Windfalls of War from The Center for Public Integrity

Windfalls of war: Pentagon buys choppers from Russia to equip Afghan, Iraqi militaries

Russia — 2011-10-09T10:23:55-04:00

If military operations in the early years of Iraq and Afghanistan justified the use of sole-sourcing contracting for support services, then the drawdown in Iraq and Afghanistan created a new justification for steering contracts to a single bidder: the need to quickly equip the militaries there.

The rush to equip the new military forces in these countries was used to justify sole-source procurements for a host of weapons and equipment, particularly for what is called “non-standard” equipment—in this case, Russian. Those countries, so the argument went, were more familiar with Russian equipment. Even in Afghanistan, a country which fought off a Soviet occupation in the 1980s, U.S. officials argued that the Northern Alliance and Afghan pilots were more familiar with Russian helicopters, which are regarded as rugged and reliable.

Today, U.S. contracts for Russian equipment, used primarily to buy Russian-built Mi-17 helicopters for Iraq, Afghanistan and Pakistan, have topped $1 billion and have almost all been sole-source or non-competitive contracts. They include:

A non-competed $89 million contract awarded to General Dynamics Ordnance and Tactical Systems to buy three VIP Russian helicopters for Afghanistan’s president
A $322 million sole-source deal to buy 22 helicopters for Iraq
Most recently, another sole-source contract, which could be worth almost $900 million, to supply Russian helicopters for Afghanistan

The Pentagon’s sole-source buying of Russian helicopters has upset some lawmakers.

Six members of the congressional delegation from Connecticut, home to Sikorsky Aircraft, wrote to the Pentagon to protest the Russian purchase. “Particularly in light of the great commitment the United States is making to Afghanistan, rather than procuring Russian helicopters with unclear reliability and cost, we believe it is only prudent to consider proposals from U.S. manufacturers, employing American workers, with a history of providing the Defense Department with the best equipment at the best value to the U.S. taxpayer,” the 2010 letter said.

Sen. Richard Shelby, R-Ala., a longtime advocate of defense interests, also questioned the choice of Russian helicopters. “The program appears to be an ad hoc procurement process with inadequate oversight,” he wrote to the Pentagon. “The program is undefined, delayed, and simply not a good use of taxpayer funds.”

In 2009, the Navy eventually held a rare competition to buy four Mi-17 helicopters for Afghanistan and opened it up for bidders, awarding a $43.5 million contract to a defense firm in Shelby’s home state to deliver four Mi-17s. The Navy was preparing to hold another competition for 21 Mi-17s in 2011, when the Pentagon decided to hand the responsibility to a newly created Army office, which canceled the competition and moved into sole-source negotiations with Rosoboronexport, the Russian state arms agency. Rosoboronexport had only recently been removed from the list of companies sanctioned by the U.S. State Department for violating U.S. laws prohibiting the sale of weapons to Iran and Syria.

The Army moved forward with plans to sole-source a $375 million contract to the Russian arms agency, now arguing that it was the only legitimate seller of Russian armaments. A number of American companies lodged protests against the award, including Sikorsky, which argued that the U.S. should have considered American aircraft, and Arinc, which, after having won its own sole source for Russian helicopters, now argued it was being disadvantaged because the contract required working with Rosoboronexport. The GAO, however, dismissed the protests.

According to a copy of the contract provided to iWatch News, it includes another $550 million for additional helicopters, which would bring the total contract to nearly $1 billion.

The head of the office in charge of the acquisition said that even though the main contract went to Russia, the installation of Western cockpits, about $3 million per helicopter, would go to a U.S. firm. “We could have easily left these aircraft in Russia and done the mod's there,” Bert Vergez, the head of the Army's Non-Standard Rotary Wing Aircraft office, told The Huntsville Times. “I thought it made sense to bring that work here.”

In fact, Vergez brought the work to Huntsville, under a non-competitive award as part of an umbrella contract called the “Prototype Integration Facility,” a 10-year, $1.1 billion award to a joint venture of Yulista Management Services, Inc. and Science and Engineering Services, Inc.

The Pentagon defended the decision and denied reports, made by another company, that Rosoboronexport was charging the U.S. government twice what it paid for the choppers. “We have no information concerning the nature of the alleged reports” about price inflation. “The contracting office determined that the costs were fair and reasonable,” the Pentagon said.

There is, however, an ongoing inspector general investigation looking at Russian helicopter procurement, examining “whether DoD official properly and effectively managed the acquisition and support of Non-Standard Rotary Wing Aircraft, such as the Russian Mi-17.”

Next: Sole-sourcing, from helicopters to air tankers

Windfalls of War: A decade of keeping government spending accountable

Afghanistan — 2011-10-07T17:33:30-04:00

UPDATED 10/7/11: Ten years ago, American bombs rained down on Afghanistan, the first thrust of revenge for the 9/11 attacks on the Pentagon and the World Trade Center.

The United States went to war to find and kill terrorist leader Osama bin Laden, who had been given refuge by Afghanistan's Taliban leadership. The Taliban fell quickly; it took another 10 years to kill bin Laden. And still the war drones on.

More than 6,000 soldiers have died in Afghanistan and Iraq. The wars cost taxpayers $2 billion a week. The Pentagon has awarded $206 billion in contracts to support operations in Iraq and Afghanistan.

The bipartisan Commission on Wartime Contracting has concluded that up to $60 billion spent on contracts in Iraq and Afghanistan has been lost to waste, fraud and abuse.

“The need for reform is urgent,” the commission report said. “Contractors’ support…has been unnecessarily costly, and has been plagued by high levels of waste and fraud.”

Over the last decade, the Center for Public Integrity and its website iWatch News have kept a watchdog’s eye on the Bush administration and now the Obama administration. What follows is a compendium of the Center’s best work on the war.

Windfalls of War III (2011)

Pentagon's no-bid contracts triple in 10 years of war
Over a decade of war, the Pentagon has awarded lucrative military contracts without competitive bidding, and the amount has increased from $50 billion in 2001 to $140 billion in 2010.

KBR: The Pentagon’s concierge
KBR, formerly Kellogg, Brown and Root, won the first "concierge" contract for an array of services in Iraq and Afghanistan and parlayed it into a sole-source $37 billion bonanza

One-stop shopping for helicopters...made in Russia
Pentagon contracts to Russian helicopter-makers confound US companies. Pentagon says Afghan and Iraqi pilots are more familiar with Russian choppers.

Taxpayers get hammered by Pentagon’s attempts to do “one-stop shopping”
The air tanker fight shows how competition among defense contractors can drive down the cost of expensive new weapons systems, to the benefit of taxpayers. The Pentagon's competed contracts fell to 55 percent in the first half of 2011.

Pentagon's record of competitive contracts is poor compared to other agencies
Over the past 10 years, the Pentagon has competed about 60 percent of its contract dollars, which stands in stark contrast to other large federal agencies. State Department competed 75 percent; Energy competed 94 percent; Homeland Security 77 percent.

JIEDDO: The Manhattan Project that bombed
After spending $21 billion, Pentagon still doesn’t have a high-tech method to detect or destroy IEDs from a safe distance.

Plus: Watch author Sharon Weinburger discuss her no-bid contractor series on DemocracyNow.

The Iraq War Card (2008)

False pretenses
Following 9/11, President Bush and seven top officials of his administration waged a carefully orchestrated campaign of misinformation about Saddam Hussein's Iraq, making more than 900 false statements

935 false statements: Key false statements by top Bush administration officials

Windfalls of War II (2007)

Baghdad Bonanza
KBR, the global engineering and construction giant, won more than nine times more contract money than the second highest contractor, DynCorps, according to an analysis by the Center for Public Integrity.

Plus: The top 100 recipients of Iraq and Afghanistan reconstruction funds.

Inside the Contracting World (2004)

Winning contractors
More than 150 American companies have received contracts worth up to $48.7 billion for work in postwar Afghanistan and Iraq, according to the latest update of the Center for Public Integrity's Windfalls of War project.

Inside a war-time contract
Over a period of six months, the contracted value of one Iraqi task order of Halliburton subsidiary Kellogg, Brown & Root grew by a multiple of 36 and was modified 21 times, according to previously classified documents.

Halliburton contracts balloon
Despite being under an investigative cloud, Cheney’s former employer gets $4.3 billion in 2003.

Windfalls of War I (2003)

Contractors reap the windfalls of war
More than 70 contractors have won up to $8 billion for work in postwar Iraq and Afghanistan over the last two years, according to a new study by the Center for Public Integrity. Those companies donated more than $500,000 to the presidential campaigns of George W. Bush.

Contracts via Kabul and Baghdad provisional authorities
Three U.S. companies—banking powerhouse J.P. Morgan Chase, oil giant Chevron/Texaco and global telecommunications provider MCI—have won contracts from the provisional governments in Kabul and Baghdad.