The Pentagon relies on the obscure Defense Contract Management Agency (DCMA) to negotiate and administer $5 trillion contracts across the Defense Department as an average of $455 million In taxpayer dollars are paid out each day to contractors. DCMA undertook to modernize its procedures and processes and contracted professionals to design and build a system. The result was a software system created to help review, implement, and track defense contracts a, a project, called the Integrated Workload Management System.
The project appears to have been a colossal cockup. But that, and the investigation it appears to have instigated, is not what this post is focused on. For that story, you must read the POGO report at the link above. The bouncing ball that traces this post is a golf ball that seems never made it onto the fairway; it was in the weeds from the gitgo. This is a tale of “Do as I say, not as I do”.
Pentagon’s Contracting Gurus Mismanaged Their Own Contracts
In 2011, the agency got the ball rolling with a contract paying a company called Apprio to conduct a study on what a “Model Contract Management Office” would look like and to “identify relevant technology” it would use. The next year, Apprio’s contract was expanded to envision a replacement for the Electronic Document Workflow system.
As mentioned above, this post presents only part of the story, the mistakes made. There is another story in the article about the investigation(s) and information obtained by POGO regarding the project and loosely related others. Here, I focus on what went wrong. The rest of the story focuses on the investigation and remedies. And that's the main point of the procurement system.
Things started going south for the software project in mid-2013, when Apprio won a contract worth more than $3 million to begin testing and developing software as the replacement system. But because the agency had previously hired Apprio to help lay out the requirements for this work, under federal acquisition regulations the company was ineligible for contracts implementing its prior recommendations. Regulations specifically prohibit this so that a contractor is not tempted to misrepresent the needs of the agency in order to sell more of its own products or services. The “organizational conflict of interest violation” raised “serious concern over contracting practices and processes within DCMA.”
Because the contract involved spending more than $1 million on a system the Defense Department uses to manage its resources, then-Director of Information Technology Haynes needed approval from the Pentagon’s deputy chief management official. The official rejected Haynes’ initial request, citing missing documentation and other flaws, and asked him to resubmit it. Despite not having the Pentagon’s approval, the contract was awarded to Apprio. But during testing over the next several months, Apprio’s software “failed to properly integrate” with the agency’s other systems.
The agency turned to another company, Discover Technologies, to develop a software solution. It appears that the documents provided to the Services Acquisition Review Board to get approval for the contract were misleading. The documents, submitted just two days before the end of the fiscal year, listed the upcoming year’s projected expenses as $960,000. There was no mention of the estimates that the contract would likely cost up to $40.5 million over its lifetime. Evidently, the Pentagon had not approved the funds necessary to cover that much larger estimate. In the event, the board received and approved the contract on September 28, 2013, and reapproved it each year through 2017.
Additionally, the board failed to conduct a formal review of the Discover Technologies contract before approving it. It didn’t seem to know what the contract was intended to deliver. Personnel consistently did not understand what was being communicated by Haynes and others in the IT department, and therefore either stopped asking questions or failed to ask any at all. In the absence of any questions or objections, approvals were essentially rubber stamps, with the board approving 95 percent of IT submissions on first attempt.
If it had done a thorough review of the Discover Technologies contract before approving it, the review board might have caught numerous problems. For example, the agency used the wrong type of contract: a “Blanket Purchase Agreement,” which is intended for recurring needs for straightforward supplies or services, not the type of complex software modifications Discover Technologies would be performing. The agency mischaracterized the software as a “commercial off-the-shelf” product, which requires less oversight, despite the fact that those involved knew it required a significant amount of coding and development work. The contract’s requirements were also vague, with some overlapping with work already assigned to Apprio. In many cases, task orders within the contract were missing key components, such as statements of work and standards by which to measure performance, and the document detailing the work requirements didn’t include a list of specific objectives.
On the last day of the fiscal year, two days after the review board approved the Discover Technologies contract, the Pentagon approved spending about $6.3 million on the software project over the next year. Hours later, the agency awarded the contract. It appears there was “pressure in contracting to get contracts awarded at year end,” leaving insufficient time to plan and properly craft the project’s requirements. In summary, some of the project’s most significant problems stemmed from the structure and administration of the contract. The lack of clear objectives in the contract directly impacted performance, and the lack of planning and strategic vision led to money being wasted through duplicative work and cost overruns.
Worse, the government did not provide any oversight focused of the project. There were “essentially two budget offices with a separate one in IT, and there was no oversight of the IT budget personnel by the [agency] budget office. This meant the agency’s own budget office didn’t know the agency was spending more money than it was authorized to. In a similar vein, Pentagon budget officials didn’t adequately keep track of the numbers or talk to each other, so one office kept giving away more money than the other had authorized.
The project had become a runaway train until the agency director put a halt to things and requested both an Inspector General audit and an independent investigation into the suspected Antideficiency Act violations. By then, the agency had spent around $45 million on the project, not including government labor costs.
In 2009, the congressionally created Commission on Wartime Contracting wrote, “DCMA is not aggressive in motivating contractors to improve business systems,” which it described as “the first line of defense against waste, fraud, and abuse.” The agency’s “conservative approach results in little, if any, motivation for contractors to improve their business systems, and ultimately has a direct impact on the warfighting mission.” In 2011, the Government Accountability Office attributed many of the agency’s struggles to “a seriously eroded workforce” stretched thin by the surging number and value of contracts in prior years due in part to the wars in Iraq and Afghanistan; a decentralization initiative that led to inconsistent guidance and practices across the agency that one official called a “free for all”; and the challenges posed by defense contractors’ increasing reliance on subcontractors.
While the agency has in many cases not been zealous enough in protecting taxpayer interests, the shortcomings are not across the board, and parts of the agency have at times seemed more willing to hold contractors accountable. The agency’s hard-hitting findings that Lockheed Martin had used a significantly flawed business system for the F-35 program, and the Pentagon’s subsequent willingness in 2012 and 2013 to withhold some payments from the company, is one example. Last year, it did the same with helicopter manufacturer and major defense contractor Sikorsky.
But the extent to which the agency was failing to properly manage contracts for even its own internal systems is coming into focus this year with the April Inspector General report and the documents POGO obtained.
While we're here, let me put in a plug for the Project On Government Oversight. Our procurement system requires the essential efforts of the private sector to police government spending in real time. POGO is one of those many sentinels along the watchtowers we rely on to keep the game clean, as best we can.
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