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Report: U.S. wasted $60 billion in contracting fraud, abuse

The full report can be viewed here

WASHINGTON — A new congressional report finds that war planners have wasted as much as $60 billion on contract fraud and abuse in Iraq and Afghanistan, about $1 for every $3.50 spent on contractors in those countries over the last decade.

Report authors said the findings are not an indictment of the defense contracting industry but instead of the government’s own auditing and oversight work, a patchwork of mismatched regulations hastily assembled in the lead-up to both wars. In many cases, mistakes made in Iraq were repeated in Afghanistan years later, costing taxpayers billions and potentially endangering military missions.

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“There are a number of causes that have been around for a long time ... but they still aren’t getting fixed,” said Katherine Schinasi, a commissioner on the wartime contracting panel which released its findings Wednesday. “But the numbers we’re talking about don’t seem to be resonating. It’s $12 million a day we’re wasting.”

Michael Thibault, co-chair of the commission and former deputy director of the Defense Contract Audit Agency, said that between $21 billion and $42 billion of the lost money has gone to incomplete construction and training projects, unnecessary subcontractors, unexplained cost overruns and similar wasteful practices.

Another $10 to $18 billion has disappeared due to fraud, including bribes to local government officials and contractors who simply ran off with thousands of dollars.

The commission’s 240-page report includes dozens of specific cases of bad contracts. Afghan subcontractors working for U.S. convoys used U.S. taxpayer money to pay off local insurgents for safety. No-bid fuel contracts in Iraq and Afghanistan totaled billions in excess fees. Third-country nationals were housed in shanties while contractors pocketed most of their salaries.

Former Rep. Chris Shays, also a co-chair, said the core problem is that even though overseas war efforts depend on private contractor assistance, the government simply does not have the capacity to oversee the large number of companies and civilian workers involved.

More than 262,000 contractors work for the departments of defense and state in overseas war zones, about 46,000 of whom are U.S. citizens. More than 2,400 contractors have been killed in the two wars since 2001.

“[Contractors] have performed vital tasks in support of U.S. defense, diplomatic, and development objectives,” the report states. “But the cost has been high. Poor planning, management, and oversight of contracts has led to massive waste and has damaged these objectives.

“Much of the contingency-contract waste and fraud could have been avoided. Unless changes are made, continued waste and fraud will undercut the effectiveness of money spent in future operations.”

In a statement, Sen. Claire McCaskill, D-Mo., called the contracting waste totals troubling.

“It is disgusting to think that nearly a third of the billions and billions we spent on contracting was wasted or used for fraud,” she said. “We cannot repeat these mistakes. The American people deserve better.”

The report details 32 recommendations on contracting improvements, most focused on decreasing agencies’ reliance on contractors, providing closer scrutiny of contract goals and costs, and penalizing or prosecuting contracting fraud.

Several would also require hiring more contracting auditors and standing up new oversight agencies, expenses which the commission members acknowledged could be a tough sell as lawmakers look for ways to cut government spending.

But Thibault called those moves an “investment” for taxpayers, not only to ensure that federal dollars are being spent wisely but also to save those funds over the long term.

Those ideas are simply high-profile suggestions for now. When lawmakers created the independent, nonpartisan commission three years ago, they did not require any of its findings to be enacted by Congress.

However, Shays said he expects the new congressional supercommittee — formed during last month’s debt ceiling crisis with a mandate to cut more than $1 trillion in federal spending — to consider the ideas as part of their three-month budget review.

Ignoring the recommendations “would be a failure,” Shays said, because of the potential to save billions.

shanel@stripes.osd.mil

Twitter: @LeoShane

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