July 29, 2006

This Week in Private Military Contacting

Here's a collection of articles on issues related to private contractors that passed through my RSS newsreader over the past few days:

• The U.S. Army Corps of Engineers has halted a high-profile children's hospital construction project contract in Basra, after contractor Bechtel (they of the ill-fated Big Dig) overran costs by %150 and lagged over a year behind schedule. Bechtel, which subcontracted the job out through several layers of companies, blamed security concerns for the problems.

Bechtel estimated that as much as 50 percent of its expenses on the project were overhead costs, which were paid with American money separate from the $50 million construction contract.

David Snider, a spokesman for the United States Agency for International Development, the State Department agency in charge of the project, said that technically, Bechtel’s contract was not being terminated because the contract did not actually require the company to complete the hospital.

“They are under a ‘term contract,’ which means their job is over when their money ends,” Mr. Snider said. So despite not finishing the hospital, he said, “they did complete the contract.”

A confidential report commissioned by the development agency criticizes it for failing to properly account for all of the costs of building a functioning hospital. The agency is likely to face further criticism as it seeks additional money to complete the hospital as part of an Iraq reconstruction program that has increasingly come to be seen as overpriced and ineffective.

As the article mentions, this follows the Army Corps' cancellation last month of another large contractor, Parsons (which happens to be the other main partner in the Big Dig, actually) after it failed to complete several prison facilities and hospitals in a timely or cost-effective manner.

• The Virginian-Pilot of Hampton Roads has an extensive six-part series on local firm Blackwater USA, which has become one of the highest-profile private military contractors today. Lots of good content here - its founding, its leadership, its experience in Iraq and post-Katrina New Orleans, and more. Check it out.
An image of strength is vital in this muscle-bound business, and Blackwater is a top dog in its field. In a decade, the company has grown from a sketch on a scrap of paper to a superstar in the rapidly expanding universe of the private military industry.

It's a controversial arena, deeply divided by an international debate over the growing use of hired guns. Blackwater has been a lightning rod in the middle of it all since March 31, 2004, when the company's name became linked with the grisly image of charred American corpses hanging from a bridge in Fallujah.

None of that has hurt the bottom line. On any given day, Blackwater has as many as 3,000 security contractors working in far-flung hot spots and some 500 paying clients in Moyock - learning to crash cars, shoot targets, board ships, storm schools, rescue hostages, bust down doors.

At Blackwater, one thing is perfectly clear:

There is big money to be made in a world full of bad news.

California Representative Henry Waxman and the House Government Reform Committee have released a new report on waste and corruption in Department of Homeland Security contracting procedures. The Washington Post gives the outlines:
Lawmakers say that since the Homeland Security Department's formation in 2003, an explosion of no-bid deals and a critical shortage of trained government contract managers have created a system prone to abuse. Based on a comprehensive survey of hundreds of government audits, 32 Homeland Security Department contracts worth a total of $34 billion have "experienced significant overcharges, wasteful spending, or mismanagement," according to the report, which is slated for release today and was obtained in advance by The Washington Post.

The value of contracts awarded without full competition increased 739 percent from 2003 to 2005, to $5.5 billion, more than half the $10 billion awarded by the department that year. By comparison, the agency awarded a total of $3.5 billion in contracts in 2003, the year it was created.

Among the contracts that went awry were deals for hiring airport screeners, inspecting airport luggage, detecting radiation at the nation's ports, securing the borders and housing Hurricane Katrina evacuees. Investigators looking into those contracts turned up whole security systems that needed to be scrapped, contractor bills for luxury hotel rooms and Homeland Security officials who bought personal items with government credit cards.

While many of those problems have been disclosed, today's report is the first comprehensive survey of the government's own investigations into contracting mismanagement in the domestic war against terrorism.

"Every dollar that is wasted on a contract is a dollar less that could be used to make Americans more secure," said former department inspector general Clark Kent Ervin. "This kind of abuse constitutes a security gap all its own in America's defense." [my emphasis added]

For a broader examination of the Bush administration's use of private contractors in Iraq, Katrina recovery, as well as homeland security, check out the House Reform Democrats' Dollars, Not Sense: Government Contracting Under the Bush Administration.

• Finally, at the blog MountainRunner, a review of the book "A Bloody Business".

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