In what may be the next big defense contracting scandal, an Associated Press story released this morning relates some troubling findings from a recent investigation. AP reporters uncovered serious flaws with the U.S. Army's $2.7 billion contract with Combat Support Associates (CSA), a contractor tasked with supporting U.S. troops at bases throughout Kuwait. After months of bad press and congressional hearings into the defense contracting industry, you would think this investigation might provide just that little extra momentum for Congress or the federal government to clean up this mess, but don't count on it.

The investigation, which the AP conducted through interviews and Freedom of Information Act (FOIA) requests, found that the Army provided very little oversight of CSA between 2003 and 2007. When contracting officials finally got around to looking into the contractor's books, they found numerous contract violations, several of them serious.

One report from an Army sergeant on a routine check of a watchtower found a Combat Support Associates guard asleep in a chair. Click here for picture. Officials also discovered that the contractor failed "to properly secure classified communications gear and weapons stored in warehouses." Nor did CSA have a "system in place to check the identification of contract employees – who are often not American citizens – at U.S. maintenance facilities in Kuwait."

The AP story summarizes the contractor's recent performance thusly:

In the past two years alone, Combat Support Associates received dozens of warnings from the government to improve performance, the records show. Several of those have been Level Three warnings, which are issued only in cases of serious noncompliance with the terms of a contract.

When questioned about problems with the contract – which expires in March – Army officials were only willing to go as far as "contemplating changes in how they handle...base support work." Jeffery Parsons, executive director of the Army Contracting Command at Fort Belvoir, Va., says he expects the contract to be "broken up into smaller, more manageable pieces that will generate competition and improve performance."

Meanwhile, CSA, claiming that it has or is in the process of resolving all of the Army's corrective action warnings, has seen no deleterious effects due to its poor performance. Rather, over the last decade, Combat Support Associates has earned an "excellent," "very good," or "good" rating from the Army Sustainment Command, a logistics coordination agency within the Army Material Command. These above average grades have allowed the contractor to earn close to $90 million.

Unfortunately, this pattern of soft-pedaling a problem contractor is standard operating procedure within the government. A recent Wartime Contracting Commission hearing displayed the State Department's complete lack of fortitude to cancel a contract, let alone punish a contractor, for extremely poor performance. Though witnesses provided overwhelming evidence of ArmorGroup's negligence that jeopardized security at the U.S. Embassy in Kabul, Afghanistan –including an apparent cover-up of debauched drinking parties – State Department officials refused to go any further than promising to review the contract.

Moreover, the AP investigation uncovered allegations that Combat Support Associates overbilled the Pentagon. These findings reinforce the Wartime Contracting Commission's work over the summer that found contractors routinely operate with faulty internal controls that rip off the government for billions every year. Even if the government finds these "discrepancies," it rarely disciplines the contractor; unless you consider paying back the money owed a punishment.

While it is encouraging to see the Army may learn a lesson about competition from its current dealings with CSA – in that it may break the contract down and allow smaller, less diversified contractors to get involved – it's troubling to see the lack of consequences for the contractor's many violations. The situation may not warrant cancellation of the contract, but surely some sort of penalty is in order.

It is the complete lack of penalties for CSA's actions thus far, and in cases like CSA's, that perpetuate bad behavior by contractors. What is a contractor to think when it sees the State Department's reaction to ArmorGroup and the Army's reaction to CSA? Without tangible consequences to often-willful violations of contract statutes and, more importantly, laws there will continue to be stories like this, no matter what legislation is passed to increase scrutiny of contractors.

Image by Flickr user slworking2 used under a Creative Commons license.