department of Defense develops its
fiscal year 2010-2015 budget, all of these considerations will be
weighed to ensure we build the right Navy for the future.
Question. Restarting the DDG 51 production program would appear to
pose some logistical drawbacks such as the unavailability of parts and
equipment obsolescence. If the Navy is giving serious consideration to
restarting the DDG 51, how does the Navy intend to ameliorate these
potential concerns?
Answer. The Navy's plan is to complete construction of the DDG 1000
ships currently under contract and the third DDG 1000 included in the
President's fiscal year 2009 budget submission. This plan will provide
stability for the industrial base and continue the development of
advanced surface ship technologies such as radar systems, stealth,
magnetic and acoustic quieting, and automated damage control.
Further, the Navy intends to reprogram funds to support DDG 51
class material procurement and related planning activities in fiscal
year 2009. This will provide the dual benefits of buying additional
spares at an economical price while also protecting future options for
restarting DDG 51 production.
The most significant vendor issue for a restart is the DDG 51
reduction gear which would be about 50 weeks longer than the
traditional reduction gear fabrication. However, both shipbuilders have
indicated to the Navy that the lead time challenges inherent in
restarting the production of DDG 51 Main Reduction gear sets can be
mitigated with advance procurement and an adjusted build sequence.
Regarding the combat systems, the last production contracts were
awarded in 2006. The cost and ease of restarting those production lines
is a function of time, and parts availability on military specification
items.
The way ahead for fiscal year 2010 and beyond will of course be
determined by the Department of Defense's continuing assessment of
existing and evolving threats, ensuring that it delivers those
capabilities best suited to meet our national security needs both now
and in the foreseeable future. This will include, but not be limited
to, defense against missile threats and the challenging requirement to
operate in littoral environments. As the Department of Defense develops
its fiscal year 2010-2015 budget, all of these considerations will be
weighed to ensure we build the right Navy for the future.
______
Question Submitted by Senator Wayne Allard
Question. During a hearing before this Committee earlier this year,
it was said that integrated plans between the DOD, Iraqi ministries,
and other U.S. agencies was lacking. The absence of a comprehensive
plan created waste and a misuse of funds.
Since then, what steps have you taken to address the integration of
agencies? Is there now a comprehensive strategy that eliminates some of
those loopholes that you were facing?
Answer. In March 2008, to further leverage the improved security
situation, the U.S. Department of State appointed Ambassador Lawrence
Benedict as Coordinator for Anti-Corruption Initiatives. As an Advisor
to Ambassador Ryan Crocker at U.S. Embassy Baghdad, Ambassador Benedict
is responsible for integrating U.S. Government support to the
Government of Iraq's anti-corruption efforts.
Through the Office of the Coordinator for Anti-Corruption
Initiatives, staff from the Department of State, Multi-National
Security Transition Command--Iraq (MNSTC-I), USAID, and Ministry of
Interior (MoI) and Ministry of Defense (MoD) Inspectors General have
improved coordination on anti-corruption efforts, including inspections
and audit trainings.
USG and GoI planning for a comprehensive Iraqi anti-corruption
strategy that eliminates redundancies, fraud and waste is currently
underway. As part of that strategy, in July 2008, the Iraqi Ministries
of Interior and Defense hosted and Anti-Corruption Strategic Planning
Conference. At the conference, GoI officials presented a draft
strategic plan for MoI and MoD Inspectors General, which was developed
with the assistance of Ambassador Benedict and MNSTC-I. The USG will
continue to engage the GoI at the highest levels to implement this
long-term strategy.
______
Questions Submitted to General Benjamin S. Griffin
Questions Submitted by Senator Robert C. Byrd
Question. General Griffin, because of the snail's pace at which
investigations are initiated or are moving, the statute of limitation
on many of the contracting offenses that have occurred in Iraq and
Afghanistan will soon expire. Do you support current Congressional
efforts to extend the statutes of limitation in cases involving these
war zones?
Answer. Senator Byrd, I would welcome any tool, statutory or
investigatory, that would allow us to improve the delivery of goods and
services to our warfighters, and assist us in our stewardship over
taxpayer dollars, including extension of the statute of limitations. I
realize that there are many policy issues that must be considered as
part of the legislative decision-making process, and I would defer
these issues to the OSD Office of General Counsel, the Attorney General
and the Justice Department.
Question. General Griffin, given the large dollar amount of
unaccounted-for expenditures, why has KBR been permitted to continue to
contract with the Department of Defense?
Answer. The Army has policy, regulations, and procedures in place
designed to prevent awarding of contracts to companies who fail to
demonstrate compliance with the terms and conditions of their contract.
Prior to a contract award contracting officers are required to make a
responsibility determination. As part of the determination they are
required to assess the contractor records as a ``responsible
contractor.'' The Excluded Parties List System should be reviewed to
determine if the contractor had previously been suspended or debarred.
The contracting officer is also required to review the contractor's
past performance data in the Contractor Performance Assessment
Reporting System. Contracting officers are required to reference this
data as part of the contract award process. This guidance, if routinely
followed, is designed to ensure contracts are awarded only to companies
with a responsible performance history, thereby helping to ensure the
Army manages its resources efficiently and effectively.
The United States Army, in conjunction with the Defense Contract
Audit Agency, continuously monitors and audits Kellogg, Brown, and Root
Services Incorporated's (KBR) incurred costs. Currently, out of $26.515
billion in billings of incurred costs, the Army has withheld or
suspended $114.553 million from KBR. KBR is working with the Army to
resolve these issues. If they are not satisfactorily resolved, KBR will
not be paid. This process is no different than the process would be for
any other defense contractor and protects the Government's interests.
The Logistics Civil Augmentation Program (LOGCAP) III competition
resulted in a single contract award to KBR in December 2001. As such,
KBR is the only source for services under the LOGCAP III contract.
The competition for LOGCAP IV resulted in awards to three
companies, including KBR, determined to offer the Best Value to the
Government. Thus, there will be three sources for logistics support
services task order awards under the LOGCAP IV contracts and the three
companies will compete for each task order.
Question. General Griffin, we are still receiving a steady stream
of reports about contract problems in Iraq. What improvements have been
made in awarding and overseeing these contracts and why do these
reports continue?
Answer. The complexity of contracting in Expeditionary Operations,
especially Iraq, is a challenge to the entire Department of Defense. As
was noted in the Gansler Commission Report entitled ``Urgent Reform
Required: Army Expeditionary Contracting'', a number of improvements
are needed to better prepare the Army for future Expeditionary
Operations. The Army has already moved out on a number of the Gansler
Commission recommendations as reported to Congress by the Army in
response to Section 849 of the fiscal year 2008 National Defense
Authorization Act. To this end, the Army Materiel Command has
established a two-star level Army Contracting Command that will execute
approximately 70 percent of all Army contract dollars. This new command
also includes a one-star Expeditionary Command that is focused upon
providing contracting support to forward deployed forces. This
deployable one-star command consists of Contracting Support Brigades,
Contingency Contracting Battalions, Senior Contingency Contracting
Teams, and Contingency Contracting Teams. Once fully staffed, this
Expeditionary Contracting Command will have over 1,100 military
contracting personnel in the active, Army Reserve, and Army National
Guard force. This new and expanded expeditionary contracting capability
will improve the Army's ability to execute and manage contracts in
future expeditionary operations.
In support of current contracting activity in Iraq, the Army
Materiel Command is working closely with the Joint Contracting
Command--Iraq/Afghanistan to improve the quality and training of our
contracting military personnel before they deploy to Iraq and
Afghanistan. We are capturing lessons learned through the Army's
Acquisition, Logistics, and Technology Initiatives Office. These
lessons learned are being used to improve our training and develop
scenarios for our deploying personnel to exercise at our Combined
Training Centers prior to deployment. The Army is also instituting
blocks of contracting and contractor management training in courses for
non-acquisition personnel. For example, all new Logistics commanders
now receive a block of instruction on contracting and contractor
management. The Army is also expanding Contracting Officer
Representative (COR) training to ensure Army personnel are trained and
equipped to perform contract oversight. To date, over 500 Army
personnel have received COR training in Kuwait.
To improve our execution of the Logistics Civil Augmentation
Program (LOGCAP), the Army Materiel Command assigned two senior
executive service personnel to further enhance our leadership and
management of the program. In addition, the Army Sustainment Command
has the following structure in place to provide management and
oversight of LOGCAP in Iraq, Afghanistan and Kuwait: a Colonel in Iraq;
a Colonel in Afghanistan; and a GS-15 on the ground in Kuwait, leading
over 100 personnel in the oversight of LOGCAP. The Defense Contract
Management Agency has 97 personnel, primarily in Iraq and Afghanistan,
performing LOGCAP contract management, and has appointed over 500
contracting officer representatives in Iraq and Afghanistan from
operational units to assist in day-to-day oversight of contractor
performance. DCMA is also going to increase their number of personnel
in theater providing quality assurance and quality control for LOGCAP
by December 2008 to 127.
Finally we are working as quickly and smartly to transition from
LOGCAP III to LOGCAP IV which addresses the structural issues and
challenges that we experienced with LOGCAP III.
Question. General Griffin, of 23 inspections performed by May 2007
by the Special Inspector General for Iraq Reconstruction (SIGIR) on
Parsons Global, Inc., contract specifications were not met and
deficiencies were noted in 15 of the 23 sites, which included the
Baghdad Police College, the Al Basra Oil Terminal, the Iraqi Civil
Defense Headquarter and the Erbil Maternity and Pediatric Hospital.
Parsons Global, Inc., was also involved in the costly effort to
construct 150 primary healthcare centers in Iraq, of which only 15 were
delivered and only 8 were open to the public as of April 2007. The Army
Corps of Engineers has also, in the past, terminated work Parsons has
done on other Iraqi hospitals and prisons because of schedule slips and
cost overruns. Given that track record, should the United States
government award any further contracts to Parsons and if so, why?
Answer. The Army's responsibility for awarding contracts does not
extend to other government agencies and departments. However, the Army
is the Executive Agent for the Department's contracting activities in
Iraq and Afghanistan and as such is directly engaged in supporting our
military forces.
The Army has policy, regulations, and procedures in place designed
to prevent awarding of contracts to companies who fail to demonstrate
compliance with the terms and conditions of their contract. Prior to a
contract award contracting officers are required to make a
responsibility determination. As part of the determination they are
required to assess the contractor records as a ``responsible
contractor.'' The Excluded Parties List System should be reviewed to
determine if the contractor had previously been suspended or debarred.
The contracting officer is also required to review the contractor's
past performance data in the Contractor Performance Assessment
Reporting System. Contracting officers are required to reference this
data as part of the contract award process. These processes are
designed to ensure contracts are awarded only to companies with a
responsible performance history, thereby helping to ensure the Army
manages its resources efficiently and effectively.
______
Questions Submitted by Senator Byron L. Dorgan
Question. Please respond in detail to the allegations raised by
former KBR electricians Debbie Crawford and Jefferey Bliss at the
hearing held by the Senate Democratic Policy Committee on Friday 11,
2008, to the effect that KBR did not provide adequate electrical
services. Be sure to include the allegations that KBR hired supervisors
with little or no experience as electricians.
Answer. The terms and conditions of the LOGCAP III contract require
KBR to provide all resources and management necessary to perform the
mission in accordance with the basic contract and task order scopes of
work.
The Defense Contract Management Agency (DCMA) has the
responsibility of overseeing KBR's performance in the theater. The
original contract did not require specific levels of expertise KBR
employees or its supervisors must have. The contract is performance
based and requires KBR to perform to set standards. It is our
understanding that KBR's standards for recruiting electricians requires
a minimum of 5 years experience and KBR's policy required these
electricians to be placed under the supervision of a licensed KBR
electrician once in theater. On occasion, an electrician will report to
someone with a background in another trade or craft. This generally
occurs when multiple crafts are involved in a single job.
After reviewing the contract language and in collaboration with
DCMA, the Contracting Officer modified the basic contract on July 21,
2008, to add specific language for Personnel Certifications and
Qualifications as follows:
--The contractor shall ensure that Contractor personnel assigned to
perform specific functions possess a license, certification,
training and/or education commensurate with the level of
assigned duties.
--Contractor's personnel will be licensed, certified, trained and/or
educated in accordance with the requirements of (1) any U.S.
Government or U.S. Government recognized program applicable to
the trade being performed, (2) any State or local government
recognized program applicable to the trade being performed, or
(3) any non-U.S. program that is deemed by the Contracting
Officer to be equivalent to or in excess of any Government,
State or local government program applicable to the trade being
performed.
--The Contractor is required to submit a Trades Certificate and
Validation Plan to the Government that describes the process to
be used by the Contractor to recruit, train and retain
personnel in accordance with the requirements of the clause.
--Upon receipt of the Validation Plan, the Government shall review
and, if acceptable, approve the Plan, including the schedule
for implementation.
Question. Please respond in detail to the allegations raised by
former KBR electricians Debbie Crawford and Jefferey Bliss at the
hearing held by the Senate Democratic Policy Committee on Friday 11,
2008, to the effect that KBR did not provide adequate electrical
services. Be sure to include the allegations that KBR hired third-
country electricians who did not speak English and were not familiar
with U.S. and British electrical standards.
Answer. The LOGCAP III contract requires all contractor employees
to either be literate in English or have a translator available at all
times to the extent of being able to read, speak, and understand the
language in order to ensure all safety, health, and security
requirements are met to include understanding instructions concerning
equipment to the extent that duties requires operation, maintenance
and/or repair, However KBR did hire third country nationals who do not
speak English.
KBR's policy is to screen foreign national candidates for English
competency in pre-employment interviews. A second screening is
conducted during pre-deployment training in Houston. Employees with
basic competency have translators available in theater.
KBR provides on-the-job skills training to ensure all employees
understand specific work performance requirements to perform their
tasks. Employees are familiarized with trade specific systems that do
not conform to American standards; such as 220V electrical systems that
conform to British Standards. New hire electricians are teamed with an
experienced senior electrician who introduces them to the working
environment, for example, provides instruction regarding the use of
power generation, 220/440V--50Hz, 3-phase power. The contractor
provides employees Hazard Awareness and Safety Briefs on a daily basis.
Question. Please respond in detail to the allegations raised by
former KBR electricians Debbie Crawford and Jefferey Bliss at the
hearing held by the Senate Democratic Policy Committee on Friday 11,
2008, to the effect that KBR did not provide adequate electrical
services. Be sure to include the allegations that KBR provided
inadequate equipment to its electricians.
Answer. The terms and conditions of the LOGCAP III contract require
KBR to provide all resources, management and equipment necessary to
perform the mission in accordance with the basic contract and task
order scopes of work.
DCMA is the agency responsible for oversight of the LOGCAP
contract. DCMA has not issued any Corrective Action Reports (CARs)
related to the contractor providing inadequate equipment to its
electricians. The Army is not aware of any instances where KBR did not
provide adequate equipment to its electricians.
Question. Please describe how much KBR is being paid to conduct the
comprehensive review of electrical safety at U.S. facilities in Iraq
that DCMA has requested.
Answer. The LOGCAP III contract is a cost reimbursable contract
where KBR is reimbursed for all reasonable, allocable, and allowable
costs incurred. The technical inspection being conducted by KBR was
directed by the Defense Contract Management Agency. In accordance with
the contract KBR will be reimbursed for all costs incurred. KBR will
perform the inspections utilizing existing task order resources.
Specific cost information when completed can be obtained from the
LOGCAP Procuring Contracting Officer (PCO) located at ASC in Rock
Island, IL.
Question. Please explain why under the LOGCAP IV contract, the
Pentagon has announced that it will not issue task orders until 2010.
Answer. To the best of our knowledge, the Pentagon never announced
that task orders under LOGCAP IV would not be issued until 2010.
We are looking to transition to LOGCAP IV as quickly and as
smoothly as possible without disrupting support to combat operations.
The current plan is to transition work geographically in Southwest
Asia. Kuwait was identified as the first area of operation to be
competed under LOGCAP IV. Kuwait has three task orders to be competed,
the largest of which is the Kuwait Area of Operation. The acquisition
phase included an on-site country visit, by the LOGCAP IV contractors,
of all facilities and operations contained in the Performance Work
Statement. This was accomplished in July of this year.
A Request for Proposal is planned to be released to the LOGCAP IV
contractors at the end of this month for the competition of the first
Kuwait task order. Award is planned to be made in late October 2008 and
the physical transition to begin shortly thereafter. The remaining two
task orders will be competed starting in September with awards planned
for early December. All three task orders will be physically
transitioned to LOGCAP IV by the end of March 2009.
In parallel, the planning and Theater coordination for Afghanistan
and Iraq will be underway starting in September and October, 2008.
Close coordination will be made with Theater Commanders to minimize
operational impacts and to minimize performance risk, as well as to
maximize competitive opportunities and the efficient use of resources.
In addition, any new requirements outside of the current LOGCAP III
Task Orders will be awarded under LOGCAP IV.
Question. Until new task orders are issued under the LOGCAP IV
contract, will LOGCAP services be provided entirely by KBR?
Answer. The Army will continue to utilize LOGCAP III, with KBR as
the single contractor, for support work until LOGCAP IV task orders are
awarded.
We plan are issuing the Request for Proposal for the formal
competition of the first of three Kuwait task orders. Award is to be
made in late October and the physical transition to begin shortly
thereafter. All three task orders will be physically transitioned to
LOGCAP IV by the end of March 2009.
In parallel, the planning and Theater coordination for Afghanistan
and Iraq will be underway starting in September and October, 2008.
Close coordination will be made with Theater Commanders to minimize
operational impacts and to minimize performance risk, as well as to
maximize competitive opportunities and the efficient use of resources.
In addition, any new requirements outside of the current LOGCAP III
Task Orders will be awarded under LOGCAP IV.
Question. Please explain in detail the specific functions that RCI
(now part of the Serco Group) was contracted to perform in connection
with determining the proper payment amount for the $1 billion in
charges by KBR that DCAA had questioned.
Specify the contractual terms for those services, including the
amount of any compensation.
Answer. The Task Order for the RCI services was signed September
27, 2004 by the Navy Contracting Officer in Philadelphia PA.
The Statement of Work for the RCI Task Order to support the LOGCAP
III definitization is provided below in its entirety.
Statement of Work--00001.7 Engineering Based Cost Analysis
The contractor will assemble a team to serve as an adjunct to a
Government special cost analysis team (SCAT). The contractor shall
perform analyses requiring special efforts in support of the U.S. Army
definitization effort under contract DAAA09.02-D-0007, Logistics Civil
Augmentation Program (LOGCAP). The contractor shall assist the customer
as needed in analyses such as, but not limited to, the following:
Performance Based Logistical (PBL) analysis; Physical Configuration
Audits; Work Breakdown Structure; Supply operations; Facility
engineering and Construction; Contractor Logistics Support;
Professional level technical/logistical assistance; Value analysis; and
Food Service Analysis.
In execution of this task, various methodologies and technical
disciplines may be applied. These may include, but are not limited to
Engineering, Mathematics, Statistics, Computing, Logistics, Production,
Economics, and Business Process Re-engineering.
Work under this task order will commence following a post award
conference to be convened at the discretion of the Army Field Support
Command shortly after the award date. The target completion date is 60
days from the date of the post award conference. This date is subject
to change.
Specifically, the contractor team will perform a comprehensive
independent evaluation of Kellogg, Brown and Root's cost proposal for
task order 59 under the LOGCAP contract. The contractor's evaluation
will take into account all Government cost evaluations including, but
not limited to, audit reports issued by the Defense Contract Audit
Agency (DCAA) and technical evaluations issued by the Defense Contract
Management Agency (DCMA). The SCAT leader ``will provide all the
pertinent Government reports required to support this task.
The contractor will submit its findings in a written report. The
written report will be furnished in Microsoft Word format. All
supporting calculations will be furnished in a working Microsoft Excel
cost model. The report will address the KBR proposal and the
corresponding position as expressed in the various Government audit and
technical evaluations on a line item basis. The contractor will
formulate an independent cost estimate for those elements of cost that
have been questioned or set aside as unresolved/unsupported in the
Government evaluations.
Supporting details will be properly cross-referenced to the cost
elements. For the KBR and DCAA/Technical positions, the basis of
estimate will be described sufficiently to allow the reader to
understand the pertinent points. The contractor position will be
supported with an explanation detailing every aspect of how the
estimate was derived. This will include, at a minimum, the basis of
estimate including assumptions and rationale. The basis of estimate
will give the complete detail of sub-elements including, but not
limited to, quantities, unit costs, labor types, hours required, hourly
rates, overhead costs and profit. The contractor's cost estimate must
be sufficiently documented to allow the Government to fully understand
the basis of estimate.
At AFSC (for clarification, this is the former acronym for the Army
Sustainment Command) request, the contractor may participate in
negotiations.
Travel is anticipated in support of this task. The contractor shall
participate in fact-finding visits and other site visits as required to
meet Price Fighter and customer requirements. Notification lead times
may be as short as one (1) day to initiate performance designated in
this delivery order. Travel sites may include but are not limited to
supplier facilities in Houston, TX and Program office in Rock Island,
IL. The authorized per diem rate shall be the same as the prevailing
per diem rate allowed by the Defense Joint Travel Regulations, Volume 2
for Civilian Personnel.
Delivery of Final Report.--Delivery of the final report shall be
accomplished not later than November 19, 2005.
The estimated cost and fixed fee negotiated for the Task Order are
as follows:
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Estimated cost.......................................... $1,425,063
Fixed Fee............................................... 72,150
---------------
Total............................................. 1,497,213
------------------------------------------------------------------------
The Defense Contract Audit Agency has not completed the final audit
of these costs.
Question. Identify whether any of these services has previously
been performed by DCAA in connection with this or any other U.S.
government contract.
Answer. DCAA has and still does provide their audit services for
the LOGCAP contracts.
The services RCI provided to the government were a supplement to
the Special Cost Analysis Team in which DCAA also participated. RCI
participated as part of the overall cost analysis process and provided
a further in-depth analysis to assist the Contracting Officer in making
an informed decision.
Question. Explain in detail why you deemed that RCI was better
suited than DCAA to perform these functions.
Answer. The services RCI provided to the government were a
supplement to the Special Cost Analysis Team in which DCAA also
participated. RCI participated as part of the overall cost analysis
process and provided a further in-depth analysis to assist the
Contracting Officer in making an informed decision. The use of an
independent cost estimator allowed the Government to make an objective
assessment of cost reasonableness in instances where financial data was
unavailable in the contractor's records. RCI was able to use analyses
techniques such as Parametric and Regression analyses to construct
estimates to assist the Contracting Officer in making a decision. They
were able to take the information provided by DCAA, research and
analyze the data to assist the Contracting Officer in making a final
determination. DCAA issues their findings but does not provide
recommendations or perform detailed analyses when data is inconclusive
or incomplete. DCAA then and now provides their audit services for the
LOGCAP contracts.
The services provided by RCI included:
--Analyses of audits, operations, food services and work breakdown
structure;
--Comprehensive independent evaluation of KBR's cost proposal for TO
59;
--Determination of cost drivers for each task;
--Cost estimating expertise in performing parametric and regression
analyses;
--Expertise in all aspects of large-scale food service (OCONUS) that
included facilities management, developing logistics and budget
requirements, quality assurance and inspections, and customer
service; and
--Provided statistically viable method to overcome lack of reliable
data.
At no time were the services provided by RCI in lieu of functions
that are performed by DCAA. RCI efforts were in concert with DCAA
efforts.
Question. Charles Smith has testified that the replacement of DCAA
by a private contractor for purposes of determining the proper payment
amount for questioned charges was ``unprecedented in his 31-year
career.'' Are you aware of any precedent for such an action?
Answer. DCAA was not replaced by a private contractor for purposes
of determining the proper payment amount. Rather, a private contractor
(RCI) provided supplemental services to a Special Cost Analysis Team,
headed by Government Contracting officials, in which DCAA also
participated. DCAA then and now provides their audit services for the
LOGCAP contracts.
Question. Please state how much RCI was compensated for its work
relating to KBR's questioned costs under the LOGCAP III contract. To
the extent that DCAA has performed similar work in the past, estimate
how much DCAA's costs for such a service would have been.
Answer. The estimated cost and fixed fee negotiated in the Task
Order for the RCI services is:
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Estimated cost.......................................... $1,425,063
Fixed Fee............................................... 72,150
---------------
Total............................................. 1,497,213
------------------------------------------------------------------------
The Defense Contract Audit Agency has not completed the final audit
of these costs.
The services provided by RCI and DCAA are not the same and
therefore there is no cost comparison between the two services.
Question. Identify the specific services that RCI/Serco is now
providing for the LOGCAP IV contract, and the contractual terms for
those services, including the amount of any compensation. Identify any
of these services that has been, or is currently being, performed by
DCAA in connection with this or any other U.S. government contract.
Answer. The Acquisition Strategy that provides for a separate
support contractor for LOGCAP IV was approved in August 2006.
The SERCO scope of work to support LOGCAP is provided below:
Scope.--The purpose of this contract is to maximize resources and
expertise of the Support Contractor to provide LOGCAP program
management analysis and support on a global basis. The contractor may
deploy within the Continental United States (CONUS) in support of CONUS
activities or world-wide in support of planning, training, exercises,
or events. Requirements shall focus on LOGCAP capabilities and/or
resources to support Army, Department of Defense components, U.S.
Federal Government Inter-Agency requirements, and non-governmental and
coalition forces LOGCAP support when approved by Department of the
Army. This scope does not intend to limit LOGCAP responses to only
military operations. SECRET clearance is required for Support
contractor personnel. The LOGCAP Support contractor will perform the
following functions: (1) provide operations support to the LOGCAP
Operations Directorate; (2) provide program support to the LOGCAP
Director staff; (3) provide liaison support between the LOGCAP Director
and COCOM/ASCC staffs and assist with development of LOGCAP PWS and
IGCE; (4) provide support to deployed LOGCAP Deputy Program Directors;
(5) participate in LOGCAP related COCOM/ASCC exercises; (6) maintain
the Worldwide management and Staffing Plan; and (7) maintain existing
and document new COCOM/ASCC deliberate plans.
Services To Be Provided.--The Support Contractor shall have
detailed knowledge of the LOGCAP program and provide acquisition and
life cycle management support for the program. This includes but is not
limited to assisting Government staff with planning, development of
policy guidance, budgetary, contract and systems/program management,
training, liaison between the LOGCAP Director and COCOM/ASCC staffs,
and administrative functions. The Support Contractor shall provide In-
Process Reviews (IPR) at the discretion of the Government. Program
support shall be provided to the LOGCAP Director, LOGCAP Operations
Directorate, and deployed Deputy LOGCAP Directors. Program support may
include liaison between supported units and the LOGCAP Director and
staff, financial, technical, and pricing analysis of contractor cost
estimates and task execution plans, training presentations and program
of instruction (POI) development, exercise preparation and
participation, and documentation and update of the LOGCAP World-wide
Management and Staffing Plan (WMSP) and LOGCAP support plans. The
Support Contractor shall collaborate with executing contractors,
establish non-disclosure agreements as required, and document
proprietary executing contractor input to the WMSP and COCOM/ASCC
plans. It is not the intent of this contract to have the contractor
perform inherently Governmental functions, or to have the contractor
make discretionary decisions for the Government relating to the program
or contracted support. The contractor will primarily provide advice,
analysis, and draft document submissions for Government approval.
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Total negotiated amount:
For period-of-performance 1--February 16, 2007 to $14,290,606.36
February 15, 2008...............................
For period-of-performance 2--February 16, 2008 to 25,328,931.14
February 15, 2009...............................
------------------------------------------------------------------------
Serco is not under contract to provide services that would
otherwise be performed by DCAA.
______
Question Submitted by Senator Frank R. Lautenberg
Question. Last January, the DOD awarded a contract worth almost
$300 million to a company called AEY to supply munitions to Afghan
forces. This company operated from an unmarked office in Miami and was
led by two men in their early twenties. We now know that most of the
ammunition was Chinese-made and outdated. How can a company like this
get such a huge contract with our Department of Defense?
Answer. Based on the evaluation of price and all non-price factors,
AEY was determined the best value offeror. The Procuring Contracting
Officer (PCO) had received positive past performance surveys regarding
AEY's performance on contracts for same and similar requirements. Prior
to contract award, the PCO requested and obtained a pre-award survey
from the Defense Contract Management Agency, which recommended complete
award based on satisfactory findings. The PCO checked the Excluded
Parties List (EPLS), which listed neither AEY nor Efraim Diveroli. She
also checked the Past Performance Information Management Systems
(PPIMS), which included no records of poor performance or terminated
contracts for AEY.
During a later investigation of AEY, it was discovered that there
were contracts that were valued at less than $5 million under which AEY
had performed poorly and/or were terminated for cause or default. The
reporting of that negative performance in the past performance
information retrieval system was not required because it did not meet
the $5 million threshold for reporting, so this information was not
available to the PCO. If this information had been available to the
PCO, her decision would most likely have been different. This reporting
flaw in the system has been corrected by a Department of Defense
directive which mandates contracting officers to report terminations
for cause or default, regardless of contract value. This information
will now be available for source selection officials in the past
performance information retrieval system.
In June 2008, the Department of Justice also indicted the President
of AEY and three business associates. AMC assisted the law enforcement
agencies on the AEY investigation more than 12 months prior to these
indictments.
To preclude some of these problems in the future, the Program
Executive Officer for Ammunition (PEO Ammo) formed a Non-Standard Ammo
Task Force (NSA-TF), with members from all key organizations, to
implement policy and command guidance. To date we have accomplished the
following:
--Developed general specifications for non-standard ammunition that
provide among other things criteria for technical data package
identification, quality assurance requirements, reliability
thresholds, test requirements, and packaging/transportation
requirements. PEO Ammo also has created a database of technical
data (commercial & WARSAW specs), performance parameters,
sources of manufacture, etc. for NSA.
--DCMA is conducting Source inspection at both CONUS and OCONUS
sites. Point of inspection can be either a depot/staging area
or the place of manufacture. DCMA will have ``eyes on'' the NSA
prior to it being delivered into the theatre.
--We are conducting theater visits to work the new specifications/
standards/procedures with all the parties in the theater
involved.
--We held an industry day with over 20 companies to get industry
feedback on the generic specification concept and requirements.
--We created a database of all current NSA contracts specifying item,
delivery dates, location and place of manufacture ensuring
efficiency of inspection prior to shipment to theatre.
--We arranged for a team of subject matter experts (SMEs) to tour
Arsenal Inc., in Bulgaria who is a major supplier of NSA. The
TF will visit other major NSA suppliers as well.
--We are working to stand-up a Product Director's office within PEO
Ammo to manage NSA issues and concerns. We expect this office
to implement the appropriate program discipline and execution
that we have with our U.S. programs.
______
Questions Submitted to Gordon S. Heddell
Questions Submitted by Senator Robert C. Byrd
Question. Mr. Heddell, because of the snail's pace at which
investigations are initiated or are moving, the statute of limitation
on many of the contracting offenses that have occurred in Iraq and
Afghanistan will soon expire. Do you support current Congressional
efforts to extend the statutes of limitation in cases involving these
war zones?
Answer. During the hearing Senator Leahy asked a similar question
regarding the War Enforcement of Fraud Act, S. 2892, which would extend
the statute of limitations. I responded to Senator Leahy ``that
proposal would be very beneficial to my office and probably other
inspectors general.'' My position on the extension of the statute of
limitations during wartime remains the same.
Question. Mr. Heddell, in a recent article in the Journal of Public
Integrity, it was reported that the Army CIDs Major Procurement Fraud
Unit concluded by late 2005 that for a number of reasons, conditions in
Iraq were highly conducive for fraud. Similarly, a recently published
Defense Criminal Investigative Service assessment found that there had
been only limited review of the completeness, accuracy, and propriety
of contingency payment vouchers and that there existed the potential
for fraud, waste, and abuse. While these reports were just recently
published, both examined periods of time prior to June 2006. Over two
years have passed. Can you explain what specifically has been done in
your organizations to change these conditions and what is being done to
identify and prosecute individual cases of fraud that occurred during
this period?
Answer. The DOD IG has primary jurisdiction over matters involving
most contract and procurement actions awarded by Defense Agencies,
Office of the Secretary of Defense components, and field activities.
Additionally, we have jurisdiction over, ``any allegations [involving
DOD] that the IG DOD considers appropriate for investigation.'' This
broad authority affords DCIS the ability to easily partner with other
agencies in an effort to protect the integrity of the entire DOD
procurement and acquisition process. We actively partner with the
Service-specific Military Criminal Investigative Organizations--the
Army Criminal Investigation Command, the Naval Criminal Investigative
Service, and the Air Force Office of Special Investigations. In
addition, we partner with the Federal Bureau of Investigation; U.S.
Department of State, Office of the Inspector General; the Special
Inspector General for Iraq Reconstruction; and the U.S. Agency for
International Development, Office of the Inspector General.
In September 2006, the DOD IG established a permanent investigative
presence in Iraq by deploying four Defense Criminal Investigative
Service (DCIS) special agents to the theater. Two special agents have
also been deployed to Iraq to support a special cell investigating
issues relating to weapons accountability. In April 2008, one special
agent was deployed to Afghanistan.
In September 2008, we will increase the DOD IG investigative
presence in Southwest Asia to five DCIS special agents in Iraq, two
special agents in Kuwait, and two agents in Afghanistan. Our European
Resident Agency in Germany and multiple CONUS offices continue to
conduct a wide variety of investigations related to Iraq and
Afghanistan. In total, approximately 75 DCIS special agents are
investigating procurement fraud, corruption, and other cases related to
Southwest Asia.
The continued presence of the DOD IG in Iraq, Afghanistan, and
Kuwait creates awareness within the Southwest Asia community that we
are aggressively pursuing allegations of fraud and corruption. To date,
several significant ongoing and closed criminal investigations, to
include that of Major John Cockerham, Jr., his family, and associates
have resulted in arrests, forfeitures, indictments, and prison
sentences. Numerous additional adjudicative actions are impending. When
further tangible results, such as arrests and convictions, are made
public, they will further serve to deter future crimes and send a clear
message that the DOD IG and its law enforcement partners will not
tolerate fraud, waste, and abuse against the Department. A recent
example is the arrest and charging of a former contractor in an ongoing
investigation regarding the theft of nearly $40 million in jet and
diesel fuel from Camp Liberty in Baghdad, Iraq.
To ensure investigations involving the war efforts in Iraq and
Afghanistan are pursued efficiently and effectively, the DOD IG and its
partner Federal law enforcement agencies refer the cases to the
designated Department of Justice Southwest Asia Intake Officer during
the early stages of the investigation. The Intake Officer, a DoJ
attorney, serves as a primary point of contact to the special agents
for investigative and prosecutive guidance. The Intake Officer also
assists the agents in identifying the best venue to successfully
prosecute the case. This collaborative effort between the law
enforcement agencies and DoJ has been central to combating fraud and
corruption in Southwest Asia.
We launched a project which will analyze over $14 billion in
payment vouchers related to U.S. Army contingency purchases in Iraq.
These vouchers are currently stored at the Defense Finance & Accounting
Service (DFAS), Rome, NY. We are coordinating with DFAS, the Defense
Contract Audit Agency, and the U.S. Army Audit Agency to
collaboratively identify fraudulent payments through data mining
techniques. As a result of our initial investigative concerns, we
performed an audit of out of country payments (Report No. D-2008-098).
As a result of the audit, DOD has initiated several critical measures
that we believe will improve the accountability of out of country
payments but we have not verified the efficacy of the new financial
initiatives within DOD. Specifically, DOD modified the DOD Financial
Management Regulation to address contingency operations, improved
training, developed check lists, and transferred disbursing operations
for contract payments back to the United States. To address the issues
raised in our audit, the Director, DFAS deployed DFAS personnel to
support the improvement of accountability within financial functions in
Southwest Asia. This included assessing what financial functions could
be removed from the theater and performed in areas where more resources
could be committed. DOD is monitoring the progress of these actions and
has established a matrix to measure progress.
Further, on August 27, 2007, we announced the audit of Internal
Controls and Data Reliability in the Deployable Disbursing System. The
DOD IG is evaluating whether the internal controls over transactions
processed through the Deployable Disbursing System are adequate to
ensure the reliability of the data processed. This audit includes
financial information processed by disbursing stations supporting the
Global War on Terror.
Question. Mr. Heddell, since Congress learns many of the cases
involving waste, fraud and abuse from media reports and complaints
received directly by the Members, I am curious: how does your office
prioritize pending investigations, and how do you respond to
whistleblower reports of abuses or unsafe conditions?
Answer. The DOD IG prioritizes investigations in line with the
national defense priorities and available resources. Our investigative
priorities for 2008 include:
--Continued vigorous investigative support to the Global War on
Terrorism, as it affects the Department of Defense at home and
abroad.
--Maintaining a high priority on procurement fraud investigations
with emphasis on defective, substituted, and substandard
products that impact the safety and mission-readiness of our
warfighters.
--Continued focus on combating corruption by ferreting out and
uncompromisingly investigating major DOD procurement fraud
including bribery, corruption, kickbacks, and major thefts.
--Continued concentration on investigations, training, and awareness
aimed at the illegal transfer of technology, systems, and
equipment critical to the Department of Defense and dangerous
if in the hands of proscribed persons and nations.
--Continued defense against cyber crimes and computer intrusions that
impact DOD, with emphasis on computer network defense to
protect the global information grid.
In addition, we carefully review and take appropriate action on all
whistleblower reports from whatever source they emanate, whether
through our Hotline, directly to our military and civilian reprisal
offices, or directly to our special agents in the field. Clearly, those
allegations that concern the health and safety of the men and women
deployed in the Southwest Asia theater are given the highest priority.
Items received through the hotline are considered to be high
priority if they are:
--Life Threatening.--The source of the information believes that an
existing condition constitutes a real and immediate threat to
life. For example, a faulty aircraft ejection seat, substandard
parachute riser cord, or a Service member threatens self harm
or to harm others.
--Time Sensitive,--A matter that is ongoing or scheduled to take
place in the immediate future and requires rapid response to
halt or correct the problem.
Question. Mr. Heddell, what are your organization's audit and
investigative priorities, who sets those priorities, and are you aware
of any outside interference with the priorities of your organization?
Answer. The DOD IG Strategic Plan is the basis for our priorities.
The strategic plan is developed by taking into consideration the risks
and challenges the Department is facing and includes consideration of
the President's Management Agenda, DOD Top Priorities, and GAO high-
risk areas. Each component uses the IG strategic plan as the basis for
setting their priorities. The priorities established for each component
are directly linked to the goals established in the DOD IG Strategic
Plan. There has been no outside interference with the establishment of
the DOD IG Strategic Plans or our investigative and audit priorities.
Below are our investigative and audit priorities.
Investigative Priorities
The Deputy Inspector General for Investigations and the Director,
Defense Criminal Investigative Service, prioritize investigations in
line with the national defense priorities and available resources. The
priorities for 2008 are:
--Continued vigorous investigative support to the Global War on
Terrorism, as it affects the Department of Defense at home and
abroad.
--Maintaining a high priority on procurement fraud investigations
with emphasis on defective, substituted, and substandard
products that impact the safety and mission-readiness of our
warfighters.
--Continued focus on combating corruption by ferreting out and
uncompromisingly investigating major DOD procurement fraud
including bribery, corruption, kickbacks, and major thefts.
--Continued concentration on investigations, training, and awareness
aimed at the illegal transfer of technology, systems, and
equipment critical to the Department of Defense and dangerous
if in the hands of proscribed persons and nations.
--Continued defense against cyber crimes and computer intrusions that
impact DOD, with emphasis on computer network defense to
protect the global information grid.
Audit Priorities
The Deputy Inspector General for Audit, focuses audit priorities on
the following high risk/high impact areas within DOD: Life or safety
issues/health care; GWOT operations; contracting and acquisition
programs; information technology management; and financial management.
Further, audit efforts are focused so we achieve results in the
following areas: Improve the effectiveness and/or safety of service
members; improve national security; identify potential monetary
benefits; improve business operations; and comply with statutes and
regulations.
Our priorities are reflected in our audit plan(s) which we publish
yearly. These plans include projects we intend to perform during the
fiscal year to address our view of the risks and challenges the
Department is facing and to include consideration of the President's
Management Agenda, DOD Top Priorities, and GAO high-risk areas.
Question. Mr. Heddell, please inform the Committee what percent of
IG investigations are referred to the Department of Justice, the
percentage of those that result in prosecution, and the primary reasons
why the remaining cases are not referred or prosecuted?
Answer. Our investigators routinely discuss their investigations
with prosecutors as soon as sufficient information is developed to
indicate that a possible violation of U.S. law has occurred. As we and
our partner Federal law enforcement agencies refer the cases to the
designated DoJ Southwest Asia Intake Officer during the early stages of
the investigation. The Intake Officer serves as a primary point of
contact to the special agents for investigative and prosecutive
guidance. The Intake Officer also assists the agents in identifying the
best venue to successfully prosecute the case. We believe this approach
is very effective.
Overall, the DOD IG has 1,685 open criminal investigations and
projects being handled by the Defense Criminal Investigative Service.
Of the 1,685, we have 134 active investigations involving Iraq and
Afghanistan which are at various stages of investigation. Of these 134
investigations, 110 are fraud related investigations. To date, 32 of
the 134 investigations have been presented to either DoJ or command
authorities for judicial or administrative action. The remaining
investigations have not been presented for or taken for adjudication
because information has not been sufficiently developed to warrant such
action. As these investigations progress, DoJ is kept apprised of the
status of the cases.
Question. Mr. Heddell, please inform the Committee as to the number
of investigations performed by the Inspector General's office involving
contracts in or in support of operations in Iraq and Afghanistan that
have involved fraud; the percent of those cases that have resulted in
arrests being made, and the percentage of those cases that have
resulted in prosecution?
Answer. DOD IG investigations in Iraq and Afghanistan have focused
on matters such as bribery, theft, procurement fraud, illegal receipt
of gratuities, bid-rigging, defective and substituted products, and
conflicts of interest.
Of the current 134 ongoing GWOT investigations, 110 are fraud
related investigations. Thirty-two cases have been adjudicated with
some type of administrative or judicial action, including 16 criminal
indictments and 16 criminal informations which resulted in 17 felony
convictions; 22 years confinement; 15 years probation; 2 companies and
6 individuals debarred from contracting; 24 companies and individuals
suspended from contracting; 2 settlement agreements; 1 contract
termination, 1 job suspension, $359,200 assessed in fines and
penalties; forfeiture of $1,029,819; seizures of $2,043,079; and
$9,889,420 in restitution to the U.S. Government.
Question. Mr. Heddell, do the arrests and prosecutions in these
cases track well with the amount of the losses and the nature of the
offense?
Answer. For the 32 adjudicated GWOT investigations, the Defense
Criminal Investigative Service Investigative Data System (electronic
case management system) indicates estimated losses due to fraud at
$58.4 million. Thirty-two cases have been adjudicated with some type of
administrative or judicial action, including 16 criminal indictments
and 16 criminal informations which resulted in 17 felony convictions;
22 years confinement; 15 years probation; 2 companies and 6 individuals
debarred from contracting; 24 companies and individuals suspended from
contracting; 2 settlement agreements; 1 contract termination, 1 job
suspension, $359,200 assessed in fines and penalties; forfeiture of
$1,029,819; seizures of $2,043,079; and $9,889,420 restitution to the
U.S. Government.
Question. Mr. Heddell, are the amounts recovered in cases that
involve fines, penalties and restitution equivalent to the amounts of
money lost by the taxpayer?
Answer. As of August 1, 2008, the total amount of fines, penalties,
and restitution in GWOT investigations, including non-fraud
investigations, amounted to $18.5 million. Fraud cases resulted in
$13.322 million in recoveries, while the estimated losses in taxpayer
dollars equaled $58.4 million.
Question. Mr. Heddell, a recent IG study entitled ``Internal
Controls over Payments Made in Iraq, Kuwait and Egypt'' covers the
period April 2001 through June 2006. The report, however, was not
published until May 22, 2008. What was the cause of the delay in the
publication of the report?
Answer. Audit fieldwork for D-2008-098, ``Internal Controls Over
Payments Made in Iraq, Kuwait and Egypt,'' was initiated in May 2006
and concluded in December 2007. We issued the draft report on February
11, 2008. We received management comments by April 25, 2008 and
additional comments on May 15, 2008. The final report was issued on May
22, 2008.
As stated in the report, ``audit trails for voucher payments did
not exist.'' Generally accepted government auditing standards require
that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. It was a time consuming and labor
intensive process for our auditors to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
given that the data was not readily available in a war zone.
Question. Mr. Heddell, what do you consider to be a metric or
quantifiable measure of success in pursuing the priorities of your
organization?
Answer. The mission of Inspector General's Office is to promote
integrity, accountability, and improvement of Department of Defense
personnel, programs and operations to support the Department's mission
and serve the public interest. To facilitate the mission, OIG must
maintain a dynamic organization that effectively processes client
requests, statutory requirements, and self-initiated assessments that
yield the greatest return on investment to the Department of Defense.
As such, the single and most important metric is the timely and
accurate response to all requirements. In the short term, the metric
centers on processes that are standardized, continuously refined and
focused on product delivery and quality. This is accomplished through
comprehensive strategic planning thereby allowing for the most
effective use of our resources to conduct and supervise future audits
and investigations relating to the programs and operations of within
the Department of Defense.
Measures of success include both monetary and non-monetary
benefits, the percentage of reports that address the key areas such as
the Secretary of Defense focus areas, the President's Management
Agenda, the Government Accountability Office's high-risk areas, and our
own assessment of DOD's management challenges; and action taken by DOD
management regarding our recommendations.
The DOD IG monitors the success of pursuing the priorities of the
organization via a quarterly performance report that assesses each
functional component in six categories: timeliness of projects,
coverage of key areas, return on investment, external engagement,
budget, and personnel.
Question. Mr. Heddell, A recent DOD-IG report, ``Internal Controls
Over Payments Made in Iraq, Kuwait and Egypt,'' dated May 22, 2008,
provided some aggregate information regarding 183,486 commercial and
miscellaneous payments totalling $10.7 billion, made by Army
contingency disbursing stations between April 2001 and June 2006. Some
$1.4 billion in commercial payments lacked even the most rudimentary
supporting documentation and $6.3 billion in payments contained basic
information but did not comply with all statutory and regulatory
requirements. That means that $7.7 billion out of $10.7 billion paid
out by the Army was not, in the DOD-IG's words, ``properly supported''
and does not ``provide the necessary assurance that funds were used as
intended.'' It does not mean that 70 percent of all funds paid out
during that period were necessarily wasted or lost--only that
contracting officers and auditors cannot confirm that the monies were
paid for actual goods delivered, services provided, or that the
products and work paid for actually met the contract requirements. Page
5 of the report notes that one payment of $11.1 million was paid to an
American company without the benefit of either a receiving report or an
invoice, leading the auditors to write that ``. . . it is unclear how
the disbursing office determined that the vendor was entitled to
payment or the amount that was due.'' That is not a record to be proud
of. Can you tell the committee how that compares to the July 2006 to
July 2008 period?
Answer. We plan to conduct a followup audit to determine whether
the actions taken by DOD as a result of this audit have improved
controls and support for payments. In response to our report,
``Internal Controls Over Payments Made in Iraq, Kuwait and Egypt,'' DOD
stated that the fielding of the Deployable Disbursing System to all in-
theater payment activities is a significant control. On August 27,
2007, we announced the audit of Internal Controls and Data Reliability
in the Deployable Disbursing System. The DOD IG is evaluating whether
the internal controls over transactions processed through the
Deployable Disbursing System are adequate to ensure the reliability of
the data processed. This audit includes financial information processed
by disbursing stations supporting the Global War on Terror.
In addition, the Defense Finance and Accounting Service Internal
Review performed a review of vouchers from disbursing stations in Iraq
from October 2005 to April 2007. They reported that additional document
management changes were necessary. Finally, the Assistant Secretary of
the Army for Financial Management and Comptroller stated on March 24,
2008, that it will work with the Army Audit Agency to perform a more
robust audit of payments made in theater and pre-deployment training in
order to more accurately identify internal control issues and
corrective actions.
As a correction, because of rounding, we estimated that $7.8
billion, not $7.7 billion, of payments did not meet all statutory or
regulatory requirements. This was out of an estimated $8.2 billion, not
$10.7 billion, of commercial payments. The difference between the $10.7
billion and the $8.2 billion were non-commercial payments of seized and
vested assets or Command Emergency Response Program payments.
Question. Mr. Heddell, are inspector general reports staffed to the
Office of the Secretary prior to their release, and if so, why?
Answer. We provide draft reports to the responsible officials
within the Department of Defense prior to issuance of our final
reports. The DOD IG follows, as required by the IG Act, generally
accepted government auditing standards, ``Government Auditing
Standards,'' July 2007. These standards are established by the
Government Accountability Office. Under these standards it is
appropriate for auditors to staff reports with responsible officials.
Specifically, Government Auditing Standards, Chapter 8.32 states:
``Providing a draft report with findings for review and comment by
responsible officials of the audited entity and others helps the
auditors develop a report that is fair, complete, and objective.
Including the views of responsible officials results in a report that
presents not only the auditors' findings, conclusions, and
recommendations, but also the perspectives of the responsible officials
of the audited entity and the corrective actions they plan to take.
Obtaining the comments in writing is preferred, but oral comments are
acceptable.''
Further, Chapter 8.36 also states:
``When the audited entity's comments are inconsistent or in
conflict with the findings, conclusions, or recommendations in the
draft report, or when planned corrective actions do not adequately
address the auditors' recommendations, the auditors should evaluate the
validity of the audited entity's comments. If the auditors disagree
with the comments, they should explain in the report their reasons for
disagreement. Conversely, the auditors should modify their report as
necessary if they find the comments valid and supported with
sufficient, appropriate evidence.''
Question. Mr. Heddell, if a Department of Defense civilian or
official is involved in an Inspector General's investigation, is the
Office of the Secretary of Defense advised prior to Justice Department
referral and if so, why?
Answer. DOD IG criminal investigations and actions related thereto
are not routinely briefed to the Office of the Secretary of Defense. We
can imagine that in a very rare instance, the Secretary's office might
be advised of an ongoing investigation prior to the Department of
Justice (e.g., an Assistant United States Attorney) being engaged.
However, the current IG Investigations leadership cannot recall one
instance of this occurring.
Question. Mr. Heddell, have your office's requests for additional
budget or resources to support oversight of contracts in Iraq ever been
refused within the Department of Defense or at the Office of Management
and Budget, and if so, why?
Answer. All requests for additional resources to support oversight
of contracts in Iraq have been met. However, Senate Report 110-77, to
accompany the National Defense Authorization Act (NDAA) for Fiscal Year
2008, addressed concerns of inadequate funding necessary to meet the
Department of Defense (DOD), Office of Inspector General audit and
investigative mission requirements. The Senate Armed Services Committee
(SASC) directed the Inspector General to provide defense committees an
analysis of current requirements. They further directed that the report
include a comprehensive and detailed master plan, with annual
objectives and funding requirements that will provide the fastest
possible increase in audit and investigative capabilities.
The report submitted to the defense committees on March 31, 2008
identified a shortfall of $677.4 million between fiscal year 2010 and
fiscal year 2015 as compared to the Inspector General's Fiscal Year
2010-2015 Fiscal Guidance.
Program Enhancements
This increase will allow us to increase audit and investigative
functions. Since 2001 the defense budget has grown from $200 billion to
well over $500 billion annually. Despite this growth the IG personnel
strength has remained relatively constant. The potential for fraud and
waste is significantly higher today due to the our diminishing ability
to maintain adequate oversight of the Department's growing resources
and programs.
Summary of Proposed Enhancements
TOA
[Current dollars in millions]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-------------------------------------------------------------------------------
2009 2010 2011 2012 2013 2014 2015 2010-15
----------------------------------------------------------------------------------------------------------------
Base
Office of the Inspector General 247.8 198.5 205.1 209.5 215.6 219.7 223.9 1,272.3
(OIG)..........................
Enhancements
OIG Growth Plan................. ........ 89.6 99.3 113 119 125.4 131.1 677.4
----------------------------------------------------------------------------------------------------------------
Effect of Enhancements
Auditors and investigators add value by helping to manage and
control risk, and detect and deter fraud, waste, and abuse. During the
period of October 1, 2004 through September 30, 2007, our auditors
identified $3.476 billion in monetary benefits, an average of $5.2
million per auditor. In fiscal year 2006 and fiscal year 2007, our
investigations resulted in 770 criminal indictments, 644 convictions,
and over $3.14 billion in criminal, civil, and administrative
recoveries. Excluding headquarters and field managers, this is an
average of $6.24 million per agent, per year. Predictions of future
achievements should not be based on prior accomplishments. However, it
is reasonable to expect that there are greater chances of achieving
monetary benefits if more resources are dedicated to conducting audits
and investigations.
Question. Mr. Heddell, it seems that Congress learns about high
profile cases of waste, fraud and abuse from the media and
whistleblowers. This seems to suggest one of two possibilities: that
you are not informing Congress when these types of cases arise, or, you
are not investigating contract irregularities very aggressively. What
is preventing whistleblowers from being able to bring cases to the IG
rather than to Congress or the media in order to get results?
Answer. There is nothing impeding whistleblowers from contacting
our office with cases of waste, fraud, and abuse. They have unfettered
access to the DOD Hotline via the Internet, e-mail, fax, mail, and
telephone. Professional investigators are available to receive
telephone calls from 7 a.m. to 5 p.m. Eastern Time, Monday through
Friday. Further, this last year, in an effort to encourage personnel
stationed in Southwest Asia to report suspected fraud, waste, abuse,
and mismanagement, we established a special, toll-free DOD Hotline
number exclusively for their use. In the first three quarters of fiscal
year 2008 the DOD Hotline received 10,196 contacts (13,560 in fiscal
year 2007) from all sources.
Due to the sensitive nature of criminal and administrative
investigations, we do not discuss ongoing investigations. Among other
benefits, this allows investigators to look into allegations without
alerting subjects, witnesses, and others that are key to an
investigation about our activities and to protect the privacy interests
of all parties. In fact, the DOD IG does not either confirm or deny the
existence of an investigation to anyone without an authorized need to
know.
Regarding audits my office does not discuss potential findings. We
use our audit and inspection reports as our primary means to keep
Congress informed of identified deficiencies within the Department.
______
Questions Submitted by Senator Byron L. Dorgan
Question. On July 12, 2005, a group of 28 senators wrote Secretary
Rumsfeld to request an immediate and full investigation of allegations
by former KBR food production manager Rory Mayberry, including
allegations that U.S. troops in Iraq were being fed expired food or
food that had been damaged by bullets and shrapnel. My office received
letters from the IG on August 11, 2005, and again on January 27, 2006,
stating that the DOD Inspector General was investigating this matter--
but no further word on this issue.
Please describe the status of this investigation.
Answer. In August 2005, the KBR Task Force in Rock Island,
Illinois, was contacted by the Army Sustainment Command (ASC) regarding
allegations by Mr. Mayberry to Congress. Mr. Mayberry alleged KBR
billed DOD for food it had not delivered. The referral from ASC
requested the FBI investigate the over-billing of food by KBR. The
referral did not mention food spoilage or shrapnel/bullets in meals
provided to U.S. troops. The FBI determined Mr. Mayberry's allegations
were not credible. In part, this assessment was based upon Mr.
Mayberry's inability to provide concrete information that could be used
to further corroborate the allegations or direct the agents to other
investigative leads. In January 2006, Mr. Mayberry filed a qui tam suit
regarding the over-billing and added allegations of spoilage and
munitions items found in food. In March 2008, DoJ declined to intervene
in the qui tam suit citing lack of evidence. In August 2006, the same
allegations were forwarded to our investigators, which following
discussions with the FBI and DoJ, declined to pursue the allegations.
Question. Explain the reason for the delay in the resolution of
this investigation, given that the allegations involved unsafe food
being fed to the troops.
Answer. In August 2005, the KBR Task Force in Rock Island,
Illinois, was contacted by the Army Sustainment Command (ASC) regarding
allegations by Mr. Mayberry to Congress. Mr. Mayberry alleged KBR
billed DOD for food it had not delivered. The referral from ASC
requested the FBI investigate the over-billing of food by KBR. The
referral did not mention food spoilage or shrapnel/bullets in meals
provided to U.S. troops. The FBI determined Mr. Mayberry's allegations
were not credible. In part, this assessment was based upon Mr.
Mayberry's inability to provide concrete information that could be used
to further corroborate the allegations or direct the agents to other
investigative leads. In January 2006, Mr. Mayberry filed a qui tam suit
regarding the over-billing and added allegations of spoilage and
munitions items found in food. In March 2008, DoJ declined to intervene
in the qui tam suit citing lack of evidence. In August 2006, the same
allegations were forwarded to our investigators, which following
discussions with the FBI and DoJ, declined to pursue the allegations.
______
Questions Submitted by Senator Frank R. Lautenberg
Question. Earlier this year, I asked your predecessor to
investigate a suspicious e-mail exchange indicating that the Army Audit
Agency was told not to answer questions about whether the cost of
closing Fort Monmouth was higher than the Army originally indicated.
Mr. Kicklighter responded ``Yes, we will.'' It's been four months. When
will your office complete its investigation?
Answer. Our investigators are continuing their fieldwork regarding
the issues of whether the Army Deputy Assistant Chief of Staff for
Installation Management failed to take appropriate action when advised
by Fort Monmouth personnel of an error in their original submission to
a base closure data call and whether he improperly suppressed an audit
into the matter. We anticipate completing that portion of the
investigation in late October and will provide a copy of the report
when it is completed.
We are also examining a related issue presented in a letter from
the New Jersey Delegation as to whether the Director of Defense
Research and Engineering improperly withheld information from the BRAC
Commission. We anticipate completing this portion of the investigation
by late October or early November and will provide a copy of the report
when it is completed.
Question. In your opinion, should Congress end the LOGCAP ``cost-
plus'' contracting process? Has it become just too rife for abuse?
Answer. My role as Inspector General is to report on whether DOD
operations are taking place within the guidelines of the applicable
laws and regulations. For me to speculate on whether programs should be
ended could give the appearance of a loss of objectivity when reporting
on whether DOD is performing operations in accordance with those laws.
However, I offer the following observation: ``Cost-plus'' contracts
are legal and are supposed to be monitored pursuant to Federal
Acquisition Regulations. The Federal Acquisition Regulations state that
more resources are required to oversee contractor performance on
``cost-plus'' contracts than on firm fixed price contracts. Cost type
contracts place the risk on the Government which must be balanced by an
adequate surveillance system to ensure that DOD receives what it pays
for.
In Iraq, a number of problems have occurred because there is an
inadequate level of Government surveillance personnel in place or
because responsibilities for providing surveillance have been delegated
to contractor personnel with little incentive to protect Government
resources. Over time, historical data can be developed and used to
allow DOD better insight into expenditures such that portions of the
logistics support should be able to be converted to fixed price work,
thereby shifting some of the risk to the contractor and reducing the
commensurate level of government surveillance. It is our opinion that
continued use of a cost-plus contracting process will increase the
likelihood of additional cases of waste and abuse unless additional
measures including more resources for surveillance and converting cost-
plus work to fixed price tasks when possible are established.
Therefore, DOD needs to better plan how to provide contractor
oversight resources for contingency contracting actions involving
``cost-plus'' contracts. The wartime environment in Iraq increases
challenges to conducting the surveillance required to support cost-plus
type contracts. As we state in our report D-2008-086, ``Challenges
Impacting Operations Iraqi Freedom and Enduring Freedom as Report by
Major Oversight Organizations for Fiscal Year 2003 Through Fiscal Year
2007,'' the Army has taken several measures to oversee LOGCAP that we
believe should improve the controls over LOGCAP. Some measures taken
include in April 2007, the Army created an Executive Director for
LOGCAP which brings program management oversight to LOGCAP. Further,
DOD efforts include developing future planning doctrine on contractor
logistical support in contingency operations.
______
Questions Submitted by Senator Wayne Allard
Question. You mentioned in your testimony that over the course of
conducting Operations Enduring and Iraqi Freedom, DOD experienced, at
times, significant and recurring challenges in contract management,
logistics, and financial management. You went on to say that these
three areas have been reported as challenges within DOD since the early
1990s, and therefore not surprising that DOD is experiencing these
challenges in Iraq and Afghanistan.
Why is this the case? In your estimation, what needs to be done
that has been overlooked or unsuccessfully executed time and again that
has caused these repeated challenges.
Answer. DOD is a large and very complex organization, which
presents a tremendous management challenge in developing and
implementing Department-wide improvements within areas such as contract
management, logistics, and financial management. For specific wartime
related challenges, we believe the Department needs to work in concert
with the Commission on Wartime Contracting to institute policies and
procedures for contingency operations. The Department has already begun
many initiatives to address implementing contingency business
operations and principles. Just as DOD prepares its military, the
Department must prepare its business operations and personnel to
support contingency operations.
Since 1990 and 1992, respectively, GAO has designated DOD Weapon
Systems Acquisition and Contract Management as high-risk areas.
Acquisition initiatives that began in the 1990s led to reductions in
acquisition oversight assets and when the spending trend dramatically
reversed after September 11th, the Department was not able to quickly
react to the need for more contract and oversight support. The emphasis
on urgency to support the war effort especially for contracting in an
expeditionary environment has only served to increase the challenges.
In fiscal year 2008, the Defense budget with war funding will approach
$650 billion. This total is more than double the last DOD budget
preceding September 11, 2001. Keeping pace with this spending would be
a difficult proposition if acquisition and oversight assets were
increasing at a proportional rate. But, from 1990 until the end of
fiscal year 1999, total personnel included in the DOD acquisition
workforce decreased about 50 percent, from 460,516 to 230,556
personnel. For example, since the mid 1990 the Defense Contract
Management Agency has taken significant cuts in personnel
(approximately 50 percent). Additional, emphasis/funding/billets for
the Defense Contract Management Agency, Defense Contract Audit Agency,
and the Defense Finance and Accounting Service would be beneficial in
increasing the oversight of the performance and payment of contractors
both at in the United States and abroad.
As of May 2008, there were approximately 25,000 contracting
officers to handle over $315 billion in procurements of goods and
services. Other organizations such as the Defense Contract Management
Agency which is responsible for much of the administration and
surveillance of DOD contracts decreased its staff levels by similar
amounts during the same time frame. Even within the Inspector General's
office, we reported in our March 31, 2008 growth plan that our auditors
are unable to keep pace with the ballooning Defense budget and this
growth ``leaves the Department increasingly more vulnerable to fraud,
waste and abuse.''
Question. As you know, there are 825 Contracting Officer's
Representatives performing contractual efforts within Iraq, and it is
imperative that these Representatives have the proper training and
expertise.
It is already July, 2008, when will the DOD Inspector General's
office be able to determine whether personnel assigned to the Joint
Contracting Command--Iraq/Afghanistan as Contracting Officer's
Representatives have the training and expertise to perform their
duties?
Answer. We announced an audit of the ``Assignment and Training of
Contracting Officers' Representatives at Joint Contracting Command--
Iraq/Afghanistan,'' (Project No. D2008-D000JC-0203.000), on May 12,
2008, to review the qualifications of Contracting Officers'
Representatives performing contractual efforts in Iraq. The overall
objective is to determine whether personnel assigned as Contracting
Officers' Representatives to the Joint Contracting Command Iraq/
Afghanistan have the necessary training and expertise required to
perform their duties. We plan to issue a draft report in January 2009
and the final report in March 2009.
Question. With so many authorities responsible for detecting waste,
fraud, and abuse in Iraq--including DOD and non-DOD law enforcement.
Are we most effectively combating corruption and fraud in Iraq? Are
DOD and non-DOD law enforcement partners working together effectively?
Is there an absolute need for each and every investigative and audit
organization that is present right now in Iraq?
Answer. Pursuant to the Inspector General Act of 1978, we have
broad criminal investigative jurisdiction regarding DOD programs and
operations. The DOD IG has primary jurisdiction over matters involving
most contract and procurement actions awarded by Defense Agencies, OSD
components, and field activities. However, effectively countering fraud
in Southwest Asia, just as in the United States, requires the
cooperative efforts of other DOD investigative agencies and Federal law
enforcement partners, as well as the audit community. As a team,
special agents are more effectively combating corruption and fraud in
Iraq and Afghanistan and avoiding duplication of effort by coordinating
investigative activities and deconflicting cases. This cooperation has
a synergetic effect that maximizes the time, tools, and efforts of the
agencies involved. Our joint efforts thus far are having a positive
impact in theater and are making a significant difference.
The DOD IG is the lead oversight agency for accountability in DOD,
and as such, is committed to maintaining an effective working
relationship with other oversight organizations to minimize duplication
of efforts and to provide more comprehensive coverage. Effective
interagency coordination, collaboration, and partnerships within the
oversight community are essential to providing comprehensive reviews of
wartime expenditures to identify whether critical gaps exist, and then
to recommend actions to fix those gaps. Below is a brief description of
investigative and audit partnerships we participate in to ensure
coordination with other oversight organizations.
Joint Investigative Partnerships
The Defense Criminal Investigative Service (DCIS), the criminal
investigative arm of the DOD IG works jointly with other federal law
enforcement agencies, participates in various working groups and has
agents assigned to FBI Joint Terrorism Task Forces throughout the
nation. Examples of partnerships between the DCIS and other agencies
include:
--Joint cases with the Federal Bureau of Investigation; Immigrations
and Customs Enforcement; United States Secret Service; United
States Marshals Service; Alcohol Tobacco and Firearms; United
States Postal Inspection Service; and various IGs including
National Aeronautics and Space Administration; General Services
Administration; Health and Human Services; Veterans Affairs;
Department of Transportation; Department of State; Housing and
Urban Development; and the Military Criminal Investigative
Organizations including the United States Army Criminal
Investigation Command; Naval Criminal Investigative Service;
and Air Force Office of Special Investigations.
--Member of the National Procurement Fraud Task Force, created in
October 2006 to promote the prevention, early detection and
prosecution of procurement fraud.
--Member of the International Contract Corruption Task Force with
full time agent assigned to the Joint Operations Center.
--Member of the Defense Enterprise Working Group.
--Excellent working relationships with agencies in the SWA theater of
operations.
Southwest Asia Joint Planning Group
The DOD IG has jointly established and chairs an interagency SWA
Joint Planning Group that meets quarterly and provides oversight of
fraud, waste, abuse, and criminal activities in the SWA region. The JPG
provides a chance for collaboration and teamwork with the organizations
engaged in this effort, including the military inspectors general and
service auditors general, combatant commands inspectors general, the
Defense Contract Audit Agency, the Defense Finance and Accounting
Service, the Defense Contract Management Agency, the Inspectors General
of State and the USAID, and the SIGIR. The mission of the JPG is to
better coordinate and integrate oversight activities in the region. The
SWA JPG leads the coordination and oversight required to identify and
recommend improved mission support to military units conducting
operations.
In conjunction with the SWA Joint Planning Group, the DOD IG also
participates in the Afghanistan Working Group and the Iraq Inspectors
General Council.
--The Afghanistan Working Group was established by the DOD IG, along
with the Government Accountability Office, the Department of
State Inspector General, and the USAID, established a working
group on oversight activities in Afghanistan to minimize the
impact on forward command operations, eradicate overlapping and
duplicate oversight requests, and facilitate the exchange of
oversight information. The DOD IG, as the Department of Defense
representative of the group, also incorporates the ongoing and
planned Afghanistan-related oversight efforts of the Service
Auditors General into the working group.
--The Iraq Inspectors General Council chaired by the SIGIR, was
established to minimize the impact on forward command
operations, deconflict overlapping and duplicate oversight
requests, and facilitate the exchange of oversight information
unique to Iraq.
Question. I understand from your testimony that the service-
specific Military Criminal Investigative Organizations--the Army
Criminal Investigation Command, the Naval Criminal Investigative
Service, and the Air Force Office of Special Investigations--typically
focus upon allegations involving the award of contract and procurement
actions of their respective military department.
How effective have these service-specific organizations been at
detecting and eliminating waste, fraud, and abuse?
Answer. The DOD IG has primary jurisdiction over matters involving
most procurement actions awarded by the Defense Agencies, OSD
components, and field activities, but it can also undertake or join any
DOD fraud, waste, and abuse investigation. The Defense Criminal
Investigative Service's (DCIS) primary partner in countering DOD-
related fraud in Southwest Asia is the U.S. Army Criminal Investigation
Command's (CID) Major Procurement Fraud Unit (MPFU). The MPFU conducts
investigations into allegations of fraud associated with the Army's
major acquisition programs. DCIS and MPFU agents conduct fraud
briefings to create awareness and to encourage DOD personnel and
contractors to report fraud, waste and abuse. DCIS and MPFU agents also
actively recruit sources for intelligence and information regarding
past and current fraud, waste, and abuse against the Department. In
addition, CID has a significant number of military special agents
deployed throughout Southwest Asia who typically investigate general
crimes and handle force protection matters. These military special
agents represent yet another resource for invaluable information.
The immense and critical roles of the Naval Criminal Investigative
Service and the Air Force Office of Special Investigations in force
protection, counter-intelligence, and general crimes investigations has
prevented significant engagement by these components in fraud
investigations as they did prior to operations in Iraq and Afghanistan.
______
Questions Submitted by Senator Larry Craig
Question. Mr. Heddell, one of the reports you provided this
Committee goes into great detail about the lack of personnel available
to actually provide adequate oversight over contractors overseas. Can
you walk us through the steps that DOD IG's office is doing to
incentivize and increase the number of folks joining the ranks of
auditors overseas?
Answer. On March 31, 2008, the DOD IG provided the defense
committees its growth plan for increasing Audit and Investigative
Capabilities fiscal years 2008-2015 (as directed by the Committee on
Armed Services, United States Senate, in the language of Senate Report
110-77, to accompany S. 1547, the National Defense Authorization Act
for Fiscal Year 2008). As identified in Senate Report 110-77, ``The
committee is concerned that funding levels for this important
independent audit and investigative function is not keeping pace with
the demands for Inspectors General services in the global war on
terror.''
In November 2007, we realigned internal core mission assets within
the Office of the Deputy Inspector General for Auditing to form the
Joint and Overseas Operations Directorate to support Southwest Asia
audit operations. This expeditionary audit directorate was formed to
address corruption, fraud, waste, and abuse in Southwest Asia; combat
illegal and improper expenditures; and improve accountability of DOD
resources that support operations in Southwest Asia. Through this new
directorate, we are expanding our audit presence in our field offices
in Southwest Asia including Afghanistan and Iraq. We are also assessing
the expansion of the DOD IG field office in Kuwait.
All DOD IG personnel working in Southwest Asia are there as
volunteers. As mentioned, we employ an expeditionary workforce model in
support of our Southwest Asia oversight efforts. Our expeditionary
workforce model is structured using a core of personnel assigned and
deployed to our field offices in Southwest Asia. This provides us a
base level of personnel to perform oversight in theater, support audit
work being performed back in CONUS, and support incoming personnel
performing specific fieldwork. This model allows us to attract
employees who accept longer term assignments as well as those who
desire limited term assignments working in combat related areas. We
believe our expeditionary model along with the additional resources
received, provides us incentives to attract personnel to deploy to
Southwest Asia in support of our mission while minimizing risks and
costs.
Within the Department of Defense, progress in training and
equipping more contract officials to handle the increased workload will
take time. However, a number of initiatives are underway that are
addressing the challenges both within the Department and from proposed
legislation that should lead to improvement and better meet these
challenges. A commission headed by Dr. Jacques Gansler evaluated the
Army Expeditionary Contracting and recommended urgent reform. As a
result, the U.S. Army Materiel Command activated the Army Contracting
Command which will oversee more than $85 billion in contracts annually
and focus on maintaining and improving the Army's ability to respond
globally in support of warfighters' needs.
Since 1990 and 1992, respectively, GAO has designated DOD Weapon
Systems Acquisition and Contract Management as high-risk areas.
Acquisition initiatives that began in the 1990s led to reductions in
acquisition oversight assets and when the spending trend dramatically
reversed after September 11th, the Department was not able to quickly
react to the need for more contract and oversight support. The emphasis
on urgency to support the war effort especially for contracting in an
expeditionary environment has only served to increase the challenges.
In fiscal year 2008, the Defense budget with war funding will
approach $650 billion. This total is more than double the last DOD
budget preceding September 11, 2001. Keeping pace with this spending
would be a difficult proposition if acquisition and oversight assets
were increasing at a proportional rate. But, from 1990 until the end of
fiscal year 1999, total personnel included in the DOD acquisition
workforce decreased about 50 percent, from 460,516 to 230,556
personnel.
As of May 2008, there were approximately 25,000 contracting
officers to handle over $315 billion in procurements of goods and
services. Other organizations such as the Defense Contract Management
Agency which is responsible for much of the administration and
surveillance of DOD contracts decreased its staff levels by similar
amounts during the same timeframe.
Question. Mr. Heddell, I am extremely concerned by the ongoing
trend of providing inadequate armor for our troops in the field. The
report specifically cites numerous incidents where the manufacturer
either did not have the capability to produce enough armor or simply
delivered substandard armor that put our troops at risk. Has this trend
been improving since the problems identified in fiscal year 2007? And
why have contractors with an ongoing history of poor performance
continued to receive contracts for armor production?
Answer. The DOD IG has issued several reports regarding the armor
capabilities supporting our troops. Our series of armor related reports
cover body armor, armored vehicles, and armor kits for tactical
vehicles. These issued reports identify that DOD has experienced
challenges in fielding adequate armor capabilities for our troops. DOD
IG has four armor related projects ongoing (two ongoing projects
reviewing aspects of body armor and two ongoing projects addressing the
Mine Resistant Armor Protected vehicle). In addition, we have another
planned audit regarding the life cycle management of body armor. The
four ongoing projects as well as the planned project should show
whether progress is being made. The four ongoing armor related projects
are:
--DOD Testing Requirements for Body Armor (D2008-D000JA-0263.000).
--Research on DOD Body Armor Contracts (D2008-D000CD-0256.000).
--Marine Corps Implementation of the Urgent Universal Need Statement
Process for Mine Resistant Ambush Protected Vehicles (D2008-
D000AE-0174.000).
--Procurement And Delivery Of Joint Service Armor Protected Vehicles
(D2007-D000CK-0230.000).
Contracting decisions are the responsibility of the DOD contracting
officials responsible for the acquisition. Past performance can be
included as evaluation criteria in the acquisition process; however, as
we discuss in report D-2007-107, ``Procurement Policy for Armored
Vehicles,'' the size of the industrial base (competitors) was a factor
in awarding contracts to a contractor that could not meet production
schedules. Specifically, for the Army Buffalo Mine Protected Clearance
Vehicle, we found no indication that other sources were available for
competition for the Buffalo. DOD can and has assessed liquidated
damages to compensate for not meeting contractual requirements, such as
with the Joint Explosive Ordnance Disposal Rapid Response Vehicle
(JERRV). The performance of the current contractors providing armor
capabilities should be considered when making future acquisition
decisions for armor capabilities. We are currently reviewing the
contracts awarded for Mine Resistant Ambush Protected (MRAP) vehicles
and assessing the strategies employed by the officials responsible for
the procurement.
Investigative indices disclosed that since 1999, the DOD IG has
investigated 29 allegations of improper manufacture or insufficient
delivery of body armor or armored vehicles. In 2006, we initiated seven
such investigations, five were initiated in 2007, and three have been
initiated so far this year. There is insufficient data to assert
generally that there has been a decline in incidents involving
defective body armor, but we believe that increased scrutiny from
auditors, law enforcement, and Congress is likely to have had an effect
in reducing attempted fraud.
CONCLUSION OF HEARINGS
Chairman Byrd. This hearing is recessed, subject to the
call of the chairman.
[Whereupon, at 12:35 p.m., Wednesday, July 23, the hearings
were concluded and the committee was recessed, to reconvene
subject to the call of the Chair.]
-