Pentagon Ends New Work On D.C. Firm's Contract

By Renae Merle and R. Jeffrey Smith
Washington Post Staff Writers
Tuesday, June 28, 2005

The Pentagon has ordered a halt in new work for MZM Inc., a local defense and intelligence firm, under a contract that has brought the company $163 million in revenue during the past 2 1/2 years.

A Pentagon spokesman said in a statement that the decision to cut off further awards for MZM under the 2002 contract, known as blanket purchase agreement, was because of a change in procurement law.

Rep. Randy "Duke" Cunningham (R-Calif.), a member of the House defense appropriations subcommittee, acknowledged last week that his relationship with MZM founder Mitchell J. Wade is being examined by federal authorities.

A representative for Wade, who spoke on condition of anonymity, said last night that Wade had stepped aside because of the investigation and that a new chief executive, retired Lt. Gen. James C. King, will be announced today. King had been head of the National Imagery and Mapping Agency, now known as the National Geospatial-Intelligence Agency. More recently, King has been a senior executive vice president at MZM.

News reports earlier this month disclosed that Wade, MZM's founder and president, bought Cunningham's California home for $1.675 million in late 2003 and then sold it at a $700,000 loss. Cunningham also has been living on Mitchell's 42-foot yacht on the Potomac while in Washington. Cunningham said last week that he exercised "poor judgment" in the relationship, but he denied doing anything improper.

MZM, a privately held District firm, was the only company to submit a proposal for the Pentagon contract, which because of the law change "could no longer be considered competitive," the statement said. The company's current work under that and other contracts will continue, and the Pentagon said the action was not related to the investigation.

Calls to MZM yesterday for comment were not returned. Wade's representative said the company's performance ratings under the contract were "always at the highest levels."

Wade's representative said the change in procurement law would affect other companies. The law requiring more competition in such awards passed in late 2001, and the accompanying regulations went into effect in October 2002, a month after MZM was awarded the blanket purchase agreement.

Danielle Brian, head of the Project on Government Oversight, which monitors defense contracting, said, "If only the Pentagon was as concerned about all its contractors as it suddenly is now about this one."

The contract is typical of many support service agreements the Pentagon has come to rely on to augment its workforce, said Dan Guttman, a specialist on government contracting and a fellow at Johns Hopkins University's Center for the Study of American Government.

Government procurement records show that MZM, which Wade started in 1993, did not report any revenue from prime contract awards until 2003. Most of its revenue has come from the agreement the Pentagon just cut off. But over the past three years it was also awarded several contracts, worth more than $600,000, by the Executive Office of the President. They include a $140,000 deal for office furniture in 2002 and several for unspecified "intelligence services."

A White House spokeswoman declined to comment.

One of the company's contracts was to provide linguists to the Office of Reconstruction and Humanitarian Assistance, the first U.S.-run administrator put in place after the fall of Saddam Hussein in Iraq. The contract, which expired last year, was initially expected to be worth about $1.2 million but grew to $5 million overall, an Army spokesman said.

Staff researcher Meg Smith contributed to this report.

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