Salon.com News | Top homeland contractors had gov't run-ins

Salon.com News | Top homeland contractors had gov't run-ins


Top homeland contractors had gov't run-ins


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By Matt Kelley



Jan. 1, 2005 | Washington -- The largest Homeland Security Department contractors include two companies which paid millions to settle charges they defrauded the Pentagon, one firm which paid a foreign corruption fine and a business accused of botching a computer system for veterans hospitals, records show.

About a quarter of the $2.5 billion awarded to the 50 largest Homeland Security contractors came under no-bid contracts, agency records show. That's lower, however, than the 44 percent of Pentagon contracts given under "other than full and open competition."

The rest of the money paid to the top contractors -- a bit more than $2 billion -- was for contracts awarded through competition, the records show. Some of the nation's largest federal contractors have won the new business of protecting America from terrorists, including many with a recent history of legal run-ins with the government, the records show.

The two companies with the most business -- nearly $700 million between them -- were Boeing Co. and Integrated Coast Guard Systems, a partnership of defense giants Lockheed Martin and Northrop Grumman.

Those companies have paid more than $250 million in the past three years to settle charges of improprieties with their Pentagon contracts. Homeland Security audits also have accused the two companies of overcharging, in Boeing's case by $49 million.

Homeland Security officials gave Congress a list of the top contractors through July and their competition status amid criticism of the agency's management and oversight of its money. The criticism has ranged from overcharges to exorbitant employee awards that came at taxpayers expense.

The department was created by pulling together 22 federal agencies with 180,000 employees and dramatically increased funding -- up to $33 billion for the fiscal year that began Oct. 1. Officials blame some of the problems on growing pains.

"The department recognizes it has many challenges, and from the day it stood up has taken positive steps to build and improve the department's contract management system," spokesman Larry Orluskie said Thursday.

Analyst James Carafano of the conservative Heritage Foundation said some agencies within the department, such as the Coast Guard, have more serious contract oversight problems than others.

"In some cases, you have programs which have been created out of thin air, and in other cases, you have people managing programs which are far larger than anything they've done in the past," Carafano said.

While the list of big contractors is dominated by well-known, large companies, there are a few lesser known players who won large contracts.

For instance, Chenega Technology Services Corp., an Alaska Native corporation, got a $500 million no-bid contract to maintain and repair screening equipment at ports and border crossings under a legislative provision written by Alaska Republican Sen. Ted Stevens, chairman of the Senate Appropriations Committee.

Homeland Security's biggest contractor this year, Integrated Coast Guard Systems, is upgrading and expanding the Coast Guard's fleet of ships, boats, airplanes and helicopters.

Clark Kent Ervin, the department's inspector general, said in a report that hiring IGCS to install new engines in HH-65 helicopters would take longer and cost more than if the Coast Guard did the work itself.

The original IGCS proposal for the project was a month late and included "$123 million worth of goods and services that the Coast Guard did not ask for and could not afford," Ervin's report said.

The Coast Guard defended the contract, telling Ervin it believes the program is properly managed. IGCS spokeswoman Margaret Mitchell-Jones said the company agreed.

Another report from Ervin said Boeing -- Homeland Security's second-largest contractor last year -- overcharged the department $49 million on a massive contract to install and maintain bomb detection and other screening equipment at U.S. airports.

Boeing spokesman Fernando Vivanco denied any overcharging and said the company met the contract's tight schedule.

"Nobody thought it could be done, and we did it," he said.

Homeland Security's critics also questioned a $229 million contract to technology giant BearingPoint. The Department of Veterans Affairs abandoned a BearingPoint computer system for a Florida hospital last fall because it failed a nine-month testing process. The Justice Department and VA are investigating.

Sen. Bill Nelson, D-Fla., wrote to DHS Secretary Tom Ridge in October questioning whether BearingPoint should be trusted with new business.

"It seems to be it's in the best interest of the taxpayers that BearingPoint be suspended until we know the facts," Nelson said in November.

BearingPoint spokesman John Schneidawind defended the company's Homeland Security contract.


"We followed the bidding process and won the project fairly," Schneidawind said Thursday.

The company that supplies airport bomb-detection equipment, InVision Technologies Inc., agreed Dec. 6 to pay an $800,000 fine for alleged improper payments by distributors to foreign officials. The agreement cleared the way for General Electric to buy InVision.


InVision was the fourth-largest Homeland Security contractor between October 2003 and July, getting about $178 million, department records show.

GE spokesman Jeffrey DeMarrais said GE has agreed to make sure its InVision subsidiary complies with anti-corruption laws.


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