Auditor faults Defense’s reliance on interagency contracts

The Pentagon's chief inspector Wednesday criticized the Defense Department's heavy reliance on a practice called interagency contracting, calling it a costly end run around the military's normal acquisition procedures.

The problems with many Pentagon contracts issued through the Interior Department, General Services Administration and other agencies largely stem from hurried orders or acquisitions with little or no planning, Thomas Gimble, Pentagon acting inspector general, told the Senate Armed Services Readiness Subcommittee.

For instance, the Defense Department often does not conduct adequate market research to determine whether it is in the department's interest to make a purchase through an in-house contracting office or pay a 2 percent to 5 percent fee to go through another agency.

Meanwhile, Interior Department and GSA officials failed at times to make sure the awarded contract offered the best quality and value to the Defense Department, Gimble said.

Indeed, the Pentagon IG office reviewed 131 GSA purchases and 49 Interior Department purchases, finding only one instance where a Defense Department agency documented that interagency contracting was in the best interest of the government.

The result, Gimble noted, is a "significant" amount of money wasted. He did not offer any figures during the hearing to quantify how much the Pentagon wastes or loses each year through interagency contracting.

In fiscal 2005, the Defense Department used interagency contracting to award 54,022 contracts valued at $5.4 billion, according to Gimble's written testimony. In one case alone, the Defense Department paid the Interior Department more than $23 million in surcharges to buy $592 million in goods and services that could have been "routinely handled by junior DOD contracting personnel."

For their part, Defense Department acquisition officials told Pentagon inspectors they often made purchases through other agencies because it was faster and they could generally get the contractor they wanted, Gimble said.

Readiness Subcommittee Chairman Daniel Akaka, D-Hawaii, decried "case after case of waste and abuse" stemming from interagency contracts. Planning and oversight, Akaka added, was "lacking in almost every case."

Akaka said the problems are "symptomatic" of a Pentagon acquisition workforce stretched too thin to meet the tasks at hand. That acquisition force has decreased from 230,000 employees in fiscal 1999 to 206,000 in fiscal 2004.

Readiness Subcommittee ranking member John Ensign, R-Nev., who said he was "disturbed" by Gimble's findings, asserted that the military cannot afford to squander funds during a time of war.

"These are abuses we can ill afford these days," Ensign said.