Summary

Defense Base Act Insurance: Review Needed of Cost and Implementation Issues

GAO-05-280R  April 29, 2005

Full Report (PDF, 14 pages)   Accessible Text   

Since the Iraq conflict began in March 2003, the Departments of Defense (DOD) and State, the U.S. Agency for International Development, and other federal agencies have issued contracts to perform reconstruction activities in Iraq. The large number of contractors working amid continued violence has raised concerns over the use of contractors to support U.S. military and civilian operations overseas, including the cost of workers' compensation insurance provided to contractor employees in Iraq under the Defense Base Act (DBA). We have received requests from over 100 members of Congress asking us to review a number of Iraq-related issues, including issues associated with DBA insurance. Because of the level of interest in issues dealing with Iraq, the Comptroller General initiated this review under his statutory authority. The objectives of our review were to identify the cost to the U.S. government of insurance coverage purchased under DBA and to assess the act's implementation. DBA provides disability and medical benefits for contractors' and subcontractors' employees injured on the job and death benefits to survivors when those employees are killed.

We are limited at this time in what we can conclude about the cost of DBA insurance. Recent investigations by several states into a number of insurance companies and brokers during the course of our review raise questions over the reliability of information that we obtained from the insurance industry, a primary source of data in our review. Additionally, we found that it is difficult to aggregate reliable data on the cost of DBA insurance due in part to the large number of contractors and the multiple levels of subcontractors performing work in Iraq. Lacking reliable aggregate data, we were unable to calculate the total cost of DBA insurance to the government or the impact of DBA insurance costs on reconstruction activities in Iraq. This report explains DBA requirements; discusses DBA insurance rates, which are higher for DOD than for other agencies; identifies challenges and concerns that federal agencies face when implementing DBA; and suggests that Congress consider requiring that the Director of the Office of Management and Budget (OMB) determine, in coordination with DOD, the Departments of Labor and State, and the U.S. Agency for International Development, what actions should be taken to address issues that came to light during our review.

Subject Terms

Americans employed abroad
Cost analysis
Data collection
Data integrity
Department of Defense contractors
Employee survivors benefits
Insurance
Insurance companies
Insurance cost control
Insurance regulation
Subcontractors
Workers compensation
Iraq War and reconstruction
Iraq