After Request From Kucinich, DOD IG To Audit DFAS Privatization
The following is a press release from December 3, 2003, by Kucinich's office in Congress
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After Request From Kucinich, DOD IG
To Audit DFAS Privatization
After a request by Congressman Dennis J. Kucinich (D-OH) the Department of Defense Inspector General’s office announced that they will be conducting a review of a recent Center for Naval Analysis (CNA) report on options following the erroneous privatization of military retired and annuitant pay functions formerly performed in the Cleveland office of Defense Finance and Accounting Service (DFAS).
“My first impression from reading CNA's report was that it seemed to be marred by bias,” stated Kucinich. “If in fact the report relied upon biased assumptions, then the report's conclusions would also be flawed. The report recommended that no action be taken to remedy this erroneous privatization. This recommendation could itself be erroneous if bias is detected. I welcome the involvement of the Inspector General and look forward to his audit of the CNA report.”
After studying CNA’s report Kucinich in a letter to DOD IG Joseph E. Schmitz requested the IG’s office review two specific instances of potential bias:
“First, C.N.A. estimated a $42 million cost savings associated with the contractor’s continuing performance for the remaining years of the current contract, relative to the MEO. This estimate was the basis for C.N.A. to conclude that retaining the current contract was superior to the three other options under consideration (return to MEO without competition, public/private competition, private/private competition), Figure 1, page 4. Please evaluate this $42 million cost savings estimate, as well as the appropriateness of C.N.A.’s presentation of the impact of this cost savings on the other options.
“Second, C.N.A. concluded that the contractor was performing the military and retired annuitant pay functions satisfactorily. C.N.A. based this conclusion primarily on summary performance data provided by DFAS. C.N.A. also concluded that in the future, the contractor would perform satisfactorily. Yet, for certain critical areas, the contract establishes random sampling as the tool for evaluating contractor performance, and that would include those areas for which C.N.A. relied instead upon summary performance data. Figures 20 and 21 (pp. 49 and 51) reveal considerable disparity between the summary performance data and random sample performance data. Please explain the difference between the summary performance data and the random sample performance data and evaluate the appropriateness of C.N.A.’s presentation of the data and its conclusions about contractor performance and future performance.”
On March 21, 2003, the Department of Defense Inspector General (IG) determined that a $31.8 million error by a DFAS consultant in the public-private competition resulted in the award of a contract with a potential value of $346 million to the contractor rather than the lower in-house bid.
“With over 500 Cleveland area jobs on the line I will take every appropriate action to ensure that this erroneous contract is reversed,” continued Kucinich. “The IG investigation is an important step in this process.”
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