Commission on Wartime Contracting to Hold First Public Hearing

January 29, 2009

Congressional oversight of the on-going military actions in Iraq and Afghanistan will move to a new level when the Commission on Wartime Contracting (the "Commission"), also known as the Webb-McCaskill Commission, holds its first public hearing on Monday, February 2nd, 2009.  The Commission could become yet another source of scrutiny for some federal government contractors, as well as for future procurement and ethics reforms.  The Commission’s mandate includes a broad investigation into Federal agency contracting in Iraq and Afghanistan, specifically focusing on contracts for logistical support of coalition forces, reconstruction efforts, and security functions.  Thus, the Commission’s activities are likely to be especially important to companies that have received contracts in these areas, or who plan to compete for such contracts in the future.

Free-standing pieces of legislation attempting to create such a commission were introduced by Democratic lawmakers in 2006 and 2007, with little result.  A version of the legislation introduced in 2007 by Senators Webb (D-VA) and McCaskill (D-MO) was eventually offered as an amendment to the National Defense Authorization Act ("NDAA") for Fiscal Year ("FY") 2008 (Public Law 110-181).  The amendment, which also included then-Senator Obama among its co-sponsors, became section 841 of the FY 2008 NDAA, which was signed into law by President Bush on January 28, 2008.  President Bush also issued a signing statement indicating that the provision creating the Commission may interfere with the Constitutional duties of the President, although it is unclear whether the Obama Administration will concur in this view. 

Proponents of the Commission have stated that it is to be a modern day Truman Committee, the Special Committee to Investigate the National Defense Program chaired by then-Senator Harry S. Truman prior to and during World War II.  The Truman Committee, formed in 1941 shortly after Congress appropriated $10.5 billion for defense contracts in preparation for WWII, was largely heralded as a success.  The Truman Committee held over 400 public hearings, issued 51 reports, and is credited with saving millions of dollars in cost-overruns.  Truman’s work as the Committee’s first chairman likely played a significant role in his selection as Roosevelt’s Vice-President in 1944, an indication of the Committee’s importance.  As noted by Senator Schumer (D-NY) in a 2007 Harvard Law and Policy Review article calling for the creation of the Commission, the Truman Committee did not limit itself to investigating procurement fraud, waste, and mismanagement.  Rather, the Truman Committee took an active role in almost all facets of the war, often serving as an ad-hoc forum for interagency coordination and troubleshooting the day-to-day squabbles and power struggles between Federal agencies over contracting for the war effort.  Truman is also said to have successfully pushed Roosevelt to reveal more information about the conduct of the war to the American public. 

It remains to be seen whether the depth, reach, and import of the Commission’s work will rival that of the Truman Committee.  Like the Truman Committee, the Commission is tasked with investigating waste, fraud, and abuse for Federal agency contracts falling under the Commission’s purview, as well as the more contemporary issue of investigating the use of force by contractors operating in Iraq and Afghanistan.  The Commission may report any crimes it discovers to the Attorney General.  However, the Commission lacks direct subpoena power, and must instead refer any matters requiring the issuance of subpoenas to other Congressional committees.  This may limit the Commission’s ability to investigate specific contracts and contractors, but may also spawn numerous off-shoot investigations in any Committees that do issue subpoenas upon a request from the Commission.  Further, it is unclear whether the Commission will initiate specific, backward-looking inquiries into contractors and contract performance rather than focus on proactive policy recommendations.  It is possible that the audits conducted by the Special Inspector General for Iraq Reconstruction ("SIGIR"), which are statutorily mandated to be coordinated and conducted independent of the Commission, may obviate the need for the Commission to focus on specific inquiries into individual companies, their personnel, and their contract performance. 

Another unknown is the extent to which the Administration and Congress will back any policy recommendations offered by the Commission.  These recommendations could cover everything from discrete topics, such as the appropriateness of specific contract vehicles, and the proper use of contractors for security functions, to broader topics, such as the general role contractors should play in future reconstruction or contingency efforts.  Federal government contractors should stay cognizant of the Commission’s efforts in these areas and prepare for the use of the Commission as a political tool to affect procurement and ethics reforms. 

The Commission is comprised of eight commissioners.  Two commissioners are appointed by the President, two by the Majority Leader of the Senate, and two by the Speaker of the House.  Additionally, the Minority Leaders of the House and Senate each appoint one member.  The current co-chairman of the Commission is Michael J. Thibault, of Navigant Consulting and formerly the Deputy Director of the Defense Contract Audit Agency.  The Commission’s second co-chair has yet to be appointed. 

The Commission has the power to hold hearings, take evidence, administer oaths, receive testimony from witnesses, and provide for the production of books, records, and other relevant documents.  However, as mentioned above, the Commission lacks any direct subpoena power.  The Commission’s first required report is due on March 1, 2009, with a final report required no later than two years after the date of the appointment of all members of the Commission.  The Commission may also issue any other reports it deems necessary. 

The Commission’s first hearing is scheduled to include the presentation of a report produced by the SIGIR, entitled: "Hard Lessons: The Iraq Reconstruction Experience."  The 500 page report, based on a draft copy circulated prior to the hearing, presents a detailed history of the reconstruction efforts in Iraq.  The report is highly critical of many government entities and personalities, and also questions the reliance on contractors as a large scale surrogate for U.S. Government personnel.  However, the report presents a generally even-handed view of contractor performance, noting in the concluding section that "[m]ost companies responsibly complied with the requirements of their contracts, even if the U.S. administrative apparatus did not make the best use of their capabilities.  A relative few took advantage of the situation by committing fraud, at a significant cost to U.S. national interests and Iraqi well-being."  Witnesses representing the Offices of Inspectors General of the U.S. Department of State, the U.S. Department of Defense, and the U.S. Agency for International Development, are also set to testify at the initial public hearing. 

Although the Commission’s role and importance is not yet fully ascertainable, it is clear that the Commission has the potential to make a large and significant impact in procurement policy for contingency contracting.  The Commission may also direct specific investigations into contractors, contracts, and contract performance.  As such, many federal government contractors may wish to closely monitor the activities and reports of the Commission in order to guard against future surprises.  The Commission’s first public hearing is scheduled to begin on February 2nd, at 9:30am in the Russell Senate Office Building. 

Gibson Dunn & Crutcher’s lawyers are available to assist clients in addressing any questions they may have regarding this issue.  Please contact the Gibson Dunn attorney with whom you work, or government contracts partners Joseph D. West (202-955-8658, [email protected]), Karen L. Manos (202-955-8536, [email protected]), or Diana G. Richard (202-877-3572, [email protected]), or white collar defense and investigations partners F. Joseph Warin (202-887-3609, [email protected]), and David P. Burns. (202-877-3786, [email protected]), all in the firm’s Washington, D.C. office.  

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