Homeland Security Contracts Abused

Report Finds Extensive Waste

By Griff Witte and Spencer S. Hsu
Washington Post Staff Writers
July 27, 2006

The multibillion-dollar surge in federal contracting to bolster the nation's domestic defenses in the wake of the Sept. 11, 2001, attacks has been marred by extensive waste and misspent funds, according to a new bipartisan congressional report.

Lawmakers say that since the Homeland Security Department's formation in 2003, an explosion of no-bid deals and a critical shortage of trained government contract managers have created a system prone to abuse. Based on a comprehensive survey of hundreds of government audits, 32 Homeland Security Department contracts worth a total of $34 billion have "experienced significant overcharges, wasteful spending, or mismanagement," according to the report, which is slated for release today and was obtained in advance by The Washington Post.

The value of contracts awarded without full competition increased 739 percent from 2003 to 2005, to $5.5 billion, more than half the $10 billion awarded by the department that year. By comparison, the agency awarded a total of $3.5 billion in contracts in 2003, the year it was created.

Among the contracts that went awry were deals for hiring airport screeners, inspecting airport luggage, detecting radiation at the nation's ports, securing the borders and housing Hurricane Katrina evacuees. Investigators looking into those contracts turned up whole security systems that needed to be scrapped, contractor bills for luxury hotel rooms and Homeland Security officials who bought personal items with government credit cards.

While many of those problems have been disclosed, today's report is the first comprehensive survey of the government's own investigations into contracting mismanagement in the domestic war against terrorism.

"Every dollar that is wasted on a contract is a dollar less that could be used to make Americans more secure," said former department inspector general Clark Kent Ervin. "This kind of abuse constitutes a security gap all its own in America's defense."

Ervin said that though an undue reliance on contractors might have been excused when the agency was launched, it "is not understandable or justified all these years after the creation of the department." The private sector, he said, has had the opportunity "time and time again to take the department -- and thereby taxpayers -- for a ride."

Homeland Security spokesman Russ Knocke said the report faulted contracts made by the Transportation Security Administration before it became part of the Homeland Security Department. "It's hard to imagine that the report can criticize the department for a contract made before the department was created," he said.

"We continue to work very aggressively to strengthen our contracting procedures, maximize oversight and ensure that what are ultimately limited resources are applied in the most effective way," Knocke said.

The Homeland Security Department was cobbled together from 22 agencies after the Sept. 11, 2001, attacks as part of the largest reshuffling of federal responsibilities in a half-century.

With limited resources in-house, department officials made an early decision to lean heavily on the private sector to deliver technology, infrastructure and personnel. But the department struggled to launch the huge contracts deemed necessary to upgrade the country's defenses. In the first major test of the department's emergency systems, Homeland Security officials and contractors alike came under harsh criticism for their response to Hurricane Katrina last summer.

"We all assumed they would get better with age," said Keith Ashdown, vice president for the watchdog group Taxpayers for Common Sense. "But now the evidence is overwhelming that they've gotten much, much worse."

The report warns that the department is on the verge of making more mistakes by giving contractors too much latitude. It points to a planned multibillion-dollar contract for border security that has only the vaguest of requirements. "We're asking you to come back and tell us how to do our business," Homeland Security Deputy Secretary Michael P. Jackson told industry leaders in January.

Among the problems cited in the report:

· A Defense Contract Audit Agency review of an NCS Pearson Inc. contract to hire airport screeners uncovered at least $297 million of questionable costs, including luxury hotel rooms. The company has defended its performance in previous statements.

· A surveillance system for monitoring activity on the Mexican and Canadian borders does not work because of cameras that malfunction when exposed to snow, ice or humidity.

· Two TSA employees used government purchase cards to buy $136,000 worth of personal items, including leather briefcases.

Beyond these specific cases, the report highlights overall problems with Homeland Security contracting, including poor planning, a dependence on no-bid contracts and inadequate oversight.

As contracting surged by 189 percent from 2003 to 2005, the department's acquisition staff did not to keep pace, increasing by less than 20 percent. The average staffer is overseeing twice as much money now as in 2003. As the burden grew, contracting officers increasingly turned to sole-source contracts or contracts for which only a limited number of firms were allowed to compete.

Paul C. Light, professor of public service at New York University, said industry consolidation in defense and homeland security increasingly enables firms to present themselves as sole-source bidders, at the same time that government expertise and contract management staffs have been hollowed out.

"They'd like to boll-weevil themselves down to the agencies and create dependencies that will last for years, if not decades," Light said.

Today's report was requested by Rep. Henry A. Waxman (D-Calif.), ranking member of the House Government Reform Committee, who was joined by Chairman Rep. Thomas M. Davis III (R-Va.).

Waxman said today's report reveals "a pattern of reckless spending, poor planning and ineffective oversight that is wasting taxpayers dollars and undermining our security efforts."

Davis said the department has a critical mission. "Unfortunately, its acquisition structure and workforce challenges . . . betray serious weaknesses that are impeding the ability of DHS to protect the homeland," he said. Davis's committee is scheduled to hold a hearing on Homeland Security contracting today.

Still, others noted that it remains early in the department's history and that problems are to be expected.

"You have to look at DHS in context. They came into being at a time of crisis. They faced at once the building of a department and the integration of 22 different agencies. And then two years later, you had the worst natural disaster in American history," said Stan Soloway, president of the Professional Services Council, a trade group that represents contractors. "I'm not saying they get a pass, but I'd be hesitant to poke a finger in their eye."

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