Private Sector Has Firm Role at the Pentagon

Meanwhile purchases have been soaring. The Defense Department said it spent almost $209 billion on goods and services in fiscal 2003, compared to $153 billion in fiscal 2001.

Steven L. Schooner, co-director of the Government Procurement Law Program at George Washington University, said the government has left itself unable to provide proper oversight at a critical juncture in Iraq. "Quite simply," he said in a recent paper, "the Government lacks sufficient qualified acquisition, contract management, and quality control personnel to handle the outsourcing burden."

The oversight issue has been complicated by a new generation of large, all-purpose contracts that were permitted because of the legislation that Congress passed in 1994 and 1996 to make contracting more efficient.

For example, the Army awarded Premier Technology Group Inc. an umbrella contract designed to allow the Army to get quick help on inventory control and systems integration. PTG was acquired last year by CACI International Inc., and the contract was used for intelligence and interrogation work. The task orders used to hire private interrogators for Abu Ghraib prison were never publicly disclosed by the Defense Department.

Another broad contract was won by Halliburton Co.'s subsidiary, KBR, a $1.9 million deal to plan the reconstruction of Iraqi oil pipelines. In March 2003, KBR landed an even broader sole-source contract to do work worth up to $7 billion.

For help on contracting, the Defense Department sometimes turns to other government agencies, who take on such work for the money, keeping a fraction of the total value of the contract in the form of a fee. Between 1999 and 2001, for instance, the General Services Administration -- which handles more than 90 percent of the contracts the Defense Department processes through other agencies -- generated $151.3 million by extracting a 1 percent fee for such management deals, according to a General Accounting Office report in 2002.

The Defense Department maintains that outsourcing the procurement work saves money, but some contracting experts are skeptical. The department paid other agencies $126 million to handle $12.5 billion in purchases in fiscal 2002. The Defense Department spent $180.2 billion on goods and services in fiscal year 2002.

The use of such arrangements, sometimes called government-wide acquisition contracts, increased sharply from 1997 to 2001, when the value of contracts awarded by one agency but managed by another tripled to $14.4 billion, according to a GAO report to Congress last year. The goal of the arrangements is to ease the administrative burden carried by departments and to let agencies buy goods and services in bulk. But it raises accountability questions, critics say. "Where does responsibility lie and who is accountable for ensuring that taxpayers are getting their money's worth," said Bill Woods, director of GAO's acquisition and sourcing management team.

After an internal Army report accused a CACI employee of encouraging soldiers to set conditions for interrogations and said he "clearly knew his instructions equated to physical abuse," it took more than a week for the government to track down and release details on the CACI contract, which was originally an Army contract but was turned over to the Interior Department.

Danielle Brian, executive director of the nonprofit Project on Government Oversight, questioned whether the Interior Department could decide whether it was appropriate to use that CACI systems integration contract to hire an interrogator. "How can a person at Interior know what qualities you're looking for in a contractor doing something as sensitive as interrogating prisoners of war?" Brian said.

Nash and other government and business officials say the reconstruction projects will be closely audited, which will prevent mismanagement problems.

Lester M. Hunkele III, a senior vice president at AECOM subsidiary DMJM, said he had been skeptical about the use of contractors years ago when he was deputy assistant secretary of Veterans Affairs. He now thinks it makes sense in Iraq, although he adds that the tenuous security situation makes the outcome hard to predict.

"My take is this does make sense [in Iraq]," Hunkele said. "It doesn't always make sense."