DeLauro Questions Defense Department Contract with Accenture

DeLauro Questions Defense Department Contract with Accenture

-Contract One of Eight Already Under Investigation by Inspector General -

WASHINGTON, D.C. - Congresswoman Rosa L. DeLauro (Conn.-3) today questioned a Defense Department (DoD) contract awarded to Accenture under former Air Force acquisition manager Darlene Druyun. Last year, Druyun was convicted of conspiring with Boeing's chief financial officer to help the company win a multi-billion dollar contract. DeLauro wrote the DoD Inspector General to ask for the status of an investigation into contracts Druyan presided over - only eight contracts of the 400 awarded during her tenure are under investigation. In particular, DeLauro asked for a review of a contract awarded to Accenture, a company that incorporated overseas to avoid U.S. taxes.

"Corporations that can avoid paying U.S. taxes are able to artificially lower their bids on various contract proposals, putting American companies at a disadvantage," said DeLauro. "Since Accenture and similar companies have been able to avoid millions in U.S. taxes and still receive U.S. contracts, companies like these will effectively weaken our defense base.

"What prompted the Inspector General to investigate this contract award?" asked DeLauro. "What contacts occurred between Ms. Druyun and Accenture? How did Accenture perform in previous contacts? These are just some of the questions I believe must be answered."

In 2001, Accenture received an $82.5 million contract for the Financial Information Resource System.

The full text of the letter follows.

July 12, 2005

The Honorable Joseph E. Schmitz
Inspector General
Department of Defense
Washington, DC 20301

Dear Mr. Schmitz:

As you may know, I have a longstanding interest in inverted corporations bidding on federal contracts because I believe this corporate structure - where the company operates in the United States, but is incorporated in a tax haven country - gives these entities a potentially significant, and in my view unfair, advantage over our domestic companies while in pursuit of federal contracts. In fact, a June 2004 Government Accounting Office (GAO) report, International Taxation: Tax Haven Companies Were More Likely to Have a Tax Cost Advantage in Federal Contracting (GAO-04-856), outlined how these corporations can avoid paying U.S. taxes and in turn are able to artificially lower their bids on various contract proposals. The majority of these companies' contracts are with the Department of Defense (DOD).

I am deeply concerned that these "corporate expatriate" companies will ultimately weaken our defense industrial base because of the unfair pricing advantage they have over their domestic competitors. For that reason, I am writing to ask you for a status report on the investigation initiated by your office in February 2005 at the request of the Department's Undersecretary for Acquisition, Technology and Logistics on eight Air Force contracts awarded under the purview of convicted former Air Force acquisition manager Darlene Druyun. I am particularly interested in the review of the program award for the Financial Information Resource System (FIRST) since it was given to the former Andersen Consulting company, now known as Accenture LLC, a company whose parent corporation is incorporated offshore.

As part of your response to my inquiry, I would like answers to the following questions:

Given that Mrs. Druyun was involved, by the Department of Defense's own admission, in more than 400 contract decisions during her tenure, what circumstances led the Department to single out the FIRST program as one of the two percent of those decisions that warranted scrutiny?

What contacts occurred between Mrs. Druyun and Andersen Consulting/Accenture officials, including electronic, telephonic, or in-person communication, and is there any evidence that these contracts might have improperly altered the Department's acquisition decision?

Was the performance of Andersen Consulting/Accenture on other DOD or other Federal contracts evaluated properly during the source evaluation process, including whether or not there is any evidence that Mrs. Druyan directed any Department officials to alter those evaluations in reaching its recommendation on the FIRST or any other DOD contract award?

Does the offshore Accenture corporate structure allow them or other companies in similar circumstances to price their bid in such a way as to give them a decisive price differential over their competitors for DOD contracts?

How would you evaluate Accenture's execution on the FIRST program with respect to its overall cost, schedule and program performance relative to their original proposal?

What other contracts does Accenture/Andersen Consulting have/had with the DOD over the last five years, and what has been their performance in terms of cost, schedule and program content for the 10 largest of those contracts? For each program, I would like the following: the original award value, the current or final contract value, the disposition of the program today, e.g. development, in operation, terminated (with details on reason for termination), and the capability being provided.

Has Accenture/Andersen Consulting been terminated on any particular DOD or Air Force programs, and if so, for what reasons?

I greatly appreciate your cooperation in this matter, and would also appreciate your office providing mine with a timeline for completion of the FIRST contract review requested by the Department.

If you have any questions related to this request, please do not hesitate to contact me. Thank you.

Sincerely,

http://www.house.gov/delauro/press/2005/July/accenture_agreement_07_12_05.html