The State Department entered new ground in Iraq on Jan. 1, taking on a diplomatic mission following the military’s departure. And with its expanded role, State faced the challenge of managing thousands of contractors.

By the end of the first-quarter of 2012, 11,386 contractors supported the diplomatic mission in Iraq, according to the most recent report from the Special Inspector General for Iraq Reconstruction (SIGIR). That’s significantly less than the 61,000 contractors that worked for DoD as of May 2011.

But the contractors now supporting State play a central role — they make up 89 percent of State’s workforce there.

“The Defense Department has a huge internal infrastructure of logistics personnel, of equipment, of civil engineers and that kind of personnel,” said Brian Friel, a federal business analyst with Bloomberg Government. “Whereas the State Department is a department made up of diplomats who don’t have the skill sets associated with that kind of work.”

The dynamic Friel described is a major reason why State’s success hinged on DoD.

In the planning stages of the transition, the Pentagon and State agreed to keep a multi-billion dollar DoD contract in place after the military left Iraq.

That contract was LOGCAP, which DoD traditionally used to buy logistical services for bases.

For many contractors, that also meant business as usual when the transition occurred, said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, an industry association.

“From the contractor’s standpoint, from the logistics support, very little changed,” Chvotkin told Federal News Radio in an interview for the special report, Trial by Fire: Overseas Contracting in Transition, part of the series, Inside the World’s Biggest Buyer.

DoD created the Logistics Civil Augmentation Program (LOGCAP) in the mid-1980s to fill gaps in its traditional logistics forces — responsible for cooking, cleaning and maintaining base camps. Those forces bore the brunt of post-Cold War troop reductions.

The modern LOGCAP era began in 2001 with the creation of LOGCAP III shortly after 9/11 and the U.S. invasion of Afghanistan. DoD awarded global-services firm KBR the sole spot on the contract, which by the time it was phased out in 2009, had attained a value of more than $35 billion.

The mentality was a winner-take-all acquisition strategy, said LOGCAP Executive Director Tommy Marks.

“When that took place, we weren’t even in what just became 10 years of conflict,” he said. “And so the acquisition strategy drove us to one winner when the government needed it.”

In hindsight, the lack of competition and a single contractor increased the risk for government, Marks said.

DoD developed LOGCAP IV in 2009 and awarded two other firms, in addition to KBR, a spot on the contract to compete for task orders: DynCorp International and Fluor. The value of the LOGCAP IV contract over 10 years is $2.4 billion.

DoD supports State

State and DoD worked out an arrangement that let State retain LOGCAP IV in Iraq and issue task orders against it. State continues to have support from the Defense Contract Management and Audit agencies as well as Army Materiel Command.

Catherine Ebert-Gray, State’s Deputy Assistant Secretary for Logistics Management, said the decision to stick with LOGCAP was a practical one. Amid all the other planning, attempting to transition LOGCAP as well would have simply been too taxing, she said.

From an industry perspective, that decision made sense, Chvotkin said.

“There is a lot of history and a lot of talented folks both supervising and managing the LOGCAP IV work,” he said. “And it didn’t matter if they wore a Defense Department badge or a State Department badge. The fact is, they wore a U.S. government badge.”

The hard deadline facing DoD and State at the start of the year also constrained State’s desire for its own logistics contract.

“This is a transition — this is a wind-down of responsibility,” Chvotkin said. “It would have been, I think, very difficult to engender a good competition for a declining mission.”

Richard Ginman, the head of Defense Acquisition and Procurement Policy, told the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight of a combatant commander who came to him during the run-up to the transition with the same concerns: “‘I can focus us on getting out of Iraq or I can focus on transitioning contractors,'” Ginman described the exchange. “‘I would much prefer to focus on getting us out of Iraq. Could you please just leave the contractors in place?'”

State has a two-year plan to begin taking on some of the contracted services that DoD now provides, and eventually State would like to contract a version of LOGCAP itself.

Meanwhile, in 2011, the Army Contracting Command, on behalf of State, awarded KBR the first $500 million task order under LOGCAP IV for base life support in Iraq. KBR essentially carries on with what it was doing under the previous DoD version of the contract.

No struggle to award contracts

State’s reliance on LOGCAP is not to say the department hasn’t embarked on its own set of contracts.

“We are not struggling to award contracts,” Undersecretary of State for Management Patrick Kennedy said at a House Oversight and Government Reform subcommittee hearing in October.

With the military-to-civilian transition, State struggled to fill gaps in its workforce and capabilities, including security. Private security contractors represent about 25 percent of State’s contracted workforce.

Under State’s large security-services contract, Worldwide Protective Security, it awarded $622 million to eight companies in fiscal-year 2011, according to data compiled by Bloomberg Government.

Construction also drives new contracts as State develops its presence in Iraq. State set up a contracting program with 11 companies to build consulate-type facilities around the country.

The department has also launched large contracts for aviation and medical care.

Much of the new contracting is taking place through multiple-award contracts. At the House hearing last fall, Kennedy said the use of these five-year “master contracts” is essential to acquisition in Iraq.

“We want competition, we want to do the best, but we want to make sure that our planning that has led to a contract in place would be available to us, given a fluid situation,” Kennedy testified.

Agencies across the government are increasingly using MACs, and State sees them as particularly well-suited to its needs, said Friel.

Uncertainty often drives the use of multiple-award contracts, because they don’t necessarily guarantee business. In other words, just because an agency has granted a company a spot on a contract doesn’t mean they’ll end up doing the work.

“If things changed and requirements disappeared, then the contracts would disappear too,” Friel said.

Increases despite uncertainty

Federal procurement data indicates growing opportunities in overseas contracting, according to a January 2012 analysis by Bloomberg Government. That’s even with uncertainty over 2013 funding levels and the security situations in Iraq and Afghanistan.

Friel pointed to the special overseas contingency budget shared by DoD, State and USAID that has been relatively sheltered from harsh budget cutting. And there’s every indication that as State continues to play larger a role in contingency contracting — even beyond Iraq — there’ll be an equally expanded role for contractors.

“The basic fact of the matter is that the State Department’s presence in Afghanistan, in particular, will be increasing over the next few years,” Friel said. “And so with that comes just a natural increase in the State Department’s need to rely on contractors.”

MORE FROM THE SERIES:

From DoD to State: Agencies break new contracting ground in Iraq

Waste, fraud in Iraq put all eyes on DoD contracting

Contingency contracting a slowly turning tide, budget shows

Inside the World’s Biggest Buyer (Main Page)

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