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Early Pentagon contracts in Iraq were badly done, report says

WASHINGTON—In awarding the first contracts in Iraq, the Pentagon "cut corners," couldn't show that it got "fair and reasonable" prices and didn't follow up to see if the work was done properly, a new Defense Department inspector general's report says.

Experts on contracting said Wednesday that the Pentagon report shows a disturbing, but not surprising, institutional problem with spending in Iraq that's probably far worse than the Department of Defense indicates.

The 68-page report shows that "no one's minding the store," said Steven Schooner, the co-director of the government procurement law program at George Washington University's law school. "The equivalent of this is to (hire contractors to) renovate my bathroom and say, `I'll be back in a month.'"

The March 18 report, which reviewed 24 contracts worth nearly $123 million—a small percentage of the tens of billions of dollars being spent in Iraq—found:

_Government officials didn't monitor work on 13 of the contracts to make sure the jobs were being done.

_Officials "inappropriately awarded personal services contracts" in 10 of the 24 cases.

_Defense Department contract officers didn't show that they were getting reasonable prices in 22 of the 24 contracts.

Thirteen of the contracts, worth $111 million, were essentially given out without a competitive bidding process. Those contracts mostly provided services and computers for the humanitarian efforts of the Iraqi reconstruction.

"Our review of the ... handling of 22 of the 24 specific agencies has disclosed significant weaknesses," the inspector general report concluded. "In each phase of the acquisition process, (the Pentagon) cut corners, from generating the initial requirement to surveillance of the contractor."

An employee of San Diego-based Science Applications International Corp., which was hired to set up new media operations in Iraq, purchased an H2 Hummer, a Ford C350 pickup truck and then chartered a cargo jet to fly the vehicles to Iraq "for his personal—or for his (program manager's) use on this contract, all outside the scope of the contract," the report said.

The inspector general also found that the Defense Department official overseeing the contract refused to authorize those $381,000 expenditures, so SAIC went over his head and got approval from an unidentified person in the office of Douglas Feith, the undersecretary of defense for policy.

SAIC was awarded the no-bid media contract by the Pentagon, even though it had no experience in building professional newsgathering operations. SAIC has been accused by some of those who worked on the media project of seriously mismanaging the effort to build two nationwide television networks, a radio network and a national newspaper.

SAIC denies the allegations.

"In general, for the eight contracts or so that we provide services in Iraq, SAIC has worked very diligently to ensure that we are performing to the customer's satisfaction. When unanticipated events occur, we immediately respond to address and resolve any issues," company spokesman Ron Zollars said in an e-mail.

Experts said the problem isn't just with the SAIC contracts, but in the way the Pentagon hands out the contracts with little oversight or planning.

The inspector general found that the unstable war conditions in Iraq, as well as the urgent need to begin the reconstruction, largely contributed to the improper contracting. But a far bigger factor, it said, was "the lack of planning for and emphasis on the need for acquisition support."

The Defense Contracting Command-Washington, which with the Coalition Provisional Authority awarded the contracts, defended its work. The contracting command office told the inspector general that it "acknowledged that shortcuts were taken" but said the report was "riddled with faulty assumptions, erroneous conclusions and egregious misinterpretation of contract law and procedures."

The head of the Washington contracting office even asked that the report "be withdrawn in its entirety," but the inspector general declined.

Peter Singer, a researcher at the Brookings Institution, a Washington think tank, said the report suggests deeper troubles throughout government, in which the amount of contracting increases without adequate oversight.

"This is the tip of the iceberg," Singer said. "If this is as bad as this is looking in a small number of noncontroversial contracts, it really worries me about the rest."


(Jonathan Landay and Tish Wells contributed to this report.)


(c) 2004, Knight Ridder/Tribune Information Services.