[There's nothing new about boondoggles in military procurement. But there's a systematic reason why it's 20 times worse now than it's ever been before: measured by personnel, the amount of work that is outsourced is 10 times higher than it was at the time of the first Gulf war (according to Frida Berrigan's Feb 26th interview on Doug's show, http://www.leftbusinessobserver.com/Radio.html). And during the same time, the military audit departments have been cut in half (and budgeting and accounting -- which writes the specs -- by two-thirds). Since everything in Iraq is a cost-plus contract, the initial bids have no binding force, and auditors are the only thing keeping people even minimally honest. And as Henry Bunting, late of Halliburton, famously put it, in 4 months on the job, he never saw an auditor in Iraq.]
Financial Times; Mar 30, 2004 Focus on Halliburton obscures deeper problems By Joshua Chaffin Halliburton, the Houston-based oilfield services company, has served as an inviting target for critics of the frustrating effort to rebuild postwar Iraq. That seems logical given that Halliburton boasts $18bn in Iraq contracts -- the biggest haul of any company -- and a former chief executive, Dick Cheney, who now sits in the White House as vice-president. But the obsession with Halliburton might be obscuring a larger problem with the US-led rebuilding effort: lack of government oversight. As Congress and Pentagon investigators delve into the often opaque contracting process, they are revealing a scarcity of auditors supervising the private companies retained to carry out vast projects such as restoring Iraq's oil sector or rehabilitating its schools. The latest indication comes in a report last week from the Pentagon's inspector-general, which found there was "little or no government surveillance" on 13 of 24 rebuilding contracts awarded at the outset of the war and that contacting officers failed to support price estimates on nearly all those assignments. The inspector-general's report followed a draft of a General Accounting Office review, which reached similar conclusions. It noted, for example, that a single Halliburton contract extension worth $587m was renewed in 10 minutes -- with just six pages of documentation. Both of these buttress the testimony of Henry Bunting, a former Halliburton procurement officer, who told a Democratic party committee in February that he did not encounter a single auditor in four months working for the company in Kuwait. During that time, according to Mr Bunting, Halliburton employees spent recklessly on items from car rentals to gym towels -- all of which was ultimately paid for by the US government. Halliburton is not the only company in Iraq that has fallen foul of the Pentagon. Dov Zakheim, the Pentagon comptroller, told Congress on March 11 that Fluor Federal Systems, Perini Corporation and the Washington International Group also had cost issues. "This is clearly pervasive in Iraq," said Steve Schooner, a federal contracting expert at the George Washington University school of law. "Everybody over there has got the same problems." The Iraq contracts require rigorous auditing, according to procurement experts, because they were often hastily drawn, alloting hundreds of millions of dollars to prime contractors to tackle dozens of fluid projects. The "cost-plus" nature of the contracts also calls for high vigilance. Under the agreements, companies are guaranteed a set profit on top of their costs. Few contractors would be willing to promise a set price for speculative work they will be performing in a war zone, say "cost-plus" advocates. But the trade-off is that such arrangements mean companies have little incentive to rein in spending. The Pentagon has acknowledged that its normal contracting procedures were strained by the rush to war. The criminal investigation into fuel imports and other Iraq contracts is evidence, they claim, that their auditors are now on the case. Mr Zakheim told Congress that the Defence Contract Audit Agency's Iraq branch office would grow from 25 to 31 by the end of May. There may also be plans to expand the work in Iraq of a related agency, the Defence Contract Management Agency. But critics such as Mr Schooner believe that the problem has deeper roots. Since the 1990s -- when both parties promised to shrink the federal government -- the Pentagon has pushed to outsource tasks that do not involve direct combat. However, at the same time that it has entrusted ever greater amounts of work to private companies such as Halliburton, it has also reduced the trained personnel to oversee them. >From 1990 to 1999, for example, the defence department's accounting and budget personnel fell from 17,504 to 6,432. During the same time, the ranks of the defence contract audit agency, the Pentagon's auditing branch, fell from 7,030 to 3,958. "When they were down-sizing the government, they whacked the acquisition workforce even harder," Mr Schooner explained. That decision may now be plaguing the rebuilding effort in Iraq.
