For the largest contractors, the new regulations probably will be “a little bump in the road,” but extra bureaucracy could harm small or midsize contractors, said Simon Brody, a spokesman for the National Association of Government Contractors, a trade group.
“There is a need for these regulations because there has been abuse, but more regulation always hurts smaller contractors first,” Brody said. “It’s off-putting, especially for businesses that are trying to get into government contracting.”
The new law also skirts the problem of cost-plus contracting. Under a cost-plus contract, a contractor bills the government for expenses and is given a margin as profit. That means the more money a contractor spends, the more profit it makes.
Primary contractors with cost-plus contracts frequently hire subcontractors on fixed-price contracts to do most of the work, said Paul Hinks, the chief executive officer of Symbion Power, a Washington-based company that has experience on projects in Iraq and Afghanistan, including as a subcontractor hired by Black & Veatch to build the Kabul power plant.
“They shouldn’t even be giving out cost-plus contracts to do this type of construction work in a war zone. It’s just madness,” Hinks said. “There’s no incentive to save any money.”
McCaskill’s crusade to overhaul contracting dates to her first Senate campaign, when she cultivated a thrifty image based on her identity as a former state auditor who was determined to curb Washington’s wasteful spending habits.
As a freshman senator in 2007, McCaskill led a Senate delegation to Iraq to scrutinize the management of defense funds. She returned to Capitol Hill shocked by lax oversight and convinced that what she saw as the Pentagon’s over-reliance on private contractors in the war zone was squandering billions of taxpayer dollars.
McCaskill joined forces with then-Sen. Jim Webb, D-Va., to create the Commission on Wartime Contracting in Iraq and Afghanistan, a bipartisan panel modeled after President Harry Truman’s campaign to curb war profiteering during World War II.
In a report published in 2011, the commission revealed that as much as $60 billion had been lost to contract waste and fraud. It concluded that the U.S. government no longer can conduct large or sustained military operations or respond to major disasters without over-relying on contractors.
McCaskill and several other senators drafted a bill, the Comprehensive Contingency Contracting Reform Act, based on the commission’s recommendations. Major components of the act were included as an amendment to the defense authorization bill that the president signed recently.
The revisions mean that at least some lessons have been learned from Iraq and Afghanistan, despite resistance to change from powerful interests in the contracting community, said commission member Charles Tiefer, a professor of government contracting law at University of Baltimore.
“The contractors would have been very happy to keep the status quo, and they would have been very happy if this bill had not gone through,” he said. “I’m much more impressed by what got into the law than what didn’t.”
McCaskill said she knew that laws on the books weren’t going to be enough. Continued scrutiny from Congress is necessary to ferret out bad contractors and poor performers, she said.
“I’m not going away,” McCaskill said. “I’ve got six more years to stay on these guys about the way they spend money.”
McClatchy correspondent Rezwan Natiq contributed reporting from Afghanistan.