By David Alexander
WASHINGTON (Reuters) - Ineffective Pentagon oversight of private contractors in Iraq and Afghanistan has wasted up to $60 billion over the past decade, a "troubling" failure that undermines U.S. security and cannot continue in an era of tight budgets, a special panel reported on Wednesday.
The congressionally mandated Commission on Wartime Contracting, releasing its final report, said U.S. security forces are overly dependent on private contractors, whose employees in theater totaled 260,000 in 2010 and have sometimes outnumbered U.S. military and civilian personnel.
Contractors have been tapped to do work meant to be handled exclusively by federal employees, the panel said. The Defense Department, State Department and U.S. Agency for International Development are so reliant on contractors that they have even lost the ability to perform some core missions themselves.
Yet despite spending some $206 billion on grants and contracts in Iraq and Afghanistan since 2002, the Pentagon and other U.S. agencies have failed to field an oversight structure that can ensure the work is carried out properly, the panel said.
"The government remains unable to provide effective large-scale contract management and oversight," former Representative Christopher Shays, a co-chairman of the panel, told a news conference to release the report.
"That fact is troubling because U.S. doctrine has held for more than 20 years that contractors are part of the total force that would be deployed in contingencies," he said.
"Yet the government was not prepared to go into Afghanistan in 2001 or Iraq in 2003 using large numbers of contractors. ... We are still not adequately prepared to use contractors to the scale required," he said.
Michael Thibault, a former deputy director of the Defense Contract Audit Agency who served as the panel's other co-chair, said ineffective oversight led to waste, fraud and abuse. Between $31 billion and $60 billion of the $206 billion in contracted funds had been lost to waste or fraud, the panel estimated.
Marine Corps Colonel David Lapan, a Pentagon spokesman, said the Defense Department shared the commission's "commitment to improving wartime contracting" and commended it for pointing out the risk of overreliance on contractors and the need to strengthen contracting functions.
"We are supportive of efforts to reduce waste and improve on the value we obtain for the dollars we spend in support of contingency operations," he said. "Monitoring, assessing, and taking corrective action is a continuous process within the department, and we continually improve our planning, oversight, and the management of contractors on the battlefield."
THREE KINDS OF ICE CREAM
Senator Claire McCaskill, who helped establish the panel, faulted the Pentagon's leadership for failing to develop adequate contract oversight and warned the military must become more cost-conscious in the current fiscal climate.
"With all due respect, they have not embraced contracting oversight as a core competency in their leadership training," she told reporters. "When I went to Iraq the guy that was in charge of overseeing the contracts in the unit was the low guy on the totem pole who was handed a clipboard."
"The attitude too many times in the military has been: I want what I want when I want it," she said. "I've had generals say to me in theater: 'I didn't care what it cost. I wanted three kinds of ice cream in the mess hall yesterday.'"
With Washington working to get a handle on the country's trillion-dollar budget deficits, McCaskill warned that military leaders "need to realize that we're going to have to find savings."
Under an August agreement between President Barack Obama and lawmakers in Congress, the Pentagon is currently working to reduce spending by $350 billion over the next decade and may face another $600 billion in cuts unless officials reach a new compromise.
"There's real money to be saved if we do this right," McCaskill said.
Given U.S. inability to conduct contingency operations without contractors, commission members expressed confidence their recommendations would be implemented.
"We have to take taking contractors to war seriously," said Robert Henke, a panel member and former senior defense official. "It's a national security issue of the highest importance and demands reform."
(Editing by Eric Walsh)