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A Pentagon contractor’s 9,400% profit on a half-inch metal pin is challenged

As the Pentagon weighs whether to recommend legislation to require more disclosure by contractors, the House Committee on Oversight and Reform will review the audit and TransDigm’s pricing policies in a hearing on Wednesday.

The inspector general’s report “exposes how a company entrusted with supporting our military men and women took advantage of American taxpayers by overcharging the government more than $16 million” in parts sales sold between 2015 and 2017, Oversight Chairman Elijah Cummings said in a statement. The hearing will “investigate whether these pricing issues are more widespread, and demand answers,” he said.

From 2013 through 2015, according to the audit, the contractor increased the price of a valve that opens and closes to change the pressure of fuel moving through an engine to $9,801 from $543. In those years, TransDigm also charged $1,443 each for a “non-vehicular clutch disk” that cost $32 to make.

Planes, Copters

The Pentagon’s inspector general first raised pricing concerns over TransDigm in a 2006 report, followed by the one this year that was released in redacted form in February.

TransDigm manufactures spare parts for airplanes and helicopters including the AH-64 Apache, C-17 Globemaster III, F-16 Fighting Falcon and the CH-47 Chinook. From April 2012 through January 2017, DOD issued 4,942 contracts valued at $471 million to TransDigm.

Liza Sabol, a spokeswoman for the Cleveland-based company, said in an email “that we are not providing comments on specific questions related to the IG report.”

Keep reading article at: http://amp.timeinc.net/fortune/2019/05/14/transdigm-pentagon-costs

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Oversight of U.S. military’s food suppliers called into question after fraud indictment

Executives from a company responsible for providing food and water for deployed U.S. troops in Afghanistan have been charged with defrauding the government and creating a fake construction site to overstate progress on an $8 billion contract, the Justice Department said in a recently filed indictment.

The allegations came four years after the company’s predecessor pleaded guilty to criminal charges that it inflated prices for basic items that it sold to the U.S. military. Both cases emphasize how the U.S. military has struggled to curb abuses of U.S. defense spending in America’s longest-running foreign war as the U.S. military presence in Afghanistan enters its 17th year, analysts said.

On Nov. 27, the Justice Department charged Abdul Huda Farouki, Mazen Farouki and Salah Maarouf — three Virginia residents who worked with a Dubai-based company called Anham Fzco — with defrauding the U.S. military under an estimated $8 billion military supply contract.

Keep reading this article at: https://www.washingtonpost.com/business/2018/12/08/oversight-us-militarys-food-suppliers-called-into-question-after-fraud-indictment/

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3 big problems continue to dog federal procurement

Congress and the executive branch have worked for years to improve the quality of and reduce costs for federal acquisition, but some problems continue to hamper many agencies, according to a Sept. 12 Government Accountability Office report.

“Acquisition reform has been on everyone’s agenda for many, many years, decades. There have been proposals in the Congress, there has been changes to the regulations. This has been a very, very active area for a long time,” said Bill Woods, director on the Contracting and National Security Acquisitions Team at GAO, in an agency podcast.

The report evaluated federal agency acquisition improvements against 89 recommendations made by the Acquisition Advisory Panel in 2007 and divided the areas of improvement into three “buckets” that represent the acquisition life cycle: requirements and definitions; competition and pricing; and contractor oversight.

“One is in the requirements, definition process of actually deciding.  What is it does the agency want?  What does it need, and what’s the best way of getting what we need?” said Woods.

Keep reading this article at: https://www.federaltimes.com/acquisition/2018/09/17/3-big-problems-continue-to-dog-federal-procurement/

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GAO acknowledges progress in federal acquisition by Congress and Executive branch, but says ‘challenges endure’

Congress established an Acquisition Advisory Panel to review federal acquisition laws, regulations, and policies — and identify opportunities for improvement.  The Government Accountability Office (GAO) just issued an assessment of the progress made since the Panel’s 2007 report.

Here’s what GAO found:

Congress and the executive branch have taken numerous actions to address key issues the Acquisition Advisory Panel identified in its 2007 report, but these actions have not eliminated some enduring challenges. The figure below presents the key issues the Panel addressed in relation to the life cycle of a typical contract as identified by GAO:

Three of the key issues, and the corresponding challenges, align with specific phases in the contracting life cycle:

  • Requirements Definition: The Panel found that fully identifying requirements before a contract is awarded is key to achieving the benefits of competition. GAO has found that unrealistic requirements have contributed to poor program outcomes at the Department of Defense (DoD), and that the Army’s requirements development workforce decreased by 22 percent from 2008 to 2017.
  • Competition and Pricing: The Panel said that competition can help reduce prices. GAO’s work shows that competition rates have remained steady government-wide, and declined at DOD. See figure below.

GAO also found that agencies are sometimes using bridge contracts — which GAO has generally defined as either extensions to existing contracts or new short-term, sole-source contracts — to avoid a lapse in service caused by delay of a follow-on contract award.   In some instances, bridge contract awards delay opportunities for competition and can place the government at risk of paying higher prices for multiple years.  The figure below depicts how an Army bridge contract for computer support services planned for 12 months was extended to 42 months.

Further, GAO’s work shows that agencies have not fully embraced initiatives and techniques intended to reduce the prices they pay, including consolidated purchasing approaches and robust market research.

  • Contractor Oversight: The Panel raised questions about the capacity of federal agencies to oversee contractors.  GAO found that agencies continue to award contracts warranting increased management attention at a steady rate, such as contracts for management support services. With contracts like those for management support services, there is an increased risk that contractors may perform tasks reserved for the government.  Additionally, GAO found that heavy workloads at the Department of Veterans Affairs have made it difficult for officials who oversee contractors to ensure contractors adhere to contract terms.

Three of the key issues, and the corresponding challenges, cut across all the phases of the contracting life cycle:

  • Acquisition Workforce: The Panel found that the federal acquisition workforce faces workload and training challenges. GAO’s work has shown that DoD has enhanced its workforce, but some workforce gaps endure at DoD and across agencies.
  • Federal Procurement Data: The Panel found that the government’s primary repository for acquisition data contained some unreliable data.  Also, GAO found that the system has demonstrated limitations. For example, guidance from the Office of Management Budget (OMB) required that agencies collect specific contract award data, but the system did not have the capability to do so.
  • Small Business Participation: The Panel found a number of challenges hindering agencies’ efforts to meet small business goals. GAO found small business participation has increased, but many agencies are not in full compliance with requirements governing Offices of Small and Disadvantaged Business Utilization (OSDBUs). For example, the directors of these offices should report directly to agency heads or their deputies, but not all agencies have established this type of direct reporting relationship.
What GAO Recommends

GAO did not make any new recommendations in its Sept. 12, 2018 assessment, but it has made numerous recommendations in the past.   Federal agencies have agreed with many of GAO’s recommendations, and have implemented some of them, but not others.  For example, GAO has previously made the following recommendations.

  • The Army should assess the resources needed for the requirements development process. The Army agreed, but it has not yet done so.
  • OMB should provide guidance for agencies to manage bridge contracts. OMB agreed and has drafted management guidance but has not yet finalized it.
  • Certain federal agencies should take steps to document how they conduct market research. The agencies agreed and did so.
  • The Department of Veterans Affairs should develop tools to help oversee contracts. The department agreed and did so.
  • DOD should have issued an updated acquisition workforce plan in fiscal year 2016. DOD agreed and issued the plan.
  • OMB should take steps to improve how agencies collect certain procurement data. OMB generally agreed, but has not yet addressed the recommendation.
  • Certain federal agencies should take steps to comply with OSDBU-related requirements. Most agencies that provided comments agreed or partially agreed. Two agencies — the National Aeronautics and Space Administration, and the U.S. Agency for International Development — have addressed the recommendations.

It its latest report, GAO reiterates its belief that all agencies should implement all of these recommendations.

See the GAO’s full report here: https://www.gao.gov/assets/700/694457.pdf

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Pentagon’s contracting gurus mismanaged their own contracts

The Pentagon’s contracting gurus repeatedly made massive, preventable mistakes while managing contracts for a critical software project of their own, violating federal budget law along the way, according to scathing internal reports and other records obtained by the Project On Government Oversight (POGO).

Ironically, the purpose of the mismanaged system is to help manage the rest of the Pentagon’s contracts.

The Pentagon relies on the obscure Defense Contract Management Agency (DCMA) to negotiate and administer $5 trillion in contracts across the Defense Department as an average of $455 million in taxpayer dollars are paid out each day to contractors. How well that agency does its job directly affects both how wisely taxpayer dollars are spent and whether our troops get what they need when they need it. Yet the cascading series of major, systemic failures within the agency, which has nearly 12,000 employees and an annual budget of roughly $1.5 billion, led an independent investigator from the Army to go so far as to recommend that it be prohibited from awarding its own contracts in the future.

Documents obtained by POGO — including a September 2017 preliminary investigative report, an April 2018 internal memo, and a draft of the final report from this summer — show that over the course of several years, the agency mismanaged contracts for the software project. The agency spent far more than it was authorized to spend, violated numerous policies and regulations, and received insufficient oversight from the Pentagon. When these documents are viewed alongside Defense Department watchdog findings from recent years, there appears to be an agency-wide pattern of failing to adequately support the Pentagon’s procurement efforts and sufficiently protect the taxpayer — the agency’s very mission.

Keep reading this article at: http://www.pogo.org/our-work/articles/2018/pentagons-contracting-gurus-mismanaged-their-own-contracts.html

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