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2011-09-02

U.S. Wasting Billions While Tripling No-Bid Contracts After Decade of War in Iraq, Afghanistan

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As the war in Afghanistan approaches its 10th anniversary, a pair of new reports reveal how the Pentagon has squandered tens of billions of dollars while tripling the amount of no-bid contracts. The bipartisan Commission on Wartime Contracting concludes that between $31 billion and $60 billion spent on projects in Iraq and Afghanistan over the last 10 years has been lost to waste and fraud. In Afghanistan, the commission found the United States is indirectly funding the Taliban as money diverted from U.S.-backed projects is paid out to militants to ensure safety. Meanwhile, the Pentagon’s use of no-bid contracts has tripled since the United States was attacked on 9/11, in spite of promises to reform the controversial practice. A new investigative report from the Center for Public Integrity says no-bid spending has ballooned from $50 billion in 2003 to $140 billion in 2011. We speak with Charles Tiefer, a member of the Commission on Wartime Contracting in Iraq and Afghanistan and a professor of government contracting at the University of Baltimore Law School, and with Sharon Weinberger of the Center for Public Integrity, author of the investigative series "Windfalls of War." "There are as many contractors in the war zone as there are soldiers. But we haven’t adjusted our thinking for it. We haven’t adjusted our structure for it," Tiefer says. [includes rush transcript]

Transcript

This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: As the war in Afghanistan approaches its 10th anniversary, a pair of new reports have just come out revealing how the Pentagon has squandered tens of billions of dollars while tripling the amount of no-bid contracts. The bipartisan Commission on Wartime Contracting has concluded that between $31 billion to $60 billion spent on projects in Iraq and Afghanistan over the last 10 years have been lost to waste and fraud. In Afghanistan, the commission found the U.S. is indirectly funding the Taliban as money diverted from U.S.-backed projects is paid out to militants to ensure safety.

AMY GOODMAN: Meanwhile, the Pentagon’s use of no-bid contracts has tripled since the United States was attacked on 9/11, in spite of promises to reform the controversial practice. According to a new investigative report from the Center for Public Integrity, no-bid spending has ballooned from $50 billion in 2003 to $140 billion in 2011.

We’re joined by two guests in Washington, D.C. Charles Tiefer is a member of the Wartime Contracting Commission, a professor of government contracting at University of Baltimore Law School. And Sharon Weinberger, journalist and author of an investigative series for the Center for Public Integrity on the no-bid contracts called "Windfalls of War."

We welcome you both to Democracy Now! Let’s begin with Charles Tiefer of the Wartime Contracting Commission. What were your major findings?

CHARLES TIEFER: Well, Amy, as you mentioned, we found that there had been between $31 billion and up to $60 billion of waste, that there was a lack of—shocking lack of competition, that we are—besides that waste, we are also building billions of dollars of unsustainable contracts that, after we withdraw, either we’ll have to continue funding or will collapse, and that we have moved in the military and in State and AID to depending on contractors. There are as many contractors in the war zone as there are soldiers. But we haven’t adjusted our thinking for it. We haven’t adjusted our structure for it. We need to change a lot to deal with the new way war is conducted with contractors.

JUAN GONZALEZ: And Charles Tiefer, apparently, much of the expenditures, not so much in terms of weapons or hard materials of war, but the services that many of these contractors provide, what kind—what’s the difference in the kind of oversight that the Pentagon has over weapon systems as opposed to the services?

CHARLES TIEFER: Well, that’s exactly right, Juan. In World War II, what we bought from contractors were munitions. And when we buy munitions today from contractors, by and large, we buy them in the United States. They can be inspected here. Even the factories that make them can be inspected here. So, we have oversight. In contrast, what we buy in Iraq and in Afghanistan are services like dining facilities, like private security for convoys and for static places like forts and camps, like translation services for the—we hire through contractors the thousands of translators we need. And we don’t have a good system for overseeing these. Basically, we hire the contractor, and to some extent, we don’t find out if the contractor is providing the quality that we need of these services.

AMY GOODMAN: Sharon Weinberger, can you name names? Can you talk about exactly what contractors are getting what?

SHARON WEINBERGER: Well, you know, it’s—there are some of the more well known contracts that are not necessarily what are called sole-source contracts, but are considered noncompetitive. I think the most famous one is the 2001 contract that went to KBR for basically—for base services, the LOGCAP contract, which over 10 years has grown to $37 billion. And it’s basically $37 billion in 10 years of work that hasn’t been competed. But, you know, it’s less about the companies than about how the government—and in this case, the Pentagon—actually conducts its business.

AMY GOODMAN: Now, of course, KBR was owned by Halliburton, which was headed by Cheney before he was vice president.

SHARON WEINBERGER: Right. And the questions that were raised about that contract and similar sort of, you know, long-term umbrella contracts is, you know, how do you know that you’re getting anything at the price you should? I mean, there were, I think, upwards of 37 referrals for possible fraud in the contract. It was almost unprecedented in the number of billing irregularities, in fraud referrals, and in just basically waste, fraud and abuse. And the company, KBR, comes back and says, "Well, why are you demonizing us?" And they may have a point there, that it’s less about which company has the contract than basically the contract—the way the contract is set up that sort of sets itself up to fail and to waste money.

JUAN GONZALEZ: I also noted, Sharon, that there was a—one of the contracts or several contracts had to do with about a billion dollars spent on Russian helicopters for Afghanistan and Iraq. Why Russian helicopters? And why was this a noncompetitive bid?

SHARON WEINBERGER: This is one of the sort of more, you know, mysterious contracts. The reason for buying Russian helicopters for countries like Iraq and Afghanistan, you know, there is a justification for that, which is, you know, we need to quickly equip the militaries there so that they can defend themselves, so that they can have a functioning military and eventually the U.S. can withdraw. And so, the argument that’s gone back some, you know, seven, eight, nine years is, well, these are countries that operated Russian and, before that, Soviet equipment. You know, they know how to fly Russian helicopters.

But no one actually ever really examined the logic. No one had an open competition. And between U.S. helicopters or Russian helicopters, somebody just made that decision and went forward. And in the meantime, even if you want to buy Russian helicopters, there are a number of companies that sell them. But instead, this year, the Pentagon basically gave a contract for $375 million to a Russian entity that was on a sanctions list for two years for selling to Iran and Syria. And it’s not necessarily that there’s evil intentions. There’s just absolutely no—there’s no oversight of it. And nobody really questions why people are doing the things they’re doing.

AMY GOODMAN: As a presidential candidate and also as president, Obama was a vocal critic of no-bid war contracts. This is what he said in March of 2009, less than two months after taking office.

PRESIDENT OBAMA: Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat. That’s $295 billion in wasteful spending. And this wasteful spending has many sources. It comes from investments in unproven technologies. It comes from a lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars.

We will stop outsourcing services that should be performed by the government and open up the contracting process to small businesses. We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability.

AMY GOODMAN: And yet, Professor Tiefer, who’s on the Wartime Contracting Commission, the contract competition history has ballooned from $50 billion in 2003 to $140 billion in 2011. And as the massive debate goes on around the deficit and how to pay for it, this is rarely mentioned. This has ballooned to $140 billion in 2011.

CHARLES TIEFER: There’s no question that while President Obama came in—and you quoted his—you had the recording of his statement when he came in—enthusiastic for more competition, there has not been follow-through. During the budget debates, you do not see enough real reform. The commission looked and found that the current system for providing services, logistic services, like dining facilities, depends on what we called mini-monopolies. There is one company, Fluor, that gets all the logistics work in northern Afghanistan, the new work. There is one company, DynCorp, that gets all the logistics work in southern Afghanistan. And so, there’s no competition over the billions of dollars in new work. None at all.

JUAN GONZALEZ: But, Charles Tiefer, why is that? I mean, were you able to determine whether this was a policy decision from the top, or was this—because you could understand in the first year or two of a war, but now these two conflicts are the longest conflicts in U.S. history, and by now, the argument that you could only do sole-source or noncompetitive bidding should have gone by the wayside. How is this continuing?

CHARLES TIEFER: Well, that’s—we—the commission held two dozen hearings, several of which were on this subject. We had the top officials in the Pentagon came in. And when we asked them, "Why haven’t you made changes?" — let me give you another example, although—which is—could fit with the previous ones: a $2 billion contract for bringing in bulk food commodities in Afghanistan to Supreme Foodservice. Its time was up. It was supposed to be competed. They weren’t ready to compete it. It was extended another $2 billion. And when we asked why, the answer came back, "Well, we weren’t ready. We didn’t have the people. We didn’t have the preparations ready to conduct a competition of that." The Under Secretary of Defense, Under Secretary Carter, I asked this, and he said, "Well, you just sometimes have to extend these contracts. It’s the wrong thing to stop the incumbent at the end of them."

AMY GOODMAN: So, as particularly the Republican lawmakers say, "If we’re going to aid these states that are ravaged by Hurricane Irene, first we have to see how we’re going to cut the deficit," it looks like the Pentagon, in this situation, is absolutely a key area of focus. Sharon Weinberger, can you talk about these no-bid contracts, the companies that use—that get them, and the amount of money they spend on lobbying to get them?

SHARON WEINBERGER: You know, the problem, I’m not so sure, is necessarily the lobbying to get them. I think I agree more with sort of what Charles Tiefer is saying, that there’s sort of a lack of ability or willingness to address the core problems in the Pentagon. You know, when I asked the Pentagon, for example, "OK, you have this memo out. You know, you have Obama’s memo. You have a Pentagon memo about decreasing sole-source contacting, decreasing no-bid contacting. What are your actual goals?" and they said, "Well, our goal is to increase competitive contracting by two percent," well, the Pentagon only competes right now 60 percent of its contract dollars, which is lower than any other major federal agency. And so, if your goal is two percent improvement, and you haven’t achieved that—I mean, over the two years since these—since Obama first said that he wants to sort of get rid of, to decrease no-bid contacting, there has been zero improvement, at least for the Pentagon. So I really think that that is the core of the problem. Companies certainly do lobby to get and keep contracts, but I think that the reform has to come from the Pentagon itself.

JUAN GONZALEZ: Yeah, Sharon, I wanted to ask you about another concrete example: the situation where the Pentagon apparently gave a contract to a firm that was actually a separate creation of Blackwater, but Pentagon officials didn’t even know that—Blackwater, the notorious firm that had all of the problems with the abuses of some of its employees overseas. How is it that the Pentagon didn’t even know that this was a Blackwater effective subsidiary?

SHARON WEINBERGER: Well, this, again, is the structure of the contract. So what happened was, is Blackwater, which has now renamed itself Xe Services, when it really started having problems and getting publicity for a lot of the things that were going on, it started using sort of different names under subsidiaries. And the accusation was that they were sort of hiding their identity. In this case, there was a subsidiary called Paravant, a subsidiary of Blackwater, that had a training contract in Afghanistan. And it came out during a Senate Armed Services Committee investigation that this was indeed Blackwater.

And the Pentagon probably didn’t know, because this is, again—the contract to the Blackwater entity was awarded under a large sort of umbrella contract, meaning a company above them. In this case, I believe it was Raytheon had the main contract, and then, below them, there were subcontractors. So, you have all these levels of pass through, where you have one company that has an umbrella, that money then goes down to other subprimes working for the main company. And the Pentagon has a real problem with overseeing where is the money going, who is doing it, who is performing on it. And it took, you know, a Senate investigation to bring that out.

AMY GOODMAN: So, these wartime no-bid contracts, Charles Tiefer, have tripled. What are your recommendations right now?

CHARLES TIEFER: Well, the commission recommended that the Pentagon—and also the problem even goes further, State Department, Agency for International Development, but the Pentagon is the big one—should set goals to make real percentage increases in competition and meet them. And this would—it would take legislation to do—to make sure that this is done. But we also stated the specific methods that the Pentagon could use to do this. A lot of these no-bid arrangements have been done by a thing called "task orders." What Sharon was talking about with KBR’s $36—$37 billion were task orders to provide increments, annual increments, for KBR of their services. And what we explain is that there should be requirements the task orders not be given out in a effectively noncompetitive way, but that if there’s a situation where you’re not seeing competition on some billion-dollar or $2 billion task order, that you require that competition occur, that you—that instead of just having it in a closed set of companies that one company or one or two that can make bids, that you open it up, and you get full and open competition on those.

AMY GOODMAN: Very quickly, is there anything you wish were included in the report that did not get included, from the Wartime Contracting Commission?

CHARLES TIEFER: Well, this was a bipartisan commission, and with all the trouble you sometimes see between the two parties, the four Republicans and the four Democrats worked together. I am quite satisfied with what’s in there. In a perfect world, changes continue to occur in Afghanistan, including problems, and I wish we could stay with it, but our time was up. And our report speaks for itself.

AMY GOODMAN: Charles Tiefer, thanks for being with us, on the Wartime Contracting Commission. Sharon Weinberger, author of the investigative series for the Center for Public Integrity on no-bid contracts called "Windfalls of War." She’s also a professor of government—he is a professor of government contracting at the University of Baltimore Law School.

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