Army Requests Five new Procurement Generals to Improve Foreign Procurement Systems

WE have periodically reported on contracting fraud in Iraq, and not long ago, the Army initiated a heavy duty investigation into contract fraud in the Army's procurement office in Kuwait.

Now the Army is asking for five new General positions to focus on procurement, and at least initially, they were turned down by the White House's budget arm, the OMB. I think they have a good idea, and maybe the OMB thinks they should take some existing generals out of the existing pool and make them procurement specialists.

This request came after a recent testimony by the DoD IG's office before Congressman Waxman's oversight committee about billions in undocumented payments for Iraq purchases.

When I was in Iraq, the reconstruction contracting operation there was run (and probably still is) by the PCO, Purchasing & Contracting Office, which focused mostly on the big construction projects, and not the work process for $4-billion in materials ordered by reconstruction project managers.

The article below says the Army does not have any procurement oriented Generals, but when I was in Iraq, they assigned a Brigadier General to run the contracting office (not PCO, which manages the contracts) which negotiates and approves vendors and who gets the contract. That BG lived in the other end of my two man trailer, and he was always working LONG HOURS on big contract negotiations, and I could hear some of their phone discussions in my work site in the Palace when they had to use the speaker phone. Later his group moved to the PCO compound, and his group was expanded to be a "Command" over Iraq and Afghanistan contracting. Compared to most generals, who were focused on battle unit operations, he seemed to be a very competent professional.

But, I agree with the article below, the Military is no matrix operation, but hierarchical, and they all follow rank. If you don't have a general on your side, you end up deferring to the side of the one that does. In my attempts to get improvement in reconstruction procurement systems, I tried going through our own two star Major General in the reconstruction office to get contract quality control improvements in the above mentioned contracting office, but he balked when I gave him a list of all the evidence and backlash I had received from Lt. Colonels and Colonels in PCO and in the Contracting office. The MJ was focused on reconstruction implementation in Falujah, etc. and didn't want to spend time on bureaucratic issues. That is part of the problem - the Military seems to require any Colonel who wants to move up to get a Master's degree, but they don't get it in business or professional areas (except engineering, which the Corps of Engineers pushes). Thus, even someone with my 20 years of experience in accounting controls can't get a general to understand business systems and needed improvements so they would back improvements and reduce the horrendous number of frauds, corruption and mismanagement losses in Iraq.

The military also doesn't seem to rely upon or expect 21st century management control systems over processes AND productivity. The ONLY item they seemed to track in the Iraq reconstruction procurement office was number of contracts processed per month. There were no reports to evaluate QUALITY of the contract data (wrong emails, phones, etc.) and NO REPORTS to determine average and target processing time. There also were no reports tracking whether the number of procurement requests completed by the preceding finance group matched the number entered into their system (thus many contracts "sat" in the Finance system and didn't get processed at all.

Not long ago, I read where the military has realized the officer corps does not have expertise in business systems, and they are starting to send officers to business related short courses at major business schools. In my opinion, they may need more MBA's and fewer engineers. Most military are used to structured business systems, but Iraq was unstructured, so they didn't have anyone who could recognize missing controls and implement them.

Lessons Learned to Fix the Broken Military Procurement Systems in Foreign Countries

1) The DoD needs to focus on improving business systems by mandating some generals have business (MBA) and professional degrees and focusing on those areas, rather than just working in such areas for short times "to get experience". They probably need to go OUTSIDE and hire some heavily experienced civilians and MAKE them Generals if the current Generals won't learn business systems.

2) DoD needs to create a specialized unit that focuses on building unstructured business systems like reconstruction programs and procurement systems in foreign countries where they have to integrate information from different systems and work with local nationals and civilians and NGO's to get things done. The unit should be VERY skilled in building unstructured systems that may not use military processes, software or forms, but still need to include professional level controls and management reports to measure productivity and detect problems.

3) DoD needs to develop quality control processes and productivity benchmarks for all procurement processes and ensure the reports are printed and reviewed each week to detect problems. This should be done for the ENTIRE procurement process from point of customer purchase requests to final delivery of materials and payments.

vj

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from THIS source

White House denies Army's pitch for more brass

By RICHARD LARDNER – 2 hours ago

WASHINGTON (AP) — The Army's march to overhaul its tarnished contracting system has been slowed by an unlikely foe: the White House.

The Office of Management and Budget, President Bush's administrative arm, has shot down a service plan to add five active-duty generals who would oversee purchasing and monitor contractor performance.

The boost in brass was a key recommendation from a blue-ribbon panel that last fall criticized the Army for contracting failures that undermined the war effort in Iraq and Afghanistan, wasted U.S. tax dollars, and sparked dozens of procurement fraud investigations.

As the Army's contracting budget ballooned — from $46 billion in 2002 to $112 billion in 2007 — it had too few experienced people negotiating and buying equipment and supplies, according to the panel. Worse still, there wasn't a single Army general in a job with contracting responsibilities. That meant the profession had little clout at a critical time.

Senior officers are needed to make sure past mistakes are not repeated, said the panel, chaired by former Pentagon acquisition chief Jacques Gansler.

"If a contracting person has to say to a general that they have to follow the rules, it's easier if you have your own general who will back you up," says David Berteau, a panel member and a former Defense Department official.

Having generals in contracting jobs also will build the talent pool by showing junior soldiers that contracting is a promising career path.

The increase would generate a modest $1.2 million per year in personnel costs. But the Army already has more than 300 full-time generals, enough, it's been told, to handle any new demands.

The panel called for two major generals and three brigadier generals. One of the major generals, who wear two stars, would run a newly established Army Contracting Command. Formation of the command was another of the Gansler panel's recommendations.

The second two-star general would be assigned to a senior staff position at the Pentagon.

Two of the brigadier generals, who wear a single star, would also be assigned to the contracting command while the third would become chief of contracting at the Army Corps of Engineers.

According to a May 28 report to Congress on the status of the recommendations, Army Secretary Pete Geren said a proposal for five extra generals was submitted in March to OMB for approval. The office's role is to ensure proposed budgets and legislation are consistent with the administration's policies.

On May 12, the Army learned its proposal had been rejected. The report does not say why. A week after the rejection, the Army appealed OMB's decision.

OMB spokeswoman Corinne Hirsch said Wednesday the office is "internally deliberating" the proposal and would not discuss the reasons for the initial rejection.

Lt. Col. Martin Downie, an Army spokesman, said Thursday that communications between the Army and OMB are "pre-decisional and not releasable to the public at this time."

Generals are carefully controlled commodities; federal law prescribes how many each military branch may have. The Army has 306 generals leading nearly 525,000 troops. More than 240 of those are one- and two-star officers.

Adding a brigadier general to the ranks costs roughly $217,000 a year in pay, benefits and retirement contributions; a major general costs $261,000 annually.

The Army opened the Contracting Command three months ago. Jeffrey Parsons, a senior Army civilian official with heavy contracting experience, was picked to run it. Parsons will be in charge "until an appropriately skilled and experienced (major general) is available to assume command," the Army's report to Congress said.

The Army is also adding 1,400 military and civilian employees to its contracting work force. A purchasing office in Kuwait that had been identified as a hub of corruption has been revamped.

In the complex world of military acquisition, contracting is a specialized occupation. Contracting personnel negotiate with vendors, translate jargon-filled requirements for equipment and services into sensible descriptions, and oversee the deals to be sure the Army gets what it ordered.

The war in Iraq exposed major flaws in the Army's contracting abilities, particularly when the buying was done outside the United States. An overworked, under-experienced, and short-handed Army contracting staff was unable to meet the fast-paced demands for supplies and services. Bad deals were made and procurement fraud cases mounted in an environment prone to abuse.

Defense contractors, frequently criticized for war profiteering, complained of being pushed to accept flat-fee arrangements in high-risk combat zones where expenses could soar and confusion existed over what U.S. laws and regulations applied.

Collectively, the shortcomings created a "perfect storm," according to the panel.

Since 2005, the Army Criminal Investigation Command has opened 168 investigations related to contract fraud in Iraq, Kuwait and Afghanistan, according to spokesman Chris Grey. Ninety-five of those cases are ongoing. Of the 73 that have been closed, the subjects were indicted, the allegations turned out to be false, or the inquiry ended because of a lack of evidence.
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