Army advised to improve strategy for transfer of logistics work

The Army has failed to adequately plan for the transfer of billions of dollars of logistics work in the Middle East from a single company to an arrangement where that contractor vies with two others for jobs, according to a new report from the Defense Department inspector general.

Planning for a piece of the transfer that should have been relatively straightforward failed to provide sufficient safeguards to prevent delays and cost overruns, the IG found. That piece involved moving three task orders in Kuwait worth $347 million from the LOGCAP III contract, which KBR Inc. held exclusively, to a setup where KBR, Fluor Corp. and DynCorp International will compete for work.

Army officials determined that because of the comparatively stable nature of the country, Kuwait would be the easiest -- and therefore the first -- location to begin transferring the work.

"It is essential that the coordination and procedures improve so that the most critical transfer of work, planned for Iraq and Afghanistan, can be accomplished with minimal effect on the mission and warfighters in those countries," the IG stated.

In total, the service will transfer 11 task orders worth $5 billion to the LOGCAP IV contract, an indefinite-quantity indefinite-delivery agreement worth as much as $150 billion. The three firms also will compete for billions of dollars in new agreements to deliver fuel; water and food; and postal, laundry and sanitation services to troops.

Officials overseeing the contract provided auditors with multiple versions of transition plans or failed to specify a plan at all, the report said. Many of the plans, the IG said, were not signed or dated.

On Feb. 23, LOGCAP leaders issued a new comprehensive transition plan that represented a major improvement, according to the IG. But deficiencies remained, the report said. For example, transition procedures were not finalized before the transfer of work began. Specifically, the plan did not outline the roles and responsibilities of a fourth contractor -- Serco Inc. of Vienna, Va. -- hired to help with planning and to provide independent cost estimates.

In March, program officials still lacked sufficient plans for the transfer of at least 1.1 million line items worth $4 billion in LOGCAP property, the report said. The Defense Contract Management Agency was responsible for developing a strategy for property transfers and for determining when the incoming LOGCAP IV contractors were ready to begin the new work. But, the program office never verified that DCMA officials developed the required procedures, auditors said.

DCMA's property plan also lacked detailed procedures for removing hazardous materials and instructions on when to transfer contractor warehouse operations, auditors said.

Additionally, the IG criticized LOGCAP officials for failure to identify which goods and services under the Kuwait task order contracts could be purchased using firm fixed-price task orders and for not developing a standard performance work statement. And DCMA failed to carefully evaluate the work of LOGCAP contractors and document incorrect performance reviews, putting the government at risk of paying erroneous award fees, the IG said.

LOGCAP and DCMA officials disagreed with many of the report's findings.

"The report is not reflective of what transpired on the ground and during the transition of functions from the Kuwait LOGCAP III task orders to the newly competed and awarded LOGCAP IV task orders," wrote Lee Thompson, executive director of the LOGCAP program.

Still, the program office took corrective actions that address many of the concerns.

LOGCAP officials said they plan to complete a standard performance work statement before transferring task orders for Iraq and Afghanistan, for instance, and will use fixed-price contracts when feasible.