Panel: Widespread waste and fraud in war spending

Associated Press
Sen. Jim Webb, D-Va., accompanied by the congressionally chartered Commission on Wartime Contracting in Iraq and Afghanistan Co-Chairs Michael Thibault, left, and former Connecticut Rep. Christopher Shays, right, gestures during the commission’s  news conference on Capitol Hill in Washington, Wednesday, Aug. 31, 2011, to present a final report that summarizes more than two and a half years' work on waste and fraud in contracting.  Commission member Charles Tiefer is second from left. (AP Photo/Manuel Balce Ceneta)
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WASHINGTON (AP) — The U.S. has lost billions of dollars to waste and fraud in Iraq and Afghanistan and stands to repeat that in future wars without big changes in how the government awards and manages contracts for battlefield support and reconstruction projects, independent investigators said Wednesday.

The Wartime Contracting Commission urged Congress and the Obama administration to quickly put in place its recommendations to overhaul the contracting process and increase accountability. The commission even suggested that the joint House-Senate debt reduction committee take a close look at the proposals.

"What you're asking for is more of the same," said Dov Zakheim, a commission member and the Pentagon comptroller during President George W. Bush's first term. "More waste. More fraud. More abuse."

The bipartisan commission, created by Congress in 2008, estimated that at least $31 billion and as much as $60 billion has been lost in Iraq and Afghanistan over the past decade due to lax oversight of contractors, poor planning, inadequate competition and corruption. "I personally believe that the number is much, much closer to $60 billion," Zakheim said.

Yet new legislation incorporating the changes could prove difficult with Republicans and Democrats divided over the best way to reduce the deficit.

Several of the proposals would require new spending, the commission acknowledged, and that would be a hard sell in an election year when reducing the size of government is a priority for many. Other proposals would cost little or simply require money to be shifted from one account to another, the panel said.

"If these recommendations are not implemented, there ought to be a Hall of Shame," said Michael Thibault, co-chairman of the commission. "There's an opportunity at hand."

The commission's 15 recommendations include creating an inspector general to monitor war zone contracting and operations, appointing a senior government official to improve planning and coordination among federal agencies, reducing the use of private security companies, and carefully monitoring contractor performance.

Massachusetts Rep. John Tierney, the top Democrat on the House Oversight and Government Reform national security subcommittee, said Wednesday that the commission's findings are "alarming." Tierney said he plans to introduce legislation next week to create the inspector general's post.

Sen. Claire McCaskill, D-Mo., chairwoman of the Senate's contracting oversight subcommittee, said she plans to prepare legislation based upon the commission's recommendations.

The commission's report said contracting waste in Afghanistan and Iraq could grow as U.S. support for reconstruction projects and programs wanes. That would leave the countries to bear the long-term costs of sustaining the schools, medical clinics, barracks, roads and power plants already built with American money.

Overall, the commission said spending on contracts and grants to support U.S. operations is expected to exceed $206 billion by the end of the 2011 budget year. Based on its investigation, the commission said contracting waste in Afghanistan ranged from 10 percent to 20 percent of the $206 billion total. Fraud during the same period ran between 5 percent and 9 percent of the total, the report said. Fraud includes bribery, kickbacks, bid rigging and defective products, according to the commission.

"It is disgusting to think that nearly a third of the billions and billions we spent on contracting was wasted or used for fraud," McCaskill said.

Styled after the Truman Committee, which examined World War II spending six decades ago, the commission had broad authority to examine military support contracts, reconstruction projects and private security companies. But the law creating the commission set this September as the end of its work, even as contractors continue their heavy support of U.S. operations in the war zones.

Security, transportation, food preparation and delivery, and much more are now handled by the private sector. At the same time, the officials responsible for monitoring contractor performance have been overwhelmed by increasing reliance on private companies.

"We are far more reliant on contractors than we ever were," said commission member Charles Tiefer, a professor of government contracting at the University of Baltimore Law School. "We always bought munitions from them. But we didn't used to buy much in the way of services from them."

Col. David Lapan, a Defense Department spokesman, said the military shares the commission's commitment to improving wartime contracting and commended the panel "for shining a spotlight on the risks of overreliance on contractors" and highlighting the importance of accountability. Lapan also said the department already has taken steps to improve contracting, including devoting more people and resources to contract oversight.

But the Professional Services Council, a trade group representing federal contractors, said the commission's findings ignored the "messy realities" of working in combat zones. While the council agreed that government needs to plan better before undertaking large operations, it disputed the commission's conclusion that agencies rely too much on contractors.

The commission cited numerous examples of waste, including a $360 million U.S.-financed agricultural development program in Afghanistan. The effort began as a $60 million project in 2009 to distribute vouchers for wheat seed and fertilizer in drought-stricken areas of northern Afghanistan. The program expanded into the south and east. Soon the U.S. was spending a $1 million a day on the program, creating an environment ripe for waste and abuse, the commission said.

"Paying villagers for what they used to do voluntarily destroyed local initiatives and diverted project goods into Pakistan for resale," the commission said.

The Afghan insurgency's second largest funding source after the illegal drug trade is the diversion of money from U.S.-backed construction projects and transportation contracts, according to the commission. But the report does not say how much money has been funneled to the insurgency. The money typically is lost when insurgents and warlords threaten Afghan subcontractors with violence unless they pay for protection, according to the report.

The Associated Press reported this month that U.S. military authorities in Kabul believe $360 million has ended up in the hands of the Taliban, criminals and power brokers with ties to both. The military said only a small percentage of the $360 million has been garnered by the Taliban and insurgent groups. Most of the money was lost to profiteering, bribery and extortion by criminals and power brokers.

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Online:

Commission on Wartime Contracting: http://www.wartimecontracting.gov/

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