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DoD procurement laws routinely broken, IG says

The U.S. military spends so much money hiring contractors that it must pay other agencies to help move the cash out the door, the acting Pentagon inspector general told senators Jan. 17.

In the process, procurement laws are routinely violated, “price reasonableness,” competitive awards and contractor oversight are abandoned, and millions of dollars are wasted, IG Thomas Gimble told the Senate Armed Services subcommittee on readiness.

The Pentagon spent $141 billion in 2005 to hire private companies to perform services for the U.S. military — everything from renting office space for counterintelligence personnel to buying armor for military vehicles.

The number of contracts involved is so enormous the Pentagon pays to more than a half dozen other agencies to help spend its money.

Four agencies alone — the General Services Administration, Interior Department, Treasury and NASA — awarded 54,022 Defense Department contracts in 2005 worth $5.4 billion. Audits of 352 of those contracts found them replete with violations, Gimble said.

“Of 131 GSA purchases and 49 Department of Interior purchases reviewed, we found only one instance where a Defense Department organization documented that using a non-DoD agency to award the contract was in the best interest of the government,” he said.

For example, the Pentagon used the Interior Department to buy $592 million in goods and services and paid Interior more than $23 million in surcharges. But the purchases “could have been routinely handled by junior DoD contracting personnel” at no extra cost to the Pentagon, Gimble said.

And “DoD often paid surcharges for GSA and the Interior Department to purchase low-cost military equipment or commercial items that could have been obtained from existing DoD contracts,” he said.

Gimble said his office examined GSA purchases made without competitive bidding and found that nearly half of the time, those purchases violated Federal Acquisition Regulations.

“GSA did not justify sole-source contracts,” he said.

The problem was even more prevalent among sole-source Interior Department contracts, he said.

And when the agencies took a stab at meeting the requirement for competition, “it was generally satisfied by obtaining a minimum of three bids by posting the solicitation on e-Buy,” Gimble said. E-Buy is a GSA web site for soliciting price quotes.

The list of other violations is long. Among them:

• The Pentagon uses other federal agencies to “bank” or “park” money that it has not spent during a given fiscal year. The money should be returned to the Treasury because authority to spend it has expired, but receiving agencies, including GSA and Interior, spend it anyway, Gimble said.

The Pentagon parked $1 billion to $2 billion at GSA and $400 million at Interior at the end of 2005, Gimble said.

• The Army used the GSA to spend $44 million worth of operations and maintenance money — money intended to pay for the Iraq war, among other things — to build two two-story office buildings at Fort Belvoir, Va. When questioned, the Army argued that “construction did not occur,” even though “no building existed at the site prior to the contract,” Gimble said.

The Army insisted use of operations and maintenance money was appropriate because the contractor was providing a service — the buildings. It was “clearly a construction project” that should have been funded through the military construction budget, Gimble said.

Gimble’s report is part of a review of “interagency contracting” that has been underway since 2004.

“We provide a lot of money for the military, and we have to hold them accountable for how they spend it,” said Sen. John Ensign, R-Nev.

But Gimble said he is unaware that anyone has been fired or otherwise held accountable for the multitude of violations he has turned up.

Sen. Daniel Akaka, D-Hawaii, the subcommittee chairman, said part of the problem is that the Defense Department’s acquisition workforce has been cut even as the amount of spending has dramatically increased.

Since the early 1990s, the department cut its acquisition workforce in half to about 150,000. But since 1996, spending on service contracts has increased from $82.3 billion to $141 billion, according to the Government Accountability Office.

Akaka said relying on other federal agencies to award Pentagon contracts may not be a good idea. Other agencies may be more focused on awarding contracts — for a 2 percent to 5 percent fee — than on getting the military what it needs, he said.

Indeed, in some instances outside agencies charged the Pentagon a fee and then used the Pentagon’s own contractor list to buy goods and services for the military, said Sen. Claire McCaskill, D-Mo.

A state auditor before she was elected to the Senate last fall, McCaskill said, “I don’t know whether to laugh or cry” over the IG report.

Quizzing Gimble about the Army office buildings built at Fort Belvoir, she asked, “Doesn’t somebody get fired?” When told probably not, she said, “If there isn’t accountability with something like that, we may as well throw in the towel.”