Contracting for Navy Husbanding Services: An Analysis of the Fat Leonard Case

Abstract

For over 25 years, the U.S. Navy contracted with Glenn Defense Marine Asia (GDMA) to provide husbanding services. In 2013, the Justice Department announced an investigation alleging that for years, GDMA had engaged in procurement fraud. The purpose of this research is to analyze Navy husbanding service contracting using the Fat Leonard case through the lens of auditability theory, applying contract management and internal control frameworks. This research analyzes each alleged act of fraud in the Fat Leonard case and aligns the act with the contract management phase in which the alleged act occurred and with the internal control component that most contributed to and allowed the alleged act to be perpetrated. The research findings identified collusion as the primary fraud scheme in the Fat Leonard case. Research findings show that the alleged acts of fraud occurred primarily in the buyer's contract administration and procurement planning phases and in the seller's pre-sales activity and contract administration phases. Furthermore, the findings indicate that the internal control deficiencies were in the control environment and information and communication components. Based on these findings, recommendations are provided to improve the auditability of husbanding service contracting.