Interior, Pentagon Faulted In Audits

By Robert O'Harrow Jr. and Scott Higham
Washington Post Staff Writers
Monday, December 25, 2006

The Defense Department paid two procurement operations at the Department of the Interior to arrange for Pentagon purchases totaling $1.7 billion that resulted in excessive fees and tens of millions of dollars in waste, documents show.

Defense turned to Interior, which manages federal lands and resources, in an effort to speed up its contracting. Interior is one of several government agencies allowed to manage contracts for other agencies in exchange for a fee.

But the arrangement between Interior and Defense "routinely violated rules designed to protect U.S. Government interests," according to draft audit documents obtained by The Washington Post.

More than half of the contracts examined were awarded without competition or without checks to determine that the prices were reasonable, according to the audits by the inspectors general for Defense (DOD) and Interior (DOI). Ninety-two percent of the work reviewed was awarded without verifying that the contractors' cost estimates were accurate; 96 percent was inadequately monitored.

In one instance, Interior officials bought armor to reinforce Army vehicles from a software maker. In another, Interior bought furniture for Defense from a company that apparently had not previously been in the furniture business. One contract worth $100 million, to lease office space for a top-secret intelligence unit in Northern Virginia, was awarded without competition. Defense auditors said that deal cost taxpayers millions more than necessary, and they have referred the matter for possible criminal investigation.

"These poor contracting practices have left DOD vulnerable to fraud, waste and abuse and DOI vulnerable to sanctions and the loss of the public trust," the Interior auditors concluded in their report.

They examined 49 deals and concluded that 61 percent had evidence of "illegal contracts, ill advised contracts, and various failings of contract administration procedures."

The auditors' findings underscore the difficulties that have come with efforts over the past decade to streamline government by outsourcing work, simplifying contracting procedures and cutting back on the procurement workforce. Agencies such as Interior are allowed to handle contracts for other agencies under the theory that they can perform some services more efficiently. But in this case, auditors found that Interior did not follow through on oversight and collected $22.8 million in fees for work the Pentagon could have done itself.

Officials at Defense and Interior said they have been working to fix contracting problems cited in the audits.

"We are currently reviewing the findings of the DOD IG, and we have been meeting with representatives of the DOI regarding the specifics of the draft report," said Shay Assad, director of defense procurement and acquisition policy at the Pentagon. "It would be premature to comment specifically except to say that we understand DOI is actively taking actions to improve their contracting practices in response to a number of the draft findings."

Interior officials said they are adopting many of the auditors' recommendations and have made "giant strides." They said they are examining "specific contracts of concern" as well as reviewing the qualifications of their contracting officers and improving their training.

"We believe that many of your recommendations can help us further improve our internal controls related to the acquisition environment," R. Thomas Weimer, Interior's assistant secretary for policy, management and budget, wrote in a Nov. 30 response to his department's inspector general.

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