Army Contracting Command Failed to Spot $100M in Overbilling

Two major contractors working on an Army counter-narco-terrorism project used unqualified labor and overbilled the government by nearly $100 million, according to a leaked version of a Pentagon inspector general report.

Prime contractor Northrop Grumman and subcontractor DynCorp overcharged the government anywhere from $91 million to $123 million from 2007 to 2013 while working for the Army’s Counter Narco-terrorism Technology Program Office.

Army contracting officers “did not review invoices prior to approving payments for labor charges,” said the classified report, released inside the Pentagon on May 13 but made public Tuesday by the nonprofit Project on Government Oversight.

Several examples of suspicious billing prompted a tip to the Defense Department hotline in October 2012, including one employee who billed 1,208 labor hours over a 12-day period, producing an overpayment of $176,900. In all, Northrop Grumman charged 29,401 hours in excess of an employee working 24 hours per day, none of which were flagged by Army contracting officers at Redstone Arsenal, Ala.

An example of rules violations included 300-400 DynCorp employees not qualified for their posts, including one program manager who billed 5,729 hours over a 1.5 -year period, totaling almost $1.2 million, though that employee lacked the required bachelor’s degree.

The contract is designed to carry out the Defense Department’s “strategy to provide global detection, monitoring and disruption of narco-terrorist activities through effective interagency mission support, technology, and acquisition solutions,” the inspector general wrote. DynCorp supplied Northrop Grumman with spare parts and maintenance for U.S. operations in Afghanistan.

The prime contractor used direct billing to submit labor charges incurred primarily by DynCorp. “Direct billing allows Northrop Grumman to send invoices directly to the Defense Finance and Accounting Service through the Wide Area Workflow system for payment,” the report stated. “Direct billing limited [the Army Contracting Command’s] oversight of the labor charges submitted by Northrop Grumman prior to payment.”

In a statement released Tuesday, the Army Contracting Command said is it working with the Army Materiel Command “on a plan for performing the audits to assist in the potential recovery of funds. Additionally, we are in the process of implementing the recommendations” in the IG report.

Its parent, the Army Materiel Command, told the IG that it agrees with auditors’ recommendations that its contracting command develop advance checks on invoice accuracy and employee qualifications, review past payments, improve accuracy of future reviews and report improper payments to the inspector general’s office.

In a blogpost Tuesday, POGO investigator Neil Gordon noted the role of a whistleblower in bringing the case to the IG’s attention and thus allowing the government to recoup the improper payments.

“The latest troubling assessment of CNTPO makes us wonder how extensive contractor overbilling and other abuses are throughout the program,” Gordon wrote. “If oversight staff is indeed spread so thin that contractors are basically being left to their own devices with regard to billing, the Army has two choices: either significantly beef up contract management or insource the work.”

Northrop Grumman Vice President for Strategic Communications Brandon R. "Randy" Belote III released a statement saying the company “has been cooperating with the DoD's OIG for some time on their investigation into the conduct of one of our subcontractors on the CNTPO contract.”

Ashley Burke, senior vice president for communications at DynCorp International, said in an email that her firm “has cooperated with investigators throughout their inquiry into this issue, has complied fully with our obligations under the subcontract, and nothing improper was submitted by DI to our customer (Northrop Grumman).”

A DynCorp representative quoted in the report said the company could not provide résumés the IG needed to verify employee qualifications “because some personnel files were archived and extremely difficult to obtain.”

The Defense IG does not comment on reports labeled “for official use only.”