Iraq, Contingency Contracting and the Defense Base Act - Part I

Author
Susie Dow
Original Publication Date
03/04/2007
Contractor Gear

Kirk von Ackermann is missing.

So is his fellow worker, Ryan Manelick.

Although both men, contractors in the Irag theater, have been declared dead, they are both missing from the official statistics of the injured or deceased maintained by the Department of Labor.

On March 18, 2003, one day before the start of the war in Iraq, Defense acquisition personnel were given a presentation that outlined recurring problems with insurance for contractors: contracts from the Department of Defense were too often excluding Defense Base Act clauses, the very clauses that provided a modicum of insurance protection for civilian contractors. While both the State Department and USAID secured low cost insurance for their overseas workers, the Pentagon consistently resisted efforts for department-wide coverage. The rationale? Saving money was considered more important than broad access to coverage1, coverage that would ensure surviving family members of kidnapped or killed contractors received compensation.

Established in 1941, the Defense Base Act (DBA)2 provides the equivalent of workers' compensation for civilian contractors working on contingency operations in overseas countries such as Iraq and Afghanistan. DBA provides benefits in the event contractors are injured, killed, or kidnapped in the course of their work for US government agencies such as the various branches of the Department of Defense, USAID, or the State Department. But this insurance is not automatic, employers must purchase it. And before they can do that, they must know about it.

According to the Department of Labor who administers DBA benefits, at least 770 contractors have died3 and 7,761 contractors have been injured in Iraq between March 2003 to December 31, 2006.

At least two American contractors should be listed: Ryan Manelick and Kirk von Ackermann. They are not, however, included in DBA casualty figures.

The Slow Pace of Bureaucracy

Deirdre A. Lee, Director of Defense Procurement and Acquisition, attended that March 18th, 2003 briefing of the Defense Acquisition Excellence Council, highlighting that contracts with the Department of Defense did not always include the required DBA contract clauses.

Seven months after that briefing, on October 9, 2003, civilian contractor Kirk von Ackermann working for Ultra Services of Istanbul, Turkey, which fulfilled logistics contracts for the US Army, disappeared in Iraq.

Nine months after that same briefing, on December 8, 2003, Director Lee belatedly issued a policy memo to4 Defense agencies indicating that DBA was a required contract clause that should be included in overseas contracts where appropriate. Within one week, von Ackermann's colleague, Ryan Manelick, was gunned down after leaving a meeting at a base in Iraq.

Eighteen months after that briefing, the two men's employers would learn for the first time of the necessity of DBA insurance, too late to cover either of the two men. With no coverage, both men are omitted from the statistics the Department of Labor compiles on Iraq contractors.

The Family Left Behind

When Kirk von Ackermann disappeared on that October day in 2003, he left behind a wife and three children.

Within a month of first learning about the Defense Base Act in March 2004, Megan von Ackermann filed a claim for compensation. To contact her husband's employer Ultra Services, which by that time had ceased operations, a claims examiner faxed a letter of inquiry dated August 5, 2004 ultimately reaching Ultra Services' principals John Dawkins and Geoff Nordloh. The inquiry requested information on von Ackermann's disappearance as well as the name and address of Ultra Services' Defense Base Act insurance carrier.

But, Ultra Services didn't have DBA insurance. In fact, the company principals had never even heard of DBA during the time of their work in Iraq despite the fact that Ultra Services had processed over $12 million in contracts.

And even though Nordloh and Dawkins had also fulfilled millions of dollars in contracts for the US Army in Afghanistan, they only first learned of the Defense Base Act requirement from another contractor, construction giant Perini, through a draft of a proposed subcontract for work with the US Army in Afghanistan in the summer of 2004. In none of Dawkins' or Nordloh's previous prime contracts had the US Army ever mentioned the need for DBA.

Meanwhile, Megan von Ackermann had another problem -- her husband was considered "missing," not dead. The Department of Labor initially indicated that they needed the US Army's Criminal Investigation Division's (CID) findings into her husband's disappearance before they could decide her claim's status.

On August 9, 2006 -- two years after the initial letter was faxed -- the CID informed Megan von Ackermann that they had determined that her husband, a former Air Force Captain, had been killed on October 9, 2003 during a botched kidnapping. While CID's determination allows Megan to move forward with processing a claim, it doesn't resolve the issue that Ultra Services didn't have DBA insurance at the time of her husband's disappearance. To this date, his remains still have not been found.

The von Ackermann family is unlikely to ever collect DBA benefits. Worse, Kirk von Ackermann was considered a missing person for almost three years, and as a result,his family not eligible for Social Security survivors' benefits, until the determination by CID. For the von Ackermann family, meeting day-to-day expenses is an ongoing problem:

I worry about money constantly - and I hate it. I don't want to reduce our situation to finances, and in a way I'm afraid the stress over money is masking the pain of our loss. The two things are so huge... and that hurts too; it hurts that being poor is nearly as difficult as losing Kirk. -- Megan von Ackermann5

Unfortunately, the von Ackermann family's experience is not unique. An Associated Press article reported Lillian Ake, wife of missing Iraq contractor Jeffrey Ake, is also unable to collect benefits. While she and her four children have received financial support through her church, Lillian Ake has placed their family home on the market in addition to beginning bankruptcy proceedings for her husband's business.6 Jeffrey Ake was last seen being held at gunpoint in an April 13, 2005 video.

Contingency Contracting

Contingency contracting is direct contracting support to tactical and operational forces engaged in the full spectrum of armed conflict and military operations (both domestic and overseas), including war, other military operations, and disaster or emergency relief.SB1 - US Army Standard Procurement System website

History of the Defense Base Act

Contingency contracting, by its very nature of working in close proximity to the battlefield, brings high risks. Civilian contractors deliver much needed supplies and services and, in doing so, often find themselves situated closer and closer to hostilities as competitive outsourcing through the US government's A-7611 program increasingly determines the most cost-effective way to fulfill government operations is through the private sector.

Contractors

Based on a survey for CENTCOM12, more than 100,000 American and Third Country National civilian contractors13 are estimated to currently be working in Iraq. Notably, this number does not include their sub-contractors. Requiring DBA insurance coverage depends in part on the "type" of support a civilian contractor provides.

Three types of civilian contractors are on or near the battlefield supporting contingency operations:

Systems support contractors maintain specialized equipment, generally sophisticated weapons.14

Theater support contractors are contracted by contingency contracting officers to provide immediate goods and services, generally by local vendors.

External support contractors, perform logistical support such as base construction and maintenance.

Ultra Services, the company Von Ackerman and Manelick worked for, was an external support contractor, similar to the more well-known, although much larger, Halliburton subsidiary Kellogg, Brown and Root (KBR). In fact, as external support contractors,. KBR administers the Logistics Civil Augmentation Program (LOGCAP) III contract for the US Army.

As a result of LOGCAP, KBR has its own contracting officers who procure goods and services for the Department of Defense's contingency operations. KBR employees are required to be covered by DBA insurance and, per the terms of the LOGCAP contract, KBR also requires that their subcontractors be adequately covered by DBA insurance as well.15

Had everything gone according to the Pentagon's plans, Halliburton's KBR unit would have handled most of the contracts for logistics in Iraq.16 Companies such as Ultra Services would have served as subcontractors to KBR so that, by default, their employees would have been covered by DBA insurance coverage. Unfortunately for the von Ackermann family, the Pentagon's assumptions met a different reality.

Who Cares?

The Department of Defense should have had all of its contractors who are legally required to carry DBA insurance to do so. Unfortunately, the Department of Defense's implementation was less aggressive than other US governmental agencies.

Whereas the State Department and U.S. Agency for International Development (USAID) had for many years secured reasonable rates from insurance carriers for DBA, rates that added less than 5% to contract costs, the Department of the Defense did not. For other agencies, rates remained low as underwriters spread risks, charging the same rates in safer countries. But for years, the Department of Defense resisted efforts to secure broad coverage for its contractors. By the time the Department of Defense solicited competitive bids, its efforts met failure:

On August 8, 2003 after the invasion, the Defense Department asked insurance agencies to submit proposals for selling discounted death and injury coverage to military contractors in Iraq, Afghanistan and Kuwait.

Not a single insurance company bid on the solicitation, which expired September 2, 2003 because the risks were too high to make it profitable.17

At the same time that the Department of Defense was failing to secure DBA insurance for its contractors at a reasonable cost, Operation Enduring Freedom was nearing the end of its second year in Afghanistan; Operation Iraqi Freedom, was nearing the end of its first six months.

Meanwhile, DBA insurance rates for Department of Defense contractors -- not surprisingly -- had skyrocketed well above those of USAID and State Department contractors, in some cases almost doubling overall contract costs.18

Eventually, the Department of Defense would later learn it was paying out as much as 10 times more in premiums than the other two government agencies19. The US taxpayer, of course, picked up the tab.20

About the Author: Susie Dow is the Editor of the weblog, The Missing Man, which follows articles on Kirk von Ackermann and Ryan Manelick. She is a volunteer researcher and editor at ePluribus Media. http://missingman.blogspot.com

ePluribus Media Contributors: cho, standingup, roxy