Commentary on the Commission on Wartime Contracting Hearings (Part 1)

September 24, 2009 • Commentary

By David Isenberg

This article appeared in the Private Military Herald on September 25, 2009.

In Part 1 of a 3‐part series David Isenberg, columnist, analyst, researcher and author of Shadow Force: Private Security Contractors in Iraq provides analysis and commentary on the transcripts of testimony from the recent hearings by the Commission on Wartime Contracting which took place on the 14th of September in Washington.

Part I | Part II | Part III (coming soon)

Much of the time U.S. governmental investigations and hearings into whatever is the current controversy are highly scripted affairs. Congressional hearings in particular usually have a certain kabuki drama or classic Greek play quality about them, insofar as everything that occurs is highly scripted and predetermined. Everyone knows the questions, and the answers to them, before they are even asked.

But, every now and then, one gets a rare moment of unscripted candor. In the recent hearing of the Commission on Wartime Contracting (CWC) on the ArmorGroup scandal in Afghanistan we had several such moments. And for those who are patient enough to watch or read the transcripts such moments are truly revelatory.

But before going any further let me note that, and no disrespect to other U.S. governmental agencies, I consider the CWC to be the one U.S. group in several years to be doing truly worthy work on this issue. They start with the premise that private military and security contractors are necessary. As CWC co‐chair, Chris Shays, said in the first panel, “Contractors have provided critical support to American military operations since the Revolutionary War. More than 250,000 contract employees are working in Iraq and Afghanistan, and more than 1,000 have died in the line of duty. They bring special skills to bear, free up warfighters for combat missions and represent a vital resource for contingency needs. Our focus today is, therefore, on understanding how we can improve this system and make it work.”

They also acknowledge that the current situation with regard to oversight and accountability is seriously flawed. Their interim report issued earlier this year is highly worth reading

Like my previous post, what I have done below is to copy various excerpts from the hearing. Each excerpt is italicized and indented. Each excerpt is usually followed by my comment in bold. Sometimes I make observations. Sometimes I ask questions. In some cases I feel the excerpt is so fascinating in its own right that it stands on its own and I make no comment.

PANELS I, II, and III OF A HEARING OF THE COMMISSION ON WARTIME CONTRACTING; THE DEPARTMENT OF STATE AND SECURITY CONTRACTOR MISCONDUCT

September 14, 2009

PANEL I OF A HEARING OF THE COMMISSION ON WARTIME CONTRACTING;

SUBJECT: THE DEPARTMENT OF STATE AND SECURITY CONTRACTOR MISCONDUCT;

CHAIRED BY: CHRISTOPHER SHAYS AND MICHAEL THIBAULT;

WITNESS: PATRICK F. KENNEDY, UNDERSECRETARY OF STATE FOR MANAGEMENT, DEPARTMENT OF STATE;

LOCATION: 2247 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

D.C. TIME: 9:31 A.M. EDT

MR. SHAYS:

With reports of misconduct among ArmorGroup personnel surfacing as early as December 2008, and with two contracting office representatives tasked full‐time to the Kabul contract, how could the State Department detect no signs of trouble until it received notice from ArmorGroup leaders in Washington, not Kabul, in late August 2009? Why did the State Department display no visible signs of outrage at the delayed notice of problems at the ArmorGroup encampment? Has the State Department issued a new tour notice or reviewed the security contract for possible default termination?

Great questions. Let us not have the equivalent of Abu Ghraib here, where wrongdoing was pinned on various enlisted men and women at the bottom of the chain of command. Instead, let’s look at the people who were supposed to be monitoring the contract from the very beginning. And yes, we’re talking about you, U.S. State Department.

It is hard to exaggerate the importance of these issues. American foreign policy goals, mission objectives and lives depend in no small part on the behavior of the contractor employees, who make up half of the contingency operation workforce in Iraq and Afghanistan. Maintaining a reputation for honorable and decent treatment of foreign nationals, as well as our own countrymen, is a key asset in the struggle against terrorists. It’s just basic common sense. Gross misconduct by employees of U.S. contractors devalues that asset. It is unfair, insulting and dangerous to the military, State Department, USAID and nongovernmental personnel working in the Southwest Asia theater to have America’s image sullied and trampled by outrageous and revolting behavior of contract employees. That concern is even more salient in countries, like Afghanistan, that have strict views of sexual misconduct and use of alcohol.

Indeed, being professional means using one’s common sense, and not just living up to the letter of the contract, although that wasn’t done either.

The incidents reported near the Kabul embassy undermine American efforts to build a stable, peaceful and democratic Afghanistan. To put it bluntly, they provide free recruiting material to the Taliban. ArmorGroup officials acknowledge the problem. They certainly can’t claim they were unaware of their obligations. Their contract with the State Department explicitly describes not only conduct requirements but also the reason for them.

Of course, lack of adult supervision by the State Department does not absolve ArmorGroup. AG can’t even claim ignorance of the requirements, as both they, and the rationale for them, are spelled out in the contract.

I’ll quote just one of those provisions. Quote, “Each contractor employee or subcontractor employee is expected to adhere to standards of conduct that reflect credit on themselves, their employee (sic) and the United States government,” end of quote.

Perhaps the AG guards and supervisors should have asked themselves how eating chips out of someone’s ass brought credit on the U.S. government.

We have seen no evidence that State Department employees participated in the incidents or had any knowledge of them until recently. That leaves open, of course, questions about the levels of vigilance and diligence that ArmorGroup and State were exercising.

Not very much apparently.

The scope and duration of misconduct are both greater than they first seemed. Initially, we thought the list of disturbing episodes comprised the parties of June 15th and August 1st and August 10th. We have since discovered that other incidents occurred during December 2008 holiday parties, and that cafeteria‐catered bunker parties became a recurring event during off‐duty hours.

Do we yet have the full timeline on how long the misconduct went on?

Tough young guards can’t be expected to spend their leisure hours diagramming sentences or studying the etiquette of the local tea ceremony. But we can expect them to be mature and use good judgment, and we certainly can insist that their managers and the government’s contract managers pay close attention to employee conduct on an important mission in a sensitive region. Obviously, we need a great deal of improvement on those points.

Possible contender for understatement of the year.

Honorable Patrick F. Kennedy, undersecretary of State for Management:

As the State Department’s senior management officer, I take responsibility for having failed to prevent them and for not having uncovered them earlier.

How exactly have you taken responsibility? You have not resigned and are still undersecretary. You have not suffered a demotion, a reprimand, a bad job evaluation or even a slap on the wrist.

And the consumption of alcoholic beverages has also been prohibited at Camp Sullivan.

Yet many other PSCs continue to allow the use of alcohol. But perhaps that is okay as they actually have professional guards and managers who know when it is okay to drink. Let’s face it the work is stressful. Perhaps better a few beers than using other drugs. Still, maybe people should ask if there needs to be an industry standard on this. If so, what? In the interim, until people figure it out, the State Department, can always write into the contract a simple clause that says, no alcohol whatsoever. Better yet, State needs to vastly improve its oversight mechanisms.

We have always had in place a rigorous regime of oversight for security operations by contractor personnel while they are on duty. Allegations of contractor misconduct are investigated, and if substantiated, appropriate action is taken.

You have, since when? Where was it in Iraq? Right now it looks like it is MIA.

The cost of using contractors also is often higher than it would be to hire and manage an internal workforce.

Now here is a money quote if ever there was one. Contractor industry advocates have always claimed that they are cheaper and more cost effective than their public sector counterparts, although there has never been an authoritative analysis confirming that. Now, for once, someone relatively high up in government is admitting that is not always the case.

On March 12th, 2007, a contract award was made to ArmorGroup North America after full and open competition involving a number of countries. This contract has required extensive oversight in management. Since award, we have issued seven deficiency notices addressing 25 deficiencies; one cure notice; and one show‐cause notice. Each deficiency notice, cure letter and show‐cause notice demanded separate corrective action plans to permanently resolve these issues.

But if the charges in James Gordon’s law lawsuit against ArmorGroup North America are true then AGNA would simply lie when they said they were taking corrective action. So how exactly did State go about verifying whether AG’s corrective actions had happened, let alone whether they actually improved anything?

Despite the administrative deficiencies discussed with ArmorGroup, the department did not observe any breaches of the mission. Through the constant oversight of the regional security office and the contracting officer, Diplomatic Security personnel on the ground in Kabul felt that the administrative contract deficiencies did not jeopardize the security and safety of the personnel assigned to our mission. Static security at Embassy Kabul, as well as all our overseas missions, is based upon multiple layers of staffing to ensure appropriate security coverage and no single point of failure.

…

Thus, while the staffing shortages for ArmorGroup received deficiency notices and represented a failure to meet contract specifications, they did not represent a security risk. And based upon our reviews to date, the safety and security of our diplomats has not been compromised and the security of the embassy was not threatened.

Just keep this quote in mind for a while. We’ll come back to it later.

For the ArmorGroup contract, weekly meetings and, at times, daily meetings are held on contract performance. The contracting office is represented as a Diplomatic Security federal agent who sits in Washington and works daily with the two contracting officer representatives on the ground in Kabul, who are also both Diplomatic Security federal agents.

And yet with all those meetings the DS agent and CORs evidently had no clue about the parties at Camp Sullivan.

We simply made a mistake. We assumed that the contractor was going to be managing its conduct at the guard camp in accordance with the standards in the contract, as your fellow co‐chair outlined.

Maybe you should have kept in mind the words of Ronald Reagan: “Trust but verify.”

It is clear that they should have stopped. I’ve seen the pictures. You’ve seen the pictures. It’s a no‐brainer. That conduct is appalling and should have been stopped immediately.

The failure of the management onsite, to do what they should have done, to adhere to the standards of the contract, caused us to ask for their removal, which has been accomplished.

If it turns out that there was — as you used the word, and I realize you also put it in quotes — a conspiracy to keep this away from the State Department, if this turns out to be larger than that, I think I stand by the statement in my — that I made in my testimony which is, this — we are waiting for the results of the investigation. And then we will decide whether or not it is proper to continue this contract.

Are you really saying that the only reason State would terminate the contract is if it was proven that there was a conspiracy to keep this away from the State Department (one of the central charges in the Gordon lawsuit by the way)? What about the already confirmed charges of gross misconduct and unprofessionalism. Given that the governmental concerns about AG go back years is that really the only standard by which you can find justification to terminate a contract?

Now, let’s return to that security issue.

CLARK KENT ERVIN (commission member):

But I have to tell you, I am also very much troubled by the State Department’s repeated characterization, not just of these incidents but this whole litany of problems over the course of two years with this contract…

In your own statement today, you — the State Department draws a distinction — attempts to draw a distinction between contract compliance and the security of the embassy. In your statement, despite the administrative deficiencies, the department did not observe any breaches of the security of the mission.

Your own letters, the State Department’s own letters — there is a June ’07 letter: The purpose of this letter is to advise you that I consider the contract deficiencies addressed below to endanger performance of the contract to such a degree that the security of the embassy is in jeopardy.

There is an August 28 letter: Upon review of the most recent corrective action plan, the government has serious concerns regarding ArmorGroup’s ability to respond in the aftermath of a mass casualty incident or extreme loss of personnel due to mass resignation, hostile fire, a loss of manpower due to illness, et cetera.

…

In March, before that, we had 18 guards, apparently, who were off‐duty of their post, some for as long as three hours.

And then we learned in May of 2009 there was this Operation Snack Pack (sp) incident, when some guards, on their own initiative, went into Kabul dressed as Afghans and pretended to undertake a reconnaissance mission. The potential for loss of life is huge there, and for a while the embassy was night‐blind as a result of that.

All of these incidents, I would argue, are not administrative deficiencies. They directly — and your own correspondence indicates that this behavior over the course of time jeopardized the security of the embassy. I’d just like your comment about that. How can you justify this distinction?

MR. KENNEDY: Commissioner, we’re — we’re not attempting to justify anything.

Yes, just as well; no point in trying to do the impossible

We’re attempting to describe a set of facts on the ground. I’m — I — I’m not offering justification for ArmorGroup’s performance. We’re saying — drawing a distinction between the off‐ duty conduct of a certain number of ArmorGroup personnel, which was reprehensible and totally inappropriate, to say the least, and their on‐duty performance in protecting the U.S. embassy facilities in there.

Did you not understand his question? He was not talking about the party, he was talking about security breaches.

MR. ERVIN: Explain to me, then, why this language was used in these letters in 2007 and 2008.

If the course of conduct by ArmorGroup, even in those early years, did not endanger the security of the mission, why was that language used in these letters?

MR. KENNEDY: In an attempt to get ArmorGroup’s attention. We wanted to shock ArmorGroup and tell them that they were endangering their continued contractual relationship with the State Department if they did not (sic) fail to correct these deficiencies.

MR. ERVIN: It didn’t say that. It said it endangered the security of the mission. But let’s — let’s pursue that further. You could really get ArmorGroup’s attention by terminating the contract, failing to exercise the option to continue. And you didn’t do that.

You know, there’s this old adage: If you want to reward something, you — you, you know, give it — you do more of it. If you want to penalize something, you know, you do less of it. The fact of the matter is, you continued this contract. And why is it, under the circumstances that we’ve had for these two years?

So AG was deficient but it kept getting paid. Doesn’t government normally have the option of not paying a contractor when it does not perform to the terms of the contract? Is this what you call failing upward?

LINDA GUSTITUS (commissioner member):

I want to go to this issue of terminating contracts, because that issue isn’t new. And what you just told us today, both Mr. Moser and Mr. Kennedy, was, we’re going to wait for the results of this investigation and then decide whether to continue the contract. That was the exact same situation after Nisoor Square with Blackwater.

In other words, it is not as if you haven’t had to deal with this issue before

But when you didn’t terminate your contract with Blackwater after Nisoor Square and the problems in Iraq, that helped to send a message to other contractors that you can do a lot and not have your contract terminated by Blackwater.

I asked the State Department for their documentation on that decision to continue their contract with Blackwater, to extend it. It was extended shortly after Nisoor Square. And we were given — we were told that there was one document relevant to that decision, which I thought would be a fairly complex decision: Are we accomplishing the major mission of winning the hearts and minds of the people, versus the security? And there was only one document, which just said, re‐up the contract with Blackwater. There was no analysis of the cost and benefits of doing so with respect to Iraq.

And I raise this because it’s in the same context. You’re giving us the exact same response as the Blackwater situation, that you’re going to await the outcome of the investigation. But I don’t know, given the history, that there’s any confidence that you’d actually take action, regardless of the outcome of the investigation.

So given its record why should we trust the State Department now?

MR. DOV ZAKHEIM (commissioner member):

And let’s be clear about this. This is the equivalent of Abu Ghraib for Afghanistan. Last night, I went on the Web, just to see how many websites they had of this — these photos. And there are loads of them. And some of them are linked to sex websites, which really is going to look really good with Muslims in Afghanistan.

Well, at least the porn industry is benefitting from this.

Another problem is that this isn’t really new for State. You say, you know, this is relatively new and a new situation. Actually, it’s five years, because my former boss, Don Rumsfeld, made that change five years ago. Five years is an awful long time. Most wars don’t even last five years. Some last less than a week. So to say we’re in a learning situation, I mean, this sounds like we’ve been in the first grade for five years. A problem there.

Is that the equivalent of saying the State Department is a special needs child?

Let’s go back to the security issue one more time

MR. ZAKHEIM: Well, again given the situation we’ve got, and as you know very well, with what could have been a crisis, I mean, let’s face it. When there were 18 guard posts vacant, you say there was no risk. Well, there was no risk because nothing happened. I guarantee you, if something had happened, there would have been a risk.

My question again is, why do you think an investigation must be completed, before you get rid of a contractor, before you descope a contractor?

MR. KENNEDY: Because of the — because of the specifications and the requirements in contract law.

MR. ZAKHEIM: But contract law allows you to descope.

MR. KENNEDY: Commissioner, we’ll look at this again.

Wait a minute Commission Zakheim. Undersecretary Kennedy just avoided answering your question. You just laid out how the law allowed State to get rid of a contractor. But Kennedy just said they will look at it again. Well, that means they looked at it previously and decided not to do anything. Why not?

MR. SHAYS:

First off, it appears that what happens in Camp Sullivan stays in Camp Sullivan, and the fact is, it didn’t, just like it didn’t stay in Abu Ghraib. In Abu Ghraib, we had a military unit run amok. In Camp Sullivan, we had Charlie Group run amok.

…

I accept that part of the answer, and — but I want to then just ask you this. We learned of these incidents from POGO — the lurid behavior, the intimidation by this rogue group. And the intimidation is something that is particularly distressful. We didn’t learn it from State, we didn’t learn it from anyone else, but — and they learned it first from a lawyer who referred people to POGO.

Something is really off base when people have to go through a real different direction. There was no one that they could go to in ArmorGroup and get their complaint heard honestly. They were punished. There appears to be no one in State Department they felt they could go to and not be punished.

And our witness from Great Britain will tell you that he basically was forced to go because he was trying to stick up for his Afghan employees. So this is what really concerns me.

And why is that? After all the State Department Inspector General is a clearinghouse for receiving and handling allegations regarding fraud, waste, abuse, mismanagement or misconduct affecting Department of State programs and operations. One can Email: oighotline@state.gov; send mail to

Office of Inspector General

HOTLINE

P.O. Box 9778
Arlington, Virginia 22219

or Phone:
(Washington D.C., Metropolitan Area) (202)-647‑3320
(Elsewhere, Toll Free) 1–800-409‑9926

MR. SHAYS: Is — no, let me just clarify. Is there any allegation that people were involved in either sponsoring a prostitute or — in somehow being connected with a brothel or the women?

MR. Eric BOSWELL[Assistant Secretary of State for Diplomatic Security]: There are allegations out there that are being investigated by the Office of the Inspector General.

MR. SHAYS: Relating to people — employees potentially doing more than frequenting a brothel, but actually participating?

MR. BOSWELL: I don’t think I want to get into exactly what’s — (we’ll be ?) investigating.

Uh, why not? Exactly what are you investigating?

MR. SHAYS: Why did ArmorGroup supervisors delay reporting news of misconduct in an attempt to intimidate people who might report it?

MR. KENNEDY: I have no idea, other than just to say that is totally inappropriate and —

MR. SHAYS: They gave you no reason, no justification for why it took them two weeks in this last circumstance?

MR. KENNEDY: No, they did not, sir.

MS. GUSTITUS: Did you ask them?

MR. KENNEDY: We have told them that that is an unacceptable action on their part, yes.

MR. : That’s not the question.

MS. GUSTITUS: No, the question was, did you ask them why they waited two weeks to give you the information?

MR. MOSER: Yeah, we have asked them. Yeah, we’ve asked them formally.

MS. GUSTITUS: And what was their answer?

MR. : They haven’t given — (off mike).

MR. MOSER: We have yet to get a formal answer on that.

Perhaps AG was having a bad hair day?

MR. ERVIN:

But let me ask this. If the investigation, and I hope it proceeds apace and I assume that it is, if the investigation establishes that all of these allegations we’ve been talking about and the allegations that bring us here today are true, will you pledge to terminate the contract?

MR. KENNEDY: Commissioner, it’s very, very hard for me to state a hypothetical. We don’t know what the investigation will say. I mean, I can say this. I can imagine facts unearthed in the investigation that would cause us to immediately terminate the contract.

And if you don’t terminate the contract what kind of signal does it send to other PSCs? Can Mr. Kennedy think of ANY reason or circumstance that would cause him to unambiguously recommend the contract be terminated?

MR. HENKE: Okay. I want to get at this issue of low‐price, technically acceptable. In non‐Beltway terms, I guess you’d call it –

MR. SHAYS: I think this needs to be the last area.

MR. HENKE: Okay. But I’d ask for two more minutes?

MR. SHAYS: Okay. Fine.

MR. HENKE: In non‐Beltway terms, I think that would be called a low‐bid contract. Fair? I mean, in a colloquial term?

MR. MOSER: Mr. Commissioner, all contracts are low‐bid. There is always a low bidder in any contract, what their bids put out for. There’s somebody who bids lower than the other bidders.

MR. : But I’m not trying to characterize. I’m actually trying to help you. I think your — I think your hands are bound by law.

MR. KENNEDY: Correct.

MR. : By law, State has an authorization to accept the low‐ price, technically acceptable contractor.

But I think it’s important that we understand this. Technically acceptable means that the contractor is just pass — pass/fail, they pass. It doesn’t allow you to exercise judgment that this vendor came in with a Grade A proposal and this vendor game in with a Grade C or D proposal, right? They’re just acceptable. They both pass.

MR. KENNEDY: That is correct. They both deliver on the contract specifications.

MR. : Right.

MR. KENNEDY: One may have proposed a better way of doing it, but if their price is higher, we are unable to accept their better way of writing it.

MR. : Yes, sir.

MR. : If Company A comes in — Company A comes in with a Grade A proposal, and they propose $1.1 million, and Company D comes in with a Grade D proposal, but it’s still technically acceptable, at $1.0 million, you have to pick Company D.

MR. KENNEDY: That is correct.

MR. : You have to, by the law.

MR. KENNEDY: Provided that they are — both meet the technically acceptable definition. Yes, sir.

MR. : Right. You can’t decide, even in a wartime — in a war — let’s be plain — in a war, you can’t decide to pay a little more for a lot more quality.

MR. KENNEDY: That is correct.

MR. : Have you submitted a legislative proposal to the House and Senate to change that law?

MR. KENNEDY: We are in discussions within the executive branch on this, sir.

MR. : So you have not submitted to the Congress a legislative change?

MR. KENNEDY: We’re still — we have been — we’re in discussions within the executive branch.

MR. : Okay. So you’re thinking about it, but it hasn’t gotten up to Congress yet, fair?

MR. KENNEDY: There’s been — there is no bill at the moment on — for State Department authorization for the next cycle.

MR. : Right. I’m just going to — I’m going to end with this statement. I think the law makes no sense in peace time. In war, I think it’s egregious that you have no flexibility; you have no ability to apply your judgment and pick who you think is the best vendor even at a little more price. What do you think, Mr. Kennedy?

MR. KENNEDY: My personal opinion is, you’re absolutely right, Commissioner.

Okay, they are both in agreement, and so am I. Even if the perennial claim of the contracting industry is true, i.e., that it is more cost‐effective, that is not the most relevant criterion by which to judge. So can we now please change the law?

David Isenberg

Former Adjunct Scholar