Blacklisted Contractor Continues Receiving Government Money Through Haiti Contracts

December 02, 2011

Jake Johnston
Congress Blog (The Hill), December 2, 2011

A shorter version of this op-ed was published by The Hill.

Without increased oversight and accountability, aid efforts in Haiti and elsewhere are bound to come up short.

Following the devastating earthquake in Haiti on January 12, 2010, the U.S. launched an unprecedented relief effort, eventually totaling over one billion dollars. But the lead agency in the immediate aftermath was not the U.S. Agency for International Development (USAID), as is typically the case when our nation provides humanitarian assistance, but the military. Just after the earthquake, the U.S. had over 20,000 troops in Haiti. Of the $1.1 billion in humanitarian funding from the U.S. in 2010, nearly half was channeled to the Department of Defense. As has been the case in Iraq and Afghanistan, the relief efforts in Haiti have relied heavily on contractors, a number of which have a history of waste, fraud and abuse. In fact, an analysis of federal contracts has revealed that Kuwait-based Agility Logistics (formerly PWC Logistics) — currently under indictment for overcharging the U.S. military by over $1 billion on food supply contracts — has benefited from over $16 million in funding awarded in the aftermath of the earthquake. With so much on the line, the U.S government, across the board, must step up its oversight of contractors to ensure taxpayer dollars are not wasted on companies with poor track records.

Agility has been barred from receiving government contracts since November 2009, when a federal grand jury indicted the company for overcharging the U.S. military by over $1 billion on contracts to supply food to troops in Iraq, Kuwait and Jordan. The total value of the contract was over $8 billion. Agility was accused of “intentionally failing to purchase less expensive food items, knowingly manipulating and inflating prices, and receiving product rebates and discounts that it did not pass on to the government as required,” according to the Project on Government Oversight. In July 2011, U.S. District Judge Thomas W. Thrash wrote that Agility could face additional charges stemming from their alleged impropriety.

Agility originally sought to downplay the effect of the indictment, responding that “[t]hese allegations should have no impact on any current contracts with the U.S. government.” Yet the same day as their press release, they were added to the U.S.’s Excluded Party List System (EPLS), which prevents them from procuring contracts from any government agency. The EPLS designation has been extended to over 125 related organizations as the investigation has continued; all of them have been indefinitely barred.

Despite the blacklist designation, however, Agility was still able to secure government contracts for work in Haiti through a joint venture. An analysis of the Federal Procurement Data System shows that Contingency Response Services LLC (CRS) has received over $16 million in government funding from the Department of the Navy since the earthquake.  Although little information is publicly available on the particularly bland-sounding Contingency Response Services, Washington Technology reported in 2007 that three defense contractor giants — Dyncorp, Parsons and Agility Logistics (then PWC logistics) — had won a $450 million contract from the Department of the Navy under the banner of CRS.

A Securities and Exchange Commission (SEC) S-4 filing from April of 2011 sheds some light on the joint venture. The document notes that DynCorp owns 45 percent of CRS and explains that, “CRS is a joint venture formed in March 2006 with two other partners for the purpose of procuring government contracts with the U.S. Navy.”

The contract with the Navy from 2006 is an indefinite quantity contract, allowing CRS to receive funds for various tasks for a period of five years up to the contract ceiling of $450 million. All the funds disbursed to the company since the Haiti earthquake have come through this original mechanism. Although the inclusion on the EPLS did not cancel previous contracts, CRS was able to take advantage of the old contract to receive new funding despite their exclusion. In 2009 President Obama directed government agencies to reduce their use of IQCs, which have been found to be excessively risky. The delivery orders are for a variety of tasks, relating to debris removal, “logistical support services”, and engineering and planning camps for the military.

DynCorp is obviously aware of their partner’s legal troubles.  Just one month after the November 2009 indictment of Agility, DynCorp dropped Agility from a $645 million one-year contract with the U.S. Army. The deal included four one-year options, bringing the contract’s total value to $5.847 billion. The contract was a partnership between DynCorp, Agility and CH2M Hill. Despite the prompt action from DynCorp in this case, their relationship with Agility through CRS appears to have continued.

Although Agility’s partners in CRS have not been barred from receiving government contracts, they have their own track record of fraud and abuse. The Special Inspector General for Iraq Reconstruction found Parsons’ work to have been so poor that Army procurement fraud officials “asked Parsons to show cause why the firm should not be proposed for debarment.” Dyncorp, with over $2 billion in government contracts in 2009 alone, is one of the largest defense contractors in the world. They are also the subject of the recent Hollywood movie “The Whistleblower”, based on the true story of two former DynCorp employees who blew the whistle on fellow employees’ involvement in human trafficking in Bosnia. Despite the Army’s own investigation and the Department of Defense Office of Inspector General finding evidence of trafficking, no charges ever came. Again in 2008, a former subcontractor for DynCorp testified before Congress about a “prostitution ring” that was run by the contractor’s employees in Iraq.

It has been nearly two years since the earthquake in Haiti and the military’s role in relief efforts has been replaced by other U.S. agencies, predominantly USAID. But this doesn’t mean contractor abuse, fraud and waste is a thing of the past. During her confirmation hearing, Hillary Clinton stated that “we know, obviously, of the security contractors and some of the difficulties that they have presented, but it’s been contractors across the board.” In the same hearing, Clinton specifically targeted USAID as having “turned into more of a contracting agency than an operational agency with the ability to deliver.”

In Haiti, for-profit development contractors have been some of the largest recipients of U.S. aid, yet agencies lack the staff and resources to adequately supervise this vast network of contractors who are relied upon for critical development work. With billions already spent, and more to come, increased oversight and accountability in Haiti will be an essential part of any successful relief and reconstruction effort.

Jake Johnston is an international researcher at the Center for Economic and Policy Research. He writes on Haiti related issues for the blog Relief and Reconstruction Watch.

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