L-3 responds to mismanagement allegations

L-3 Communications Inc. today rebutted allegations by the inspector general of the General Services Administration that L-3 and a company it owns mishandled a federal contract to install and integrate surveillance cameras and sensors along U.S. borders.

"While there are important lessons to be learned from the contract, the audit allegations were unfounded," said Joe Saponaro, president of L-3's government services division, in testimony during a hearing of the House Homeland Security Subcommittee on Management, Integration and Oversight.

Saponaro criticized GSA for not reviewing the charges with L-3 before publishing its critical audit in December 2004. "The simple act of discussing these charges with L-3 prior to issuing the report could have prevented the spread of inaccurate and damaging information," he said.

The subject of the hearing was the GSA inspector general's audit that accused International Microwave Corp. (IMC) ? purchased by L-3 in November 2002 ? of substituting cameras, failing to deliver camera systems and maintenance services, inappropriate billing, poor worksmanship and other shortcomings in connection with $200 million in federal contracts related to the Remote Video Surveillance Program at the borders.

That remote surveillance program is receiving renewed attention because the Homeland Security Department is expected to launch a much larger version of the program, the $2.5 billion America's Shield Initiative, later this year.

GSA's inspector general determined the remote surveillance program had severe problems. "Our review concluded that there were a number of significant deficiencies in the RVS procurement," Joel S. Gallay, deputy inspector general at GSA, testified at the hearing.

Of eight sites inspected, "none had fully operational RVS systems" as of September 2004, Gallay said. "At some of these locations, no equipment had been installed, and at others problems with the equipment installed to date have rendered the system incomplete and unreliable. Contracting deficiencies occurred in five broad areas: lack of competition for contract award; use of an inappropriate contract vehicle; inadequate contract administration and project management; contractor's providing less expensive equipment; and ineffective management controls."

Saponaro disputed those accusations, saying "installation at four sites was effectively complete by contract expiration." He added that documentation has been submitted to the committee members to disprove other GSA allegations as well.

"L-3 does know, without doubt, that IMC did not improperly substitute cameras and overbill the contract as alleged in the report. Documentation of this has been provided to the committee," Saponaro testified.

Saponaro acknowledged the program had grown too quickly, and for a period had been unwieldy. The original remote surveillance program had been limited in scope to immigration control but quickly expanded into a counterrorism initiative following the Sept. 11, 2001, terrorist attacks.

"It is fair to say that the contract outgrew the company performing it and the government offices administering it, neither of which had the processes in place at that time to efficiently work a contract of this magnitude," Saponaro said.

By mid-2003, it was clear that "IMC did not have adequate program and contract management experience to keep up with the mounting complexity of the project," Saponaro testified. L-3 replaced IMC's original management team in January 2004 to correct those problems, he added.

Saponaro suggested that the program's negative perception might be due to a lack of maintenance.

"While L-3 is mindful of the shortcomings of the greatly expanded RVS contract, we believe the successes of the program must also be recognized," Saponaro said. "By the expiration of the RVS contract on Sept. 30, 2004, a total of 246 sites with daytime and night-vision cameras had been installed. Where properly maintained, the system is operational today. However, as with any high-technology system exposed to the environment, RVS cannot be expected to operate continuously without regular maintenance. It will, in time, cease to function."

The GSA audit also found serious failures by the Federal Technology Service in the procurement process, including inadequate competition and ineffective contract administration and project management.

The problems included "numerous improper task order and contract awards, including improper sole-source awards, work outside the contract scope, lack of support for fair and reasonable pricing, improper task order modifications, frequent inappropriate use of time-and-materials task orders, misuse of small business contracts and failure to enforce contract provisions," GSA's Gallay said.

"Overall, we found that the Federal Technology Service failed to adequately ensure that contracting laws and regulations were followed," Gallay said.

"What we have here, plain and simple, is a case of gross mismanagement of a multimillion dollar contract. This agreement has violated federal contracting rules, and it has wasted taxpayers' dollars," said Rep. Michael Rogers (R-Ala.), chairman of the subcommittee, in prepared testimony. "Worst of all, it's seriously weakened our border security."

L-3 Communications of New York is ranked No. 15 on Washington Technology's 2005 Top 100 list. The company employs 44,200 workers and had 2004 revenue of $6.9 billion, with profit of $381.9 million.