Back in February 2006, “The Pentagon’s Broken Book-keeping” discussed the depth of the problems inherent in trying to audit that organization. It’s not that the US Department of Defense fails audits. The problem is more fundamental: it is not currently possible to audit it, and any comprehensive audit would be a first-ever event in modern times.

This topic can seem trivial, but the Pentagon’s accounting problems are not limited to issues of day to day functioning. They also go right to the heart of the American political system’s ability to properly evaluate and learn from procurement decisions over the long term.

On June 18/09, U.S. Senators John McCain (R-AZ), Dr. Tom Coburn (R-OK), and Chuck Grassley (R-IA) introduced bill S.1287, the Department of Defense Financial Accountability Act of 2009, which sets a progressive deadlines for the Department of Defense to undergo a complete audit of its financial statements. DID offers more information about the bill, and excerpts from a special supplement to the Pentagon’s FY 2010 budget documents…

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In 2006, DID covered the US Department of Defense’s serious accounting and finance-related issues. Booz Allen Hamilton, Inc. is one of many consulting companies trying to help them change that, and in May 2006 they received a new blanket purchase agreement (BPA) under contract HQ-0423-06-A-0011 in support of the Defense Finance and Service (DFAS) agency transformation initiative. The contract covers program management, accounting, training, human resource services and Information Technology services in support of the Transformation Directorate at DFAS Indianapolis, IN. Booz consultants role will assist DFAS in planning and executing agency efforts and lead a team of vendors under the BPA through 21 contractor teaming arrangements. These services will be temporary support to closing DFAS locations, and are not anticipated to be required after agency transformation is complete.

The estimated total value of this contract was $25 million, with primary work performed at DFAS Indianapolis, IN, and temporary services provided to closing locations at the closing locations. Work will be performed between May 1, 2006 – April 30, 2011. Funding will be provided through defense working capital funds and BRAC funding, via the DFAS Contract Services Directorate in Columbus, OH (HQ-0423-06-A-0011).

A March 4/08 Booz Allen Hamilton podcast provides something we don’t often get: a retrospective look at the project, which was tied into BRAC 2005, consolidation of IT and accounting systems, and wider efforts within the DoD. The podcast doesn’t reach the high benchmarks set by Manager Tools; nevertheless, it is a useful way to begin to connect the award with the actual project, and understand the challenges involved.

HMMWV, IEDed
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Paradigm Technologies, Inc. (Paradigm) recently received a $15.7 million Task Order to provide Business and Financial Management Support Services to the Mine Resistant Ambush Protected (MRAP) Vehicle Joint Program Office in Quantico, Virginia. The Task Order, awarded through the Naval Sea Systems Command’s SeaPort-e, includes a base year and 4 one-year options.

The MRAP Vehicle Program fits with a strong international trend, and seeks to replace vulnerable, flat-bottomed Hummers with vehicles designed from the ground up to resist land mine blasts. It is a Joint, Acquisition Category (ACAT) 1D program that is currently the number 1 Department of Defense priority program, with a DX priority rating for materials that is usually reserved for items like nuclear submarines. The program is currently in the procurement phase, and is valued at about $25 billion over Fiscal Years 2007 – 2009. The Joint Program Office (JPO) is led by Marine Corps Systems Command in Quantico, Virginia.

Under this contract (N00178-05-D-4486-EH02), Paradigm is teamed with Computer Sciences Corporation (CSC) to provide comprehensive Business and Financial Management support to the MRAP JPO, in order to support the successful execution of the MRAP Vehicle program. This kind of support usually comes from professionals with domain experience – in this case, business and financial management support personnel with extensive ACAT 1 program experience. For further background context, see also the recent US GAO report covering the Pentagon’s use of contractors for acquisition assistance, and likely trends in this area.

Lockheed Martin Government Services, Inc. in Seabrook, MD received a 7th year option of $27.1 million as part of contract MDA220-01-D-0002 for management of the Retired and Annuitant pay service. The service was formerly managed by the Defense Finance and Accounting Service (DFAS), but was the subject of an “A-76 action.” The core concept of the American “A-76” option is that it puts in-house services up for bid against private contractors, and may outsource the function if outside contractors can deliver better and cheaper. This sort of thing can be rather disconcerting to our readers in government departments, while many our readers working in large corporations probably wish they had this option with some of their internal departments. DID covered option #6 last year, along with a very provocative and interesting follow-on question from a reader re: A-76 competitions.

The estimated aggregate face value of this contract at time of award was $346.4 million. Primary work is performed at DFAS Cleveland, OH and secondary work which includes document scanning and primarily imaging is performed at London, KY. Under this option, work will be performed between Feb 1/08, through Jan 31/09. The DFAS Contract Services Directorate in Columbus, OH issued the contract (MDA220-01-D-0002).

Pentagon spokesman Bryan Whitman recently said [release | full press conference transcript] that US Department of Defense officials are concerned with the number of contracting improprieties that have been uncovered within the CENTCOM area of responsibility. Problems with the contracts run the gamut of seriousness from bid-rigging, kickbacks and product substitution to double billing, and Whitman added that the DoD is concerned about “ensuring the integrity of our accounting systems, as well as the integrity of our contracting procedures.” The former could be a tall order; accounting systems have been a long-standing issue in the Pentagon.

The Army is the lead agency in the investigations, which cover up to $5 billion in contracts for goods and services issued in Iraq, Kuwait and Afghanistan….

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Seaport-Enhanced (Seaport-e) is a $5.3 billion multiple-award umbrella contract that lets the US Navy use an integrated approach to contracting for support services. Most requests involve engineering, financial, and program management support. Receiving an award makes a firm eligible to big on jobs under a pre-set contract vehicle, and the SeaPort-e portal provides a standardized means of soliciting bids and awarding task orders.

In 2005, the US Navy issued 503 Seaport-e contracts. In 2006, another 251 were issued. In 2007, there were 391 winners, adding to the existing 892 contracts previously awarded under this program…

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Price Waterhouse Coopers L.L.P. in Washington, DC received a delivery order amount of $7.5 million as part of a $16.8 million firm-fixed-price contract to conduct a financial statement audit of the U.S. Army Corps of Engineers Civil Works FY 2007 financial statements.

Work will be performed in Washington, DC and is expected to be complete by April 25, 2008. There were 5 bids solicited on March 20, 2006, and 5 bids were received by the Washington Headquarters Services in Arlington, VA (N00421-05-D-0025).

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Tecolote Research Inc. in Goleta, CA and Quantech Services Inc. in Bedford, MA are being awarded an $88 million indefinite-delivery/ indefinite-quantity contract. This contract will procure specialized costing services for Hanscom Air Force Base for the next four years. These services includes but are not limited to cost estimating, earned value computations, what if calculations, etc. These calculations are important for benchmarking the performance of major weapons programs et. al., and feed into both project management and top-level acquisition & budgeting decisions.

The Air Force can issue delivery orders to these contractors totaling up to $88 million, but doesn’t have to spend it all. At this time, $1.2 million has been obligated. Solicitations began June 2006, negotiations were complete October 2006, and work will be complete October 2010. The Headquarters Electronic Systems Center at Hanscom Air Force Base, MA issued the contract (FA8721-07-D-0002-0001 and FA8721-07-D-0003-0001).

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United Technologies Corp., whose subsidiaries include Sikorsky and Pratt & Whitney, has entered into a $283 million settlement of government contract accounting matters with the U.S. Department of Defense. The agreement ends litigation over Pratt & Whitney’s cost accounting for engine parts on commercial engine collaboration programs from 1984 through 2004. Since January 1, 2005, Pratt & Whitney has used an alternative method approved by the US government for allocating overhead costs, which is based on the value added by Pratt & Whitney in the manufacturing process.

UTC reports that reserves relating to these matters exceeded the settlement amount by approximately $0.05 per share, and the company anticipates restructuring charges over the course of 2006 will equal or exceed this difference. UTC reaffirmed guidance of earnings per share in the range of $3.50 to $3.60. http://www.utc.com/press/releases/2006-06-06.htm”>See corporate release.

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The Headquarters Aeronautical Systems Center, Wright-Patterson Air Force Base, OH has awarded an $850 million firm-fixed-price, time and materials and cost-reimbursement contract among a number of firms. It’s a consolidated acquisition of professional services approach, using indefinite-delivery/ indefinite-quantity contracts that will cover a wide range of technical/management support at Wright-Patterson Air Force Base, OH.

Located near the home of the Wright Brothers’ first flight, Wright-Patterson AFB may well be the largest, most diverse and organizationally complex air base in the world. Missions range from acquisition and logistics management, to research and development via the Air force Research Laboratory, education, flight operations, and many other defense related activities. To cover support for such a wide range of activities, the contract must also have a very wide scope…

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