$6 Billion in Contracts Reviewed, Pentagon Says

By Eric Schmitt and Ginger Thompson
The New York Times

Friday 21 September 2007

Washington - Military officials said Thursday that contracts worth $6 billion to provide essential supplies to American troops in Kuwait, Iraq and Afghanistan - including food, water and shelter - were under review by criminal investigators, double the amount the Pentagon had previously disclosed.

In addition, $88 billion in contracts and programs, including those for body armor for American soldiers and material for Iraqi and Afghan security forces, are being audited for financial irregularities, the officials said.

Taken together, the figures, provided by the Pentagon in a hearing before the House Armed Services Committee, represent the fullest public accounting of the magnitude of a widening government investigation into bid-rigging, bribery and kickbacks by members of the military and civilians linked to the Pentagon's purchasing system.

Until the hearing on Thursday, the Army's most detailed public disclosure about the scale of the problem was that contracts worth $3 billion awarded by the Kuwait office were under review.

At the hearing, a panel of high-ranking Defense Department officials described a war-zone procurement system in disarray. They said that the Pentagon failed to provide adequate training for contracting officers for their assignments, offered insufficient oversight of contracting officers' activities and had not put in place early warning systems to catch officers who violated the law.

"In a combat environment, we didn't have the checks and balances we should have in place," said Shay D. Assad, director of defense procurement and acquisition policy. "So people who don't have ethics and integrity are going to be able to get away with things."

Representatives from both parties pummeled the panel with angry questions and comments, assailing the Pentagon for having failed to overhaul the procurement system more than two years after Congress had identified serious problems in defense contracting and passed legislation aimed at helping the Pentagon correct them.

The lawmakers also challenged assertions by the Pentagon officials that the corruption being uncovered was the work of a few isolated individuals. Several committee members suggested that the abuses were far more systemic.

"The problems were so severe that I fear they could represent a culture of corruption," said Representative Ike Skelton, Democrat of Missouri, the chairman of the committee. "I am extremely disappointed to learn that so many individuals violated their integrity and undermined the oaths they made to this country."

Representative John Kline, a Minnesota Republican and retired Marine colonel, said he was "doubly, triply, quadruply appalled" at the "clear breakdown in leadership" that allowed some Army contracting officers to corrupt the procurement system. He said it was inexcusable that it took so long for the Army to put adequate checks in place.

Pentagon officials did not dispute the seriousness of the problems. However, they took issue with lawmakers' characterizations of their scope. "I think it's isolated incidents," said Thomas F. Gimble, the principal deputy Pentagon inspector general. "The real issue is a lack of control, a lack of integrity and lots of opportunity and lots of money."

Mr. Gimble and the other Pentagon officials said they were working aggressively to identify officers and civilians responsible for crimes and turn them over for prosecution, increasing the numbers of contracting officers and lawyers in Kuwait and improving the contracts and ethics training they provide to their specialists.

The Pentagon officials said that they would turn the largest contracts in Kuwait over to more seasoned military procurement specialists in the United States and that they had set up a more rigorous set of contract review procedures. And the Pentagon inspector general has been sent to Iraq to investigate the department's contracting procedures.

"I don't think it was a widespread conspiracy or cultural issue," said Lt. Gen. N. Ross Thompson 3rd of the Army, a senior procurement official who is co-leader of an Army review of contracting procedures in Kuwait and Iraq. "We've got a number of individual cases. All the ones we know about are being actively investigated. We've got internal controls to make sure there aren't new problems in different areas."

As of Sept. 12, the Army reported that it had 78 cases of fraud and corruption under investigation, had obtained 20 criminal indictments, and had uncovered over $15 million in bribes.

Lawmakers scolded the Pentagon for just recently ordering the creation of a special contracting corps of experienced procurement specialists - authorized in the legislation two years ago - to bolster purchasing teams in the most active combat zones, and to report directly to a regional military commander.

"That it's taken two years to do this is an indication of a system that's quite slow," said Representative Duncan Hunter of California, the senior Republican on the committee. "That's half the time it took to win World War II."