Pentagon auditors could reclaim billions overcharged by suppliers in conflict zones

By Frederika Whitehead | 18 January 2012

“The $5 billion or $10 billion of extra recovery would pay for the extra auditors even if they ate their lunch off gold plates”
– Charles Tiefer, member of commission on wartime contracting

America could recover $10 billion in overpayments made by the Pentagon to defence contractors working in Iraq and Afghanistan – if it hired more auditors. That was the estimate given to Exaro by a US law professor who served on the commission that investigated the American government’s ‘wartime contracting’.

Charles Tiefer, a specialist in law on government contracting, said that the US Department of Defense wasted billions of dollars through fraud and waste because military spending is not scrutinised properly.

He said that Congress, in the current economic climate, was reluctant to approve spending money on hiring what he sees as the necessary number of additional government auditors to tackle the waste.

He told Exaro: “There are billions of dollars to be recovered, but we are just not getting to it. And the longer we wait, the less likely it is that we will. It is like a tax audit from 10 years ago. Both the government auditor and the taxpayer are looking at each other and saying, ‘I guess neither of us knows what took place 10 years ago, do we?’”

In war, the Pentagon adopts a ‘pay now, scrutinise later’ attitude to invoices. So, bills from the front line in Iraq and Afghanistan have been paid after a brief inspection, to be scrutinised later.

If auditors later find that private companies supporting the military have overcharged, the Pentagon reclaims the overpayments.

The Pentagon’s Defense Contract Auditing Agency (DCAA) has a growing backlog of at least $558 billion of spending to scrutinise. At existing levels of staff, and with the current rate of increase, the DCAA has admitted that its backlog will “continue to grow virtually unchecked and will exceed $1 trillion in 2016.”

Tiefer, who is based at the University of Baltimore, estimates that the US government could recover between $5 billion and $10 billion if the current backlog was cleared.

He says that spending a far lower sum to hire a few hundred extra auditors would achieve this. However, there is a “great reluctance in Congress to make available any money to hire more people,” he said. “The tide is going out about US government employees.”

“So, the message about ‘we could do so much better if we hired more auditors’ gets lost,” he said. “The $5 billion or $10 billion of extra recovery would pay for the extra auditors even if they ate their lunch off gold plates.”

Congress set up the commission on wartime contracting in 2008 to investigate the extent of fraud and waste during the conflicts in Iraq and Afghanistan since 2001.

It spent three years looking through bills totalling $206 billion spent by the US government on war-related contracting – most of it on American companies – during the previous decade.

The panel of commissioners declared in their final report last August that at least $31 billion – and up to $60 billion – of that spending was wasted. Some of the money was lost through overcharging and fraud, while much was wasted on unwanted, unsustainable, or useless reconstruction projects.

Their report described Khan Bani Saad prison, just north of Baghdad, as the “ultimate instance” of a wasteful construction contract. It said that $40 million was wasted on the prison – designed for 3,600 inmates – which was abandoned halfway through construction after Iraq’s Ministry of Justice “made it clear that it had no intention of completing, occupying, or securing the project.”

The report also said that $277 million was spent on a water treatment plant in Nassiriya, 225 miles south-east of Baghdad, in an area without reliable electricity. The erratic local power supply means that the water produced is murky, and the villagers refuse to drink it.

Tiefer, one of the eight commissioners who helped compile the report, said: “The skunk at the party for reconstruction projects [in Afghanistan] has been the giant diesel-burning power-generating plants.”

Afghanistan itself produces no oil, and has no oil pipelines and no railway system. Any diesel that it uses has to be brought into the country by truck.

Building diesel-power stations made “no sense”, said Tiefer, and US-funded plants usually close down within two or three years of being built. “When the US stops subsidising the fuel, they become unsustainable.”

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