IG Report: Acquisition, Contract Management Are 'Persistent Challenges' for Defense

By Sandra I. Erwin

The Pentagon continues to mismanage acquisition programs, as a result, wastes billions of taxpayer dollars, says theDefense Department's Inspector General in his semiannual report to Congress.
The report, released Feb. 3, covers IG investigations from April 1 through Sept. 30, 2013.

During that time, the IG office issued 83 reports identifying $23.5 billion in "potential monetary benefits."

Acquisition and contract management is one of seven "core functions" of the IG's auditing operation. The others are financial management, joint war fighting and readiness, cybersecurity, health care, equipping and training Afghan Security Forces, and the nuclear enterprise.

In the report, Inspector General Jon T. Rymer called acquisition and contract management "persistent challenges" for the Defense Department.

"For acquisition programs, the department needs to better balance its limited resources, the capabilities needed for current conflicts and the capabilities needed to prepare for possible future conflicts,” said the report. “Senior leadership has, in recent years, terminated acquisition programs that were underperforming, over budget or of questionable continuing investment.”

Rymer credits Pentagon leaders for having strengthened contracting policies to prevent procurement abuses. But nonetheless, the report said, the department “continues to struggle to consistently provide effective oversight of its contracting efforts."

Chronic contracting deficiencies include inadequate competition in contracts, poor definition of contract requirements, ineffective oversight of contract performance, subpart methods for obtaining fair and reasonable prices, and inadequate maintenance of contract documentation for payments.

During the six months covered by the report, the IG office conducted several audits involving questionable acquisition programs, several of which involve the procurement of spare parts, pricing of spare parts and inadequate oversight of contracting procedures.

One area that was found lacking is how the Defense Department awards “performance-based” payments to contractors. Of 60 contracts the IG office reviewed, worth about $13.2 billion, auditors found that the government was making payments in the absence of measurable contractor performance.

Purchases of spare parts have been the subject of persistent IG investigations in recent years. By some estimates, the Defense Department spends up to $70 billion a year on logistics support of weapons systems, which includes spare parts. Auditors have questioned whether many of these purchases meet legitimate needs. IG reports over the past two years have increasingly challenged the quantities bought and the prices paid for military spare parts. Investigators also found warehouses packed with unneeded items.

The Defense Advanced Research Projects Agency  was called out for using inconsistent criteria in evaluating contractor proposals. Of 36 contracts reviewed, valued at about $426.4 million, DARPA “did not consistently adhere to scientific review process and Federal Acquisition Regulation requirements" before awarding contracts from broad agency announcements for 35 projects valued at about $424.6 million, the IG report said.

Among the IG audits that sent shock waves across the military contracting community last year was the probe of the Army’s carbine acquisition program. The IG concluded the Army had not justified the requirement for a new carbine, and was prepared to spend $2.5 billion to “procure and maintain 501,289 carbines that the Army’s own analysis states can be delayed for another 10 years with no impact to readiness.”

Topics: Business Trends, Doing Business with the Government, Service Contracts, Defense Contracting

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