The Department of Defense (DOD) now employs contractors to keep contractors in check in Iraq, under a new framework for war industry management solidified last month.

    In April, the Pentagon split its largest military contract in Iraq - formerly belonging to the Houston-based corporation KBR, Inc. - among companies Fluor and DynCorp, in addition to KBR.
A fourth company, the British-American service provider Serco, is responsible for managing and overseeing the other three, according to its contract, signed last year and now in effect.

    Based on the contract, Serco's duties include planning activities, managerial work, performance reviews, training and budget recommendations. According to an Army Sustainment Command news release last year, Serco is responsible for "analyzing performance contractors' costs," "working with the Army to measure contractor performance" and "recommending process improvements." The company also serves as a liaison between the other three contractors, and between the contractors and the government.

    The Serco deal marks a new level of Defense Department privatization, according to Dina Rasor, the chief investigator of the Follow the Money Project, who founded the nonprofit Project on Government Oversight (POGO).

    "It's gotten to the point where we're actually outsourcing the oversight," Rasor told Truthout.

    Serco plays a direct role in oversight activities previously reserved for government officials, according to Rasor. When government auditors and investigators request material from contractors in Iraq, Serco now acts as their intermediary, summarizing and interpreting the documents.

    "Auditors can't just go in and get source documentation from contractors," Rasor said. "Now when they want to do it, Serco gets the documentation and then sends them a summary. By putting that layer between auditors and companies, they're making it that much more difficult to get at what the fraud may be."

    Serco and RCI, the Virginia-based company it later bought, both entered Iraq in 2004, with Serco managing air traffic control at two airports and RCI employed in human resources and recruiting. Yet, Serco's role grew steadily, according to criminal investigator Bob Bauman, who spent 24 years with the Defense Department and is the co-author with Rasor of "Betraying Our Troops: The Destructive Results of Privatizing War."

    In addition to its direct management tasks, Serco's responsibilities include analyzing bids from other contractors, assessing costs and making recommendations on how money should be obligated.

    "Although Serco was supposed to provide acquisition support, they have slowly acquired more of the oversight responsibilities the DOD is supposed to do," Bauman told Truthout. "We believe they have trampled onto what should be inherently governmental functions and that could prove to be dangerous to the procurement process."

    Using contractors as a mediating step between contracted companies and the government creates a "potential for conflicts of interest, both organizational and personal," according to a recent Government Accountability Office (GAO) report on the employment of contractors as "contract specialists," who analyze and evaluate contracts.

    "A [conflict of interest] may be present when a contractor organization has other interests that either directly or indirectly (because of business or relationships with other contractor organizations) relate to the work to be performed under a contract and may diminish its capacity to give impartial, technically sound, objective assistance or advice," the report states.

    Some level of conflict of interest will always be present for a contractor charged with managing contracts, according to Rasor.

    "The government is supposed to be the protector of the taxpayer," Rasor said. "The contractor caters to shareholders' interests."

    According to the GAO, "The panel also found that while there are numerous statutory and regulatory provisions that apply to federal employees to protect against personal conflicts of interest, most do not apply to contractor personnel."

    In the absence of those provisions, Serco's contract does impose one unique regulatory mechanism: In addition to overseeing other contractors' duties, the company is responsible for some of the oversight of itself. The contract states that, prior to its assessment by the governmental Award Fee Evaluation Board, "the contractor shall submit a self-assessment," which "should contain any information that may be reasonably expected to assist the AFEB in evaluating the Contractors [sic] performance."

    Beyond that self-evaluation, Serco will likely not be subject to much substantive oversight. The company's prominent new role in Iraq debuts amid a great wave of DOD oversight failures in Washington.

    As the "Global War on Terror" (GWOT) continues, oversight mechanisms are understaffed, underfunded and underperforming, according to Winslow Wheeler, director of the Straus Military Reform Project at the Center for Defense Information.

    "Virtually the entire expanse of the DOD budget gets no oversight - certainly no aggressive oversight," said Wheeler, a former Senate staffer and GAO analyst. "I worked on Capitol Hill for over 30 years, and I've never seen it as bad as it is now."

    A DOD Inspector General's Office (OIG) report, released last week by POGO, shows that OIG staffing has remained stagnant since 2000, although DOD funding has more than doubled and defense contracts have steadily multiplied. The report states that the OIG's shrinking capabilities have left it with "gaps in coverage in important areas." These include criminal investigation personnel, staff to respond to whistleblower complaints and oversight for intelligence agencies.

    "As the delta between the resources of the Department and the DOD IG grows, it will continue to stretch our resources and affect our ability to be an effective oversight function and control for the Department of Defense, and could ultimately impact our ability to provide adequate coverage of services related to the GWOT," the report states.

    The DOD's marked shortage of resources and oversight personnel opens the door for an increasing number of decisions to be made in response to pressure from contractors, according to Wheeler. He cites the example of weapons procurement. Throughout the Bush administration, many DOD weapons programs have increased in cost while production either remains the same or decreases. Additionally, the DOD has invested significant funds in unnecessary, irrelevant weapons, according to Wheeler, who points to an order of 184 F-22 fighters - $64.5 billion worth of aircraft - planes which have never been used in Iraq or Afghanistan.

    In these cases, government actions are often dictated by assessments made by contractors, and costs can easily run out of control.

    "If Lockheed says, 'Oops! We screwed up on the F-22! We need more money,' then Congress complies,'" Wheeler said.

    Oversight from Congress itself has played little role in reining in Defense Department spending and contractor abuse to date, according to Wheeler, who holds that, though some Congress members may want to perform defense oversight, they "don't know how to do it."

    Moreover, Wheeler notes, when it comes to underfunding the DOD's inspector general, Congress is to blame. The legislature decides how much money each department office should receive.

    However, the past few months have seen a spate of legislation on contracting reform. And Rasor points to a number of pending fraud-related lawsuits that will come to fruition in the next few years. Ultimately, almost any increase in DOD oversight would constitute real improvement, according to Rasor.

    "No one was watching the store for the first five years of the war," she said.