Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Congressional research reportSep 20, 2010

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Defense Logistical Support Contracts in Iraq

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September 20, 2010

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RL33834

Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Summary

This report examines Department of Defense (DOD) logistical support contracts for troop support

services in Iraq and Afghanistan administered through the U.S. Army’s Logistics Civil

Augmentation Program (LOGCAP), as well as legislative initiatives which may impact the

oversight and management of logistical support contracts. LOGCAP is an initiative designed to

manage the use of civilian contractors that perform services during times of war and other

military mobilization. The first LOGCAP was awarded in 1992. Four LOGCAP contracts have

been awarded for combat support services in Iraq and Afghanistan. The current LOGCAP III

contractor supports the drawdown in Iraq by providing logistical services, theater transportation,

augmentation of maintenance services, and other combat support services.

On April 18, 2008, DOD announced the Army’s LOGCAP IV contract awards to three

companies—DynCorp International LLC, Fort Worth, TX; Fluor Intercontinental, Inc, Greenville,

SC; and KBR, Houston, TX, through a full and open competition. The LOGCAP IV contract calls

for each company to compete for task orders. Each company may be awarded up to $5 billion

annually for troop support services with a maximum annual value of $15 billion. As of March

2010, each company has been awarded at least one task order under LOGCAP IV. Over the life

of LOGCAP IV, the maximum contract value is $150 billion. The U.S. Army Sustainment

Command awarded the first performance task order on September 25, 2008, to Fluor

Intercontinental, Inc., for logistical support services in Afghanistan. As of April 2010,

approximately 12 tasks orders have been awarded under LOGCAP IV for a total of $1.8 billion in

obligations under LOGCAP IV contracts.

In May 2010, the U.S. Army announced that it would continue to use the LOGCAP III contract to

provide support services until the scheduled withdrawal of all troops in December 2011. Previous

to this announcement, the Army had announced that the LOGCAP III contract would be cancelled

and that all services would be transferred to the LOGCAP IV contract. However, the Army has

reportedly completed a business case analysis and concluded that keeping the LOGCAP III

contract would be of greater benefit to the federal government. Some Members of Congress have

questioned this decision and asked the Secretary of Defense to reconsider, particularly in light of

the Justice Department’s decision to bring civil action against the LOGCAP III contractor.

Congress is concerned about the federal oversight and management of DOD contracting in Iraq

and Afghanistan, particularly under programs like LOGCAP. Assessments from the Government

Accountability Office (GAO), DOD Office of the Inspector General (DOD-IG), the Special

Inspector General for Iraq Reconstruction (SIGIR), and the Defense Contract Audit Agency

reveal a lack of accountability for large sums of money spent for Iraq contracts.

Congressional concerns over the federal oversight and management of defense contracts were the

subject of a House Armed Services Committee (HASC) Panel on Defense Acquisition Reform to

conduct a systematic review of the defense acquisition system. On March 23, 2010, the panel

provided the HASC its findings and recommendations. Largely as a result of the panel’s work,

H.R. 5013, the Implementing Management for Performance and Related Reforms to Obtain Value

in Every Acquisition Act (IMPROVE) of 2010, was introduced on April 14, 2010, seeking to

improve the management and oversight of DOD’s procurement of goods and services.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Contents

Introduction .................................................................................... Error! Bookmark not defined.

Purpose and Scope .................................................................................................................... 1

Legislative Activity, H.R. 5013 ................................................................................................. 1

Air Force Contract Augmentation Program .............................................................................. 5

Logistics Civil Augmentation Program ........................................................................................... 6

LOGCAP Contracts (1992-2010).............................................................................................. 7

Latest Update on LOGCAP III Contract ................................................................................... 8

LOGCAP IV Contract Awards .................................................................................................. 9

The Planning Contract Was Awarded to Serco ................................................................... 9

ASC Selected the Performance Contractors ....................................................................... 9

Protests .............................................................................................................................. 10

Contract Details ................................................................................................................ 10

Performance Task Orders ................................................................................................... 11

Congressional Interest .............................................................................................................. 11

The Defense Base Act (DBA) and LOGCAP ................................................................... 14

Background ................................................................................................................................... 16

Awarding of Defense Contracts .............................................................................................. 16

Full and Open Competition............................................................................................... 16

Emergency Contracting Authorities .................................................................................. 17

Contingency Contracting .................................................................................................. 17

Rapid Acquisition Methods............................................................................................... 17

Audits, Investigations, and Reports......................................................................................... 18

Role of Federal Agencies .................................................................................................. 18

Special Inspector General for Iraq Reconstruction (SIGIR) ............................................. 18

Special Inspector General for Iraq Reconstruction (SIGIR) LOGCAP Reviews .................... 19

Quarterly Report to Congress ........................................................................................... 19

Reviews of Task Orders 130 and 151 ............................................................................... 19

DOD Inspector General .................................................................................................... 20

Government Accountability Office (GAO)....................................................................... 21

Potential Oversight Issues ............................................................................................................. 21

Contract Oversight ............................................................................................................ 21

Contract Administration .................................................................................................... 22

DOD Contracting Officials ............................................................................................... 23

Development of Contract Requirements ........................................................................... 24

Use of Indefinite-Delivery/Indefinite-Quantity Contracts ................................................ 24

Costs and the Use of No-Bid and Sole-Source Contracts ................................................. 25

Cost-reimbursement Contracts.......................................................................................... 25

Use of Overhead Fees ....................................................................................................... 25

Transparency ..................................................................................................................... 26

Acquisition Workforce ...................................................................................................... 26

The Gansler Commission.................................................................................................. 28

Independent Panel to Examine the Defense Contract Audit Agency ................................ 29

Potential Options for Congress ...................................................................................................... 30

Option 1: Implementing the Gansler Commission Recommendations ................................... 30

Option 2: Expanding the SIGIR’s Jurisdiction ........................................................................ 30

Option 3: Convening a Study of the Federal Employee and Contractor Workforce ............... 31

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Option 4: Requiring More Detail for Better Oversight ........................................................... 31

Option 5: Establishing a Dedicated Office to Conduct Audits and Investigation of

DOD Contracts..................................................................................................................... 32

Appendixes

Appendix A. Selected Reports ....................................................................................................... 33

Appendix B. Selected Legislative Initiatives on Iraq Contracting ................................................ 35

Contacts

Author Contact Information ........................................................... Error! Bookmark not defined.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Introduction

Purpose and Scope

This report will examine logistical support contracts for troop support services (also known as

service contracts1) in Iraq and Afghanistan, primarily administered through a smaller program, the

United States Air Force Contract Augmentation Program (AFCAP) and a larger program, the

United States Army’s Logistics Civil Augmentation Program (LOGCAP).2 This report will focus

primarily on contracts involving Department of Defense (DOD) appropriated funds, although

some projects involve a blending of funds from other agencies.3

Legislative Activity, H.R. 5013

This section of the report will provide some background on proposed legislative initiatives which

seek to improve the acquisition, management, and oversight of defense service contracts such as

LOGCAP.

In March 2009, the House Armed Services Committee (HASC) appointed a Panel on Defense

Acquisition Reform to conduct a systematic review of the defense acquisition system. On March

23, 2010, the panel issued its final report, and provided the HASC its findings and

recommendations. On March 23, 2010, the House Armed Services Committee’s Defense

Acquisition Reform Panel issued its final report, and provided its findings and recommendations

to the House Armed Services Committee.4 Largely due to the recommendations of the panel, a

new set of legislative initiatives have been introduced to address the ongoing and systemic

problems with DOD’s acquisition of goods and services. They are described below.

H.R. 5013, the Implementing Management for Performance and Related Reforms to Obtain Value

in Every Acquisition Act (IMPROVE) of 2010, was introduced on April 14, 2010, by

Representative Robert Andrews.5 The proposed bill is largely a result of the recommendations of

the House Armed Services Committee’s Panel on Defense Acquisition Reform, a yearlong effort

Federal Acquisition Regulation (FAR) 37, Subpart 37.1 defines “service contracts” as contracts that directly engage

the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end

item of supply.

Department of the Army. Logistics Civil Augmentation Program (LOGCAP). Army Regulation (AR) 700-137,

Introduction, 1-1. Purpose, p. 1.

For a fact sheet on the application of federal procurement statutes to contracts for the reconstruction of Iraq, see CRS

Report RS21555, Iraq Reconstruction: Frequently Asked Questions Concerning the Application of Federal

Procurement Statutes, by (name redacted); for a discussion on Iraqi Relief and Reconstruction Fund (IRRF) contracting

issues, see CRS Report RL31833, Iraq: Reconstruction Assistance, by (name redacted)

. For a discussion on private

security contracting see CRS Report RL32419, Private Security Contractors in Iraq: Background, Legal Status, and

Other Issues, by (name redacted), (name redacted), and (name redacted)

. For a discussion of war-related costs

see CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by

(name redacted)

. For a discussion on the FY2008 DOD appropriations and authorization bills, refer to CRS Report

RL33999, Defense: FY2008 Authorization and Appropriations, by (name redacted), (name redacted),

d (name

redacted)

Final Report of the Defense Acquisition Reform Panel, Findings and Recommendations. House Armed Services

Committee, .March 23, 2010.

H.Rept. 111-465, Part I. H.R. 5013, 111th Congress, 2nd Session. The bill has nine co-sponsors, and was referred to

the House Armed Services Committee (HASC) and the House Oversight and Government Reform Committee on was

reported out of the House Armed Services Committee on April 14, 2010. The bill was amended by the HASC on April

21, 2010, discharged by the House Oversight and Government Reform Committee on April 23, 2010, and reported

favorably in a HASC vote of 56-0.

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to study the defense acquisition system with the goal of identifying systemic failures that impact

DOD’s acquisition of goods and services. H.R. 5013 appears to represent a significant overhaul of

Department of Defense (DOD) acquisition policy and one of the first attempts to address the

oversight and management of defense service contracts. Some estimates are that DOD’s annual

spending for goods and services comprise some 60% to 80% of DOD’s total annual spending,

including spending for logistical support contracts.6

H.R. 5013 is divided into four major areas of reform: Title I, the Defense Acquisition System;

Title II, the Defense Acquisition Workforce; Title III, the Financial Management System; and

Title IV, the Industrial Base. Selected highlights from each section of the bill appear below.7

Title 1—Defense Acquisition System. Title I amends Title 10 of the United States Code (U.S.C)

to insert a new chapter, Chapter 149—Performance Management of the Defense Acquisition

System. Title I would require the Secretary of Defense to regularly assess the performance of the

defense acquisition system designed to “ensure that all elements of the defense acquisition system

are subject to regular performance assessments – (A) to determine the extent to which such

elements deliver appropriate value to the Department of Defense; and (B) to enable senior

officials of the Department of Defense to manage the elements of the defense acquisition to

maximize their value to the Department.”8

Highlights of Title I include the following provisions:



The development of system-wide categories of metrics to ensure that there is

sufficient uniformity in performance assessments across the defense acquisition

system;

The conduct of periodic audits to determine the accuracy and reliability of the

performance assessments;

The establishment of linkages between the performance assessments, the

management of personnel, and the criteria for promotion, awards, and other

workforce incentives;

The establishment of a process for generating requirements for the acquisition of

services that includes commanders of unified combatant commands and other

designated officers, to provide input on joint requirements for the acquisition of

services;

The revision of the Federal Acquisition Regulation (FAR) to provide appropriate

references to service contracting that are in addition to those references in FAR

Part 37;9 and

Donnelly, John M. Commission Warnings Raise Doubts on Oversight of Pentagon Contracts. Congressional

Quarterly (CQ) Today, April 20, 2010, p. 9. The Government Accountability Office, in a recent report, has stated: “In

fiscal year 2008, the Department of Defense (DOD) obligated over $200 billion on contracts for services, which

accounted for more than half of its total contract obligations.” Defense Acquisitions: Actions Needed to Ensure Value

for Service Contracts. Statement of John Hutton, Director, Acquisition and Sourcing Management and William Solis,

Director, Defense Capabilities and Management, in testimony before the Defense Acquisition Reform Panel, House

Armed Services Committee. GAO-09-643T, April 23, 2009.

Title I - Sections 102, 103, and 105, which address performance management initiatives in weapon system

acquisition, are discussed in CRS Report RL34026, Defense Acquisitions: How DOD Acquires Weapon Systems and

Recent Efforts to Reform the Process, by (name redacted) .

H.R. 5013 RH, p. 5.

FAR Part 37 prescribes the policy and procedure for the acquisition and management of services by contract. For

further information, see https://www.acquisition.gov/far/html/FARTOCP37.html.

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

The amendment of Title 10, Chapter 14110 by adding a section on the acquisition

of certain “military purpose, nondevelopmental items.”

Title II—Defense Acquisition Workforce. Title II amends Title 10, Chapter 87, by adding a new

section on the management of the acquisition workforce. Title II focuses on workforce

improvements designed to develop and maintain a highly skilled and professionally trained

acquisition workforce.11

Highlights of Title II include the following provisions:



The requirement for the Secretary of Defense to use the full authorities granted in

Title 5, Section 9902,12 to manage the defense acquisition workforce in a way

that complements and reinforces the performance management of the defense

acquisition system;

The hiring and training of managers, and the development of performance plans

for individual members of the acquisition workforce;

The incorporation of best practices adopted from the acquisition demonstration

project carried out under Section 1762 of this title;

The full use of the Defense Civilian Leadership Program established under

Section 1112 of P.L. 111-84, the National Defense Authorization Act for

FY2010;13

The full use of authorities under Title 5, Section 990314 to hire highly qualified

experts and skilled acquisition professionals;

The revision of the acquisition workforce demonstration project by the addition

of Section 1762, “Demonstration Project Relating to certain Acquisition

Personnel Management Policies and Procurements;”

The revision of Title 10, Chapter 87 by the addition of Section 1763, “Incentive

Programs for Civilian and Military Personnel in the Acquisition Workforce;”

The revision of Title 10, Chapter 87 by the addition of Section 1722b. “Special

Requirements for Civilian Employees in the Acquisition Field”, including

educational, recertification, training, and career advancement requirements;

The development of guidance and standards for acquisition workforce training;

The amendment of Title 10, Chapter 87, Subchapter II, by requiring the Secretary

of Defense to develop and carry out a plan to strengthen the segment of the

workforce that specializes in information technology acquisition;

The requirement for a review of the curriculum offered by the Defense

Acquisition University, “to ensure that it adequately supports the training and

education requirements of acquisition professionals, particularly in service

Title 10, Subtitle A, Part 4, Chapter 141, Miscellaneous Procurement Provisions.

Title 10, Subchapter A, Part II, Chapter 87, Defense Acquisition Workforce.

Title 5, Part III, Subchapter I, Chapter 99, Section 9902. Establishment of Human Resources Management System.

Title XI-Civilian Personnel Matters, Subtitle A-Personnel, Section 1112. Department of Defense Civilian Leadership

Program.

Title 5, Part III, Subchapter I, Chapter 99, Section 9903, Attracting Highly Qualified Experts.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress



contracting, long term sustainment strategies, information technology, and rapid

acquisition;”15 and

The requirement for the Secretary of Defense to develop internship and

scholarship programs in cost estimating “to underscore the importance of cost

estimating as a core acquisition function to the acquisition process.”16

Title III—Financial Management. Title III provides DOD with a new structure for increased

accountability for financial management.

Highlights of Title III include the following provisions:



The offering of incentives and other inducements to encourage DOD to produce

financial statements validated and ready for audit, earlier than September 30,

2017;

The development of penalties and other inducements in the event that a DOD

component fails to take corrective measures (to address the failure to achieve a

financial statement validated as ready for audit by September 30, 2017);

The requirement for the DOD Chief Management Officer, in coordination with

the Chief Management Officers for each military service, to review and update

policies and instructions regarding obligation and expenditure benchmarks to

ensure best value for the federal government; within 180 days of enactment of

this act; and

The requirement for the DOD Chief Management Officer, in coordination with

the Chief Management Officer for each military service, the Director of the

Office of Performance Assessment and Root Cause Analysis, the Under Secretary

of Defense (Comptroller), and the Comptrollers of the military services, to

conduct a comprehensive review of the “use and value of obligation and

expenditure benchmarks, and propose new benchmarks or processes for tracking

financial performance.”17

Title IV—Industrial Base. Title IV requires the Secretary of Defense to “establish a program

designed to expand the industrial base and to increase the Department’s access to innovation and

the benefits of competition.”18

Highlights of Title IV include the following provisions:



The establishment of a program to identify and communicate with

“nontraditional suppliers” and “markets of importance to the Department of

Defense.”19

The requirement for the Secretary of Defense to develop and implement

procedures for a price trend analysis for certain categories of commercial items;

H.R. 5013 RH, p. 49.

H.R. 5013 RH, p. 54.

H.R. 5013 RH, p. 59.

H.R. 5013 RH, p. 60.

H.R. 5013 RH, p. 61. As defined in the proposed legislation, the terms “nontraditional suppliers” means companies

having been awarded DOD contracts with a total value of not more than $100,000 in the previous 5 years. The terms

“markets of important to the Department of Defense” means business sectors where DOD spends more than

$500,000,000 annually.

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

The requirement for contractors and grantees to disclose any delinquent Federal

tax debts;

The amendment of Title 10, Chapter 8, Subchapter II20 to authorize the

appointment of a General Counsel for the Defense Contract Audit Agency;

The amendment of Title 10, Subtitle A, Part 4, Chapter 13121 to require the

Secretary of Defense to adhere to guidelines governing the conduct of contractor

business system reviews;

The requirement for the Secretary of Defense to establish a panel “consisting of

owners of large and small businesses that are not traditional defense suppliers, for

purposes of creating a set of recommendations on eliminating barriers to

contracting with the Department of Defense and its defense supply centers;”22

and

The revision of Title 10, Section 2500 to expand the National Technology and

Industrial Base to include the providers of services and information technology.

Air Force Contract Augmentation Program

The U.S. Air Force has a smaller contingency contracting support program for services in Iraq.

The Air Force Contract Augmentation Program (AFCAP) administers logistical support service

contracts in Iraq. AFCAP is the largest contingency support contract awarded by the Air Force.

AFCAP is an “umbrella” contract, similar to the U.S. Army’s LOGCAP. It was designed to

provide an on-call capability for troop sustainment and support. The program was established in

1997 for a wide-range of non-combatant, civil engineering services during wartime, contingency

operation, and humanitarian efforts. AFCAP provides for contractor support to relieve active duty

and air reserve personnel in the areas of food service, lodging, carpentry, plumbing, electrical,

mechanical, air conditioning, laundry plant operations, fire protection emergency management,

and project and program management.

Initially, AFCAP began as a five-year, $475 million program; now it is a 10-year, $10 billion

program. AFCAP is managed by the Air Force Civil Engineer Support Agency at Tyndall Air

Force Base and the Air Force Services Agency in San Antonio, TX.23 The first AFCAP contract

was awarded as a result of a competitive bidding process. Readiness Management Support LC

(RMS) was awarded the contract in February 1997. The cost-reimbursement plus award fee

contract was valued up to $452,600,000 for one base year plus four option years. RMS was again

awarded the contract when the contract was rebidded in February 2002. The new contract

(AFCAP II) calls for one base year and seven option years, and the contract is in effect until

February 2010. RMS is supported by its parent company, Johnson Controls, Inc., and eight other

subcontractors on the AFCAP team.24

Title 10, Chapter 8 – Defense Agencies and Department of Defense Field Activities, Subchapter II – Miscellaneous

Defense Agency Matters

Title 10, Subtitle A – General Military Law, Part IV – Service, Supply, and Procurement, Chapter 131 – Planning

and Coordination

H.R. 5013 RH, p. 71.

$10 Billion AFCAP III Award Provides Expeditionary Engineering. Defense Industry Daily: Military Purchasing

News for Defense Procurement Managers and Contractors, at http://www.defenseindustrydaily.com/10b-afcap-iiiprogram-contract-provides-expeditionary-engineering-01468/.

See http://www.globalsecurity.org/military/agency/usaf/afcap.htm, viewed on March 4, 2010.

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The Air Force Civil Engineer Agency describes the AFCAP program elements in this way:

AFCAP consists of five key players; 1) the customer, 2) MAJCOM Civil Engineer or

Director of Services, 3) AFCAP program managers located at HQ AFCESA/CEK, 4)

AFCAP contracting officers (AETC Contracting Detachment at AFCESA), and 5) the six

AFCAP contractors (Bechtel, CH2M Hill, DynCorp, Readiness Management Support,

URS & Washington Group). The customer is responsible for providing on-site contract

administration, quality assurance and task order surveillance. The MAJCOM Civil

Engineer/Director of Services (or delegated individual) provides resource advocacy,

appropriate programming and guidance on execution method to complete tasks. The

AFCESA AFCAP program managers work as an interface between customers and the

AFCAP contracting officers to solidify requirements available under this contract.25

Logistics Civil Augmentation Program

LOGCAP was established by the U.S. Army on December 6, 1985, with the publication of Army

Regulation 700-137. LOGCAP is an initiative to manage the use of civilian contractors who

perform services in support of DOD missions during times of war and other military

mobilizations. The use of LOGCAP contracts augments combat support and combat service

support to military forces.26

In September 2006 the Army Sustainment Command (ASC) was created to serve as the “logistics

integrator” for the contingency contracting and sustainment needs of the military worldwide. ASC

oversees about 65,000 contractors and manages about $25 billion in contracts.27 The Defense

Contract Management Agency (DCMA) manages the task orders issued under the LOGCAP

contract.28

In a May 2009 hearing before the Senate Commission on Wartime Contracting, the Executive

Director for the U.S. Army Contracting Command, Army Material Command, testified on the

status of the LOGCAP IV contract. Excerpts of his remarks appear below:

Eight task orders have been awarded to date, including five task orders for performance

and three task orders for project management offices (one for each contractor). Services

are transitioned from LOGCAP III to LOGCAP IV as task orders are awarded. In

addition to protests against the award of the basic contracts, nearly all the task orders

issued or awarded to date under LOGCAP IV have been protested. 29

Air Force Civil Engineer Agency, Fact Sheet on AFCAP, at

http://www.afcesa.af.mil/library/factsheets/factsheet.asp?id=9381; also, $10 Billion AFCAP III Provides Expeditionary

Engineering. Defense Industry Dailey, November 5, 2005. Accessed online at

http://www.defenseindustrydaily.com/10b-afcap-iii-program-contract-provides-expeditionary-engineering-01468/.

LOGCAP contracts have been previously awarded for work in Rwanda, Haiti, Saudi Arabia, Kosovo, Ecuador,

Qatar, Italy, southeastern Europe, Bosnia, South Korea, Iraq, and Kuwait. Under LOGCAP, private sector contractors

are used to provide a broad range of logistical and other support services to U.S. and allied forces during combat,

peacekeeping, humanitarian and training operations.

http://www.aschq.army.mil/home/missionvision.htm.

U.S. Congress. Deficient Electrical Facilities at U.S. Facilities in Iraq. Hearing before the House Oversight and

Government Reform Committee. Statement of Jeffrey P. Parsons, Executive Director, Army Contracting Command,

U.S. Army Materiel Command, July 30, 2008.

U.S Congress. Military Logistics Contracts: Committee on Senate Commission on Wartime Contracting in Iraq and

Afghanistan. Statement of Jeffrey P. Parsons, Executive Director, U.S. Army Contracting Command, U.S. Army

Materiel Command, May 4, 2009.

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In testimony before the Senate Homeland Security and Governmental Affairs Subcommittee, U.S.

Army officials discussed the status of combat support operations under the LOGCAP program, as

described in excerpts taken from the hearing transcript:

All LOGCAP requirements in Kuwait have successfully transitioned from LOGCAP

III to LOGCAP IV and LOGCAP requirements are in the process of transitioning in

Afghanistan. The current LOGCAP III contractor supports the responsible drawdown in

Iraq through base closure and de-scoping of LOGCAP services which began in May

2009 and continues through August 2010. The two contractors that were awarded the

LOGCAP IV Afghanistan task orders, Fluor and DynCorp will increase their support as

troops transition to the Afghanistan theater. The competitively bid pricing matrixes for

the Afghanistan task orders will be used to adjust the cost estimate for the increased

support associated with the President’s decision.

We are currently conducting a fair opportunity competition for Transportation and Corps

Logistics Support Services requirements in Iraq that will result in requirements

transitioning from LOGCAP III to LOGCAP IV. The next anticipated action involves

Base Life Support. We are in the presolicitation phase for that acquisition with a draft

Request for Proposal issued the week of December 7, 2009.

The Army anticipates that the LOGCAP III contractor will provide logistics services in

support of the Iraq drawdown with theater transportation assets, augmentation of

maintenance services, and support for the supply support activities in the retrograde of

supplies and equipment from theater. The LOGCAP III contractor also possesses other

capabilities in support of the responsible drawdown of forces, such as packaging,

blocking, bracing, and crating of equipment for shipment, wash rack operations, and

cleaning of equipment for agriculture and customs. These services are available to the

supported unit upon request. We expect the LOGCAP IV contractor to provide the same

level of services in support of the responsible drawdown but only for those bases that will

remain after August 2010.30

As of March 29, 2010, 12 task orders have been awarded under LOGCAP IV, as revealed in

recent testimony before the Senate Commission on Wartime Contracting in Iraq and Afghanistan:

Twelve task orders have been awarded to date, including nine task orders for

performance and three task orders for project management offices (one for each

contractor.) To date, $1.8 billion has been obligated under the LOGCAP IV contracts.

With inclusion of the core logistics support, theater transportation, and postal operations

services (CPT), 76 percent of LOGCAP work has been competitively awarded under

LOGCAP IV. Services are transitioned from LOGCAP III to LOGCAP IV as task orders

are awarded.31

LOGCAP Contracts (1992-2010)

The first LOGCAP contract (LOGCAP I) for combat support services in Iraq was awarded on

August 3, 1992, to Brown and Root Services of Houston, TX (also referred to as KBR).

Reportedly, the contract was competitively awarded and consisted of a cost-plus-award-fee

U.S. Congress. Senate Homeland Security and Governmental Affairs Subcommittee. Contracting Oversight Hearing

on Afghanistan Contracts: An Overview. Edward Harrington, Deputy Assistant Secretary of the Army for Procurement,

U.S. Department of the Army, and Jeffrey Parsons, Executive Director, Army Contracting Command, U.S. Department

of the Army, December 17, 2009.

U.S. Congress. Managing Contractors During Iraq Drawdown. Testimony by James Loehrl, Executive Director,

Rock Island Contracting Center, before the Senate Commission on Wartime Contracting in Iraq and Afghanistan. ,

March 29, 2010.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

contract for one year followed by four option years. The Army Corp of Engineers reportedly held

a competition to award the second LOGCAP contract (LOGCAP II). The contract, a cost-plus

award fee contract for one base year followed by four option years was awarded to Dyncorp on

January 1, 1997. The third LOGCAP contract (LOGCAP III) was awarded in 2001 to

Halliburton/KBR.32

LOGCAP III, a 10-year contract (one base year followed by nine option years), was awarded to

Halliburton/KBR to perform a variety of tasks. Initial press reports indicated that the 2001

LOGCAP III contract would be for the development of a contingency plan for extinguishing oil

well fires in Iraq; however, subsequent press reports indicate that the contract included such tasks

as providing housing for troops, preparing food, supplying water, and collecting trash. This

contract was awarded under a cost-plus-award-fee, Indefinite-Delivery/Indefinite-Quantity

(ID/IQ) contract.33 The 2001 contract was based on specific task orders which are issued

individually and only for those services that DOD felt were necessary to support the mission in

the near term. During 2003, LOGCAP III contract rose to more than $3.5 billion. According to

one press account, Halliburton/KBR reportedly earned a fixed 1% profit above costs on LOGCAP

III, with the possibility of an additional 2% incentive bonus,34 while another press account

reported that the Halliburton/KBR LOGCAP III contract was a cost-plus, award fee contract that

earned a 2% fixed fee with the potential for an extra 5% incentive fee.35

The fourth LOGCAP contract (LOGCAP IV) was executed with a different acquisition strategy.

According to the Army, the LOGCAP IV contract award as based on a full and open competition.

Instead of using a single contractor, the contract called for multiple contractors. Competitions

were held and the contracts were awarded based on what represented the best value to the

government.36 In best value source selections, the government may make tradeoffs to make

awards based on factors other than costs or technical superiority. The use of multiple LOGCAP

contractors is reportedly intended to reduce the government’s risk. Under the new strategy, the

three performance contractors may compete for individual LOGCAP task orders, creating a

competitive environment meant to control costs and enhance quality.

Latest Update on LOGCAP III Contract

In May 2010, the U.S. Army announced that it would not hold a new competition for contract

support services in Iraq. Rather, the Army would continue to use KBR to execute the LOGCAP

III contract to provide support services until the scheduled withdrawal of all troops in December

2011. Reportedly, the Army will extend the task orders until LOGCAP III through the end of

2011. Estimates are that KBR stands to earn approximately $568 million in additional work on

the contract, which would bring KBR’s total value until LOGCAP III to approximately $35.7

billion.37

KBR was formerly known as Brown and Root Services. Brown & Root Services was the original LOGCAP

contractor.

Indefinite delivery/indefinite quantity contracts, also known as ID/IQ contracts, supply an indefinite quantity of

supplies, goods, or materials for an indefinite period of time. See FAR, Part 16, Types of Contracts.

Jaffe, Greg and King, Neil, Jr. U.S. General Criticizes Halliburton. Wall Street Journal, March 15, 2004.

See the Center for Public Integrity’s website at http://www.publicintegrity.org/wow/ under the section for Windfalls

of War, U.S. Contractors in Afghanistan and Iraq.

FAR, Part 15. Contracting by Negotiation.

Brodsky, Robert. Army Cancels Competition for LOGCAP work in Iraq. Government Executive, May 6, 2010.

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Previous to this announcement, the Army had maintained that the LOGCAP III contract would be

cancelled and that all services would be transferred to the LOGCAP IV contract. However, the

Army has reportedly completed a business case analysis and concluded that keeping the

LOGCAP III contract would be of greater benefit to the federal government. Some Members of

Congress have questioned this decision and asked the Secretary of Defense to reconsider,

particularly in light of the Justice Department’s decision to bring civil action against the

LOGCAP III contractor.38

LOGCAP IV Contract Awards

The Planning Contract Was Awarded to Serco

In August 2006 the Army held a competition to select a logistical planning and program support

contractor for LOGCAP IV. Two proposals were received and in February 2007 the ASC selected

Serco, Inc., of Vienna, VA. This contract will have a minimum value of $613,677 with a contract

period of one base year followed by up to four one-year options with a maximum annual contract

value of $45 million and a maximum contract value of $225 million.39

The ASC news release announcing the initial award selection described the range of logistical and

program services provided under the contract. They appear on ASC’s website.



Augmenting the Army’s capability to develop and update worldwide

management and staffing plans for contingencies;

working with LOGCAP IV performance contractors to assure that they

understand these plans;

helping theater planners integrate LOGCAP into their plans;

assisting planners in incorporating a broad range of contracted logistics support;

developing scopes of work officially referred to as procurement work statements;

preparing independent government cost estimates which are compared against

the contractor’s bids to assure valid costs for task orders;

conducting analysis of how performance contractors will do the work outlined in

the task orders’ scopes of work;

analyzing performance contractors’ costs;

working with the Army to measure LOGCAP IV contractor performance; and

recommending process improvements in the above actions.40

ASC Selected the Performance Contractors

The Army conducted a competition to select up to three performance contractors for services

similar to those rendered under LOGCAP III.41 Solicitations were issued in October 2006 and six

U.S. ,April 30, 2010.

U.S. Army Sustainment Command, February 16, 2007; News Release, U.S. Army Sustainment Command, June 27,

2007.

Ibid., p. 1.

From the Army’s FY2008 Budget Estimates for the Global War on Terrorism: LOGCAP augments combat support

and combat service support force structure by reinforcing military assets with civilian contract support. The program

provides primarily base life support services to the forces in theater. Base life support services provide a full spectrum

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proposals were received. In June 2007 the ASC selected three companies to serve as performance

contractors—DynCorp International LLC, Fort Worth, TX; Fluor Intercontinental, Inc,

Greenville, SC; and KBR, Houston, TX.

Protests

On June 27, 2007 the losing companies filed protests with GAO over the LOGCAP IV award

decision.42 GAO sustained the protests on October 5, 2007. The Army reopened the competition.

Five companies submitted bids. On April 17, 2008, the Army announced that it would re-award

the LOGCAP IV contract to the three companies previously awarded contracts under LOGCAP

IV.

Contract Details

The LOGCAP IV contract will cover a range of services:



supply operations, including food, water, fuel, spare parts, and other items;

field operations, including food, laundry, housing, sanitation, waste management,

postal services, and morale, welfare and recreation activities; and

other operations, including engineering and construction; support to the

communication networks; transportation and cargo services; and facilities and

repair.43

LOGCAP IV contracts were awarded as ID/IQ contracts with one base year followed by nine

option years. Each company will compete for task orders. Each of the three contracts will have a

maximum value of $5 billion per year, with a collective annual maximum value of $15 billion and

lifetime maximum value of $150 billion for LOGCAP IV.44

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of services, including food service, power generation, electrical distribution, facilities management, dining facility

operations, pest management, hazardous and non-hazardous waste management, latrines, water systems, billeting

management, fire fighting and fire protection services, and laundry service operations. In Iraq, the program provides for

the Multi-National Force—Iraq base logistics support, base camp reorganization, the International Zone, Camp Bucca

Prisoner of War base operations support, and contractor support management in theater. In Afghanistan, the program

manages base operations support for the Coalition Joint Operations Area—Afghanistan, and the Kabul, Bagram,

Kandahar, and Salerno airfields. In Kuwait, the program manages Camps Spearhead, Udari, Arifjan; theater Retrograde

operations; the theater-wide transportation mission; theater oil analysis and test facilities; management and diagnostic

equipment, and bulk fuel operations. Army Operations and Maintenance, Volume 1, February 2007, p. 13, at

http://www.asafm.army.mil/budget/fybm/fybm.asp.

Kelley, Matt. GAO Challenges $150B Contract Awarded By Army: Urges Review of 10-year Deal to Support

Troops. USA Today, October 31, 2007, p. 5A. According to the article, the ASC spokesperson identified was Daniel

Carlson. According to Dan Gordon, a GAO official identified in the article, the ruling was issued under seal. Also, see

GAO Upholds Protests to Army’s Award of $50 Billion for LOGCAP 4. Engineering News-Record, November 5,

2007, Construction Week; pg. 9, Vol. 259, No. 16. An ASC spokesperson announced that the LOGCAP III contract

would be extended while the Army made a final decision.

Sheftick, Gary. Three Firms to Vie for LOGCAP Services in Theater. Department of Defense, U.S. Army Release.

April 18, 2008.

U.S. Army Sustainment Command. ASC Selects LOGCAP IV Contractors, June 27, 2007, at

http://www.aschq.army.mil/commandnews/default.asp.

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Performance Task Orders

The U.S. Army Sustainment Command announced the award of the first performance task order

under LOGCAP IV, on September 25, 2008, to Fluor Intercontinental, Inc. The purpose of the

task order is to provide logistical support services in Afghanistan to personnel (both U.S.

personnel and coalition forces) in the field. The performance period is from September 25, 2008,

through September 24, 2009, and the task order is valued at $68 million.45

Each company has been awarded task orders under LOGCAP IV. The latest task order on

LOGCAP IV was awarded to KBR, representing KBR’s first task order under LOGCAP IV.46

Congressional Interest

Policymakers continue to express concern over the oversight of Iraq contracts for several

reasons—including the expense and difficulty of managing logistical support contracts;

allegations and reported instances of contract waste, fraud, abuse, and financial mismanagement;

and questions regarding DOD’s ability and capacity to manage such contracts. Some

policymakers have raised questions as to whether DOD has the right mix of acquisition workforce

personnel trained and equipped to oversee these large-scale contracts. Due to these and other

concerns, Congress extended the tenure of the Office of the Special Inspector General for Iraq

Reconstruction (SIGIR) from March 2004 through September 2009.47 SIGIR conducts audits and

investigations and presents recommendations for improving the management of Iraq

reconstruction and relief activities.48 The SIGIR has identified at least two ongoing investigations

into LOGCAP activities, as reported in the SIGIR’s latest quarterly report to Congress.49

Recent assessments from GAO, DOD’s IG, and the SIGIR reveal a lack of federal oversight,

management, and accountability for funds spent for Iraq contracting. According to Charles

Williams, Director, Defense Contract Management Agency, there are vacancies for more than 600

oversight positions in Iraq and Afghanistan.50 An audit conducted by the DOD IG revealed that

Theis, Linda, HQ, ASC. First LOGCAP IV Performance Task Order Awarded. Army.mil/News, at

http://www.army.mil/-news/2008/09/30/12832-first-logcap-iv-performance-task-order-awarded.

Several news outlets have reported the Army’s announcement of this task order award, including the following media

sources: An Up and Down Week for KBR. The Project on Government Oversight (POGO), March 1, 2010; Hefling,

Kimberly and Lardner, Richard, Army Awards Lucrative Iraq Support Contract to KBR, NewsWest.com, March 2,

2010, accessed online at http://www.newswest9.com/Global/story.asp?S=12069959; and KBR Awarded Major Task

Order Under LOGCAP IV, KBR, March 2, 2010, accessed online at http://www.kbr.com/Newsroom/PressReleases/2010/03/02/KBR-Awarded-Major-Task-Order-Under-Logistics-Civil-Augmentation-Program-LOGCAP-IVContract/.

P.L. 110-252.

See the Special Inspector General for Iraq Reconstruction, Quarterly Report to Congress, April 30, 2009, at

http://www.sigir.mil/reports/quarterlyreports/default.aspx. The SIGIR replaced the Inspector General for the Coalition

Provisional Authority (CPA-IG). As provided for in P.L. 108-106, the SIGIR provides an independent and objective

audit, analysis, and investigation into the use of U.S.-appropriated resources for Iraq relief and reconstruction. The

SIGIR, Stuart W. Bowen, Jr., was appointed as CPA-IG on January 20, 2004. He reports to both the Department of

State and the Department of Defense, provides quarterly reports and semi-annual reports to Congress, and has offices in

Baghad and Arlington, VA. For a summary of the history of U.S. reconstruction assistance in Iraq, see CRS Report

RL31833, Iraq: Reconstruction Assistance, by (name redacted)

Ongoing Oversight Activities of Other U.S. Agencies: DOD, Project Number D2009-DIPOAI-0141, “Review of

Army Decision Not to Withhold Funds on the Logistics Civil Augmentation Program (LOGCAP) III Contract, initiated

1/29/09; and DOD, D2008-D000AS-0270.000, Transition Planning for the Logistics Civil Augmentation Program IV

Contract, initiated 8/25/08. See http://www.sigir.mil/reports/quarterlyreports/Apr09/pdf/Section5_-_April_2009.pdf.

LOGCAP: Support Contracting Challenges in Iraq and Afghanistan. Public Hearing Before the Commission on

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the federal government failed to substantiate the disbursement of at least $7.8 billion of $8.2

billion dollars spent for goods and services in Iraq. In a May 22, 2008, congressional hearing

before the House Oversight and Government Reform Committee, DOD officials revealed

estimates that the Army disbursed $1.4 billion in commercial payments that lacked the minimum

supporting justification and documentation for a valid payment—such as certified vouchers and

invoices. In one reported instance, a $320 million payment in cash was made without justification

beyond a signature.51

The FY2009 National Defense Authorization Act (P.L. 110-417) contains provisions that impact

federal contracting. Some key highlights are provided here:52



Section 832 offers a “Sense of Congress” provision that security operations in

“uncontrolled or unpredictable high-threat environments” should ordinarily be

performed by the military forces; that private security contractors should not

perform inherently governmental functions in the area of combat operations, but

that it should be in the “sole discretion of the commander of the relevant

combatant command” to determine whether such activities should be delegated to

individuals not in the chain of command;

Section 833 amends 10 U.S.C. 1705 by designating an expedited hiring authority

for the DOD acquisition workforce;

Section 834 sets certain acquisition personnel requirements for military personnel

in the acquisition field;

Section 841 establishes a policy to address personal conflicts of interest by

employees of federal government contractors;

Section 842 requires the Secretary of Defense to ensure that DOD contractors

inform their employees, in writing, of employee whistleblower rights and

protections under 10 U.S.C. 2409, as implemented by Subpart 3.9, Part I, Title

48, Code of Federal Regulations;

Section 844 requires the Comptroller General to provide a report to the House

and Senate Armed Services Committees on the use of off-shore subsidiaries by

DOD contractors;

Section 845 sets requirements for the Secretary of Defense in the area of defense

industrial security;

Section 851 clarifies the pay and annuities of certain Members and staff related to

the Commission on Wartime Contracting in Iraq and Afghanistan;

Section 852 calls for the Army Audit Agency, the Navy Audit Services, and the

Air Force Audit Agency to each conduct a comprehensive audit of spare parts

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Wartime Contracting in Iraq and Afghanistan, May 4, 2009. According to the testimony of Charles Williams, Director,

Defense Contracting Management Agency: “At present, we have 57 unfilled SME (Subject Matter Expert) theater

requirements: 36 SMEs in Iraq and 21 SMEs in Afghanistan. We have unfulfilled requirements for 335 CORs

(Contractor Officer Representatives) in Iraq and 335 CORS in Afghanistan.”

U.S. Congress. Accountability Lapses in Multiple Funds for Iraq. Testimony of Mary L. Ugone, Deputy Inspector

General for Auditing, U.S. Department of Defense, Office of the Inspector General. Hearing before the House

Oversight and Government Reform Committee, May 22, 2008.

The following provisions can be found, in their entirety, in S. 3001, the Duncan Hunter National Defense

Authorization Act for 2009, P.L. 110-417. Excerpts are provided here.

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

purchases and depot maintenance and repair equipment activities for operations

in Iraq and Afghanistan, the purpose of which is to identify potential waste,

fraud, and abuse in the performance of DOD contracts, subcontracts, and task

and delivery orders, and make such audits available to the Commission on

Wartime Contracting in Iraq and Afghanistan;

Section 853 sets additional reporting requirements for contractors that perform

security functions in areas of combat operations and are involved in the discharge

of a weapon or other active, non-lethal countermeasures; and

Section 854 sets additional reporting requirements for contractors related to

alleged crimes by or against contractor personnel in Iraq and Afghanistan.

Finally, P.L. 110-417 contains Subtitle G – Government Wide Acquisition Improvement, which

includes provisions that affect all federal contracts. These provisions are known as the Clean

Contracting Act of 2008. Key highlights are provided here:



Section 862 limits the length of certain federal executive agency and DOD

contracts (for any contract in an amount greater than the simplified acquisition

threshold) by certain conditions: (1) the contract may not exceed the time

necessary to meet the “unusual and compelling requirements” of the work to be

performed; (2) the contract may not exceed the time necessary for the executive

agency to enter into a competition for a new contract; and (3) the contract may

not exceed one year unless the head of the executive agency determines that

exceptional circumstances apply.

Section 863 amends the Federal Acquisition Regulation (FAR) to require

competition for the procurement of property and services, in excess of the

simplified acquisition threshold, that is made under a multiple award contract,

unless the contracting officer waives the requirement on the basis of certain

determinations, and justifies the determination in writing.53

Section 864 requires a revision of the FAR to address the use of costreimbursement contracts, including guidance when they are to be used; under

what circumstances; justification; and what appropriate workforce resources are

necessary to award and manage cost-reimbursement contracts. This provision

also requires that the Inspector General for certain federal executive agencies

review the agency’s use of cost-reimbursement contracts for compliance with

such regulations, and that the Director of the Office of Management and Budget

(OMB) submit an annual report by March 1 of each year on each agency’s use of

cost-reimbursement contracts, and submit such a report to certain congressional

committees (House Oversight and Government Reform, Senate Homeland

Security and Governmental Affairs, House and Senate Appropriations, and the

House and Senate Armed Services Committees).

Section 865 requires that the OMB Director submit a comprehensive report on

the use of interagency contracts, and include guidelines to improve the

management of such contracts.

It should be noted that DOD has been subject to requirements for competition since 2001 under Section 803 of P.L.

107-107, which was repealed by P.L. 110-417. Section 863 subjects other federal agencies to the same requirements as

DOD, and provides a common authority for the requirements for all federal agencies.

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

Section 866 amends the FAR to minimize the excessive use of contracts by

contractors, subcontractors, or tiers of subcontractors, that add none or negligibly

no value to the work. This practice is sometimes referred to as “pass-through

charges or fees.” This provision would eliminate a contractor, subcontractor, or

tiers of subcontractors, from receiving indirect costs or profit on work performed

by a lower-tier contractor, to which the higher tier adds no value or negligible

value to the work. This section of the provision applies to any costreimbursement contract type, contract, or task or delivery order in an amount

greater than the simplified acquisition threshold. DOD will continue to be subject

to guidance pursuant to Section 852 of the John Warner National Defense

Authorization Act for Fiscal Year 2007 (P.L. 109-364).54

Section 867 amends the FAR to provide federal executive agencies (excluding

DOD) with guidance on the appropriate use of award and incentive fees in

federal acquisition programs. DOD will continue to be subject to guidance

pursuant to Section 852 of the John Warner National Defense Authorization Act

for Fiscal Year 2007 (P.L. 109-364).55

Section 868 amends the FAR to clarify the procurement of items from (and

minimize the abuse of) the commercial services inventory.

Section 869 authorizes the preparation and completion of the Acquisition

Workforce Development Strategic Plan for federal agencies (except DOD) to

develop “a specific and actionable 5-year plan to increase the size of the

acquisition workforce,” and to operate a government wide, acquisition intern

program for such federal agencies. The plan is to be completed within one year of

the enactment of this act and “in a fashion that allows for immediate

implementation of its recommendations and guidelines.”

Section 870 amends the Office of Federal Procurement Policy Act to establish a

Government Wide Contingency Contracting Corps. The Corps is under the

authority of the Administrator of General Services. Members of the Corps shall

be available for deployment in responding to an emergency or major disaster, or

contingency operation, both within and outside the continental United States.

Legislation passed in the FY2008 National Defense Authorization Act (P.L. 110-181) required

increased oversight and accountability for DOD contracting during combat operations. Overall

these provisions sought to enhance competition; reduce sole-source contracts; improve the

acquisition workforce; address waste, fraud, and mismanagement; and provide mechanisms for

greater oversight and transparency. A group of 24 provisions included in the bill known as the

Clean Contracting Act of 2008 were introduced in the 109th Congress and enacted in the 110th

Congress.56

The Defense Base Act (DBA) and LOGCAP

Congress is also interested in costs under the Defense Base Act (DBA). The DBA requires that

many federal government contractors and subcontractors provide workers’ compensation

Section 852. Report and Regulations on Excessive Past-Through Charges. This section applies to contracts for or on

behalf of DOD made on or after May 1, 2007.

Section 814. Linking of Award and Incentive Fees to Acquisition Outcomes.

P.L. 110-417 was enacted into law on October 14, 2008.

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insurance for their employees who work outside of the United States.57 The U.S. Army’s

LOGCAP covers costs for DBA insurance and includes significant overheard and other costs

beyond the costs of the actual insurance claims. In testimony before the Commission on Wartime

Contracting in Iraq and Afghanistan, the Director of the Defense Contract Audit Agency stated

that from 2003 to 2007 KBR incurred $592 million in costs for DBA insurance premiums.58

The Duncan Hunter National Defense Authorization Act of 2009 (P.L. 110-417) includes a

provision that requires the Secretary of Defense to adopt an acquisition strategy to acquire

insurance under the Defense Base Act; such a strategy should minimize overhead and coverage

costs, provide a low level of risk to DOD, and present a competitive marketplace strategy. A

report is due to congressional committees within 270 days of the date of the act’s enactment into

law.59

In September 2007, the U.S. Army Audit Agency (USAAA) released its audit report of DBA costs

under LOGCAP and uncovered rising program costs and wide fluctuations in insurance rates. In

early 2007, an audit of the DBA program was initiated by the U.S. Army Audit Agency (USAAA)

due to several factors, including the growing complexity of the DBA program, rising program

costs, and wide fluctuations in insurance rates.60 The audit report stated that the costs of DBA

insurance charges were paid through the Army’s LOGCAP contract with KBR. Chairman

Waxman offered the following testimony on the DBA financial transactions under the LOGCAP

contract:

On September 28, 2007, the Army Audit Agency issued a report examining DBA

payments under the single largest contract in Iraq, KBR’s $27 billion contract to provide

meals, housing, laundry, and other logistical support to the troops, also known as the

Logistics Civil Augmentation Program (LOGCAP). The findings in this audit provide an

illustration of the waste in the DBA program.

In its audit, the Army Audit Agency reported that the Army had reimbursed KBR for

DBA charges of $284 million made by its insurance company AIG through fiscal year

2005. Of this amount, the auditors reported that AIG would be required to pay out only

$73 million in actual claims. The auditors observed that “the cost of DBA insurance

substantially exceeded the losses experienced by the LOGCAP contractor.”

The data the Committee received from AIG indicate that expenses in providing DBA

insurance are typically 40% of premiums. Using this estimate, AIG’s expenses under the

LOGCAP contract would be $114 million, and its underwriting profit would be $97

million. The Army Audit Agency concluded that AIG’s rates appear “unreasonably high”

and “excessive,” warning of an “increased risk that the Army could be overcharged.” The

audit report found that there is “a high risk that the contractor may have been paying

more than necessary for this insurance” and that “significant annual increases insurance

The provisions of the Defense Base Act (DBA) are provided in statute at 42 U.S.C. §§ 1651-1654 and as part of the

Longshore and Harbor Workers’ Compensation Act (LHWCA) at 33 U.S.C. §§ 901-950. Regulations implementing the

DBA are provided in Parts 701-704 of Title 20 of the Code of Federal Regulations (CFR) and in the Federal

Acquisition Regulation at 48 C.F.R. §§ 28.305, 52.228-3, and 52.228-4.

Commission on Wartime Contracting in Iraq and Afghanistan. Testimony of April Stephenson, Director of the

Defense Contract Audit Agency, May 4, 2009.

Section 843. Requirement for Department of Defense to Adopt An Acquisition Strategy for Defense Base Act

Insurance. P.L. 110-417, enacted into law on October 14, 2008.

The USAAA does not publicly release its audit reports. However, the House Committee on Oversight and

Government Reform has posted a copy of this report, titled Audit of Defense Base Insurance for the Logistics Civil

Augmentation Program, Audit of Logistics Civil Augmentation Program Operations in Support of Operation Iraqi

Freedom, on its website at http://oversight.house.gov/documents/20080515102103.pdf.

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companies made to DBA insurance rates don’t appear to be consistent with the risk.”

Army auditors also raised concerns about the cost-plus nature of these charges.

As the auditors stated, “because the LOGCAP contract is primarily a cost-reimbursable

contract, the cost of this insurance is ultimately passed on to the government. As a result,

there is little incentive for KBR to control its costs for DBA insurance. To the contrary,

under the LOGCAP contract, KBR itself is paid its fee as a percentage of these DBA

costs, ranging from 1% to 3%, meaning that KBR may have received between $2.8

million and $8.4 million on top of AIG’s 61 profits. Although the Army auditors found that

“Army personnel at all levels appear to be aware of, and concerned with, the high cost of

DBA insurance,” they concluded that “sufficient action hadn’t been taken to scrutinize

these costs.” The auditors also warned that “we believe similar problems could exist on

other contracts outside the LOGCAP arena.”62

Background

Awarding of Defense Contracts

In most cases, federal government contracts are awarded under “full and open competition.”

However, there are exceptions, particularly during situations involving national security.63

Full and Open Competition

The foundation for the awarding of federal government contracts is in the Competition in

Contracting Act of 1984 (CICA),64 which explicitly states that the federal government “shall

obtain full and open competition through use of the competitive procedures in accordance with

the requirements of the CICA and the FAR.”65 The Competition in Contracting Act, FAR, and the

Defense Federal Acquisition Regulation Supplement (DFARS) outline at least seven exceptions

to the use of other than full and open competition in the awarding of contracts.66

AIG stands for American International Group, Inc.

U.S. Congress. House Oversight and Government Reform Committee Hearing. Defense Base Act Insurance: Are

Taxpayers Paying Too Much? Supplemental Information on Defense Base Act Insurance Costs. Memorandum from the

Majority Staff, to the Members of the House Oversight and Government Reform Committee, May 15, 2008, p. 7.

For a detailed discussion on the legal requirements for federal contracting, see CRS Report R40516, Competition in

Federal Contracting: An Overview of the Legal Requirements, by (name redacted) .

41 U.S.C. 253. CICA can also be found in Title 10 U.S.C., Chapter 137, and was included in Section 805 of the

FY2004 National Defense Authorization Act (P.L. 108-136).

41 U.S.C. 253 (a)(1)(A).

The Defense Federal Acquisition Regulation and AIDAR are supplements to the FAR. See DFARS, Subpart 206.3,

and AIDAR, Subpart 706.3, Other Than Full and Open Competition. The exceptions are: (1) There is only one

responsible source available to fulfill the contract requirements; (2) the federal agency’s need for these goods or

services is of such an unusual and compelling urgency that the federal government would be seriously injured if this

contract were not awarded; (3) the federal government needs to ensure that suppliers are maintained in the event of a

national emergency, or to achieve industrial mobilization, or to establish or achieve or maintain an engineering,

development, or research capability; (4) The federal government has an international agreement to make this

acquisition through means other than through full and open competition; (5) a statute specifically authorizes or requires

that the contract be made through a specific source; (6) The use of full and open competition may compromise national

security; (7) The public interest would be better served by use of other than full and open competition. The procedures

for submitting written justifications to use other than full and open competition, including review requirements and

delegation of authority, are outlined in DFARS, Subparts 206.303-1 and 206.304, and AIDAR 706.3. For a more

detailed discussion on the seven exceptions to the use of full and open competition, refer to CRS Report RS21555, Iraq

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Emergency Contracting Authorities

Title 41 USC Section 428a grants special emergency procurement authority to heads of executive

agencies where it is determined that a procurement is to be used in support of a contingency

operation, or to facilitate defense against or recovery from nuclear, biological, chemical, or

radiological attack.

Contingency Contracting

Contingency contracting differs from emergency contracting—the first usually describes

situations where urgent requirements are necessitated by disasters, while the second usually

describes military, humanitarian, or peacekeeping operations.67 DOD has developed initiatives to

strengthen DOD contracting operations, particularly in contingency contracting situations.68

Section 817 of the National Defense Authorization Act for Fiscal Year (FY) 200669 directs the

Secretary of Defense, in consultation with the Chairman of the Joint Chiefs of Staff, to develop a

joint policy for contingency contracting during combat operations and post-conflict operations no

later than one year from the bill’s enactment. Sections 815 and 854 of the John Warner National

Defense Authorization Act for FY2007 required DOD to report to Congress on contingency

contracting requirements and program management, and to develop instructions to implement a

contingency contracting program. The report was issued in October 2007.70

Rapid Acquisition Methods

Section 811 of the FY2005 National Defense Authorization Act71 grants the Secretary of Defense

limited rapid acquisition authority to acquire goods and services during combat emergencies.

Also, Title 10, Section 2304 outlines the use of ID/IQ task orders, sealed bidding, certain contract

actions, and set-aside procurement under section 8(a) of the Small Business Act72 as examples of

ways to expedite the delivery of goods and services during combat operations or post-conflict

operations.

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Reconstruction: Frequently Asked Questions Concerning the Application of Federal Procurement Statutes, by (name re

dacted).

Drabkin, David, and Thai, Khi V. Emergency Contracting in the US Federal Government. Journal of Public

Procurement 2007, Vol. 7, No. 1, p. 84.

For further information on DOD Procurement and Acquisition Policy governing contingency contracting, refer to

http://www.acq.osd.mil/dpap/pacc/cc/about.html.

P.L. 109-16.

Report on DOD Program for Planning, Managing, and Accounting for Contractor Services and Contractor Personnel

during Contingency Operations, accompanied by a memorandum to the Honorable Richard B. Cheney from the

Honorable P. Jackson Bell, Deputy Under Secretary of Defense for Logistics and Materiel Readiness, October 15,

2007. Section 815 covers the implementation of DOD Instruction (DODI) 3020.41,Contractor Personnel Authorized to

Accompany Armed Forces, October 3, 2005, at http://www.dtic.mil/whs/directives/corres/html/302041.htm.

Section 806 of the Bob Stump National Defense Authorization Act for Fiscal Year 2003 (10 U.S.C. 2302 note) is

amended through the passage of Section 811.

15 U.S.C. 637(a).

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Audits, Investigations, and Reports

Role of Federal Agencies

No one federal agency has the sole mission to audit, investigate, or oversee DOD-appropriated

funds for troop support services under LOGCAP. Multiple agencies share responsibility, among

them the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency

(DCMA), the Army Audit Agency (AAA), and the DOD Inspector General.

Special Inspector General for Iraq Reconstruction (SIGIR)

Media reports suggests that a perceived lack of transparency in the earliest Iraq contracts led to

the appointment of the Special Inspector General for the Coalition Provisional Authority (now

SIGIR). SIGIR Stuart Bowen has audited and investigated contracts for Iraq reconstruction and

relief funds, although some projects have involved a blending of IRRF funds with DOD

appropriated funds.73 The SIGIR’s additional investigations into LOGCAP contracts have largely

described LOGCAP contracts as lacking transparency, oversight, and financial accountability, and

his investigations have documented some cases of waste, fraud, abuse, and financial

mismanagement. According to the Congressional Budget Office, the SIGIR has produced more

than 150 reports, audits, or investigations of reconstruction-related activities.74 Estimates have

been made that the SIGIR’s work has resulted in significant benefits to the federal government.75

In June 2007 the SIGIR released a report based on its partial audit of Task Order 130, awarded to

KBR on April 27, 2006, to provide support services to officials at the U.S. Embassy in Iraq as

well as other Iraq sites. This report found substantial deficiencies in both KBR’s ability to provide

enough data for the SIGIR to perform an adequate audit and investigation of (what appeared to

be) gross overcharges for fuel and food services. Additionally, the report found that the

government’s oversight and management of the contract was inadequate and contributed to the

SIGIR’s inability to completely audit and investigate the contract—including an evaluation of the

government’s ability to provide oversight and management.76

Overall, the SIGIR has recommended that the federal government “generally avoid the use of

sole-source and limited-competition contracting actions.”77 The report concludes that the use of

sole-source and limited competition contracting in Iraq should have ended sooner, and that

contracts issued previously under limited or sole-source competition should have been subject to

re-competition.

For a discussion of contract funds for Iraqi Relief and Reconstruction projects, see CRS Report RL31833, Iraq:

Reconstruction Assistance, by (name redacted)

. Also, for a discussion on federal procurement statutes as they affect Iraq

reconstruction projects see CRS Report RS21555, Iraq Reconstruction: Frequently Asked Questions Concerning the

Application of Federal Procurement Statutes, by (name redacted).

Paying for Iraq Reconstruction. An Update of the January 2004 analysis. Congressional Budget Office, December 8,

2006.

Senator Collins Works To Extend The Term of the Office that Oversees Billions in Iraqi Reconstruction Dollars.

Press Release of the United States Senate Committee on Governmental Affairs, November 13, 2006. Also, see SIGIR

website http://www.sigir.mil/ for audits reports.

Logistics Civil Augmentation Program Task Order 130: Requirements Validation, Government Oversight, and

Contractor Performance. SIGIR 07-001, June 22, 2007, at http://www.sigir.mil/reports/pdf/audits/07-001.pdf.

Lessons in Contracting from Iraq Reconstruction. Lessons Learned and Recommendations from the SIGIR, July

2006.

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Special Inspector General for Iraq Reconstruction (SIGIR)

LOGCAP Reviews

Quarterly Report to Congress

The SIGIR’s July 30, 2010, Quarterly Report to Congress discussed two LOGCAP-related

activities, as described here:

(1) The Department of State (DOS) has requested permission to use the existing

LOGCAP program to continue to with essential services, including meals, mail delivery

and laundry, to the five Enduring Presence Posts (EPPs).78

(2) According to DOS, if State is unable to use the LOGCAP contract, DOS does not

have a plan to meet its support and requirements.79

Reviews of Task Orders 130 and 151

The SIGIR LOGCAP review of Task Order 130 is a continuation of a past review (awarded on

April 27, 2006, with an estimated value of $283 million) and a new review of LOGCAP Task

Order 151 (awarded on June 6, 2007, with an estimated value of $200 million). Both task orders

were awarded to KBR for support services to the Chief of Mission and Multi-National Force-Iraq

staffs (located at the U.S. Embassy-Iraq) and for services at other Chief of Mission sites within

Iraq (located in Baghdad, Basra, Al Hillah and Kirkuk.) SIGIR conducted its review at KBR sites

in Baghdad and involved interviews with personnel responsible for the administration and

oversight from DCMA, DCAA, and DOS; personnel with the Joint Area Support Group-Central

appointed as the Contracting Officer’s Technical Representatives (COTR); the LOGCAP Task

Order 151 Support Officer; personnel at the Army’s Logistic and Budget Offices, and KBR

managers and operational personnel.80 From the report, here is an excerpt which described the

costs:

Because these task orders provided support to both the Department of Defense (DOD)

and Department of State (DOS) missions in Iraq, DOD and DOS agreed that the

reimbursement of costs associated with these task orders would be shared 60% by DOS

and 40% by DOD. The total cost of these four task orders is approximately $1.5 billion.81

Overall, the SIGIR’s audit and investigation found that the federal government and KBR had

improved its oversight and management of Task Orders 130 and 151. However, the report

Lardner, Richard. State Department Wants a Mini-Army in Iraq. Army Times, June 14, 2010. According to the

article, “By September 2011,the 22 U.S.-led reconstruction teams spread throughout Iraq will be replaced by five

Enduring Presence Posts... State will be responsible for all the costs of operating these stations, including security, until

at least 2015.”

U.S. Congress. Special Inspector General for Iraq Reconstruction. Quarterly Report and Semiannual Report to the

United States Congress. July 30, 2010, pages 5 and 43.

Both Task Orders are a continuation of services previously awarded under Task Order 100 and Task Order 44.

Logistics Civil Augmentation Program Task Orders 130 and 151: Program Management, Reimbursement, and

Transition. SIGIR-08-002, October 30, 2007, Appendix A, Scope and Methodology p. 22, at http://www.sigir.mil/

reports/pdf/audits/08-002.pdf

Logistics Civil Augmentation Program Task Orders 130 and 151: Program Management, Reimbursement, and

Transition. SIGIR-08-002, October 30, 2007, pages 1-2, at http://www.sigir.mil/reports/pdf/audits/08-002.pdf.

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identified areas where the government should make specific improvements in both oversight and

management.82

DOD Inspector General

Thomas F. Gimble, Principal Deputy Inspector General for the Department of Defense, testified

at the September 20, 2007, hearing before the House Armed Services Committee on

“Accountability During Contingency Operations: Preventing and Fighting Corruption in

Contracting and Establishing and Maintaining Appropriate Controls on Materiel.”83 In his

testimony he described DOD’s past and present efforts to provide oversight for contracting during

contingency operations:

To date, over $550 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. To provide oversight, we have over 225 personnel working on 29 audits and 90

investigations that address a wide variety of matters to include contracting,

accountability, and required documentation. Additionally, we are working with other

DoD organizations, such as the Army Audit Agency, the Army Criminal Investigation

Command, and the Defense Finance and Accounting Service, to evaluate and provide

recommendations for actions addressing these critical mission support areas. 84

He also described the formation of a new partnership to combine the efforts of multiple federal

agencies to combat both waste, fraud, abuse, and mismanagement of Iraq reconstruction

contracts:

More recently, as a result of the magnitude of alleged criminal activities within the Iraqi

theater, a group of Federal agencies has formalized a partnership to combine resources to

investigate and prosecute cases of contract fraud and public corruption related to U.S.

Government spending for Iraq reconstruction. The participating agencies in the

International Contract Corruption Task Force (ICCTF) are DCIS; Army CIDs Major

Procurement Fraud Unit; the Office of the Inspector General, Department of State; the

FBI; the Special Inspector General for Iraq Reconstruction; and the Office of the

Inspector General, Agency for International Development.

The ICCTF has established a Joint Operations Center which is a case coordination cell

and criminal intelligence element aimed at achieving maximum interagency cooperation

to successfully prosecute fraud and corruption cases in support of the war effort in Iraq.

The mission and objectives of the ICCTF are a shared responsibility of the participating

agencies. Case information and criminal intelligence are shared without reservation and

statistical accomplishments will be reported jointly.

As a result of closed and ongoing investigations, five Federal criminal indictments and

ten Federal criminal information have been issued, and two Article 32 hearings under the

Uniform Code of Military Justice have been conducted. As a result of the investigations,

nine U.S. persons and one foreign person have been convicted of felonies, resulting in a

total of approximately fifteen years of confinement and eleven years of probation. Four

individuals and one company were debarred from contracting with the U.S. Government;

nineteen companies and persons were suspended from contracting; and two contractors

signed settlement agreements with the U.S. Government. In all, $9.84 million was paid to

Ibid, pp. 4-20.

Statement of Mr. Thomas F. Gimble, Principal Deputy Inspector General, Department of Defense, before the House

Armed Services Committee, September 20, 2007.

Ibid, p. 1.

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the U.S. in restitution; $323,525 was levied in fines and penalties; $3,500 was forfeited;

and $61,953 was seized.85

Government Accountability Office (GAO)

GAO has identified DOD contract management as a high-risk area and monitors DOD’s

performance with periodic progress updates.86 GAO has conducted numerous studies of Iraq

contracting including several studies of logistical support contracts.87 Since 2003 GAO has issued

a number of Iraq-related reports and testimonies to Congress.

The Comptroller General David Walker appeared in July 2007 before the Senate Homeland

Security and Governmental Affairs Committee to discuss four specific challenges facing federal

agencies in the oversight and management of contracts. There he made several important

observations:

Managing risks when requirements are in transition requires effective oversight. DOD

lacked the capacity to provide sufficient numbers of contracting, logistics, and other

personnel, thereby hindering oversight efforts. The challenges faced in Iraq are a symbol

of systematic challenges facing DOD. DOD cannot develop a complete picture of the

extent to which it relies on contractors to support its operations. Information on the

number of contractor employees, and the services they provide, is not aggregated within

DOD or its components. DOD recently established an office to address contractor support

issues, but the office’s specific roles and responsibilities are under study. DOD and its

contractors need to clearly understand DOD’s objectives and needs. To produce desired

outcomes with available funding and within required time frames, they need to know the

goods or services required, the level of performance or quality desired, the schedule, and

the cost.88

Potential Oversight Issues

Potential contract oversight issues that Congress may choose to examine include various aspects

of contract administration, such as contract costs; development of contract requirements; costsreimbursement and sole-source contracts; transparency; and the size, shape, and skill diversity of

the acquisition workforce.

Contract Oversight

One rationale often cited for the outsourcing of program management to industry is that DOD no

longer has the in-house expertise needed to manage such complicated acquisition programs.

Some Members of Congress may want DOD to develop a long-term plan to restore in-house

expertise to make the government a smarter customer. Because of several cases in which highprofile weapons acquisition programs have been affected by escalating costs and technical

Ibid, pp. 11-13.

“High Risk Area: Defense Contract Management.” GAO-05-207, February 2005.

GAO-04-854, Military Operation. DOD’s Extensive Use of Logistics Support Contracts Requires Strengthened

Oversight. July 2004.

GAO-07-358T, p. 13. Also see GAO-07-1098T. Federal Acquisitions and Contracting. Systemic Challenges Need

Attention. Statement of David M. Walker, Comptroller General of the United States, July 17, 2007; 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 2006, p. 53.; and GAO-04-854. Military Operations:

DOD’s Extensive Use of Logistics Support Contracts Requires Strengthened Oversight. July 2004, p. 67.

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shortcomings, Congress may choose to review the management of individual programs and the

evolution of DOD’s acquisition management processes with an eye toward using the FY2008

funding bills to strengthen the government’s hand in dealing with industry. As an example,

Secretary of the Navy Donald C. Winter and Chief of Naval Operations Adm. Michael G. Mullen

have reported that the Navy intends to reclaim some of the authority over ship design it has ceded

to industry. Congress may also choose to study the Army’s Future Combat System (FCS) and may

question the amount of managerial discretion the Army has vested in the Lead System Integrator

(LSI).89

Contract Administration

Contract administration includes contract management and contract oversight. FAR Part 37 states

that “agencies shall ensure that sufficiently trained and experienced professionals are available to

manage contracts.”90 The burden rests with the federal government to ensure that enough

appropriately trained professionals are available to manage contracts. This is essential,

particularly before the requirements generation process, when the government determines the

scope of work to be completed. Contract management is also described in the Office of Federal

Procurement Policy’s (OFPP) “Guide To Best Practices for Contract Administration” where it

states that “the technical administration of government contracts is an essential activity ... [it is]

absolutely essential that those entrusted with the duty ensure that the government gets all that it

bargains for ... and they must be competent in the practice of contractor administration.”91

Over the past few years the size, shape, and complexity of logistical support service contracts

have grown with the technical requirements. However, the size of the federal contractor

workforce has decreased. There is now an imbalance—there are fewer federal contracting

officials to manage the large-scale contracts and in some cases the government has sought to hire

contractors to do the job that federal employees use to perform. For example, GAO reported that

military officials utilizing LOGCAP had little understanding of LOGCAP or their contract

management responsibilities. Additionally, some logistical support units intended to assist

military commanders had no prior LOGCAP or contracting experience.92

Two former OFPP administrators, Steven Kelman and Allan Burman, stated that the current

contracting situation creates a crisis. Here they offer their assessment:

Hiring contracting officials is hardly the way to dress for political success—who wants to

bring in more “bureaucrats?”—but there can’t be well-managed contracts without people

to manage them. The current situation creates a vicious circle: Overstretched people

make mistakes, producing demands for more rules, creating additional burdens, giving

people even less time to plan effective procurement and manage performance.93

For a discussion of the LSI concept, see CRS Report RS22631, Defense Acquisition: Use of Lead System Integrators

(LSIs)—Background, Oversight Issues, and Options for Congress, by (name redacted)

; CRS Report RL33753,

Coast Guard Deepwater Acquisition Programs: Background, Oversight Issues, and Options for Congress, by Ronald

O’Rourke; and CRS Report RL32888, Army Future Combat System (FCS) “Spin-Outs” and Ground Combat Vehicle

(GCV): Background and Issues for Congress, by (name redacted) and (name redacted) .

FAR Part 37.

OFPP Guide at http://www.acqnet.gov/comp/seven_steps/library/OFPPguide-bp.pdf.

Logistical support units write performance statements of work, prepare independent government cost estimates, and

review contractor estimates on behalf of the government. See GAO-04-854. Military Operations: DOD’s Extensive Use

of Logistics Support Contracts Strengthen Oversight, July 21, 2004.

Burman, Allan and Kelman, Steven. “Better Oversight of Contractors,” The Boston Globe, January 16, 2007, p. A9.

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It is important that both civilian and military procurement sectors have qualified and experienced

contract professionals. In the case of service contracts, having professionally trained contracting

personnel could be even more critical than contracts for tangible goods. With tangible goods,

there is an identifiable product. In the absence of a product, it becomes even more important that

DOD and the contractor both exercise good stewardship of federally appropriated dollars.

DOD Contracting Officials

Contracting officials are expected to make tough decisions. As an example, Ms. Bunnatine

Greenhouse, formerly the highest-ranking civilian at the U.S. Army Corps of Engineers

(USACE), raised important questions on the rationale for the awarding of one KBR contract: first,

in her opinion, because the awarding of the contract lacked an appropriate level of competition;

and second, because in her view there existed an organizational conflict of interest. She objected

to the awarding of one contract award as well as the five-year contract term.94 The basis for her

refusal to approve the proposed five-year, sole-source contract between KBR and the U.S. Army

[for the Restore Iraqi Oil (RIO) contract] was because (1) KBR had been paid $1.9 million to

draft a contingency plan to design the “guts” of the contract, including the process, budget, and

other details; and (2) selecting KBR for the five-year contract would violate procurement

protocol, as (reportedly, Ms. Greenhouse stated) contractors who draw up a contingency plan

cannot be allowed to bid on the job to execute the same plan.95 She stated that bidding on the

contract would give KBR an unfair advantage over any competitors. When pressured to sign the

KBR contract, Ms. Greenhouse added the following contract language: “I caution that extending

this sole source effort beyond a one-year period could convey an invalid perception that there is

not strong intent for a limited competition.”96 The contract was later investigated by the SIGIR.97

Various media reports suggested that in the case of Bunnatine Greenhouse, a trained and

experienced senior DOD contract management official was eventually demoted and later fired for

doing her job.98

Another senior DOD civilian testified that he made a decision to award KBR a task order under

the LOGCAP contract without conducting any competition. Michael Mobbs, then-Special

Assistant to the Under Secretary of Defense for Policy, testified that he made the decision to

award KBR the contingency planning contract over the objections of an attorney with the Army

Materiel Command. The attorney had determined that the oil-related task order was outside of the

scope of the LOGCAP troop support contract. Later, GAO concluded that the lawyer’s position

Schnayerson, Michael. “Oh, What a Lucrative War,” Vanity Fair, April 2005, p. 9.

For additional information, see CRS Report RL32229, Iraq: Frequently Asked Questions About Contracting, by

(name redacted) et al.

Vanity Fair, p. 149.

It should be noted here that the KBR sole-source contract, according to the SIGIR, complied with applicable federal

regulations for sole-source contracts, according to the SIGIR. The SIGIR concluded that “the justification used was that

KBR had drafted the Contingency Support Plan (CSP), had complete familiarity with it, had the security clearances

necessary to implement it, and the contract needed] to be immediately available to implement.” Lessons In Contracting

and Procurement. Iraq Reconstruction. Special Inspector General for Iraq Reconstruction. July 2006, p. 20.

Witte, Griff. Halliburton Contract Critic Loses Her Job. Washington Post, August 29, 200, p. A11. For additional

information, see the following documents: Letter to Tom Davis, Chairman, Committee on Government Reform, House

of Representatives, from Henry A. Waxman, Ranking Minority Member, House of Representatives, November 10,

2004; Testimony of Bunnatine Greenhouse before the Senate Democratic Policy Committee, June 27, 2005; and Letter

to Donald Rumsfeld, Secretary of Defense, from Senators Byron L. Dorgan and Frank Lautenberg, and Representative

Henry A. Waxman, August 29, 2005.

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was the correct one and that the work “should have been awarded using competitive

procedures.”99

Development of Contract Requirements

LOGCAP contracts have often bypassed the process to define realistic funding, appropriate time

frames, and other important requirements through the use of “undefinitized” contract actions.

Undefinitized contract actions100 do not require that the DOD contracting official write a

completed performance work statement before the work is performed. Some proponents of

undefinitized task orders have stated that they give the contractor more flexibility in getting work

started sooner. However, recent DCAA audits have found that these undefinitized task orders

have given KBR a significant cost advantage. Auditors have found that DOD contracting officials

were more willing to rely on KBR’s costs estimates, estimates later found to be greatly inflated.

According to DCAA auditors, DOD contracting officials rarely challenged these cost estimates.

The estimates became the baseline from which KBR established their costs upon which to bill the

government, which later increased their overall profit.

In testimony before the Senate Armed Services Committee, the SIGIR stated that contracting

personnel must be provided with an adequate description of a customer’s needs. The inability to

properly define and prepare requirements appeared to be a significant oversight challenge in the

Iraq contracting process.101

Use of Indefinite-Delivery/Indefinite-Quantity Contracts102

FAR Subpart 16.5 defines Indefinite-Delivery/Indefinite-Quantity (ID/IQ) contracts.103 In the case

of ID/IQ contracts, task and delivery orders are issued; these orders do not define a firm quantity

of goods or services.104 While task and delivery orders under ID/IQ contracts are not subject to

the Competition in Contracting Act (CICA), they are subject to competition-type requirements

under other provisions of law. Task orders are the “to do” portion of the contract, the contractor’s

action list. LOGCAP contracts allow task orders to be approved as needed without being subject

to competition among multiple contractors. Task orders are not contracts but can potentially allow

significant amounts of work to be performed on a non-competitive basis. Task Order 59 was one

of the largest single task orders on the LOGCAP III contract. It was issued in May 2003 and

includes various discrete functions, supporting up to 130,000 U.S. troops, and has reportedly

resulted in estimates of charges to the government of about $5.2 billion dollars from June 2003

through June 2004.

Briefing by Michael Mobbs, Special Assistant to the Undersecretary of Defense for Policy, for staff of the House

Government Reform Committee, June 8, 2003. Also, see GAO-04-605. Rebuilding Iraq: Fiscal Year 2003 Contract

Award Procedures and Management Challenges, June 2004.

100

Also referred to as undefinitized task orders.

101

Testimony of the Special Inspector General for Iraq Reconstruction, before the Senate Armed Services Committee,

February 7, 2006.

102

For a discussion of indefinite-delivery/

103

FAR Subpart 16.5 Indefinite-delivery/indefinite-quantity contracts, also known as ID/IQ contracts, supply an

indefinite quantity of supplies, goods, or materials, for an indefinite period of time. See FAR, Part 16, Types of

Contracts.

104

Indefinite-quantity contracts are also known as delivery order contracts or task order contracts.

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Costs and the Use of No-Bid and Sole-Source Contracts

Much has been written in the media about the use of sole-source contracting in Iraq.105 In general,

most authorities believe that government contract costs are influenced significantly by the degree

of competition; that having several competitors will reduce overall cost. However, questions have

been raised as to whether contract costs in a war zone are inherently uncontrollable. DOD has

argued that Iraq contracting costs are expensive because of the uncertainty of war-related

requirements for goods and services. Government contingency contracting in times of war has

often favored using programs such as LOGCAP because it enables contracting officials to move

quickly to secure contractors, who in turn can be deployed quickly into the combat theater.

While full and open competition is the standard for government contracting, full and open

competition has not been the standard for contracting for troop support services under LOGCAP.

One report stated that of the $145 billion in non-competitive contracts awarded by the federal

government in 2005, $97.8 billion was awarded in “no-bid” contracts. Of that $97.8 billion in

contracts, $63.4 billion was awarded under the rationale that only one contractor could supply the

needed goods or services. The remaining $34.4 billion was awarded in no-bid contracts under a

variety of other exceptions to full and open competition. $8.7 billion was awarded for emergency

situations, and $2.9 billion was awarded for circumstances where a statute authorizes or requires

restricted competition.106 Finally, $47.2 billion in contracts was awarded in cases where the

competitive range was limited to a small group of companies.

The Special Investigations Division of the House Government Reform Committee has issued a

report titled Dollars, not Sense: Government Contracting Under the Bush Administration.

According to this report, in 2000 the federal government awarded $67.5 billion in noncompetitive contracts; that figure rose to $145 billion in 2005, an increase of 115%. While the

contracts awarded were larger, the value of contracts overseen by the average government

procurement official rose by 83% (between 2000-2005).

Cost-reimbursement Contracts

Cost-reimbursement contracts can be (1) cost-plus award fee; (2) cost-plus incentive fee; or (3)

cost-plus fixed fee.107 In 2000, the federal government spent $62 billion on cost-plus contracts; in

2005, that figure increased to $110 billion. Nearly half of all costs-plus contracts ($52 billion)

were costs-plus award fee contracts. LOGCAP was the single largest cost-plus award fee contract,

and at one time was valued at about $16.4 billion.108

Use of Overhead Fees

The SIGIR’s past investigations into reconstruction contracts revealed that, in some contracts,

overhead expenses accounted for more than half of the costs that Kellogg, Brown, and Root

(KBR) billed the federal government. A recent audit report, “Review of Administrative Task

Orders for Iraq Reconstruction Contracts,” found that relatively high overhead costs were

105

Sole-source contracts are contracts which are not subject to competition.

Dollars, Not Sense: Government Contracting Under the Bush Administration. United States House of

Representatives, Committee on Government Reform - Minority Staff, Special Investigations Division, p. 7-9.

107

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in

the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a

ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

108

Army Field Support Command, Media Obligation Spreadsheet, April 20, 2006.

106

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charged, and that these costs were significantly higher than work performed by other companies

in Iraq. For these contracts, overhead costs ranged from 11% to 55% of projected contract

budgets. For example, the SIGIR found that in five KBR projects, administrative costs

outdistanced the costs of the projects alone. For example, the report cites a project where

administrative costs totaled about $52.7 million, while the actual project costs were about $13.4

million. In another case, the combined administrative costs for five contractors totaled about $62

million, while the direct construction costs totaled $26.7 million.109 The SIGIR found that

overhead expenses accounted for more than half of the costs KBR billed the federal government.

Overhead fees can also result as a part of fees passed from one contractor to another. One such

example is the case of Blackwater Security Firm’s contract for private security services in Iraq.

Blackwater’s contract paid workers who guarded food trucks a salary of $600 a day. The

company added overhead costs and a 36% markup to its bill, then forwarded the bill to a Kuwaiti

company. The Kuwaiti company then added costs and profit, then sent the bill to the food

company. The food company did the same, and finally sent the bill to KBR. KBR passed its cost

to DOD. Yet the U.S. Army stated in a congressional committee hearing that it had never

authorized KBR to enter into a subcontracting relationship with Blackwater. The matter remains

pending.110

Transparency

Transparency allows the federal government to better administer contracts and oversee

contractors. For example, the federal government has had difficulty getting certain contractors to

provide important information on their invoices and billing statements. The SIGIR released a

series of audit and investigative reports which drew attention to barriers that hampered the

government’s efforts. In one report, SIGIR Bowen reported that it was difficult to complete the

investigation into the KBR contracts because KBR “routinely and inappropriately marked their

data as proprietary.”111

Another problem with a lack of transparency is the relationship between the federal government,

the prime contractor, and the subcontractors. The federal government has a contractual

relationship with the prime contractor, not with subcontractors. Thus the government may be

somewhat limited in providing full accountability for tax-payer dollars. While the prime

contractor-subcontractor relationship is between private sector companies, the monies are from

public funds.112

Acquisition Workforce

Secretary Gates has announced a move to significantly increase the size of the defense acquisition

workforce, primarily achieved by converting about 10,000 private-sector contractor positions to

full-time government positions, and hiring an additional 10,000 defense acquisition workforce

employees by 2015. According to DOD officials, the long-term goal is to increase the size of the

109

Powers, Mary Buckner. Congress Moves To Reinstate Iraq Contracting Overseer. Engineering News-Record, Vol.

257, No. 19, p. 13. November 13, 2006.

110

“Watching War Costs,” The News & Observer, Raleigh, NC, December 9, 2006. Retrieved January 21, 2007, at

http://www.nexis.com/research/search/submitViewTagged.

111

Powers, Mary Buckner. Congress Moves To Reinstate Iraq Contracting Overseer. Engineering News-Record, Vol.

257, No. 19, p. 13. November 13, 2006.

112

“Commentary: Watching War Costs,” The News & Observer, Raleigh, NC, at http://www.nexis.com/research/

search/submitViewTagged.

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organic defense acquisition workforce to its 1998 levels of approximately 147,000 employees. At

the same time, statements issued by President Obama have signaled his intention to reduce

defense contracting spending by reviewing DOD’s acquisition processes prior to the

commencement of the next Quadrennial Defense Review. President Obama has reportedly

announced that he may perform a line-by-line review of the federal budget, eliminate government

programs that are not performing, reduce federal spending on contractors by at least 10%, and

require each federal agency to justify the use of cost-reimbursement (also known as costs-plus)

and sole-source (also known as non-competitive) contracts with possible implications for DOD

acquisition policy.113

According to DOD, its acquisition workforce has been reduced by more than 50% between 1994

and 2005.114 In future years, between 2006-2010, half of the federal acquisition workforce will be

eligible to retire.115 It has been reported that DOD does not have sufficient numbers of contractor

oversight personnel, particularly at deployed locations. This limits DOD’s ability to assure that

taxpayer dollars are being used in a judicious manner. For example, in recent testimony before

Congress, a GAO official reported that if adequate staffing had been in place, the Army could

have realized substantial savings on LOGCAP contracts in Iraq.116 The GAO official also stated

that one DCMA official, who is responsible for overseeing the LOGCAP contractor’s

performance at 27 locations, reported that he was “unable to visit all of those locations during his

six-month tour to determine the extent to which the contractor was meeting the contract’s

requirements.”117

Earlier mandates to reduce the size of the DOD acquisition workforce reflected Congress’ view

that the workforce had not been downsized enough—that reductions continued to lag in

proportion to the decline in the size of the overall defense budget, in general, and to the

acquisition portion of the defense budget, in particular. At that time, Congress and DOD were at

odds over the need for further reductions in the defense acquisition workforce. Reducing the

defense acquisition workforce had been viewed by the Congress, in the past, as a necessary

113

See the following two documents: Defense Budget Recommendation Statement, as prepared for delivery by

Secretary of Defense Robert M. Gates, Arlington, VA, Monday, April 06, 2009; and The White House, Office of the

Press Secretary, Government Contracting: Memorandum for the Heads of Executive Departments and Agencies, March

4, 2009.

114

In 1998, the House National Security Committee asked GAO to review DOD’s progress in achieving a 25-percent

reduction in the acquisition organizations’ workforce, examine the potential savings associated with such reductions,

determine the status of DOD efforts to redefine the acquisition workforce, and examine DOD’s efforts to restructure

acquisition organizations. GAO concluded that “DOD has been reducing its acquisition workforce at a faster rate than

its overall workforce and is on schedule to accomplish a 25-percent reduction by the fiscal year 2000. However,

potential savings from these reductions cannot be precisely tracked in DOD’s budget. In addition, some of the potential

savings from acquisition workforce reductions may be offset by other anticipated costs. Such costs include those for

contracting with private entities for some services previously performed by government personnel (i.e., substituting one

workforce for another.” U.S. Congress. General Accounting Office. Defense Acquisition Organizations: Status of

Workforce Reductions. Report to the Chairman, Committee on National Security, House of Representatives.

GAO/NSIAD-98-161. June 1998. 20 pages. For another source of data on the federal acquisition, see Report on the

Federal Acquisition Workforce, FY2003-2004, Federal Acquisition Institute Report, Executive Summary, p. vii.

115

S. Assad, Director, Defense Procurement and Acquisition Policy, in testimony before the Acquisition Advisory

Panel, June 13, 2006, p. 57-58 (excerpted from the Final Panel Working Draft, Report of the Acquisition Advisory

Panel to the Office of Federal Procurement Policy and the U.S. Congress, December 2006.

116

GAO-07-359T. Defense Acquisitions: DOD Needs to Exert Management and Oversight to Better Control

Acquisition of Services. Statement of Katherine V. Schinasi, Managing Director, Acquisition and Sourcing

Management, before the Subcommittee on Readiness and Management Support Committee on Armed Services, United

States Senate, January 17, 2007.

117

GAO-07-359T, p. 8.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

requirement for eliminating wasteful spending, and providing DOD with increased funding for

other priorities.

Staffing shortages in the defense contracting personnel to oversee Iraq contracts have become part

of a larger, systemic problem within DOD.118 In reducing the size and shape of the federal

acquisition workforce, an unanticipated result has been the increase in the growth of the private

sector service contracts. With the growth in service contracting; the increase in the number of

complex, billion dollar contracts; and the decline in the number of federal acquisition workforce

employees, some officials have asserted that there are not enough DOD contracting officials,

onsite in Iraq, who are available and experienced enough to manage the complexities of the new

acquisition programs, or oversee private sector contractors.

It appears to some that DOD has downsized the federal acquisition workforce, particularly those

that oversee large-scale contracts like LOGCAP, to dangerously low levels. They note that the

past downsizing of the defense acquisition workforce has resulted in the loss of technical

personnel and a talent drain on DOD’s ability to meet its mission and objectives. There are

concerns over potential deficits and imbalances in the skills and experience levels of personnel

who manage large-scale weapon acquisition programs and defense contracts.

The Gansler Commission

The Secretary of the Army commissioned a study headed by former Deputy Secretary of Defense

Jacques Gansler to analyze “structural weaknesses and organizational deficiencies in the Army’s

acquisition and contracting system used to support expeditionary operations.” Dr. Gansler has

recently presented the commission’s findings and recommendations before Congress.119 Here is

an excerpt of the commission’s analysis of the acquisition workforce:

The expeditionary environment requires more trained and experienced military officers

and non-commissioned officers (NCOs). Yet, only 3 percent of Army contracting

personnel are active duty military and there are no longer any Army contracting career

General Officer (GO) positions. The Army’s acquisition workforce is not adequately

staffed, trained, structured, or empowered to meet the Army needs of the 21 st Century

deployed war fighters. Only 56 percent of the military officers and 53 percent of the

civilians in the contracting career field are certified for their current positions.

Notwithstanding a seven-fold workload increase and greater complexity of contracting,

the Institutional Army is not supporting this key capability. Notwithstanding there being

almost as many contractor personnel in the Kuwait/Iraq/Afghanistan theater as there are

U.S. military, the Operational Army does not yet recognize the impact of contracting and

contractors in expeditionary operations and on mission success. What should be a core

competence—contracting (from requirements definition, through contract management,

to contract closeout)—is treated as an operational and institutional side issue. 120

118

The same observations were made about the U.S. Coast Guard’s Deepwater contract. According to Admiral Thad

Allen, Commandant, the issue concerns “the capacity of our acquisition staffs to deal with the myriad definitization of

task orders, particular line items, the ability to interact with the extensive amount of nodes that you have in Integrated

Coast Guard Systems ... I’m not sure that we understood going how much we had to be prepared to handle the work

load in terms of capacity and competency in human capital, and that’s one of the main things I’m focusing on.” Cavas,

Christopher P. Millions for Deepwater, No One to Spend It. U.S. Coast Guard Adds Acquisition Experts for

Modernization. Defense News, Vol. 22, No. 2, January 8, 2007, p. 1.

119

Senate Armed Services Committee, Subcommittee on Readiness and Management Support on December 6, 2007.

http://armed-services.senate.gov/e_witnesslist.cfm?id=3048.

120

U.S. Army. Urgent Attention Required: Army Expeditionary Contracting, Report of the Commission on Army

Acquisition and Program Management, November 1, 2007, p. 10, at http://www.army.mil/docs/

(continued...)

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

The commission’s report recommends that the Army makes systemic and fundamental changes in

the way it conducts business, and has divided its recommendations into four major areas as

described here:



Increase the stature, quantity, and career development of military and civilian

contracting personnel (especially for expeditionary operations);

Restructure the organization and restore responsibility to facilitate contracting

and contract management in expeditionary and CONUS operations;

Provide training and tools for overall contracting activities in expeditionary

operations; and

Obtain legislative, regulatory, and policy assistance to enable contracting

effectiveness in expeditionary operations.121

Independent Panel to Examine the Defense Contract Audit Agency

DOD has asked the Defense Business Board to examine the performance of the Defense Contract

Audit Agency (DCAA) and report their findings within 60 days.122 DCAA has come under

increased scrutiny, in part, because of a July 2008 GAO report which investigated certain

complaints it received from the FraudNet hotline alleging questionable and improper auditing

irregularities. GAO found that the allegations were substantiated; the report concluded with the

following observations, as stated below:

In the cases we investigated, pressure from the contracting community and buying

commands for favorable opinions to support contract negotiations impaired the

independence of three audits involving two of the five largest government contractors. In

addition, DCAA management pressure to (1) complete audit work on time in order to

meet performance metrics and (2) report favorable opinions so that work could be

reduced on future audits and contractors could be approved for direct-billing privileges

led the three DCAA personnel to take inappropriate short cuts—ultimately resulting in

noncompliance with GAAS and internal DCAA CAM guidance. Although it is important

for DCAA to issue products in a timely manner, the only way for auditors to determine

whether “prices paid by the government for needed goods and services are fair and

reasonable” is by performing sufficient audit work to determine the adequacy of

contractor systems and related controls, and contractors compliance with laws,

regulations, CAS, and contract terms. Further, it is important that managers and

supervisory auditors at the three locations we investigated work with their audit staff to

foster a productive, professional relationship and ensure that auditors have the

appropriate training, knowledge, and experience. 123

(...continued)

Gansler_Commission_Report_Final_071031.pdf.

121

Ibid, p. 13.

122

From the Defense Business Board’s website: “The Defense Business Board, under the provisions of the Federal

Advisory Committee Act of 1972, as amended, shall provide the Secretary of Defense, through the Deputy Secretary of

Defense, independent advice and recommendations on effective strategies for the implementation of best business

practices of interest to the Department of Defense. The ultimate objective of this advice is to enhance the efficiency and

effectiveness of organizational support to the nation’s warfighters.” Board members are appointed by the President and

serve for two-year terms. For further information, refer to http://www.defenselink.mil/dbb/charter.html.

123

U.S. Government Accountability Office. DCAA Audits: Allegations That Certain Audits at Three Locations Did

Not Meet Professional Statements Were Substantiated. Report to Congressional Addressees, GAO-09-857, July 2008,

p. 65. Also, see Peters, Katherine McIntire. Defense Taps Independent Panel to Examine Contracting Agency.

Government Executive, August 12, 2008; and Brodsky, Robert. Defense Audit Agency Maps Out Response to

(continued...)

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Potential Options for Congress

Congress may choose to consider the following options when examining DOD contracts for troop

support: (1) implementing of the Gansler Commission’s recommendations; (2) broadening of the

jurisdiction of the SIGIR to include DOD contracts for troop support services (like LOGCAP

contracts); (3) convening of a study of the federal employee and contractor workforce; (4)

requiring more detail to give Congress better information to perform its oversight role; and (5)

establishing a dedicated office to conduct audits and investigation of DOD contracts.

Option 1: Implementing the Gansler Commission

Recommendations

Perhaps the most significant recommendation of the Gansler Commission is that the Army

address some institutional and cultural issues that may provide an obstacle to moving forward.

The commission interviewed a number of knowledgeable Army officials and concluded with the

following observations about the challenges that the Army will face in making significant

improvements in its business operations, as described here in the report:

Those charged with getting the job done have provided valuable insight into the doctrine,

policies, tools, and resources needed for success. Clearly, the Army must address the

repeated and alarming testimony that detailed the failure of the institution (both the

Institutional Army and the Department of Defense) to anticipate, plan for, adapt, and

adjust acquisition and program management to the needs of the Operational Army as it

has been transformed, since the end of the Cold War, into an expeditionary force. The

Institutional Army has not adjusted to the challenges of providing timely, efficient, and

effective contracting support to the force in Operation Iraqi Freedom (more than half of

which is contractor personnel). Essentially, the Army sent a skeleton contracting force

into theater without the tools or resources necessary to adequately support our war

fighters. The personnel placed in that untenable position focused on getting the job done,

as best they could under the circumstances—where support is needed in a matter of

hours, or, at best, days. They used their knowledge, skill, limited resources, and

extraordinary dedication to get contracts awarded. Alarmingly, most of the institutional

deficiencies remain four-and-a-half-years after the world’s best Army rolled triumphantly

into Baghdad.124

Option 2: Expanding the SIGIR’s Jurisdiction

Another option is to give the SIGIR the authority to audit and investigate DOD logistical support

contracts in Iraq. The SIGIR has already established a presence in Iraq, and has issued more than

150 reports, including audits and investigations. His efforts have largely resulted in the arrest of

five people, and the convictions of four of them, with more than $17 million in assets seized.125

The SIGIR has made several recommendations related to his audit and investigation of contracts

(...continued)

Damaging Report. Government Executive, August 14, 2008.

124

Ibid, p. 16.

125

Senator Collins Works To Extend The Term of the Office that Oversees Billions in Iraqi Reconstruction Dollars.

Press Release of the United States Senate Committee on Governmental Affairs, November 13, 2006.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

under his jurisdiction. His observations and insights may be relevant and appropriate for the

contract administration and oversight of DOD contracts for troop support services.126

Option 3: Convening a Study of the Federal Employee and

Contractor Workforce

Congress may want to convene a study of the federal employee and contractor workforce. The

study could examine three important questions: (1) Is there an appropriate balance of federal

employee and contractor roles? (2) Is there an appropriate federal role and presence in the

oversight area? and (3) Is the federal government attracting the right types of acquisition

professionals?

Congress could require a separate report, from each military service, on the size, scope, costs, and

structure of its acquisition workforce (including military, civilian, and contractor personnel).

Option 4: Requiring More Detail for Better Oversight

Congress could require DOD to provide more details for better congressional oversight. There are

five questions that Congress could consider: (1) Should DOD move to limit sole-source or limited

competition for Iraq contracts? (2) Should DOD use more fixed-priced contracting in Iraq? (3)

Should task and delivery orders have certain dollar constraints? (4) Should task orders be subject

to public notice? and (5) Should larger contracts be divided into smaller contracts, with betterdefined, discrete tasks?

To create more transparency and openness in defense acquisitions regarding contract

administration, costs, and performance, Congress could require a separate report from each

military service. Each report could include data on the size, scope, costs, and structure of all

contracts, particularly no-bid, sole-source, and costs-reimbursement contracts.

Congress also could require that specific criteria be met before certain contract arrangements can

be approved by DOD or by Congress. In addition, Congress could require a periodic recompetition of certain types of contracts, like LOGCAP, that have the potential of spanning for

many years. Congress could also require, for example, that task orders beyond a certain size be

treated as a separate contract, and thus subject to competition among multiple contractors.

And finally, Congress could require that large defense contracts be subject to competition and that

a minimum of three contractors be selected for contracts beyond a certain size.127 Some have

suggested based on available press accounts that some contracts for services in Iraq might have

been segregated (into smaller contracts) and opened for competitive bidding. Financial oversight

might be more manageable in administering smaller contracts. Small businesses may have more

of an ability to compete for contracts.

126

As an example, the SIGIR recommends the creation of an “enhanced contingency FAR” to simplify the rules

governing contingency contracting. SIGIR, Lessons in Contracting and Procurement, July 2006, p. 97.

127

On April 18, 2008, DOD announced that the Army had awarded contracts to three companies under LOGCAP IV.

Each company will compete for task orders.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Option 5: Establishing a Dedicated Office to Conduct Audits and

Investigation of DOD Contracts

One of the recommendations of the SIGIR is to “designate a single, unified contracting entity to

coordinate all contracting in theater.”128 One way to accomplish this is to establish a Contingency

Contracting Corp (a DOD initiative currently underway is studying the issue) that will deploy to

Iraq and establish a standing presence. However, what additional resources might be necessary in

order to provide better contract management and oversight of DOD-appropriated funds?

Given that the mission of the DOD 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 to serve the public interest”,129 should the DOD

Inspector General have a stronger presence in Iraq? Given the many problems associated with

LOGCAP contracts, oversight agencies like the DOD IG could have a pivotal role in preventing

future contractor waste, fraud, or mismanagement.

Congress may want to consider creating a singularly dedicated office for the audit and

investigation of DOD contracts for troop support services.

128

129

Lessons in Contracting and Procurement, SIGIR, July 2006, p. 95.

From the DOD Inspector General’s website at http://www.dodig.osd.mil/mission.htm.

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Appendix A. Selected Reports

During the last four years, the Congressional Research Service, General Accounting Office,

Department of Defense Inspector General, Army Audit Agency, Air Force Audit Agency, and the

Special Inspector General for Iraq Reconstruction have issued numerous reports on Iraq

contracting issues, including those listed below.

Congress

Dollars, Not Sense: Government Contracting Under the Bush Administration. Prepared by the

Special Investigations Division, Committee on Government Reform-Minority Staff, U.S. House

of Representatives, June 2006.

Congressional Research Service

CRS Report RS22923, Department of Defense Fuel Costs in Iraq, by (name redacted) and

(name redacted) .

CRS Report RL34026, Defense Acquisitions: How DOD Acquires Weapon Systems and Recent

Efforts to Reform the Process, by (name redacted) .

CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror

Operations Since 9/11, by (name redacted)

CRS Report RL32419, Private Security Contractors in Iraq: Background, Legal Status, and

Other Issues, by (name redacted), (name redacted), and ( name redacted)

CRS Report RS21555, Iraq Reconstruction: Frequently Asked Questions Concerning the

Application of Federal Procurement Statutes, by (name redacted).

CRS Report RL31833, Iraq: Reconstruction Assistance, by (name redacted)

CRS Report RL32229, Iraq: Frequently Asked Questions About Contracting, by (name redacted)

et al.

Congressional Budget Office

Contractor’s Support of U.S. Operations in Iraq, Congressional Budget Office, August 2008.

Government Accountability Office

GAO-08-857. DCAA Audits: Allegations That Certain Audits at Three Locations Did Not Meet

Professional Standards Were Substantiated. Report to Congressional Addressees, July 2008.

GAO-07-1098T. Federal Acquisitions and Contracting. Systemic Challenges Need Attention.

Statement of David M. Walker, Comptroller General of the United States, July 17, 2007.

GAO-07-359T. Defense Acquisitions: DOD Needs to Exert Management and Oversight to Better

Control Acquisition of Services. Statement of Katherine V. Schinasi, Managing Director,

Acquisition and Sourcing Management. Testimony Before the Subcommittee on Readiness and

Management Support, Committee on Armed Services, U.S. Senate, January 17, 2007.

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 16, 2006.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

GAO-06-800T. DOD Acquisitions: Contracting for Better Outcomes. September 7, 2006.

GAO-06-838R. Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and

Abuse, GAO-06-838R, July 7, 2006.

GAO-05-274. Contract Management: Opportunities to Improve Surveillance on Department of

Defense Service Contracts, March 17, 2005.

GAO-05-207. GAO, High Risk Series: An Update, January 2005.

GAO-04-854. Military Operations: DOD’s Extensive Use of Logistics Support Contracts

Requires Strengthened Oversight, July 19, 2004.

Special Inspector General for Iraq Reconstruction

Department of Defense Inspector General, Quarterly Report to

Congress, April 30, 2008

Semi-Annual Report to Congress. October 1, 2006-March 31, 2007.

Semi-Annual Report to Congress. April 1, 2006-September 30, 2006.

Semi-Annual Report to Congress. October 1, 2005-March 31, 2006.

Semi-Annual Report to Congress. April 1, 2005-September 30, 2005.

Semi-Annual Report to Congress. October 1, 2004-March 31, 2005.

Army Audit Agency

(The website is restricted to military domains (.mil) and to the Government Accountability

Office)

Report Number A-2005-0043-ALE Logistics Civil Augmentation Program in Kuwait, U.S. Army

Field Support Command, November 24, 2004.

Gansler Commission

U.S. Army. Urgent Attention Required: Army Expeditionary Contracting, Report of the

Commission on Army Acquisition and Program Management, at http://www.army.mil/docs/

Gansler_Commission_Report_Final_071031.pdf. Published November 2007.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Appendix B. Selected Legislative Initiatives on Iraq

Contracting

Selected Legislation Introduced in the 110th Congress

The House has approved the following bills, as noted below.

H.R. 5658, National Defense Authorization Act for FY2009

Passed House, May 22, 2008; placed on Senate Legislative Calendar, June 3, 2008.

H.R. 3033, Contractors and Federal Spending Accountability Act of 2008

This provision would require the Administrator of General Services to establish and maintain a

database on defense contractors containing updated information on criminal, civil, or debarment

and suspension proceedings as well as establish the Interagency Committee on Debarment and

Suspension. Congress would require a report within 180 days of the act’s enactment.

H.R. 5712, Close the Contractor Fraud Loophole Act

This provision would require federal contractors to report violations of federal criminal law and

over-payments on contracts valued greater than $5 million.

H.R. 3928, Government Contractor Accountability Act of 2007

This provision would require “covered” government contractors to submit certification and other

financial disclosure requirements in cases where the contractor receives 80% or less of its annual

gross revenue from federal contracts. Contractors covered by this provision are those receiving

more than $25 million in annual gross revenues from federal contracts, but are not publicly traded

companies required to file reports with the Security and Exchange Commission.

H.R. 4881, Contracting and Tax Accountability Act of 2008

This provision would require tax compliance as a prerequisite for receiving federal contracts, and

would prohibit contract awards to certain delinquent federal tax debtors.

Several other bills have been introduced during the 110th Congress. Each could potentially impact

DOD contracting in Iraq, as described below.

H.R. 4102/S. 2398, Stop Outsourcing Security Act

This provision would require that only U.S. federal government personnel provide security to

personnel at U.S. diplomatic or consular mission in Iraq by six months after enactment, and

require the President to report to Congress s on “the status of planning for the transition away

from the use of private contractors for mission critical or emergency essential functions by

January 1, 2009, in all conflict zones in which Congress has authorized the use of force.”

S. 2147, Security Contractor Accountability Act of 2007

This provision would expand the coverage of the Military Extraterritorial Jurisdiction Act

(MEJA) to include all persons “while employed under a contract (or subcontract at any tier)

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

awarded by any department or agency of the United States, where the work under such contract is

carried out in a region outside the United States in which the Armed Forces are conducting a

contingency operation.”

H.R. 528, Iraq Contracting Fraud Review of 2007

This provision would require the Secretary of Defense, acting through the Defense Contract Audit

Agency, to review all Iraq defense contracts for reconstruction or troop support involving any

contractors, subcontractors, or federal officers or employees indicted or convicted for contracting

improprieties.

H.R. 663, New Direction for Iraq Act of 2007

These bill contains provisions addressing war profiteering, the recovery of funds from terminated

contracts, and other issues. A select number of additional legislative initiatives, proposed during

the 110th Congress, that may impact defense contracting will follow.

H.R. 4102, Stop Outsourcing Security Act

This provision would require that only U.S. federal government personnel provide security to

personnel at U.S. diplomatic or consular mission in Iraq within six months after bill enactment,

and would require that the President report to specified congressional committees on “the status

of planning for the transition away from the use of private contractors for mission critical or

emergency essential functions by January 1, 2009, in all conflict zones in which Congress has

authorized the use of force.”

S. 2147, Security Contractor Accountability Act of 2007

This provision would broaden the Military Extraterritorial Jurisdiction Act (MEJA) to include all

persons “while employed under a contract (or subcontract at any tier) awarded by any department

or agency of the United States, where the work under such contract is carried out in a region

outside the United Sates in which the Armed Forces are conducting a contingency operation.”

H.R. 897, Iraq and Afghanistan Contractor Sunshine Act

This provision would require the Secretaries of Defense, State, Interior, and the Administrator of

the U.S. Agency for International Development to provide Congress with copies and descriptions

of all contracts and task orders valued at over $5 million.

H.R. 3695, Freeze Private Contractors in Iraq Act

This provision would prohibit an increase in the number of private security contractors employed

by DOD, State, and USAID that perform certain security functions in Iraq.

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress

Selected Legislation Passed in the 110th Congress

P.L. 110-181, the FY2008 National Defense Authorization Act, H.R. 4986

(formerly H.R. 1585)

Several provisions contained in H.R. 4986 focus on the management and oversight of DOD

contracts.130 Key provisions are listed below:



Section 802 prohibits future contracts for the use of new Lead System

Integrators;131

Section 813 requires the Comptroller General to report to Congress on potential

modifications to the organization and structure of DOD Major Defense

Acquisition Programs;

Section 816 directs the Under Secretary of Defense for Acquisition, Technology,

and Logistics to conduct an annual review on the systematic deficiencies in

Major Defense Acquisition Programs;

Section 830 directs the Comptroller General to report to Congress on DOD’s use

of noncompetitive awards;

Section 841 establishes a commission to study federal contracting in Iraq and

Afghanistan, called the “Commission on Wartime Contracting;”

Section 842 requires the DOD Inspector General, the SIGIR for Iraq

Reconstruction, and the SIGIR for Afghanistan Reconstruction to collaborate on

the development of comprehensive plans to perform a series of audits on DOD

contracts, subcontracts, and task and delivery orders for the performance of

logistical support activities of coalition forces in Iraq and Afghanistan, as well as

audits for federal agency contracts, subcontracts, and task and delivery orders for

the performance of security and reconstruction functions in Iraq and Afghanistan;

Section 851, which would require that the Secretary of Defense (as part of the

Strategic Human Capital Plan for 2008) include a separate section of the report

focused on the military and civilian acquisition workforce;

Section 852 establishes a Defense Acquisition Workforce Development Fund;

Section 861 requires coordination between the DOD, the Department of State,

and the United States Agency for International Development through the creation

of a Memorandum of Understanding between the three agency heads on matters

relating to contracting in Iraq and Afghanistan;

130

Excerpts from H.R. 1585 discuss the rationale for legislative initiatives focused on the oversight and accountability

for contracts in Iraq and Afghanistan: “The committee remains concerned about the level of oversight for contracting in

Iraq and Afghanistan. These countries present uniquely complex challenges for contracting and contract oversight, but

U.S. efforts in these countries will continue to require significant contractor support. The committee believes that

government responsibilities for a range of issues involving contracting in Iraq and Afghanistan are unclear. The

committee believes that clarification of roles and responsibilities for contracting in Iraq and Afghanistan and increased

oversight will enhance the effectiveness of U.S. Government efforts in both countries.

131

For a brief discussion on the role of the Lead System Integrator, see CRS Report RS22631, Defense Acquisition:

Use of Lead System Integrators (LSIs)—Background, Oversight Issues, and Options for Congress, by (name redacted)

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Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress



Section 862 requires that the Secretary of Defense prescribe, within 120 days of

enactment, regulations on the selection, training, equipping, and conduct of

personnel performing private security functions under a covered contract or

covered subcontract in a combat area. These regulations would include processes

for registering, processing, and accounting for such personnel; and authorizing

and accounting for weapons, and investigating the death and injury of such

personnel, their discharge of weapons, and incidents of alleged misconduct. The

regulations would also provide guidance to combatant commanders on orders,

directives, and instructions to contractors and subcontractors performing private

security functions relating to force protection, security, health, safety, relations

and interaction with locals, and rules of engagement;

Section 863 requires the Comptroller General to review annually all contracts in

Iraq and Afghanistan and report to Congress on the total number of contracts and

task orders, total number of active contracts and task orders, total value of all

contracts and task orders, the degree to which DOD has awarded noncompetitive

contracts, the total number of contractor personnel (including the total number of

contractor personnel performing security functions and the total number of

contractor personnel killed or wounded); also, Section 863 would require the

Secretaries of Defense and State to provide the Comptroller General full accesses

to the database as described in Section 861;

Section 871 establishes a Defense Materiel Readiness Board;

Section 872 grants authority to the Secretary of Defense to designate critical

readiness shortfalls; and

Section 941 requires the Secretary of Defense to conduct a comprehensive

assessment of the roles and missions of the military forces, known as a

quadrennial roles and missions review.

Author Contact Information

(name redacted)

Specialist in Defense Acquisition

r[ edacted]@crs.loc.gov

, 7-....

Congressional Research Service

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