19 Jan 2008 Memo for Record ITTs Investigation of Improper Procurement Actions of the ITT MEO Kuwait Office and the Qatar Office

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Systems Division

Middle East Office

Waha Mall, Dajeej,

Farwaniya, Kuwait

Post Box 9493

Salmiya 22095

Tel: (965) 431-2905 Ext.

142

Cell: (965) 714-8838

Fax: (965) 431-6469

January 19, 2007 Keven Barnes Contracts Administrator Waha Mall, Dajeej Farwaniya, Kuwait Subject: Investigation of ITT MEO Procurement Practices Reference: GMASS Task Order 1 Contract # W52PIJ-05-D-0003 ________________________________________________________________________________ Place of Meeting: Waha Mall, Dajeej, Farwaniya, Kuwait Date of Meeting: 17 and 18 Jan 2008 Time of Meeting: 1800 - 2000 Attendees: Martha Hires, Tom Mason, Paul LeBar, Keven Barnes

Name Position

Paul LeBar ITT Counsel – Colorado Springs

Tom Mason ITT Hired-Counsel

Martha Hires ITT – Contracts Manager, Colorado Springs

Keven Barnes ITT – GMASS T.O. 1 Contracts Administrator, Kuwait MEO

Purpose of Meeting: Discuss ITT MEO Contracting Practices, plus Fraud, Waste and Abuse at ITT MEO and Colorado Spring’s ITT Head Quarters. Introduction: N/A Discussion Items: Keven Barnes’ background and qualifications: Discussed Keven’s work experience.

Keven worked for DCMA , as a Contracts Administrator, while on a tour of duty as a U.S. Air Force Reservist in late 2004 – early 2005 overseeing the Halliburton Contract in the International Zone, Baghdad, Iraq.

Keven worked as a Subcontracts Administrator in Baghdad, Iraq for a full year, 12 hour days and 7-day weeks.

Keven later returned Iraq to work as a DoD Contractor and Advisor to the Iraqi Ministry of Defense to the Contracting Department of the Iraqi Army and Air Force.

Basis for Keven’s subcontracting experience: That experience came from working for Prime Contractor – KBR and following the strict compliance to the Federal Acquisition Regulations and with DCMA guidance. DCAA audits were common and contracting folders were in an auditable condition. Full compliance with Federal

Memo for Record ITTs 17Jan2008 Investigation of Improper Procurement Actions of the ITT MEO Kuwait Office and the Qatar Office

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Acquisition Regulations and vetting proposed subcontractors prior to allowing them to bid. Checking that the subcontractor was registered in the Central Contracting Registration system, had a Dun and Bradstreet number, and was not barred from doing business with the U.S. Government by being on the Excluded Parties Listing System, was a routine matter of compliance and a duty of him as Subcontract Administrator for KBR. The investigators established that Keven was fully qualified to evaluate that there was serious problems at ITT’s Procurement Department both in the Middle East and at the Head Quarters of ITT. ITTs Subcontractor Fluor and their practice of conducting ITT solicitations: There is clear evidence that Flour determines who will be solicited for contracts at Camp Arifjan, not ITT. Molly Harris calls it market research, except that no Request for Proposals with the normal items that goes into a Request For Proposal ever go out to qualified and vetted bidders, and there is no a clear bidding cut-off date for determining responsive bids. Those items normally included would be; Defense Base Act Insurance application, DBA Notice to Employees, Employer Wage Statement, Injury Report Submittal Form LS202, Subcontractor DBA Guidebook; HSE Attachments; Subcontract General Conditions; Subcontract Special Conditions; Back-Charge Agreements; Terms and Conditions in regards to Health, illegal drugs, weapons, Fall Prevention; Request for Representations and Certifications, Alternative Dispute Resolution form; Request for Liability Insurance; Sample Contract; Affidavit and Contract close-out forms; Scope of Work; Letter of Instructions for responding to the Request for Proposal that outlines bidding format, with documents required to be a responsive bid and also lists the time and date for the end of bidding. We also discussed Blind Carbon Copies to the qualified bidders. -A method that works very well for communicating to those you wish to be included. ITTs MEO Procurement Department’s failure to conduct solicitations that conformed with Federal Acquisition Regulations and generally accepted practices of a Prime Contractor in the Area Of Responsibility or Theater of Operations to promote fair and open competition for the best interest of the U. S. Government: Discussed with the investigators that there is ample evidence in both the GMASS T.O. 1 Contract and the subcontracts lack proper documentation and that ITT is out of compliance. ITTs Purchasing Department going exclusively to Global Logistics as a single sole source repeatedly, and failing to qualify subcontractors: Failing to check the Excluded Parties Listing System (EPLS), Dun and Bradstreet, Central Contracting Registration System, conducting proper bidding per Federal Acquisition Regulations is causing ITT to be in violation of Federal Acquisition Regulation and normal practices of a competent Prime Contractor.

ITTs failure to implement the Defense Base Act Insurance on a subcontract awarded to a Fluor solicitation: (Office Trailer Refurbishment) -with ITT MEO Manager, Mike Lassiter stating this only affects ITTs bottom line and the insurance is not necessary: This flow-down insurance was never extended to the subcontractor performing the refurbishment of the Office Trailers. Had a proper RFP been conducted and an application filled out as is the generally accepted method in the AOR, this would have been accomplished. Mike Lassiter and Molly Harris both failed to provide the necessary DBA documents to protect the employees of the subcontractor and to comply with Federal Acquisition Regulations and the current law. ITTs failure to document the Stanley Subcontract file: following off-base motor vehicle 3 accidents in the last 6 months that sent Stanley employees to the States injured and destroyed vehicles owned by ITTs sponsor – KRH, ITT never documented either of the files - Stanley or KRH. The injured personnel from Stanley were not documented in the file. Documentation of the incidents were not documented in either the KRH file under vehicles nor the Stanley file. Iona Brewer, Finance Manager for ITT MEO, was unaware that she should be looking for a dip in the hours submitted by Stanley because there was a lack of coordination of critical information. That failure is due to the Project Manager of GMASS T.O. 1 management of the contract and his insistence on not sharing information with Contracting. Overall, this inept method of management jeopardizes the credibility overall of ITT and shows that upper level managers again do not have a grasp on contracting and documentation matters regarding the GMASS Task Order 1 contract. Both Mike Lassiter and Molly Harris failed to ensure that the subcontract file was properly documented. This further shows the U.S. Government that ITT is not a responsible contractor.

Memo for Record ITTs 17Jan2008 Investigation of Improper Procurement Actions of the ITT MEO Kuwait Office and the Qatar Office

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ITTs MEO Procurement Department failure to obtain a signed contract prior to the start of a kick-off meeting for the refurbishment of (8) Office Trailers: ITTs MEO Procurement Departments failure to obtain a delegation letter from the awarded subcontractor, for another subcontractor to perform the agreed upon work – prior to even having a signed contract is just another sign of the lack of ITT’s Procurement Department organization in Subcontracts at the hands of Mike Lassiter and Molly Harris. Only after the meeting with the “investigators” did Molly Harris begin to put a subcontract folder together to bring together some documentation. ITTs involvement in the acquisition of building 50 and suspected kickbacks to company officials in Colorado Springs: Keven discussed with Tom Mason and Paul LeBar that although ITT has blamed Carl Scott for the obligating the U.S. Government to this poor business decision, the blame again lays with poor management of the Procurement Department’s leadership, namely Mike Lassiter and Molly Harris. Mike had several late night meetings with KRH by himself and then came to work proclaiming he had solved the problem? Gary McGraw had meetings away from the ears of Contracting, again, not lending itself to sound business judgment, only leading to the perception that there was discussions that couldn’t be open and documented. However, what was documented was the inspection of Building 50 on 4 January 2008, and that clearly showed the building was not occupied, and was in no condition to be received. There was also the evidence to terminate for convenience, except that there appears to be some side-deals made with KRH to continue to lease a building that is both unsafe, but poorly designed. ITT management appears to have once again partnered up with KRH, but not in the best interest of the U.S. Government, but instead for profits. ITTs turn-in of $ 2 million in buildings and then fast-tracking a 12% increase due to “inflation” with justification being accomplished by ITT Procurement Manager, Molly Harris: KRH had ample opportunity to tell ITT management about forecasted increases in time for the Option Year 3 proposal. But when the U.S. Government cut the hours of the Foreign Nationals and some Ex-Pat personnel, KRH turned around within weeks and said they would have to remove the FN workers into cheaper housing and would also seek to start moving ITT Ex-Pat personnel to a lesser quality of housing to maintain its profit margins. These threats were at 2 different meetings held at the ITT MEO Office in the Waha Mall, Dejeej, Farwaniya. Although Molly explained that they would need to prove these costs, her actions were to write their justification for them and presenting that justification as if KRH had written the justification themselves. Army 15-6 Investigation of GMASS T.O.1: Keven discussed the $35 million in missing and unaccounted for equipment and inventory, and that this subject seemed to occupy 40% of the U.S. Government’s complaints about GMASS T.O.1 in both the CPARS of Option Year 1 and Option Year 2. Although the corrections have been presented to the GMASS T.O. 1 Project Manager by Stanley, the information is ignored. Colorado Springs has a great deal to do with the mismanagement of the supply chain and has failed after 2 years to correct the problem. Keven explained that there was an AR 15-6 investigation and that the same syndrome of down-playing the CARS and CDRS and keeping them from the Contracting Department only compounded the problem and the mismanagement of inventory will only manifest itself again with yet another poor CPARS report, except this time the poor performance will cost ITT their Award Fee. ITTs fraudulent cost allocation: ITTs MEO Procurment Manager’s fraudulent proposals submitted to the U.S. Government for both the MRAP and the TARP 2. When this data brought forward to Molly Harris and was confirmed – she asked that Keven resign. This is further evidence that ITTs lack of integrity and failure to do the right thing as the company proclaims. ITTs poor performance on GMASS T.O. 1: CPARS for Option Years OY1 and OY2 ended Sept 2007. ITTs GMASS T.O. 1’s - weekly CARs and CDRs are an indicator or systemic problems and ITTs responses only show a further lack of effective management by the GMASS T.O. 1 Project Manager and his lack of understanding Contracting Law and Principles. Performance of the contract and following the scope of work is the responsibility of the Camp Arifjan management, not the Contract Administrator. The multiple “Letters of

Memo for Record ITTs 17Jan2008 Investigation of Improper Procurement Actions of the ITT MEO Kuwait Office and the Qatar Office

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Concern from the Government are just another sign that ITTs Leadership have failed to meet their contractual obligations. Now the latest GAO report and subsequent headline news stories about ITTs poor performance just further validate that ITT is a poor performing contractor and has been for quite some time. No amount of denial by ITT Headquarters, with their concerted responses at huge expense to ITT and the U.S. Government can alter the facts and the imminent actions of the U.S. Government to terminate ITTs contract for the convenience of the Government. Fraud, Waste and Abuse - ITTs GMASS T.O. 1’s Project Manager living at the Hilton in a Villa: A Purchase Request initiated by the Project Manager and approved by the same GMASS T.O. 1 Project Manager is Fraud, Waste, and Abuse of ITT and U.S. Government resources. ITTs Failure to follow Kuwait Labor Laws: Discussed with the “investigators” was a request from a GMASS T.O. 1 manager about what the contract stated in regards to overtime and holiday pay. ITT appears to have been cherry-picking laws from the U.S. law and ignoring Kuwaiti laws for over-time rates, limitations on hours, holidays for both U.S. and Third Country National Workers. PREPARED BY: Keven L. Barnes Contracts Administrator