Weak State Department Oversight Resulted in Mismanagement of Iraq Security Contract Fund

Weak State Department Oversight Resulted in Mismanagement of Iraq Security Contract Fund

Due to mismanagement, the State Department has left more than $2.5 billion vulnerable to waste and fraud and is unsure of where $1 billion of that has gone, according to a report from a federal watchdog agency released Monday.

The office of the Special Inspector General for Iraq Reconstruction (SIGIR) said that the department’s oversight of a defense contract with DynCorp International was “weak” due to insufficient resources, understaffing and adequate controls.

In early 2004, the State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL) contracted DynCorp, among several other companies, to train the Iraqi police force. Currently, it is also involved in training local Afghanistan forces.

INL plans to review “100 percent” of the DynCorp invoices, and told SIGIR that this would take three to five years. However, the report said that the process will likely take more time as this initiative is not fully staffed.

During the initial years of the contract, the only contracting officer there to provide oversight did “little to no validation” of the large DynCorp invoices, often approving them all without a second glance. Because of this, INL itself has “no confidence” in those charges – which total over $1 billion.

The report also documented how INL’s oversight failed to catch certain issues, highlighting several examples. In one case, INL had been leasing two generators since December 2006 at $450,000 when they had more than enough of them in inventory. Additionally, INL could have bought the two generators from the landlord for $78,000 instead.

INL also sent a security team to protect six US corrections advisers who already had one from another contracted company. The DynCorp security team cost about $4.54 million per year, whereas the other security team provided cost $546,000 per year.

In addition, when INL negotiated leases for facilities that DynCorp used, it came up with large cost estimates and no explanations for them, though they were seven times the cost of what the US Embassy negotiated for its lease per square foot. Other leases grew in cost over time from 50 to 67 percent, which contracting officers did not question. When one was asked by SIGIR why he didn’t inquire further, he had no response.

One contracting officer in charge of labor costs said that due to a lack of time he relied on staff from another INL division to validate the invoices. However, the officer from the other division who managed such invoices said he relied on the contracting officer to validate them instead, underlining a lack of communication and accountability.

The State Department itself noted in 2005 that INL had understaffing problems, releasing a report saying that INL needed to strengthen its oversight procedures. SIGIR also made several recommendations since INL attempted to increase its staff, but this did not do enough.

While INL agreed with the report on the need to find ways to shorten the review process and to hire more contracting officers, which it said it has been “actively seeking,” it called the report’s statement that over $2.5 billion is vulnerable to waste and fraud “inaccurate” and “unfounded.” It also said in the report that 19 percent of the invoices are rejected after detailed review, which saved $9 million.

But Stuart Bowen, special inspector general for Iraq reconstruction, has for some time stressed the “pervasive waste and inefficiency” found in the Iraq effort. In a statement released in 2009, Bowen criticized the ad hoc use of reconstruction funds. “They usually failed to meet the needs at hand, in part because the resources necessary for managing their proper expenditure were unavailable or inadequate to the task. These shortfalls resulted in substantial waste and missed opportunities.”

In a statement regarding the report, Sen. Claire McCaskill (D-Missouri), chairman of the Subcommittee on Contracting Oversight, said that it was “unacceptable” how INL does not know where the money has gone. “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.”

“The State Department appears to be sleepwalking through its oversight obligations,” said Sen. Joseph Lieberman (ID-Connecticut) and chairman of the Senate Homeland Security and Governmental Affairs Committee. “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.”