Agency Spotlight: Commission on Wartime Contracting

10.24.11

"Agency Spotlight: Commission on Wartime Contracting"

The Commission on Wartime Contracting’s authorizing statute ceased at the end of September 2011. This article highlights the agency’s formational purpose and the key findings and recommendations as provided in the agency’s final report issued to Congress in August 2011.

Background

Congress established the Commission on Wartime Contracting (Commission or CWC) pursuant to Public Law 110-181: Section 841 of the National Defense Authorization Act (NDAA) (Section 841) in 2008. The underlying purpose of the CWC is to study wartime contracting in Iraq and Afghanistan. Section 841 specifies the following areas of study:

Federal agency contracting for the reconstruction of Iraq and Afghanistan;
Federal agency contracting for the logistical support of coalition forces operating in Iraq and Afghanistan; and
Federal agency contracting for the performance of security functions in Iraq and Afghanistan. ¹

A combination of several factors served as the major movement for the formation of the Commission and its ultimate purpose. Notable factors were $10 billion in questioned costs by the Defense Contracting Audit Agency (DCAA) during audits of wartime contractors; an estimated $1.6 billion in unsupported contract and vendor payments; and an estimated $6.3 billion in unsupported commercial payments.

The Commission’s chief objectives include, “a thorough assessment of the systemic problems identified with interagency wartime contracting, the identification of instances of waste, fraud and abuse, and ensuring accountability for those responsible.”² The Commission’s final report details the issues identified by the agency.

Final Report Findings:

The final report issued by the Commission includes results and documentation from the CWC’s research, hearings, meetings, and briefings. The report provides several critical findings and recommendations for Congressional consideration, which could influence legislative actions related to Agency mandates, Procurement authorities and contractor oversight.

The following is a summary of the Commission’s findings and recommendations:

Agencies Over-rely on Contractors for Contingency Operations: In its final report, the Commission documents that the Government, in particular the Department of Defense (DOD), Department of State (DOS) and the United States Agency for International Development (USAID), over-relies on private contractors to execute the contingency operations in Iraq and Afghanistan and in doing so, culminated in their inability to effectively manage those contractors. In particular, the Commission contends that these agencies (predominantly the DOD) engaged a large amount of private contractors to aid in the contingency efforts, however did not simultaneously obtain a proportionate amount of resources to oversee them. According to the final report, more than 280,000 employees from private contractors supported those efforts, 80% of which were third-country and local nationals. The Commission also notes key risks that transpire consequent to the over-reliance on these contractors. Notable examples include an erosion of the government agencies’ abilities to self-perform certain core capabilities, a shift of technical knowledge to the private sector which inhibits an agency’s ability to monitor technical performance and an additional encumbrance on an agency’s ability to effectively manage contractors, which may indicate an increase in costs.
Lack of Guidance for Use of Contractors in Contingency Operations: The Commission cites poor planning and hasty decisions in contracting by DOD, DOS and USAID as another finding related to contingency operations and questions whether or not the Government has sufficient and formalized processes or standards to make decisions regarding the use of contractors, particularly for what may appear to be “inherently governmental functions,” for contingency operations. The report documents that certain regulations and authoritative literatures address functions that are “closely associated” to those that are inherently governmental functions, however does not address “critical functions (i.e. certain contingency operations) and the need to maintain a sufficient number of federal employees to perform them so that the government [maintains] control over agencies’ core missions and operations.” Hence, an increasing reliance on contractors, as opposed to the Government for certain functions that may indeed be appropriate for the Government to execute, is observed. The Commission also states that although a function may not inherently be governmental and therefore provides a “permissible” opportunity for contractors to execute the function, contracting it may not be appropriate in some circumstances. Given the nature of contingency operations, contracting the function may aggravate current risks and culminate in new ones. Ultimately, the Commission recommends that the Government apply and consider risk in decisions regarding whether or not to contract an inherently governmental function, as extensively described in the final report. In addition, the Commission recommends the Government establish a deployable cadre for acquisition-management and contractor oversight functions to deter from reliance on contractors managing other contractors. As part of this finding, the Commission recommends, phasing out the use of contractors “for static security at bases and camps,” where the Government identifies risk deriving from the continued use of the contractor.
Inattention to Contingency Contracting: The Commission’s report also addresses what is describes as unwarranted “waste, fraud and abuse” that culminated from inattention of contingency contracting in Iraq and Afghanistan. The Commission documents factors stemming from inattention to unique risks and considerations associated with contingency contracting, which occurred at various levels – including host-country level, program, project and individual-contract level - as the impetus for such fraud, waste and abuse. For example, at the host-country level, agencies did not pay particular attention to the host-government and overall country’s ability to sustain, execute and fund projects that are currently managed and funded by the U.S. At the program and project level, the Commission notes a lack of competition for a majority of the contracts. For example, the report documents that the agencies either failed in formulating acquisition strategies to re-compete existing contracts or failed in competing short-term contracts. Finally, according to the CWC’s report, at the individual contract level, exposure to waste materialized as agencies inadequately defined contract requirements prior to awarding the contracts. The final report extensively documents other examples for each of the aforementioned areas.
Looming Sustainment Costs Risk Massive New Waste: Continuing with the notion of waste, the CWC documents that the forthcoming withdrawal of U.S. troops gives rise to the potential for “new waste.” Also, in further emphasizing waste due to host-country level factors, the report documents that if the host-country demonstrates an inability to sustain current projects and programs implemented and currently maintained under U.S. operations, an environment for additional waste can develop. For example, if the host nation cannot self-provide trained staff, they may not properly execute programs nor deliver intended results. To counter this potential for incremental waste, the Commission recommends that agencies evaluate current projects and programs and identify unsustainable ones or those posing risk and remediate them accordingly. Remediation can come in the form of redesign or termination.
Agencies Have Not Institutionalized Acquisition as a Core Function: The report documents a lack of emphasis over the acquisition function. According to the CWC, with respect to contingency operations, the DOD, DOS and USAID views acquisitions as a mere support function as opposed to a core function. The report suggests that a cultural overhaul affecting acquisitions is necessary in order to improve contracting for contingency operations. The Commission states that, “Assigning responsibility, allocating resources and demanding accountability are all critical tools for ensuring cultural change.” Further, with respect to the acquisition function for contingency operations, the Commission recommends an elevated role, as to structure the function closer to agency heads across the DOD, DOS and USAID. The report delves into specific details for each of the three agencies in this regard.
Agency Structures and Authorities Prevent Effective Interagency Coordination: The Commission identifies roadblocks to effective interagency coordination as another notable concern. The Commission states that the agencies tasked at facilitating and executing contingency operations in Iraq and Afghanistan, for the most part, do not have an aligned organizational structure at the macro level necessary for “interagency coordination and cooperation for contingency contracting.” Hence, the final report recommends establishing functions and authorities to help concert objectives and resources across the three agencies with regards to contingency operations. For example, the Commission recommends senior positions be established at the Office of Management and Budget (OMB) and National Security Council (NSC) for purposes of oversight and strategy related to contingency operations.
Contract Competition, Management and Enforcement are Ineffective: As previously mentioned, the CWC alleges that the DOD, DOS and USAID have all failed (to a certain degree) to facilitate competition in procuring goods or services for contingency operations. To reinforce the evidence of the lack of competition, the final report documents that the agencies repeatedly awarded certain contracts to incumbent awardees, failed to record certain contractor performance evaluations, failed to re-compete certain long-term contracts and awarded certain cost-reimbursable contracts opposed to fixed-price contracts even if a fixed price contract appeared as the more efficient contract vehicle. Therefore, in order to encourage competition for contingency contracts, the CWC recommends that the Government establish competition goals for such contracts including annual increases to those goals. Additionally, the CWC describes the significance of monitoring individual contractor performance through contractor performance evaluations. Accordingly, the agency recommends developing strategies to allow for improvements in recording and using contractor performance data. The Commission notes that mandates and resources are necessary for contingency contracting reform to gain momentum. The Commission also notes that Congress’ current attitude towards spending and the negative budget forecast may dim the light over this matter. Therefore, the Commission encourages and recommends Congress to promote “preparedness for emergencies requiring contingency-contracting” as a priority alongside procurement for weapons systems by providing and/or reallocating resources towards this initiative. To fortify any future gains in progress towards contingency contracting reform, the CWC also recommends that Congress enact legislation that requires periodic assessments and reports documenting agency progress over implementing reform recommendations. The Commission’s final report contains substantial information and detail regarding its analysis and the rationale behind its recommendations. The Commission’s prior interim recommendations have been influential in legislative action, which have already resulted in changes to procurement regulations. (e.g., DFARS Business Systems Rule was partially initiated by recommendations from the CWCs interim report). The recommendations within the final report will undoubtedly influence future legislative action and prompt additional regulatory change.

¹http://www/wartimecontracting.gov/index.php/about/statute

²http://www.wartimecontracting.gov/index.php/about

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