A government contracting process that lets companies set their own price, instead of getting paid at a fixed rate, has allowed Fort Gordon’s public works contractor to exceed its original estimate by more than $104 million since 2007.
The original projected cost of the contract to Akima Facilities Management, which ended last year, was $131 million, but it came in at $235.4 million, according to Army officials and federal documents obtained by The Augusta Chronicle under the Freedom of Information Act.
The contract breakdown: $31.8 million in 2008 and then four one-year options of $38.2 million in 2009; $41.5 million in 2010; $42.2 million in 2011; and $40.4 million in 2012. Akima received a $32.7 million extension in 2013 and one last year worth $8.2 million. The company, which modified the contract 140 times, can also qualify for a bonus for performing effectively under established deadlines and “successfully controlling and reducing estimated costs,” documents show.
Last week in an e-mail, Daniel Elkins, a spokesman for the Army Contracting Command, cited inflation and Fort Gordon growth for the increase. But beyond changes in market conditions, nine federal audits since 2009 show that cost-reimbursement contracts awarded among five U.S. agencies have become high-risk because of the “potential for cost escalation.”
At the moment, Elkins said there are no efforts to restructure Akima’s cost-reimbursement contract because prices were determined to be “fair and reasonable.” He added, however, that Fort Gordon is negotiating a new contract for base operations under the Army’s Small Business Program.
“As stewards of American taxpayers, every effort is made to negotiate costs for goods and services at the best value for the Army,” Elkins said, adding that “increased services drive higher prices.”
Under the contract process being used, Fort Gordon reimburses Akima for costs incurred while managing post facilities, conducting groundskeeping work, treating water and sewer systems and providing pest control and electrical, heating and cooling support.
The terms do not guarantee the government a completed end item or service within the estimated cost, opening the door for prices to go up nearly 80 percent.
Since 2007, Elkins said, training requirements have resulted in significant increases in facility needs at Fort Gordon as many buildings and structures were added or closed, and some that were previously deactivated were re-opened.
Elkins said the Army’s Base Realignment and Closure process in fiscal 2011 added to the post’s workload and public works needs, as it took on support of the Gillem Enclave, a satellite installation of Fort McPherson in Atlanta.
As a result, Elkins said, priorities for barracks and child development centers were adjusted with the growth of Fort Gordon, which by 2019 is expected to add 4,700 jobs with the relocation of the Army Cyber Command.
Elkins said these factors “increased the workload and complexity of the acquisition requirement over the life of the contract” and authorized a new work extension for a contract type that critics and the Obama administration have attacked as wasteful.
According to the Government Accountability Office, federal agencies budget more than $100 billion annually for cost-reimbursement contracts. In 2007, the year Akima signed its deal with Fort Gordon, 97 percent of the Defense Department deals were classified as this type of agreement.
“Excessive reliance by executive agencies on … cost-reimbursement contracts creates a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse or otherwise not well designed to serve the needs of the federal government or the interests of the American taxpayer,” the White House said in a March 2009 memorandum .
Later that year, the National Defense Authorization Act revised federal acquisition regulations to require agencies to determine the possibility of transitioning a cost-reimbursement contract to a firm, fixed price in the future.
In November, the Defense Department Inspector General’s Office found its contracting personnel met the rule for only 377 contracts – valued at about $71.4 billion – of 604 contracts reviewed.
“Of the 227 contracts that did not identify opportunities to transition to firm-fixed-price contracts, valued at about $11.3 billion, contracting personnel stated in many cases they did not document the opportunities because they were unaware of the requirement, no opportunities to transition existed or the contract was a one-time (deal),” the audit stated.
Fort Gordon’s contract was not reviewed in this audit, but a U.S. District Court lawsuit filed in Augusta revealed that an employee of IAP Worldwide Services, an Akima subcontractor, was arrested in October 2008 for solicitation and acceptance of a “kickback.”
The arrest led to an internal investigation, which found that an $11,200 order for air conditioners inside a Fort Gordon building was not bid competitively and that the vendor who received the contract was the husband of an IAP employee, according to the lawsuit.
IAP terminated its Fort Gordon operations manager Feb. 10, 2009. Four months later, the former supervisor sued for slander and libel. U.S. District Judge J. Randal Hall ruled in favor of IAP in 2011, citing lack of evidence.
Elkins could not confirm whether IAP remains an Akima subcontractor because his office works only with prime contractors. Dave Turner, Akima’s vice president of corporate development, did not reply to calls or e-mails seeking comment.
Under its contract, Akima can earn a performance award, but it redacted the financial records from public documents, citing proprietary and confidential business information that if released would put it at a competitive disadvantage and could cause “irreparable harm.”
The Army contracting command upheld the decision.