May 11, 2018 —
We determined whether the DoD adequately monitored contractor performance and conducted sufficient invoice reviews for services provided under the Logistics Civil Augmentation Program (LOGCAP) IV contract in Afghanistan.
LOGCAP is an Army program, established in 1992, which uses contractors to provide logistical and sustainment services to deployed forces, such as dining and laundry facilities, housing, construction, transportation, facilities maintenance, and fire and emergency services.
On July 7, 2009, the Army Contracting Command–Rock Island awarded two cost‑reimbursable task orders for LOGCAP services in Afghanistan. Cost‑reimbursable contracts provide payment of allowable incurred costs and require contractors to submit interim vouchers to obtain payments for costs they incurred to perform the contract.
We determined that DoD officials did not conduct sufficient voucher reviews for services provided under the LOGCAP IV contract. Specifically, Army Contracting Command and Defense Contract Audit Agency (DCAA) officials did not adequately monitor all 128 LOGCAP IV vouchers submitted from 2015 to 2017 for questionable and potentially unallowable costs.
This inadequate monitoring occurred because DoD policy regarding voucher reviews did not clearly state what role contracting officials should have in reviewing vouchers or establish an expectation of how the contract administration office could augment DCAA voucher reviews. In addition, DoD policy established DCAA prepayment reviews as the sole method of voucher oversight prior to payment; however, prepayment reviews are cursory reviews not sufficient for preventing reimbursement to the contractor for all potentially unallowable costs.
As a result, the Army paid all 128 LOGCAP vouchers the LOGCAP contractors submitted from 2015 to 2017, valued at $2.4 billion, with little or no examination of the supporting documentation. We identified at least $536 million of the $2.4 billion billed on vouchers that were supported by questionable documentation that warranted further analysis. Specifically, the contractor provided supporting documentation for labor, employee travel, and employee bonuses that did not contain sufficient detail for us to determine how the contractor calculated costs. In addition, we identified a $32 million voucher the contractor submitted for labor and expenses, which did not include accounting transactions that supported the costs billed. Furthermore, we identified at least $26 million in direct labor for employees who were not physically present in Afghanistan. We also identified $422,825 in costs that, based on the description of the costs in contractor’s accounting data, may not be allowable.
In addition, the Army Contracting Command–Afghanistan (ACC-A) did not monitor all contract requirements. For example, CORs did not determine whether contractors were fulfilling contract requirements to meet DoD Fire and Emergency Services Program standards or food service sanitation standards.
This inadequate monitoring occurred because ACC-A officials used a program-wide LOGCAP Quality Assurance Surveillance Plan (QASP), which contained generic surveillance checklists not designed to monitor specific LOGCAP services used by the Army in Afghanistan.
As a result, ACC-A officials did not have reasonable assurance that the contractor performed all 28 active LOGCAP IV services in Afghanistan in accordance with contract requirements. Using generic surveillance checklists resulted in CORs conducting quality assurance inspections that did not identify deficiencies in contractor performance because they did not identify specific requirements for high-risk services, such as procedures for verifying response times for fire and emergency services and food preparation and storage requirements for dining facilities. This increased health and safety risks to U.S. and Coalition personnel.
To improve voucher oversight, we recommend that the:
- Defense Procurement and Acquisition Policy (DPAP) Director issue clarifying guidance establishing the contract administration office’s responsibilities for monitoring contractor billings;
- Army Contracting Command – Rock Island Executive Director delegate additional voucher review responsibilities to the Army Contracting Command – Afghanistan and modify the LOGCAP IV contract to require contractors to submit transaction-level accounting data that accurately represent the costs billed on vouchers in the DoD’s Invoicing, Receipt, Acceptance, and Property Transfer application of the Wide Area Workflow;
- Army Contracting Command – Afghanistan Principal Assistant Responsible for Contracting (PARC) develop a standard operating procedure to monitor contractor billings and communicate the results with the Procuring Contracting Officer and responsible Defense Contract Audit Agency office;
- Defense Contract Audit Agency Director review the Logistics Civil Augmentation Program contractor’s labor billing practices and, at a minimum, review $422,825 we found which may not have been necessary to meet contract requirements; and
- ACC-A PARC create a new QASP specific to task order 0004 and 0005 requirements in Afghanistan and develop detailed checklists for the CORs to use when conducting contract oversight to improve monitoring of contractor performance on the LOGCAP IV Afghanistan task orders.
On November 28, 2017, we met with the DPAP Director and DCAA officials to discuss concerns we identified during the audit. According to the Director, the current COR Handbook does not address communication between the COR and DCAA, and his staff indicated they would update the COR Handbook to include procedures to correct this. This action addresses our recommendation and the recommendation will be closed when we verify the planned actions are fully implemented.
On January 8, 2018, we met with senior DCAA policy officials to discuss the costs we identified as supported by questionable documentation. The DCAA officials were responsive to our concerns and took immediate action. Specifically, to address our concern over clustered costs, the DCAA obtained from the contractor more detailed cost data from its accounting system, which matched the total amount and total hours that were billed on four clustered transactions we provided to DCAA as examples of clustered transactions. In addition, DCAA began to investigate the $422,825 we found to be potentially unallowable and stated that it has not found any significant unallowable costs. This action addresses our recommendation and will be closed when we verify the planned actions are fully implemented.
During the audit, we also advised the ACC-A PARC that deficiencies existed in contractor performance oversight. The PARC agreed with our observations and took immediate action to resolve our concerns. Specifically, ACC-A officials created a new QASP specific to LOGCAP IV, task orders 0 004 and 0 005. We reviewed the updated QASP and determined that the updated surveillance checklists included surveillance steps to improve oversight of the contract. In addition, the new QASP identifies the criteria for each service, including high risk-services. This action addressed our concern and this recommendation is closed.
Management Comments and Our Response:
The Defense Procurement and Acquisition Policy Director agreed with our recommendation and stated that he will issue clarifying guidance on the responsibilities of the contract administration office to monitor contractor billings and will update the Contracting Officer’s Representative Handbook to include procedures for more effective communication between Contracting Officer’s Representatives and the Defense Contract Audit Agency. Therefore, this recommend is resolved and will be closed when we verify the planned actions are fully implemented.
The Deputy to the Commanding General, Army Contracting Command, agreed to:
- improve communication and coordination with DCAA when DCAA performs contractor risk assessments;
- coordinate with the DCAA to ensure transparent supporting documentation is provided with each submitted voucher; and
- develop a cost control evaluation guide for the contract administration office to monitor the contractor’s cost control performance.
Therefore, these recommendations are resolved and will be closed once we verify the planned actions are fully implemented.
The Defense Contract Audit Agency Director agreed with the recommendation and stated that the Defense Contract Audit Agency did not find any significant unallowable costs during its review of the $422,825 in costs we identified as potentially unallowable. Therefore, this recommendation is resolved and will be closed when we verify the DCAA completes its review.
This report is a result of Project No. D2017-D000JB-0171.000.