You get what you pay for

The State Department “got what it paid for” when it hired embattled contractor ArmorGroup North America to provide security to the U.S. Embassy in Kabul, Afghanistan, a new report from the Wartime Contracting Commission found.

Unfortunately, the commission also found State had little choice because federal law prohibits the department from choosing security contractors based on performance rather than cost. According to the report:

Unlike other federal agencies, the U.S. Department of State is forbidden by law to select anything but the lowest price and ‘technically acceptable’ offer when awarding contracts to protect its overseas buildings — even if this means passing up offers from firms offering higher quality and better experience. In contingency operations like those in Iraq and Afghanistan, this prohibition can have negative consequences for security, wartime mission objectives, and America’s image.”

The report comes on the heels of revelations by the Project on Government Oversight that employees of ArmorGroup threw alcohol-fueled parties and forced subordinates to engage in lewd behavior that resulted in high staff turnover and placed embassy officials at risk.

The commission recommended removing the low-price requirement to allow State to select the contractor that will provide the best value.

The “low-price, technically acceptable” award requirement motivates underbidding that results in post-award cost cutting, such as hiring unqualified staff, employing poor-quality subcontractors and using low-quality materials, the commission found. Further, the commission found that high-quality and highly qualified contractors are unlikely to compete for work when the award hinges on a bid being the lowest price because they’re unwilling to compromise their standards to match a low-ball bidder.

The report cites the embassy security contract as an example:

In contracting security for the U.S. Embassy in Afghanistan, the government received only two offers deemed ‘technically acceptable,’ even though dozens of security companies operate in Iraq and Afghanistan. As a result, the State Department struggles with a poorly performing contractor.”

In a statement accompanying the report’s Oct. 1 release, co-chair Michael Thibault said:

The lowest-price, technically acceptable standard may work fine if you’re buying low-value, non-critical things like office supplies, but it’s a questionable standard for more complicated purchases like construction projects or embassy security. Most federal departments can operate on the sensible principle that best value for contract dollars means more than picking the lowest price. Forcing the State Department to make decisions on an artificially narrow basis does not serve the public interest.”