Privatized Walter Reed Workforce Gets Scrutiny

Army Secretary Francis J. Harvey, second from left, is escorted from the floor during a farewell ceremony at Fort Myer. Harvey resigned last week in the wake of problems at Walter Reed.
Army Secretary Francis J. Harvey, second from left, is escorted from the floor during a farewell ceremony at Fort Myer. Harvey resigned last week in the wake of problems at Walter Reed. (By Win Mcnamee -- Getty Images)
By Steve Vogel and Renae Merle
Washington Post Staff Writers
Saturday, March 10, 2007

The scandal over treatment of outpatients at Walter Reed Army Medical Center has focused attention on the Army's decision to privatize the facilities support workforce at the hospital, a move commanders say left the building maintenance staff undermanned.

Some Democratic lawmakers have questioned the decision to hire IAP Worldwide Services, a contractor with connections to the Bush administration and to KBR, a Halliburton subsidiary.

Last year, IAP won a $120 million contract to maintain and operate Walter Reed facilities. The decision reversed a 2004 finding by the Army that it would be more cost-effective to keep the work in-house. After IAP protested, Army auditors ruled that the cost estimates offered by in-house federal workers were too low. They had to submit a new bid, which added 23 employees and $16 million to their cost, according to the Army.

Yesterday, the American Federation of Government Employees, the largest federal workers union, blamed pressure on the Army from the White House's Office of Management and Budget for the decision to privatize its civilian workforce.

"Left to its own devices, the Army would likely have suspended this privatization effort," John Gage, president of the organization, said in a statement. "However, the political pressure from OMB left Army officials with no choice but to go forward, even if that resulted in unsatisfactory care to the nation's veterans."

The Army selected IAP for the five-year deal in January 2006, but IAP did not take over management until last month. During that period, the number of facilities management workers at Walter Reed dropped from about 180 to 100, and the hospital found it hard to hire replacements.

Maj. Gen. George W. Weightman, who was Walter Reed's commander until he was relieved last week, testified this week that the privatization -- in combination with a decision by the Pentagon in 2005 to close Walter Reed by 2011 -- "absolutely" contributed to the problems.

IAP said in a statement it has "responded with a sense of urgency to address maintenance concerns throughout the [Walter Reed] complex."

Sen. Barbara A. Mikulski (D-Md.) charged this week that the Bush administration had unfairly blamed federal workers for problems "that are a direct result of the Bush administration's contracting out policy."

The White House did not respond to a request for comment.

IAP, based in Cape Canaveral, has provided such services to the government as delivering ice in the Gulf Coast after Hurricane Katrina and helping maintain Afghanistan's air traffic control system. In 2006, the firm had $393 million in military contracts, according to Pentagon data.

IAP is owned by Cerberus Capital Management LP, an asset-management firm chaired by former Treasury secretary John W. Snow. The company is headed by two former high-ranking executives of KBR, formerly known as Kellogg Brown & Root. Al Neffgen, IAP's chief executive, was chief operating officer for a KBR division before joining IAP in 2004. IAP's president, Dave Swindle, is a former KBR vice president.

The company has worked at Walter Reed since 2003, providing housekeepers, computer analysts and clerks under a Treasury contract.

In an unrelated case, the U.S. attorney's office in Maryland announced that a Rockville contractor, Leon Krachyna Jr., pleaded guilty yesterday to a charge of bribing a Walter Reed official.

The official, Kevin R. Roach, was indicted in October for conspiracy and obstruction. According to court papers, Roach, a civilian contract specialist for the Army Medical Command, received kickbacks between 1999 and 2003 in exchange for favorable treatment of companies controlled by Krachyna and his partner, Louis Pisani Jr. Roach and Pisani await trial.

At a Fort Myer ceremony yesterday, the Army bade farewell to Secretary Francis J. Harvey, forced to resign over Walter Reed. Leaders, he said, must show "that they will be held personally accountable for their decisions."

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