The Contracting Education Academy

Contracting Academy Logo
  • Home
  • Training & Education
  • Services
  • Contact Us
You are here: Home / Archives for foreign-based

December 12, 2019 By cs

GAO says DoD’s fraud assessment efforts should include examination of contractor ownership

Some companies doing business with the Defense Department have opaque ownership structures that may conceal who owns, controls, or benefits from the company.
This GAO illustration depicts how DoD’s use of an ineligible foreign manufacturer — that illegally exported sensitive military data and provided defective and nonconforming parts — led to the grounding of at least 47 U.S. fighter aircraft.

The Government Accountability Office (GAO) recently  identified fraud and national security risks to DoD from opaque ownership such as ineligible contractors receiving contracts and foreign firms receiving sensitive information through U.S.-based companies.

These risks, identified through GAO’s review of 32 adjudicated cases, include price inflation through multiple companies owned by the same entity to falsely create the appearance of competition, contractors receiving contracts they were not eligible to receive, and a foreign manufacturer receiving sensitive information or producing faulty equipment through a U.S.-based company.

For example, one case involved an ineligible foreign manufacturer that illegally exported sensitive military data and provided defective and nonconforming parts that led to the grounding of at least 47 fighter aircraft.

The GAO reports that DoD has taken some steps that could address some of the risks related to contractor ownership in the procurement process but has not yet assessed these risks across the department.  DoD, in coordination with other agencies, revised the Federal Acquisition Regulation (FAR) in 2014 to require contractors to self-report some ownership information.  In addition, DoD has taken steps to identify and use ownership information — for example, as part of its supply-chain risk analysis when acquiring critical components. DoD has also begun a department-wide fraud risk management program but, according to GAO, it has neither assessed risks of contractor ownership across the department nor identified risks posed by contractor ownership as a specific area for assessment.

GAO contends that assessing risks arising from contractor ownership would allow DoD to take a strategic approach to identifying and managing these risks, make informed decisions on how to best use its resources, and evaluate its existing control activities to ensure they effectively respond to these risks.

Keep reading this GAO report summary at: https://www.gao.gov/products/GAO-20-106#summary

Filed Under: Government Contracting News Tagged With: DoD, FAR, foreign manufacturer, foreign-based, fraud, fraud risk management program, GAO, ownership and control, risk, risk assessment

December 10, 2019 By cs

A new rule could allow Commerce secretary to ban certain tech buys

A proposed rule will allow a government department’s secretary to block the purchase of foreign technology that pose an “undue” risk to the U.S. information and communications infrastructure.

The rule, published by the Department of Commerce Nov. 26, establishes procedures for Commerce Secretary Wilbur Ross to “identify, assess, and address” information and communication technology (ICT) transactions he deems risky to national security.

The proposed rule stems from an executive order President Donald Trump signed on May 15, which gave the secretary the authority to prohibit or mitigate transactions that involve ICT technology developed or supplied by entities located in adversarial nations.

Transactions will be reviewed on a case-by-case basis, and the secretary will take a “fact-specific approach” to evaluation, according to the Commerce Department announcement.

Specifically, transactions will be blocked or mitigated if they are found to have an “an undue risk of sabotage or subversion ICTS in the United States; an undue risk of catastrophic effects on the security and resiliency of critical infrastructure or the digital economy in the United States; or an unacceptable risk to national security or to the security and safety of U.S. persons.”

Keep reading this article at: https://www.fifthdomain.com/civilian/2019/11/26/a-new-rule-could-allow-one-department-secretary-to-ban-certain-tech-buys/

Filed Under: Government Contracting News Tagged With: Commerce Dept., communication technology, foreign acquisition, foreign-based, information technology, national security, sabotage

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.

Filed Under: Government Contracting News Tagged With: accountability, DoD, foreign-based

December 21, 2010 By AMK

Senate bill would impose 2% fee on some federal contracts

A Senate proposal to apply a 2% fee to certain foreign-based U.S. government contractors could affect Gulf state oil companies that sell fuel to the U.S. military, as well as Chinese and Indian companies. 

The proposal is part of legislation from Sens. Charles Schumer and Kirsten Gillibrand, both New York Democrats, that would compensate rescue workers who responded to the Sept. 11, 2001, attacks, and their families. Some of those workers died or have suffered illness related to their rescue efforts.

The bill has met with opposition from Republicans about the size of the compensation fund, which some Republicans argue is too large, and the 2% procurement fee.

Senate Majority Leader Harry Reid (D., Nev.) planned to bring the bill up for a procedural vote as early as Tuesday, a spokeswoman said. It is unclear whether the measure has support from 60 senators, the number needed to overcome procedural hurdles.

The fee would apply to contracts for goods or services provided in countries that are not members of the World Trade Organization’s government procurement pact — a list that includes Brazil, China, India, Iraq, Saudi Arabia, Kuwait, Qatar and others.

Such contracts total as much as $35 billion to $40 billion per year, according to a fact sheet released by Schumer. The 2% fee would raise $4.5 billion over 10 years to partially offset the cost of the Sept. 11 rescue workers fund.

Many of the largest foreign-based federal contractors — such as UK-based Rolls Royce Plc (RYCEY, RR.LN) and Italy’s Finmeccanica (FNC.MI) — would not be affected because they are located in jurisdictions that are members of the WTO government procurement deal.

In part because of domestic sourcing requirements for U.S. military apparel and supplies, Chinese and Indian companies are not a major player in the federal contracting arena. But passage of the bill could nonetheless ruffle feathers abroad at a time when U.S. firms are trying to win inroads into the Chinese procurement market.

U.S. business groups warned Tuesday the proposed fee could prompt China, India and others to retaliate with their own restrictions on government contracts.

“As a result, there would more than likely be net loss for U.S. exports, U.S. companies and U.S. jobs if this provision became a model for foreign governments,” wrote the groups, including the Emergency Committee for American Trade, the National Foreign Trade Council, and the Organization For International Investment.

The U.S. and Western trading partners have put pressure on China to join the WTO government procurement deal, but have rejected recent Chinese proposals as inadequate. Unlike most WTO rules, WTO members have the option to join the procurement pact or not.

Sen. Tom Coburn (R., Okla.) planned to try to block the Schumer Sept. 11 rescue workers’ bill, according to an aide. Coburn wants the bill to be funded by spending cuts, and wants to send the bill to committee for further review.

– By Martin Vaughan, Dow Jones Newswires; 12/21/2010; Danny Yadron contributed to this article.

Filed Under: Government Contracting News Tagged With: foreign-based

Popular Topics

abuse acquisition reform acquisition strategy acquisition training acquisition workforce Air Force Army AT&L bid protest budget budget cuts competition cybersecurity DAU DFARS DHS DoD DOJ FAR fraud GAO Georgia Tech GSA GSA Schedule GSA Schedules IG industrial base information technology innovation IT Justice Dept. Navy NDAA OFPP OMB OTA Pentagon procurement reform protest SBA sequestration small business spending technology VA
Contracting Academy Logo
75 Fifth Street, NW, Suite 300
Atlanta, GA 30308
info@ContractingAcademy.gatech.edu
Phone: 404-894-6109
Fax: 404-410-6885

RSS Twitter

Search this Website

Copyright © 2023 · Georgia Tech - Enterprise Innovation Institute