Contractors Wag Defense Watchdog

Want some outrage today?

Take out your pay stub, look at the gaping hole the Internal Revenue Service has made in your income and then read this Government Accountability Office testimony. It details how contractors have managed to defang the Defense Contract Audit Agency, the outfit that's supposed to protect the public purse from looters called federal contractors.

Gregory Kutz, managing director of forensic audits and special investigations at GAO, told a hearing of the Defense acquisition reform panel of the House Armed Services Committee on Thursday that slipshod auditing practices -- and what seems like a "Stockholm Syndrome" relationship between Defense auditors and contractors -- has resulted in billions of dollars in taxpayer money being subject to fraud, waste, abuse and mismanagement.

In one egregious example Kutz cites, a DCAA manager auditing a satellite launch proposal from an unnamed major U.S. defense contractor got pressure from the contractor and the buying command to drop some unflattering findings. The manager directed his auditors to omit the bad results, and DCAA issued a more favorable opinion, which allowed the company to win a contract that improperly compensated it for $271 million in commercial business losses.

Kutz added that the Defense inspector general has launched a criminal investigation of the smelly deal.

Shay Assad, acting deputy undersecretary of Defense for acquisition and technology, tried to explain to the committee that DCAA is just one of many players in a complex decision making process.

He told the hearing, "Occasionally there are differences of opinion between the DCAA auditor and the contracting officer on audit findings. That is to be expected as DCAA is accounting oriented, while the contracting officer is business oriented, and must balance many factors and considers input from many technical advisors, including DCAA, in his decision-making process."

Unfortunately, as Kutz pointed out, that process seems to favor the contractor rather than taxpayers who don't have a rocket business in their backyards.