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article imageWartime fraud costing American taxpayers 'tens of billions'

By Lynn Herrmann     Mar 4, 2011 in Politics
Washington - A new report shows the US government’s unprecedented use of contractors in Iraq and Afghanistan has allowed them to commit fraud and then get rehired, over and over, letting them continue profiting from a lack of government oversight.
The Commission on Wartime Contracting in Iraq and Afghanistan has released its second interim report to Congress, At What Risk? Correcting over-reliance on contractors in contingency operations (pdf), and notes the various forms of contract waste, fraud and abuse, including ill-conceived projects, poor planning and oversight by the US government, and criminal behavior and blatant corruption.
The Commission report notes contractors account for fully half of US contingency operations in the two military efforts and almost $200 billion in contracts and grants have been awarded since October 2001. Because of government neglect, the resulting waste, fraud and abuse is costing taxpayers “tens of billions” of dollars.
Those contract and grant obligations are equivalent to $407 million per Congressional district, or more than $1,500 per US household, numbers that are a small fraction of the overall costs associated with the two occupations.
Referencing the Special Inspector General for Afghanistan Reconstruction (SIGAR) warning in January, the Commission noted
that the entire $11.4 billion for contracts to build nearly 900 facilities for the Afghan National Security Forces is at risk due to inadequate planning. This estimate does not include the waste that has resulted from the host country’s inability to sustain projects.
At What Risk? denounced a slow-reacting government over its ability to make necessary changes and calls for “sweeping reforms”
Various agencies involved in contractor oversight share oversight responsibility, yet their differing management styles and limited resources have helped sustain the prevalent contractor abuse, waste and fraud.
The Commission notes that the Association of Certified Fraud Examiners has estimated 7 percent of revenue is lost to fraud alone. Applied to the contingency and grants funding, the cost associated with the US government’s lack of oversight could be as high as $12 billion, just for fraud.
Many observers believe that waste accounts for substantially greater sums than fraud and abuse. Whether the waste is caused by poor requirements definition and bad management by government or by contractor misbehavior, adding an allowance for waste to the fraud estimate indicates to the Commission that tens of billions of taxpayers’ dollars have failed to achieve their intended use in Iraq and Afghanistan.
Reliance on private contractors in the two occupations has escalated since President Barack Obama took office. The nonprofit watchdog group Project on Government Oversight’s (POGO) general counsel, Scott Amey, testified at the Commission’s hearing late last month that “contract award dollars have increased from approximately $200 billion in fiscal year 2000 to over $535 billion in fiscal year 2010,” according to Huffington Post. That staggering increase comes when “contract administration and oversight have decreased because the acquisition workforce is stretched thin,” he added.
Among the frauds being conducted at taxpayer expense that some contractors have pleaded guilty to or have been convicted of are theft of government property, money laundering, bribe solicitation, kickbacks, and false invoicing, with scores of additional cases still being conducted.
Contractors overseeing contractors, contractor management performance, lack of budget restrictions, organizational failure based on lack of knowledge, and lack of competitive contracting practices are other issues raised by the Commission.
The report notes government agencies have repeatedly awarded contracts lasting five years or longer, extended contracts past specified expiration dates, added extensive new work to existing contracts, and used cost-reimbursable contracts rather than fixed-price contracts to increase the competition pool.
Another taxpayer dollar concern raised in the report includes the lack of contractor accountability. The US government has awarded contracts to
contractors that have questionable business practices, employ inadequate business systems, or fail to provide access to internal information that is important for efficient audit and oversight.
Deferred-prosecution and non-prosecution agreements have been reached with various agencies and fraudulent contractors and the Commission calls for using contractors capable of performing job descriptions and those who maintain “acceptable standards of behavior.”
Fitting into the At What Risk? report on fraud, waste, and abuse is a statement by Lt. Gen. William Caldwell last June, in a memo to US CENTCOM command:
The responsiveness required to rapidly generate and sustain the Afghan Army and Police is lagging. The shortage of acquisition specialists leads to mistakes and delays, creating vulnerabilities in an already high-risk environment. Given that the magnitude of funding for the Afghan Security Forces Fund continues to increase at the same time that contracting demand from U.S. Forces is increasing, there is an urgent requirement for additional acquisition specialists.
Caldwell has recently made headlines when it was discovered his command had authorized a psy-ops cell to conduct background information on US senators and VIPs visiting Afghanistan, in order for applying pressure points to them for delivering more troops and funding for his role in the Afghan occupation.
Among the many recommendations the report calls for is the increased use of suspensions and debarments, conditional consent to US civil jurisdiction by contractors before contract awards, establishing a permanent organization to investigate international contract corruption, expanding the powers of the inspectors general, and broader government access to contractor records by amending access-to-records authority.
The Commission report comes at a time when Obama’s budget proposal targets America’s poor and state governors are targeting various labor groups, including teachers and labor groups, looking for ways to cut an out-of-control US deficit.
The Commission’s first interim report to Congress was filed in June 2009 and has also presented three special reports. Its final report will be filed with Congress in July 2011.
More about wartime fraud, fraudulent contractors, Iraq war, afghanistan occupation, Fraud
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