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US security contracts draw scrutiny

Questions raised on bidding process

WASHINGTON -- The largest Homeland Security Department contractors include two companies that paid millions to settle charges they defrauded the Pentagon, one that paid a foreign corruption fine, and one accused of botching a computer system for veterans hospitals, records show.

About a quarter of the $2.5 billion awarded to the 50 largest Homeland Security contractors came under no-bid contracts, according to the department's records. At the Pentagon 44 percent of contracts were awarded under "other than full and open competition."

The rest of the money paid to the top contractors for Homeland Security, a bit more than $2 billion, was for contracts awarded through competition.

Some of the nation's largest federal contractors have won the new business of protecting America from terrorists, including many with a recent history of legal run-ins with the government, according to the records.

The two companies with the most business, nearly $700 million between them, were Boeing Co. and Integrated Coast Guard Systems, a partnership of defense contractors Lockheed Martin Corp. and Northrop Grumman Corp.

Those companies have paid more than $250 million in the past three years to settle charges of improprieties involving their Pentagon contracts. Homeland Security audits also have accused the two companies of overcharging, in Boeing's case by $49 million.

Homeland Security officials gave Congress a list of the top contractors through July and their competition status amid criticism of the agency's management and oversight of its money.

The department was created by pulling together 22 federal agencies with 180,000 employees and dramatically increased funding, as much as $33 billion for the fiscal year that began Oct. 1. Officials blame some of the problems on growing pains.

"The department recognizes it has many challenges, and from the day it stood up has taken positive steps to build and improve the department's contract management system," spokesman Larry Orluskie said Thursday.

Analyst James J. Carafano of the conservative Heritage Foundation said some agencies within the department, such as the Coast Guard, have more serious problems with contract oversight than others. "In some cases, you have programs which have been created out of thin air, and in other cases, you have people managing programs which are far larger than anything they've done in the past," he said.

Homeland Security's biggest contractor this year, Integrated Coast Guard Systems, is upgrading and expanding the Coast Guard's fleet of ships, boats, airplanes, and helicopters.

Clark Kent Ervin, the department's inspector general, said in a report that hiring Integrated to install new engines in HH-65 helicopters would take longer and cost more than if the Coast Guard did the work itself.

The original proposal for the project was a month late and included "$123 million worth of goods and services that the Coast Guard did not ask for and could not afford," Ervin's report said.

The Coast Guard defended the contract, telling Ervin it believes the program is properly managed. Margaret Mitchell-Jones, spokeswoman for Integrated, said the company agreed.

Another report from Ervin said Boeing, Homeland Security's second-largest contractor last year, overcharged the department $49 million on a extensive contract to install and maintain bomb-detection gear at US airports.

Boeing spokesman Fernando Vivanco denied overcharging and said the company met a tight schedule. "Nobody thought it could be done, and we did it," he said.

Homeland Security's critics also questioned a $229 million contract to high-technology company BearingPoint. The Department of Veterans Affairs abandoned a BearingPoint computer system for a Florida hospital last fall after it failed nine months of tests. The Justice Department and VA are investigating.

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