On Monday the congressionally-created Wartime Contracting Commission will hold a hearing on Defense Department logistics contracts in Iraq and Afghanistan. The commission might want to begin by looking at a case PaperTrail has learned about, where the government’s oversight has been less than ideal.

“There have been too many instances of poor definition of needs, weak oversight, flawed performance, and individual wrongdoing — by government as well as by contractor employees,” said Commission co-chair Michael J. Thibault.

A Defense Contract Audit Agency employee, who spent a year in Iraq, told PaperTrail, on the condition of anonymity out of fear of retaliation, that the agency has squelched many referrals of suspected fraud.

The DCAA auditor, to illustrate the difficulty with management, pointed to a referral the auditor wanted sent to criminal investigators on over-billing by a dining facilities subcontractor in Iraq. The auditor’s manager watered down the original referral’s content, the auditor said.

“As it stands, I think the changed [fraud referral form] is just too conservative a take on the DFACs [dining facilities contracts] and would not represent my informed opinion on what has transpired,” the auditor wrote in a November 2007 e-mail to management, which was provided to PaperTrail.

DCAA managers are loath to send suspected fraud referrals to headquarters, the auditor said. “They don’t do it because they’d have to devote too much manpower” to assist criminal investigators.

Recently, there have been policy changes at the agency that will allow auditors to bypass some levels of management. When asked about these changes, a Pentagon spokesperson said DCAA would not be able to respond in time for publication.

The Defense Contract Management Agency’s Houston office made some missteps in dealing with a contractor engaged in Iraq reconstruction work as well. The result, according to the Defense Department inspector general: “[T]he Government lost a combined $1.6 million in costs that DCMA contracting officers should not have paid the contractor.” PaperTrail has been told by an official at the Defense Department, that the contractor in question is KBR, the former Halliburton subsidiary and single largest logistics contractor in Iraq.