By Matthew D. LaPlante
The Salt Lake Tribune
April 9, 2008

Even as Defense Logistics Agency officials were finalizing the details of a $64 million deal for military contractor EG&G Inc. to oversee the distribution of missile and aircraft parts at Hill Air Force Base, Defense Department inspectors were learning of serious problems with the company's performance at a similar facility in Georgia.

Now, military investigators are examining EG&G's role in the wrongful transfer of ballistic missile fuses to Taiwan and members of Congress are calling into question the amount of oversight placed on the company and others like it.

But a military inspector general was making similar calls as early as 2002 - several years before the Taiwan debacle - and apparently to no avail.

In an October report from that year, inspectors warned that EG&G employees at a defense distribution center at Warner-Robins Air Force Base routinely failed to provide an adequate response to orders for military parts, weathered extremely poor performance ratings, failed to provide mandatory quality control reports to military supervisors and were forced to turn to Defense Department employees to help alleviate a backlog of orders immediately after the company began its work at the Georgia logistics center.

And the auditors warned that "the Defense Logistics Agency did not provide adequate contractor oversight," and failed to write a contract that would have reduced EG&G's payments for poor performance.

While the inspector's conclusions were not released until several months after the Defense Logistics Agency finalized the Hill contract with the Maryland-based company, many of the damning evaluations relied upon in the report were in DLA files dating as far back as two years earlier. Meanwhile, reports of problems with EG&G's services had reached several members of Congress, including then-Sens. Max Cleland and Zell Miller and then-Rep. Saxby Chambliss, who joined together to request the inspector general's audit.

DLA officials on Tuesday said they were not prepared to comment on why EG&G was given a contract at Hill at the same time it was getting such poor reviews at Warner-Robins. A spokeswoman from EG&G's parent company, URS Corp., also declined to speak to that issue.

The 2002 audit did not address inventory control, which appears to be the central issue in the Taiwan missile case. In that situation, which is currently under investigation, fuses that were supposed to be kept in a classified storage area - and inventoried every three months - went unaccounted for over three years after arriving at Hill in 2004. Last month, Defense Department officials acknowledged that the parts mistakenly had been shipped to Taiwan, a transfer that may have violated international arms control treaties and caused further strain on relations between the United States and China, which considers Taiwan to be a renegade province.

But one defense-spending critic wondered why EG&G would even have been considered for the contract that placed it in charge of depot operations at Hill. Scott Amey, general counsel for the nonprofit Project On Government Oversight, expressed alarm at the 2002 audit's report of performance levels that were as low as 36 percent at EG&G's Warner-Robins operation in the years that preceded the company's acquisition of the Hill contract.

Amey said government contracting officials are required to look at a company's past performance when considering whether to award contracts but that oftentimes "the government will go back to the usual suspects, to keep using the same contractors because it is quick and easy and it at least seems to be more efficient to do it that way."

Indeed, a Department of Defense inspector general's report released last month concluded that the systems used by the military to measure and report the past performance of contractors are woefully inadequate. The report blamed "a lack of DoD emphasis" on ensuring that such reports are "credible and justifiable."

Amey said federal contract officers "are stretched very thin," overseeing contracts worth $400 billion with the same staff that, just a few years back, was overseeing contracts worth half that amount.

Military investigators looking into the Taiwan missile parts case have kept a tight lid on their work, but Air Force officials and members of Congress briefed on the progress of the inquiry say that the shipping containers in which the fuses were kept apparently had been mislabeled, and much attention is being devoted to contractors involved in the process.

Rep. Rob Bishop, who sits on the House Armed Services Committee and was briefed on the case last week, told The Salt Lake Tribune that he was withholding judgment on the issue until the investigation is complete, sometime next month. He said he has "empathy" for those trying to keep such a complex operation afloat with minimal error - EG&G shipped or received 1.4 million items last year - while using computerized tracking systems that are in some cases decades old. But, he noted, he has long been wary of the minimal oversight placed upon contractors when jobs formerly held by military personnel are privatized.

"I am worried about it," he said.

Fellow committee member Joe Sestak, a Pennsylvania Democrat, was more adamant.

"We need to know what happened here and then we need to take a deep and serious look at how we're doing things," he said. "I'm not saying you cannot use contractors, but we have to have thoughtful and thorough accountability."

Sestak, a retired Navy admiral, said the entire culture surrounding the nation's nuclear program needed to change. An Air Force Audit Agency report released last year concluded that officials at Hill were not regularly reconciling obsolete missile components being stored in preparation for destruction, a condition that could potentially result in "inadvertent technology transfers."

The report applied to Air Force efforts at a separate area of the base and under a separate command structure from the DLA system cited in the 2002 report and the most recent debacle.