- The Washington Times - Tuesday, May 5, 2009

A massive contract to support U.S. troops in Iraq and Afghanistan received a withering review Monday, as a special panel investigating waste and fraud in wartime spending was told of numerous deficiencies in the arrangement that has paid KBR Inc. nearly $32 billion since 2001.

Testifying before the bipartisan Wartime Contracting Commission, April Stephenson, head of the Defense Contract Audit Agency, said her agency has referred at least 16 reports since 2004 of suspected fraud or improper conduct stemming from the contract to government investigators.

Miss Stephenson called the number of referrals “unprecedented” for a military contract or program. But she declined to give details on those reports or name the sources of the purported improprieties.

The agency has conducted dozens of audits on the KBR contract and has challenged about $4.7 billion in costs charged by the company, she said.

KBR is the primary contractor for the so-called LOGCAP III contract, but the Houston-based company has hired an extensive network of subcontractors to help it provide U.S. forces in Afghanistan, Iraq, and Kuwait with dining facilities, transportation, sanitation systems, warehouses and other critical services.

Armed with Miss Stephenson’s 66-page testimony, members of the commission pounded KBR, which was not invited to testify, for overcharging the government, and Army officials, who were invited, for failing to control contract costs.

Jeffrey Parsons, head of the Army Contracting Command, and Lee Thompson from the Army Materiel Command were on the defensive throughout most of the hearing, which lasted more than three hours. They said the demands for KBR’s services as the war in Iraq escalated stressed the contract and the accounting systems to manage it beyond planned capacities.

In a statement issued after the hearing ended, KBR spokeswoman Heather Browne defended the company’s record, saying the scope of the work has “changed significantly from what KBR was first expected to support.”

To avoid relying on one contractor, Mr. Parsons and Mr. Thompson said the Army rebid the contract two years ago. Now, under what’s known as LOGCAP IV, KBR, along with contractors DynCorp and Fluor, compete against one another. Costs should be reduced, they said, and government oversight increased.

But commission members said the Army continues to rely on KBR, defeating the purpose of expanding the number of contractors. They pointed to a letter sent Friday by two senators to Defense Secretary Robert M. Gates that says the Army hasn’t done enough to make the logistics contracts more competitive.

Sens. Claire McCaskill, Missouri Democrat, and Susan Collins, Maine Republican, also called on the Defense Department to do more to reclaim $100 million worth of overcharges paid to KBR subcontractors.

Mrs. McCaskill and Miss Collins are, respectively, the chairman and ranking Republican on a contracting oversight subcommittee of the Senate Homeland Security and Governmental Affairs Committee.

In the letter to Mr. Gates, the senators also said that since the war in Iraq began in 2003, several KBR officials have been indicted or convicted of corruption-related charges involving LOGCAP subcontracts.

In her statement, Miss Browne said that whenever it discovered any wrongdoing by an employee, the company has quickly reported it to the government.

Miss Stephenson cited KBR’s heavy use of subcontractors as a trouble spot. There often was too little documentation “to justify the reasonableness of the prices and costs billed to the government,” she said.

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