Another Case of Alleged Contract Fraud in the Middle East

Iraq and Afghanistan continue to be cesspools of Government contracting. Urgent requirements, huge amounts of money, and lax oversight contribute to an endless parade of contractors, subcontractors, and their employees engaged in or accused of fraud, waste, and abuse. Its a feeding frenzy over there. Many workers see what's going on, notice huge risk/reward imbalances and decide to get a piece of the action.

Another case hit the DoJ press release trumpeters last week. This one involved DynCorp and its State Department contract.

In April 2004, the State Department awarded a contract to train Iraqi civilian police forces to DynCorp. The contract not only called for training but also other services need to support that effort including trainers, guards, translators, vehicles and living quarters for contractor personnel. DynCorp was the prime contractor but a significant portion of the work was subcontracted.

In a False Claims Act complaint, the United States alleged that DynCorp knowingly allowed one of its main subcontractors to charge excessive and unsubstantiated rates for hotel lodging, translator, security guard and driving services and overhead expenses and included these charges in claims submitted to the State Department. Additionally, DynCorp added its own markup to these excessive subcontract costs thereby further inflating the claims it submitted to the Government.

In this case, DynCorp subcontracted some of the labor and lodging costs and knew, at the time it awarded the subcontract that the rates were not competitive with the market. DynCorp chose to protect its relationship with the subcontractor at the expense of the "public fisc" by accepting uncompetitive and unsupported rates from the subcontractor and passing them forward to the State Department. In doing so, DynCorp ignored its contractual obligation to ensure that its subcontractor's prices were reasonable and misrepresented the bases for its proposed pricing.

Although the amount of the fraud has yet to be determined, the court filing states that it is in the millions of dollars. No word on how the fraud was uncovered. In matters like these, it is oftentimes a whistleblower that brings these matters to the Government's attention.