POGO Obtains Army ‘Compelling Reason’ Memos

Now that oil company BP has been suspended from federal contracting, many are wondering if the Department of Defense (DoD) will waive the suspension so that it may continue awarding the company new contracts and subcontracts. BP, after all, is a top supplier of fuel to the U.S. military. Just how does an agency decide to continue doing business with a contractor who did something bad enough to warrant being barred from contracting in the first place? POGO recently obtained documents through the Freedom of Information Act (FOIA) that provide a glimpse into this controversial policy.

Suspended and debarred federal contractors may not win new contracts, or have their existing contracts renewed or extended, unless an agency determines that there is a compelling reason (see FAR 9.405(a)) for waiving the suspension or debarment. Typically, this requires a determination that the contractor is the only one who can provide the good or service and/or there is an overriding national security interest. Probably the most famous waiver in recent years occurred during the 2003-2005 suspension of Boeing’s launch services units. Before the suspension was officially lifted, the Air Force waived it on at least two occasions due to a compelling national defense need.

A provision in the 1982 Defense Authorization Act requires DoD to provide a notice describing compelling reason determinations to the General Services Administration (GSA), which must maintain these notices in a public file. In September, the Government Accountability Office (GAO) reported DoD made a total of 14 compelling reason determinations during fiscal years 2009 through 2011—seven each by the Army and the Defense Logistics Agency (DLA)—but found that DoD has not been notifying the GSA of these determinations as the law requires.

POGO was unable to track down any public cache of compelling reason determinations, which the law requires the GSA to maintain, so we decided to file a FOIA request for the 14 determinations identified in the GAO report. This week, we obtained the Army’s compelling reason determinations.

The seven determinations are contained in memoranda prepared by the Army Suspension and Debarment Official (SDO) between December 2009 and May 2010. All of them waived the November 2009 suspension of divisions and affiliates of the Kuwaiti logistics company Agility (formerly known as Public Warehousing Company KSC and PWC Logistics) in order to extend their existing contracts. The suspension of Agility and its related entities was based on a criminal indictment accusing them of defrauding the government on contracts to provide food and other supplies to the military in the Middle East.

Five of the Army’s waivers temporarily extended Agility subcontracts with KBR to provide freight forwarding services under the LOGCAP III contract. The SDO justified these waivers on the basis that a disruption of Agility’s delivery of supplies to Iraq and Afghanistan could “impact life, safety and security of personnel.” Furthermore, the SDO determined that the Army would not be able to find another contractor to replace Agility “in time to meet the operational needs of the warfighter throughout Afghanistan and Iraq.”

Two of the Army’s waivers involved subcontracts of suspended Agility affiliate Gulf Catering Company (GCC). The SDO cited “health and safety implications” as the justification for a two-month extension of GCC’s subcontract to construct a warehouse for the storage of sanitation and hygiene supplies at Forward Operating Base Prosperity in Iraq. Two weeks earlier, the SDO approved an eight-month extension of GCC’s Iraq dining facility (DFAC) operations task order because finding a replacement subcontractor risked “a negative impact on health and life support requirements.”

Each of the Army’s compelling reason memoranda contains an assurance that the Army will provide the GSA with a written notification of the determination. However, as the GAO found, this was never done.

POGO is still waiting for the DLA’s compelling reason determinations. So far, based on information provided by the GAO, we know that these also involve waivers for Agility in 2009 and 2010, and that the DLA granted at least two waivers on one of the contracts on which Agility allegedly defrauded the government. The DLA was the agency that suspended Agility in the first place. We’ll post those documents when we get them.

Compelling reason determinations should be made public. They are vital for contractor accountability and transparency because they explain why and how often the government does business with risky, non-responsible contractors. With more than $500 billion of taxpayer money spent every year on federal contracts, we should know whether compelling reason determinations are, in the words of the GAO, “carefully considered and used only when necessary.”