WASHINGTON, May 18 (UPI) -- As the Army plans for its next massive logistics contract, top former Pentagon officials say the military's use of contractors on the battlefield -- both for logistics and security -- is only going to increase in the future. What is needed is an overhaul of policy and oversight to make the best use of them and control their costs.
The Army's controversial LOGCAP contract -- now worth about $13 billion to Halliburton subsidiary KBR, Inc. -- will eventually be re-openned for competition, though no date has been set: The 10-year task-order contract for services like dining facilities, laundry and pest control on foreign bases was awarded in 2001, with a one-year guarantee and nine one-year options.
The Army is breaking the LOGCAP IV contract into two: a planning contract, which would have a contractor drawing up plans for supporting future contingencies and exercises, and a separate execution contract, which would be actually providing services at U.S. military facilities, including in war zones.
KBR currently performs both functions, according to an Army official.
The Army is planning an even bigger change: it will hire up to three prime contractors for the LOGCAP IV contract who will compete among themselves for awards to perform individual task orders -- for instance, running dining facilities or providing cargo transportation services.
Under the new construct, the planning contractor would also help draw up and monitor the task orders and the fulfillment of the execution contract.
Former Pentagon comptroller Dov Zakheim, now vice president for defense contracts at Booz Allen Hamilton, advocated an even more dramatic division of LOGCAP at a panel discussion at the American Enterprise Institute.
Zakheim said Wednesday he thinks the Logistics Civilian Augmentation Program contract should be divided into regions around the globe to correlate with the military's worldwide combatant commands -- European Command, Central Command (the Middle East), Pacific Command, Northern Command (North America) and Southern Command (Central and South America).
Zakheim said the problem is not KBR's ability to provide services globally, but the ability of any one company to financially track all the assets, paperwork and funding that go along with it.
"Maybe this is more than any one contractor can handle," Zakheim said. "At a minimum you are asking for mistakes."
Zakheim would take it even further, perhaps breaking down contracts into sub-regions.
And to inject competition back into what has been a "winner take all" contract for more than a decade, Zakheim suggested banning prime contractors from competing for other geographic LOGCAP awards once they win one of them.
He said it would minimize the strain on company's accounting departments, and would make them easier for government auditors to monitor.
To give companies a further incentive to carefully track their costs and payments, Zakheim would want to see the Defense Contract Audit Agency have the de facto final word on whether a company has shorted the government.
"That would probably mean there word was being upheld 90 to 95 percent of the time," Zakheim said.
Empowering DCAA would be a sea change in defense contracting.
KBR spokeswoman Cathy Mann told the Washington Post last year, when the DCAA questioned more than $1 billion in KBR charges to the government for its work in Iraq, that such challenges are "a normal part of the contracting process."
"It is important to note that the auditors' role in the process is advisory only," she said.
Former Deputy Defense Secretary John Hamre, now president of the Center for Strategic and International Studies, said he agreed with the spirit of Zakheim's recommendation -- that "more breadth and competition" is needed in the sector.
But at the same time, the military needs to invest in its contract oversight agencies for service contracts like KBR's. The military is skilled at contracting for things, but the less tangible LOGCAP tasks challenge contracting officials.
Hamre was cautious on Zakheim's idea to make contractors ineligible for more than one combatant command's LOGCAP prime contract.
"My sense is that would be awkward right now because we don't have depth" in the service contract industry, Hamre said.
Only a handful of companies are currently capable of taking on the varied tasks needed to support a military contingency.
Holding down the price of LOGCAP contracts is a key concern for the U.S. military in Iraq. Last summer, Gen. George Casey, the top U.S. commander in Iraq, directed an across the board tightening of belts in direct response to the high cost of the KBR contract. In an undated memo obtained by United Press International, Casey expressed concern that the high cost of the contract undermined public support for ongoing U.S. military operations.
"Increasing expenditures in theater ... jeopardize our ability to maintain public support as the costs associated with our operations continue to rise," wrote Casey. "Just as we enforce fire discipline to conserve ammunition, so too must we exercise spending discipline. Our spending in theater not only affects us directly, it has a ripple effect throughout all of the services. Our expenditures for 'nice to haves' directly compete with other requirements."
As a result, he wrote, "We have to accept standards that are 'good enough.'"
