Locked and Loaded: Pentagon Contractor Helped Write Its Own Armored-Truck Deal

By Spencer Ackerman
July 11, 2011 |



How badly did the Pentagon want special trucks that could protect against insurgent bombs? So badly that it let the contractors responsible for providing them essentially write their own contracts.

That’s one of the conclusions from a Pentagon inspector general’s report released late Monday (.pdf) into a contract to provide logistics and maintenance work on Mine Resistant Ambush Protected vehicles (MRAPs) worth nearly half a billion dollars. The line between contractor and government vendor became so porous that officials “increased the risk for potential waste or abuse on the contract,” the inspector general wrote.

Getting the resilient MRAPs into Iraq and Afghanistan was a top priority for former Defense Secretary Robert Gates. That urgency led some officials at the Army’s Contracting Command and the Joint Program Office-MRAP into a too-cozy relationship with Jacobs Technology and its subcontractor SAIC, which won a $193.4 million award for logistics services on the MRAPs in November 2007.

In a reversal of how contracting is supposed to work, the inspector general finds that Jacobs/SAIC employees “directed Government personnel in Iraq,” ordering them to report to the contractor team and not government officials. In another case, a battalion commander with the 402nd Army Field Support Brigade allowed a contractor employee to assist in reprimanding an unnamed Defense Department official for an unspecified infraction, another no-no. “[C]ontractor employees appeared to be directing the day-to-day operations of DoD personnel,” the inspector general finds.

But the coup de grace came in 2009, ahead of the re-up of the contract. The contractors’ Army partners and the Joint Program Office “worked together to prepare the contract requirement” for the successor to the MRAP bid, a deal worth $285.5 million that ended in May. Shockingly, that contract went to SAIC, too.

“The contractor’s performance of these functions violates the two underlying principles in the acquisition process: preventing unfair competitive advantage and preventing the existence of conflicting roles that might bias a contractor’s judgment,” the inspector general writes.

Yet the report doesn’t assess how much cash, if any, was wasted as a result. Nor does the inspector general recommend any punishment more punitive than sending contracting officials back to training on “inherently governmental functions and organizational conflicts of interest requirements.”
Government watchdogs were stunned at the MRAP audit results. “We were allowing a company to help write contract requirements for a contract that it was bidding on — and it ended up winning the contract!” says Nick Schwellenbach, lead investigator for the Project on Government Oversight. “The contractor could have stacked the deck in its favor, steering the contract towards a worse deal for the taxpayer.”

How could this have happened? In order to get the MRAPs into the warzones swiftly, the inspector general finds that JPO MRAP made SAIC employees middlemen between the overall head of the MRAP program and its deputies in Iraq and Kuwait. “This structure gave the contractor authority over DoD employees, which enabled the contractor to perform inherently governmental functions and allowed organizational conflicts of interest,” the inspector general writes.

It’s not been the greatest moment for oversight in military contracting. Late last year, the Defense Department restricted its own ability to review conflicts of interest on big contracts after an industry freakout. And this is right as the Pentagon’s top gear-buyer bangs the table about making contractors pay if their programs go over budget.

Of course, if the contractor is really the one in charge, the government doesn’t have much leverage. “The buyer-seller relationship is turned on its head when the company that is working for the government can discipline the government’s own employees,” Schwellenbach says, after reminding that “the government hires contractors to work for it.” How old-fashioned.

Locked and Loaded: Pentagon Contractor Helped Write Its Own Armored-Truck Deal | Danger Room | Wired.com

I have no sympathy whatsoever for military gear providers. They're certainly build fortunes on reaping off the taxpayers.

However, this article seems to assume that, in a buy-sell relationship, the buyer has, by definition, the upper hand. This is the most common set-up but by no means the only one.

Here, if the gvt really really wanted those trucks and had no one else to go to, then the seller really has the upper hand.

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Well true enough, and I think for that reason there is an inevitably close relationship between military suppliers and governments. But that can't extend to the point that the company can set the terms. If you contract someone to build you an aircraft carrier you don't want them to turn around and say no, what you really want is a PT boat (at aircraft carrier prices). The government has to keep the whip hand, and that appears to have gone wrong in this case.

And in many other cases. I simply don't see why they don't nationalise those industries - Keep a commercial division, if you want, avoid giving employees the status of federal employee but, frankly, for anyone, esp the US where the militaro-industrial complex is so big, I think nationalisation makes sense.

At least, that should reduce the conflict of interest and the tendency of the Pentagon/DoD to be robbed blind...

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