By Douglas Doan

Last week, I argued that the new Secretary of DHS, Janet Napolitano, would need to avoid common problems that have plagued so many border projects over the past year.  Long ago, it was thought that all problems had their source in one of the seven deadly sins, sloth, gluttony, lust, wrath, envy, and pride.   This week, we look at gluttony, defined as an insatiable appetite, gulping down without thought or need, and the compelling desire for instant gratification.

Instant gratification and the simultaneous unwillingness to think through actions and consequences before committing to a course of action have been common at DHS.  Too often, the DHS’s appetite for instant gratification undermined long term goals of better border policy and security.

In the wake of 9/11, one of the most critical components of the strategy at CBP was the ability to detect nuclear materials relied upon a set of complicated new technology that could take an x-ray like image of a truck or contained.  One of the most effective new systems was called the Vehicle and Cargo Inspection System (VACIS) developed by a company named SAIC and relied upon a technique to bombard the truck with gamma radiation.  The VACIS system consisted of a gamma radiation source, sophisticated sensors to detect anomalies in the radiation once it had passed through a truck or cargo, and complicated computer technology to evaluate the results,  detect any discrepancies, and to highlight  hidden contraband.  VACIS was exactly the product that CBP needed to rush to the field.

But, there was a problem.  The first VACIS system was rushed into the field as a test and evaluation unit , but soon become so effective that CBP did not want to return it.  CBP was far more willing to make whatever repairs that were required to keep the system operating, rather than return the VACIS unit.  This sparked a larger debate within the government for the need to get the different inspection systems deployed quickly, and to keep them well maintained and constantly working. In short, CBP needed to find the technical talent to keep these complicated systems working.

All of the companies that sold the government non-intrusive inspection systems had also concluded that they could increase revenues by making sure only their company’s technicians were authorized to perform the maintenance on the systems that they had invented.  SAIC wanted only SAIC technicians to repair the VACIS system; the other major manufacturers of inspection equipment (AS&E, Rapiscan, General Dynamics, et. al) held a similar view.

The obvious problem with this concept is that while it protected the manufacturers, it saddled the government with increased costs as it had to juggle multiple contracts and technicians to keep the equipment working properly.  The logistics of getting the right technician to the right site to work on the right piece of equipment was a scheduling nightmare.  What the government decided it needed was a single company, or organization, that was capable of maintaining all of the equipment.

Finding a company with the right skills and experience to maintain these inspection systems was not going to be easy.  First, the company needed a license to handle low level nuclear materials, since the heart of the VACIS system consisted of a source of gamma radiation.  Next, the winning company would need to be able to navigate a thorny minefield of fierce and adversarial manufacturers of the different inspection devices.

By this time, several companies (AS&E, Rapiscan, General Dynamics and Smiths Detection) had entered the lucrative field of non-intrusive inspections systems.  Initially, SAIC may have taken the lead with the VACIS system, but other companies were gaining fast and developing their own systems that relied on slightly different technologies to perform a fast and reliable scan of a truck or cargo.

Moreover, in the wake of 9/11, these companies knew that NII devices were going to be a growth field.  Companies making these devices felt their products were technical superior (or soon would be) to their competitors’, and none of them wanted to share their secrets with a competitor.  Companies thought they had a market edge, and they were keen on keeping it that way.

A determined and active senior leadership at DHS could have resoled the conflicts, but DHS was impatient.  Gluttony, and the need for instant gratification with little consideration for the consequences, was at work.  And so, on September 11th, 2003, one of the biggest and most important decisions regarding border security fell to an unlikely junior official named Jose Ponce, who promptly decided to award a sole source contract for unusually complex engineering and technical competence, valued at $ 500 million, to an Alaskan native company called Chenega. Chenega had no experience working on the border, no technical competence working with sources of nuclear emissions like gamma rays, no license from the Nuclear Regulatory Commission (NRC) to even handle such devices that were critical components of the VACIS system.  None of that mattered. DHS’s appetite for an immediate solution trumped all.   By contracting to an Alaskan-native company, the government could avoid the more exhausting and difficult contracting requirements, preparation of detailed statements of work, examination of past performance records of competing companies in order to get the best deal for the nation.

Awarding such a complicated contract for border security to a company that had no experience or technical ability to perform the required tasks would normally have attracted a great deal of negative attention and immediate protests from all competitors. But that didn’t happen.  Chenega never intended to perform the required work, and freely admitted that it did not have the necessary experience.  Instead, their intent was to act as a front to all of the major equipment manufacturers, allowing manufacturers to continue to support the deployment, repair and maintenance of their inspection equipment.  Not performing 51% of the work was illegal, but that was the plan.  And that is exactly what Chenega did, at a significant , new cost to the government.

Within a few days, Chenega subcontracted all of the technical requirements to the original equipment manufacturers (OEM) to keep the status quo system in place. Companies just marked up their prices and vended them trough Chenega to the government just as before.  The arrangement was very neat because the key players understood that Chenega was a front and would never be able to gain the necessary skills required to perform the work, but would be forever dependent upon the large primary vendors for the real expertise.  The deal would certainly drive up costs, but no senior government official took much of an interest.  In effect, the Chenega deal just put the same old wine in new bottles, but at a much higher cost.

Chenega also rolled up smaller government support efforts that were performed by other government agencies like the National Guard.  For years, Customs benefited from service and support provided by the Arizona National Guard who helped perform maintenance, training, and offered other support along the border.  This arrangement allowed Customs to take advantage of well trained, highly professional soldiers that were located close to the border who could provide immediate assistance. In exchange, CBP reimbursed the Arizona National Guard for expenses, which in 2004 were approximately $2.5 million.

Under Jose Ponce’s direction, Chenega was to manage these responsibilities, too, even though it would be impossible for a private company to contract out to the National Guard for services and support.  So, predictably, Chenega hired all the existing Arizona National Guardsmen as employees at an additional, annual cost of almost $12 million for the exact same services that were once provided at much less cost.

There was an added advantage for DHS to claim that this contract was an award to a small business, thereby ensuring, in this one procurement, that DHS met its annual goals of providing contract opportunities to small and disadvantaged businesses.  Of course, this was not the intent of the small business set aside goals set by the SBA, and all the key players understood that Chenega was only a front, but it worked.

Quite predictably, the growing rumors of malfeasance resulted in an official investigation into the Chenega contract.  The investigation that followed found that “CBP did not comply with federal regulations when it awarded Chenega the contract.”   The investigation also found that Chenega improperly subcontracted out more than the 50% allowed by the law and was essentially operating as a pass through to larger companies.

When Senator Stevens, in 1971, pushed through legislation authorizing special treatment and contractual preferences be given to Alaskan-native companies, few took much interest.  But within a very short period of time, Alaskan-native companies were able to significantly ramp up government contracting operations and take full advantage of the legislative preferences that allowed them to be awarded large, no-bid contracts.  It did not take much time for lazy and indifferent government program managers to realize that the new laws favoring Alaskan-native companies gave them an opportunity to bypass the more rigorous government contracting process that demanded well written statements of work, solid past performance evaluations of companies bidding on the work, and competitive pricing. With Alaskan –native companies, those burdens could all be avoided.

The original Congressional goal of increasing hiring opportunities for Alaskan-natives, who had traditionally survived on hunting and fishing, was never realized.  Of the many Alaskan-native companies that have emerged as government contractors, few have ever employed many Alaskan-natives.  Instead, the offices were fully staffed with former government officials and the traditional white collar work force that is typical in the DC area.

Today, according to government reports, nearly 200 different Alaskan-native companies have set up shop in Washington and have taken advantage of preferential legislation to garner nearly $13 billion in government contracts.  Yet, you would be hard pressed to find more than a handful of actual Alaskan-natives performing any of this work.  In short, Alaskan-native companies were essentially a fraud, but they were a legal way to cut corners.

The historical record shows that when there is a burning appetite for immediate gratification, and little direct involvement from senior leaders, short cuts often occur.  To be sure, Congress unwisely established the rules that implicitly encourage short cuts and deception, by allowing the government to by-pass much of the required contractual rigor, by tapping a bogus Alaskan-native company that employs few Alaskan natives.

But, government makes a mistake when it takes the easy route, and additional costs will always rise, if the government’s primary focus is to gain instant gratification, rather than what will best serve the country.  Critically important tasks and projects should be carefully awarded and assigned to the best and brightest companies and individuals who are most prepared and able to accomplish the difficult tasks required.  The country can no longer afford to make awards based upon convenience and unsupportable preferences, all to appease the parochial interests of a single Senator that no longer serves.