Rules Skirted, Millions Wasted on Navy Boat Barriers

· 58 for $2.9 million on Oct. 12.

On May 9, 2002, three invoices came in for an identical amount -- $2,956,762 each. On Feb. 14, 2003, six invoices came in for $2,678,813 apiece.

GSA officials later told auditors they "believed each order represented a discrete boat-barrier system installed at a discrete harbor, but this was clearly not the case."

Nelson said Northern officials knew the project was being structured to stay beneath the $3 million cap. But he said company officials believed that it was being done properly by NCIS and GSA in the interests of speed and national security.

"It was pretty obvious what they were doing," said Nelson, who is now at another company. "We figured somebody who was in authority knew what they were doing. We didn't go out and try to win this work. It just came our way."

At each step in the process, Northern and P-Con received a percentage of the proceeds from the project.

For example, the base cost for each boat barrier was supposed to be $45,250. Northern charged a 4.8 percent fee for "acting as GSA's order administrator," the auditors said. P-Con charged a 7.5 percent on all expenses as a "Consultant Markup." The final cost to taxpayers for each boat barrier was $50,978.65, auditors estimated.

Even larger markups took place for the installation of the barriers and the buoys to hold them in place, documents show. The base cost for each buoy was supposed to be $31,000. The company responsible for installing the barriers added a 9.8 percent administrative fee and another unspecified 20 percent fee. Company officials told auditors the fees were the standard industry markup.

Northern charged another 5 percent fee. The final cost to taxpayers for each buoy was $42,825.68, documents show.

"Millions of dollars were wasted by compensating the contractors for doing little more than placing orders with other favored contractors to do the actual work," the auditors said.

Auditors also found that NCIS paid too much for radar, sonar video systems and a command control console to monitor boat traffic near the barriers, according to contracting documents. Fifteen sonar systems were purchased through Northern for $5.4 million. That was 40 percent more than necessary, according to the auditors.

"We concluded that free and open competition could have substantially reduced the prices for the sonar systems supplied to the Navy," the auditors wrote in their report.