The real problem is not that one particular contract with one particular vendor was misused. The real problem is that the system is broke - I questioned the use of this contract; I was entitled to a fair hearing, an honest evaluation, and feedback. Instead, I was ignored until I had gotten other offices into the fray, then efforts were made to downplay the problem.
I did not begin this with an anonymous phone call alleging wrongdoing. I started by intensively researching the contract and the circumstances behind the orders at Charleston, Norfolk and Portsmouth. I spoke with key contracting personnel at each of those activities and documented their concerns in dealing with the contractor and the customer.
I obtained a copy of the Federal Supply Schedule contract and closely read it. I found that the proposed work did not appear to fit the contract. I contacted the contracting officer, who referred me to the Federal Quality Institute which provided me a copy of a memo it had sent to the Coast Guard regarding misuse of the contract to do "management studies".
The work I was asked to contract for was clearly a "management study" and I obtained legal counsel and senior contracting management concurrence. I then prepared two strong point papers which sold Captains Reed Sullivan and Robert Rogers, the Supply Officers at Mare Island and Puget Sound Naval Shipyards on a joint competitive approach which they in turn sold to their Shipyard Commanders Captains George Yount and John Cavender.
This competitive approach identified a number of possible sources, especially educational institutions, but had difficulty developing a statement of work because it was not clear what Coopers and Lybrand had done at the other four shipyards. During the two days at Puget, however, I first saw copies of the Coopers and Lybrand logoed viewgraphs marked with "Kehoe CHNSY" (Charleston Naval Shipyard). I also saw, but did not retain or ever again locate, a communication which clearly stated that these studies would not be of any value in recommending a shipyard base closure strategy to the Secretary of the Navy. At this time, I expected everything to go right, so I did not attempt to collect evidence.
About a month later, I was told that the statement of work had been rewritten to emphasize training and that Puget (allegedly Captain Stephen H. Chertock, Fleet Industrial Supply Center Commander) had been directed by some unnamed Naval Supply Systems Command executive to use this new statement of work to contract with Coopers and Lybrand on a sole source basis. I further was told that William Mackinson, the Assistant Deputy Commander for Contracts, Naval Supply Systems Command, would personally sign the Justification and Approval (J&A) required by law to authorize this contract. I then on my own time wrote Mackinson to make sure he was aware of my concerns and sent this by fax. I was assured by Commander Kevin White that the fax had been placed on Mackinson's desk.
Mackinson declined to talk with me; his secretary referred me to Anne Fisher, and she was not available. The J&A was signed locally at Puget Sound, but was not signed by legal counsel as required by the Navy's contracting procedures. Vice Admiral Bowes 31 August 1995 reply to Senator Pryor's questioning the lack of the legal counsel's signature states that the Puget Sound J&A was not prepared; I sent Vice Admiral Bowes a copy with all but legal counsel's signature.
I then spent another evening writing Secretary Sean O' Keefe. This did not stop the Puget Sound order. I expected someone to Stop, Look and Listen - then only proceed after justifying their actions in writing. That not only did not occur, but a month later, when I asked for the name of the assigned case officer, was told they had lost the letter.
Captain Sullivan, a former Comptroller, always had strong concerns about the value of the work done at Charleston (where we thought this started until the Department of Defense Inspector General audit team uncovered the earlier 1991 Portsmouth Planning Department effort which had not been cited in any of Naval Sea Systems Command, Charleston or any other Shipyard's documentation as being a successful prototype). He arranged a conference call from his office for me with Mackinson, Captain William Pollock, the Deputy Commander, and Anne Fisher, who took notes of the call. In that call, Mackinson and Pollock made it clear that they were displeased with my writing the Secretary and that I should be satisfied that Mackinson had taken a personal interest by flying to Puget Sound and thence to Long Beach where he had discussed Naval Regional Contracting Center San Diego's handling of the Mare Island order. They also totally discounted my concerns with there being a deliberate split of a $3 million plus pie into less than $600,000 chunks in order to use the simpler Federal Supply Schedule. Mackinson assured me that Puget Sound had done everything correctly and that the Long Beach Detachment would follow suit. They reminded Captain Sullivan to remind me that there is a "chain-of--command" and indicated I should not expect any kudos for my role in this. I kept very brief notes of this since I was in a side chair in Sullivan's office and an active participant in the call, but obtained Ms. Fisher's memorandum documenting the call under the Freedom of Information Act in 1995.
I next attempted to obtain copies of Puget Sound's contracting file documentation, just as I had obtained copies of Norfolk, Charleston and Portsmouth documentation during my initial research. I sent an e-mail to the person I had worked closely with during the joint competitive attempt; my boss Daniel Gillen then chided me for making the request and told me I would not receive the information. I made a second request; Mackinson then called Sullivan and told him that I had no business requesting the information since I was not going to be the contracting officer for the Mare Island order. Sullivan chewed me out royally. I finally obtained the information under a Freedom of Information Act request in 1995 from Naval Supply Systems Command Headquarters; Puget Sound never sent it directly; they were afraid to.
My first night on active Air Force reserve duty, I stayed in the office and prepared the seven page narrative that became the written Hotline complaint. The next day, I called Paul Granetto and he gave me Ben Simon, the Hotline Director's direct number. I reported my concerns to Simon and Robert Lieberman, Assistant Inspector General for Auditing, called Simon during that call (after being alerted by Granetto) and said he would take the case. The Department of Defense Inspector General (DOD-IG) then charged right in, thinking as I did, that the Navy would pause and not issue the Mare Island order. Instead the order was issued on the very day the IG faxed over its formal memorandum establishing the audit. The contractor, however, was required to acknowledge the order in writing and Joseph Kehoe did not do so until 12 days later; this left ample time for the Navy to pause and rethink its actions; it did not.
I learned the Mare Island order had been placed a couple of days before the Coopers and Lybrand team arrived. I informed the IG team chief Garry Hopper and tried to get Charles Mills (who had by then been appointed the Assistant Secretary of the Navy (RD&A) case officer) to stop the order. Mills essentially told me I did not have enough clout and Hopper informed me that DOD-IG could not direct the Navy's actions, but merely inform them of its concern.
Then I became an active participant in the Coopers and Lybrand study (remember, this is "training" as "studies" are outside the scope of work and are no longer permissible). My group received no more than an hour of training from Dennis Fish who proclaimed that he was a former Deputy Commander for Contracts of Naval Supply Systems Command and thus we should pay him heed. Fish provided minimal training in brain storming techniques which duplicated that provided through Team Leader and other Mare Island TQM College offerings and had less substance. He also seemed to have a minimal understanding of TQM, of accounting, or of activity-based costing, but was paid approximately $100/hour (I do not know the exact rate because Coopers and Lybrand never indicated any specific individual's contract labor category).
Other even more knowledgeable persons on TQM and costing processes also complained about the quality of the Coopers and Lybrand team and methodology. These complaints were brought to Hopper during the IG team's visit; at least one by Valinda Gillis, a TQM Facilitator, should be in writing in the IG's work papers. I then alleged that fraud had occurred; that it strongly appeared the work had been made up to provide employment to retired Captains Fish and Oliver Keith Evans, and Joseph Kehoe and others who had retired from military or civilian navy service. Hopper told me he could not ask the tough questions, that these needed to be addressed by a criminal investigator.
In his outbrief, Hopper told Captain Sullivan and me that he did not understand why the Navy did the orders for Puget and Mare Island. The next day, I received Captain M. P. Sullivan's letter as Acting Assistant Secretary telling me that he had directed all Navy activities not to use the Coopers and Lybrand contract until further guidance. This was followed by Contracting Information/Policy Letter 93-11 from Naval Supply Systems Command signed by Mackinson directing a temporary halt to the use of the Coopers and Lybrand contract. Mackinson's letter also specifically stated that use of the contract was not permitted for "activity--based costing studies". Contracting Information/Policy Letter 93--20 then lifted the ban and provided all of the guidance I had given Mackinson except that pertaining to the "maximum order limitation", which also was skirted in the DOD-IG audit report.
I immediately replied to Sullivan (and unbeknownst to me Captain Reed Sullivan e-mailed Captain (later Rear Admiral) Michael Sullivan conveying the same thoughts) asking why the Mare Island order had not been terminated since it had been found to be improperly issued.
The standard Navy reply to all further inquiries was "wait for the DOD-IG audit report" which was not issued until 15 months later.
Return to Coopers & Lybrand, Navy and TQM - Fraud or Mistake
Send mail to me at rhelbig@california.com