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Iraq Reconstruction Contracting Abuses: Expanded Loopholes Considered by Defense Authorization Conference Committee

October 23, 2003 


 A new report released today by the Project On Government Oversight (POGO) addresses the unprecedented attention given to Iraq reconstruction contracts awarded by the federal government. "This Administration has taken full of advantage of gaping loopholes that make the federal government's contracting ripe for abuse," said POGO Senior Investigator Scott Amey.

The report, Federal Contracting and Iraq Reconstruction, summarizes how changes in federal procurement over the past decade have gradually weakened oversight of contracting and includes suggested reforms.

In recent months, POGO's investigative spotlight has helped to defeat some proposals backed by hundreds of defense and technology contractors that would further weaken taxpayer protections. The proposals were included in the Services Acquisition Reform Act (SARA) legislation sponsored by Representative Tom Davis (R-VA). Some of that legislation's harmful proposals were attached to the pending House Defense Authorization bill now in conference including:

  • Contractors for Life, Section 1431. This would allow contracting officers to extend contracts indefinitely, even sole source contracts.

  • Rewarding Overbudget and Behind-Schedule Contractors, Section 1442. This section expands use of high-risk time and material and Labor Hours contracts which would which allow contractors to engage in almost unlimited billing of the government without producing a product. This is like hiring a house painter, telling him no matter how long he takes or how much he spends on paint, his bill will be paid.

  • Open Money Bags for Contractors, Section 1444. As long as a company sells any goods or services to the public, that company can overcharge on all of its business with the government without being held in check by taxpayer protections.

  • Wolf in Sheep's Clothing, Section 1451. Expands use of "Other Transactions," a shady and questionable vehicle that is particularly abused to avoid compliance with federal contracting statutes and regulations that improve competition, transparency, and financial accounting. Touted as a way to attract nontraditional contractors, but traditional contractors such as Lockheed Martin and Boeing account for 95% of "other transactions."

  • Rewarding Anti-Competitive Contracting. Section 1454. This section would waive pro-taxpayer oversight on sole source contracts under $15 million. Sole source contracts are awarded without competition or transparency so are particularly ripe for abuse.

  • Hiding Behind Homeland Security, Section 1456. This section would waive taxpayer protections on any goods or services purchased to respond to or defend against a terrorist attack.

For more on POGO's investigations in this area, go to its Contract Oversight Investigations page. POGO's historical interest in contracting goes back to its founding in the 1980's when it drew attention to egregious military spending abuses such as the $7,600 coffee maker and the $436 hammer.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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