The Defense Department is paying a firm called AECOM Technology Corp. to do work in Iraq once reserved mostly for military managers and other public employees, an arrangement that shows how far the government has gone in its decade-long effort to turn over much of its work to private contractors.
Under the $22 million contract, awarded in March, the Los Angeles-based engineering firm's subsidiaries will help the Pentagon buy goods and services, plan projects and administer contracts in Iraq related to reconstruction work. The firm will also monitor other contractors who are overseeing billions of dollars worth of electrical, water and communications projects. And the firm will assist on audits of projects, according to company documents.
The AECOM contract is the latest example of a transformation of the military acquisition system that started more than a decade ago and has contractors making decisions once made by government staffers. From 1990 to 2000, the Defense Department cut its procurement and acquisition staff from about 461,000 to 231,000, according to a 2000 report by the Defense Department's inspector general. Many duties that had been handled by the government were gradually shifted to the private sector.
David J. Nash, head of the Program Management Office of the Coalition Provisional Authority in Iraq, said the shift is crucial to the complex task of Iraq reconstruction. "What we have is a bit of a private-sector model," he said in an interview from Iraq. "What we've tried to create here is a very agile approach" that uses private-sector management expertise.
Some procurement and military experts contend that the expanded use of contractors has made accountability more difficult. The government is investigating whether Halliburton Inc. charged the government improperly for meals and gasoline. The military is examining allegations that civilian contract interrogators were involved in abusing prisoners at the Abu Ghraib prison. Concerns also are growing about the use of private armies following the deaths of armed guards working for Blackwater Security Consulting, a company hired to protect L. Paul Bremer, the U.S. civilian administrator of Iraq, several military facilities and other companies operating in Iraq. Congress has raised questions about conflicts of interests among the companies hired to help the government manage the $18.4 billion allocated to help rebuild Iraq.
"How much control do we have over these organizations?" said Conrad C. Crane, director of the U.S. Army Military History Institute at the Army War College in Carlisle, Pa. "It's at a point that it's here to stay. You can't go back. We have to make sure it's going to work."
The roots of these changes go back to the early 1990s, when Congress and the Clinton administration were trying to cut costs and making federal contracting more efficient. In 1992, when Congress pressed the Defense Department to cut back on nonessential personnel and focus resources on the fighting forces, the acquisition staff was reduced. Two years later, Congress passed the Federal Acquisition Streamlining Act of 1994, giving agencies broader authority to buy goods and services, while narrowing their responsibility to negotiate. In 1996, Congress approved the Clinger-Cohen Act, which allowed the use of multi-agency contracts, easing the way for one agency to handle contracts for others.
Behind all that activity was a document, revised many times, called the Office of Management and Budget Circular A-76. "Competition enhances quality, economy, and productivity," and government has an obligation to use contractors whenever possible, it says.
As the personnel cuts at the Pentagon accelerated in the 1990s, there was a fierce debate inside the government. Some Pentagon officials warned that a lack of oversight could result. One of them was Dennis H. Trosch, who worked for more than two decades in the Defense Department's general counsel's office. Though he agreed that some outsourcing could improve efficiency, Trosch said he and others warned that reliance on private companies would probably lead to problems.
"From where I was, I felt the government was losing control and accountability," said Trosch, who retired in May 1996 as the department's deputy general counsel for acquisition and logistics.
Meanwhile purchases have been soaring. The Defense Department said it spent almost $209 billion on goods and services in fiscal 2003, compared to $153 billion in fiscal 2001.
Steven L. Schooner, co-director of the Government Procurement Law Program at George Washington University, said the government has left itself unable to provide proper oversight at a critical juncture in Iraq. "Quite simply," he said in a recent paper, "the Government lacks sufficient qualified acquisition, contract management, and quality control personnel to handle the outsourcing burden."
The oversight issue has been complicated by a new generation of large, all-purpose contracts that were permitted because of the legislation that Congress passed in 1994 and 1996 to make contracting more efficient.
For example, the Army awarded Premier Technology Group Inc. an umbrella contract designed to allow the Army to get quick help on inventory control and systems integration. PTG was acquired last year by CACI International Inc., and the contract was used for intelligence and interrogation work. The task orders used to hire private interrogators for Abu Ghraib prison were never publicly disclosed by the Defense Department.
Another broad contract was won by Halliburton Co.'s subsidiary, KBR, a $1.9 million deal to plan the reconstruction of Iraqi oil pipelines. In March 2003, KBR landed an even broader sole-source contract to do work worth up to $7 billion.
For help on contracting, the Defense Department sometimes turns to other government agencies, who take on such work for the money, keeping a fraction of the total value of the contract in the form of a fee. Between 1999 and 2001, for instance, the General Services Administration -- which handles more than 90 percent of the contracts the Defense Department processes through other agencies -- generated $151.3 million by extracting a 1 percent fee for such management deals, according to a General Accounting Office report in 2002.
The Defense Department maintains that outsourcing the procurement work saves money, but some contracting experts are skeptical. The department paid other agencies $126 million to handle $12.5 billion in purchases in fiscal 2002. The Defense Department spent $180.2 billion on goods and services in fiscal year 2002.
The use of such arrangements, sometimes called government-wide acquisition contracts, increased sharply from 1997 to 2001, when the value of contracts awarded by one agency but managed by another tripled to $14.4 billion, according to a GAO report to Congress last year. The goal of the arrangements is to ease the administrative burden carried by departments and to let agencies buy goods and services in bulk. But it raises accountability questions, critics say. "Where does responsibility lie and who is accountable for ensuring that taxpayers are getting their money's worth," said Bill Woods, director of GAO's acquisition and sourcing management team.
After an internal Army report accused a CACI employee of encouraging soldiers to set conditions for interrogations and said he "clearly knew his instructions equated to physical abuse," it took more than a week for the government to track down and release details on the CACI contract, which was originally an Army contract but was turned over to the Interior Department.
Danielle Brian, executive director of the nonprofit Project on Government Oversight, questioned whether the Interior Department could decide whether it was appropriate to use that CACI systems integration contract to hire an interrogator. "How can a person at Interior know what qualities you're looking for in a contractor doing something as sensitive as interrogating prisoners of war?" Brian said.
Nash and other government and business officials say the reconstruction projects will be closely audited, which will prevent mismanagement problems.
Lester M. Hunkele III, a senior vice president at AECOM subsidiary DMJM, said he had been skeptical about the use of contractors years ago when he was deputy assistant secretary of Veterans Affairs. He now thinks it makes sense in Iraq, although he adds that the tenuous security situation makes the outcome hard to predict.
"My take is this does make sense [in Iraq]," Hunkele said. "It doesn't always make sense."