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The Pentagon's chief inspector Wednesday criticized the Defense Department's heavy reliance on a practice called interagency contracting, calling it a costly end run around the military's normal acquisition procedures.

The problems with many Pentagon contracts issued through the Interior Department, General Services Administration and other agencies largely stem from hurried orders or acquisitions with little or no planning, Thomas Gimble, Pentagon acting inspector general, told the Senate Armed Services Readiness Subcommittee.

For instance, the Defense Department often does not conduct adequate market research to determine whether it is in the department's interest to make a purchase through an in-house contracting office or pay a 2 percent to 5 percent fee to go through another agency.

Meanwhile, Interior Department and GSA officials failed at times to make sure the awarded contract offered the best quality and value to the Defense Department, Gimble said.

Indeed, the Pentagon IG office reviewed 131 GSA purchases and 49 Interior Department purchases, finding only one instance where a Defense Department agency documented that interagency contracting was in the best interest of the government.

The result, Gimble noted, is a "significant" amount of money wasted. He did not offer any figures during the hearing to quantify how much the Pentagon wastes or loses each year through interagency contracting.

In fiscal 2005, the Defense Department used interagency contracting to award 54,022 contracts valued at $5.4 billion, according to Gimble's written testimony. In one case alone, the Defense Department paid the Interior Department more than $23 million in surcharges to buy $592 million in goods and services that could have been "routinely handled by junior DOD contracting personnel."

For their part, Defense Department acquisition officials told Pentagon inspectors they often made purchases through other agencies because it was faster and they could generally get the contractor they wanted, Gimble said.

Readiness Subcommittee Chairman Daniel Akaka, D-Hawaii, decried "case after case of waste and abuse" stemming from interagency contracts. Planning and oversight, Akaka added, was "lacking in almost every case."

Akaka said the problems are "symptomatic" of a Pentagon acquisition workforce stretched too thin to meet the tasks at hand. That acquisition force has decreased from 230,000 employees in fiscal 1999 to 206,000 in fiscal 2004.

Readiness Subcommittee ranking member John Ensign, R-Nev., who said he was "disturbed" by Gimble's findings, asserted that the military cannot afford to squander funds during a time of war.

"These are abuses we can ill afford these days," Ensign said.

COMMENTS

• The Government needs to reverse the current policy where GSA is a competing contracting entity. GSA policy of the 50 through 80s era was most responsible and cost effective with the issuance of mandatory and non-mandatory contracting sources to the contracting agencies. Requiring clearances to contracting agencies for not using the GSA Schedules was also a good management tool. It forced agencies to assess their acquisition requirements more closely before carelessly contracting. I recommend that an assessment be made of the former acquisition policies and compare with the effectiveness of the new policies currently in place before making anymore reforms. Sophie C. Moore Posted January 26, 2007 10:48 AM
• Interagency agreements, e.g., with GSA, are also used because DoD agencies run out of time in the FY to jump through the acquisition widgets. The agreements essentially allow for money to be sent to GSA and they can continue the acquisition requirements beyond the FY. If the Congress wants this process to change they will need to change the law and require that the same rules apply to interagency agreements as they apply to contracts using DoD contracting offices. GovExec.com reader Posted January 25, 2007 8:01 AM
• There is nothing wrong with using other agency contracts or BPAs as long as the competitive process is observed based upon the dollar amount and specific need. GSA's Web site is much more user friendly than most agencies (the Defense Department included) procurement resources to include their own BPAs and schedules. The lack of training and/or disregard for basic procurement practices is to blame for waste; not "interagency contracts." GovExec.com reader Posted January 18, 2007 2:40 PM