FAA orders a closer look at contracts

By Sara Kehaulani Goo

updated 4:54 a.m. ET Aug. 14, 2005

WASHINGTON - Debra Srite got an odd phone call a month after starting her new job at the Federal Aviation Administration last year.

A contractor told her that he needed several thousand dollars more from the agency because he had run through nearly all the money allowed under his company's program. When Srite, a by-the-book contracting officer who cites the United States Code from memory, pressed him to provide a reason for the new money, she said he wouldn't cooperate.

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"It was like he was in charge and he was surprised I asked for that verification," she said.

The call prompted Srite to dig into the FAA's records on the project. What she and a co-worker found out about the $16 million contract raised concerns about how the FAA handles $1.3 billion in such programs with small businesses.

The agency has begun the largest line-by-line review in a decade of its business with hundreds of companies. Two months earlier, the Transportation Department inspector general's office began its own audit and investigation into possible criminal wrongdoing by the company. The inspector general also has undertaken a much broader audit of FAA contracting practices.

Federal Aviation Administrator Marion C. Blakey announced in an Aug. 11 memo to top managers that new management procedures would be implemented to safeguard against abuse by contractors. "In this environment, we simply must control our expenses, one of the largest of which is our services contracts, and we must also ensure that every taxpayer dollar is spent wisely, effectively and properly," Blakey said in the memo. In a statement to The Washington Post, she said, "The actions the FAA is taking are part of larger efforts to fundamentally change the culture of how we spend money at the FAA."

The company at the center of the investigation is Crown Consulting Inc., a District firm with 180 employees. Its chief executive, Afzal I. Khan, founded the company as a disadvantaged federal contractor in the late 1980s. Crown now has 58 contracts with the FAA worth up to $135 million.

Among the red flags Srite says she found in the $16 million contract were invoices for an unapproved trip to Las Vegas and an unexplained lease for a Porsche Boxster. She also learned that Crown had hired the wife of a top FAA official and that the company later was ordered by that official to keep his wife on staff after the contract ended. A computer software system the firm was supposed to develop for the FAA failed many government tests and was never used, according to FAA documents.

Khan said all of Crown's invoices were legitimate and that suggestions of wrongdoing are inaccurate. The company disputes Srite's recollection of the initial phone conversation with one of its employees, saying that Crown was simply informing her that the contract would soon run out of money.

The Porsche lease was never submitted to the FAA for reimbursement, said Gene Grabowski, a Crown spokesman. It was given to the inspector general and the FAA after Crown was asked for documentation of all company expenses, he said.

Experts in contracting law say projects like Crown's are meant to save the government money but instead may add to costs. So-called support services contracts allow the FAA to award initial contracts to a short list of pre-qualified small companies and then add tasks amounting to as much as several million dollars without bidding. Such awards are often open-ended or loosely defined jobs to provide technical expertise, consultation or additional labor hours on programs ranging from developing a new software system to running a computer help desk.

Sometimes, such contracts do not include firm deadlines and in most cases they lack specific performance standards. The contractor is paid based on whether it supplied the required hours of service. In some cases, an FAA employee will retire from the government and soon after begin similar work for a contractor for more money, raising the questions of whether the government is really saving money by using the contractor.

The FAA's contract with Crown began six years ago as a $160,000 project with one employee to provide technical support, according to the company. The job expanded after the terrorist attacks in 2001 when the FAA needed to upgrade a computer system for air traffic controllers. The agency wanted controllers to easily see real-time flight activity so they could reroute airliners when the military planned to use certain airspace. Crown was asked to expand its original contract in 2002 in a sole-source award to provide the software, starting at $6 million with a "ceiling" of $16 million.

Three months into the project, Crown's system failed its first crucial test, according to FAA documents. The FAA noted 134 errors, FAA documents show. The agency ordered the company to fix the problems quickly. When the system was tested again in 2004 at the agency's technical center in Atlantic City, FAA officials did not see much improvement. It "failed to perform in providing easier user friendly software as required," said an FAA document dated June 4, 2004, that summarizes the test results. Crown officials did not dispute the test results.

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