Out-of-scope contracts run out of time

Congress, OMB, GSA to tighten procurement rules<@VM>Money isn't only cost of work outside contract scope

"If we find irregularities, we will provide training to make sure they know what happened was wrong, and if we continue to see these problems, we will debar or suspend the contractor." ? GSA's David Drabkin

J. Adam Fenster

Federal agencies may soon get new restrictions on how they buy products and services as part of a crackdown against out-of-scope contracting.

The issue got national attention last month when it became known that the Army purchased interrogation services from CACI International Inc. of Arlington, Va., through a General Services Administration information technology contract.

The company has not been charged with any wrongdoing but has been under scrutiny following allegations that Army guards, and possibly CACI contractors, abused Iraqi prisoners in the Abu Ghraib prison.

GSA has launched an investigation into CACI's contract and, depending on the outcome, could suspend or debar the company from federal contracting.

The Office of Federal Procurement Policy is considering a rule that would require agencies that run governmentwide acquisition contracts to ensure that orders of $100,000 or more fall within the scope of the contract, said Matthew Blum, a staff attorney at OFPP.

"The ordering activity needs to apply the rules correctly, and the servicing agency has to have some general oversight rubric," Blum said.

GSA also is drafting a new rule or guidance to address situations when buyers or contractors fail to meet regulations, said David Drabkin, assistant deputy administrator for acquisition policy at GSA.

"If we find irregularities, we will provide training to make sure they know what happened was wrong, and if we continue to see these problems, we will debar or suspend the contractor or not let the agency use our contracting services," he said.

Drabkin said the Army's use of the IT contract to buy interrogation services from CACI led GSA to move forward quickly with its guidance.

"We don't expect contractors to be our policemen, but we also don't expect them to willingly take part in work that is out of the scope of a contract," he said.

Also, a provision in the Senate version of the fiscal 2005 Defense Authorization Act comes in direct response to out-of-scope contracting by GSA.

The agency's inspector general last year found that its Federal Technology Service field office staff in Bremerton, Wash., misused the IT Fund to buy construction, architecture and engineering services.

The provision would prevent the Defense Department from using GSA's Federal Technology Service contracts for purchases worth more than $100,000 until the department's inspector general has certified that FTS policies and procedures comply with laws and regulations.

The Senate Armed Services Committee, led by Sen. John Warner (R-Va.), justified the provision in a May 11 report, saying that out-of-scope contracting occurred because of ineffective management and inattention to procurement procedures.

Because Defense Department orders comprised 85 percent of FTS' $5.8 billion in fiscal 2003 revenue, "the committee recommends a provision that would prohibit department officials from placing additional orders until these problems have been addressed," the report said.


FTS' misuse of the IT Fund drew considerable attention as more than $36 million from the fund was used to construct a new office building and make renovations.

Government and industry officials said they don't know how much out-of-scope contracting occurs. It's not always easy to tell when a contract is out of scope, said William Woods, director of acquisition sourcing and management at the General Accounting Office.

"I think you can see this will be a big issue for GAO," Woods said. "This is an important issue for the administration and Congress. They want to get a handle on it."

GAO in April denied a protest because the contract's statement of objectives was very broad, Woods said. Computers Universal Inc. had protested an Army contract for nondestructive testing services, saying the testing techniques did not fit within the contract's scope.

CACI's contract is also broad, procurement experts said.

The Army's ordering office is "justifying it by saying the contractors at the prison will be entering data about prisoners in the system, therefore it falls under IT work," said Steve Charles, executive vice president at the Immix Group, a McLean, Va., consulting firm that advises on government contracting.

Congress and GAO have begun trying to assess the scope of out-of-scope contracting.

The House Government Reform Committee, led by Rep. Tom Davis (R-Va.), is investigating out-of-scope contracting through conversations with GSA and federal contractors, said David Marin, deputy staff director of the committee.

"We want to better understand what's happening and why," Marin said. "We're not ready to say that any specific contract was inappropriately out of scope.

But Davis does think there are sufficient grounds to ask why certain vehicles were used when more appropriate ones seem to have been available."

GAO recently sustained protests by contractors that questioned the scope of work on two proposed contracts. The agency also identified other out-of-scope task orders in a June 15 report about contracts for rebuilding Iraq.

Seven of 11 task orders GAO reviewed were found to be wholly or partly out of scope. Two were awarded to Science Applications International Corp. of San Diego.

The SAIC task orders, awarded by the Defense Contracting Command-Washington, are for developing a news media capability and for recruiting subject-matter experts and providing them with travel and logistical support. Together, they are worth more than $107 million, according to GAO.

All the out-of-scope task orders "should have been separately competed or alternatively justified and approved at the required official level," Comptroller General David Walker said at a June 15 hearing before the House Government Reform Committee.

SAIC declined to answer questions about the contracts.

Defense Department officials generally agreed with GAO recommendations to improve acquisition methods and are taking steps to improve contracting processes, according to the GAO report.


Out-of-scope work is prohibited, according to GSA. But it is unclear what actions contractors must take to avoid it.

The procurement regulations governing out-of-scope work are directed at the government, not the contractor, said Joseph Petrillo, a government contracts lawyer at Petrillo & Powell PLLC in Washington.

Angela Styles, former administrator of the Office of Federal Procurement Policy, said she would have a hard time blaming a contractor for performing work that's outside the scope of its contract.

"It's hard sometimes to blame the private sector for giving the government something they want to buy," said Styles, a government contracts lawyer at Miller and Chevalier in Washington. "It's an internal government staffing issue. You have to have people who know what they are buying."

But contractors know the scope of their contracts and should note when work doesn't fall within them, Woods said. They are not obligated to perform out-of-scope work, he said.

Scrutiny of the CACI contract and others by Congress and GSA means contractors should assess more carefully the scope of their work, said Jonathan Aronie, a lawyer with Sheppard, Mullin, Richter & Hampton LLP in Washington.

"You can no longer rely on the government to make the determination for you," he said.

"Veteran companies will have a number of vehicles to fulfill the government's needs and could point the agency to the vehicle that is appropriate."

Procurement experts welcomed the government's efforts to clarify who can be held accountable for out-of-scope contracting.

Danielle Brian, executive director of the Project on Government Oversight, a non-profit, federal government watchdog group in Washington, said procurement reforms of the 1990s, which led to the proliferation of schedule contracts, have made it too easy to issue task orders under an contract without regard to the contract's scope.

"The current controversy is, hopefully, going to generate some new interest in having a better-articulated relationship between contractors and government," she said. "The burden should be on the contracting officer to have confidence that they are asking for appropriate services or goods."

Alan Chvotkin, senior vice president and counsel at the Professional Services Council, an Arlington, Va., trade group, said it's never been clear who has the responsibility for making scope determinations.

"We've always assumed it is the responsibility of the contracting officer for the contracting vehicle," he said.

"To the extent that this will pin the tail on the single individual, it is helpful."

Staff Writers Gail Repsher Emery and Roseanne Gerin can be reached at gemery@postnewsweektech.com and rgerin@postnewsweektech.com. Government Computer News Staff Writer Jason Miller contributed to this story.
The controversy over CACI International Inc.'s work at Abu Ghraib prison shows why contractors must assess carefully whether work requested by an agency falls within the scope of a contract.

Although procurement experts said government agencies, not contractors, are primarily responsible for ensuring that task orders and other work are allowed under a contract, the companies seem to pay the greater price if questions later arise.

In CACI's case, the Army hired the company to provide interrogators at the Iraqi prison under a General Services Administration contract for information technology services.

GSA now is investigating whether the interrogation services fell within the scope of that contract.

GSA could suspend or debar CACI from federal contracting, although most observers do not expect that outcome. The Arlington, Va., defense contractor, which relies on federal work for more than 90 percent of its revenue, reported revenue of $843.1 million in 2003.

William Reed, director of the Defense Contract Audit Agency, told the House Government Reform Committee June 15 that the agency also is reviewing "potential misuse" of the GSA contract by CACI.

CACI chief executive J.P. "Jack" London said the company has done nothing wrong, and it is cooperating fully with the GSA investigation.

"We have not knowingly done anything wrong on any of this, and if we have, we're going to do it right and behave in proper, right and correct fashions," London said during a conference call with analysts late last month.

The contract the Army used to buy the interrogation services was awarded in September 1998 by the Army Directorate of Contracting at Fort Huachuca, Ariz. It was a blanket purchase agreement awarded to Premier Technology Group Inc. under a GSA IT schedule.

The contract was transferred to the Interior Department's National Business Center at Fort Huachuca when the Army directorate closed in January 2001. The contract was extended for five years in 2003.

CACI acquired Premier Technology in May 2003, and the contract was changed in July 2003 to reflect the acquisition.

CACI got the interrogation work at Abu Ghraib through a delivery order to support the Coalition Joint Task Force-7 in Iraq. Under the contract, CACI has 11 task orders worth a total of $66 million, according to the company.

CACI has billed the military for $16.3 million and received $7.1 million to date. The company said the contract accounts for less than 1 percent of its total business through April 2004.

GSA began investigating the contract after an Army report issued earlier this year and subsequent media reports that named CACI in the Iraqi prisoner abuse scandal at Abu Ghraib.

Joseph Neurauter, GSA's suspension and debarment official, sent CACI a certified letter May 26, requesting information about the firm's services and noting that it appeared that the GSA schedule was "misused" in the issuance of the task orders with CACI's knowledge and consent.

"Prior to the issuance of [the] task orders, information I have indicates that CACI conducted a 'cross-walk' between the work requested by the Army and the tasks identified in the CACI Schedule contract," Neurauter wrote.

Neurauter gave CACI 10 days from receipt of the letter to respond. In a printed statement issued that same day, CACI said it would respond promptly to GSA.

CACI then asked GSA for an extension until June 11. GSA spokeswoman Mary Alice Johnson said she could not discuss the details of an ongoing administrative review.

Jody Brown, CACI's senior vice president of public relations, said in an e-mail that GSA has been flexible in working with CACI as the company continues to provide information.

"We believe that upon review of the facts, GSA will agree with us that neither suspension nor debarment is appropriate," she said.

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