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Tuesday, June 17, 2008
Pentagon Removes Impediments to Flushing Cash Away
 Writing in The New York Times, James Risen brings us an astonishing article on the circumstances surrounding the firing of the Army official in charge of overseeing the KBR contract in Iraq. It's not only galling to read that the chief of the Field Support Contracting Division of the Army Field Support Command Charles M. Smith was sacked because he refused to approve payment for unsubstantiated work by KBR, but it's a sharp reminder of how the current level of Iraq contracting has lead to billions and billions of wasted federal funds.
Army auditors had determined that KBR lacked credible data or records for more than $1 billion in spending, so Mr. Smith refused to sign off on the payments to the company. "They had a gigantic amount of costs they couldn't justify," he said in an interview. "Ultimately, the money that was going to KBR was money being taken away from the troops, and I wasn't going to do that."
But he was suddenly replaced, he said, and his successors — after taking the unusual step of hiring an outside contractor to consider KBR's claims — approved most of the payments he had tried to block.
That's awful. But, the Army's rationale for making sure the cash spigot flows unabated signals even deeper problems with Pentagon procurement.
Army officials denied that Mr. Smith had been removed because of the dispute, but confirmed that they had reversed his decision, arguing that blocking the payments to KBR would have eroded basic services to troops. They said that KBR had warned that if it was not paid, it would reduce payments to subcontractors, which in turn would cut back on services.
By farming out so many war-fighting operations to a single contractor, it has put itself in the position of having to keep its prime contractor happy, lest bad things happen to the troops.
It gets even better:
Soon after Mr. Smith was replaced, the Army hired a contractor, RCI Holding Corporation, to review KBR's costs. "They came up with estimates, using very weak data from KBR," Mr. Smith said. "They ignored D.C.A.A.'s auditors," he said, referring to the Defense Contract Audit Agency.
Got that? A private firm has the Army over a barrel in Iraq as the Army hemorrhages billions of dollars in contracting expenses, and now the Army is using yet another private firm to oversee hemorrhaging.
Is this the Magic of the Marketplace® that privatizers talk about -- the practice of ensuring unaccounted, untold billions of dollars flow freely into the accounts of corporations?
I would be remiss here not to point out that the Democratic Policy Committee has begun a series of hearings on contractor waste, fraud, and abuse in Iraq. Video from committee's first hearing this year -- "Have Bush Administration Reconstruction and Anti-Corruption Failures Undermined the U.S. Mission in Iraq?" -- can be found here.
The next hearing will be held on Friday, June 20 at 10:00 AM in the Dirksen Senate Office Building. The committee will be investigating how KBR and Haliburton knowingly exposed their employees and troops to dangerous chemicals.
Posted by Craig Jennings
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