"Waste, Fraud and Abuse in U.S. Gov't Contracting in Iraq"

For those who have not read it, here is the link to Bunny Greenhouse's testimony on July 27th at the Senate Democratic Policy Committee Hearing: “An Oversight Hearing on Waste, Fraud, and Abuse in U.S. Government Contracting in Iraq.”

Some exerpts:

- The independence of the USACE contracting process was unquestionably compromised with respect to the issuance of the Restore Iraqi Oil contract, known as RIO. I observed, first hand, that essentially every aspect of the RIO contract remained under the control of the Office of the Secretary of Defense (“OSD”). This troubled me and was wrong. However, once the OSD delegated responsibility for the RIO contract to the Department of the Army, control over the contracting process by the OSD should have ceased. However, the OSD remained in control over the contracting process. In reality, the OSD ultimately controlled the award of the RIO contract to KBR and controlled the terms of the contract that was to be awarded even over my objection to specific terms that were ultimately included in the contract.

- I immediately questioned whether the Corps had the legal authority to function as the Army’s delegated contracting authority. The Corps had absolutely no competencies related to oil production. Restoration of oil production was simply outside of the scope of our congressionally mandated mission. How then, I asked, could executive agency authority for the RIO contract be delegated to the USACE? I openly raised this concern with high level officials of the Department of Defense, the Department of the Army and the U.S. Army Corps of Engineers. I specifically explained that the scope of the RIO contract was outside our mission competencies such that congressional authority had to be obtained before the Corps could properly be delegated contracting authority over the RIO contract.

Exactly why USACE was selected remains a mystery to me.

- I further raised a concern over which contract authorized payment for prepositioning work KBR was doing in anticipation of being awarded the RIO contract. I was generally familiar with the scope of the LOGCAP contract and was under the impression that the LOGCAP contract was being used to fund the initial preposition workbeing done by KBR before the Iraq War commenced. I specifically questioned whether using LOGCAP funding was legal and insisted that a new contract be prepared. My concern over this issue ended when I was apparently provided misinformation that a newcontract had been issued. This is the first time I can recall being overtly misled about something as fundamental as the existence of an underlying contract authorizing work to be done.

- The fact that it was a no-bid, sole source contract meant that the government was placing KBR in the position of being able to define what the reasonable costs would be to execute the RIO contract and then charging the government what it defined as being reasonable. Given the enormity of the scope of work contemplated under the RIO contract, the exclusion of the contractor responsible for pricing out the scope of work to be done under the RIO contract should have been an imperative. Instead, it formed the basis of awarding the RIO contract to KBR.

- Ultimately, I was most concerned over the continuing insistence that the RIO contract be awarded to KBR without competitive bidding for an unreasonable period of time -- two years plus the option to extend the contract an additional three years. I raised this concern with officials representing the Department of Defense, the Department of the Army and the Corps of Engineers. However, when the final Justification and Approval of the RIO contract was forwarded to me for signature -- after the draft had been approved by representatives of the office of the Secretary of Defense -- the five year, nocompete clause remained in place. I could not sign the document in good faith knowing that this extended period was unreasonable. However, we were about to prosecute a war and the only option that remained opened to me was to raise an objection to this requirement. Therefore, next to my signature I hand-wrote the following comment:

I caution that extending this sole source effort beyond a one year period could convey an invalid perception that there is not strong intent for a limited competition.

I hand-wrote this comment directly onto the original document because experience had taught me that a separate memo outlining my concerns could inexplicably be lost. I wrote my comment on the original J&A to guarantee that my concern was not overlooked. Instead, it was just ignored.

The RIO contract was subjected to public scrutiny when, on December 11, 2003, the Defense Contract Audit Agency (DCAA) issued a draft report concluding that KBR over-charged for the purchase of fuel by $61,000,000. However, the firestorm over this issue was significantly dampened a week later when the Commander of the USACE, Lt. General Flowers, took the unusual step of issuing a waiver absolving KBR of its need, under the RIO contract, to provide “cost and pricing data.” The Corps simply asserted that the price charged for the fuel was “fair and reasonable,” thereby relieving KBR of the contract requirement that cost and pricing data be provided.

However, the manner in which the waiver request was prepared and finalized demonstrates that the USACE Command knowingly violated the AFARS by intentionally failing to obtain my approval, as the PARC. The evidence suggests that the reasons why I was intentionally kept from seeing the waiver request were politically motivated and driven by the DCAA’s conclusion that KBR had overcharged the government for the fuel by $61,000,000, rather than whether the granting of the waiver was in the interest of the government.

Significantly, it appears that a concerted effort was undertaken to ensure that I was kept in the dark about the waiver request. I have every reason to believe that the USACE knew I would object to the granting of the waiver if it had been presented to me for signature. So, I was specifically kept in the dark and did not learn of the existence of the waiver until I read about it in the press. Having reviewed the documentation used to justify the waiver, I can unequivocally state that I would not have approved it because the documentation relied upon to justify the fuel charges as “fair and reasonable” was grossly insufficient.

- As a result stating my concern in writing on the original RIO J&A and as a result of expressing other significant concerns over contracting matters related to KBR, I was eventually summoned to a meeting on October 6, 2004 at which time I was issued a memorandum notifying me that I was to be removed from the Senior Executive Service and from my position as PARC. At that point I knew that my ability to resolve the issues within the USACE had terminated. I had no other alterative at that juncture but to file a formal request for investigation with the then-Acting Secretary of the Army and to appropriate members of Congress.

She did everything right. She did everything by the book: tried to go up the chain, expressed concern to the proper folks, etc...

I hope she wins a HUGE lawsuit someday.