Subject: RELEASE: Senator Clinton Announces Department of Homeland Security Inspector General to Launch Investigation of Contractor Bonuses at Her Urging
From: "Clinton, Press Office (Clinton)" <[email-masked]>
Date: Fri, 21 Dec 2007 15:36:57 -0500

For Immediate Release

December 21, 2007

Contact:  Press Office

202-224-2243

SENATOR CLINTON ANNOUNCES DEPARTMENT OF HOMELAND SECURITY INSPECTOR
GENERAL TO LAUNCH INVESTIGATION OF CONTRACTOR BONUSES AT HER URGING

Washington, DC - Senator Hillary Rodham Clinton today announced that the
Department of Homeland Security (DHS) Inspector General (IG) has agreed
to examine award fees for DHS contractors.  In particular, the DHS IG
will investigate the award fees paid to Chenega Technology Services
Corporation and will work with DHS to collect information on the number
and value of contracts DHS awarded during the 2007 fiscal year that
include award fee provisions, and the oversight mechanisms DHS has to
ensure that award fees are awarded in a proper manner.  In addition to
calling for the investigation, Senator Clinton secured a measure in the
FY2008 Omnibus Appropriations bill to bar DHS from awarding bonuses to
contractors without regard to performance.

"The American people deserve to know that precious homeland security
funds are being used appropriately.  It is critical that the Department
of Homeland Security hold contractors accountable, not reward bad
behavior.  With high risk areas like New York fighting for limited
homeland security funds, it is beyond the pale that DHS is awarding
bonuses to contractors that they haven't even earned," said Senator
Clinton.  

In announcing the investigation, Senator Clinton noted that she had
requested a broader based investigation and expressed serious concern
about the inability of the DHS IG to undertake such an investigation.
In a letter to Senator Clinton, the DHS IG indicated that, "Generally,
insufficient record-keeping, extensive staff turnover in key acquisition
roles, and inadequate data systems are common challenges we encounter in
accomplishing our DHS acquisition reviews."

Senator Clinton wrote to the Department of Homeland Security Inspector
General in November calling on the IG to expand an investigation of
federal contracting practices to investigate the practice of award fees
by DHS, especially when it comes to no-bid contracts. Senator Clinton's
call came following a recent report by the DHS Inspector General that
DHS improperly awarded a $475 million no-bid contract to Chenega
Technology Services Corporation, which according to the report "likely
did not provide the government the best value" and that DHS "did not
comply with federal regulations."  According to the IG's office, the
agency also provided award fees to the company as part of its contract.

 

The following is Senator Clinton's letter to DHS Inspector General
Richard L. Skinner requesting an investigation:

November 26, 2007

Mr. Richard L. Skinner
Inspector General
United States Department of Homeland Security
Washington, D.C. 20528

Dear Mr. Skinner:

I write regarding a disturbing report you issued last month that raises
serious questions about contracting practices at the Department of
Homeland Security (DHS). The report - Customs and Border Protection
Award and Oversight of Alaska Native Corporation Contract for
Enforcement Equipment Maintenance and Field Operations Support
(OIG-08-10) - details how DHS improperly awarded a $475 million, no-bid
contract to Chenega Technology Services Corporation to maintain X-ray,
radiation and other screening machines at U.S. border checkpoints. Your
report concludes the contract "award likely did not provide the
government the best value" and that DHS "did not comply with federal
regulations."

Additionally, your staff informs me that award fees were given to
Chenega as a part of its contract with DHS. Given that your report did
not focus on award fees to Chenega, the details of these fees are
unclear. However, taken together with your conclusion that the
Department improperly awarded the underlying contract to Chenega, it is
disturbing to hear that DHS has provided an award fee to this
corporation. 

This disconnect between performance and award fees appears to be part of
a troubling pattern. The Federal Acquisition Regulations (FAR) state
clearly that cost-based award fee contracts are intended to motivate
excellent contractor performance in areas such as quality, timeliness,
technical ingenuity, and cost-effective management. Despite this
guidance, during the course of the past several years there have been a
number of reports documenting how award fees are being doled out by DHS
to contractors regardless of performance:

* Evaluation of TSA's contract for the installation and maintenance of
explosive detection equipment at United States Airports (DHS Inspector
General, September 2004) - TSA awarded a contract to Boeing for the
installation and maintenance of explosive detection equipment at
airports. TSA paid more than $44 million to Boeing without any
evaluation of Boeing's performance. 

* Transportation Security Administration Review of the TSA Passenger and
Baggage Screening Pilot Program (DHS Inspector General, September 2004)
- TSA awarded four pilot program contracts to determine whether private
companies could provide and maintain passenger screening performance at
levels equal to or greater than the TSA screener force. The Inspector
General found the award fee determinations lacked performance criteria,
were highly subjective and based primarily on contractor
self-assessments and input from TSA officials. 

* Observations on the Department of Homeland Security's Acquisition
Organization and on the Coast Guard's Deepwater Program (GAO-07-453T)
(February 8, 2007) - GAO found that despite documented problems in
schedule, performance, cost control, and contract administration
throughout the first year of the Deepwater contract, the contractor had
received a rating of 87 percent, which fell in the "very good" range and
resulted in an award fee of $4 million. 

In too many cases, DHS appears to be awarding bonuses despite poor
performance, or worse, without even evaluating work. Failing contractors
should be rooted out, not rewarded. Given your report of what appears to
be noncompliant federal contracting practices on the part of the DHS and
a pattern of providing award fees to contractors without justification,
I request that you expand your investigation into the practice of award
fees by the Department, especially when it comes to no-bid contacts.
Specifically, I would ask that your investigation review the following
questions:

* Section 3501 of the U.S. Troop Readiness, Veterans' Care, Katrina
Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28)
states, "The Secretary of Homeland Security shall require that all
contracts of the Department of Homeland Security that provide award fees
link such fees to successful acquisition outcomes (which outcomes shall
be specified in terms of cost, schedule, and performance)." DHS has
engaged in a number of contracts in Fiscal Year 2007. How many of these
contracts included award fees and were these award fees based on
successful acquisition outcomes? What was the total amount of these
award fees? 

* Did the Department of Homeland Security violate P.L. 110-28 in
providing award fees to contractors Fiscal Year 2007? 

* Were award fees given to Chenega Technology Services Corporation
justified and based on successful acquisition outcomes? 

* What mechanisms are currently in place at DHS to ensure that award
fees are awarded in a proper manner? Are these mechanisms enforced in
providing award fees for DHS contracts? What can the Department of
Homeland Security do to ensure that award fees are justified and based
on successful acquisition outcomes? 

Thank you for attention to this matter. 

Sincerely,
Hillary Rodham Clinton

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