LOGCAP III Illustrates Why Government Contracting Can Be Prolonged

(MoneyWatch)  The U.S. Army even before the invasion of Iraq in March, 2003 utilized private contractors to provide housekeeping services. This was especially true overseas in places like Kuwait. The contracts used to provide these services were called LOGCAP. KBR a large company that did this kind of work for the U.S. government as well as private companies was chosen as the prime for LOGCAP in 2001. The company was subsequently awarded two more contracts which now last to after 2010.

The Wartime Contracting Commission established by Congress held a hearing on May 4 to discuss the problems with this contract. This Commission is similar to one set up in World War II to investigate fraud, waste and abuse by companies getting wartime contracts. At the hearing various government officials from the Army, GAO and Defense Contracting Audit Agency (DCAA) detailed issues with the performance on the contract. One key finding was that the DCAA had disallowed charges of $4.7 billion by KBR and its subcontractors.

The Army has paid about $32 billion under this contract over the last eight years as KBR has ramped up to provide major services in Iraq and Kuwait. The contract is for food, laundry, housing and support services. The Army, and the other U.S. military services, long ago gave up using organic military members to provide these due to the cost and size requirements. It was easier to hire a contractor who could then provide cooks and custodians. With the draft and a much larger Army up to the mid-Seventies you could use military personnel for this, but who would join the Army today to do laundry?

The Army was also concerned with ramping up quickly with enough capability to support a growing force in Iraq. KBR too had to rapidly generate capability. This meant hiring a group of subcontractors who were local and mainly Kuwaiti or from other Gulf States. It was certainly possible that in this hurry some layers of review were not as thorough as they should have been for both the award and for the invoices submitted by KBR.

KBR had to review those from its subcontractors and then process these to the government. It was not surprising that issues arose with billings and payments. Large contracts like this for services often have these problems. That is why there is a review and audit process that may lead to the return of money to the government. While there have been a substantial amount of accusations and complaints about the contract the size, the amount of companies and individuals involved this is not surprising.

The issue is that normal contracting procedures would have meant a lengthy bid and review process. Also KBR was about the only company at that time who could have done the work so this limited competition. Using standard practices would have meant that the necessary services would not have been available. While government rules allow for flexibility and speed the second guessing, investigations and audits may lead a contracting officer to err on the side of caution leading to longer award process and greater costs in the end. This looking-over-the-shoulder cautious approaches often is a reason acquisition programs are very long. Length often equals cost in the world of government contracting.