Pentagon IG details waste in military contracts

The acting Pentagon inspector general Thursday detailed for the House Defense Appropriations Subcommittee billions of dollars of waste from excessive prices, unjustified expenses and fraud and criminal activity in military contracts, largely due to an understaffed, poorly trained contracting work force coping with an explosive growth in spending.

The examples provided by Gordon Heddell ranged from Marine Corps officials failing to determine what were "fair and reasonable" prices for armored vehicles rushed to Iraq in a $9.1 billion program to a firm that fraudulently charged $24 million for shipping thousands of dollars of small parts to the war zone.

The owners' final act before being caught was charging $998,798 to ship two flat washers worth 19 cents each, Heddell said.

He also described how private contractors were given control of a program to provide encrypted "common access cards" to military facilities -- including classified spaces -- and gave cards to their employees without proof of background security checks.

Some of the employees were improperly identified as government workers and thousands of cards were never recovered when work ended, he said.

The inspector general also noted, as other witnesses have in the subcommittee's two previous hearings on contracting, that a reduced acquisition and contracting work force was unable to handle a surge in contracts from $154 billion in fiscal 2001 to $390 billion last year. That required the armed services frequently to use contractors to manage contracts, violating the ban on outsourcing "inherently governmental functions."

Rep. James Moran, D-Va., who has led the contracting hearings in place of Defense Appropriations Chairman John Murtha, D-Pa., said the military is paying more for contracted services than it spends on personnel pay and benefits.

Moran questioned Heddell about the finding that the Marine program official failed to determine fair prices for the Mine Resistant, Ambush Protected vehicles rushed to Iraq. Although there was a competition among five firms, Heddell said, the Marines did not determine how much it cost to produce the vehicles and appeared to treat them the same, even though prices ranged from $306,000 to $1 million per vehicle.

Heddell also said the contracting officer never attempted to get a volume discount for the MRAPs, even though one contract was for more than 1,500 vehicles.