Wednesday, March 23, 2016

Contractors Are Responsible for the Actions of Their Employees

During the wars in Iraq and Afghanistan, the military and its contractors disposed of garbage and anything it didn't want to ship back to the States, in open-air burn pits. According to the GAO (Government Accountability Office) there were at least 230 burn pits in Iraq and Afghanistan. It wasn't too long before veterans were claiming health issues as a result of inhaling smoke and fumes from the fires. They have now begun suing contractors alleging that the smoke from the burn pits was toxic and made them sick. Today the Department of Veterans Affairs is tracking veteran's exposures to burn pit dust, fumes and other pollution generated from the use of burn pits. Some are calling it the new "agent orange".

ERKA Construction was a Turkish company who was awarded a contract in 2007 to operate one of the burn pits in Iraq. The contract provided for the government to furnish ERKA fuel to perform contract work. Fuel was provided on the honor system because there was no oversight to ensure that ERKA took only the amount reasonably required to perform their contract work. In 2009, the AFOSI (Air Force Office of Special Investigations) was alerted through a contract fraud tip line that theft was occurring at the fuel farm.

An investigation ensued. Ultimately the AFOSI proved that contractor employees, with or without the contractor's knowledge, were systematically stealing fuel and taking it off base. The Government calculated that about $480 thousand worth of fuel was lost and demanded repayment. ERKA filed an appeal with the ASBCA.

Although the Air Force had not proven whether the fuel theft scheme was an enterprise that benefited ERKA or simply the people who were involved, it had little difficulty in determining the ERKA's project level management staff had knowledge of the theft. And because a Government contractor must adequately staff a project and supervise its employees, ERKA's claim of innocence didn't work.

Ultimately, the Board ruled that the responsibility should fall on ERKA for the stolen fuel. ERKA put in place people who were dishonest, and whose general manager failed to stop the theft even after it was brought to his attention.

The full text of the case can be found under ASBCA Nos. 57618, 58515.

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