Audit finds that Iraq contractor overcharged for repair parts

By Walter Pincus
Washington Post Staff Writer
Friday, October 30, 2009; A09

A defense contractor that supplied vehicle parts for the Iraqi army sought reimbursements from the U.S. military far in excess of the cost of the items, according to a new report by the special inspector general for Iraq reconstruction.

The contractor, Aecom Government Services, charged $237 for a vehicle side mirror that was supposed to cost $14.88, according to the report. The company also submitted invoices to the U.S. military in Iraq seeking reimbursements of $196.50 for a bag of 10 washers that was supposed to cost $1.22, $10 for a fuse that should have cost 45 cents and $210 for an inner tube that was supposed to cost $24.09.

Aecom officials disputed the allegations, telling auditors that the overcharging was the result of "billing errors" that "occurred early in the contract," according to the report, scheduled for release Friday. The company said that "cumulative adjustments were made."

Paul J. Gennaro, a senior vice president of Aecom, said Thursday that the company had "self-identified and corrected" the issues, "making an immediate repayment over two years ago -- to the client's satisfaction."

Stuart W. Bowen Jr., the special inspector general, said in the report that the findings point to larger issues with government contracts issued for work in Iraq. Preliminary audits of 22,000 Defense Department transactions involving about $10.7 billion have identified not just overpayments by the government, but also duplicate payments, as well as payments to fictitious vendors and addresses.

The preliminary findings have prompted a decision to examine all financial transactions related to the major U.S. programs in Iraq -- spending that totaled $35.2 billion as of Sept. 30, 2008. The report said particular attention will be paid to programs "that afford easy access to cash," such as the military's $3.6 billion Commander's Emergency Response Program.

Aecom Government Services' contract called for it to buy repair parts for Iraqi military units as part of a program to make the units self-sufficient in logistics. The firm won the contract based in part on the per-item unit price it quoted, plus an allowable markup.

Bowen's auditors reviewed four of 139 invoices Aecom submitted for repayment from July 2005 to September 2009; they totaled $29.9 million. From those, the audit identified "about $4.1 million in potential overbillings."

The auditors disputed assertions that Aecom had repaid the government in full. In an interview, Daniel Kopp, a spokesman for Bowen, cited the case of the washers.

"Based on the documentation Aecom provided us, they've never reimbursed the government for the washers," he said.

Contractors such as Aecom have their invoices reviewed by Army Contracting Command personnel in Rock Island, Ill. But Bowen's auditors found that the command "did not have enough experienced personnel to review invoices thoroughly, leaving the U.S. government vulnerable to undetected overcharges." Over time, additional personnel were transferred to Rock Island, and the review process improved. Thereafter, the contracting office "denied payment of as much as 33% from invoices, compared to only 0.1% from invoices prior to that time," the report said.

On its Web site this month, Aecom Government Services announced a $78.8 million six-month extension of its contract with the U.S. Army to support operations in Afghanistan, which entails providing general support maintenance and running maintenance facilities at two military bases as well as forward operating bases and satellite locations. The Los Angeles-based parent company, Aecom, provides worldwide technical and management services and reported $6.1 billion in revenue for the year ending June 30, with operations in more than 100 countries.

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