Private military contractor Blackwater and its affiliates may have wrongly received more than $100 million in contracts that were supposed to be set aside for small businesses, according to an inspector general's report released today.

At issue was a November 2006 determination by the Small Business Administration that a Blackwater affiliate, Presidential Airways, was a small business with less than 1,500 employees.

Blackwater contended, and the agency agreed, that its more than 1,000 workers providing security for the State Department overseas were not employees, but independent contractors. That made the company appear smaller on paper than it actually is.

The SBA Inspector General said that assessment was incorrect, based on SBA regulations.

How the agency made that determination regarding Blackwater is unclear, the report concluded.

"We're not sure how that happened," Glenn Harris, chief counsel for the SBA inspector general's office, said in an interview with TPMmuckraker. "We're not saying there was misrepresentation. ... It could be contracting-officer error."

Although Blackwater did provide some information indicating the size of the company, the SBA appears to have overlooked evidence that the company was too large to qualify as a small business.

SBA did not follow-up on or attempt to reconcile conflicting information in its files that the total number of Blackwater employees -- even excluding the security personnel hired under Federal contracts -- exceeded the applicable size standard.

The SBA IG forwarded its report to the Department of Defense and the Department of Veterans Affairs, which together awarded Blackwater some 39 contracts that were set aside for small business. SBA only accesses whether a company is eligible for small-business contracts.

Rep. Henry Waxman (D-CA), chairman of the House oversight committee, questioned Blackwater's conduct.

"The SBA IG report raises serious concerns about whet her Blackwater made false statements about its small business status to the federal agencies that awarded these contracts," wrote in a memo to his committee today.

A spokeswoman for Blackwater denied any wrongdoing by the company.

"Over the past several years, expert accounting and outside legal counsel have determined that Blackwater's classification of security personnel as independent contractors is reasonable, correct and legally protected," said Anne Tyrell, the spokeswoman.

She said the IG's report "draws no conclusions" and was "unnecessarily speculative."

The Small Business Administration did not respond to a request for comment.

Late Update: The SBA issued a statement noting that the the IG report questions its reasoning in the size determination but did not declare it incorrect.

The lack of clarity, the report says, depends on various interpretations of whether nearly 1,000 security personnel hired for a Department of State contract were employees and should have been counted against the 1,500-employee limit, or whether they were contractors and should not have been counted.

"As a legal matter, some factors suggested Blackwater's security personnel were employees; other factors suggested they were independent contractors. The company also represented that those staff were considered independent contractors for IRS purposes," the statement said.

We pointed out this morning the New York Times story that suggested KBR was over charging the military on Iraq-related contracts and threatening to cut off services to combat troops if the bills weren't paid.

Now here's another one about KBR's billing. This time from the Department of Defense Inspector General. And it looks at the company's role in the clean-up efforts after Hurricane Katrina.

The Houston Chronicle reports:

The Pentagon Inspector General said he could find no documentation in Navy contracting files to back up KBR claims it paid fair and reasonable prices to subcontractors that served meals in New Orleans.

"The prices KBR agreed to pay were greatly inflated," the 86-page audit said.

"The Navy paid approximately $4.1 million for meals and services we calculate should have cost $1.7 million, more than a $2.3 million difference," said the audit, signed by Assistant Inspector General for Acquisition Management Richard Jolliffe.

. . . Altogether, the audit requested that the Navy seek refunds of at least $8.5 million for "inappropriate" payments to KBR.

More from Sharon Weinberger over at Wired regarding former Rep. Curt Weldon's ties to Russia.

We learned earlier this week that Weldon's under investigation in what is "an element of a broader U.S. Justice Department probe into what officials suspect are efforts by Russian-backed firms to gain influence or gather information in Washington."

Now Weinberger, who co-wrote a book about nuclear weapons, found this nugget in her notes. In 2006, Weldon told her that he met with Sergey Chemezov, a former KGB officer and then the head of Rosoboronexport, which handles Russian weapons exports.

"Chemezov offers--it's an amazing offer with Putin's support... there are countries in the Middle East that are approaching Russia to buy replacement weapons and spare parts. Chemezov is here to say, "We want to work with America to either establish either a joint company, or even an American company that would act as a front for weapons these nations want to buy. So American would not think we're going behind their back."

Weldon thought it was a great idea.

The other day we told you about the Russian not-for-profit group that was giving undisclosed payments to the wife of former Rep. Curt Weldon's chief of staff.

Weldon, a Pennsylvania Republican who lost his reelection bid in 2006, had sought federal grants for International Exchange Group, which was run by a Russian with ties to the Kremlin. IEG was involved in "promoting U.S.-Russia business exchange, including nonproliferation issues."

IEG popped up again this week. Over at Wired Sharon Weinberger, who recently co-wrote a book about nuclear weapons, pointed out another connection the group had to the U.S. government.

IEG signed a deal with the U.S. military's Missile Defense Agency back in 2004 promising to provide "Russian radar data" for use with the U.S. missile defense's early warning system.

From Wired:

But the entire structure of IEG was suspect, and smacked of conflict of interest: why should the U.S. government have to pay an openly Kremlin-linked nonprofit in order to ensure government cooperation?

It didn't pass the smell test with upper-level decision makers at the Pentagon, who halted the 2004 deal at the last minute.

Weldon's connection here is unclear. But he has promoted the Russian group and he's also a longtime supporter for the Defense Missile Agency.

Weldon has been under federal investigation for a couple of years concerning his actions on behalf of a natural-gas company, Itera International Energy LLC, which has longstanding connections to alleged Russian organized-crime figures. Weldon just dumped his last $80,000 in campaign money into his legal defense fund.

And the Wall Street Journal reported this week, the probe of Weldon may be "a broader U.S. Justice Department probe into what officials suspect are efforts by Russian-backed firms to gain influence or gather information in Washington."

Maybe we'll eventually get to the bottom of just what the Pentagon was up to when it cultivated the TV networks' supposedly independent military analysts as part of a massive PR push to support Bush Administration policy in Iraq. Well, it's pretty obvious what it was up to. But maybe we can better learn the full scope of the domestic PR effort undertaken.

The New York Times' April expose on the massaging of public opinion through "message force multipliers" (a term only the Pentagon could come up with) has now prompted at least two investigations. The program was suspended following the initial NYT report.

The Department of Defense inspector general announced last Friday that it was undertaking a investigation of the program, and the Congress' own General Accountability Office has "already begun looking into the program and would give a legal opinion on whether it violated longstanding prohibitions against spending government money to spread propaganda to audiences in the United States."

The investigations come after the House last Thursday passed an amendment to this year's military authorization bill mandating investigations by the DOD IG and the GAO. Democrats argued that the program amounted to illegal domestic propaganda. Rep. Rosa DeLauro (D-CT) called the program part of "a military-industrial-media complex" (with apologies to Eisenhower).

Meanwhile, the TV networks have remained largely silent, as their credibility and transparency have been tarnished by the revelations about the program. As Media Matters has documented, the military analysts named in the Times piece appeared or were quoted more than 4,500 times on broadcast networks, cable news channels, and NPR. One minute they were giving ostensibly objective analysis, the next they were fawning over Rummy in private as "the leader."

Despite knowing that alternatives existed for providing vehicular armor kits to the Army and Marine Corps, Pentagon procurement officials awarded over $2 billion in "sole-source" contracts to two big defense companies that had difficulty delivering the armor on time, according to a June 27 Defense Department Inspector General report. At the time the contracts were awarded to Force Protection and Armor Holdings, senior officials argued for competitive bidding.

Says the report:

Force Protection, Inc., did not perform as a responsible contractor and repeatedly failed to meet contractual delivery schedules for getting vehicles to the theater. In addition, (U.S. Army Tank-Automotive Command) Life Cycle Management Command and Marine Corps Systems Command decisions to award commercial contracts to Force Protection, Inc., may have limited the Government's ability to ensure it paid fair and reasonable prices for the contracts.

As for Armor Holdings -- which, by the way, is being purchased by the much-investigated BAE Systems -- one subsidiary, Simula Aerospace and Defense Group, delivered to TACOM armor kits with "missing and unusable components" and missed several shipment deadlines, resulting in "increasing risk to the lives of soldiers." According to the IG report, Simula didn't qualify under the Federal Acquisition Regulation as a "responsible prospective contractor," but it got its contracts anyway.

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First Admiral William J. Fallon took over as head of U.S. Central Command, even though it's the Army and Marines that are most engaged in the wars in Iraq and Afghanistan. Now Admiral Mike Mullen, the chief of naval operations, has been nominated to become the next head of the joint chiefs of staff. If approved, that means a Naval officer will helm the joint chiefs, Central Command, Southern Command, Pacific Command (an understandably typical position for an admiral) and Special Operations Command. What's up with the Navy's commanding position?

One factor is obvious, says Loren Thompson of the Lexington Institute: The Navy "has not been tarred by the failure in Iraq." In other words, it's precisely because the Navy doesn't have the degree of skin in the game that the ground services have that admirals are making for attractive nominees for vacancies at key commands. That certainly tracks with Defense Secretary Gates's worry that General Peter Pace's prospective renomination hearing would have become a rancorous reexamination of the Iraq war. And it's doubly surprising, given how the Navy was the service most comfortable with ex-Defense Secretary Donald Rumsfeld, the man most closely associated with Iraq other than President Bush. "The irony is that the Navy culture was always able to get along with Rumsfeld, but otherwise rolled rather quickly with the Rumsfeld reversal" underway thanks to Defense Secretary Gates. No one can say the Navy is anything but buoyant. "The Navy has an intellectual tradition stronger than that of the other services," Thompson adds, referencing the overrepresentation of Naval officers on the Joint Staff.

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Breaking news: Marine General Peter Pace -- "Perfect Pete," as he's known inside the Pentagon -- is out as chairman of the Joint Chiefs of Staff after serving less than two years. Pace's announced departure comes just after the deputy joint chiefs chairman, Admiral Edmund Giambastiani, announced his own retirement last week.

ThinkProgress links to a report from defense expert Loren Thompson speculating that Pace's departure is "related more to the triggering of certain retirement benefits than his close association with the discredited former Defense Secretary Donald Rumsfeld." Defense Secretary Bob Gates announced the nomination of Admiral Mike Mullen to replace Pace.

Update: Gates explained in a press conference that he feared Pace couldn't get through a nomination for another two-year term as chairman without it becoming a "contentious" forum on the administration's performance on Iraq and Afghanistan.