SHAHEEN: ARMY CORPS CONTRACTING CASE PROVES NEED FOR OVERSIGHT

Urges Pentagon to preserve funding for contract management

October 05, 2011

(Washington, D.C.) – In the wake of a federal indictment alleging a $20 million fraud in an Army Corps of Engineering contract, U.S. Senator Jeanne Shaheen (D-NH) called on Pentagon officials to preserve and strengthen the department’s oversight capabilities as they implement coming budget reductions.

“We cannot allow this kind of fraud to run unchecked,” Shaheen said. “This kind of waste erodes trust in our government and makes our already difficult fiscal situation that much worse. We need robust oversight of all taxpayer dollars, especially big-dollar contracts such as those at the Department of Defense.”

The FBI announced yesterday that it had arrested four Virginia men, including two longtime employees of the U.S. Army Corps of Engineers, on charges that they operated a bribe and kickback scheme that stole $20 million from the government. By falsifying invoices, the group allegedly siphoned money off an otherwise legitimate government contract to purchase luxury cars and high-end watches.

In a letter sent today to Deputy Secretary of Defense Ashton Carter, Shaheen pointed to the criminal case and to the staggering report from the Commission on Wartime Contracting that found as much as $60 billion lost to contract waste and abuse in Iraq and Afghanistan as proof that contract oversight is vital to the protection of taxpayer dollars and to the efficient operation of the Department of Defense.

“The federal government has a responsibility to the taxpayer to not only ensure it receives fair-market value for products and services, but also has the capability to combat fraud and abuse,” the letter says. “Given (the Department of Defense’s) size and budget, as well as the complexity of managing contracts in war-zones, maintaining adequate oversight personnel within (the Department) is critical to providing an effective national defense.”

Senator Shaheen has repeatedly pushed for improvements to contract oversight, including an overhaul of the Special Inspector General for Afghanistan Reconstruction. The full text of the Senator’s letter to Carter is below:

October 05, 2011

The Honorable Ashton Carter

Deputy Secretary of Defense

1000 Defense Pentagon

Washington, DC 20301-1000


Dear Secretary Carter, 

As you make decisions on the Fiscal Year 2013 budget and beyond, I urge you to remain cognizant of the importance of contract management and auditing personnel to the efficient operation of the Department of Defense (DOD).  I recognize the Department will need to make difficult decisions to accommodate deficit reduction efforts and that everything must be on the table.  However, it is also important to ensure that the government has the resources it needs to combat fraud and abuse, and protect our responsibility to taxpayers.  Given DOD’s size and budget, as well as the complexity of managing contracts in war zones, maintaining adequate oversight personnel within DOD is critical to providing an effective national defense.

The Department faces a unique challenge in overseeing its 450,000 employees and over $600 billion budget.  To meet that challenge, we must ensure those charged with protecting taxpayer investments have the necessary resources and training to fulfill their mission. As a prime example of the difficulty of that task, the Washington Post reported this week on an ongoing investigation of an alleged, multi-million dollar fraud against the Army Corp of Engineers.  According to the report, several Army Corps of Engineers’ employees conspired with a private sector firm to defraud the government of over $20 million.  Though authorities eventually discovered the fraud, we must redouble our efforts to identify criminal activity before millions of dollars are lost.

Over the past 10 years, the conflicts in both Iraq and Afghanistan have demonstrated the fundamental importance of contract oversight in contingency operations.  The Commission on Wartime Contracting’s (CWC) final report estimated that as much as $60 billion was lost to waste and abuse in Iraq and Afghanistan, due in large part to inadequate contract design and management.  Aside from the staggering loss of resources, the U.S. military also acknowledges that poor contractor performance has a direct negative impact on the overall U.S. war effort. Contractors augment our combat personnel by providing the infrastructure development, security services, and logistical support required to conduct counter-insurgency.  Substandard work reflects directly on U.S. military personnel to the benefit of insurgents. Thus, inadequate contract oversight not only wastes taxpayer dollars, it also directly increases risk to our men and women in uniform.   

I fully appreciate the unprecedented fiscal pressure our country faces, and the challenges in allocating resources in an uncertain budget environment.  However, as both the recent Washington Post article and the CWC report have documented, if the Department does not adequately maintain its oversight workforce, too many of our hard-earned tax dollars will be lost to fraud and abuse. Thank you for your continued service on behalf of our men and women in uniform and our nation.

Sincerely,

Jeanne Shaheen

United States Senator

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