Scout’s Obsession with the GAO: Got a great deal, then don’t be such a dick

(Obsession explainedhere at inaugural edition)</pScout

If I were allowed to offer an alternative title to this GAO report it would be “Act like a Dick and Ya get Nicked: Lessons Learned by Contractors Padding their Travel Costs”

OK the real title is“Department of State Contract for Security Installation at Embassies” and what is interesting about this November 8 report is how it came about. The contract, held by a company named EmbSEC for installing and maintaining security equipment at US embassies, came under review by the GAO after a tip from their Fraud Line. The GAO decided to look into why this contract was awarded without competition, why the travel costs which are the major cost of the contract are firm and fixed-price and where the heck was the oversight.

The awarding of the contract without competition gets complicated and that info can be found after the jump. Let’s start with the aspect of this which garners the simplified wasteful big government headline treatment. The contract was fixed-priced which the GAO says usually places the greater risk on the contractor however in this case there were unintended consequences regarding…

Travel Costs:

Because travel is fixed-price and not cost-reimbursable, the government pays airfare and other associated travel costs for the number of travelers proposed for each task order, regardless of the actual costs the contractor incurs. According to our review of the contract file and discussions with State personnel, there have been instances where the contractor has proposed a number of travelers that turned out to be more than actually traveled, and the government has thus paid for trips that did not occur.For example, for work in Baghdad, Iraq, the contractor’s price proposal reflected 23 travelers, but only 10 actually traveled. For work in Tashkent, Uzbekistan, 12 travelers were proposed and only 5 traveled. In the case of Baghdad, a State official calculated that the government paid at least $380,000 more than incurred costs.

And Baggage Handling Fees:

Another issue related to travel costs pertains to excess baggage handling fees. These fees are intended to cover the contractor’s expenses associated with transporting equipment overseas. According to contractor representatives and State officials, the tools and equipment needed under this contract can be very large and bulky, requiring additional fees to transport them in and out of the countries of destination. The contractor’s proposals for 200 task orders between December 2003 and July 2005 reflected a fixed price per traveler for excess baggage fees that some State officials believed was too high. State paid this price until it requested information on actual costs, which turned out to be much less.An OBO official calculated that State overpaid $1.2 million during this 1 1/2 year period.

Yikes! That’s John Stossel material… Can‘t ya hear it—$1.2 million for shuffling Samsonite? Give me a break.

So this in part led contracting officials to call for an audit last year which never got under way due to a shortage of staff and “much of the [one] contracting officer’s time has been taken up with resolving disagreements with the contractor.” The GAO described the wrangling over travel costs as having become “contentious” when the contracting official attempted to “change travel to a cost-reimbursable expense.” In other words the contractor got pissy and greedy with their overlords about the contract. Some contractors just don’t know their place and given the sweetheart deal this firm fell into they ought to have quit while they were ahead.

Continues–Click Read More

EmbSEC was created under the Small Business Administration’s (SBA) 8(a) business development program. It is the protg and BP International is it’s mentor. I’m always suspicious of these relationships and this case doesn‘t alleviate my suspicions. Another SBA 8(a) company called RDR had this contract for years. The problem is one can only be an 8(a) for 9 years then you graduate from the program. Thus they couldn‘t get the contract when it came up again. But apparently State had wanted RDR to retain the contract. Solution: RDR sought out another 8(a) company (EmbSEC) to form a joint venture for the follow-on sole source contract. Awarding of the contract gets involved and complicated and involved the use of a blanket type post 9/11 induced SBA waiver to award the contract and without competition. Given the limited space here let’s just say in the end the GAO determined the waiver was improper. Thus EmbSEC should not have received the contract in the way it did and in the end they’ll be losing it.


The State department agreed with the GAO recommendations and the contract was altered in that “a new contract clause was inserted that allows recovery of unused travel funds after order completion. ” Also State decided to opt out of the last year of the contract with EmbSEC , make the contract competitive in the future, look at changing the type of contract and dump that blanket waiver in the future that made the award possible.

So what did State object to? First for those unfamiliar with GAO reports…a draft report is given to agencies involved for an opportunity to comment on the report. The GAO will consider those comments in finalizing the report. Each report contains letters and comments from those agencies at the end of a GAO report and the GAO usually addresses those comments in the report. Here was what State objected to…

State also questioned the accuracy of two statements in the report, pertaining to its interest in retaining RDR for the follow-on contract and to the reason the contracting office requested assistance from the Defense Contract Audit Agency.

And here is why I love the GAO. Their response…

Both of these statements are correct as written.</blockquote

End of that bitches.

But do ya have to call it fraud for God‘s Sake!

State also wasn’t happy with the Fraud Line thing particulary the footnote that explained the Fraud Line …”The purpose of GAO’s FraudNET is to facilitate reporting of allegations of fraud, waste, abuse, or mismanagement of federal funds. Allegations are received via e-mail at”

So State pulled out the violins…

As this paragraph is currently structured, the reader might be left with an unduly negative impression. […]We accknowledge as GAO has documented in its report, that there have been problems and some complicated issues addressed in both the formation and administration of this contract. That said, we would also point out that this critical worldwide security program has been carried out–with overall success–by the Department and its contractor under difficult and even dangerous circumstances. One particularly stark example was the situation encountered in Baghdad.In addition to gunfire in the vicinity, a mortar shell hit the palace as EmbSec’s employees were working at that location. In sum we do not believe that the events and actions described in the draft report can properly be categorized as “fraud, waste, abuse or mismanagement.”

So did the mortar sympathy ploy work its way into the heart of the GAO…

The intent of the footnote is simply to describe the purpose of FraudNET for the general reader. That being said, we believe our findings do point to some mismanagement issues that could have led to waste of government funds.

So there is a happy ending after all. The greedy, difficult and shall we say illegitimately awarded and rewarded contractor lost out in the end. Now the question I have is who dropped the dime on them??? I like to think it was the over worked contracting agent trying to do oversight with the dickish contractor. What say you?

(all emphasis throughout are mine)

8 thoughts on “Scout’s Obsession with the GAO: Got a great deal, then don’t be such a dick

  1. Cool. I wondered if it’d be ah…not very interesting (just cause it interests me well…)
    So thanks for the feedback.

  2. Scout,
    Nice area to have an obsession. As the GAO gets to audit anything and everything, looks like they’ll have quite a huge amount of fun material.
    (after all, gotta fill up the void left by Holden and Katherine Harris 😉

  3. The GAO has been one of the increasingly few federal agencies actually willing to perform the oversight for which they exist. They have been severely shackled by the maladministration, but it hasn’t stopped them from investigating and reporting. They have just mostly been ignored by their bosses. I think that’s all about to change. Thanks for the newest Obsession (although I still want that gaggle, Holden). I’ll look forward to the further exploits and adventures of the GAO!

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