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Summary

Many overseas federal contractors are covered by the Defense Base Act (DBA), which mandates that they provide workers compensation insurance for their employees. As the U.S. military has increased operations in Iraq, the size of the DBA program has grown. Since September 2001, there have been 49,472 DBA cases, including 1,584 cases involving the deaths of contractors in Iraq and Afghanistan. Nearly $200 million in cash and medical benefits were paid to DBA claimants in 2008. Congress has become increasingly concerned with the costs involved in the DBA program because the federal government usually reimburses its contractors for their DBA premiums. The Department of State (DOS) and the U.S. Agency for International Development (USAID) have seen some cost savings since adopting single-source models for their DBA insurance in which contractors for each agency are required to purchase insurance from a single company selected by the agency. The U.S. Army Corps of Engineers (USACE) is currently testing such a model for its DBA system. For the rest of the Department of Defense (DOD), however, including the Armys large Logistics Civil Augmentation Program (LOGCAP) contract, individual contractors are free to select their own DBA insurers and negotiate their own rates, and one contractor, KBR, has been criticized by DOD auditors for failing to demonstrate that it sought to control DBA premium costs when selecting an insurer. The Duncan Hunter National Defense Authorization Act (NDAA) for FY2009 (P.L. 110-417) includes a provision that requires DOD to change the way its contractors provide DBA coverage for their workers. In addition, the House Committee on Oversight and Government Reform held hearings in 2008 and 2009 on the DBA. Current DOD DBA policies have also been criticized by the Government Accountability Office (GAO) and the Armys own auditors. This report provides an overview of the DBA and the systems used to provide DBA insurance at DOS, USAID, DOD, and USACE. Also included are criticisms of the current DOD DBA policy raised by GAO and Army auditors as well as responses to those criticisms by DOD and USACE. The report concludes with a discussion of several DBA reform options suggested by the House of Representatives in recent legislation. This report will be updated with any legislative changes. A list of acronyms used in this report is provided in the Appendix.

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