No-Bid Worries

DHS finds itself defending companies that get its contracts.

If the Homeland Security Department's procurement focus in fiscal 2005 was rebuilding the Gulf Coast region after the devastating effects of Hurricane Katrina, then much of its efforts in fiscal 2006 could be described as addressing post-Katrina contracting problems.

One of those areas is no-bid contracts, or awards with less than full and open competition. Nearly half the department's contract awards in fiscal 2005 were sole-source, no-bid procurements, according to Rep. Bennie Thompson, D-Miss. DHS puts that figure at 38 percent. Although the expediency required by sudden emergencies such as hurricanes Katrina and Rita represent the most persuasive case for fewer competitive awards, that sort of acquisition leaves the government vulnerable to wasteful and abusive contracting arrangements, auditors say. That certainly proved true in the case of some Katrina recovery contracts. Federal agents are investigating 11,000 cases of potential fraud, though that figure includes thousands of cases of suspect aid claims by individuals.

In particular, some on Capitol Hill have focused on the issue of awarding contracts to companies with dubious or checkered pasts. The company hired to recover bodies in Louisiana is owned by a corporation sued for mishandling bodies in Florida. A Texas firm hired to provide ambulances had been beset with legal and financial troubles before the hurricanes hit. The Washington nonprofit watchdog Project on Government Oversight says three of the four top Katrina contractors have 37 instances of past misconduct among them.

Industry representatives say those figures are inflated and include cases in which the company was never found to have done anything wrong. Still, the fiscal 2008 Homeland Security authorization bill would require contractors to certify that they are not late on taxes and to disclose any role in creating part of the contract vehicle, which could be a conflict of interest.

One of the most frequently cited causes of wasteful and fraudulent contracts is Homeland Security's continuing shortage of qualified procurement personnel, which has attracted the attention of auditors and others since the department's formation in 2003. In particular, DHS' Office of Procurement Operations, created to handle contracts for the agencies that did not bring their own procurement shops to DHS, continues to employ fewer people than many say are needed. The department's chief procurement officer, Elaine Duke, says building the acquisition workforce is her top priority.

The dearth of contract officers leads to other practices that can be problematic. One is interagency contracting-purchasing goods and services from another agency's pre-established contracts, for a fee.

DHS says about $6 billion of its $22 billion in obligations for fiscal 2006 went to other agencies in the form of these kinds of agreements. The personnel shortage also can lead to hiring contractors or paying private sector firms to help DHS devise and manage programs.

These lead systems integrator contracts are fraught with their own perils, evidenced by the glaring problems uncovered this year in Deepwater, the Coast Guard's fleet modernization acquisition. In addition to escalating costs and delayed timelines, some of the new patrol boats built by the contractor were found to be unseaworthy. The Coast Guard since has taken much of the program management away from the contractor, and its new consolidated procurement directorate-a change initiated before many of the Deepwater problems were revealed-began operations in July. Still, some on Capitol Hill think the agency's changes do not go far enough. One House bill would require the Coast Guard to remove the contractor, a partnership between Lockheed Martin Corp. and Northrop Grumman Corp., by 2011 or earlier if DHS certified that was possible.

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