Audit faults State for failing to monitor Iraq contract

The State Department failed to adequately oversee a massive contract for training the Iraqi police force, putting the award at risk of waste and fraud, according to an audit released on Monday by the Special Inspector General for Iraq Reconstruction.

Initially, State's Bureau of International Narcotics and Law Enforcement Affairs (INL) designated just one in-country contracting officer representative to monitor the $2.5 billion deal, the report stated. That official approved every invoice submitted by the primary contractor, DynCorp International Inc. of Falls Church, Va., without questioning the accuracy, auditors found.

"As a result, INL has no confidence in the accuracy of payments of more than $1 billion to DynCorp and is reconciling 100 percent of DynCorp's historical invoices related to Iraq," the IG stated. "However, personnel shortages, high error rates on invoices, and poor or missing support documentation have delayed the reconciliation process."

State officials said they will request reimbursement for any unsupported labor charges, but noted it could take them until 2012 to complete the reconciliation process, even with the Defense Contract Audit Agency's help.

Assistant Secretary of State David Johnson conceded that the number of contracting officer representatives originally assigned to monitor the work was insufficient. But, he questioned suggestions that the entire contract was at risk of abuse. "This assertion is not substantiated in the report nor is it consistent with INL's comprehensive invoicing review process," Johnson wrote in response to the IG.

Johnson argued that more than 19 percent of invoices the contractor submitted have been rejected, saving taxpayers nearly $9 million.

Still, senators expressed outrage over the report's findings. "No private sector company worth its salt would spend $2.5 billion on a contract and then ask one to three people to oversee it," said Sen. Joe Lieberman, I-Conn., chairman of the Homeland Security and Governmental Affairs Committee. "A vigorous contract management strategy for this contract is now more urgent than it has ever been."

Sen. Susan Collins, R-Maine, ranking member of the committee, said the findings "are simply outrageous and illustrate the need to move quickly and systemically to reform how the government manages federal contracts in the field, particularly in complex environments like Iraq, Afghanistan and Haiti."

Sen. Claire McCaskill, chairwoman of the panel's Subcommittee on Contracting Oversight, echoed Collins' concern.

"What's even worse is that these are the same people responsible for police training in Afghanistan, so I don't have any confidence that they're doing a better job there," McCaskill said. "If we don't correct this immediately, we are going to be having the same conversation a few years from now."

This is not the first time auditors have criticized State's oversight of the police training contract, which is the largest the department has ever managed.

In 2005, SIGIR told State that INL's staffing had not kept pace with its workload and the department needed to strengthen its oversight of the contracts for Iraq and Afghanistan. SIGIR repeated those calls in 2007 and INL officials said they planned to increase staffing and improve contract management. "However, INL has fallen far short on those initiatives," the audit said.

By November 2009, there were three contract monitors in Iraq for the police training work; State said it soon plans to boost that figure to 11.

The audit, which did not examine the performance of the contract, cited several examples where the lack of oversight might have led to waste:

• INL has leased two generators since December 2006 at a total cost of $450,000, even though unused generators were already in inventory. The contracting officer representative said he was unaware of the lease agreement even though DynCorp submitted invoices. The lease, which has been renewed every six months, is scheduled to expire in February.
• State assigned a 16-person security team to protect DynCorp personnel in the Kurdish region, even though the company said police advisers travel without protection and the area was not particularly dangerous. The protection cost $4.5 million annually.
• The contracting officer representative did not perform checks on DynCorp payroll documents to determine accuracy. As of November 2009, DynCorp's review of time cards had just begun, but the company already had found a 30 percent error rate at a few locations; 75 percent of the errors were overpayments to individuals.

"It is complex and challenging work in a difficult environment, and both the program and contract complexities require and benefit from thorough oversight and review of business systems, property management and invoicing," he said.

The police training contract, awarded in 2004, was a five-year agreement but has been extended through August 2010. Two other smaller training contracts also have been extended.

The Defense Department is responsible for setting requirements and managing the Iraqi Police Training Program. The Pentagon then transfers funds to State for contractor support. SIGIR has a separate audit under way to review Defense's management of the program. Once that assessment is complete, McCaskill plans to hold hearings on the contract.