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FAA orders a closer look at contracts

The FAA has begun the largest line-by-line review in a decade of its business with hundreds of companies in order to address concerns about a $1.3 billion small business initiative.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

Debra Srite got an odd phone call a month after starting her new job at the Federal Aviation Administration last year.

A contractor told her that he needed several thousand dollars more from the agency because he had run through nearly all the money allowed under his company's program. When Srite, a by-the-book contracting officer who cites the United States Code from memory, pressed him to provide a reason for the new money, she said he wouldn't cooperate.

"It was like he was in charge and he was surprised I asked for that verification," she said.

The call prompted Srite to dig into the FAA's records on the project. What she and a co-worker found out about the $16 million contract raised concerns about how the FAA handles $1.3 billion in such programs with small businesses.

The agency has begun the largest line-by-line review in a decade of its business with hundreds of companies. Two months earlier, the Transportation Department inspector general's office began its own audit and investigation into possible criminal wrongdoing by the company. The inspector general also has undertaken a much broader audit of FAA contracting practices.

Federal Aviation Administrator Marion C. Blakey announced in an Aug. 11 memo to top managers that new management procedures would be implemented to safeguard against abuse by contractors. "In this environment, we simply must control our expenses, one of the largest of which is our services contracts, and we must also ensure that every taxpayer dollar is spent wisely, effectively and properly," Blakey said in the memo. In a statement to The Washington Post, she said, "The actions the FAA is taking are part of larger efforts to fundamentally change the culture of how we spend money at the FAA."

The company at the center of the investigation is Crown Consulting Inc., a District firm with 180 employees. Its chief executive, Afzal I. Khan, founded the company as a disadvantaged federal contractor in the late 1980s. Crown now has 58 contracts with the FAA worth up to $135 million.

Among the red flags Srite says she found in the $16 million contract were invoices for an unapproved trip to Las Vegas and an unexplained lease for a Porsche Boxster. She also learned that Crown had hired the wife of a top FAA official and that the company later was ordered by that official to keep his wife on staff after the contract ended. A computer software system the firm was supposed to develop for the FAA failed many government tests and was never used, according to FAA documents.

Khan said all of Crown's invoices were legitimate and that suggestions of wrongdoing are inaccurate. The company disputes Srite's recollection of the initial phone conversation with one of its employees, saying that Crown was simply informing her that the contract would soon run out of money.

The Porsche lease was never submitted to the FAA for reimbursement, said Gene Grabowski, a Crown spokesman. It was given to the inspector general and the FAA after Crown was asked for documentation of all company expenses, he said.

Experts in contracting law say projects like Crown's are meant to save the government money but instead may add to costs. So-called support services contracts allow the FAA to award initial contracts to a short list of pre-qualified small companies and then add tasks amounting to as much as several million dollars without bidding. Such awards are often open-ended or loosely defined jobs to provide technical expertise, consultation or additional labor hours on programs ranging from developing a new software system to running a computer help desk.

Sometimes, such contracts do not include firm deadlines and in most cases they lack specific performance standards. The contractor is paid based on whether it supplied the required hours of service. In some cases, an FAA employee will retire from the government and soon after begin similar work for a contractor for more money, raising the questions of whether the government is really saving money by using the contractor.

The FAA's contract with Crown began six years ago as a $160,000 project with one employee to provide technical support, according to the company. The job expanded after the terrorist attacks in 2001 when the FAA needed to upgrade a computer system for air traffic controllers. The agency wanted controllers to easily see real-time flight activity so they could reroute airliners when the military planned to use certain airspace. Crown was asked to expand its original contract in 2002 in a sole-source award to provide the software, starting at $6 million with a "ceiling" of $16 million.

Three months into the project, Crown's system failed its first crucial test, according to FAA documents. The FAA noted 134 errors, FAA documents show. The agency ordered the company to fix the problems quickly. When the system was tested again in 2004 at the agency's technical center in Atlantic City, FAA officials did not see much improvement. It "failed to perform in providing easier user friendly software as required," said an FAA document dated June 4, 2004, that summarizes the test results. Crown officials did not dispute the test results.

Despite the performance problems, no one at the FAA raised any alarms about the Crown contract until Srite joined the staff last fall. She brought a fresh pair of eyes to FAA contracting, after eight years at the Defense Department where she oversaw two $500 million contracts for the B1 bomber.

A month into her new job, Srite received her first call from a company official at Crown, one of many contracts she was assigned to oversee. Srite learned that Crown submitted its invoices electronically for reimbursement on an FAA contracting management Web site. Srite said she did not have access to the Web site and that she had to ask managers of the program for a password. "I've never heard of a contracting officer not having access to invoices, because they are the only ones who can obligate government funds," she said.

Using the Web site, Srite said she discovered numerous invoices that appeared to be unauthorized or unexplained. For example, she came upon an invoice in March 2003 for leases of several properties in New Jersey, Bethesda, Herndon and Australia, and the lease for the Porsche. She found invoices for a trip to Las Vegas by two Crown employees. Normally, contractors must obtain written approvals before taking trips, Srite said, and she could not find any.

Complicating oversight of the contract, Srite said, is that she is based at the FAA's office in Oklahoma City and Crown's project office was in Herndon. As is normal practice with other government contracts, the FAA usually assigns a local technical representative to monitor a contractor's work on site to confirm performance and the number of hours worked. In the Crown case, Srite said she was the one legally responsible for overseeing the contract, but the FAA said the technical representative in Herndon had been the one approving invoices.

Srite said that in January she reported the Crown invoices to the Defense Contracting Audit Agency. Another FAA employee, whom she declined to identify, also was aware of the invoices and reported them to the inspector general and to Senate Finance Committee Chairman Charles E. Grassley (R-Iowa). Around that time, FAA officials started discussions with Crown to end the contract for reasons of "convenience," a broad term used to reflect the agency's discretion. The FAA agreed to pay more than $700,000 to Crown to end the contract, in a deal that requires approval by the audit agency.

Just as the contract was ending, Srite received an e-mail from her boss directing her to retain a small part of Crown's work that kept the air traffic system updated, for safety reasons, until a new contractor could be hired. Item No. 3 in the e-mail instructed her to keep two specific Crown employees on the contract.

The order came from Michael A. Cirillo, who is vice president for system operations services at the FAA's Air Traffic Organization. One of the employees to be retained, according to the e-mail, was Cirillo's wife, Patricia. The other employee mentioned in the e-mail was Janie Miller, who is a former FAA administration and budget analyst who worked for Michael Cirillo for several years before retiring in June 2003 after 40 years at the agency, the FAA said. Srite said Miller was performing the same role at Crown that she did at the FAA. Efforts to reach Miller were unsuccessful.

Srite said she felt uncomfortable being directed to retain Patricia Cirillo and Miller and she reported a possible ethics violation to the FAA's legal counsel. She said she did not receive a response, but was asked about it by FAA attorneys weeks later when the agency was working out its settlement with Crown. "They said I did the right thing," to report the e-mail. The FAA said Michael Cirillo is no longer overseeing the Crown contract because of the inspector general's inquiry, and that the contract has been moved to another division.

Crown said Miller and Cirillo's wife no longer work at the company. Michael Cirillo declined to comment for this story through the FAA's spokesman, Greg Martin. A phone message left at the Cirillo home was returned by the FAA, which said the Cirillos declined to comment.

"Mr. Cirillo has had an unblemished record at the FAA," Martin said. "It's only fair to reserve judgment pending the outcome of the inspector general's investigation."

Khan said Crown provided "backup data" to the inspector general that show "there is no validity to the allegations" and that "substantiate all of our invoices," he said in a written statement. "It's important to get this matter resolved as soon as possible. We are a small minority business and we depend on our good reputation."

Khan and other employees said they fear that the federal audit and allegations will hurt the small company's reputation and future business, of which 90 percent is with the FAA. Khan said in an interview that the allegations of wasteful spending are unfounded and a result of a misunderstanding. "I believe we did a great job," Khan said, pointing to his long history of work with the FAA and to an "outstanding performance recognition award" the firm won from the agency in the late 1990s. "We stand on our reputation and the good work we do and we live by that."

This week, the FAA announced management controls for support service contracts, including ethics training for FAA employees and a new conflict-of-interest clause that requires contractors to disclose whether they plan to use employees who are relatives of current FAA employees. The FAA said it also will require open bidding for all new support service contracts worth $1 million or more or for modifications to existing contracts worth more than $1 million in new work. The agency's chief financial officer will review any contract over $10 million and the FAA will require contracting officers -- not their technical representatives -- to sign off on all invoices submitted by contractors.

Although the inspector general hasn't yet issued a report, the FAA said its chief legal counsel will review all new task orders for contracts the FAA has with Crown, and any new contracts with the firm. "They've been a long-standing contractor, yet we need to acknowledge there are certain concerns that have come about from this particular contract and we need to proceed with due caution," said Martin, the FAA spokesman.

Srite said she had no qualms about bringing her concerns to higher officials at the FAA and the outside audit agency, although she said she will not be surprised if her career suffers.

"It's our personal obligation, especially when representing our government, to represent the public interest," Srite said. "My purpose was never to harm anyone. I came to work and I sat in a chair and all I knew how to do was contracting. I went about the procedures I thought were right."