Fuel Fraud Latest In Army Contracting Woes

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The delivery of aviation gas to the giant U.S. air base at Bagram in Afghanistan is the latest case of fraud to hit a contracting system overwhelmed by war and practically begging to be ripped off, CBS News national security correspondent David Martin reports exclusively.

So far two former employees of Kellogg, Brown and Root have been arrested for their part in a scheme worthy of Tony Soprano.

The two KBR men, who worked for the U.S. military at Bagram, forged receipts for 80 tanker loads trucked in but never delivered, according to court documents. The Pentagon paid for the undelivered fuel while the drivers sold it on the black market. For their role in the scheme, KBR employees divvyed up an estimated $800,000 in kick backs, reports Martin.

That's just one of more than 80 criminal cases involving some $15 million in bribes. It is still a growing scandal which Pentagon officials expect will uncover hundreds of fraudulent contracts.

A new report by a blue ribbon panel is headlined, "Urgent Reform Required."

"It usually takes a crisis to make change," said Jacques Gansler, head of the panel. "We have a crisis."

The panel said the massive logistical demands of Iraq and Afghanistan exposed "key failures" in army contracting. The value of contracts awarded tripled to well over $100 billion, but the number of people managing those contracts stayed the same, Martin reports. There are currently 160,000 contractors working for the United States in the war zone but only 75 contract managers, and most of them are not trained.

"When you go over to Iraq and Kuwait you're going to see that even about 36 percent of them are certified for those jobs," said Gansler.

Investigative Unit Blog: Read more about the Bagram fuel scheme.
Untrained contract managers are one reason there is so much fraud.

"They're not trained to do it," said Gansler. "They're not used to doing it, and it's a little bit hard when somebody hands them a bag of money and says manage this - some of it might fall out."

Untrained or just plain dishonest, the fact is nearly 100 Army personnel are under criminal investigation, adds Martin.

The panel recommends adding 400 military personnel and about a thousand Army civilians and says another 600 Army staff should be assigned to the Defense Department's contract management agency to provide greater oversight of the contracts.

U.S. officials familiar with the panel's report did not say how much the additional personnel would cost. The Army's contracting work force now has just over 10,000 people, according to statistics compiled by the Defense Acquisition University at Fort Belvoir, Va.

The report calls for creating five new general officer positions within the Army's contracting work force, a move to attract talented men and women to a field most would otherwise avoid because of dim prospects for career advancement.

Citing key problem areas, the report said the Army's policies are outdated, training is lacking and a little more than half of the military and civilian contracting personnel are certified for their jobs.

Higher numbers of personnel, better quality and more clout within the Army's contracting ranks are expected to increase professionalism and decrease opportunities for misconduct as tens of billions of dollars continue to be spent on the wars in Iraq and Afghanistan, the officials said.