WASHINGTON – “What on earth did you think would happen,” is the question U.S. Senator Claire McCaskill is posing to two federal agencies after a contractor—re-hired for critical national security work over the objections of McCaskill, following misconduct by its employees and substantial financial problems on other contracts—abruptly defaulted on its contract.
“This is one of those instances where it doesn’t feel or do any good to say ‘we told you so,’ because the real harm will be felt by taxpayers,” said McCaskill, a former Missouri State Auditor and the top-ranking Democrat on the Permanent Subcommittee on Investigations. “Even after videos surfaced showing employees of this company stoned and drunk on the job, and watchdogs identified possible fraud and a lack of financial controls at the company, procurement officers at these two agencies thought it was a great idea to re-hire the company for critical national security work—and then somehow failed to learn that the company was in such severe financial straits that they defaulted on the contract with no warning. Somebody should be held accountable for such willful ignorance, and I plan to figure out who.”
Allegations first surfaced against Jorge Scientific (now rebranded as Imperatis Corporation) when cell phone video appeared to show employees under the influence of drugs and alcohol (alcohol consumption by contractors in Afghanistan is not permitted). According to the complaint, the parties and other wrongdoing also included Army military and civilian personnel. Jorge Scientific at the time had been the recipient of nearly $1 billion in U.S. taxpayer-funded contracts. McCaskill wrote a letter to Army Secretary John McHugh urging action on the allegations.
Later, the top independent U.S. watchdog in Afghanistan completed an audit of the Legacy East Project, in which Imperatis was awarded a $50 million contract to provide counterinsurgency intelligence experts to mentor and train the Afghan National Security Forces. In the audit, the watchdog identified possibly fraudulent payments and a lack of internal controls that resulted in almost $135 million in unsupported costs billed by Jorge Scientific/Imperatis under its contract. McCaskill then teamed up with Republican Senator Rob Portman of Ohio—the Chairman of the U.S. Senate Permanent Subcommittee on Investigations—requesting additional answers about the potential loss of nearly $135 million in taxpayer dollars by the company.
Despite a change in leadership at Imperatis, McCaskill questioned the decision by the Department of Homeland Security and Office of Personnel Management to award a sole-source contract to the company. However in 2015, the contractor was re-hired to revamp the IT system used to support the nation’s security clearance background check process.
This week, the Office of Personnel Management informed McCaskill that “On Friday May 6, 2016, [the Department of Homeland Security and Office of Personnel Management] learned that the company would be ceasing operations immediately. In its communications with the government on May 7, 2016, Imperatis referenced financial distress at the company as the reason for the immediate closure. On Monday May 9, 2016, Imperatis employees did not report to OPM offices as usual, and contract performance stopped…”
McCaskill today wrote to the Acting Director of the Office of Personnel Management, demanding a full accounting of the work done so far by Imperatis, and the agency’s contingency plan. The text of McCaskill’s letter appears below:
The Honorable Beth Cobert
U.S. Office of Personnel Management
Dear Ms. Cobert:
On May 10, 2016, my staff was informed that Imperatis Corporation had abruptly ceased operations on its contract with the Office of Personnel Management (OPM) to overhaul OPM’s secure information technology environment. The reason reported for this disruption in service is Imperatis’ financial distress and potential bankruptcy. I am disturbed, but not entirely surprised, by this turn of events given Imperatis’ troubled history with government contracting. I write to request additional information about OPM’s management of the contract and contingency plan for its Information Technology (IT) overhaul now that Imperatis has defaulted on its obligations.
On July 10, 2015, I sent a letter to your predecessor, Katherine Archuleta, requesting information about a sole source contract award to Imperatis – formerly known as Jorge Scientific Corporation – to overhaul OPM’s IT infrastructure. I was concerned about OPM’s decision to rush to award, and its decision to not engage in a full and open competition. In addition, the history of misbehavior of employees of Jorge Scientific in Afghanistan, lack of oversight of those employees by the contractor, and the $134 million in costs claimed by Jorge that were questioned by the Special Inspector General for Afghanistan Reconstruction (SIGAR) raised serious concerns about the choice of contractor.
During a briefing with my staff, OPM indicated that it was unaware of SIGAR’s work related to Jorge Scientific because the audit was not released until after OPM completed its contract with Imperatis. However, a simple Internet search would have revealed news stories about employee misconduct as far back as 2012, including a lawsuit filed by former Jorge employees that was eventually settled in 2013. I also learned that additional information regarding the justification for the award of the contract to Jorge is classified, which has enabled OPM to avoid further public questions regarding the process used for this award.
Although OPM may not have been aware of Imperatis’ history before awarding the contract, the agency was on notice as of my July 10, 2015, letter that the company had a history of mismanagement and poor financial controls. Nevertheless, it appears that OPM failed to discover the company’s financial problems before the company informed the government on May 6, 2016, that it was immediately ceasing operations. I am also concerned that Imperatis’ default may now delay OPM’s much-needed IT infrastructure and security fixes. In order to better understand the full extent of the consequences of Imperatis’ default, I request that you provide a briefing for my staff as soon as possible, but in no event later than June 13, 2016. At the briefing, I request that you provide the following information and documents:
- The current status of OPM’s IT overhaul effort;
- The plan to replace Imperatis, including whether OPM will seek to issue another sole source contract;
- Whether any of the work Imperatis has already completed will be retained by OPM for use by a subsequent contractor;
- Whether Imperatis will retain any of the intellectual property that resulted from its work with OPM;
- Whether the delay required to find a new contractor will result in prolonging known vulnerabilities to the current IT infrastructure, and if so, the expected length and cost of that delay;
- Any documentation related to Imperatis’ performance on the contract;
- Any documentation or communications to or from the contracting officer or contracting officer’s representative regarding any concerns relating to performance and the financial status of Imperatis; and
- Any plans to suspend and/or debar Imperatis or any of its executives.