SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

September 9, 2005 

MEMORANDUM FOR COMMANDING GENERAL, JOINT CONTRACTING COMMAND 

– IRAQ/AFGHANISTAN 

COMMANDER, GULF REGION DIVISION, U.S. ARMY CORPS 

OF ENGINEERS 

DIRECTOR, IRAQ RECONSTRUCTION MANAGEMENT OFFICE 

DIRECTOR, PROJECT AND CONTRACTING OFFICE 

COMMANDER, DEFENSE CONTRACT MANAGEMENT 

AGENCY-IRAQ 

SUBJECT: Controls Over Equipment Acquired by Security Contractors 

(Report No. SIGIR 05-013) 

We are providing this audit memorandum for your information and use. We performed the audit 

in accordance with our statutory duties contained in Public Law 108-106, as amended, which 

mandates the independent and objective conduct of audits relating to the programs and 

operations funded with amounts appropriated or otherwise made available to the Iraq Relief and 

Reconstruction Fund (IRRF). Our statutory duties require that we provide for the leadership and 

coordination of, and recommendations on, policies designed to promote economy and 

effectiveness in the administration of IRRF programs and operations and to prevent and detect 

waste, fraud, and abuse. 

This memorandum discusses the management controls and accountability processes for 

government property purchased with IRRF monies, and it identifies our concerns about those 

controls and processes. 

Objectives, Scope, and Methodology. The objective of this audit was to determine whether 

controls over equipment acquired by security contractors were established, implemented, and are 

effective. Specifically, we proposed to examine selected contracts to determine whether 

requirements for the acquisition of equipment were valid, adequately supported, properly 

approved, and the equipment was accounted for and safeguarded. During the course of our audit, 

we narrowed the scope of the audit to focus on property accountability. In addition, we found 

that we could not fully address the property accountability objectives, because the organizations 

responsible for property administration could not provide adequate documented inventories of 

government equipment. We conducted this audit from April through September 2005, in 

accordance with generally accepted government auditing standards. 

We reviewed nine contracts obtained from the Joint Contracting Command-Iraq/Afghanistan 

(JCC-I/A), Baghdad, Iraq, to identify what controls, if any, those contracts provided for the 

equipment purchased under those contracts (see Attachment). The nine contracts we reviewed 

comprised construction and security service contracts valued at more than $661 million. 

We determined that the Project and Contracting Office (PCO) had established contract 

procedures regarding government property in July 2004. Additionally, we determined that the 
2

JCC-I/A government property administrator reinforced the need for the application of these 

procedures in letters to contracting chiefs in September 2004. 

Audit Concerns. Our concerns were: (1) that some of the contracts we reviewed failed to 

include required control provisions regarding government property; (2) that the PCO property 

administration standard operating procedures may not have been consistently followed; and (3) 

that government property administrators assigned to monitor contract compliance did not always 

adequately perform property administration procedures. 

Required Controls Over Government Property. Of the nine contracts we reviewed, seven did 

not include any or all of the required Federal Acquisition Regulation (FAR) and Defense Federal 

Acquisition Regulation Supplement (DFARS) clauses. 

Federal Acquisition Regulation Requirements. The FAR Part 45, entitled Government 

Property, prescribes policies and procedures for providing government property to contractors, 

for how contractors' should use and manage government property, and for the reporting, 

redistributing, and disposing of contractor inventory. The FAR 45.106, Government Property 

Clauses, states that a contracting officer shall insert FAR clause 52.245-2, Government Property 

(Fixed-Price Contracts), in solicitations and contracts involving a fixed-price contract and shall 

insert FAR clause 52.245-5, Government Property (Cost-Reimbursement, Time-and-Material, or 

Labor-Hour Contracts), in solicitations and contracts involving cost-reimbursement, time-andmaterial, or labor-hour contracts Of the nine contracts we reviewed, three failed to include either 

FAR clause 52.245-2 or FAR clause 52.245-5.1

Defense Federal Acquisition Regulation Supplement. The DFARS clause 245.252-

7001 states that a contractor shall provide an annual report accounting for all Department of 

Defense property for which the contractor is accountable under the contract, in duplicate, to the 

cognizant government property administrator, no later than October 31. The clause also provides 

that the contractor is responsible for reporting all government property acquired under the 

contract, including equipment at subcontractor and alternate locations. Of the nine contracts, 

seven should have included DFARS clause 245.252-7001.2

Project and Contracting Office Standard Operating Procedure. In July 2004, the PCO 

established a property administration standard operating procedure, entitled Management of 

Contractor-Acquired Government Property. This standard operating procedure provided 

guidance to the PCO (and its contractors and subcontractors) regarding the management of 

contractor-acquired government property. The procedure applied to all contractors that acquired 

and managed real and personal property on behalf of the PCO, and it provided guidance on their 

roles and responsibilities, as specified in FAR Subpart 45.5, Management of Government 

Property in the Possession of Contractors. Neither the contracting officers nor the Defense 

Contract Management Agency (DCMA) government property administrator we interviewed 

during the audit were aware of the existence of PCO’s property administration standard 

operating procedure. 

Government Property Administrators. We determined that the government property 

administrators assigned to the nine contracts we reviewed did not always adequately perform 

property administration procedures. The property administration responsibilities were shared by 

the JCC-I/A, the DCMA, and the Gulf Region Division (GRD), U.S. Army Corps of Engineers. 

 

1

 Contracts W911S0-04-A-0002, Task Order 1; W911S0-04-A-0003, Task Order 3; and W914NS-04-D-0022, 

Task Order 2. 

2

 Contracts DABV01-04-D-0014, Task Order 3; W911S0-04-A-0002, Task Order 1; W911S0-04-A-0003, 

Task Order 3; W911S0-04-C-0003; W914NS-04-D-0006, Task Order 12; W914NS-04-D-0008, Task Order 2; and 

W914NS-04-D-0022, Task Order 2. 
3

The property administration responsibility was not clearly delegated among the three 

organizations and, in some instances, the property administrators were not aware of the contracts 

for which they were responsible. 

Joint Contracting Command-Iraq/Afghanistan Government Property Administrator. The JCC-I/A government property administrator was responsible for all contractor-acquired 

property on government contracts entered into on behalf of the PCO. Of the nine contracts we 

reviewed, four were assigned to the JCC-I/A government property administrator, and he 

performed government property assistance visits on two of the four contracts (see Attachment). 

For the other two contracts, the contracting officers did not clearly communicate property 

administration requirements to the JCC-I/A government property administrator, and he thus did 

not perform property administration procedures on the contracts. 

 Government Property Assistance Team Visits. The JCC-I/A government property 

administrator performed government property assistance team visits on two contracts in April 

and July 2005. 3 The JCC-I/A government property administrator performed the visits with the 

JCC-I/A - Property Administration Technical Advisor. The JCC-I/A - Property Administration 

Technical Advisor was also a GRD Assistant Project Manager for Government Property and was 

detailed to the JCC–I/A to provide property administration technical advice to the JCC-I/A 

government property administrator. 

The purpose of the government property assistance team visits was to review implementation of 

contractor procedures governing the care, custody, and control of government property. During 

the visits, the JCC-I/A government property administrator and JCC-I/A - Property 

Administration Technical Advisor briefed the contractors on the 15 functional areas of 

government property management responsibility. Full property audits were supposed to be 

scheduled for the contractors within 90 to 120 days of the government property assistance team 

visit. 

 Property Administration. The JCC-I/A government property administrator did not 

perform property administration for two contracts.4

 One of the two contracts provided that 

purchased equipment would become the property of the Coalition Provisional Authority upon 

contract completion.5 The contract was completed in January 2004, but the government 

property, valued at $530,450, was not recovered. 

Defense Contract Management Agency Government Property Administrator. The 

DCMA government property administrator had the authority to approve a property management 

process, on behalf of the contracting officer, concerning the oversight of a contractor’s control of 

government property. Of the nine contracts we reviewed, two were assigned to the DCMA 

government property administrator (see Attachment). She performed a property system audit for 

one contract that included government property valued at about $24.5 million.6

 She rated the 

property system conditionally satisfactory. No property administration procedures were 

performed on the other contract, which included government property valued at about 

$9 million.7 The DCMA government property administrator was planning a property review of 

this contract in August 2005. 

 

3

 Contracts W9126G-04-D-0001, Task Order 16; and W9126G-04-D-0002, Task Order 10. 

4

 Contracts W911S0-04-A-0002, Task Order 1; and W911S0-04-A-0003, Task Order 9. 

5

 Contract W911S0-04-A-0002, Task Order 1. 

6

 Contract W911S0-04-C-0003. 

7

 Contract DABV01-04-D-0014, Task Order 3. 
4

Gulf Region Division Government Property Administrator. Of the nine contracts we 

reviewed, three were assigned to the GRD (see Attachment).8 The GRD, however, did not 

assign a government property administrator and did not perform any government property 

accountability procedures on the three contracts, which comprised government property valued 

at about $34.6 million. The former administrative contracting officers within the GRD we 

interviewed stated that they did not perform property administration procedures, because they 

had not been delegated the authority. The JCC-I/A contracting officers stated that they did not 

assign authority to the GRD administrative contracting officers, because there were no qualified 

personnel to whom they could have assigned the responsibility. The only evidence of property 

administration procedures was the government property assistance team visits performed by the 

JCC-I/A government property administrator and the JCC-I/A Property Administration Technical 

Advisor on two of the three contracts. 

Actions. We plan to address overall IRRF property accountability issues in a series of future 

audits. We briefed senior leadership at the addressee commands. No specific recommendations 

were made; therefore, no written response to this report is required. We are providing this 

information so that the affected agencies may take necessary actions to improve their 

accountability over government-owned property. 

We appreciate the courtesies extended to the staff. For additional information on this report, 

please contact Mr. James A. Carrera at (703) 343-8817, or at james.carrera@iraq.centcom.mil, or 

Ms. Emily G. Richards at (703) 343-4141, or at emily.richards@iraq.centcom.mil. 

Stuart W. Bowen, Jr. 

Inspector General 

Attachment: 

As Stated 

 

8

 Contracts W914NS-04-D-0006, Task Order 12; W914NS0-04-D-0008, Task Order 2; and W914NS-04-D-0022, 

Task Order 2. 
5

Attachment

Contracts Reviewed 

We reviewed nine contracts obtained from the JCC-I/A to identify the controls over the 

equipment purchased through those contracts. Those contracts are listed below in the order 

of the effective date of the contract. 

* Description of scope of work may not be all inclusive 

Contract Number & Task 

Order (TO) 

Contract 

Effective 

Date General Scope of Work* 

Organization 

Responsible for 

Property 

Administration 

Contract 

Value 

W911S0-04-A-0002, TO 1 12/30/2003 

Security for Governorate Teams 

and Regional Coordinators in 18 

Iraqi Provinces 

JCC-I/A $ 3,590,137 

W914NS0-04-D-0008, TO 2 4/21/2004 Erbil Water Treatment Plant GRD 125,367,680 

W914NS-04-D-0022, TO 2 4/21/2004 Nasiriyah Water Construction 

Project GRD 172,389,320 

W911S0-04-C-0003 5/25/2004 Reconstruction Security Support 

Services DCMA 168,099,027 

W9126G-04-D-0001, TO 16 6/7/2004 

Security Costs Associated with 

Iraqi Oil Infrastructure 

Restoration in Southern Iraq 

JCC-I/A 48,043,941 

W9126G-04-D-0002, TO 10 6/17/2004 

Security Costs Associated with 

Iraqi Oil Infrastructure 

Restoration in Northern Iraq 

JCC-I/A 24,968,887 

DABV01-04-D-0014, TO 3 6/17/2004 Transportation and Security 

Convoy DCMA 46,415,442 

W911S0-04-A-0003, TO 9 6/30/2004 

Personal Security Detail for the 

Senior Advisor to the Minister of 

Interior 

JCC-I/A 3,600,000 

W914NS-04-D-0006, TO 12 10/20/2004 Construct 60 Primary Health 

Centers in Southern Iraq GRD 69,021,269 

TOTAL $661,495,703