Ervin said that he then faxed the memo himself to Ridge's office, but that he never heard back from the secretary.
Ridge said in an interview yesterday that he did not recall receiving the memo but that his department addressed the kinds of issues Ervin raised. "I'll give him the benefit of the doubt that he sent it," Ridge said. "Clark raised a lot of alarm bells. It was his responsibility."
Before long, Ervin was investigating a contract the TSA awarded to Boeing that included the delivery and installation of 1,100 explosive detection systems -- stand-alone, minivan-size machines designed to examine passenger baggage. Even though Boeing's bid was the highest, the company won the contract because TSA officials said they thought Boeing had the expertise to best manage such a complicated federal contract under the deadline pressure.
Boeing subcontracted 92 percent of the work, much of it to two firms that made the machines: L-3 Communications Holdings Inc. and InVision Technologies Inc. Boeing hired other companies to install and maintain the devices.
Ervin's auditors would later find Boeing's contract with the TSA to be extremely favorable to the company.
The TSA guaranteed that all of Boeing's costs would be covered. The agency further guaranteed that Boeing's profit would be based on a percentage of those expenses, the auditors found. Such an arrangement, cited in the inspector general's report as a "cost-plus-a-percentage-of-cost" contract, is banned by federal law, Ervin's office later said in a report.
The contract structure removed an important incentive to hold costs down, Ervin said in an interview. The TSA initially estimated the Boeing contract to be worth $508 million. Within 18 months, the cost more than doubled, to $1.2 billion, auditors found.
In September 2004, Ervin's office issued its critical report, saying the TSA failed to meet its obligation to ensure that Boeing got only "a reasonable profit" on its contract.
As the manager of the contract, Boeing received about $82 million in profit from 2002 to 2003, the report said. That was a 210 percent return on the investment the company had made in the project, Ervin's office found; $49 million of the profit was deemed to be "excessive."
The inspector general also found that the TSA gave the company at least $44 million in award fees without evaluating the company's performance. Ervin described those fees to The Washington Post as "bonuses."
In a written statement to The Post, Boeing disputed the inspector general's findings. The company denied that it received a 210 percent profit or that it had received a prohibited "cost-plus-a-percentage-of-cost" contract. A TSA contracting official on Friday said agency officials "do not believe" they used an inappropriate contract.
The company said the contract grew because it and its subcontractors had to remodel airport lobbies and other areas to accommodate the new machines.
Boeing said the TSA recognized this problem and agreed to adjust the contract accordingly. The contract was modified 54 times, Boeing said.
"This was a very challenging program to execute," Boeing said. "Timelines were very tight and Boeing met all of them."
Boeing noted that the TSA, in its response to the inspector general, said the company was "appropriately compensated."
Elaine C. Duke, who was then the TSA's deputy assistant administrator for acquisition, defended the contract and the agency's handling of it. Duke cited the high-risk nature of the work, the technical complexity of the job, competitive market pressures, the congressional mandate and the lack of staff resources -- there were only five employees in the TSA's acquisition office when the contract was awarded.
"One should recognize that these are unique circumstances that have not and will not be repeated," Duke wrote in her response to the inspector general.
Ervin took a different view.
"The bulk of the work was done by subcontractors. Boeing could have been cut out entirely," he said in a recent interview. "They took advantage of a very good deal they got for themselves.
"The government was just inept," he said. "TSA didn't know what they were doing, or they didn't exercise due control over the contract."
At the time of the Boeing contract, the TSA was handling more than $4 billion worth of contracts without enough staff members to ensure the work was being properly supervised, according to federal auditors. Last year, GAO auditors examined 21 contract files at the TSA. They found that several of the contract files, including one covering work by a subcontractor on the bomb-detection machines, "did not contain evidence of government surveillance to ensure cost efficiency," said Bill Woods, who directed the audit.
The GAO later cited a 2003 TSA internal study estimating that the agency needed as many as 628 employees to run its Office of Acquisition, which awards and monitors contracts. A year later, the office still had only 61 people, the GAO found.
Ron Endicott, a former federal contracting official hired as a consultant in 2003 to help assess the TSA's acquisition workforce, said more contracting officials were needed to watch the money.
"The workforce over there was dying on the vine," said Endicott, who retired from the federal government after nearly four decades. "People were working 16 hours a day, six and seven days a week, and a lot of talented people were leaving. It was dangerously understaffed."
Kair, the TSA contracting official, said he now has 83 acquisition employees and plans to hire more.
After the bomb-detection machines were put in airports across the country, some of them began to register false alarms. Screeners were forced to open and hand-check bags. Lines backed up, infuriating passengers and airline managers.
The false-alarm rates have since come down, according to counter-terrorism experts and government scientists familiar with the machines. They say the reason is that the machines have been calibrated to be less sensitive, cutting the false alarms but also making the machines less effective.
"When used the way they're supposed to be used, they're almost as good as a dog," said a government technology expert intimately familiar with the machines, who spoke on condition of anonymity for fear of retribution. "The big machines have a very high false-alarm rate. As a result, as anybody in counter-terrorism knows, U.S. officials set the standard way too high, and that's bad." The TSA's Fleming disputed that the machines have been made less sensitive, but he said the agency has upgraded the software to improve their effectiveness.
Last month, the GAO issued a report documenting a series of problems with the bomb-detection machines, including poor contract oversight, and said the stand-alone machines were hampered by "operational inefficiencies." The report also faulted TSA officials for not conducting an analysis that might have led them to a better method: installing machines "in-line" with baggage conveyer belts, speeding up and simplifying the process.
Members of Congress are now calling for a new generation of "in-line" machines, which are considered better at detecting explosives because they rely on the latest technology. The cost: an additional $3 billion to $5 billion.
The TSA was forced to choose the lesser technology primarily because of deadline pressure, government scientists and aviation experts said.
"Congress was frustrated. They said, 'We're going to give you a deadline, and you're bloody well going to meet it,' " said Cathal Flynn, associate administer for civil aviation security at the Federal Aviation Administration between 1993 and 2000 who had been working to install bomb-detection machines in airports for years. "Now they have to spend billions of dollars to get these machines out of the lobbies and put the new ones in the baggage lines."
David M. Stone, assistant secretary in charge of the TSA, said the agency is addressing the problems of the past and has made improvements in all areas. "The TSA of today is not the TSA of 2003," he said in an interview Friday.
A High Risk of Failure
Last year, in a confidential report prepared for the House Homeland Security Committee by a GAO auditor on loan to the panel, the entire Homeland Security Department was deemed to be at "high risk" of failure. The auditor noted in his report, a copy of which was obtained by The Post, that without a stronger management system, "the agency will not have the ability to effectively protect our homeland."
Financial controls were so lax, auditor Glenn Davis found, that DHS officials were unsure whether a $1.2 billion budget shortfall was real or simply an "accounting irregularity." The confusion prompted the DHS to impose a hiring freeze last spring on new customs and border agents. A few weeks later, budget managers concluded that the shortfall was an accounting error, the report said.
"The ambiguity about staffing levels calls into question whether the department can be confident that there is sufficient manpower at our borders to prevent the unwanted entry of terrorist factions into this country," Davis wrote in his report. "Weaknesses in DHS financial systems also could expose the agency unnecessarily to excess waste, fraud and abuse."
The report noted that contracting officers were too overwhelmed to track and supervise billions of dollars worth of contracts. "DHS still struggles to compile a detailed and accurate listing of its contracts and to keep track of spending by its agencies," the report concluded. Davis declined to discuss his report.
A GAO report released last month found that the Homeland Security Department's Office of Procurement Operations, which monitors many of the department's contracts, had 19 employees supervising an average of $101 million in contracts each. By comparison, 332 employees at the U.S. Coast Guard, a Homeland Security division that runs its own contracting office, averaged $6.3 million.
"If you don't have controls over major programs, chances are increased you're going to waste a lot of money and waste a lot time and keep doing the same things over and over again," said Michael J. Sullivan, a GAO analyst who directed the Homeland Security Department procurement study. "They need to get staffing up. They need to get training up. They need to get a handle on oversight."
Further limiting oversight: No single official has been given clear responsibility for all of the department's procurement spending, Sullivan's report said. The lower-level managers are often poorly trained. In the past year, only 22 percent of homeland security contracts and programs were being supervised by managers who had the necessary training and certification, the GAO auditors said.
As a result, relatively inexperienced government workers are required to monitor corporations armed with highly skilled contract specialists and lawyers, who increasingly work side-by-side with the government workers.
"What's developed over the last decade is a new culture that has put [contracting officials] in a very vulnerable position," said Goodger, the veteran government procurement official.
"From a contracting perspective, it's not a healthy situation," he said. "Contractors typically will take advantage of government employees."
Homeland Security officials acknowledged that their contract oversight staff has been understrength and said they are working to bolster it. They now have 60 people in their procurement office, and they plan to more than double that number.
"You just have to rebuild the workforce," said Hale, the undersecretary for management. "This is terribly important."
Making 'His Displeasure Known'
As chief of the Homeland Security Department, Ridge grew frustrated by the drumbeat of bad news contained in the audits, particularly from his department's own office of inspector general, according to Ervin. Twice last year, Ridge summoned the inspector general to his office to complain about his reports, according to Ervin.
Ridge was particularly upset with one report documenting problems with a visa-waiver program and another describing difficulties with terrorist watch lists, Ervin said.
"He said he regarded the reports as being unduly critical," said Ervin, whose political appointment expired in December and who now works at a District think tank. "He was trying to make his displeasure known."
Ridge said he never asked Ervin to "modify or mollify" his reports. But he objected to Ervin's methods.
"I said, 'Do you feel obligated to send every report to the Hill? Does everything you do have to end up in a press release?' "
Ervin said he responded that inspectors general do not answer to agency chiefs but to Congress and the public. "His view was, I wasn't part of the team," Ervin said. "I told him that I thought the team was supposed to be the American people."
Database editor Sarah Cohen and researcher Alice Crites contributed to this report.
