SIGAR Letter Reveals Nonpayment of Subcontractors

The Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR) released a letter detailing the problem of prime contractors failing to pay subcontractors in Afghanistan. SIGAR, the Afghanistan reconstruction government watchdog agency, noted that almost “a quarter of SIGAR’s hotline complaints from 2009 through October 2012” dealt with Afghan subcontractor nonpayment issues. Ultimately, SIGAR warned that the “failure of prime contractors to pay their subcontractors has resulted in projects promoting the stability of Afghanistan being delayed or not completed,” hampering the U.S. reconstruction mission in Afghanistan.

In the same period of time, SIGAR opened 52 investigations into $69 million worth of nonpayments to Afghan subcontractors. Afghan subcontractors are particularly susceptible, SIGAR notes, because of the “lack of adequate legal protections” as well as “limitations placed on the U.S. government’s ability to intervene on their behalf.”

Moreover, SIGAR’s letter points out that nonpayment has impacts beyond the stoppage of income. SIGAR calls nonpayment of subcontractors “a serious problem” that has resulted in “death threats, work stoppages, and strikes.” It is also harmful to prime contractors, who in multiple cases received bomb threats from disgruntled subcontractors.

SIGAR proposed a number of solutions, including encouraging the U.S. government, as well as subcontractors, to “seek recovery under the False Claims Act (FCA) from prime contractors.” SIGAR also suggests the government should initiate suspension and debarment actions and seek remedies under the Federal Acquisition Regulation (FAR).

Interestingly, an example of subcontractor nonpayment in SIGAR’s letter is the recent lawsuit filed against DynCorp by a Turkish subcontractor, which POGO blogged about. The subcontractor, Nasa Construction and Trade, claims that DynCorp owes it $1.6 million for work it performed on U.S. Army Corps of Engineers projects in Afghanistan.

Unfortunately, many small companies in Afghanistan are not able to avail themselves of the U.S. court system. POGO has highlighted efforts to ensure the prompt payment of subcontractors, such as the Small Business Jobs Act of 2010, signed into law by President Obama. We hope that SIGAR’s letter spurs government action regarding this very serious problem.