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

Author
Susie Dow
Original Publication Date
03/04/2007
Grey Zone

Part II: DBA Clauses Missing In Action

The first part of this series traced how the lack of adequate insurance coverage impacted families already suffering the deaths or uncertainty surrounding the status of their family members serving in Iraq or Afghanistan as civilian contractors. Part II concentrates on how the appropriate Defense Base Act contract clauses that could have made a difference went "missing in action."

Missing in Action

For those writing and administering contracts, whether or not to include the appropriate Defense Base Act (DBA) clauses requiring insurance protection for civilian contractors is left to individual contracting officers. At best when the appropriate clauses are missing, the contract was mistakenly assumed to be exempt. At worst, the clause was overlooked or never considered.

Grey Zone

Department of Defense contracts are generally divided into three types: services, supplies, and construction.

Both "services" and "construction" contracts require DBA clauses. But civilian contractors who provide "supplies" on or near the battlefield are generally exempt from carrying DBA insurance. However, in some instances, contractors who provide supplies where the contract requires work on site -- known as "service incidental to supply" -- are not exempt. 1

Current language within Federal Acquisition Regulation (FAR) 2 is ambiguous and may appear to waive the requirement of DBA coverage by creating grey zones for service incidental to supply. These grey zones leave each contingency contracting officer to interpret FAR to the best of his or her ability and to determine when and where they should include DBA clauses.

The Defense Base Act clause is a mandatory clause that must be included in appropriately designated contracts awarded by any federal agency for overseas performance. It should be included in the "check list " provided to government contracting officers with responsibility for soliciting and awarding contingency (and any other) type of contracts for overseas performance. -- Alan Chvotkin of the Professional Services Council 3

One can argue that the work of Ultra Services and its employees, Kirk von Ackermann and Ryan Manelick, may have fallen outside of "service incidental to supply." That is, the contracts they worked under were exempt from DBA because they supplied US forces with prefabricated Containerized Housing Units (CHUs) and their work was not sufficient to warrant DBA coverage.

FAR 28.305 SB1Overseas workers' compensation and war-hazard insurance.

FAR 28.310SB2 Contract clause for work on a Government installation.

For more information on FARS, please see the endnote section.

In 2003, during the time von Ackerman and Manelick were in Iraq, contingency contracting officers (CCOs) were expected to respond rapidly to the priorities set by their commanders for fulfilling the immediate needs of 173,000 troops. They were also expected to verify that, where needed, subcontractors also had DBA in place.

With upwards of 200 requisitions and 400 contracts on the CCOs' desks, each CCO had to decide between 1) carefully including all relevant contract clauses and verifying each contractor's insurance paperwork -- which could add delays or 2) quickly expediting the contracts to secure the needed supplies and services for troops.

A 21st-century military force "burns up" a tremendous volume of expendable supplies and continuously needs repairs to equipment as well as medical treatment. Without a plentiful and dependable source of fuel, food, and ammunition, a military force falters. First it stops moving, then it begins to starve, and eventually it becomes unable to resist the enemy.4 -- Patrick Lang, Christian Science Monitor.

Under such a pressure, it should come as no surprise that some supply contracts were little more than a statement of understanding, with an actual contract following months later. The Department of Defense placed its contingency contracting officers in an untenable position. Either the troops on the ground suffered shortages or the civilian contractors and their families faced the risk of being uninsured in a dangerous environment. Even today, unless more detailed language is added to the Federal Acquisition Regulation (FAR), contingency contracting officers are likely to be unaware of decisions that clarify policy5 -- most especially while deployed in war zones -- as they prioritize fulfilling troops' needs over paperwork.

Bandaid or Surgery?

The sheer volume of work, compounded by a lack of clear guidance from the Department of Defense promoted confusion. Confusion, the Department of Defense should have both expected and been prepared for.

And indeed, the Special Inspector General of Iraq Reconstruction (SIGIR) issued a report, Iraq Reconstruction: Lessons Learned in Contracting and Procurement which analyzed contracting problems and made several recommendations. One recommendation was to establish a new Contingency FAR specifically for contingency operations. Another prompted the Deputy Secretary of the Army for Policy and Procurement to prepare two new guidebooks: The Army Guidebook for OCONUS Contingency Contracting and CONUS Guide for Supporting Emergencies within the United States and Supporting Overseas Contingencies from CONUS Locations.

Drafts of the guidebooks reportedly rely on Special Operations Command (SOCOM) contracting documents as well as on the Air Force Guidebook on Contingency Contracting6 a source that a review showed7 contained no reference to DBA insurance.

In September 2003, the US Army issued a new guidebook, Army Contractors Accompanying the Force (CAF) 8 which included two pages on the necessity of Defense Base Act coverage. Acquisition personnel knew contractors may not be aware of the DBA, as pointed out within the guidebook:

Pursuing benefits and remedies under these laws is the responsibility of the contractor employee and/or contractor. Since they may be unaware of this assistance, however, contracting personnel should inform the contractor of these laws if the situation arises. 9

The contractor is ultimately responsible.

Insurance in some circumstances is available under the Defense Base Act and Longshoreman's and Harbor Workers Compensation Act administered by the Department of Labor, and the War Hazards Act. It is the contractor's or employee's responsibility to pursue possible benefits under those Acts. 10

Yet, for the families of civilian contractors, it is imperative that both new guidebooks include clear guidance on the implementation of the Defense Base Act for the tens of thousands of civilian contractors working overseas.

Ducking Responsibility

The SIGIR report, Lessons Learned, confirmed that by Spring 2003 the Department of Defense had fully expected the Logistics Civil Augmentation Program (LOGCAP III), as administered by Halliburton's KBR, to reliably fulfill ALL logistics needs in Iraq. 11 Had KBR done as the Pentagon expected, companies such as Ultra Services would have clearly understood they were required to carry DBA insurance for their employees. Had Ultra Services secured coverage, Kirk von Ackermann's family would have received benefits during the entire duration he was considered missing, sparing his family the added burden of financial hardship.

But unfortunately, due to the urgency and sheer volume of needs required by deploying 173,00012 troops to the Iraq region, many of the responsibilities expected to be coordinated by KBR actually fell to Department of Defense contracting officers. Simply put: the Department of Defense had grossly underestimated and severely misjudged the abilities of LOGCAP III to handle Iraq contracts and by extension, insurance protection for its contractors. The Pentagon was unprepared to handle logistics on the battlefield.

As succinctly pointed out by Dov S. Zakheim, the Pentagon's comptroller from 2001 until 2004, "You're really asking too much of one firm to be able to manage all of this."13 As further proof of this basic fact -- that no one company could provide 100,000 contractors -- the Department of Defense announced in July 2006 that the next contract for logistics support, LOGCAP IV, would be split and awarded to three separate external support contractors. 14 And a fourth contractor will "monitor the performance" of the other three.

Finding Insurance On The Battlefield

While the Department of Defense in Washington DC expected external support contractor KBR to fulfill LOGCAP III, life in theater didn't cooperate. Contingency contracting officers were confronted with the necessity of working with local contractors to get urgently needed requisitions filled. Waiting for KBR to deploy sufficient staff and personnel to implement LOGCAP III throughout Iraq was not a viable option. Additionally, the expectation that contractors already operating in Iraq would have secured some form of local workers' compensation coverage was unrealistic.

Even if they'd known of the need for DBA insurance, local companies such as Ultra Services had few options. Iraq didn't have much in the way of a robust private insurance industry. Many Iraqis had relied on government insurance programs. Reporting on an early briefing held by Bechtel for local Iraqi companies in Baghdad, July 2003, Kelly Hayes-Raitt wrote:

Before this last war, there were six insurance companies in Iraq, the largest of which were run by Saddam Hussein's government. They offered basic auto and casualty insurance, workers compensation and liability insurance with maximum policies of either 200 million or 150 million dinars (about $100,000 or $60,000, respectively). As of July [2003], only one insurance company was operating. The others had been shut down or looted. 15

As one example of these difficulties, when local Iraqi companies first sought work as Bechtel subcontractors, they were told to get insurance. 16 But there was no mechanism in place to procure the three types of insurance Bechtel required -- indemnification, bid security, and performance, so eventually, Bechtel told their potential subcontractors that American companies would provide it. Finally, even unable to make that solution work, Bechtel waived their insurance requirements for Iraqi sub-contractors altogether17. Under LOGCAP III, today, KBR does not normally require liability insurance18 from its Iraq sub-contractors, but instead requires DBA coverage which is easier to obtain through a referral to its own insurance carrier, AIG. 19

Civilian Contractors Assuming Military Risks

Why is the insurance situation for civilian contractors important?

Since 2000, the number of contract obligations and contract actions by the Department of Defense has nearly doubled. 20 As more services within the military are privatized or outsourced, 21 reliance on civilian contractors supporting overseas contingency operations increases -- civilian contractors assume risks once handled entirely by military personnel.

The administration's own numbers illustrate how dramatically the warrior is becoming privatized.

With their increased presence, more civilian contractors, such as Ultra Services' von Ackermann and Manelick, face the possibility of injury, kidnapping and death. Accordingly, the Department of Defense and the Department of Labor have a responsibility to ensure broad implementation and uniform dissemination of DBA contract clauses.

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.

ePluribus Media Contributors: rba, newton snookers, cho, intranets, steven reich, wanderindiana, standingup, roxy

Endnotes

1 The Department of Labor Benefits Review Board had previously determined in 1988 in Alan-Howard v. Todd Logistics, Inc., 21 BRBS 70, that "individuals who work on-site to facilitate the utilization of such goods "constituted a service and as a result employees of such supply contractors were covered by DBA. See: The Defense Base Act -- A Growth Industry? by Kerry J. Anzalone, Counsel for Longshore, Office of Administrative Law Judges, U.S. Department of Labor, 2004

2Federal Acquisition Regulation (FAR)

3 email from Alan Chvotkin to Susie Dow Friday, July 07, 2006 5:11 PM

4The vulnerable line of supply to US troops in Iraq By Patrick Lang, Christian Science Monitor, July 21, 2006

5ARMY CONTRACTORS ACCOMPANYING THE FORCE (CAF), Guidebook, September 8, 2003 page 17 & 18 include information on DBA

6 Iraq Reconstruction: Lessons Learned in Contracting and Procurement, Special Inspector General of Iraq Reconstruction, July 2006, pp 112-113 Also see...

7Army Federal Acquisition Regulation (AFARS) Manual No. 2 for Contingency Contracting released November 1997

Air Force Federal Acquisition Regulation Supplement (AFFARS) APPENDIX CC Contingency Operational Contracting Support Program (COCSP), revised June 15, 2006, Navy Contingency Contracting Handbook Marine Corps Purchasing Procedures Manual Appendix B

8ARMY CONTRACTORS ACCOMPANYING THE FORCE (CAF), Guidebook, September 8, 2003 page 18

9ARMY CONTRACTORS ACCOMPANYING THE FORCE (CAF), Guidebook, September 8, 2003 page 17 & 18 include information on DBA

10ARMY CONTRACTORS ACCOMPANYING THE FORCE (CAF), Guidebook, September 8, 2003 page 17 & 18 include information on DBA

11 Iraq Reconstruction: Lessons Learned in Contracting and Procurement, Special Inspector General of Iraq Reconstruction, July 2006, p 14

12 Total US and Coalition Troops in May 2003, The Iraq Index (PDF), May 30, 2006

13Army to End Expansive, Exclusive Halliburton Deal, By Griff Witte, Washington Post, July 12, 2006

14 Army to End Expansive, Exclusive Halliburton Deal, By Griff Witte, Washington Post, July 12, 2006

15America's rebuilding of Iraq shuts out Iraqis, p3 by Kelly Hayes-Raitt, Santa Monica Daily Press, August 19, 2003, Evidence Of Waste Of US Taxpayers' Dollars In Iraq Contracts Letter from Rep. Henry Waxman to Joshua Bolten, September 26, 2003

16 America's rebuilding of Iraq shuts out Iraqis by Kelly Hayes-Raitt, Santa Monica Daily Press, August 19, 2003

17Bechtel's Outreach to Iraqi Subcontractors

18In a few instances, contractors from surrounding nations are able to obtain liability insurance. But more often, KBR requires DBA coverage.

19 Former US military contracting officer

20 Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse, GAO-06-838R, p 8, Government Accountability Office, July 7, 2006,

21Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse, GAO-06-838R, Government Accountability Office, July 7, 2006, http://www.gao.gov/new.items/d06838r.pdf

Endnotes - Sidebar

SB1FAR 28.305

SB2FAR 28.310 (2) (a)