DoD contractors lobby Congress against competition

As the Army prepares to choose the new builder of its handheld digital radios, the incumbent contractors are tryiing to convince Congress to keep other companies out. The incumbents are General Dynamics, which publicly apologized to the Army over its half of the program last year, and Rockwell Collins. The Army’s own chief of acquisitions, Lt. Gen. William Phillips, told the Senate Armed Services Committee just yesterday that “the industry partners that were not a part of the program of record” — i.e.  the troubled JTRS (Joint Tactical Radio System) program, which had contracted Rockwell and GD — provided “radios that were cheaper, better capability and met almost all of our requirements in most cases”. The service, he said, was committed to “full and open competition.”

We saw a similar play already last year, albeit slightly later in the legislative process, when Reps. Dave Loesback and Trent Frank offered an amendment – later withdrawn – that would have required competitors to meet stringent conditions that effectively ruled out radio-builder Harris and other outsiders, thereby protecting General Dynamics. This time it is co-incumbent Rockwell Collins, which splits the current contract with GD, that’s leading the charge.

Keep reading this article at: http://breakingdefense.com/2013/05/09/army-radios-contractors-lobby-congress-against-competition

Army acquisition strategy supports helicopters that can’t fly

The Army’s problem with its new Apache helicopters isn’t as bad as we thought when we first wrote about it last week. It’s worse.

We knew that Northstar Aerospace, the subcontractor making the transmissions for lead contractor Boeing, had fallen behind on building that crucial component. We knew at least seven of the latest model, the vaunted AH-64E Apache Guardian, had been built at some point without transmissions, rendering them unflyable until the part was finally installed.

What we didn’t know was that the Army was taking new Apaches that did have transmissions, running them through the full battery of flight tests, formally accepting them from the contractor, and then taking the transmissions back out again. Why? So Boeing can re-install those transmissions on the next aircraft coming off the line, which allows that chopper to be tested, accepted, and stripped of its transmission in turn.

In brief, it looks like the service is playing a classic shell game that allows the aircraft to pass their flight tests even though there are not enough transmissions for all of them to actually fly at the same time. The Army insists Boeing is paying for all the extra work, as the company should. But installing, removing, reinstalling, re-removing, and re-reinstalling a component can’t help but put unnecessary wear and tear on it. (There’s a reason that technicians call the process, with grim humor, “cannibalization”). The ultimate result is that transmissions will wear out faster, which in turn means more expense down the road and a higher probability of the part failing in combat.

Lt. Gen. William Phillips, the military deputy to Army acquisition chief Heidi Shyu, revealed much of this in testimony this morning (Apr. 26, 2013) to the House Armed Services tactical air and land forces subcommittee. Phillips was responding to a pointed question from a clearly well-briefed Rep. Loretta Sanchez, the panel’s top Democrat. We’ve also received explanatory documents from sources we can’t name. And there are still plenty of questions we’re waiting for the Army and Congress to answer on the record.

Keep reading this article at: http://defense.aol.com/2013/04/26/army-plays-shell-game-with-unfinished-apache-helicopters-put-th

 

Northern Virginia company pleads guilty in bribery scheme involving government contracts

Nova Datacom LLC, a Northern Virginia company, and its former president, Min Jung Cho, pled guilty today (Apr. 11, 2013) to federal charges stemming from their roles in a bribery and kickback scheme involving corrupt public officials from the U.S. Army Corps of Engineers and the Department of the Army, as well as various government contractors.

Nova Datacom admitted to paying more than $15 million in bribes to three public officials in return for contracts awarded through the Army Corps of Engineers and the Department of the Army. In addition, Nova Datacom admitted paying more than $790,000 in kickbacks to executives of two companies that channeled government sub-contracts to the firm.

The guilty pleas were announced by U.S. Attorney Ronald C. Machen, Jr.; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; Thomas J. Kelly, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); Peggy E. Gustafson, Inspector General for the Small Business Administration (SBA); Robert E. Craig, Special Agent in Charge of the Mid-Atlantic Field Office of the Defense Criminal Investigative Service (DCIS), and Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).

The developments are the latest in an ongoing investigation of the largest domestic bribery and bid-rigging scheme in the history of federal contracting cases. Overall, participants in the scheme stole over $30 million in government money through inflated and fictitious invoices.

Nova Datacom LLC and Min Jung Cho, 44, of Springfield, Virginia, each pled guilty in the U.S. District Court for the District of Columbia to conspiracy to defraud the United States. In addition, Nova Datacom pled guilty to three counts of bribery.

The Honorable Emmet G. Sullivan scheduled a status hearing for June 27, 2013. No sentencing date was set. Under federal sentencing guidelines, Nova Datacom faces a fine of $39.6 million to $79.2 million. Cho faces a statutory maximum of five years in prison and financial penalties.

Two executives from other businesses pled guilty to charges in recent weeks. All told, 15 individuals and Nova Datacom have pled guilty so far in the investigation.

They include three defendants who worked closely with Nova Datacom throughout the course of the scheme: Kerry F. Khan and Michael A. Alexander, former program managers for the U.S. Army Corps of Engineers, and Harold F. Babb, the former director of contracts at Eyak Technology LLC (EyakTek), an Alaska Native-owned small business.

Three other defendants who worked for Nova Datacom are among those who earlier pled guilty to charges. They include Alex N. Cho, also known as Young N. Cho, the brother of Min Jung Cho and the company’s former chief technology officer; Nick Park, a former employee who later opened his own business, Unisource Enterprise Inc. (UEI); and Theodoros Hallas, the company’s former executive vice president of Operations.

As part of the plea agreements, Nova Datacom and Min Jung Cho have agreed to the entry of a forfeiture money judgment against them in the amount of $6.8 million.

* * *

“Today’s guilty pleas hold a corporation and its former president criminally accountable for their roles in funneling millions of dollars into a sprawling bribery scheme involving corrupt public officials and compromised government contractors,” said U.S. Attorney Machen. “They also reveal that this brazen fraud extended to the Department of the Army, where a corrupt public official exchanged contracts for cash, gambling in Las Vegas, and a $70,000 Lexus. Fifteen individuals have now pled guilty in this ongoing investigation, and today’s guilty plea by Nova Datacom demonstrates our commitment to holding accountable the corporations that benefit from crimes committed by their officers and employees.”

“Today’s pleas are yet two more admissions of guilt in the largest fraud scheme in the history of federal contracting cases,” said Assistant Director in Charge Parlave. “Together with our law enforcement partners, the FBI will continue to combat bribery and fraud, and we will ensure those who engage in such illegal activity are brought to appropriate justice.”

“The use of bribes and kickbacks to secure government contracts will not be tolerated in SBA’s 8(a) Business Development Program,” said SBA Inspector General Gustafson. “The SBA OIG appreciates the leadership of the U.S. Attorney’s Office and the support of our interagency partners in bringing forth these plea agreements.”

“At a time when government and taxpayer resources are being stretched to their limits and our service members continue to make sacrifices to protect our national security, it is detestable that Nova Datacom would blatantly conspire to defraud the government and, eventually, the American warfighter,” said Special Agent in Charge Craig of DCIS. “The illegal manipulation of contracts to facilitate bribes and kickbacks that circumvent the military contracting process costs the taxpayer and warfighter alike. This investigation sends a clear message to those who may follow in the defendants’ footsteps—the Defense Criminal Investigative Service and our law enforcement partners will take aggressive action to identify and investigate those that endeavor to take advantage of the Department of Defense and the men and women of the Uniformed Services.”

* * *

Nova Datacom provided information assurance and security services to commercial companies and federal departments and agencies. The bribery charges involve Nova Datacom’s dealings with an unnamed former official with the Department of the Army and with Khan and Alexander of the Army Corps of Engineers. Evidence shows that the schemes began in 2007, as Nova Datacom moved heavily into government contracting.

According to the government’s evidence, Alex Cho founded Nova Datacom in 2004 and was its sole owner until 2007. That year, he transferred complete ownership of the company to his sister to enable the firm to apply to the Small Business Administration for status as a woman- owned, minority small business. This would give the company an advantage in securing government contracts. At the time of the transfer, Alex Cho did not intend that his sister would control Nova Datacom or control its day-to-day operations. Later in 2007, based on false representations, the SBA certified Nova Datacom.

From 2007 through 2010, Nova Datacom sought government business by submitting false past performance references and evaluations that fraudulently burnished its qualifications. The company also engaged in bribery to win government contracts.

Scheme Involving the Army Corps of Engineers

According to the government’s evidence, one scheme involved bribery payments and promises to Khan and Alexander. Starting in 2007, Alex Cho, Min Cho, Park, and other representatives of Nova Datacom paid Khan and Alexander in exchange for their steering contracts and subcontracts from the U.S. Army Corps of Engineers to the company. Some subcontracts were awarded through Babb’s firm, EyakTek, and Babb also received kickbacks.

At Khan’s direction, Nova Datacom submitted fraudulently inflated quotes to the Army Corps of Engineers and EyakTek for the work performed. The fraudulently inflated amounts were referred to by Khan as “overhead,” and they generated the illicit proceeds of the scheme.

From in or about the spring of 2007 through October 4, 2011, when Khan, Alexander, and Babb were arrested, the U.S. Army Corps of Engineers awarded contracts and sub-contracts to Nova Datacom that included in excess of $20 million in “overhead.” Nova Datacom used portions of this “overhead” to make payments benefiting Khan, Alexander, Babb, and others.

For example, Nova Datacom and its representatives gave, offered, and promised things of value directly and indirectly to Khan in excess of $14 million. The company and its representatives offered, promised, and provided things of value directly and indirectly to Alexander of approximately $1 million.

Finally, Nova Datacom and its representatives offered, promised, and provided kickbacks directly and indirectly for the benefit of Babb in excess of $400,000.

Law enforcement stepped in as plans were in development to steer a long-term contract worth up to $780 million to Nova Datacom as the primary contractor.

Schemes Involving the Department of the Army

According to the government’s evidence, Alex Cho and Park paid a person identified as “Public Official C” a total of $50,000 in cash in 2007 in return for the award of subcontracts to Nova Datacom. In addition, they provided the official with first-class airline upgrades, entertainment, casino chips, and lodging in Las Vegas. The official recommended the company receive a subcontract valued at nearly $330,000.

Also, in 2010, Alex Cho agreed to pay kickbacks to another businessman in return for subcontracts awarded to Nova Datacom through the Army. Oh Sung Kwon, also known as Thomas Kwon, was the co-founder and chief financial officer of Avenciatech Inc. He helped Nova Datcom win a subcontract worth more than $1.4 million. Nova Datacom paid approximately $390,000 in profits derived from this contract for the benefit of Kwon.

Other Guilty Pleas

John Han Lee, 42, a co-founder of Unisource Enterprise Inc. (UEI), pled guilty on March 29, 2013, to one count of bribery and one count of conspiracy to commit bank fraud.

Lee, 42, of Ashburn, Virginia, admitted taking part in schemes between 2008 and 2011 with Public Official C at UEI and two other firms that he later joined, “Company E,” and Avenciatech Inc. With assistance from Public Official C, who had a secret ownership in UEI and Avenciatech, the companies got sub-contracts; in turn, they provided Public Official C with benefits including golf outings, hotel stays, a trip to the Bahamas, cash payments, a Lexus automobile worth about $69,000, meals, and entertainment.

In addition, Lee admitted joining in a mortgage fraud scheme in northern Virginia between 2004 and 2008 that cost lenders more than $1.2 million.

King Everett Johnson, a former employee of UEI and the founder of Integrated Business and Technology Solutions, LLC (IBATS), pled guilty on March 29, 2013, to one count of conspiracy to commit wire fraud. Johnson, 42, of Jersey City, New Jersey, admitted participating in the conspiracy in 2009 with others, including Public Official C, who at the time was an assistant project manager for the U.S. Army based in Seoul, South Korea. In collusion with Public Official C, Johnson submitted fraudulent invoices from IBATS, totaling $124,163, to the Department of the Army through Company E. He received the proceeds, transferred $40,000 for the benefit of Kwon, and kept the rest for himself.

The others who earlier pled guilty to charges include Kerry Khan’s son, Lee A. Khan; Kerry Khan’s brother, Nazim Khan; Larry G. Corbett, owner of Core Technology LLC and Enterprise Technical Solutions Inc.; Robert L. McKinney, the president of Alpha Technology Group Inc., a provider of program management services; James Edward Miller, formerly of Virginia Beach, Virginia, the owner of Big Surf Construction Management LLC; and Kwon, the co-founder and chief executive officer of Avenciatech Inc.

* * *

In announcing the guilty pleas, U.S. Attorney Machen, Assistant Director in Charge Parlave, Special Agent in Charge Kelly, Inspector General Gustafson, Special Agent in Charge Craig, and Director Robey thanked those who investigated the case from the FBI’s Washington Field Office; the Office of the Inspector General for the Small Business Administration; the Department of Defense’s Defense Criminal Investigative Service; the Defense Contract Audit Agency; the Washington Field Office of the Internal Revenue Service-Criminal Investigation; and the Army Criminal Investigation Command. They also expressed thanks to the U.S. Marshals Service for its assistance on the forfeiture matter.

They also praised the efforts of those who worked on the case from the U.S. Attorney’s Office, including Assistant U.S. Attorneys Michael K. Atkinson, Bryan Seeley, and James Smith of the Fraud and Public Corruption Section and Assistant U.S. Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section.

Finally, they expressed thanks for assistance provided by Stephanie Brooker, former chief of the office’s Asset Forfeiture and Money Laundering Section; Forensic Accountant Maria Boodoo; Paralegal Specialists Tasha Harris, Lenisse Edloe, Shanna Hays, Taryn McLaughlin, Christopher Samson, and Nicole Wattelet; and Legal Assistants Krishawn Graham and Jessica McCormick.

This is a statement issued by the U.S. Attorney’s Office, District of Columbia, April 11, 2013 – http://www.fbi.gov/washingtondc/press-releases/2013/nova-datacom-llc-and-its-former-president-plead-guilty-in-bribery-scheme-involving-government-contracts 

Army acquisition must streamline requirements process

Army acquisition officials want to speed up the process to issue requests for proposals to defense companies and thus issue contract awards quicker.

Army Lt. Gen. William Phillips, military deputy to the Army’s acquisition executive, said on Feb. 20, 2013 at the Association of the U.S. Army’s Winter Symposium that the Army too often drags its feet trying to perfect the draft RFP rather than issue it to companies and receive feedback faster.

“I think in the past, looking over the last three years that I’ve been in this job, we’ve been somewhat hesitant to get the draft RFP out,” Phillips said. “We want to get it better and get it better.”

Instead, the Army needs to “take some risk in that area,” Phillips said. He explained that the Army will have to finish their requirement lists for weapons programs faster to drive down costs.

Keep reading this article at: http://www.dodbuzz.com/2013/02/21/phillips-army-must-streamline-requirements-process/ 

Army slides show cuts to readiness, contracting and training

A set of Army briefing slides outlining the devastating effects of Sequestration has mysteriously surfaced and is circulating the Web just two days before senior leaders are scheduled to present them to the White House.

“Effects of FY13 Fiscal Uncertainty on Army OMA Accounts” lays out the potential funding cuts to the service operations and maintenance efforts.

The Pentagon is facing $5.3 billion in sequestration cuts in March if Congress cannot find a way to prevent the mandatory spending reductions. All of the services will likely have to furlough hundreds of thousands of workers, cut back on contractor logistics support, freeze sustainment of thousands of vehicles and other equipment and gut training.

Keep reading this article at: http://www.dodbuzz.com/2013/02/06/army-slides-show-cuts-to-readiness-support-reset/

 

Three contractors tapped to develop smart Humvee replacements

The Army and Marine Corps awarded three companies development contracts Wednesday for their next generation of wheeled tactical vehicles, which will require a gigabit speed local area network to support onboard computers, communications and electronic warfare systems.

AM General, Lockheed Martin Corp. and Oshkosh Corp. won 27-month engineering and development contracts valued at $64.5 million, $66.3 million and $56.4 million respectively to produce 22 prototype Joint Light Tactical Vehicles each. The services will evaluate the prototypes at Army test centers in Arizona, Maryland and New Mexico.

The services then will select a single contractor to manufacture up to 50,000 JLTVs for the Army and another 5,000 for the Marine Corps. The development contracts specify that the services will pay no more than $250,000 per JLTV, putting the value of the production contract for 55,000 vehicles at $13.8 billion.

Keep reading this article at: http://www.nextgov.com/defense/2012/08/three-contractors-tapped-develop-sample-humvee-replacements/57622/.

Shyu: Army acquisition’s pivot to the Pacific

Army leadership has a struggle ahead in explaining how America’s land service fits into the new defense strategy and the Pacific pivot that it outlines. The Army’s acquisitions chief said Monday the pivot will shape the service’s acquisition strategy going forward.

Heidi Shyu explained in an interview with Military.com that the Army must focus more on technological battlefields where the Army will not enjoy uncontested aerial environments. The Army will face enemies with missile fleets, cyber attack capabilities and the ability to shoot down U.S. drones.

Shyu will join the rest of the Army’s generals at the Association of the U.S. Army’s conference in Washington D.C. this week to lobby for the rapidly shrinking pool of defense dollars focused on building a military to exert influence in the Pacific.

Keep reading this article at: http://www.dodbuzz.com/2012/10/22/shyu-army-acquisitions-pivot-to-pacific/

Hold lifted on Army acquisition chief’s nomination

U.S. Sen. John Cornyn, R-Texas, removed the last road block to the lengthy process of confirming Heidi Shyu as the Army’s top acquisition official.

Shyu has served in the role since May 31, 2011 since Malcolm O’Neill, the former Army acquisition chief, resigned and recommended his deputy, Shyu, take over. The Obama administration waited until this past February to officially nominate Shyu.

The Army has since had to work with Cornyn and Sen. Tom Coburn, R-Okla., who each placed a hold on her nomination for separate reasons.

Coburn held up the nomination because he was upset about the sluggish pace of the Army’s Improved Carbine Competition. He released his hold in August.

That left Cornyn as the sole barrier between Shyu and the confirmation of her nomination. He released his hold on Sept. 21st after the Defense Department agreed to investigate an arms dealer that supplied the U.S. Army with Mi-17 helicopters while also dealing with Syrian President Bashar al-Assad in Syria.

Read this article at: http://www.dodbuzz.com/2012/09/21/hold-lifted-on-army-acquisition-chiefs-nomination/

Government doesn’t use bulk-purchasing initiative enough, auditors say

The government’s seven-year-old strategic sourcing initiative designed to save money through bulk purchasing of office supplies and services is achieving nowhere near its potential, according to a Government Accountability Office report released Thursday.

Agencies “leveraged only a fraction of their buying power through strategic sourcing and achieved only limited savings,” auditors concluded after a yearlong review of procurement efforts under the General Services Administration’s Federal Strategic Sourcing Initiative and independent efforts at the Defense, Energy, Homeland Security and Veterans Affairs departments.

Those agencies’ contract spending made up about 80 percent of the government’s overall $537 billion procurement budget in fiscal 2011, and GAO analysts added reviews of strategic sourcing by the Air Force, Army, Navy and Defense Logistics Agency for greater detail.

Strategic sourcing, a popular tool the private and public sectors use to buy office supplies and services, telecommunications and print management aids and other items, was institutionalized by the Office of Management and Budget in 2005 and is overseen by GSA and the Office of Federal Procurement Policy.

Keep reading this article at: http://www.govexec.com/contracting/2012/10/government-doesnt-use-bulk-purchasing-initiative-enough-auditors-say/58590/?oref=dropdown.

Army Contracting Command easing burden on contracting officers

The Army Contracting Command is helping to lead an effort to modernize the service’s contract writing system.

This is more than just a technology refresh. It’s about improving the functionality of the existing contract writing tools that many contracting officers use every day.

“A lot of our contract writing applications are supporting architectures that are 8-to-10 years old, which is a lifetime in the technology business,” said Gino Magnifico, the Army Contracting Command’s chief information officer. “One of things that we are looking at as a structure, not just across the Army but all of DoD, is how do we upgrade our capabilities in contracting writing areas and get applications that are really more modernized, that reflect architectures, that work really well in these different environments, everything from sustainment to these thin solutions to these communication satellite requirements that we really try to leverage in this command.”

Magnifico said the ACC is leading an effort to conduct an analysis of alternatives within the Army to figure out the requirements for the future contracting writing tools.

Keep reading this article at: http://www.federalnewsradio.com/396/3023451/Army-Contracting-Command-easing-burden-on-contracting-officers.