Posted at 01:59 PM ET, 11/21/2008

Raytheon Gets $54M Missile Defense Contract

"Raytheon Company was awarded a $54 million Missile Defense Agency contract to continue design and development of a Multiple Kill Vehicle. MKV-R, as it is known, will counter complex ballistic missile threats during the midcourse phase of flight with multiple kill vehicles launched from a single interceptor," a company statement said.

"'Raytheon is the only company that has designed, developed and deployed exoatmospheric kill vehicles for the Ballistic Missile Defense System,' said Frank Wyatt, Raytheon Missile Systems vice president of Naval Weapon Systems. 'This contract award establishes Raytheon as the prime contractor for the development of the MKV-R and as the systems integrator for the MKV-R payload.'"

This kind of thing might be good for business. But government auditors question -- and question -- and question -- whether taxpayer dollars are being well spent on the program.

A GAO report last year, for instance, noted that MDA has improved some spending controls. But, as the GAO folks like to say, challenges remain.

In case you lost track, here's why it all matters (mind bending budgets, missile threats and all):

"Missile defense is important because at least 25 countries now possess or are acquiring sophisticated missile technology that could be used to attack the United States, deployed troops, friends, and allies. MDA's mission is to develop and field an integrated, layered BMDS capable of defending against enemy ballistic missiles launched from all ranges and during all phases of the missiles' flight. DOD has spent and continues to spend large sums of money to defend against this threat."

Government Inc. adds italics to the GAO stuff here:

"Since the mid-1980s, about $107 billion has been spent, and over the next 5 years, another $49 billion is expected to be invested."

We wonder what President-elect Obama will think about this once he is settled into the Oval Office?

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Pearson was the subject of probes almost from the start of its contract with the TSA. The Post devoted ample ink to questions about Pearson's approach to the contracting and the bills it submitted to the government.

A lot of bills. Big bills. $741 million in bills.

As noted in the Post story, those bills included:

"$526.95 for one phone call from the Hyatt Regency O'Hare in Chicago to Iowa City.

"$1,180 for 20 gallons of Starbucks Coffee -- $3.69 a cup -- at the Santa Clara Marriott in California.

"$1,540 to rent 14 extension cords at $5 each per day for three weeks at the Wyndham Peaks Resort and Golden Door Spa in Telluride, Colo.

"$8,100 for elevator operators at the Marriott Marquis in Manhattan.

"$5.4 million claimed for nine months' salary for the chief executive of an 'event logistics' firm that received a contract before it was incorporated and went out of business after the contract ended.

"Those details are contained in a federal audit that calls into question $303 million of the $741 million spent to assess and hire airport passenger screeners for the newly created Transportation Security Administration after the terrorist attacks of Sept. 11, 2001. The audit, along with interviews with people involved in the passenger-screener contract, paints a rare and detailed portrait of how officials at the fledgling agency lost control of the spending in the pell-mell rush to hire 60,000 screeners to meet a one-year congressional deadline.

"The audit, performed by the Defense Contract Audit Agency at the TSA's behest, spotlights scores of expenses: $20-an-hour temporary workers billed to the government at $48 per hour, subcontractors who signed out $5,000 in cash at a time with no supporting documents, $377,273.75 in unsubstantiated long-distance phone calls, $514,201 to rent tents that flooded in a rainstorm, $4.4 million in "no show" fees for job candidates who did not appear for tests."

Was that really five years ago? Oh, how time flies.

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That brings to $21 billion the amount of money the government has collected through civil fraud suits since the federal False Claims Act was strengthened in 1986, according to a DOJ statement.

"'Now, more than ever, it is crucial that taxpayer dollars aren't lost to fraud,' Gregory G. Katsas, Assistant Attorney General for the Department's Civil Division, said in the statement. "The billion dollars collected this year is only part of the story. By rooting out fraud and vigorously pursuing it, the Department, with the help of concerned citizens who report fraud in hotline calls and in qui tam complaints, undoubtedly saves the country many times that amount in aborted schemes and misconduct.'"

The False Claims Act is an interesting creature. It enables whistleblowers -- known in the vernacular as relators -- to get a piece of any cash recovered by the government as a result of their fraud allegations. Last year, the so-called relators scored about $198 million.

A big and growing source of fraud? Healthcare. More from the statement:

"As in the last several years, health care accounted for the lion's share of fraud settlements and judgments-$1.12 billion. This number includes both qui tam claims and those initiated by the United States. The Department of Health and Human Services reaped the biggest recoveries, largely attributable to its Medicare program and the federal/state Medicaid program which funds health care for the needy. Recoveries were also made by the Office of Personnel Management which administers the Federal Employees Health Benefits Program, the Department of Defense for its TRICARE insurance program, the Department of Veterans Affairs and others.

"The largest health care recoveries came from pharmaceutical companies and related entities."

There are some big numbers cited here. And yet. Is this just the tip of the iceberg? Government Inc. thinks alas it may be.

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Oversight sabers are rattling, according to a letter and statement the lawmakers released yesterday. From the statement:

"It is disconcerting that the FDA may be spending money on public relations when it is dangerously short of resources it needs to protect our nation's food and drug supplies," said Dingell. "The FDA would be wise to swiftly produce the records we have requested and make available for interviews the FDA staff we need to speak with to complete our investigation."

"'The FDA may have run afoul of Federal procurement and contracting laws while concocting this publicity campaign," said Stupak. "It is offensive that the FDA is using tax dollars to shore up their public image rather than using these limited resources to patch the gaping holes in our food and drug safety net. We intend to find out who at FDA thought up this public relations scheme, why they authorized it, and how they justify spending money on it."

You Post readers may recall the story about the deal.

Under fire from the lawmakers and others, the FDA decided to have a public relations campaign that would "create and foster a lasting positive public image of the agency for the American public," according to agency documents.

But. There was no competition of the sort prescribed by government policy. The agency instead worked through an Alaska Native corporation that did not have to compete. Under the plan, the ANC would pass the work onto a Washington firm favored by an FDA consultant (who by the way once worked closely in the private sector with said firm).

The agency suspended the contract after the Post brought its findings to their attention. And Dingell and company dug even deeper into the questionable (by the FDA's own judgment) arrangements.

That's what the letter yesterday is about. It asks that six agency employees, including contracting officials, public relations folks and the chief of staff, be made available as soon as possible for interviews.

And by the way:

"FDA staff members associated with the public relations contract have been advised that, if the Committee's information requests are not fulfilled by this Friday, they can expect to receive subpoenas," said the statement accompanying the letter.

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It seems that Rep. Tom Davis(R-Va.) -- perhaps the lawmaker most active in procurement over the last decade -- is joining Deloitte Consulting. He'll be receiving more than $1 million a year.

"This is not a revolving door for me," Davis told The Post's Tim Craig. "I am basically doing what I did before I went into government."

The announcement brings back memories for Government Inc.

"Until 1991, when he was elected chairman of the Fairfax County Board of Supervisors, Davis was general counsel for PRC Inc., a McLean-based technology contractor," the Post story said.

As chairman of the Government Reform Committee (since renamed the Oversight and Government Reform Committee), Davis was a well-informed, ardent advocate of "procurement reform" that gave contractors, particularly technology contractors, some of which operated in Fairfax, much latitude in how they conducted business with the government.

According to a tall stack of emails obtained by The Post, Davis and his congressional staff were in routine contact with the GSA. Other documents over the years showed that Davis also maintained close ties to the contracting community, sometimes about proposed procurement legislation.

Davis and his staff also were also close to a consulting firm started by a former private sector colleague, friend and political adviser. Davis once described the owner of the consulting firm as "a very close confidant and political ally."

That consulting firm, ICG Government, advised technology companies seeking government contracts. It also hosted seminars on procurement that featured Davis and his staff as speakers. ICG clients have appeared before Davis's committee as expert speakers. Among the employees was Davis's wife.

So.

Davis said that his role won't involve lobbying. He "will be a director helping to oversee" Deloitte's Washington office, The Post story said.

What does someone in Washington's contracting consulting community do to earn more than $1 million? Government Inc. thinks it will be interesting to find out. Any ideas? We'll be following up on this one at some point.

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Now comes the Boston Globe with a story about the Defense Business Board, an internal oversight organization at the Pentagon, and its recommendation that the government "slash some of the nation's most costly and troubled weapons to ensure they can finance the military's most pressing priorities."

"'Business as usual is no longer an option,' according to one of the internal briefings prepared in late October for the presidential transition, copies of which were provided to the Globe. 'The current and future fiscal environments facing the department demand bold action.'"

Apparently no programs were mentioned by name. But there's no secret about some of the possible big budget targets, including the new F-35 fighter jet, Future Combat Systems, etc.

Will the move for cuts actually get traction after an eight-year run of extraordinary increases?

Here's an answer from a defense-monitoring group, as reported by the Globe:

"The forces arrayed against terminating defense programs are today so powerful that if you try to do that it will be like the British Army at the Somme in World War I," said Winslow Wheeler, director of the Straus Military Reform Project at the liberal Center for Defense Information. "You will just get mowed down by the defense industry and military services' machine guns."

Ideas, dear readers? Government Inc. is standing by.

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A federal court decision last week that tossed out federal requirements for set-aside contracts at the Pentagon for disadvantaged businesses could undermine one of the government's key contracting goals: to help small businesses thrive.

That's according to a story by Elizabeth Newell in GovernmentExecutive.com.

"The ruling by the U.S. Court of Appeals in Rothe Development Corp. v. Department of Defense and Department of the Air Force stated that the government did not have sufficient evidence of 'pervasive, nationwide racial discrimination' by Defense to justify a race-based contracting preference program. Procurement and legal analysts argued that the rationale could be applied to minority contracting programs and the women's procurement program governmentwide.

"'The decision itself is limited, but I definitely think there will be future cases that quote this case as precedent where they try to make the argument that it applies in a broader way,'" said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy and now a partner at the Washington law firm Venable. "'I think it's pretty clear the case will be cited as precedent for striking down other preference categories.'"

At issue is a 1986 legislative provision that established the 5 percent set-aside target for defense spending. The appeals court said the provision violates equal protection guarantees in the Fifth Amendment.

This could be a big deal. Stay tuned for more.

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The Pentagon's top weapons buyer made a move Wednesday that temporarily keeps the budget pipeline open for the F-22 fighter jet.

John Young, the undersecretary for acquisition, technology and logistics, said the Air Force should spend up to $50 million to buy parts and other supplies needed to build four more F-22s. (See a PDF of the signed procurement agreement here.)

Young said the money "provides a bridge" that will keep spending going until the Obama administration can decide whether to go forward with the expensive weapons program -- or shut down Lockheed Martin's production line in Marietta, Ga. in 2011 as planned.

Young's move comes after congressional leaders on the House Armed Services Committee pushed the Pentagon in two recent letters to explain why $140 million set aside for the plane's suppliers has been in limbo.

Lawmakers argued that any future costs of the F-22 could rise significantly if suppliers were forced to shut down because the money hadn't been released.

"The cost of opening and shutting a production line is really high," said Chris Isleib, a spokesman for Young.

He said Young's decision to authorize money to buy such parts as engine components, hydraulic systems, wheels and other materials for four aircraft will keep the production line open until March. "You want to keep it there especially if there is a question of whether you're going to buy more airplanes," he said.

Richard Aboulafia, an aerospace industry analyst at the Teal Group in Fairfax, said Young's move only "stops the bleeding" on the F-22. He said in the 2009 budget the Pentagon had a choice to put in funding to shut down the plane's production line or fund a long lead-time but did neither.

"Young's buying time for the next administration," Aboulafia said. "That's where the real decision will be made."

He said president-elect Obama's administration seems likely to consider the F-22 a Cold War relic. "It doesn't look great," he said of the F-22's future.

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As a gesture of cooperation -- to other inspectors general and the procurement world in general -- the DoD inspector general's office has launched a Web site loaded with oversight tools.

"Knowledge is an important tool in the fight against fraud, waste and abuse," acting DoD IG Gordon S. Heddell says on the page. "In an effort to share that resource with others in our community, the Office of the Inspector General of the Department of Defense has launched a new web site titled 'Fraud Indicators in Procurement and Other Defense Activities.'"

"Internal controls can decrease the opportunities for fraud; however, they do not, by themselves, eliminate or prevent fraud. The web site is intended to assist in the detection of fraud by providing common fraud indicators in contracting and other areas susceptible to fraud. It provides tips in the scenarios for using data mining techniques and data analysis."

The site reaches from simple to complex. It helps define fraud. It has links to guidance for oversight pros. And it offers a variety of fraud scenerios, involving travel, war zones, health care and, of course, contracting.

If you use these tools and turn up fraud, waste or abuse -- or find examples of good government and efficient contracting -- please give us a call.

We're here in part to shine a bright light whenever we can.

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