The Department of Homeland Security continues to rely heavily on contractors, and a new report says employees at private companies were even in a position to review their own invoices and determine if they were reasonable, according to Inspector General Richard Skinner.

In May, the Senate Homeland Security and Governmental Affairs Committee learned that contract workers outnumbered civilian employees at the department by approximately 12,000. Senators Joseph Lieberman and Susan Collins who lead the committee wrote a letter to Homeland Security Secretary Janet Napolitano (photo) calling the imbalance “unacceptable, untenable, and unsustainable.” The revelation raised questions about whether the department ceded essential decisions to private companies, according to the letter.

Allegations of potential conflicts of interest like those contained in the most recent report have occurred in the past with the department. Democratic Congressman Henry Waxman of Los Angeles led a series of hearings in 2007 to examine a pair of major homeland-security projects. He found that more than half of the personnel hired to oversee one of them, a bid to line the southwest border with high-tech surveillance gear known as SBInet, worked for private companies, and some of them were even employed by businesses with ties to SBInet’s prime contractor, Boeing.

“What we have learned is that there seems to be no task too important to be outsourced to private contractors,” Waxman said at the time. A senior homeland security official countered that the company Waxman claimed had links to Boeing, consultant Booz Allen Hamilton, didn’t provide “oversight” but rather served a “support” function. Waxman nonetheless pointed to Booz Allen’s own Web site, which described its “solid working relationship” with Boeing and personal connections between the companies that ranged from the executive office “to the people on the shop floor.”

Waxman added that SBInet was still overly dependent on private companies to perform functions government employees would ordinarily do, and in this case “with a company that may have a conflict of interest.” Critics have said that the Coast Guard’s decision to relinquish many of its management and oversight responsibilities to contractors led to trouble eventually faced by the Deepwater program, a years-long push to acquire new ships and aircraft. At one time, the majority of Deepwater’s administrative staff also worked for private companies, Waxman said at the hearing.

“We need to correct our mistakes, not repeat them,” he said. “The Deepwater contract is a textbook case of what not do. Yet Deepwater seems to be the model for SBInet.”

The inspector general’s latest report, meanwhile, looked at $609 million worth of support services contracts signed by transportation security officials and found that employees working for private companies performed “inherently governmental functions” for more than $250 million worth. Such activities included determining whether invoices were reasonable, allowable and correctly charged. Contractors then made recommendations for approval and payment, auditors found. Federal acquisition rules define contract administration duties as “inherently governmental,” meaning public employees should be performing them, according to the inspector general.

When Transportation Security Administration managers were told by the Inspector General’s Office that one contractor was allowed to review its own invoices, “they took immediate action to correct the problem.”

“[Federal rules] require that agency officials retain control over and remain accountable for contract administration, approval, and payment of invoices,” the inspector general wrote. “Until TSA provides greater scrutiny and enhances management oversight of support services contracts, it will continue to risk transferring government responsibility to contractors.”

Skinner’s report also determined that the TSA lacked its own employees to carry out purchasing tasks, and as a result “did not have reasonable assurance that contractors were performing as required, that it contracted for services it needed, that it received the services it paid for, or that taxpayers were receiving the best value.”

The TSA responded that it would annually review professional services contracts over $1 million to make certain they didn’t include work federal employees should be doing. It also promised that an internal policy on conflicts of interest had been finalized to prevent contractors from overseeing their own work.

G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED, Wired.com, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.