Improving the Government‐Contractor Relationship

February 22, 2010 • Commentary

By David Isenberg

This article appeared in the Huffington Post on February 22, 2010.

Let’s concede the obvious; the U.S. military cannot function, either in peacetime or wartime, without heavy dependence on private contractors.

Let’s also acknowledge another fact; namely, that this situation is not going to change anytime soon.

So rather than engage in futile debates about getting rid of such dependence we should be focusing on solving problems in the current government‐contractor relationship. At this point in time it should be uncontroversial for both supporters and critics of private contractors to say that they have done many things well and some things not so well. After all, as the saying goes, only God is perfect and the last time I checked nobody was saying private contractors were the Supreme Deity.

With that in mind let’s take a look at a just released report by the Special Inspector General for Iraq (SIGIR).

This report, titled “Applying Iraq’s Hard Lessons to the Reform of Stabilization and Reconstruction Operations” elaborates on the key conclusions of its February, 2009, lessons‐learned report “Hard Lessons: The Story of Iraq Reconstruction.”

The report contains a number of specific recommendations, including one to establish a new entity that would be accountable for planning and executing stability and reconstruction operations (SRO). Private military contractors have long claimed that they can bring unique expertise and experience to such an area. Certainly, ongoing relief efforts in Haiti give them the latest opportunity to make their case.

Looking at private contractors past performance in Iraq the SIGIR report notes past
problems:

Regardless of incentives, federal civilians will not be available in sufficient numbers to ensure an adequate civilian workforce for future SROs. Contractors thus will continue to fill essential roles. Given this reality, the U.S. government should better prepare to deploy qualified and properly overseen contractors from the outset of an SRO. (p. 17)

Thus, we can’t do without contractors but government is not yet where it should be in terms of being able to do proper oversight of them. In case that is not clear enough the report says in the very next paragraph:

SIGIR’s reports repeatedly documented contingency contracting weaknesses in Iraq, from poor compliance with the Federal Acquisition Regulation (FAR) to ad hoc oversight systems that could not keep track of contracts. SIGIR found contracting entities that improvised systems and procedures to monitor contracts, and produced poor and incomplete contracting and procurement histories. These weaknesses led to fraud, waste, and abuse. As Secretary Gates aptly observed, “Contracting in Iraq was done willy‐nilly.” The Commission on Wartime Contracting underscored this point, noting that the “weaknesses in the federal contract management and oversight systems created plentiful opportunities for fraud, waste, and abuse.”

That is a noteworthy statement, considering how often private military companies which get in trouble claim they follow all the provisions in the FAR.

Why does government do such a lousy job on contracting oversight? The answer has long been obvious and it has nothing to do with Dick Cheney and Halliburton conspiracies.

One of the chief causes of the contracting problems in Iraq stemmed from a decision that far pre‐dated the invasion. During the 1990s, the Army reduced its acquisition workforce by 25 percent, while, during the same period, its contracting actions increased sevenfold. This left the Army with a shortage of warranted contracting officers just when the largest overseas contracting program in U.S. history was beginning in 2003. (p. 18)

Of course, poor contractor oversight is not just a problem for the Defense Department

The State Department experienced unprecedented contracting burdens in Iraq. In 2000, State spent $1.2 billion on federal contracts, but, by 2005, its spending had risen to $5.3 billion, a jump of 332 percent. As Secretary Clinton noted, “Contractors are there to support, not supplant. USAID and the State Department must have the staff, the expertise, and the resources to design, implement and evaluate our programs.” State, however, does not currently have sufficient staff or systems to oversee its growing contracting responsibilities. (pp. 18–19)

Now, given all the years that people have been saying over and over and over again how important oversight is the following is going to shock even veteran observers:

Oversight is a critical core governmental function; but oversight of SROs has been an ad hoc process. Despite recognition that a convergence of hazardous conditions in SROs‐including a cash environment, the desire for quick results, and unstable working conditions‐create vulnerabilities for fraud, waste, and abuse; no permanent system for SRO oversight currently exists. The U.S. government began spending huge sums of money in Iraq in 2003 without sufficient accounting processes in place.

The significant fraud, waste, and abuse that ensued might have been deterred or detected had there been a robust oversight capability in place from the outset. In 2003, the Congress created an office of inspector general to oversee the CPA’s [Coalition Provisional Authority] activities. This office became SIGIR in 2004, with the Congress gradually extending its mandate to include oversight of all U.S.-funded Iraq reconstruction activities. By contrast, no Special Inspector General was created for Afghanistan until 2008-$38 billion and seven years into the program.
(p. 19)

What does SIGIR think should be done? It says the “challenges inherent in operating in SRO environments, the specialized nature of contingency contracting, and the sheer number of programs and projects requiring review militate in favor of creating a single standing oversight capability for all SROs. Because these contingency operations are necessarily interagency enterprises, the body charged with overseeing them should possess a mandate enabling it to audit, inspect, evaluate, and investigate programs and projects conducted by any agency present in theater.”

Specifically it calls for the creation of a new office to manage SROs‐the U.S. Office for Contingency Operations, which could significantly enhance SRO planning and execution.

SIGIR notes that::

The seven‐year Iraq stabilization and reconstruction program‐the largest ever undertaken by the United States‐began without a sufficiently established management structure capable of executing the unprecedented effort. In mid‐2003, the U.S. government undertook a massive reconstruction mission‐much larger than planned and now exceeding $53 billion‐with an ad hoc management system. Some projects met contract specifications, but the many unacceptable outcomes stemmed chiefly from the lack of a clear, continuing, and coherent management structure (as opposed to a paucity of resources or poor leadership). Hard experience has shown that the United States did not have the financial, personnel, information technology, or contracting systems in place necessary to execute what became the most extensive and most expensive SRO in history. It is thus not surprising that the Iraq program failed to achieve its goals. (p. 23).

Putting aside for now the larger issue of whether the U.S. should be engaging in SRO operations, which often is a euphemism for war and conflict, the lesson of the past twenty years is clear. The current government contracting relationship does not work nearly as well as it should.

To its credit private industry has often been very clear and articulate in saying just that. The SIGIR recommendation offers a possible way to improve the status quo. It will be interesting to see whether private industry steps up to the plate and offers its support to help make it happen.

David Isenberg

Former Adjunct Scholar