```
U.S. Army and Marine Corps: Allegations of Contracting Irregularities and
Conflicts of Interest (Letter Report, 11/23/93, GAO/OSI-94-3).

This report expands on a July 1993 testimony (GAO/T-OSI-93-2) that
concluded that the Army had abused the contract "offloading" process and
had circumvented the Competition in Contracting Act of 1984 when it
steered a three-year, $8-million contract to the Computer Services
Corporation.  Neither the Army nor the Marine Corps did an initial costs
analysis, and the government had no guarantee that the price for the
work was fair.  In addition, appropriated funds were spent for purposes
other than that for which they were intended, and both the Army and the
Marine Corps violated federal regulations governing contracting officers
and computer purchases--problems that GAO attributes to poor contract
oversight.  GAO also discovered conflicts of interest between U.S. Army
civilian employees and the contractor.  GAO discovered that on at least
one independent government cost estimate, costs had been "padded" at the
direction of an Army employee who was married to a Computer Services
Corporation employee.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OSI-94-3
     TITLE:  U.S. Army and Marine Corps: Allegations of Contracting 
             Irregularities and Conflicts of Interest
      DATE:  11/23/93
   SUBJECT:  Conflict of interest
             Army procurement
             Interagency relations
             Irregular procurement practices
             Internal controls
             Contract administration
             Investigations into federal agencies
             Contracting procedures
             Contract negotiations
             Service contracts
IDENTIFIER:  Army JRTC Interim Instrumentation System
             Army Training Development Workload Management System
             Army Battle Data Management and Display System
             
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Cover
================================================================ COVER

Report to the Chairman, Subcommittee on Oversight of Government
Management, Committee on Governmental Affairs, U.S.  Senate

November 1993

U.S.  ARMY AND MARINE CORPS -
ALLEGATIONS OF CONTRACTING
IRREGULARITIES AND CONFLICTS OF
INTEREST

GAO/OSI-94-3

Contracting Irregularities/Conflicts

Abbreviations
=============================================================== ABBREV

  CICA - Competition in Contracting Act of 1984
  CMTC - Combat Maneuver Training Center
  COTR - Contracting Officer's Technical Representative
  CSC - Computer Sciences Corporation
  CTIES - Collective Training, Instrumentation, and Engagement
     Systems
  DOD - Department of Defense
  FAR - federal acquisition regulation
  FORSCOM - U.S.  Army Forces Command
  GAO - General Accounting Office
  JRTC - Joint Readiness Training Center
  MCLB - Marine Corps Logistics Base
  OMA - Operation and Maintenance, Army (funds)
  OPA - Other Procurement, Army (funds)
  OSI - Office of Special Investigations
  RDT&E - Research, Development, Test, and Evaluation (funds)
  TRADOC - U.S.  Army Training and Doctrine Command

Letter
=============================================================== LETTER

B-254243

November 23, 1993

The Honorable Carl Levin,
Chairman, Subcommittee on Oversight of
 Government Management
Committee on Governmental Affairs
United States Senate

Dear Mr.  Chairman: 

On May 11, 1992, you requested that we investigate allegations of
contracting irregularities and conflicts of interest involving a U.S. 
Army directorate and a Marine Corps contracting office.  You further
requested that we provide both a brief discussion of the results of
our investigation for a hearing (GAO/T-OSI-93-2, July 30, 1993)
before your Subcommittee and a more complete discussion of our
findings in this report.  We have referred information regarding this
case to the Defense Criminal Investigative Service and the U.S. 
Army's Criminal Investigation Command for further investigation. 

Our investigation focused on an allegation that the Army had abused
the contract "offloading" process and, as a result, had circumvented
the Competition in Contracting Act (CICA) of 1984.  As used in this
report, contract "offloads"--or contracts executed under the Economy
Act--are task orders or contracts for the purchase of goods or
services for one organizational unit that are issued under a contract
held by another unit within the same agency or by another agency.  In
this case, a Directorate within the Army's Training and Doctrine
Command (TRADOC) added tasks to an ongoing contract that was being
administered by the Marine Corps Logistics Base for a unit within the
Army Materiel Command.  In addition, we investigated the lack of
program management controls and oversight by contracting and program
officials, including both Army and Marine Corps officials, and the
alleged conflicts of interests of several key Army officials. 

The allegations involved a Computer Sciences Corporation (CSC)
contract that was awarded in 1986.  The contract was a 3-year,
$8-million, indefinite delivery, indefinite quantity,
time-and-materials contract for work that was performed primarily for
the Army Communicative Technology Office at Fort Eustis, Virginia. 
The Marine Corps Logistics Base in Albany, Georgia, awarded and
administered the contract for the Army under an interservice support
agreement that provided contracting support services to the Army's
Project Manager for Training Devices. 

The contract expired in September 1989.  However, the period of
performance for orders placed under the contract was extended to
September 1992, in part to permit completion of task orders issued
under it from the Army's Collective Training, Instrumentation, and
Engagement Systems (CTIES) Directorate.  By March 1993, 38 task
orders and numerous subtasks had been issued under the contract,
raising its cost from $8 million to $32.9 million.  Our investigation
focused on Task Order 32 that had an initial ceiling price of
$134,000 but, after its 24 amendments, resulted in total costs of
over $16.5 million.  In particular, we investigated the effort
covered by Task Order 32/Subtask 16 that the CTIES Directorate
generated to perform work for the Army's Joint Readiness Training
Center (JRTC).  The cost of Task Order 32/Subtask 16 was over $11.5
million.  The total cost of the JRTC project, which included an
additional operations and maintenance contract for $5.5 million, was
over $17 million.  (See app.  I.)

In brief, the Army's CTIES Directorate used the expiring Marine Corps
Logistics Base contract to direct work (Task Order 32) to the
contractor, CSC.  The Marine Corps Logistics Base accepted the
tasking, which included work (Subtask 16) that was outside the scope
of the contract.  Neither the Army nor the Marine Corps performed an
initial cost analysis before Task Order 32 was added; thus, the
government had no assurance that it had obtained a fair price for the
work.  In addition, the CTIES Directorate used appropriated funds for
purposes other than that for which they were intended.  As a result,
the CTIES Directorate avoided competition and circumvented CICA,
thereby abusing the TRADOC contract offloading process.  The Army and
Marine Corps also violated federal acquisition regulations that state
requirements for contracting officers and their representatives,
funding, and the purchase of automated data-processing equipment. 
(See app.  III.)

This avoidance of competition and abuse of the TRADOC offload process
were possible because both Army and Marine Corps officials
demonstrated an overall lack of oversight for the contract taskings. 
In addition, two U.S.  Army civilian employees had conflicts of
interest involving the contract and CSC.  We also found evidence that
the costs on at least one independent government cost estimate had
been "padded"--which, in this case, more than doubled the actual
costs--at the direction of a CTIES employee who, at the time, was
married to a CSC employee.  (See app.  II.)

   AGENCY COMMENTS
------------------------------------------------------------ Letter :1

The Department of Defense (DOD) provided written comments on a draft
of this report and partially concurred with the report.  DOD
commented that the events in the report had resulted from errors in
judgement by both the Army and the Marine Corps and a breakdown in
the normal checks and balances between a requiring activity and a
supporting contracting activity, not from any systemic internal-
management-control weaknesses or abuse of the contract offloading
procedures.  DOD agrees that a lack of management control and
oversight took place in the generation of the requirement and
subsequent award and administration of the order.  As a result, both
the Army and the Marine Corps have taken action to address these
errors. 

Although our investigation focused on only one case involving
contract offloads within DOD, we found that the internal- control
weaknesses identified in this investigation were similar to
internal-control weaknesses identified by the DOD Office of the
Inspector General involving DOD contract offloads to non-DOD
agencies.  As a result of the lack of internal control in this case,
the CTIES Directorate was able to use TRADOC's contract-offloading
procedures to direct work to CSC, thus avoiding competition and
circumventing CICA.  We believe that this was an abuse of TRADOC's
contract- offloading procedures. 

DOD's written comments, with our evaluation, are presented in
appendix IV. 

   METHODOLOGY
------------------------------------------------------------ Letter :2

We conducted interviews and reviewed files on the JRTC Interim
Instrumentation System at the CTIES Directorate and its funding
office at the Army Training Support Center at Fort Eustis, Virginia. 
We also interviewed several former CTIES employees regarding this
contract.  We conducted interviews with current and former officers
at the JRTC, Fort Chaffee, Arkansas, and reviewed their files
regarding the Interim Instrumentation System.  We also visited the
JRTC and reviewed the system.  We interviewed CTIES' technical
advisors and reviewed their reports on the status of the system.  We
interviewed officials from the Army's TRADOC at Fort Monroe,
Virginia.  We also obtained information regarding the Army's
offloading policy from the U.S.  Army Materiel Command in Arlington,
Virginia. 

We interviewed current and former officers at the Combined Arms
Command at Fort Leavenworth, Kansas.  We also interviewed the
auditors who had conducted the internal review of the CTIES
Directorate in 1991 and reviewed their workpapers.  We reviewed the
CSC/Marine Corps Logistics Base (CSC/MCLB) contract file and
interviewed the Contracting Officers and Contracting Specialists
assigned to this contract and to the Director of Contracting at the
Marine Corps Logistics Base in Albany, Georgia.  We reviewed the
subvouchers that the Marine Corps Logistics Base submitted for CSC's
payment by the Defense Finance Center in Columbus, Ohio.  We
coordinated our efforts with the U.S.  Army Criminal Investigation
Command and the Defense Criminal Investigative Service. 

We briefed the Department of Defense Office of the Inspector General
plus program officials for both the Army and the Marine Corps and
provided them a copy of our draft report to enable them to comment on
our findings.  (See app.  IV.)

---------------------------------------------------------- Letter :2.1

We will send copies of this report to the appropriate congressional
committees; Secretary of Defense; Acting Secretary of the Army;
Commandant, Marine Corps; Commanders of TRADOC and the Marine Corps
Logistics Base; and other interested parties.  We will also make
copies available to others upon request. 

If we can be of further assistance to you, please contact me, or
Assistant Director Barbara Cart of my staff, at (202) 512-6722. 
Major contributors to this report are listed in appendix V. 

Sincerely yours,

Richard C.  Stiener
Director

BACKGROUND
=========================================================== Appendix I

   ARMY COMBAT TRAINING CENTERS
--------------------------------------------------------- Appendix I:1

The U.S.  Army has four Combat Training Centers.  The National
Training Center, for combat heavy forces, is located at Fort Irwin,
California, under the U.S.  Army Forces Command (FORSCOM).  The
Combat Maneuver Training Center, also for combat heavy forces, is
located at Hohenfelds, Germany, under the U.S.  Army-Europe Command. 
The Battle Command Training Program, for commanders at brigade level
and above, is located at Fort Leavenworth, Kansas, under the U.S. 
Army Training and Doctrine Command (TRADOC).  The Joint Readiness
Training Center (JRTC), a joint effort for Army combat light infantry
forces and Air Force tactical support forces, is located at Fort
Polk, Louisiana.\1 JRTC was under TRADOC at the time of the events
discussed in this report but is now under FORSCOM. 

--------------------
\1 At the time of our investigation, JRTC was located at Fort
Chaffee, Arkansas.  The JRTC was relocated to Fort Polk in June 1993. 

   INSTRUMENTATION SYSTEMS FOR
   ARMY COMBAT TRAINING CENTERS
--------------------------------------------------------- Appendix I:2

      INITIAL SYSTEMS
------------------------------------------------------- Appendix I:2.1

In the early 1980s, the Army began applying sophisticated
instrumentation to its Combat Training Centers to increase the
effectiveness of its training programs.  The resulting
instrumentation systems record battle events during training
exercises to provide feedback and after-action reports to the
training units. 

By the mid-1980s, an instrumentation system was in place at the
National Training Center in California; and plans to procure a
permanent system were ongoing for the Combat Maneuver Training Center
in Germany.  However, instrumentation support for the JRTC had not
yet been obtained.  A former senior Army officer with the Combined
Arms Command told us that when TRADOC approached the Army's primary
procuring activity--the Army Materiel Command--to procure an
instrumentation system for the JRTC, the Army Materiel Command
advised TRADOC that a 5-year lead time was needed for the
procurement. 

According to the former senior officer, TRADOC officials determined
that more immediate support to the JRTC was needed.  As a result,
TRADOC created what became known as the Collective Training,
Instrumentation, and Engagement Systems (CTIES) Directorate within
the Army Training Support Center at Fort Eustis, Virginia.\2 CTIES'
purpose was to coordinate and standardize the instrumentation systems
used at all of the Army's major training centers.  The advantage to
this arrangement, according to the former officer, was that it gave
TRADOC the ability to contract directly for training instrumentation
support, without going through the procurement channels of the Army
Materiel Command.  In particular, the CTIES Directorate was given
acquisition authority allowing it to use an analytical support
contract through its assigned contracting activity within TRADOC--the
TRADOC Contracting Activity--to make purchases for the training
centers. 

--------------------
\2 The Directorate was initially known as the Combat Training
Center-Instrumentation Support (CTC-IS) Directorate.  In a 1991
reorganization, the CTC-IS Directorate was placed under the direct
command of the Combined Arms Command at Fort Leavenworth, Kansas; and
the name was changed to the Collective Training, Instrumentation, and
Engagement Systems (CTIES) Directorate. 

      DECISION TO PURSUE AN
      INTERIM INSTRUMENTATION
      SYSTEM FOR JRTC
------------------------------------------------------- Appendix I:2.2

In January 1988, CTIES tasked an analytical support contractor of the
Army Training Support Center at Fort Eustis, Virginia, with
developing an operational and organizational concept and drafting a
requirements document for the permanent JRTC instrumentation system. 
(CTIES had planned to issue a request for proposals by June 10, 1991,
and to award the contract by January 24, 1992.) According to
documentation, in May 1989, before this task was completed, the Chief
of Staff of the Army was briefed on the overall Combat Training
Centers Training Strategy for the years 1990 through 2000.  The
purpose of the Master Plan Briefing, in part, was to establish
funding priorities for the Army's training needs. 

At the briefing, the Army Chief of Staff directed that plans for
JRTC's permanent system be delayed and that a "mission essential
instrumentation" system be developed for use until the permanent
system could be procured.  This decision was based upon the lack of
available funding and the possible relocation of the JRTC.  The two
primary criteria for the JRTC interim system were that it be (1) a
"poor man's instrumentation system," composed of in-house and
government-furnished equipment and consisting of only those essential
capabilities needed to gather information on weapons effects and to
provide feedback, and (2) movable in the event the JRTC was
relocated. 

CTIES subsequently modified its previous task to the analytical
support contractor of the Army Training Support Center.  The
modification required the contractor to address only the
mission-essential instrumentation needs in the requirements document. 
These needs generally consisted of developing a means for capturing
information during the training exercises that could be recorded in
after-action reports and provided to the units for further study. 
CTIES also attempted to have the TRADOC Contracting Activity extend
the Army Training Support Center's analytical support contract, which
expired in March 1990, to cover the additional work needed on the
JRTC Interim Instrumentation System project.  When this was not
possible, CTIES sought an alternative means of continuing work on the
JRTC project. 

      UNSUCCESSFUL EFFORT TO AWARD
      SOLE-SOURCE CONTRACT RESULTS
      IN OFFLOAD
------------------------------------------------------- Appendix I:2.3

We were told that CTIES attempted to obtain a sole-source contract
for the remaining work on the JRTC interim system with Computer
Sciences Corporation (CSC).  A TRADOC Contracting Activity attorney
denied CTIES' request for a sole-source contract because of
inadequate justification.  The former CTIES Director (now retired)
told us that a contracting official, with the Army Materiel Command's
Project Manager for Training Devices, then informed him of an omnibus
U.S.  Marine Corps contract with CSC.  The official suggested that
CTIES use the contract as a vehicle to procure the JRTC Interim
Instrumentation System by assigning the work as a task under the
contract.  As a result, the work was added as a task to the existing
CSC contract with the Marine Corps Logistics Base in Albany, Georgia. 

The former CTIES Director claimed to have "found" the CSC/Marine
Corps Logistics Base (CSC/MCLB) contract shortly before CTIES
requested that the JRTC interim-system subtask be added to the
contract.  We discovered that CTIES had previously obtained work
under this contract in March 1989, a year earlier.  According to the
TRADOC contracting official who determined that the offload request
was in the government's best interest, TRADOC was unaware that the
Marine Corps Logistics Base had previously added tasks to the
CSC/MCLB contract for CTIES when it reviewed CTIES' request to
offload the JRTC work.  He indicated that CTIES' request to offload
would have been given more scrutiny had TRADOC known this.  However,
the Army Training Support Center, which acted as a project manager
for TRADOC, was aware that CTIES had previously directed work to the
contract because its staff had prepared the Statement of Work for
Task Order 32 several months earlier. 

We were unable to establish why CTIES preferred CSC for the work on
the interim system, especially since other contractors were available
to assist in the effort.  For instance, the analytical support
contractor of the Army Training Support Center had previously
suggested developing an interim system by using existing,
government-furnished equipment.  The contractor estimated that the
system could be developed within 9-12 months at a cost of about $1
million.  Alternatively, the JRTC mission support contractor had
suggested using MacIntosh computers to assist in the preparation of
training reports until the permanent system could be developed. 

However, CTIES rejected these approaches in favor of the CSC
approach.  This decision resulted in the development of a more
sophisticated system costing over $17 million--$11.5 million in
charges against the CSC/MCLB contract, plus another $5.5 million in
maintenance costs.  This "throw-away" system will be replaced by the
more advanced technology required for the permanent system. 

Ironically, according to JRTC officials, the requirements document
that CSC ultimately presented appeared to "clone" an earlier
requirements document that the Army Training Support Center's support
contractor had prepared.  The support contractor had prepared the
document for the interim system at the Combat Maneuver Training
Center in Germany.  Also according to the officials, CSC's Data
Collection and Feedback Plan, which was meant to be a blueprint for
the interim system, was later rejected in favor of a plan developed
by the JRTC mission support contractor. 

   THE CSC/MCLB CONTRACT
--------------------------------------------------------- Appendix I:3

The 1986 CSC/MCLB contract was a competitively bid, 3-year (1 year
plus 2 option years), $8.6-million, indefinite delivery, indefinite
quantity, time-and-materials contract for the acquisition of
engineering support services.\3 The contract's expiration date was
September 30, 1989.  This contract specifically covered
systems-engineering support in the area of interactive video disc
technology, interactive training courseware design, and additional
communicative technology systems for the U.S.  Army Communicative
Technology Office at Fort Eustis, Virginia.  (This office was a
subordinate element of the Army's Project Manager for Training
Devices, an Army Materiel Command activity.) The Marine Corps
Logistics Base in Albany, Georgia, managed the contract pursuant to
an interservice support agreement signed May 15, 1985, with the
Army's Project Manager for Training Devices. 

According to the agreement, the Marine Corps received reimbursements
from the Army for accumulated labor and materials costs.  Marine
Corps contracting officials acknowledged that the majority of their
work in the Special Projects Support Contracting Branch at Albany was
from the Army's Project Manager for Training Devices and provided
documentary proof of the reimbursable costs they had charged to the
Army.  From 1987 to 1993, the Project Manager for Training Devices
paid over $800,000 in administrative fees, on this and other U.S. 
Army contracts, to the Marine Corps Logistics Base for contracting
support services. 

--------------------
\3 Although this contract was competitively bid, CSC was the only
contractor to submit a bid.  The 1986 contract was a follow-on to a
1983 cost-plus, fixed-fee contract that CSC also won. 

      TASK ORDER 32
------------------------------------------------------- Appendix I:3.1

The contract file revealed that CTIES requested the Marine Corps to
add Task Order 32 to the CSC/MCLB contract in March 1989.  The task
order initially tasked CSC to conduct a study for the Development of
a Combined Arms Training Strategy for Devices, Simulations, and
Simulators, at a cost of $134,000.  Five months later, in August
1989, after the Army Chief of Staff had directed CTIES to develop a
mission-essential instrumentation system for JRTC, the Statement of
Work was submitted for 11 subtasks under Task Order 32.\4 Task Order
32 was then amended to extend the performance date retroactively from
June 30, 1989, to August 30, 1989.  The Task Order was amended again
in September 1989 to further extend the performance date to September
30, 1991; increase the funding ceiling for Subtasks 1-11 by $763,214;
and change the objective to design, develop, and implement a Training
Development Workload Management System.  This September 1989
modification to Task Order 32--insofar as it allowed the contractor
to implement, or install, a system--was outside the scope of the
basic contract. 

In December 1989, 3 months after the contract had expired for
issuance of new task/delivery orders, the contract review committee
determined that, as of September 30, 1989, 17 of the contract's 38
task orders--including Task Order 32--were open with estimated
delivery dates ranging from September 30, 1990, through September 30,
1992.  The committee further determined that CSC needed additional
time to complete these task orders.  The contract was amended in
January 1990 to extend the period of performance from September 30,
1989, to September 30, 1992, and incorporate the negotiated labor
rates for that period.  The need to extend the contract performance
date by 3 years for almost half of the task orders on this contract,
at quadruple the original cost, indicates a lack of adequate
acquisition planning and poor contract administration. 

--------------------
\4 The Statement of Work directed the contractor to conduct an
Information Requirements Analysis leading to the design, development,
and implementation of a training-development, workload-management
information system for TRADOC and non-TRADOC proponent schools,
integrating centers, the Army Training Support Center, and
Headquarters TRADOC.  The subtasks required the contractor to (1)
identify and report on the information requirements, (2) provide a
briefing on the requirements, (3) finalize the report on the
requirements, (4) develop a functional description of the
requirements, (5) conduct systems design and development, (6) develop
a program specification, (7) develop a test plan for the system, (8)
write and test computer application programs for the system, (9) test
the system, (10) prepare manuals for use with the system, and (11)
install the system at each proponent site and conduct training.  This
project was separate from the JRTC Interim Instrumentation System. 

      SUBTASK 16:  THE JRTC
      INTERIM INSTRUMENTATION
      SYSTEM
------------------------------------------------------- Appendix I:3.2

The January 1990 amendment also noted that "no new task orders"
(delivery orders) were to be issued under the CSC/MCLB contract after
the effective date of the modification.  However, additional
subtasks, approved Engineering Change Proposals, and change orders
were incorporated in various task orders under the contract after
September 1989.  For example, on March 30, 1990, CTIES submitted a
request to modify the CSC/MCLB contract to add five subtasks
(Subtasks 12-16) to Task Order 32.  On May 3, 1990, the Marine Corps
Logistics Base added the subtasks to the CSC/MCLB contract.  Subtask
16 covered the continuation of the JRTC Interim Instrumentation
System work that had been performed by the Army Training Support
Center's support contractor.  The estimated cost of Subtask 16 was $1
million. 

Subtask 16 tasked CSC to provide analytical and technical support to
CTIES in the concept development, implementation, and evaluation of
an improved instrumentation system for JRTC in two phases.  Phase I
was to be an analysis of the current instrumentation capability of
JRTC and would use existing computer hardware and software from JRTC
and the Army Training Support Center in developing an improved system
for JRTC.  Phase II was to provide for the preparation of a concept
implementation plan, software modifications, implementation, and
evaluation of the approved JRTC Interim Instrumentation System, also
using existing computer hardware and software from JRTC and the Army
Training Support Center. 

By June 1990, two additional phases had been added to the JRTC
project.  Phase III referred to the implementation of a simultaneous
two-battalion rotation through the JRTC as required by the Chief of
Staff of the Army.  Phase IV referred to milestones that CTIES hoped
to meet regarding the permanent JRTC system. 

Although tasking CSC to "implement," or install, the system was
outside the scope of the original CSC/MCLB contract, we found no
evidence that the Army or Marine Corps contracting officials ever
questioned whether the subtask was within the contract's scope. 

THE JRTC INTERIM INSTRUMENTATION
SYSTEM
========================================================== Appendix II

   PHASE I AND THE DECISION TO
   PROCEED TO PHASE II
-------------------------------------------------------- Appendix II:1

Although Subtask 16 was not added to Task Order 32 until May 3, 1990,
the Marine Corps Contracting Officer approved the start of work a
month earlier, on April 4, 1990, after a Marine Corps legal review of
the subtask.  Several days later, on April 10, 1990, TRADOC notified
the CTIES Director that the TRADOC approval should have been obtained
before work on the subtask had begun; but work on the project was
allowed to continue. 

In August 1990, the CTIES Director was notified that "[e]ffective
immediately all `offloads' to include third party contracts require
TRADOC DCSK [Deputy Chief of Staff for Contracting] review and
approval before certification of funds." By this time, CSC had
completed the analysis phase, Phase I, of Subtask 16.  This included
development of the requirements into a final document, a data
collection and feedback plan, and a best technical approach and
"trade-off" analysis.  The Deputy Chief of Staff for Training,
TRADOC, and the Commander of the Combined Arms Training Activity,
then decided to proceed with Phase II of the project. 

      REQUEST TO TRADOC TO PROCEED
      WITH PHASE II
------------------------------------------------------ Appendix II:1.1

Because of the August 1990 policy announcement regarding contract
offloads, CTIES was required to submit a request to TRADOC to
continue the contractual support for Phase II.  Part of the
officials' rationale for continuing to use the CSC/MCLB contract was
based on Army demands that the JRTC increase its training
capabilities from one-battalion rotations to two-battalion rotations
by fiscal year 1992.  CTIES argued that the "strict timeline does not
permit another complete competitive effort to do this work." CTIES
estimated the cost of Phase II at $2.3 million in Operations and
Maintenance, Army (OMA) funds and $1.2 million in Other Procurement,
Army (OPA) funds.\5

TRADOC approved the offload request for Phase II of the JRTC Interim
Instrumentation System on September 12, 1990, subject to three
qualifications:  (1) "the requirement [for the Interim
Instrumentation System] meets the provisions of AR [Army Regulation]
25-1, paragraph 1-4a (i.e., information resources acquired are
embedded in an instrumentation system and do not interface or
communicate outside the host system),"\6 (2) "the OMA/OPA [Operations
and Maintenance, Army/Other Procurement, Army] mix is correct and
does not circumvent or violate current guidance," and (3) "the
performing agency (USMC) issues a task order that is effective.  The
acceptance of the MIPR [Military Interdepartmental Purchase Request]
alone by USMC is not sufficient to hold an obligation of funds past
30 Sep 90." The Marine Corps contracting office "must incur cost in
the form of a contractual obligation on CTIES's behalf."

--------------------
\5 Operation and Maintenance, Army (OMA) funds include (a) funding
for operation and maintenance of all Army organizational equipment
and facilities, (b) purchasing equipment and supplies, (c) production
of audiovisual instructional materials and training aids, and (d)
operation of training.  Other Procurement, Army (OPA) funds provide
for manufacturing, engineering, and acceptance testing during the
production period of other major end items of equipment, including
(a) communications and electronics equipment, (b) production
engineering of equipment, (c) construction, (d) automated
data-processing equipment costs, and (e) procurement of executive
software.  Research, Development, Test, and Evaluation (RDT&E) funds
provide for work performed by an agency, private individuals, or
private organizations under a contractual or grant agreement with the
federal government.  RDT&E funds also include research and
development in all fields. 

\6 In January 1988, the Director of Training Development and
Analysis, TRADOC, had authorized a limited waiver of AR 25-1 that
applied "only to instrumentation that consists of embedded hardware
and software primarily designed to operate ranges and Combat Training
Centers (CTC)." He had further directed that "[t]he requirements and
procurement documentation for these systems will be submitted to HQ
TRADOC .  .  .  for review and approval prior to contract award to
insure [sic] that this information accessibility requirement will be
met."

         "EMBEDDED" PROVISIONS OF
         AR 25-1
---------------------------------------------------- Appendix II:1.1.1

The CTIES requirement for the JRTC Interim Instrumentation System did
not meet the provisions of AR 25-1.  However, CTIES maintained that
the proposed system was "embedded" and, therefore, was exempt from AR
25-1.  The resulting JRTC Interim Instrumentation System does not
meet this criterion. 

JRTC's original May 1990 draft requirements document for the Interim
Instrumentation System provided for "TAF [Tactical Analysis and
Feedback] analysis workstations integrated [capable of interacting
with other systems and of being expanded] into a TAF/DTOC [Division
Tactical Operations Center] local area network." The August 1990
Requirements Document prepared by CSC restated this need as "[t]he
JRTC Interim Instrumentation System must support the evolution of the
current Exercise Maneuver Control Center (EMCC) at JRTC into a
CTC-style Training Analysis and Feedback" and Division Tactical
Operations Center operation.  It further noted, "[t]he JRTC Interim
Instrumentation System requires reconfiguration to a single,
integrated [emphasis added], relational database comparable to
existing CTC computer systems" used to integrate the Training
Analysis and Feedback/Division Tactical Operations Center operation. 
Clearly, what was envisioned was an integrated system, not an
embedded system. 

         GUIDANCE REGARDING
         OPERATIONS AND
         MAINTENANCE, ARMY/OTHER
         PROCUREMENT, ARMY FUNDS
---------------------------------------------------- Appendix II:1.1.2

Army policy, which became effective in May 1990, stated that

     "[using] a MIPR [Military Interdepartmental Purchase Request] or
     RO [Reimbursable Order] to acquire IMA [Information Mission
     Area] hardware and/or software from another Army activity or
     Federal agency is proper and legal, provided the appropriate
     color of money [type of funding, e.g., Other Procurement, Army
     funds] is cited.  Neither the MIPR nor the RO can be used to
     circumvent the expense/investment criteria or to change the
     color of money.  It is illegal for one activity to MIPR
     Operation and Maintenance funds to another Federal Agency to
     purchase IMA equipment and software which should be financed
     with procurement funds."\7

On September 28, 1990, the contracting office at the Marine Corps
Logistics Base raised the ceiling price of Task Order 32/Subtask 16
to $3.1 million by adding an additional $1,235,000 in Other
Procurement, Army funding for computer hardware/software.  This use
of Other Procurement, Army funding for hardware/software purchases
was consistent with Army policy.  However, the contract acquisition
plan called for using Operations and Maintenance, Army funding (30
percent) and Research, Development, Test, and Evaluation funding (70
percent).  As a result, this was not the appropriate contract for
such a purchase. 

--------------------
\7 A February 1992 legal opinion by an Army Attorney-Adviser to CTIES
determined that OMA funds were used inappropriately on the CSC/MCLB
contract. 

         TASK ORDER ISSUED BY
         MARINE CORPS LOGISTICS
         BASE
---------------------------------------------------- Appendix II:1.1.3

The third qualification of the September 12, 1990, TRADOC offload
approval stated that the Military Interdepartmental Purchase Request
to the Marine Corps Logistics Base was not sufficient to obligate
Army funds after the close of the fiscal year on September 30, 1990. 
The Marine Corps Logistics Base had to incur a contractual obligation
on CTIES' behalf before the end of the fiscal year. 

Thus, the September 28, 1990, amendment to Task Order 32, which
raised the ceiling price for Subtask 16 to $3.1 million, was issued 2
days before the end of the fiscal year.  Hardware and software costs
were expected to total $1.48 million.  The Statement of Work
regarding Phase II was also amended to add the requirement to support
a system composed of Commercial Off-the-Shelf and Government
Furnished Equipment hardware and software components. 

However, the amendment prohibited CSC from purchasing the equipment
until the Contracting Officer authorized the contractor to do so. 
The Army did not provide the Delegation of Procurement Authority to
the Marine Corps Logistics Base to purchase the hardware until
October 22, 1990; and CSC did not receive the Contracting Officer's
authorization to purchase the hardware until November 13, 1990--6
weeks after the fiscal year had ended. 

When asked why the Marine Corps accepted the transfer of expiring
1990 funds for work that was to be done in fiscal year 1991, a
Contract Specialist assigned to the CSC/MCLB contract told us that
the tasking provided work for her office. 

      REQUEST FOR WARNER AMENDMENT
      EXEMPTION
------------------------------------------------------ Appendix II:1.2

Despite the qualified approval of TRADOC, the Marine Corps Logistics
Base questioned the purchase of automated data-processing equipment
under the CSC/MCLB contract because it was nonmission-essential and,
therefore, unallowable.  As a result, the JRTC Commander requested
the assistance of the Combined Arms Command-Training Commander at
Fort Leavenworth, Kansas, in obtaining a "mission critical" Warner
Amendment Exemption from the U.S.  Army's Information Systems,
Selection, and Acquisition Agency, to allow the purchase. 

Under the Brooks Act, the General Services Administration has the
sole authority to procure automated data-processing resources for
federal agencies.  The Warner Amendment exempts certain Department of
Defense acquisitions from the Brooks Act if, for example, the
procurement is necessary to fulfill a mission-critical need. 
Computer resources are considered mission-critical when the
functions, operations, or use (1) involves intelligence activities,
(2) involves cryptoanalytic activities related to national security,
(3) involves the command and control of military forces, (4) involves
equipment that is an integral part of a weapon system, or (5) is
critical to the direct fulfillment of military or intelligence
missions. 

According to the "Mission Critical Computer Management Guide" from
the Defense Systems Management College, the test as to whether the
acquisition of computer resources is covered by the Warner Amendment
or the Brooks Act is the intended use of the equipment and services
and not their commercial marketplace availability. 

The Army's Information Systems, Selection, and Acquisition Agency
granted the needed exemption on October 22, 1990, on the basis that
the JRTC Interim Instrumentation System was "critical to the direct
fulfillment of a military mission (excluding routine administrative
and business applications)." The Delegation of Procurement Authority
emphasized the TRADOC Contracting Activity's responsibilities to
ensure that all contracting actions taken under this Delegation of
Procurement Authority "are in the best interests of the Army." The
Delegation of Procurement Authority then outlined these
responsibilities as follow: 

  ensure that appropriate contracting officials clearly understand
     the scope of this Delegation of Procurement Authority;

  advise and provide the contracting officer of the terms and
     conditions of the delegated authority and the attached Warner
     Amendment determination document;

  monitor the administration of the contract for adherence to the
     requirements of this Delegation of Procurement Authority, to
     include acquisition of only the automatic data-processing
     equipment listed at enclosure and the maximum total value of the
     automatic data-processing equipment of $1.48 million;

  ensure timely adherence to the reporting requirements of this
     Delegation of Procurement Authority; and

  ensure that all federal statutes, policies, and regulations
     governing the acquisition, management, and utilization of
     Federal Information Processing resources are adhered to. 

During our investigation, we approached both the TRADOC Contracting
Activity and the Army's Information Systems, Selection, and
Acquisition Agency and requested copies of their files on the
Delegation of Procurement Authority issued on the JRTC Interim
Instrumentation System.  We were told by officials of both agencies
that, at that time, they had no files.  The TRADOC Contracting
Activity official who determined that this offload was in the
government's best interest admitted that the Contracting Activity had
not obtained files on the project from the Marine Corps Logistics
Base.  An Information Systems, Selection, and Acquisition Agency
official admitted that his agency had never followed up the
provisions of the Army's Delegation of Procurement Authority. 

   IMPLEMENTATION OF JRTC INTERIM
   INSTRUMENTATION SYSTEM:  PHASE
   II
-------------------------------------------------------- Appendix II:2

Originally, the JRTC Interim Instrumentation System project was to
design and implement a system using government-furnished equipment
and software for an estimated cost of $1 million.  When the plan was
amended to add commercial off-the-shelf items--specifically, a
mapping and server workstation and mapping software--the estimated
cost of the system increased to over $3 million.  Ultimately, more
than $11 million was spent to purchase hardware and develop software
for the JRTC project. 

      GOVERNMENT-FURNISHED
      HARDWARE SURPLUSED AND NEW
      HARDWARE PURCHASED
------------------------------------------------------ Appendix II:2.1

Initially, the plan was to obtain about 20 Zenith Z-248 computers, in
addition to the 15 Zenith Z-248 computers already at the JRTC,
reconfigure them, and add them to the existing local area network. 
According to the Chief of the Instrumented Branch at JRTC, this
option was discounted because of high maintenance costs.  Instead,
according to the Chief, it was decided to obtain excess ARTECON
computers from the Army's National Training Center in California and
government-furnished software from the Combat Maneuver Training
Center in Germany, where an interim system was being developed, for
use in developing the JRTC Interim Instrumentation System.  According
to the September 1990 amendment to Task Order 32, a DEC 5000M
mapper/server workstation was also to be purchased. 

In about November 1990, the ARTECONs were shipped to CSC where they
were reviewed for serviceability.  CSC advised the Contracting
Officer's Technical Representative (COTR) for Subtask 16 that the
equipment was unsuitable because some pieces had been cannibalized,
while others had been broken in shipment.  The contract file
indicates that in January 1991, additional money was provided to CSC
to repair five ARTECON computers damaged during shipment from the
National Training Center to CSC and to ship the remaining 14 ARTECON
computers from the National Training Center to CSC. 

In February 1991, CSC reported that the DEC 5000M workstations were
not available and recommended SUN equipment as a substitute.  In
addition, the JRTC team proposed using new equipment "in lieu of
ARTECON and Zenith GFE [government-furnished equipment] .  .  . 
based on the repair and maintenance costs." As a result, the CTIES
Directorate then requested an amendment to the Army's Delegation of
Procurement Authority because of the "non-delivery by DEC, broken
GFE, and increase in workload[, and] thus requirements[,] from JRTC."
We question the validity of this request for the following reasons: 

  First, we found no evidence that the COTR or other responsible
     individual adequately assessed or monitored the purchase.  CSC's
     recommendations as to the need to purchase SUN equipment were
     approved without government scrutiny. 

  Second, the Chief of the Instrumentation Branch at JRTC was told by
     CSC that the ARTECONs were nice but that they were a "plain
     Jane" version and not what the National Training Center was
     using.  He told us that he examined the ARTECONs while they were
     still packaged and that some appeared to be new, while others
     appeared to be used.  Documents indicate that repairs were made
     to some of the ARTECON computers, and all were then sent to
     another military facility where they are still in use. 

The equipment may not have been capable of handling the software
needs even if it was in good repair.  We were told by the Independent
Verification and Validation contractor--hired to act as technical
advisor to CTIES on the JRTC Interim Instrumentation System
project--that computer technicians would or should have known from
the outset that these computers were incapable of handling the
software needs of the proposed interim system. 

  Finally, it is unclear what the "increase in workload" was, since
     it was known in May 1989 that the Army planned to increase the
     amount of training from one to two battalions at JRTC by the
     summer of 1992.  This increase was apparently considered when
     the interim system was initially planned. 

Regardless, the Army's Information Systems, Selection, and
Acquisition Agency approved the amendment to the Delegation of
Procurement Authority on April 3, 1991, authorizing total
expenditures of $6.9 million for the JRTC Interim Instrumentation
System.  The agency's Director again noted, in his memorandum to the
TRADOC Contracting Activity, that "[t]he extraordinary circumstances
of this procurement authority places emphasis on your contracting
responsibility to insure [sic] that all contracting actions taken
under this amended DPA [Delegation of Procurement Authority] are in
the best interest of the Army."

      MODIFICATIONS TO
      GOVERNMENT-FURNISHED
      SOFTWARE RESULT IN SOFTWARE
      LICENSE FOR CONTRACTOR
------------------------------------------------------ Appendix II:2.2

In addition to government-furnished hardware, CSC also received
government-furnished software to use in the development of the JRTC
interim system.  The software was an upgraded baseline software that
was being developed for the Combat Maneuver Training Center in
Germany by Engineering and Economics Research, Inc. 

CSC had modified the Center's software as part of the JRTC Tactical
Analysis and Feedback, Phase I.  By the summer of 1991, CSC had
identified and proposed several significant enhancements to the
system, which were needed to move the system into the next phase for
use during the upcoming two-battalion training rotations.  These
enhancements included the proposed purchase of a Battle Management
Software marketed by VITec.  However, Engineering and Economics
Research, Inc.  and VITec had already developed enhancements for
similar problems encountered in Germany; and CSC, according to the
following memorandum, had received a copy of the developed
enhancements. 

A June 21, 1991, memorandum to the CTIES Director from a CTIES
Training Systems Management Specialist noted serious questions about
this proposed purchase: 

     "Under the CMTC [Combat Maneuver Training Center] Initial
     Instrumentation System contract, EER [Engineering and Economics
     Research, Inc.] purchased Object Library Software/license,
     boards and Software Engineer Time from VITec to assist in the
     integration of the VITec hardware/firmware/software into the
     CMTC-IIC.  This effort involved one of the early CMTC software
     version[s--]1.0. 

     "VITec apparently walked away from their earlier effort with
     actual copies of EER/VITec developed CMTC-unique integrated
     source code, screen and map prints, and a working knowledge of
     how it was to be accomplished.  .  .  .  VITec is currently
     marketing a Battle Management Software that may have been
     developed, apparently utilizing the CMTC-IIC [software]. 

     "Early after the CMTC-IIC was accepted, a copy of their
     software/source code was given to CSC as GFI
     [government-furnished information] in their developmental
     effort.  My understanding is that it was Version 1.2.  In
     December 1990, CSC was given a copy of the updated CMTC Software
     Version 1.3, which includes significant modifications,
     enhancements and changes. 

     "Without further analysis of the proposed license agreement, the
     Government may be purchasing software that it has already
     purchased through EER's effort with VITec as a subcontractor. 
     If the current VITec software is based on CMTC-IIC Version 1.0,
     the Government may be repurchasing an old/earlier version which
     obviates the debugging and increased functionality of CMTC-IIC
     Versions 1.2 and 1.3.  The JRTC Interim Instrumentation System
     software may end up being a grab-bag of portions of CMTC-IIC
     Versions 1.0, 1.2, and 1.3 with MAPPER and VITec layered on top,
     and with proprietary restrictions which inhibit debugging and
     incorporating changes."

We found no evidence that the Army ever addressed these questions. 
Despite the questions raised by the Training Systems Management
Specialist, CTIES proceeded to request yet another amendment to the
Delegation of Procurement Authority from the Army's Information
Systems, Selection, and Acquisition Agency in September 1991. 
Claiming it had "inadvertently exceeded the DPA [Delegation of
Procurement Authority] ceiling with regard to hardware and support
services," CTIES requested an increase of $4.2 million for
"additional resources." The Agency granted the amended acquisition,
raising the total cost of the project to $11.4 million. 

   JRTC INCREASE TO TWO-BATTALION
   ROTATION:  PHASE III
-------------------------------------------------------- Appendix II:3

Phase III of JRTC's Interim Instrumentation System involved the
implementation of the simultaneous two-battalion rotations through
the training center.  The plan was to develop the interim system for
the regular one-battalion training program, then to expand the system
by cloning the existing equipment and software to meet the training
center's increased needs for the two-battalion rotation.  Instead,
through engineering change proposals to develop the identified
enhancements, the system for the two-battalion rotation was greatly
enhanced and the cost significantly increased.  Although some Army
officials objected to the costly enhanced system, it was installed. 
Furthermore, although the federal government paid for the system's
development, it apparently has granted ownership of the system to CSC
and must pay license fees to use it. 

      ARMY ADVISORS' OBJECTIONS TO
      PROPOSED SYSTEM ENHANCEMENTS
------------------------------------------------------ Appendix II:3.1

In November 1991, a CTIES technical advisor reviewed CSC's proposed
enhancements for the JRTC two-battalion rotation system.  In his
report to the CTIES Directorate, the technical advisor questioned the
"drastic" increase in labor and software costs and noted that "CTIES
stands to spend excessive money on enhancements to an `interim
system' against requirements that are invalidated by any procurement
CM process.  .  .  .  What started off as a replication .  .  .  has
blossomed into the inventing of a new wheel."

He also noted that "CSC has not yet presented a complete ECP
[engineering change proposal] with all the new proposed (and as yet
invalidated) changes nor any type draft design drawings to illustrate
the configuration of all this new, proposed equipment." Without this
information, "the Government has no basis on which to make an
informed and responsible decision for approval of the cost estimates
presented by CSC."

These concerns were echoed, in part, by the Chief of the
Instrumentation Branch at the JRTC.  The Chief noted in an internal
memorandum that the engineering change proposal for the two-battalion
system "is actually more than just the installation of a second TAF
[system], but also involves additional requirements .  .  .  [to
include] (f) Testing.  As envisioned, no one from outside CSC would
see the software until the end of June.  This is unacceptable." He
added a handwritten comment to his list of concerns that noted, "I
suspect some creative funding is taking place.  We need a detail[ed]
backbrief from COG [Commander, Operations Group] staff on 2 BN
[battalion] TAFF."

Finally, in March 1992, a quality assurance specialist reported to
the COTR for Subtask 16 that "[t]he equipment and labor detailed,
particularly in ECP [engineering change proposal] 003 appears to be
in excess of that required for second TAF [system] augmentation. 
This indicates a consolidation of several requirements into a single,
untraceable effort which makes verification nearly impossible."
Because CSC had not broken down the interim system's cost, the
specialist could not determine the amount of the various funding
types--e.g., Other Procurement, Army funds--that had been expended. 

Despite these concerns, in April 1992, the Army's Information
Systems, Selection, and Acquisition Agency authorized yet another
amendment to the Delegation of Procurement Authority, raising the
total value limit of the Interim Instrumentation System project to
$16.07 million.  We found no evidence that the Army addressed any of
the concerns before the value limit was raised. 

In the summer of 1992, the enhanced two-battalion system was
installed at the JRTC.  The two-battalion training rotations were
initiated soon thereafter. 

      WHAT DID THE GOVERNMENT BUY? 
------------------------------------------------------ Appendix II:3.2

During our investigation, we requested the Contracting Officer to
provide us access to the property books listing the hardware and
software items purchased by CSC with government funds for the JRTC
Interim Instrumentation System.  We were told that there were no
property books.  Furthermore, neither the Marine Corps Logistics Base
nor CTIES had maintained a record of--or knew--what funds were used
to make the purchases for the system. 

According to a February 21, 1992, memorandum from an Army
Attorney-Advisor to Critical Design Review, Combined Arms Command,
Ft.  Eustis, Operations and Maintenance, Army funds had been used
inappropriately on the CSC/MCLB contract.  The maintenance costs had
not been properly priced.  Although the Attorney-Advisor instructed
CTIES to determine what purchases had been made with the Army's
various funding types, CTIES made no attempt to determine the
information until December 1992. 

A January 8, 1993, memorandum to TRADOC from the Army's Director of
Resource Management, ATIC-RM, noted a similar difficulty in
determining whether appropriate funding types had been expended for
labor on the JRTC Interim Instrumentation System. 

     "In December 1992, CTIES asked the Computer Sciences Corporation
     (CSC) to review their accounting records to determine the
     installation costs for the hardware installed at the JRTC for
     the two task orders in question.  CSC advised CTIES that this
     information was not available because they were unable to
     distinguish between different categories of installation labor,
     eg, hardware (OPA) versus developed software (OMA cost). 
     Furthermore, at the time the original task orders were accepted,
     a detailed labor estimate by category was not available and
     would have to be estimated if required for funding purposes."

When we reviewed the contract file, we found a handwritten note
signed by JRTC's COTR for the Interim Instrumentation System,
recording that she had

     "spoken w/ .  .  .  , Contracting Specialist [assigned to the
     CSC/MCLB contract at the Marine Corps Logistics Base] re color
     of money.  She indicated that it did not matter as long as it is
     $.  If not directed to do otherwise, she applies all money
     toward direct labor."

When we interviewed the Marine Corps Contracting Specialist, she
stated that she had applied all of the Army funds toward direct labor
costs, even though contract records indicated that installation costs
had been incurred. 

      WHO OWNS SOFTWARE FOR JRTC
      INTERIM INSTRUMENTATION
      SYSTEM? 
------------------------------------------------------ Appendix II:3.3

In their November 1991 memorandum to the CTIES Directorate on the
two-battalion system enhancements, technical advisors also questioned
the unresolved status of the software development and integration. 
They asked, "[I]s the Government paying CSC and VITec for engineering
time for them to develop what will become a proprietary commercial
product that the Government has no data rights to?"

In December 1991, the CTIES Director requested a legal opinion from
the TRADOC Contracting Activity on the ownership of the software
being developed for the JRTC Interim Instrumentation System.  The
Director noted that CTIES had reviewed the license agreement and
"maintains the position that the software in question was developed
with money from the government in conjunction with the software
effort for the .  .  .  (JRTC Interim Instrumentation System)
program.  If this is indeed the way the software was `paid for,' the
ownership question is not an issue.  The product belongs to the
government."

Although Army officials repeatedly told us--even after August
1992--that the software should belong to the government, the Marine
Corps Contracting Officer signed a license agreement in August 1992,
giving CSC the proprietary interests in the Battle Data Management
and Display System software--the JRTC Interim Instrumentation System
software.  According to the licensing agreement, the
government-financed software is now owned by CSC.  The government
must now pay CSC a license fee so that the Army may use the software. 

   OPERATIONS AND MAINTENANCE OF
   THE JRTC INTERIM
   INSTRUMENTATION SYSTEM:  PHASE
   IV
-------------------------------------------------------- Appendix II:4

As early as April 1991, CTIES began preparing to move into phase
IV--the operations and maintenance phase of the contract with CSC. 
Initially, additional funds were required to extend the operations
and maintenance from May through September 1991.  Later, an
additional $2.1 million in Operations and Maintenance, Army funds
were requested "to continue the day to day O&M [operations and
maintenance] activities necessary to allow the .  .  .  [JRTC] to
fulfill its mission.  The O&M staff will also be responsible for
minor software efforts as required by the JRTC Operations Group.  . 
.  .  The current O&M effort will end 30 Sep 92," with the expiration
of the CSC/MCLB contract. 

CTIES also met with the TRADOC Contracting Activity Legal Advisor in
April 1991 "to determine a course of action to legally and
effectively execute the O&M of the IIS [Interim Instrumentation
System] at JRTC after 1 OCT 92." The contract was needed to continue
operations and maintenance support for the interim system until the
permanent system was built and in place.  One of the problems
affecting the decision was that "full documentation was not purchased
and is therefore not available to turn over to a third party." As a
result, competition for the operations and maintenance contract was
not feasible "because the lack of documentation available will hamper
a new contractor's ability to perform the O&M mission." However, the
TRADOC Contracting Activity Legal Advisor refused to award a
sole-source letter contract to CSC--but indicated that he would not
object if the Marine Corps did so.  Ultimately, this is what the
Marine Corps Logistics Base did. 

Documents indicate that, on September 17, 1992, the Army's
Information Systems Selection and Acquisition Agency approved a
Delegation of Procurement Authority with a cost limit of $5.5 million
for support services.  The procurement authority was specifically
redelegated to the Marine Corps.  However, the agency noted that this
approval was unique and directed that "[t]his DPA [Delegation of
Procurement Authority] is contingent upon receipt of a signed
Justification and Approval (J&A) document before contract award .  . 
.  or the DPA is void."

We were told that the Marine Corps was also concerned about the
sole-source letter contract with CSC and that Justification and
Approval documents were transferred simultaneously between the Marine
Corps Logistics Base and the Army's Information Systems Selection and
Acquisition Agency.  On September 30, 1992, the Marine Corps
Logistics Base issued a 1-year letter contract, not to exceed
$5,492,255, to CSC for operations and maintenance of the JRTC Interim
Instrumentation System. 

   INTERNAL REVIEW OF CTIES
-------------------------------------------------------- Appendix II:5

In early 1991, the CTIES Directorate was placed under the direct
command of the Combined Arms Command at Fort Leavenworth, Kansas. 
Shortly thereafter, the Deputy Commanding General for Training,
Combined Arms Command, expressed his concern about the "escalating
costs of contract support" at CTIES and its reliance on "exceptions
to normal contract award procedures." He also indicated his concern
about "less than desirable contractor performance," "consistent
milestone slippage," and CTIES' "reliance on temporary and overhire
personnel."

The Deputy Commander ordered an internal review of CTIES "to examine
the processes and procedures of CTC [Combat Training Center] related
contract and manpower actions generated by CTIES during FY 90 & 91."
The review was completed in late 1991, after the General had been
reassigned to the Department of the Army Headquarters as the Director
of the Army's Training Directorate and the CTIES Director had been
reassigned as the Assistant Deputy Chief of Staff for Training at
TRADOC.  The reviewers found numerous problems at the CTIES
Directorate, but these findings were summarily dismissed without
action by the new CTIES Director and by officials at the Combined
Arms Command who concluded that the review found nothing to indicate
culpability.  No further action was taken. 

   CONFLICTS OF INTEREST
-------------------------------------------------------- Appendix II:6

Procurements without competition and adequate oversight are
vulnerable to fraud and abuse, especially when conflicts of interest
are involved.  We identified two instances of conflict of interest
during our investigation.  Both individuals were personally and
substantially involved in either the JRTC Interim Instrumentation
System project or the CSC/MCLB contract.  In addition, the U.S.  Army
Criminal Investigation Command is currently investigating two retired
Army officers who were involved in either the JRTC Interim
Instrumentation System project or the CSC/MCLB contract and who were
subsequently hired by CSC. 

      THE JRTC TEAM LEADER/SUBTASK
      16 COTR
------------------------------------------------------ Appendix II:6.1

Ms.  B, the wife of a retired Army officer who works for CSC, is a
career federal employee who served as the Project Manager and JRTC
Team Leader for the JRTC Interim Instrumentation System between
December 1988 and September 1991.  She also served as the COTR for
Task Order 32/Subtask 16 (JRTC Interim Instrumentation System)
between September 1990 and September 1991.  Her duties as the COTR
included preparing contract statements of work and task orders,
certifying the Independent Government Cost Estimates, and reviewing
CSC's monthly labor-hour charges. 

During our investigation, a former U.S.  Army officer, who had been
assigned to work for the COTR--Ms.  B--admitted that he had "padded"
travel and other costs on what was supposed to be an Independent
Government Cost Estimate on work for CSC.  He told us that Ms.  B had
given him CSC's cost estimate and told him to "make the numbers come
out." He examined CSC's cost estimate and discovered that the costs
were approximately three times what they should have been.  When he
brought this to the COTR's attention, he was told to "quit making
waves" and maximize the contractor's costs by adding such items as
extra days and extra rental cars.  He recalled that the final
government cost estimate was approximately twice the actual cost of
the services. 

Ms.  B's husband retired from the Army as a Lieutenant Colonel in
July 1989.  CSC interviewed him for employment in October 1989 and
hired him in September 1990--during the same time that his wife was
the COTR for the JRTC Interim Instrumentation System--as an
Information Systems Designer.  His compensation package included a
salary and ownership in CSC stock. 

We were told by an officer at the Combined Arms Command at Fort
Leavenworth that he had heard a rumor that Mr.  B was working for CSC
while Ms.  B was the COTR on the JRTC Interim Instrumentation System. 
The officer stated that he then advised the Deputy Commanding General
for Training that Ms.  B had a potential conflict of interest.  The
officer told us that he was present when the General telephoned the
CTIES Director and discussed the matter with him.  According to the
Combined Arms Command officer, the CTIES Director subsequently
transferred Ms.  B. 

Neither the General nor the former CTIES Director recalled discussing
the matter.  The former CTIES Director, who supervised Ms.  B when
she worked at CTIES, told us that Ms.  B and her husband had advised
the former CTIES Director of her husband's negotiations with CSC for
employment.  The former CTIES Director acknowledged that there were
"appearance" problems but stated that he had no one else to assign as
the COTR.  He said that he had asked his legal staff if this would
present a conflict of interest and was advised that it was not a
problem.  However, he did not obtain a written opinion to this
effect, and he could not recall who had provided this verbal opinion. 

The General, who subsequently ordered the internal audit of the CTIES
Directorate contracts, told us that he was unaware of Ms.  B's
potential conflict of interest until our investigation. 

In September 1991, Ms.  B was promoted to GS-13 and transferred to
the TRADOC Office of the Deputy Chief of Staff for Base Operations
Support at Fort Monroe, Virginia, where she is currently a
Requirements Acquisition Management Officer.  This is the TRADOC
office that grants offload approvals.  After she was transferred to
Fort Monroe, CSC assigned her husband to the JRTC Interim
Instrumentation System project. 

During our investigation, we were told that at a late 1992 meeting
between TRADOC Contracting Activity officials, Ms.  B was introduced
as the point of contact for the Army's training needs.  A TRADOC
Contracting Activity Legal Advisor subsequently questioned whether
this presented a conflict of interest, since Ms.  B's husband was
working for CSC on the JRTC Interim Instrumentation System and was a
potential bidder on other Army work.  The attorney told us that she
was advised that Ms.  B had been given ethics counseling and told not
to discuss her work with her husband. 

      ARMY TRAINING SUPPORT CENTER
      PROGRAM AND BUDGET OFFICER
------------------------------------------------------ Appendix II:6.2

Ms.  W is the Army Training Support Center's Program Budget Officer
and Chief, Budget Branch.  She is also a career federal employee,
GM-13, whose husband is employed by CSC.  Her position description
states that she, among other duties, exercises responsibility for the
certification of funds and the issuing of direct and reimbursable
funds.  She was delegated the authority to certify funds availability
on May 5, 1988.  Ms.  W signed most of the Military Interdepartmental
Purchase Requests transferring Army funds to the Marine Corps
Logistics Base for use on the JRTC Interim Instrumentation
System--Task Order 32/Subtask 16 of the CSC/MCLB contract. 

Lieutenant Colonel W, her husband, retired as the Director, Army
Extension Training, Army Training Support Center on May 1, 1989.\8

He began negotiating for employment with CSC in February 1989 and was
employed by the company on September 25, 1989, as a Senior Member of
the Advisory Staff.  He has a salaried position with CSC and owns CSC
stock. 

In August 1992, almost 3 years after her husband was employed by CSC,
Ms.  W requested a legal opinion on her potential conflict of
interest.  The signed opinion issued by the Acting Staff Judge
Advocate, U.S.  Army Transportation Center, Fort Eustis, on October
15, 1992, stated that, by certifying the funds intended for use on
the CSC/MCLB contract, she had participated "personally and
substantially in contracting actions" and that this was a "conflict
of interest."

--------------------
\8 While reviewing the CSC/MCLB contract, we discovered that, as the
Army Extension Training Director, Lieutenant Colonel W had
participated in the contract.  In a November 1, 1988, memorandum to
the Contracts Division at the Marine Corps Logistics Base, Lieutenant
Colonel W and the Acting Product Manager for the Army Communicative
Systems recommended that a software license agreement covering
software enhancements (unrelated to JRTC) made by CSC, at government
expense, be signed and incorporated into the CSC/MCLB contract.  As
stated previously, Lieutenant Colonel W began negotiations for
employment with CSC in February 1989 and was hired by the contractor
in September 1989.  Lieutenant Colonel W is currently under
investigation by the Army's Criminal Investigation Command. 

      FORMER DIVISION CHIEF,
      COMBAT TRAINING CENTERS
      DIVISION, CTIES
------------------------------------------------------ Appendix II:6.3

Lieutenant Colonel M (Ret.), as the former Division Chief for the
Combat Training Centers Division of CTIES, was responsible for
supervising the contract instrumentation work at the Army training
centers, including the JRTC.  He retired from the Army on June 1,
1991, and was employed by CSC 3 days later.  CSC assigned Mr.  M to
the JRTC Interim Instrumentation System as a Training Analyst II on
August 20, 1991. 

On March 25, 1991, several months before he retired, Lieutenant
Colonel M sought a legal opinion regarding his negotiations for
employment with CSC.  He specifically noted that his involvement with
the CSC/MCLB contract "has been that of conducting high level
supervisory reviews," that he had "no official dealings with CSC,"
and that he had "issued a disqualification statement which includes
CSC." The Assistant Staff Judge Advocate/Ethics Counselor responded
to Lieutenant Colonel M in an April 12, 1991, legal opinion.  That
opinion noted that "there is no general prohibition on accepting any
employment with CSC" but noted that "[t]here are certain restrictions
on representing CSC on matters that you have had responsibility for
during government service and on selling to certain government
agencies." The opinion also notes that "it appears that you were not
personally and substantially involved in the tasks that CSC performed
for your division.  .  .  .  Members of your staff had primary
responsibility," and "[y]ou have disqualified yourself from further
participation in any matter concerning CSC."

However, Lieutenant Colonel M misrepresented his role in the JRTC
Interim Instrumentation System, i.e., the CSC/MCLB contract, to the
Ethics Counselor.  As the CTIES Division Chief, Lieutenant Colonel M
was responsible for the JRTC instrumentation project and directly
supervised the COTR--he prepared her performance appraisals in 1990
and 1991.  He also participated in discussions and planning for the
JRTC Interim Instrumentation System.  Specifically, a month after he
had advised the Ethics Counselor that he had disqualified himself
from participation in matters concerning CSC, Lieutenant Colonel M
participated in an April 24, 1991, meeting between CTIES officials
and their legal advisor "to determine a course of action to legally
and effectively execute the O&M [operations and maintenance] of the
IIS [Interim Instrumentation System] at JRTC after 1 OCT 92." As a
result of that meeting, it was decided that the operations and
maintenance contract would not be competed but would be awarded as a
sole-source contract to CSC.  Ultimately, that contract was worth
$5.5 million to CSC. 

Lieutenant Colonel M's role in the JRTC Interim Instrumentation
System was also discussed in a May 22, 1991, memorandum to TRADOC
Headquarters, which requested an increase to the Task Order 32
offload to cover operations and maintenance costs prior to October 1,
1992.  That memorandum noted, "[b]ased on a conversation on or about
mid Feb 91, several plans of attack were deliberated.  The basic
concept was to draft up an amendment to the off-load contract per
Lieutenant Colonel M .  .  .  's guidance."

We were also told by the former COTR for Task Order 32/Subtask 16 and
the former CTIES Director that Lieutenant Colonel M had initially
recommended using the CSC/MCLB contract as a means of offloading the
JRTC Interim Instrumentation System. 

In addition, we were told that Lieutenant Colonel M had been advised
that an Independent Government Cost Estimate for Work to be performed
by CSC had been inflated at the COTR's direction and that he took no
action.  A short time later, Lieutenant Colonel M retired and began
working for CSC. 

Lieutenant Colonel M is currently under investigation by the Army's
Criminal Investigation Command. 

INVESTIGATIVE ANALYSIS AND
FINDINGS
========================================================= Appendix III

   CONTRACT OFFLOADING USED TO
   CIRCUMVENT COMPETITION
------------------------------------------------------- Appendix III:1

CICA requires federal agencies to use competitive procedures when
procuring goods and services (10 U.S.C.  section 2304 (1988)).  While
CICA allows certain exceptions to this rule, agencies are prohibited
from contracting for supplies or services from another agency to
avoid full and open competition (10 U.S.C.  section 2304 (f)(5)(B)). 
However, the head of an agency, or a designee, may place orders with
another agency for supplies or services on the other agency's
contract, when, among other factors, it is in the best interest of
the government (Economy Act of 1932, 31 U.S.C.  section 1535). 

The Army's CTIES Directorate used the CSC/MCLB contract to direct
work to Computer Sciences Corporation and procure the Interim
Instrumentation System for the JRTC, thereby avoiding competition,
circumventing CICA and federal acquisition regulations, and abusing
TRADOC's contract offloading process.  We were told that from the
time the CTIES Directorate was first created, one of its goals was to
avoid the Army's complicated, lengthy acquisition process in an
attempt to meet Army training needs.  The Directorate aggressively
pursued this goal, first by trying to extend the Army Training
Support Center's analytical support contract; next by seeking to
award a sole-source contract to CSC; and finally, by requesting the
Marine Corps Logistics Base to issue a task order under the CSC/MCLB
contract for the JRTC Interim Instrumentation System. 

Regardless of whether the intent was to provide immediate assistance
to the JRTC or to direct work to CSC, the result was the same--by
offloading the requirement to the existing CSC/MCLB contract, CTIES
avoided having to compete the procurement of the JRTC Interim
Instrumentation System.  In addition, the Marine Corps Logistics Base
should not have used an expiring contract for work that was not
within the scope of the contract.  Furthermore, no cost analysis was
performed prior to the decision to offload Task Order 32, which grew
from $134,000 to over $16.5 million.  As a result, the government had
no assurance that this was the best price for the work performed. 

By offloading the JRTC project, CTIES effectively shielded CSC from
competition by allowing CSC to conduct the initial analysis, develop,
and implement (or install) the system in a competition-free
environment.  If the installation of the JRTC Interim Instrumentation
System had been competed after CSC had designed and developed the
requirements for the system, CSC would have been prohibited from
competing on that contract because of an organizational conflict of
interest. 

Finally, appropriated funds were used for purposes other than that
for which they were intended. 

   LACK OF MANAGEMENT
   CONTROLS/OVERSIGHT RESULTED IN
   ABUSE OF CONTRACT OFFLOADING
------------------------------------------------------- Appendix III:2

Adequate oversight of the management of the tasks assigned to the
CSC/MCLB contract might have prevented this abuse of contract
offloading. 

In discussing interagency acquisition under the Economy Act, the
Federal Acquisition Regulation (FAR section 17.502) and the
Department of Defense FAR Supplement (DFARS subsection 217.5) require
the contracting officer of the agency placing the interagency
order--in this case, the TRADOC Contracting Activity--to determine
whether the task is in the best interests of the government.  This
determination also states that legal authority for the acquisition
exists and that the action does not conflict with any other agency's
authority or responsibility.  The requesting agency is responsible
for furnishing other assistance that may be necessary, such as
providing contract terms or conditions or limitations applicable to
the funds of the requesting agency.  The servicing agency is
responsible for compliance with all legal or regulatory requirements,
including the competition requirements under CICA and federal
acquisition regulations. 

We found no evidence that either the TRADOC Contracting Activity or
the Marine Corps Logistics Base complied with these regulations. 

      THE TRADOC CONTRACTING
      ACTIVITY
----------------------------------------------------- Appendix III:2.1

As discussed in appendix II, the CTIES Directorate did not initially
seek approval from the TRADOC Contracting Activity for the JRTC
Interim Instrumentation System offload to the CSC/MCLB contract. 
When TRADOC discovered the offload request, it informed the CTIES
Director that TRADOC approval was needed.  The CTIES Directorate then
sought a determination from TRADOC that the offload was in the
government's best interest.  The TRADOC Contracting Activity approved
the offload request using the rationale that (1) Phase I of the JRTC
project had been completed; (2) the analytical support contract
supporting that office had expired and the CSC/MCLB contract was
recommended as an alternative; and (3) the strict timeline imposed by
the implementation of a two-battalion rotation by the first quarter
of fiscal year 1992 did not permit a complete competitive effort. 
However, as stated above--because the contract was expiring, the work
was not within the contract's scope, no cost analysis had been
performed, and funds had been inappropriately applied to the
contract--TRADOC's determination that this offload was in the
government's best interest is questionable. 

According to the Federal Acquisition Regulation, the Army was also
responsible for providing information to the Marine Corps Logistics
Base regarding contract terms and limitations or conditions on the
funding.  TRADOC Headquarters notified the CTIES Directorate that
there were three conditions or qualifications that were required to
be met prior to the offload:  (1) the requirement for the Interim
Instrumentation System meets the provisions of Army Regulation 25-1
"that information resources acquired are imbedded in an
instrumentation system and do not interface or communicate outside
the host system," (2) "the OMA/OPA mix is correct and does not
circumvent or violate current guidance," and (3) the Marine Corps
"issues a task order that is effective." For a task order to be
"effective," the Marine Corps' contracting office "must incur cost in
the form of a contractual obligation on CTIES's behalf" before the
close of the fiscal year, September 30, 1990.  We found no evidence
that these conditions were conveyed to the Marine Corps Logistics
Base, although the CTIES COTR should have provided this information
to the Marine Corps Contracting Officer.  TRADOC did not confirm that
the qualifications had been met, yet TRADOC allowed the offload.  We
believe the abuse of the offload process could have been prevented
with oversight by TRADOC. 

      THE MARINE CORPS LOGISTICS
      BASE
----------------------------------------------------- Appendix III:2.2

Under the Federal Acquisition Regulation, FAR section 1.602-1,
contracting officers are responsible for ensuring that all
requirements of law, executive orders, regulations, and other
applicable procedures have been met before the government enters into
a contract.  The federal acquisition regulation also requires
contracting officers to ensure that the terms of the contract are met
and that the government's interests are safeguarded. 

In this case, the CSC/MCLB contract had expired and the period of
performance had been extended to allow only completion of existing
tasks.  No new orders--or subtasks--were to be added.  Yet, the
Marine Corps Logistics Base subsequently allowed the CTIES
Directorate to add several new subtasks, including Task Order
32/Subtask 16, for the JRTC Interim Instrumentation System.  These
subtasks should not have been allowed. 

In addition, the CSC/MCLB contract was a contract for professional
and technical services, not for equipment purchases.  Task Order
32/Subtask 16, insofar as it involved the installation of the JRTC
Interim Instrumentation System, was outside the scope of the
contract; and the Marine Corps Logistics Base should never have
allowed the request to offload the task.  A modification does not
exceed the contract's scope as long as the modified contract is
substantially the same as the work for which the parties originally
contracted.  Indian and Native American Employment and Training
Coalition, 64 Comp.  Gen.  460 (1985).  A modification that is
outside the scope of the contract can be viewed as an attempt to
circumvent the competitive procurement statutes.  Cray Research,
Inc., 62 Comp.  Gen.  22 (1982). 

Finally, both agencies failed to keep accurate records indicating the
cost of operations and maintenance services versus hardware and
installation costs, making it extremely difficult to determine
whether appropriated funds were properly expended. 

   CONFLICTS OF INTEREST
------------------------------------------------------- Appendix III:3

Conflict-of-interest rules prohibit government employees from
engaging in certain activities that create a conflict between the
employees' personal interest and their duty to serve the government. 
Title 18 U.S.C.  section 208 prohibits certain acts by government
employees affecting their personal financial interests. 

Specifically, Title 18 U.S.C.  section 208 prohibits government
employees from participating personally and substantially in a
particular matter in which they, their spouse, child, partner, or
organization in which they are serving as officer, director, trustee,
general partner, or employee, knowingly has a financial interest. 
"Participating personally and substantially" includes such things as
deciding, approving, recommending, advising, and investigating.  A
"particular matter" includes judicial or other proceedings,
contracts, claims, and controversies. 

The statute provides an exception from the prohibition if the
employee informs the agency of the potential conflict and the agency
recuses the employee on the basis of a determination that the
conflict is not substantial enough to affect the integrity of the
services to the government. 

In our opinion, both the COTR for Task Order 32/Subtask 16, Ms.  B,
and the Army Training Support Center Budget Officer, Ms.  W, violated
the provisions of 18 U.S.C.  section 208. 

(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================= Appendix III

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

The following are GAO's comments on the Department of Defense's
letter dated September 16, 1993. 

GAO COMMENTS

1.  The Department of Defense's (DOD) Office of the Inspector General
previously identified material internal-control weaknesses involving
interagency agreements between DOD agencies and non-DOD agencies,
including "Contracting Through Interagency Agreements With the
Library of Congress," No.  90-034, Feb.  9, 1990; "DOD Hotline
Allegation of Irregularities in DOD Contractual Arrangements With the
Department of Energy," No.  90-085, June 19, 1990; and
"Quick-Reaction Report on DOD Procurements Through the Tennessee
Valley Authority," No.  92-069, Apr.  3, 1992.  Although our
investigation focused on the use of interagency agreements within
DOD, in this case example, we found similar internal-control
weaknesses.  As a result of this lack of internal control, the CTIES
Directorate was able to use TRADOC's contract offloading procedures
to direct work to CSC, thus avoiding competition and circumventing
CICA.  We believe that this was an abuse of TRADOC's contract
offloading procedures. 

2.  This case has been referred to the Defense Criminal Investigative
Service and the U.S.  Army Criminal Investigation Command and is
currently under investigation. 

3.  Our investigation focused on Task Order 32/Subtask 16 and did not
address the overall issue of whether it is appropriate for the Marine
Corps to provide contracting support to the Army.  However, in this
case, we believe that it was inappropriate for the Marine Corps
contracting office to allow the CTIES Directorate to offload work,
which was outside the scope of the contract, to the Marine Corps/CSC
contract. 

4.  The TRADOC Contracting Activity had denied the CTIES
Directorate's request to award a sole-source contract to CSC. 
Without the ability to offload this work to an existing contract,
CTIES would have had to compete the work.  As a result, TRADOC's
contract offloading process allowed CTIES to direct the work to CSC
through the Marine Corps Logistics Base. 

5.  On the basis of our review of the contract file, no cost analysis
was performed before the decision was made to offload Task Order 32,
which grew from $134,000 to over $16.5 million.  Although costs
analyses were performed at various stages of the work, the Combined
Arms Command's internal review noted that "CTIES had no plan or
baseline to measure or evaluate program execution." The review
further noted that "[p]roper development and accuracy of Independent
Government Cost Estimates (IGCE) and mathematical analysis is poor,"
and that "[i]nternal controls would .  .  .  save dollars, and avoid
appearance of questionable transactions."

6.  Our finding was based in part upon a February 1992 legal opinion
by a TRADOC Contract Activity Legal Advisor to the CTIES Directorate. 
That opinion determined that the OMA funds had been used
inappropriately on the CSC/MCLB contract.  (See pp.  15-16.)

LIST OF MAJOR CONTRIBUTORS TO THIS
REPORT
=========================================================== Appendix V

OFFICE OF SPECIAL INVESTIGATIONS,
WASHINGTON, D.C. 

Barbara J.  Cart, Assistant Director for Defense and National
 Security Crimes
Leigh A.  Jackson, Senior Special Agent
Douglas D.  Nosik, Detailee, Assistant Director, Information
Management and Technology Division
M.  Jane Hunt, Special Assistant for Investigative Plans and Reports

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Leslie J.  Krasner, Attorney-Advisor

NORFOLK REGIONAL OFFICE

Lindsay B.  Harwood, Regional Investigative Liaison
Robert C.  Mandigo, Jr., Senior Evaluator
Lester L.  Ward, Senior Evaluator

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