accountability | The Contracting Education Academy

October 3, 2011 By AMK

Better oversight of contracts called key to repairing Pentagon ledgers

Improving oversight and administration of defense contracts is the key to victory in Pentagon financial managers’ struggle to meet a 2017 deadline for auditable books, a Defense Department deputy inspector general official said Friday.

“From the contract officer level to the contract officer on the ground, the more improvement in regulation and oversight of contracts, the more we will know about how we are spending the taxpayers’ money,” Daniel Blair, deputy inspector general for auditing at Defense, told lawmakers.

Members of the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management heard testimony from three financial management specialists discussing the 14-year-plus effort to integrate some 2,200 separate Pentagon business systems — handling $2 billion to $3 billion in transactions daily — to achieve auditability and to get Defense accounting systems off the Government Accountability Office’s high-risk list.

In the military, “we say we saved the world in two or four years, but we can’t get our books straight in six years,” said Rep. Todd Platts, R-Pa., chairman of the subcommittee. “These are not sexy, glamorous or exciting hearings, but it’s important to find out how the American people’s money is being handled.”

Defense Secretary Leon Panetta on Thursday reiterated his position that book-keeping problems must be solved quickly.

Of the 14 Defense entities that are required to prepare annual financial statements, only two have achieved an unqualified opinion, said Blair, the two being the Military Retirement Fund and the Army Corps of Engineers Civil Works. In the push to meet the 2017 deadline, which involves standing up new systems that cost $9 billion, some milestones have already begun to slip, he said.

Mark Easton, the Pentagon’s deputy chief financial officer, said the right resources and leaders are in place, particularly at the local levels, to “ensure a world-class management system.” But, he said, “enormous fundamental changes” are still needed.

In information technology, for example, “many of our business IT systems are old, functionally stovepiped, and were originally designed to capture financial transactions to conduct basic budgetary accounting,” Easton said. To address these problems, “we are reorienting the DoD around end-to-end business processes that support audit goals, implement enterprise resource planning systems, leverage those investments to the maximum extent practicable, modernize legacy systems when necessary and supported by a business case, and also aggressively sunset legacy systems that are obsolete, redundant, or not aligned with our business objectives.”

The enterprise resource planning systems, which are part of a broader two-year-old effort known as the Financial Improvement and Audit Readiness plan, are encouraging, but “weaknesses are pervasive,” said Asif Khan, director of financial management and assurance at GAO. “Compliance by 2017 could be in jeopardy if the ERPs don’t work,” he said, stressing the need for training of employees in technically complex audit practices.

The witnesses agreed on the need to improve data reliability and internal controls to reduce improper payments to contractors, ideally preventing them in advance rather than seeking to recover funds already paid out. “There’s a learning process,” Blair said.

Easton cited a need to reduce the number of systems that have evolved over the years and increase standardization to create an enterprisewide “holistic framework.” He likened the Pentagon’s experience to that of Henry Ford, “who at first managed his company all out of his own pocket, but then had to become a multinational corporation.”

— by Charles S. Clark – Government Executive – September 23, 2011 at http://www.govexec.com/story_page.cfm?articleid=48882&dcn=e_gvet

September 9, 2011 By AMK

Daniel Gordon: ‘Progress on Wartime Contracting’

This commentary originally appeared as a blog post on The White House’s Office of Management & Budget web site.

When the Administration took office, it was clear to us that for too long there was not adequate oversight of contractors, leading to wasted taxpayer dollars, repeated delivery delays, and unacceptable contractor performance. Nowhere has this been more apparent than in wartime contracting during the last decade. That’s why this Administration has focused on cutting waste in contracting, boosting oversight, and strengthening accountability of contractors. And more broadly, earlier this summer the White House launched the Campaign to Cut Waste, a government-wide drive to crack down on fraud, waste, and abuse.

On August 31, the Commission on Wartime Contracting released a report on these challenges. We welcome the report and commend the Commission for shining a spotlight on waste in contracting, on the need to strengthen the contracting function at agencies, on the value of increasing competition in contracting, and on the importance of holding contractors accountable for their performance.

The Administration already has made significant progress addressing each of the issues raised in the Commission’s report, in many cases reversing more than a decade of problems. Whether it is reducing improper payments to contractors and grantees, closing down redundant data centers, or cracking down on nonperforming contractors, we cannot tolerate the wasting of hard-earned taxpayer dollars.

There is a lot in the report, and I want to highlight the main issues raised in it and how the Administration is working on them.

Cutting Waste and Reducing Overreliance on Contractors:

On March 4, 2009, the President issued the Memorandum on Government Contracting, which called attention to the rapid growth in contracting spending, and raised concerns about contracts awarded without adequate competition. The memorandum also addressed issues with contractors performing functions that should be performed by public-sector employees. Agency efforts to reduce waste and demonstrate fiscal discipline are producing results. We cut contracting spending for the first time in 13 years in fiscal year 2010; agencies spent nearly $80 billion less than they would have if contract spending continued to grow at the same rate it had under the prior Administration.

Expanding Competition and Strengthening Contract Management and Oversight:

Over the past two years, significant progress has been made in reducing the use of high-risk contracting methods – including cutting $5 billion in spending on so-called “no bid contracts” last year. Consistent with the Commission’s recommendations, the Administration is strengthening the acquisition workforce by increasing training and certification requirements for those with a key role in oversight of contractors, including those working in Iraq and Afghanistan. The Department of Defense has made improving the defense acquisition system a top priority, and is tracking metrics on cost overruns, schedule delays, competition, the acquisition workforce, and acquisition employee training certifications.

Strengthening the Suspension and Debarment Process for Bad Actors and Improving Contractor Accountability:

Where there are bad actors in the contracting community, agencies have increased their use of suspension and debarment and other tools to deal with irresponsible contractors, consistent with the Commission’s recommendations. For example, in the last 18 months alone, USAID has taken more than 40 suspension or debarment actions – almost double the number of actions taken in the prior seven years combined. OMB has worked closely with the Interagency Suspension and Debarment Committee (ISDC) to review current agency suspension and debarment practices and to identify opportunities where these practices can be strengthened.

The Commission’s report recommends improving the recording and use of contractor performance data, so that contracting officers have ready access to useful information about vendors’ past performance, and can take this information into account in decisions to award contracts. This Administration has made unprecedented progress in improving the collection of contractor performance data and in making this information publicly available, as part of our commitment to transparency.

For the first time, contractor performance data is posted online to help ensure that the government does business with reputable companies. Data is now available on suspensions and debarments, terminations, and criminal activities of contractors. Data on where contractor dollars are being spent is now posted on http://www.usaspending.gov/ – including down to the sub contract or sub award level for the first time this year. Finally, the Office of Federal Procurement Policy issued guidance to agencies to enter meaningful assessments of contractor performance into a central database to ensure that the government awards to vendors that can perform.

Our agreement with the broad contours of the Commission’s report and with many of the specific recommendations does not, of course, mean that we agree with all details of the Commission’s recommendations, but we welcome the focus the report brings to the need to continue improving contracting. We simply cannot afford to continue to tolerate the waste of taxpayer dollars that we saw in the past. We look forward to continuing to work with Congress and all concerned citizens in addressing the Commission’s legislative recommendations, as we continue to make strides toward boosting accountability and cutting waste in contracting.

Daniel Gordon is Administrator of OMB’s Office of Federal Procurement Policy.

June 17, 2011 By AMK

All agencies looped into Campaign to Cut Government Waste

Vice President Biden on Monday announced the launch of a Campaign to Cut Government Waste, creating an oversight board modeled on the Recovery Accountability and Transparency Board, which used a central website to track federal stimulus money.

The head of the new board will be former Interior Department Inspector General Earl Devaney, who has been chairing the Recovery Board.

Joined at a press conference in the Executive Office Building by Office of Management and Budget Director Jack Lew, Biden said, “The American people have lost confidence over the years in the ability of government to deliver” on spending money with minimal fraud and abuse. “The fundamental rationale for this campaign is to regain that public trust.” It means requiring every agency to focus on “transparency and accountability” by putting the spending on websites to involve the public and create “hundreds of thousands of inspectors general,” Lew said.

Also on Monday, the White House released details on the campaign to “hunt down and eliminate misspent funds” in the form of an executive order titled Delivering an Efficient, Effective and Accountable Government.

Building on what Biden called the “success story” of the Recovery Act’s “unprecedented transparency to drive accountability and prevent fraud,” the order signed Monday by President Obama creates the 11-member Oversight and Accountability Board to “replicate” the Recovery Board’s work across government, using existing government employees. Working with Devaney will be agency inspectors general, chief financial officers or deputy secretaries, an official from the Office of Management and Budget, and other members the president may name.

The order commits each Cabinet member to track progress and report monthly during meetings with the vice president. It also requires chief operating and financial officers to report progress regularly to OMB.

In addition, the initiative will target duplicative federal websites, calling for an immediate halt to the creation of new sites and working with agencies to shut down 25 percent of some 2,000 sites over the next few months.

“We’re going to hit every corner and track every dollar,” Biden said, while “institutionalizing” the anti-waste campaign as “part of a new culture.”

Republicans on Capitol Hill may be on roughly the same page. House Oversight Committee Chairman Darrell Issa, R-Calif., who unveiled legislation to create a similar oversight board just hours before Biden’s announcement, issued the following statement: “The American people have a right to know how their money is being spent. There is common ground and bipartisan support for legislation to increase transparency and openness in all federal spending because the problem we face is not a partisan one, it is a bureaucratic one,” he said. “The bureaucracy is resistant to change.”

Issa said he looks forward to working with the Obama administration to curb waste and improve transparency.

Federal Chief Performance Officer Jeffrey Zients, in a conference call with reporters, said he had not had time to study the Issa bill. But he said, “The train that left the station two years ago with the president and the vice president driving it, which led to an unprecedented low level of fraud in spending under the Recovery Act, is headed, lots of people feel, in a good direction. We look forward to working with Issa and others in both houses of Congress to take the best practices from this earlier effort.”

Though many Republicans argue that the 2009 stimulus package failed because the unemployment rate remains high, Lew praised it as a model for making the entire government more transparent and accountable. “When President Obama came in 2009, our two goals were stopping the economy’s free-fall and changing how Washington does business, to make it more transparent and accountable,” Lew said. That’s why the president appointed Vice President Biden, who calls himself the new “sheriff” in the battle against waste, “because he has experience as a guardian of taxpayer’s needs.”

Lew and Biden detailed administration progress in reducing no-bid contracts, cutting improper payments and disposing of unneeded real estate. The same day the Campaign to Cut Government Waste was launched, the White House issued a new summary of the Accountable Government Initiative led over the past two years by Lew and Zients. It talks of cutting federal contracting for the first time in 13 years, identifying $3 billion in information technology savings and shutting down duplicative data centers.

Other potential efficiencies it cites are leveraging large-scale purchasing power in office supplies (which could save up to $200 million over the next four years) and pooling cellphone plans (which could save more than $180 million over six years.)

Biden on Monday credited Devaney as his “point man, without whom I don’t think we would have accomplished all this to make government work better.” He said Devaney’s work tracking spending at the Recovery Board “set the standard for transparency and accountability and comes with a high bar.” Of $480 billion spent on the stimulus, less than $3 million turned out to be fraud, Biden said. “It shifted the paradigm.”

Biden’s expects the Campaign to Cut Government Waste will replicate governmentwide the “post-modern technology” and “sophisticated tools” that Devaney’s Recovery Board set up to track funding, based on consultations with the FBI, the CIA, the Defense Department and the Homeland Security Department. Websites will allow local citizens to track each item of spending, explore whether designated projects are actually getting built and report any items that appear suspicious.

An example of the technology Biden noted was the time a monitor in the Recovery Board’s “war room” went on Google maps and found that a stimulus money recipient who was said to be running five corporations was in fact operating out of a boat off the Florida Keys.

“I asked Earl when he discovers waste and fraud, that he tell me so I can announce it and help the public regain confidence,” Biden said.

One apparent difference between the administration’s plan and Issa’s is that the board envisioned by the congressman would include a Senate-confirmed head.

Under Issa’s plan, a single new website would replace Recovery.gov and USAspending.gov, which tracks standard government spending. The information on the site would come both from the federal agencies that spend the money and from recipients of federal funds who will be required to report those receipts in a standardized form.

Both the Issa and Biden plans appear to draw from a proposal Devaney made in a not-yet-public memo he recently sent to Biden. Devaney described the proposal in an interview last week with the Center for Public Integrity’s iWatch News service.

Devaney is slated to testify about that plan before Issa’s committee on Tuesday.

In promoting the campaign on Monday, Biden said that while the effort won’t fully solve the federal debt problem, it is important to “change the attitude of how we do business in Washington. We plan to create the most transparent and efficient federal government in our lifetime.”

— by Charles S. Clark – NextGov – 6/13/2011 – at http://www.nextgov.com/nextgov/ng_20110613_8013.php?oref=rss?zone=NGtoday

December 27, 2010 By AMK

Government can’t account for billions spent In Afghanistan

In its bid to win the hearts and minds of Afghanistan’s teeming population, the United States has spent more than $55 billion to rebuild and bolster the war-ravaged country.

That money was meant to cover everything from the construction of government buildings and economic development projects to the salaries of U.S. government employees working closely with Afghans.

Yet no one can say with any authority or precision how that money was spent and who profited from it. Most of the funds were funneled to a vast array of U.S. and foreign contractors. But according to a recent audit by the Special Inspector General for Afghanistan Reconstruction (SIGAR), there is no way of knowing whether the money went for the intended purposes.

“The audit shows that navigating the confusing labyrinth of government contracting is difficult, at best,” SIGAR said in releasing the audit. “USAID, the State Department and the Pentagon are unable to readily report on how much money they spend on contracting for reconstruction activities in Afghanistan.”

One large part of the problem is that the United States is not demanding accountability for outgoing funds from U.S. companies which have little incentive to fully disclose where the U.S. money is going. Add to this the many Afghan companies that have minimal accounting capabilities and you have a recipe for a massive misappropriation of funds. The money flows from Washington to Afghanistan, with little oversight and accountability, and at every step along the way someone else takes a cut.

“There’s no mechanism to track where this money is going,” said Scott Amey, general counsel for the Project on Government Oversight, an independent, nonprofit group that investigates government corruption. “Security problems persist and this money doesn’t seem to be accomplishing a real mission.”

As staggering amounts of U.S. tax dollars virtually vanish down a black hole, many of the government projects designed to foster improved relations with the Afghan people and undermine the appeal of the Taliban have fallen far behind schedule or simply aren’t completed. In October, SIGAR found that six Afghan National Police buildings were so poorly built that they are unusable. They were constructed at a cost of $5 million by Basirat Construction, an Afghan construction company.

Another report found that the United States has spent nearly $200 million on Afghan security service buildings that cannot be used. SIGAR also found that the U.S. Agency for International Development (USAID) couldn’t account for nearly $18 billion that was paid to some 7,000 U.S. and Afghan contractors for development projects. Afghan contractors often pay kickbacks to local warlords, like Ahmad Wali Karzai, the president’s brother and the so-called “King of Kandahar.” Their actions often undermine the work of the coalition.

Botched construction projects aren’t the only U.S. failures. Earlier this summer, coalition forces cleared Malajat, a longstanding Taliban stronghold in the eastern flatlands just outside of Kandahar City. But after they were forced out in September, many of the residents of Malajat remained sympathetic to the Taliban’s cause.

In an effort to project provincial and national authority and strengthen Afghan infrastructure, Canada’s Commander’s Emergency Response Program and the USAID ordered the construction of four government buildings in Malajat where local residents could meet with government officials to air grievances. The complex was meant to symbolically supplant Taliban power and influence.

In accordance with U.S. General David Petraeus’ plan to expand contracting awards to Afghan firms, Afghan companies were hired late in September. The contractors then hired Afghan subcontractors to begin construction in the shadow of a fortress built by Alexander the Great around 330 B.C.

Since then, however, little work has been done and the project has fallen behind schedule. As of early November, Afghans earning about a dollar a day had only dug holes for the foundation of the building complex, which was optimistically scheduled to be completed by July.

Work Habits, Cultural Mandates

Most Afghans do little work in the winter months. Despite numerous inquiries, U.S. and Canadian officials could not estimate the cost of the project. Gen. Ben Hodges, a former top U.S. commander in Kandahar, told The Fiscal Times that the success of the Kandahar offensive will depend in part on the United States and its allies building Afghan economic, political and security infrastructure over the winter. Projects like the Malajat government building are essential to keeping the Taliban out once the fighting season resumes next spring, especially as the U.S. strategy review has shown tenuous progress here. But there is little confidence among soldiers and development workers that this project will be completed in time.

“We can pour as much money as we want into this and it’s not getting done by the spring,” said an official with the Kandahar Provincial Reconstruction Team (KPRT), a civilian and Canadian-led organization jointly operated with the United States. “These people [Afghan contractors] have no accountability.” Thomas Ford, a spokesman for the KPRT project, said he could not reveal the identities of Afghan contractors involved because of security concerns. He also said he did “not have the exact cost figures in front of [him]”and declined to provide them. Canadian forces, along with KPRT, are scheduled to leave next summer. The United States is expected to assume sole responsibility for their projects.

Petraeus, commander of the NATO International Security Assistance Force (ISAF) and U.S. Forces Afghanistan, acknowledged in a September memorandum that the contracting process in Afghanistan has been deeply flawed for years and needed to be changed if the Afghan war is to be won.

“With proper oversight, contracting can spur economic development and support the Afghan government and NATO’s campaign objectives,” wrote Petraeus. “If, however, we spend large quantities of international contracting funds quickly and with insufficient oversight, it is likely that some of those funds will unintentionally fuel corruption, finance insurgent organizations, strengthen criminal patronage networks and undermine our efforts in Afghanistan.”

At Kandahar Airfield, a base the size of London’s Heathrow Airport located just outside of Kandahar City, contractors provide transportation, food service, sanitation and construction, among other services. According to a July 2010 Congressional Research Service report, as of last March private contractors made up 57 percent of all personnel in Afghanistan employed by the Department of Defense. “This apparently [represents] the highest recorded percentage of contractors used by DOD in any conflict in the history of the United States,” the study found.

According to the report, there were 68,197 Pentagon contractors in Afghanistan, compared with 52,300 uniformed U.S. personnel. Of the Pentagon contractors, 9,300 were U.S. citizens, 52,000 were Afghan, and 7,000 were third-country nationals. There has been a 300 percent increase in contractors since 2007, according to the Defense Contract Management Agency.

Outside of U.S. bases, Afghan firms are primarily employed due to security concerns in places like Kandahar City. As with the Malajat buildings, locals are hired for construction projects that U.S. military commanders have said are key to demonstrating Kabul’s central authority, especially in provinces reluctant to recognize Afghan President Harmid Karzai as their ruler. Afghan contractors have also been hired to help train Afghan police.

As a result of U.S. pressure, the Afghan government recently arrested American Roy Carver, CEO of Red Sea Engineers and Constructors, a company that has received $500 million in Pentagon contracts to construct buildings at U.S. bases. Carver is charged with not paying his Afghan subcontractors.

Amey, of the Project on Government Oversight, said the situation in Afghanistan mirrors the U.S. experience in Iraq: Security concerns made it difficult for foreign contractors to work on the battlefield, forcing reliance on local contractors with little accountability. It’s an endless cycle of frustration and failure.

“It seems as if there wasn’t a lessons- learned approach carrying into Afghanistan, which is not to waste federal taxpayer dollars on contracting projects like this,” Amey said in an interview with The Fiscal Times. “We can build an embassy and things can work around that, but what are we doing around the rest of country? If our money is going to security and the rest is going to impractical projects that aren’t being completed, then the government has to reevaluate the model.”

This article originally appeared on The Fiscal Times – Dec. 27, 2010.

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