Defense Contractor's Offensive Maneuvers

Mitchell J. Wade -- who pleaded guilty in February to giving more than $1 million worth of bribes to former congressman Randy "Duke" Cunningham -- was a master of the Pentagon procurement system, using methods both fair and foul.

Wade's company, District-based MZM Inc., had no prime federal contracts in 2002, but over the next three years collected $170 million -- thanks not just to corruption, but also to his ability to take common practices and push them to the limit.

Post staff writer Charles R. Babcock was online to answer questions about the MZM owner and the often cutthroat world of defense contracting. A transcript follows.

Read: A Contractor's Purchase on Power (March 20, 2006)

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Charles R. Babcock: see several questions waiting so lets get started.

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Alexandria, VA: Would the Post consider doing a larger story by trying to account for all the new "Homeland Security Millionaires?"

Specifically, I am interested in an article detailing the total transfer of wealth to new and existing gov't contractors specifically tied to domestic security and the war on terror.

Charles R. Babcock: interesting idea. and a topic i believe we are looking at in a broader way about the growth of wealth in the area with all the growth in contracting post 9/11.

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Washington, D.C.: Unlike the companies belonging to alleged fellow co-conspirator Brent Wilkes, Mitchell Wade's company has been reinvented as Athena Innovative Solutions and continues to get federal contracts, including those for sensitive classified -- and controversial programs, such as the Pentagon's CIFA. To what extent have government investigators assured themselves of the fitness of MZM, and now its successor, of Athena, to continue to perform the highly sensitive and classified tasks for which it initially received contracts due seemingly to Mitchell Wade's unethical practices, e.g. bribery?

Should a company be getting contracts to collate data on peaceful anti war groups for the Pentagon based on its founder having bribed lawmaker(s)?

Secondly, your piece mentions that in recent years, Wilkes became a subcontractor to Wade. On which projects/contracts?

Charles R. Babcock: I don't know what government investigators have done to check on Athena, but Mitchell Wade seemed to have hired some well credentialied people with the necessary clearances to work on programs like CIFA. I never heard of CIFA until I ran into MZM. The intelligence committees in Congress have the responsibility to oversee such agencies, although my colleague, Walter Pincus, has been on the case too. See his story on A3 today about contracting out intelligence work.

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washingtonpost.com: Increase in Contracting Intelligence Jobs Raises Concerns

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Bethesda, MD: Did MZM have outside auditors? Who were they, and why wasn't this discovered earlier by them, or DCAA?

Charles R. Babcock: MZM was a private company and I haven't seen financials that might show who their auditors were. The Cunningham and Wade pleas show the MZM owner was writing lots of corporate checks for the congressman. It doesn't seem that the Pentagon auditors can keep up with all the contracts out there, unless someone whispers in their ear to look.

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Cockeysville, MD: On average, what percentage of an award fee pool does the contractor historically receive in a government contract? Are the criteria for these awards effective in ensuring the job is done correctly?

Charles R. Babcock: Afraid I'm not enough of an expert to say. There has been quite a fuss recently from Rep. Henry Waxman (D-Cal.) about Halliburton subsidiary KBR getting high award fees on Iraq work even after it was challenged by auditors.

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Annapolis, MD: I am wondering since wars are very profitable for defense contractors are they actively lobbying for wars? Do they support the think tanks that advocated the Iraq war (and possibly attacking Iran). From a business point of view it would make complete sense.

Charles R. Babcock: Doubt that they would call it lobbying "for war," but defense contractors obviously see there is money to be made in the Bush administration's decision to build up defense and ntelligence capabilities after the terrorist attacks. And yes, I'm sure some of them support think tanks that have taken a hawkish approach to our foreign affairs.

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Springfield, Virginia: Is Mitch Wade going to have to do some time? Is so when is his sentencing?

Charles R. Babcock: Yes, he pleaded guilty to four felonies and seems sure to serve time in prison, though he is cooperating with the authorities. He is scheduled to be sentenced in August.

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Washington DC: MZM is such a great story!

Do you have any more information about the unspecified "intelligence services" MZM apparently performed for the White House, or how the company got White House contracts totaling more than $250,000?

If you don't, is it because the White House is stonewalling, or you haven't asked? If the former, could you write that somewhere? It seems newsworthy.

If the White House won't talk, isn't there some other way to find out what happened? Aren't reporters intrigued by this very tantalizing loose thread?

Is it conceivable that someone was bribed? In the absence of any information, can we rule that out?

Charles R. Babcock: I have heard a few possible explanations of the small White House contracts, and agree reporters are intrigued by loose threads. This is one we are still interested in.

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Rochester, NY: Great article on Wade this morning. I have a couple questions for you:

(1) What do you make of the story this weekend in the San Diego Union-Tribune about Representative Doolitte's wife essentially skimming campaign contributions? Is that under scrutiny from the DOJ as well?

(2) Jeffrey Birnbaum had a story this morning about a ruling on a bribery case from an appeals court and how that might affect the Abramoff probe. Might is also affect the Cunningham case?

Thanks.

washingtonpost.com: K Street Confidential: Why Clearing A Cop's Name Matters In Abramoff Scandal (March 20, 2006)

Charles R. Babcock: Thanks. Don't know whether Justice looking at Mrs. Doolittle's commissions. And afraid to say I haven't read Jeff's column yet.

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RRB in Washington D.C.: I work for the US government in the international development area in Africa, Asia, Latin America, and Asia. Our costs of our contracts come no where near those that are in Iraq and Afghanistan. But we have built in controls on too freely awarding "sole source" contracts. A firm has to demonstrate "unique or pre-dominant capability" to obtain such a contract. This means that they are the only ones in the world that can provide the services requested. Experience shows that they usually are not. There are other companies that can not only provide the services, but can do so cheaply. How can the big 'body-shops', as we call them, frequently and continuously get these kinds of 'sole source' contracts?

Charles R. Babcock: Good question. Mr. Wade appeared to work hard to get his people in an agency where they used to work and knew the people, so they could press for more work. And then there's the allegation he traded financial favors with contracting officers.

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Baltimore, MD: One of my pet peeves about articles on defense contracting is the term "no-bid". There is no such term in the Federal Acquisition Regulations (FAR), but it is all over the media. The implication seems to be that these contracts allow the contractors to pass on all costs plus add a markup or fee. This type of contract is illegal: see FAR 16.102 and 10 U.S.C. 2306(a) and 41 U.S.C. 254 (b). So, is the media failing to pursue clearly illegal activities by the Government, or are they (intentionally or ignorantly) failing to inform the public?

Charles R. Babcock: We may be ignorant about FAR details at times, but we don't intentionally mislead the public. In the $225 million ceiling blanket purchase agreement cited in the article, the Defense agency asked two companies to respond and only MZM did. The requirement was that three companies respond. That's why, nearly three years later, new work on the BPA was blocked. "No bid" doesn't imply anything about fees to me. That depends on what type of contract it is.

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Alexandria, VA: Mr Babcock: 2 questions: Any insights into how MZM justified labor rates that were 25-50% more than the market? I'm curious how contracting officers were able to justify awards that were so much higher than the going rate.

Second: MZM hired a lot of senior officials including SESs (several, in fact, from the FBI) as well as general officers. How is it that they did they not notice that "something was rotten?"

Charles R. Babcock: Good question and one former employees and some MZM competitors have wondered all along. They apparently were able to list the high rates by coming up with some invoices to show GSA to justify them. It does make me wonder whether contracting officers ever challenge the bills.

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Leesburg, Virginia: Can you comment on the other article in today's Post about the money being made on the Hurricane Katrina effort?

washingtonpost.com: Multiple Layers Of Contractors Drive Up Cost of Katrina Cleanup

Charles R. Babcock: I thought it was very good because it tried to peel away the lawyer of contractors and ask the basic question: what is the taxpayer getting in return?

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Burke, VA: Well written, researched article - how far do you think this case will go into the Department of the Interior?

Charles R. Babcock: Thanks. Not sure how far it will reach into Interior, but know that investigators are looking into parts of the Defense Department, since one of the counts Wade pleaded guilty to was conpiring with officials there to trade favors for good treatment of MZM.

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Burke, VA: Have you made any progress in identifying the motivation behind the earmarks/plus-ups sponsored by Rep. Duncan Hunter?

Charles R. Babcock: Have any particular ones in mind?

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Redondo Beach, CA: This story about Wade is representative of the Dept. of Defense culture of corruption that has exploded during this administration's tenure. I'd like to know what role the major defense contractors, i.e., Lockheed-Martin, Northrop-Grumman, etc., also play in "persuading" our elected public servants to award $billions to them using unscrupulous lobbying or other dirty tactics?

Charles R. Babcock: The usual Washington routine is for supplicants to the federal government of any size to hire lobbyists, often former aides to the members on the key committees, and then raise money for their campaigns while trying to persuade them of the importance of their airplane or software. What makes Wade and Cunningham an aberration, we hope, was the cash under the table.

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Falls Church, VA: Are senators and representatives (and their staffs) required to report meetings with contractors? If they did, do you think fraud and unnecessary spending would be diminished?

Charles R. Babcock: No, they are not. And lobbyists aren't either. Sunshine is a powerful disinfectant, but reports don't change human nature.

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Fairfax, VA: I work for a major DHS contractor and the government folks are just as shady as we are. The amount of 'back scratching' between their program people and ours is crazy. It's a revolving door between the two jobs and everyone gets their piece of the pie.

Charles R. Babcock: That's a trait MZM certainly seemed to take advantage of.

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Arlington, VA: Great article, fascinating read! The most striking thing about MZM's actions is how blatant the manipulation was, how much of a trail they left. Which echoes the Abramoff case. It seems likely that the cardinal sin of both (the one that got them caught), was that they shook their respective boats a bit too much, grabbed too big of a share from the established market, and that competitors who were getting shut out started noticing, dug up the dirt, and started leaking it.

How likely is that scenario, in your opinion?

Charles R. Babcock: Thanks. Not sure how my colleagues first learned of Abramoff deeds, but Cunningham-Wade downfall started with good work by reporter for the San Diego Union-Tribune, who did a lifestyle audit of the congressman after he bought his huge new mansion in Rancho Santa Fe. He found that deal looked okay from land records. But in looking at the home Duke sold first, the reporter found the buyer, a corp. located at MZM's address in the District, sold it months later at a $700k loss. Didn't take him long to find Wade and the corrupt relationship started to unravel right after the first story last June.

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Washington, D.C.: After reading your article, I think some readers might have come away thinking that "blanket purchase agreements" (the so-called "licenses to hunt") are somehow shady, or at worst, illegal. Obviously they aren't and are used every day as legit federal contracting vehicles.

Not saying your piece was misleading but just wanted to clarify - not sure if others had the same reaction.

Charles R. Babcock: I think like most contracting vehicles, it depends how they are used. One problem is that is assumed competition when there was none.

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Burke, VA: With respect to plus-ups by rep. Hunter: Plus-ups to General Atomics, Titan and VSSL, to name a few.

Charles R. Babcock: First two at least in southern California. And many members put out press releases bragging about bringing money home to their state or district. But would be glad to hear more specific instances to check out at my e-mail after the chat. Thanks all.

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