The Responsible Contract Manager: Protecting the Public Interest in an Outsourced World

9. When Not to Contract: The U.S. Military and Iraq

159 Chapter 9 When Not to Contract The U.S. Military and Iraq UNDER WHAT conditions is the task best performed directly by your own organization? When should you develop the capacity in-house instead of purchasing it from another organization? The war in Iraq is the most contracted-out war in world history. It is clear that overcontracting was one of a number of strategic errors in this war. While some contracting is typical in military operations, it is the amount of contracting that is the issue here. There are, of course, many other examples of contracted efforts that do not succeed and are replaced by development of in-house capacity. This book will review two cases of failed contracting with the aim of developing a deeper understanding of the factors that cause such failure. Our objective is not to argue against contracting, but to enhance our understanding of the factors that limit it. Contracting for the War in Iraq The use of contractors in combat raises a variety of issues related to democratic accountability. First, if their conduct does not adhere to military rules and priorities, they are not subject to military discipline. The need for strict adherence to orders from a chain of command is obviously more important for military and police officials who are authorized to take a person’s freedom or even his or her life. In a democratic system, the need for such strict accountability is profound and absolutely necessary if the values of liberty and self-determination are to be preserved while security is maintained. The modern American military has a set of contracts to provide private sector support services for all manner of operational logistics. Food 160 Chapter 9 services, communications, transportation, supplies, and even “security” are provided under contract to private firms. The size and scope of these contracts were indicated in a statement before Congress in June 2004 by William Reed, director of the Defense Contract Audit Agency (DCAA). As Reed reported at the time, “DCAA currently is responsible for providing Iraq-related contract audit services to both DOD and other Government organizations at 56 contractors holding more than 80 prime contracts with contract ceiling amounts of $34.6 billion and funding to date under those contracts of about $12.4 billion” (Reed 2004, 1). Several of those contracts were issued to Halliburton subsidiary Kellogg Brown & Root (KBR). Reed noted that “KBR has been awarded Iraq reconstruction contracts with ceilings totaling more than $18 billion under two major programs: Logistics Civil Augmentation Program (LOGCAP III) for $10 billion; and Restore Iraqi Oil (RIO) for $8.2 billion” (2004, 2). The scope of this work was so extensive that the DOD had established an extensive audit organization exclusively for Iraq. Reed testified, “To carry out the extensive and time-sensitive audit requirements, DCAA has implemented new planning and coordination procedures to effectively integrate audit work between the new Iraq Branch Office, opened in May 2003, and more than 50 DCAA CONUS Audit Offices with cognizance of companies performing contracts in Iraq. The Iraq Branch Office itself now has 22 auditors , and will increase to 28 auditors by the end of June. . . . During the first 8 months of FY2004, DCAA has issued 285 audit reports related to Iraq reconstruction contracts” (2004, 1). Most of the contracted functions identified in these audits were standard and fairly prosaic support services, but some were not. Reed testified about the activities of one contractor, CACI, and observed, DCAA is expanding its audit coverage at CACI based on recent disclosure of additional contracts awarded to the Company. Since August of 2003, the Army has awarded 11 task orders under a GSA Supply Contract for Information Technology services for interrogation and intelligence gathering effort in Iraq. At least three of those tasks related to interrogation of Iraqi prisoners. Billed costs as of March 2004 under these task orders is $12.7 million, with a total funded contract value in excess of $60 million. DCAA is reviewing the potential misuse by CACI of the GSA schedule contract on this Depart- When Not to Contract 161 ment of Interior contract that is funded by the Army, since “interrogator ” type effort is not a function provided by CACI in their GSA schedule. (2004, 4) The abuse of prisoners in the Abu Ghraib prison by contractor personnel was one of the issues that alerted the media to the unprecedented contracted effort...