Saturday, July 28, 2007

Watchdog Group: Government Awards Contracts Despite Firms' Misconduct

By Roxana Tiron
The Hill

Thursday 19 July 2007

A watchdog organization is calling attention to what it deems the government's failure to properly vet the companies to which it awards hundreds of billions of dollars in contracts.

The Project on Government Oversight (POGO) yesterday released a revamped database detailing misconduct by the top 50 government contractors, including some of the world's largest military hardware, information technology, construction and energy companies. The database is stirring up criticism from industry members concerned that minor or even irrelevant issues are given too much attention.

POGO, which for years has criticized government waste in defense-related and other programs, said it set up the database due to the lack of centralized federal tracking of misconduct.

The new database includes instances of misconduct from 1995 to the present. POGO found that in fiscal 2005, the top 50 federal contractors received $178 billion in contracts out of a total of $384 billion in federal awards. Since 1995, the top 50 contractors paid $12 billion in fines, penalties, restitution or civil settlements for what POGO identified as more than 370 instances of misconduct.

In 2006 alone, the federal government collected $3.1 billion in settlements and judgments in cases involving allegations of fraud against the government, according to the Department of Justice. Since 1986 the government has collected $18 billion.

"Although the government is recovering federal funds from prosecutions and enforcement actions, more can be done preventively to ensure contract dollars are not awarded to risky contractors at the contract award stage," POGO's general counsel, Scott Amey, said.

Amey was expected to testify at a hearing of the Oversight and Government Reform Subcommittee on Government Management, Organization and Procurement.

POGO has highlighted a troop-support arrangement, the Logistics Civilian Augmentation Program (LOGCAP), which the Pentagon has opted to compete following stinging criticism. POGO charges that in the second go-round, the Army chose companies with repeated instances of misconduct.

Three companies - Kellogg Brown and Root (KBR), DynCorp and Fluor Corp. - now will compete for LOGCAP projects in the Middle East worth up to $150 billion. Previously, costs and allegations of misconduct tainted a multibillion-dollar Pentagon contract with KBR for some of the work. According to POGO's database, since 1995 Fluor has had 21 instances of misconduct, KBR has had five and Dyncorp, under parent company Veritas Capital Fund, has had three.

Instances of misconduct may include false claims against the government, violations of the Anti-Kickback Act, fraud, conspiracy to launder money, retaliation against workers' complaints and environmental violations.

"According to the Army's press release, three other contractors bid on the LOGCAP contract - one can only wonder if they were less risky contractors," Amey said.

Critics say the statistics can be misleading if tax adjustments, environmental settlements and discrimination complaints are given the same weight as fraud cases.

Alan Chvotkin, senior vice president and counsel of the Professional Services Council, said POGO's database is "not very good," "not very factual," and fails to provide useful information to government officials. PSC is one of the largest trade associations of the government's professional and technical services industries, counting large companies such as Lockheed Martin and Boeing among its members, but also medium and small companies.

"We certainly understand their interest in trying to characterize and collect information about contractors and the issues that they face," Chvotkin said in an interview. "To the extent that they are highlighting contractors' behavior, there are other mechanisms within the government which are more accurate and more directly related to the decisions that the government has to make about contractor eligibility."

Chvotkin objected that complaints or filed lawsuits in the database easily could be equated to guilt even if no action has been taken. Chvotkin said his organization supports government collection of all information relevant to making an award decision.

He said that instead of a private database, he would like to see a government database that links administrative settlements and Department of Justice actions.

The federal government already has a database intended to monitor contractors, the Past Performance Information Retrieval System, but critics have called it outdated and incomplete.

Rarely, businesses with a history of poor performance are temporarily denied contracts or barred from government work.

Rep. Carolyn Maloney (D-N.Y.) last week introduced a bill that would create a comprehensive, centralized database to monitor the procurement system more efficiently. It would track civil, criminal and administrative actions, allowing contracting officers to gauge companies' performance or whether they have violated federal laws.

Some of the largest companies lead POGO's database in instances of misconduct: Lockheed Martin (39), Boeing (23), Northrop Grumman (21), ExxonMobil (25), Fluor (21) and General Electric (26).

While most companies did not respond to POGO's letters requesting participation in the database, General Electric (GE) sent a letter to POGO two years ago complaining that the organization's information "has been plagued in the past by inaccuracies and misinformation."

"We have objected via phone calls and letters to POGO, which has not responded," GE's Gary Sheffer wrote.

"While each compliance miss is unacceptable, I would note that the items listed for GE in your database are relatively few in number, given the size and breadth of GE and the nearly 20-year period you cover. Most of the instances of misconduct you cite are civil not criminal cases and were resolved cooperatively with government. Many also involve issues that are more than a decade old."


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