Defense awards more Iraq reconstruction work to contractors cited for poor performance

The Defense Department has not taken steps to prevent companies whose Iraq reconstruction contracts were terminated for poor performance from receiving additional government work, the Special Inspector General for Iraq Reconstruction reported on Monday.

In a report on deficient Iraq reconstruction contracts, the SIGIR found that even when contracts were terminated for default due to poor performance, no action was taken to suspend or debar contractors from future contracts.

In several cases, poor performing contractors were awarded additional contracts. In two cases, contractors suspended for fraud and other criminal violations received new construction contracts after being placed on the Excluded Parties List System.

The inspector general identified 1,262 Defense Department projects for Iraq reconstruction that have been terminated as of June 2008. The majority, 732, were ended "for the convenience of the government," while another 530 were terminated for default on the part of the contractor.

These terminated projects had initial obligations of nearly $1 billion, according to the report, of which about $600 million had been paid to contractors, including $89.7 million on projects ended for default.

Although the Federal Acquisition Regulation does not require agencies to suspend or debar contractors for poor performance, the report noted, it does authorize agencies to suspend or debar them for failure or refusal to perform on a contract and for any other action of a serious and compelling nature affecting responsibility.

Joint Contracting Command-Iraq deputy commander Col. Roger Westermeyer responded to a draft copy of the report, noting that the circumstances surrounding each terminated contract are reviewed before determining whether a contractor should be placed on the excluded parties list.

"Poor performance alone, without any showing of fraud or unethical behavior, will not generally result in the contractor being suspended or debarred," Westermeyer wrote. "Rather, the FAR already has procedures in place to screen poor performers from receiving future federal contracts."

The SIGIR report showed that none of the contractors whose reconstruction projects were terminated for default were placed on the excluded parties list. In fact, at least eight companies that had contracts terminated received new contracts and purchase orders.

An Iraqi company that won two contracts to rehabilitate electrical substations for $45 million -- both of which were terminated for default -- was subsequently awarded three contracts to provide equipment.

Although these kinds of awards are within the agency's authority under the FAR, "they do raise questions about the degree to which contractor's prior performance is being reviewed," the report stated.

Neil Gordon of the Washington-based Project on Government Oversight said the report illuminates the watchdog group's ongoing concern about past performance issues. He said the organization has seen contracts repeatedly awarded quickly without sufficient vetting of the companies bidding for work. With an acquisition workforce stretched thin and reconstruction projects caught up in a war zone, the normal problems are magnified, he said.

The contracting officers "are understaffed, compared to the volume of work," Gordon said. "Contracting has grown over the past years exponentially, and you don't have the staff to keep up with it. Also, in a war zone like Iraq, time is of the essence, you've got to support the troops."

In addition, Defense gave work to four contractors after or just before they were suspended or debarred. Suspensions are temporary actions taken by agencies to immediately protect the public interest by excluding contractors pending criminal investigations or proposed debarment. Debarments exclude contractors from receiving work for a set period of time based on "on preponderant evidence of wrongdoing, having given the party proposed for debarment notice and opportunity to be heard."

Two of the contractors awarded new reconstruction contracts had been charged with fraud and other criminal violations and placed on the excluded parties list. The two other suspended contractors continued to work on previously awarded contracts after their exclusion, although action eventually was taken to terminate one of the contractor's projects.

"Contractors who received contract awards before their suspension are allowed to continue to perform under the prior contract award," the report stated. "However, agencies should consider the consequences of continuing to work with suspended or debarred contractors."

The inspector general recommended that Army Corps of Engineers' Gulf region division and the Joint Contracting Command-Iraq/Afghanistan take steps to reinforce the importance of screening contractors against lists of those debarred or suspended from receiving contracts.

Both entities agreed with the recommendations included in the report.

Commanding Maj. Gen. Michael Eyre said the Gulf region division's contracting officials "access several databases to screen contractors to make sure they have not been suspended or debarred."

Westermeyer wrote that while all potential contractors already are required to be screened, "contracting centers will be reminded of the importance of this step in the acquisition process to help ensure contracts are being awarded