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Pentagon Builds Auditing Army as Budget Shrinks: BGOV Barometer

February 27, 2012

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(Editors: this Bloomberg Government feature moved earlier and is being made available to newspapers today.)

Feb. 17 (Bloomberg) -- The Defense Department wants to add as many as 1,612 employees to oversee and audit contracts next year even as it plans for a 5 percent cut in the U.S. military’s budget.

The BGOV Barometer shows spending on the workers would rise 14 percent to $1.9 billion in fiscal 2013 from $1.7 billion a year earlier, according to the Pentagon’s budget request. Staffs at two defense agencies that manage and audit contracts would increase 10 percent to 17,226 during the same period.

The military has been trying to catch up with an audit backlog that worsened with the spending surge that followed the Sept. 11 attacks. Defense contractors support the funding increase because it’s aimed at shrinking $400 billion in unaudited contractor bills, said Alan Chvotkin, executive vice president of the Arlington, Virginia-based Professional Services Council, which represents about 330 vendors.

“There’s money on the table that companies are probably owed,” he said in an interview. “As companies look at an austere environment, they want to get every dollar they’re entitled to.”

The government also may benefit by recovering as much as $2.2 billion in overcharges, according to the Commission on Wartime Contracting, appointed by Congress to address contracting problems. More than $30 billion has been wasted or lost to fraud from contracts tied to the wars in Iraq and Afghanistan, the commission estimated.

The Defense Contract Audit Agency completed $19 billion in so-called incurred-cost audits -- reviews of expenses submitted under cost-reimbursement contracts -- in fiscal 2011, according to the agency. That’s a 44 percent drop from the prior year, when it audited $34 billion in expenses.

The audit agency is seeking $574 million next year, a 16 percent increase from $495 million in fiscal 2012, which ended Sept. 30. It expects to complete $175 billion of incurred-cost audits in fiscal 2013, Elizabeth Robbins, a Pentagon spokeswoman, said in an e-mail.

The bump in funding should allow the agency to improve audit quality and “fully address the hefty backlog” by 2014, John LaBombard, a spokesman for Senator Claire McCaskill of Missouri, said in an e-mail. McCaskill chairs a subcommittee on contracting oversight.

The Defense Contract Management Agency would get an 11 percent increase to $1.3 billion in fiscal 2013. It would add 79 people to oversee contracting in Afghanistan, where the Pentagon expects $20 billion in awards next year.

The Defense Department is requesting a total budget of $613.9 billion for fiscal 2013, including $88.5 billion for the war in Afghanistan.

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--With assistance from David Lerman and Tony Capaccio in Washington. Editors: Stephanie Stoughton, Joe Winski

-0- Feb/27/2012 17:44 GMT

To contact the reporter on this story: Nick Taborek in Washington at

To contact the editor responsible for this story: Stephanie Stoughton at

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