The Boston Herald reports that “With millions already wasted in the Iraq reconstruction effort, Sen. John F. Kerry will push today for federal legislation to punish war profiteers, root out cronyism in post-war contract awards and give new protections to whistleblowers.”

John Kerry is co-sponsoring the new legislation aimed at preventing contracting waste, fraud and abuse by Pentagon contractors in Iraq, Afghanistan and elsewhere. GAO auditors report that billions have been squandered in Iraq – “as much as $10 billion in public money on Iraq reconstruction aid because of overcharges and unsubstantiated expenses.”

The bill, written by Sen. Byron Dorgan (D-ND), who has led a series of hearings on the issue, would make a series of immediate fixes to the procurement process, including punishing war profiteers with stiffer penalties, requiring more disclosure of contracting abuses, forcing more competition by eliminating sole-source contracts and restricting the ability of contractors to oversee one another.

Kerry said:

“We owe every man and woman serving in our military nothing less than complete transparency when we spend money in places like Iraq and Afghanistan. Unfortunately, the war in Iraq and the actions of companies like Halliburton and Custer Battles have become symbols for questions about government waste and a near total lack of accountability. It’s a disgrace that we have to answer to parents who ask how we can allow corporate cheaters to reap massive profits on the battlefield of Iraq when their sons and daughters are serving without proper equipment. This bill will help restore confidence in this process.”

A summary of the legislation is below:

Honest Leadership and Accountability in Contracting Act
Section-by-Section Analysis

1. Punishes War Profiteers – Sec. 101 establishes penalties of up to 20 years in prison and at least $1 million in fines for war profiteering. This provision is largely modeled on anti-profiteering legislation by Senator Leahy. Note that the penalties would apply to fraud by contractors in any place where the United States engages in military action – regardless of whether the fraud is against the United States or “the entity having jurisdiction over the place where the military action takes place.” So fraud against the Coalition Provisional Authority would have been covered by this provision.

2. Cracks Down on Big Corporate Cheaters – Sec. 102 restores a Clinton Administration rule on suspension and debarment, which prohibited awarding federal contracts to companies that exhibited a pattern of overcharging the government or failing to comply with the law, including tax, labor, environmental, antitrust, and consumer protection laws. The Bush Administration repealed this rule in March 2001, one of its first actions upon taking office.

3. Requires Full Disclosure of Contract Abuses – Sec. 103 provides for greater transparency in contracting. Specifically, this section would require agencies to provide to the chairman and ranking member of committees of jurisdiction a list of all agency audit reports that have found contractor misconduct. It would also require creation of a website listing (1) any instances where a major contractor has been fined or found guilty of misconduct, and (2) information on all sole source contracts in excess of $2 million.

4. Forces Real Contract Competition – Secs. 201 and 202 would prohibit the awarding of umbrella contracts over $100 million on a “sole source” basis, so that such contracts would be jointly awarded to at least two companies, which would then compete with each other, under the umbrella contract, for all purchase orders worth more than $1 million. The provision would preclude a multi-billion dollar, sole source award like Halliburton’s LOGCAP contract, forcing some real price competition. Agencies would have waiver authority in cases where only a sole source contract was feasible, but would have to justify a waiver in writing and notify Congress.

5. Bans Corporate Cronyism in Contracting – Sec. 211 requires that federal agencies conduct contract oversight, rather than paying contractors with conflicts of interest to oversee one another. (On March 10, 2004, the Pentagon awarded $129 million worth of oversight work to major Iraq contractors – essentially asking them to oversee each other. Some of the companies tasked with overseeing each other had huge conflicts of interest, like Parsons and Fluor, which had a $2.6 billion joint venture in Kazakhstan.) A Dorgan-Wyden amendment to the FY 2005 Defense Authorization bill prohibited the outsourcing of oversight, and was signed into law – but the Pentagon took the position that it had not outsourced oversight, but rather functions relating to oversight. Sec. 211 restates the prohibition on outsourcing of oversight, and clarifies that specific activities relating to oversight, including “services that involve or relate to the evaluation of another contractor’s performance,” could not be outsourced to companies that have a conflict of interest.

6. Eliminates Conflicts of Interest for Federal Contracting Employees – Sec. 212 closes the perverse loophole that allows federal contracting officials to work as representatives for companies to whom they awarded contracts. Federal law currently prohibits federal contracting officials from being hired as employees, directors, or consultants of companies to whom they awarded contracts – but the law does not prohibit them from being hired as representatives. Sec. 212 would make it clear that procurement officials could not be employed by contractors in any capacity, including as representatives, within two years of leaving their government positions.

7. Ends Cronyism in Key Government Positions – Sec. 301 stops unqualified political appointees like David Safavian and Michael Brown from holding key jobs relating to (1) federal contracting or (2) public safety. It specifies that political appointees for such positions must have relevant professional credentials, a record of accomplishment, and specific expertise in the field in question. Also, the nominee cannot have been a representative for any client having business before the agency in question in the previous two years. The provision explicitly lists certain jobs that this restriction would apply to, including the head of procurement at OMB and the director of FEMA, but would extend to all political appointments in the fields of federal contracting and public safety. This provision is modeled on the Waxman Anti-Cronyism Legislation in the 109th Congress.

8. Strengthens Whistleblower Protections – Among other provisions, Sec. 302 makes it more difficult for federal agencies to retaliate against whistleblowers. Currently, only the Federal Circuit Court of Appeals is allowed to review whistleblower retaliation cases; Sec. 302 would allow other federal courts to consider such cases. The bill would also create a mechanism to ensure that whistleblowers are able to come forward to Congress with classified information, in a way that protects both the whistleblower and the classified information.

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