Overblown price

The $43 million gas station that wasn't

An outside contractor says an overzealous inspector general is responsible for the Afghanistan filling station's overblown price tag.

By Nahal Toosi

Last October, a top U.S. watchdog produced a doozy of a report, alleging the Pentagon had spent $43 million just to build a compressed natural gas station in Afghanistan.

Sen. Claire McCaskill (D-Mo.) said it made her “jaw drop.” Sen. Chuck Grassley (R-Iowa) called it a “colossal waste of tax dollars.”

It was one of the biggest headline-generating moves yet by John Sopko, who took over the Office of the Special Inspector General for Afghanistan Reconstruction in 2012 and quickly turned it from a relatively quiet outfit to one that frequently and loudly points to fraud, waste and incompetence.

But the $43 million figure was way off, according to sources familiar with the calculations. The true cost of the station — the first of its kind in the war-torn country — was somewhere between $5 million and $10 million, they claim.

The controversy around the overpriced station has festered for months and illustrates the toxic relationship that has developed between the inspector general and the Pentagon. It is also expected to come up Wednesday during a Senate subcommittee hearing that will examine the work of a now-defunct Pentagon task force charged with rebuilding the Afghan economy.

The discrepancy in the cost came from a mix of factors, including imprecise accounting standards used by the Defense Department and poor — borderline hostile — communications between the inspector general and the Pentagon, which failed to provide clarifying information.

According to an outside contractor who worked on the task force’s energy program, the report alleging the gas station cost $43 million is an example of a watchdog determined to score headlines without acting responsibly.

The $43 million ($42.7 million, to be exact) includes about $30 million in overhead costs, the contractor said. Because of the way the Pentagon did its accounting, the overhead wasn’t weighted to focus on the gas station and incorporated expenses from a range of other energy projects. The contractor estimated the true overhead cost to the station was $3 million. He said a similar weighting problem inflated other labor costs associated with the project, so that its real expense was ultimately between $5 million and $10 million.

A spokesman for Sopko, however, placed the blame on the Defense Department's own accounting and its unwillingness to make officials available who could clarify the issue. He noted that the inspector general's office, known as SIGAR, had very recently received additional information from the Pentagon about the task force and was combing through it.

"It would have been irresponsible for us not to publish the report, since we had sufficient evidence to justify our findings," said the spokesman, Alex Bronstein-Moffly. "We had all the information that DOD would provide us; we knew that the $43 million figure came directly from DOD, and DOD never refuted any of the items in our report."

A Defense Department spokeswoman declined to comment ahead of Wednesday's hearing.

The Pentagon group that helped build the gas station, known as the Task Force for Business and Stability Operations, has been a major target of many reports, audits and investigations by the special inspector general. SIGAR's work on the task force and other areas has earned praise from members of Congress and others keen on oversight for how taxpayers dollars are being spent.

At the same time, the inspector general has attracted criticism, especially from officials at the State Department, USAID and the Pentagon, who say his office produces shoddy, misleading work and fails to appreciate the challenges of working in a war zone.

Republicans and Democrats at Wednesday’s hearing are expected to aim most of their ire at Brian McKeon, the principal deputy undersecretary of defense for policy testifying on behalf of the Pentagon. But, due to behind-the-scenes pushback over the October report, Sopko, too, is likely to get some difficult questions about SIGAR’s methodology and intentions. Already, senators have raised concerns about a special projects unit he created within SIGAR that isn’t required to meet traditional government auditing standards (and which produced the gas station report).

The $43 million figure was also mentioned in a 197-page Economic Impact Assessment report from December 2014 that evaluated all of the task force’s projects in Afghanistan and forecast their economic impact a decade into the future. The “sensitive but unclassified” consultants’ report found mixed results for the projects but said the task force's overall work was “instrumental in catalyzing long-term economic growth in Afghanistan.” The consultants’ economic modeling found that task force projects would, by 2025, help lift Afghanistan’s gross domestic product to $107.8 billion, compared with just $53.3 billion if those projects didn’t exist.

The Economic Impact Assessment’s brief section on the compressed natural gas station devoted just a sentence to the $43 million in costs, noting the breakdown in direct and overhead costs relying on Defense Department data. That sole sentence ended up being a key pillar of the subsequent SIGAR report.

SIGAR staffers tried repeatedly to get details from the Pentagon about what exactly the $43 million was spent on. But McKeon, in letters to SIGAR, asserted that because the task force shut down in March 2015 and its employees left, the Defense Department had no one who could answer the questions posed.

Regardless of the lack of clarity about the spending, SIGAR’s report came across as definitive in its accounting of the gas station’s costs. The report was titled “DOD’s Compressed Natural Gas Filling Station in Afghanistan: An Ill-Conceived $43 Million Project.” Its concluding section stated that the task force “spent nearly $43 million to build a CNG filling station that would have cost no more than $500,000 in neighboring Pakistan” — a comparison some call unfair because Pakistan is a more developed, more stable state with far more experience in building such gas stations.

A proper audit, the contractor complained, would not have made such sweeping assertions even if the auditors found themselves stonewalled by the Defense Department. It would have been more nuanced and careful in its language.

Indeed, in an audit of the task force’s energy projects released just last week, SIGAR is more cautious in its assessment. In its brief references to the gas station, for example, the audit mentions the special projects unit’s report. But the auditors wrote in a footnote that because the Defense Department was “unable to provide information” on the composition of the $42.7 million, they had chosen to stick to the cost directly tied to contracts involved in the project — $5.1 million.

In a November letter, Senate Armed Services Committee Chairman John McCain (R-Ariz.) and the ranking Democrat on the committee, Sen. Jack Reed of Rhode Island, asked Sopko to answer a slew of questions about SIGAR’s special projects unit, which issued the report about the gas station.

The senators, noting the “strongly worded title, the nature and tone” of that particular report, requested details about the Special Projects division, including whether its work was of the same quality as SIGAR’s audits section, which has to follow special auditing standards.

“In 2012, almost 90 percent of SIGAR’s publicly issued products were reports conducted in accordance with GAGAS or CIGIE standards,” the senators wrote, referring to official guidelines for auditors and inspectors general. “This has dropped to just over 50 percent in fiscal year 2015; by contrast Special Project products represented more than 40 percent of SIGAR’s publicly issued products.”

In his response, according to a copy obtained by POLITICO, Sopko disputes that assessment, insisting that from 2012 to 2015, the percentage of SIGAR products following the GAGAS and CIGIE standards increased from 70 percent to 73 percent and that “Special Projects reports and Alert Letters accounted for less than 11 percent of all SIGAR products.”

Sopko, a former federal prosecutor and longtime congressional staffer, also writes that he created the special projects section because it could move faster than the audit and investigations sections, whose work often takes many months, and he had done this because he had been told by lawmakers and others that his office needed to be more aggressive.

Aides to senators on the Armed Services Committee say they are eager to get a better sense of what numbers are correct, be it on the gas station or the special projects’ standards, and they hope that Wednesday’s hearing can lead to some explanations.

They stress, however, that there is more frustration in Congress with the Pentagon than with SIGAR because of the opaqueness of its accounting.

“Even if the Defense Department asserts that only, say, $5 million was spent on the gas station, the obvious question is: What was the other $38 million spent on?” a McCaskill aide said.