Costs Skyrocket As DHS Runs Up No-Bid Contracts

To buy themselves time to solicit bids, agency officials decided they should award Booz Allen a temporary "bridge" contract through the GSA to keep the infrastructure and intelligence analysis offices running. As part of that move, the department used its authority to dispense with federal acquisition procedures that would have brought extra delays -- and more scrutiny -- to the project, according to memos, e-mail and interviews with procurement officials.

Throughout the spring of 2005, for instance, Booz Allen worked for months with only "verbal authorization" from Homeland Security officials, rather than a written contract, as the department continued working on the bridge contract, according to Duke, the department's procurement chief.

In March 2005, a senior agency procurement official asked for approval in an e-mail to waive a requirement that the department draw up a plan for spending the money. The reason: The bridge contract was "contemplated only as a short-term sole-source" arrangement. Ashley J. Lewis, the department's director of acquisition policy and oversight at the time, approved the request less than a day after he received it: "You've got it," Lewis said in a brief response.

Contracting officials did not create a statement of the work that would "require measurable performance and quality standards" from Booz Allen. A contracting specialist wrote that "the massive effort . . . was not feasible in this situation" because the bridge contract was considered temporary.

Officials did not require Booz Allen to provide a fixed price for the work they would be doing -- a standard way of preventing cost overruns; the government agreed to pay the firm by the hour on an open-ended basis. Officials used that approach because they did not know how much the project would eventually cost. Booz Allen's labor rates ran $42 to $383 an hour.

On May 25, 2005, Homeland Security approved the temporary contract that would keep the offices operating. The deal was projected to be worth $18 million, a third more than previously estimated.

Because its approval took so long, the arrangement was technically slated to end less than a week later, when the department hoped to allow other companies to bid for the work. But the "bridge contract" did not end, and costs continued to rise.

On June 1, 2005, the temporary contract was extended, as the agency approved the first of multiple modifications to the work that would increase spending by at least $25 million more.

When Booz Allen finally faced competition last year, Homeland Security had broken the work into five contracts. In total, those contracts were worth more than $50 million over a year's time.

Booz Allen won them all.