You are here: Home / Archives for debarment

Page 1 of 212

Suspension and debarment often misunderstood, contractors told

Filed under Contracting News · Tagged with , , , , , ,

April 18, 2012 by cs

Though viewed by industry as a punishment, the government’s suspension and debarment procedure for errant contractors is designed to be an “instantaneous” way to protect taxpayers from irresponsible spending, a panel of procurement officials agreed on Thursday. They parted company, however, on whether the current rules afford sufficient due process to affected companies.

Speaking at the first Acquisition Excellence conference staged jointly by the General Services Administration and the American Council for Technology and Industry Advisory Council, current and former procurement officials expressed concern that suspension and debarment has become “a hot topic” in Congress. Government Executive was one of four media partners for the conference.

It’s being used to go after “bad actors in all sorts of endeavors, from failure to pay taxes to fraud convictions,” said William Woods, director of acquisition and sourcing management at the Government Accountability Office, which in October 2011 published a study comparing frequency of suspensions and departments at 10 agencies. Most of the contractors tagged as suspended on GSA’s Excluded Parties List System are there for reasons unrelated to federal contracting such as drug trafficking or violations of export controls, he said.

Seven of the fiscal 2012 appropriations bills contained language requiring use of suspensions and debarments, added Rob Burton, a top White House procurement administrator during the George W. Bush administration and now a partner at Venable LLP. But the purpose of suspension and debarment is “not complicated,” said Dan Gordon, former administrator of procurement policy for the Obama White House who is now associate dean for government contracts law at The George Washington University Law School. “The purpose is to protect the taxpayers, not to replace or supplement the Justice Department’s administration of justice — they take care of the bad guys,” he said. Gordon warned that many misread the GAO report to imply that the more an agency suspends and debars, the better, as if “what this country needs is to hang more contractors high from a tree.”

What the process requires is “a matter of checking, of being careful,” Gordon said. “The system works pretty well,” and doesn’t require new legislation or regulation. The interagency committee on suspension and debarment can help by sharing best practices among specialized staff at agencies, he added.

Burton disagreed, calling the current regulations “flawed in a fundamental way because they allow for no due process.” He described how his private sector clients can suddenly receive a letter informing them they can’t do business with the federal government and “they get no opportunity to present their own information or defend themselves.” He added the current rules “would not pass constitutional muster.”

Joseph Neurauter, GSA’s top suspension and debarment official, stressed that the tool is not intended as punishment for contractors, though he acknowledged it can jeopardize an individual’s job. “It’s about minimizing risk for the federal government,” which is why the suspension is “instantaneous,” he said. His job is to view the problem from the point of view of agency acquisitions teams, Neurauter added. But he does regularly send letters to individuals who are suspended and invite them to meet informally and “show cause” as to why they should regain eligibility for government contracts.

Asked about new legislation that would impose suspension and debarment consideration for war zone contractors involved in human trafficking, Woods said “that’s a policy call for Congress.” Gordon said he is “always concerned when Congress sets up an automatic system of suspension and debarment because it undercuts the process by precluding discretion by officials looking at the full picture.”

At other sessions of the all-day conference that assembled several hundred federal employees and contractors at the Grand Hyatt in Washington, GSA chief Martha Johnson opened proceedings by stressing the value of sustainability as a key to reframing procurement in an age of limited budgets. A related session was titled, Sustainable Acquisition: Is It a Dream or Is It Real?

At lunch, Lesley Field, acting White House administrator for federal procurement policy, and colleagues presented achievement awards to federal contracting professionals in categories of buying smarter, effective vendor communication and strategic sourcing.

In a nod to the challenge of preparing the next generation of acquisition officers, Steve Ressler, founder of the social networking tool GovLoop, moderated a panel of young federal contract specialists from several agencies who are in the Rising Acquisition Professionals program. It was set up in 2010 by the Office of Federal Procurement Policy and the Federal Acquisition Institute.

Other sessions focused on how tight budgets are affecting ongoing relationships among agency contracting officers, program managers and industry. Speakers stressed the importance of engagement and dialogue early in the acquisition process, and many complained that too many agency staff members are fearful of tapping the expertise of contractors for fear of violating the Federal Acquisition Regulation and favoring one potential bidder over others, possibly provoking a bid protest.

“Government and industry too often talk past each other on early engagement,” said Mark Day, director of the Office of Strategic Programs at GSA’s Federal Acquisition Service. “Government asks the wrong questions, asking about prices before we know the cost drives, and then they write requirements that drive costs up.” Contractors, in turn, too often target the title not the role, Day added, and he recommended they talk to the official actually writing the requirements. “Early engagement is a mystery to the government side, and they’re scared of it,” Day said. “But it is an opportunity to find the sweet spot between what the government needs, what the contractor can provide and what the FAR allows.”

– by Charles S. Clark, Government Executive, Mar. 30, 2012 at http://www.govexec.com/contracting/2012/03/suspension-and-debarment-often-misunderstood-contractors-told/41638.

Lawmakers, OMB push to ban more ‘bad-actor’ contractors

Filed under Contracting News · Tagged with , , , , , , ,

November 18, 2011 by cs

Procedures for disqualifying dishonest or incompetent federal contractors are too rarely exploited, according to a consensus of several senators, the White House and cross-agency watchdogs. But there is disagreement over whether the solution is improving application of the rules or whether Congress should make some suspensions and debarments mandatory.

At a Wednesday hearing of the Senate Homeland Security and Governmental Affairs Committee, Chairman Joe Lieberman, I-Conn., expressed alarm that a series of reports from the Government Accountability Office and inspectors general have shown a reluctance of many agencies to refer unsatisfactory contractors to the Excluded Parties List System maintained by the General Services Administration.

A Pentagon report “just last month shows that over a 10-year period, DoD awarded $255 million to contractors who were convicted of criminal fraud; and almost $574 billion to contractors involved in civil fraud cases that resulted in a settlement or judgment against the contractor,” Lieberman said. “Last year, the Department of Homeland Security’s inspector general found 23 cases where the department had canceled a contract because of poor performance, but in none of those cases did DHS suspend or debar the contractor.”

The Federal Emergency Management Agency, despite the existence of an anti-fraud task force following Hurricane Katrina in 2005, has not sent a single name to the list, Lieberman added, noting that the rarity of suspensions and debarments has been a concern of the committee as far back as 1981.

Sen. Claire McCaskill, D-Mo., said she got angry about the issue when a U.S. soldier was killed in Iraq by a negligent truck driver working for a U.S. contractor. The U.S. military continued using the contractor. “It’s a matter of character for our nation,” said McCaskill, who is preparing related legislation to implement recommendations of the recently disbanded Commission on Wartime Contracting.

She regretted that proposals to require more suspensions and debarments founder because of a fear of litigation, because it’s “too much trouble,” some contractors are seen as “too big to fail,” or “it is unclear who is accountable for a failure” to pursue that course, she said. “We need to draw a line in the sand.”

Dan Gordon, the departing administrator of the Office of Federal Procurement Policy, said the Obama administration had made significant progress on the issue over the past three years, but the system’s “weak link” is ensuring that a fraudulent contractor is flagged for action in a timely way. “Sometimes the referral takes too long, as historically agencies have been very bad about sharing, either because officials didn’t check the list, checked it too late, or because of problems in the spelling of an entity’s name,” he said.

He pointed to a memo to agencies released Tuesday by Office of Management and Budget Director Jack Lew that requires agencies to appoint a senior accountable official to “assess the agency’s suspension and debarment program — including the adequacy of available training and resources — review internal policies and procedures,” ensure databases are checked before grants and contracts are awarded, and “take corrective action if an award is improperly made to a suspended or debarred contractor.”

Gordon said OMB has been working with its Interagency Suspension and Debarment Committee to improve training and create detailed agency guidance. But he expressed skepticism toward any prospective legislation making certain referrals mandatory, saying agency cultures differ and mandatory referrals that take away discretion could undermine the role of suspension and debarment officials.

Allison Lerner, the inspector general of the National Science Foundation who co-chairs an IG working group on the issue, said suspensions and debarments “could be used more frequently and effectively.” The resistance comes from misconceptions among agency contracting officials, she said. Some fear jeopardizing investigations by disclosing negative information on contractors and some hold the incorrect beliefs that a decision must be based only on facts uncovered in a judicial process and that IG investigations cannot be cited as evidence against contractors.

Panelists agreed that the model policy is that practiced by the Air Force. Steven Shaw, deputy general counsel for contractor responsibility at the Air Force described two recent suspensions, one involving the Boeing Co.’s launch systems units and the other involving programs within L-3 Communications. Sixty-two percent of his suspensions and debarments are “fact-based,” he said, meaning his team doesn’t wait for the Justice Department to bring criminal charges. “We take a broad view of the type of misconduct, not just criminal fraud but as it relates to business integrity, tax issues, the Foreign Corrupt Practices Act or commercial fraud,” he said.

The Air Force also uses a “carrot-and-stick approach that is aggressive at the front end” but still allows contractors to prevent fraud through risk management and ethics programs.

Ranking committee member Sen. Susan Collins, R-Maine, who as a staff director worked on the 1981 hearing chaired by then-Sen. William Cohen, R-Maine, reminded the hearing that the goal of suspension and debarment is “not to punish contractors but to protect” the taxpayer, and that allowing “bad actors” to win new contracts is “not fair or ethical to the honest contractors.” She said she is considering legislation that would force agencies — she mentioned the Justice Department — to step up use of the tool.

Such a move is opposed by Alan Chvotkin, executive vice president and counsel of the Professional Services Council, a contractors trade group. He praised this week’s OMB memo as good “cross-agency coordination to bring attention” to the appropriate use of suspension and debarment. But he stressed the “very limited circumstances” under which “automatic exclusion” should be applied to a contractor.

“The government has wide flexibility to assess each individual situation to determine whether the government is at risk, including built-in due process procedures,” he said. “Doing it in an arbitrary way would be a mistake and convert it into a punishment, which it is not.”

– by Charles S. Clark - Government Executive - November 16, 2011  at http://www.govexec.com/story_page.cfm?articleid=49355&dcn=e_gvet

Fraud continues in small business preference programs

Filed under Contracting Tips · Tagged with , , , , , , , ,

October 31, 2011 by cs

Contractor fraud in small business set-aside programs is difficult to detect and prove, but its annual costs to government are significant in dollars and damage to legitimate business that deserve the work, two federal watchdogs told a House panel Thursday.

In fulfilling the Obama administration’s goal of giving 23 percent of prime federal contracts to small business, agencies need to do better at making a public example of “bad actors” and at vetting contractors that misrepresent their qualifications for minority advantages through self-certification, according to Peggy Gustafson, inspector general for the Small Business Administration, and Brian Miller, IG for the General Services Administration.

They spoke at a hearing of the House Small Business Subcommittee on Investigations, Oversight and Regulations called by Chairman Mike Coffman, R-Colo., who sought to learn why much contractor fraud goes unpunished and unprosecuted.

“Just as we all benefit from small business prime contracting, we all suffer when fraud rears its ugly head,” Coffman said. “Legitimate small businesses lose the ability to perform when contracts go to firms that do not qualify for, or who are not following the rules associated with, the small business contracting program. The government suffers from this fraud because bad actors give all small businesses a bad name, so contacting officers are more reluctant to use the small business programs, which in turn results in less competition and a less vibrant industrial base.”

The set-aside programs consist chiefly of preferences for section 8(a) business development, Historically Underutilized Business Zones, women-owned businesses and the service-disabled veteran-owned program. Both inspectors general testified that their own agencies had fallen victim to fraud. SBA and the HUBZone certification program played a role in the sensational case exposed with the arrests earlier this month involving $20 million in fraud allegedly committed by contractors and two employees of the Army Corps of Engineers, Gustafson noted.

Miller described a recent $6 million contract awarded to a company that claimed to be run by a disabled veteran whose documents said he served three tours of duty during the Vietnam War and received medals and citations. It turned out, Miller said, he was a mechanical engineer serving stateside in the National Guard.

“It’s difficult to prove a monetary loss to the government because it did receive the goods and services,” Miller said. “But the real loss is to program integrity, to the legitimate small businesses that didn’t get the contract.” He added that fraudulent self-certification is difficult to detect and agencies rely on such information in the majority of the preference contract awards because their resources are limited.

“Strong penalties are needed to deter” the fraud, he said. “The tougher it is to detect, the tougher penalties must be,” though the rules should avoid punishing innocent companies simply because of a clerical error, he said.

Gustafson said each type of set-aside has its own level of vetting and the Section 8 program is the hardest for contractors to qualify for. She agreed that agencies could deter more fraud by publicizing their reviews of such programs, which in one instance prompted “contractors to drop out in droves.” It is acknowledged by all IGs, she added, “that the federal government doesn’t use suspension and debarment enough — that hits contractors in the pocketbook.”

Miller noted that GSA has an interactive map on its website providing other agencies with links to state databases reporting contractors that have been suspended or debarred.

Coffman asked whether agencies should take more responsibility for policing fraud. “It’s hard to draw simple rules,” Gustafson said. “Overburdened” agencies focused on awarding contracts are “not expected to know all the ins and outs” of the set-aside programs. Also, “the more difficult the rules are to administer, the harder it is to present the case to a jury,” she said.

But the issue “needs more discussion in the executive branch and guidance from Congress since it’s not always clear who’s minding the store,” she said. “If the programs don’t have integrity, we might as well throw them open to open competition.”

– by Charles S. Clark - Government Executive – October 27, 2011 – http://www.govexec.com/story_page.cfm?articleid=49156&dcn=e_gvet

Defense department contractors may see new hiring regulations

Filed under Contracting News · Tagged with , , , , , , , ,

September 19, 2011 by cs

A proposed Defense Department regulation, if implemented, will substantially change how contractors hire, oversee and track certain former civilian and military personnel. As proposed, it will also establish a new suspension and debarment risk for contractors that hire former personnel.

On June 6, the department issued a proposed rule — DFARS Case 2010-D020 “Representation Relating to Compensation of Former DoD Officials” — to require all offerors to submit a representation, upon submission of the offer, that all employees who are former Defense Department “covered officials”
(defined in DFARS Clause 252.203-7000), to the best of the offeror’s knowledge and belief, comply with:

  • Defense Federal Acquisition Regulation Supplement (DFARS) 203.171-3 that
    states that covered Defense Department officials must have received or requested
    an ethics opinion on post-government employment restrictions;
  • 18 U.S.C. 207 and 5 C.F.R. Part 2641, which is the statute and regulations
    affecting post-government employment of ex-government civilian personnel and
    military officers; and
  • Federal Acquisition Regulation (FAR) 3.104-2, which implements the
    Procurement Integrity Act.

This proposed rule would likely have the several effects.  For example, it will share responsibility for compliance with post-government employment laws and regulations between ex-government personnel to defense contractors. Current post-government employment laws impose criminal and civil liability on ex-government personnel violations.

It will also require defense contractors to implement new compliance measures. To ensure compliance, defense contractors must establish systems and processes to identify, track, educate, and obtain periodic certifications from all employees, consultants, and others who receive compensation and who are former “covered officials.”

The new requirement will burden both smaller contractors that must establish a new compliance program to meet this requirement, as well as larger defense contractors that must levy the requirement on subsidiaries, joint ventures and affiliates, even those entities that are non-government contractors. Any new compliance system obviously will increase contractor overhead costs, which often are passed on to the government.

It will also impose on defense contractors a new liability over which they have no control.  Because the proposed regulation does not limit the certification to the activities of the former “covered employees” on a Defense Department contract or even related to employment by the contractor, the contractor will be required to certify compliance of its employees even as to their personal, off-duty activities.

Consultants and part-time employees working for other companies or organizations may violate their restriction in pursuit of other activities wholly unconnected to the certifying contractor. For example, an ex-military officer employed by a contractor may violate her representational restrictions under 18 U.S.C. 207 by contacting the government on behalf of another company for which she is consulting, or even as a volunteer for a civic,
charitable or scouting organization.

The proposed regulation may also deter smaller companies from bidding on Defense Department contracts. Smaller commercial contractors with less sophisticated employee screening and tracking systems may view this requirement as too costly to introduce across their enterprise in order to seek new defense business.

Another result may be that contractors will be deterred from hiring ex-military and Defense Department personnel. The proposed rule imposes both a new risk of non-compliance, which could lead to suspension and debarment or liability under the False Claims Act, as well as a new requirement for a compliance system to mitigate the risk. Thus, defense contractors likely will be deterred from hiring ex-military and department personnel. Ironically, this proposed rule red flags former department personnel — including Title 10 reserves and National Guard personnel — as potential burdens for Defense contractors.

The proposed regulation applies only to “covered officials,” but the difficulty in identifying who qualifies as a “covered official,” may cause defense contractors, especially smaller contractors, to simply close the door to all former department personnel.

Another potential consequence is that it may deter civilian federal employees from working in the Defense Department. Since the restrictions apply only to former department personnel, civilian employees, especially procurement and senior program managers who qualify as “covered employees,” may choose to serve in other federal agencies instead of Defense, if they envision post-government employment in the commercial sector. This obviously would frustrate Defense Department efforts to build a world-class acquisition work force.

The bottom line is that the proposed regulation offers several dysfunctional, expensive, and possibly unintended consequences that the Defense Department hopefully will address as it considers whether it should be implemented.

– by Steve Epstein, chief counsel for ethics and compliance at The Boeing Company. The views expressed are solely those of the author. Published by National Defense magazine, October 2011 at http://www.nationaldefensemagazine.org/archive/2011/October/Pages/DefenseDepartmentContractorsMaySeeNewHiringRegulations.aspx

OMB announces final guidance on inherently governmental functions

Filed under Contracting News · Tagged with , , , , , , , ,

September 13, 2011 by cs

Long-anticipated final guidance on “inherently governmental functions” is set for publication on Monday and should clarify confusion over blurred lines in agencies’ understanding of which types of work should be outsourced, top officials at the Office of Management and Budget told reporters on Friday.

The final policy letter, said Chief Performance Officer Jeffrey Zients, “helps agencies do better at balancing contracting out with management by federal employees. The mix was out of balance and we think this protects the public interest. Given our fiscal situation today, it is important more than ever that taxpayer money be well spent.”

With a few exceptions, the guidance, which takes effect Oct. 12, is similar to the draft released in March 2010, said Dan Gordon, administrator of the Office of Federal Procurement Policy. “But it is a milestone” that follows up on a memorandum of understanding about reducing waste in contracting issued by President Obama in March 2009.

The document includes lengthy lists of functions that are clearly inherently governmental and separate lists of “functions closely associated with the performance of inherently governmental functions” — where agencies can use more discretion.

One difference in the new guidance is a provision intended to “clarify the confusing and controversial” policy on the contracting out of military security operations, Gordon said. If a function is part of combat or could evolve into combat, then contractors can’t be used. “We benefited on this issue from public comments from the private sector, agencies, nonprofits and the Hill,” he added.

A second departure is a provision intended to help small businesses. “It places a lower priority on in-sourcing if the function is not inherently governmental,” Gordon said. “Insourcing is not a goal, but agencies need to understand that if an inherently governmental function is improperly contracted,” they can lose control of the work.

The administration “is sensitive” to realities of the current budget crunch, Gordon acknowledged. “We need to demonstrate fiscal responsibility on both sides” of the contracting process, he said. “We don’t want to dramatically increase [full-time equivalent] levels on the federal side, but in today’s fiscal world, the solution is not massive contracting out,” nor is it massive insourcing.

Zients presented the letter in the context of the administration’s two-and-a-half-year-old effort to trim waste by curbing contracting “after its uncontrolled growth under the prior administration.” One in six federal dollars is contracted out, and the rate, mostly in services, doubled since 2008, he said. But 2010 marked the first time in a decade that the level of contracting decreased, by $80 billion.

Examples of smarter contracting, Zients said, include “strategic sourcing,” such as pooling purchases of office supplies, which can save as much as 40 percent. “Rather than buying like 100 medium-sized businesses, take advantage of the fact that the United States is the world’s largest purchaser,” he said.

Another means is cutting spending on management support, which quadrupled over the past 10 years, he added. “In information technology and acquisition, management support produces many wasteful and unnecessary consultants’ reports that sit on a shelf.” That approach will reduce expenses by 15 percent, or $7 billion in fiscal 2012, he said.

Focusing on interaction with contractors, the administration also has “strengthened suspension and debarment” processes, Zients said, stressing, however, that “contractors do valuable work and will continue to do so.”

Over the past year and a half, Gordon said, the outsourcing-insourcing issue has been reviewed most thoroughly by the Defense and Homeland Security departments, a process now largely complete. Most agencies have already been working under the principles of the final guidance, he said, so its release won’t prompt major shifts.

Critical functions differ by agency, Gordon said, but the letter provides “clear direction to managers responsible for policy on the closely associated functions to make sure that the agency can control it and that the work doesn’t expand.”

The problem, he said, though “now largely corrected,” has been that some agencies, for example, would have a contractor write a statement of work and then award the contract to that same company. In managing IT functions, he added, he’s heard federal managers say that “no one in-house understands the work and that they’re completely dependent on the contractor. It’s intolerable.” The solution, he said, might be limited insourcing, adding two to three people, or simply applying more attention.

The guidance’s definition of inherently governmental, as in the draft, is based on the 1998 Federal Activities Inventory Reform Act, and Zients said the letter’s other changes, though small, would require adjusting the Federal Acquisition Regulation to conform.

Dozens of interest groups had been following the evolution of final guidance on what is inherently governmental.    “We are pleased OFPP has retained flexibilities for agencies to determine what functions are considered closely associated with inherently governmental functions or are critical functions to agency missions and to provide for these functions in a way that best meets their needs and capabilities,” said Stan Soloway, president of the industry group the Professional Services Council. “However, we are concerned that the list of closely associated functions could be misconstrued as a ‘do not contract’ list, even though it is not the case, nor OFPP’s intent. The checklist that identifies closely associated functions must not become a barrier to contracting for work where it is appropriate to do so.”

Scott Amey, general counsel of the watchdog group the Project on Government Oversight, said he is impressed with the guidance. “The policy comes clean about the government’s over-reliance on contractors and improves the categories of activities and functions that shouldn’t be performed by contractors,” he said. “Private security in combat areas was never a good policy, and OFPP’s changes will ensure that properly trained and mission-responsible government personnel conduct such work.” He wonders, however, whether agencies will actually retain or insource work that his group believes should be performed by public servants.

Steve Amitay, federal legislative counsel of the National Association of Security Companies, said on Friday that absence of any mention of “building security” in the guidance “validates the continued successful use of contract security by federal agencies. Furthermore, given the decades of effective and efficient use of contract security by federal agencies, any agency that is considering insourcing security jobs should, as the policy states, be required to conduct an in-depth, comprehensive cost-analysis of such a move.”

– by Charles S. Clark - Government Executive – September 9, 2011 – http://www.govexec.com/dailyfed/0911/090911cc1.htm?rss=getoday&oref=rss

U.S. bans contractor from further aid programs

Filed under Contracting News · Tagged with , , , ,

December 10, 2010 by cs

The U.S. government Wednesday took the unusual step of banning an American firm from being awarded new federal contracts due to evidence of “serious corporate misconduct” uncovered in an investigation of the company’s work on aid programs in Pakistan and Afghanistan.

The move by the U.S. Agency for International Development, or USAID, to suspend the Academy for Educational Development, or AED, a Washington-based nonprofit corporation that does extensive federal contracting, highlights longstanding concerns about the way the United States delivers foreign aid through a network of American contractors that some critics deride as “Beltway Bandits.”

AED has 65 contracts and grant agreements with USAID worth $640 million, according to agency spokesman Lars Anderson.

The suspension prevents AED from winning new contracts with any federal agency, Anderson said. USAID is now examining whether to seek debarment of the company, a step which would mean the loss of all its federal contracts.

USAID’s inspector general declined to release details of the alleged wrongdoing by AED, citing an ongoing investigation. But in a recently published report to Congress, the office noted that USAID “terminated a 5-year, $150 million cooperative agreement after [investigators] found evidence of fraud” relating to the purchase of household kits obtained by AED in Pakistan’s tribal areas.

The investigation revealed evidence of collusion between vendors and AED, resulting in overpayment for certain goods, the report said. The investigation also discovered that AED had inappropriately hired relatives of a person hired by USAID to oversee the program.

AED’s interim CEO, George Ingram, confirmed in a statement “an active, ongoing investigation” of the firm related to programs in Pakistan and Afghanistan.

The firm “has made significant steps toward strengthening its project-oversight processes … and is undertaking a full scale structural and procedural review to institute further organizational oversight and internal controls,” the statement said.

Ingram is a former deputy assistant administrator of USAID.

USAID once sent thousands of government employees abroad but now distributes aid mainly through American companies. Following two decades of staff cuts, it has become a “check writing agency,” in the words of Sen. Patrick J. Leahy (D-Vt.), who chairs a committee that oversees its work.

In Afghanistan and Pakistan, where aid is considered an important factor in battling the Taliban insurgencies, the Obama administration has been pushing to distribute funds directly through the governments and local organizations.

Contractors and their political allies in Washington have opposed that approach, warning, among other things, that money would be lost to corruption.

The money at stake is significant: The U.S. has pledged $7.5 billion in civilian aid to Pakistan, while the U.S. awarded $17.7 billion in contracts for Afghanistan reconstruction from 2007 to 2009, a recent audit found.

AED is among a group of large USAID contractors that are organized as tax-exempt public charities. A 2007 report, by a commission appointed by the president and Congress to examine foreign aid, concluded that some nonprofit USAID grant recipients “are so dependent on the agency that their private character is in doubt.”

– by Ken Dilanian, Los Angeles Times – December 8, 2010

Government contracting developments worth watching

Filed under Contracting Tips · Tagged with , , , , , , , , , , , , , , , , , , , , ,

August 6, 2010 by cs

There are several new developments in the government contracting arena which will have an effect on how you do business with federal, state and local agencies in the future. 

New rules soon will affect woman-owned and small disadvantaged-owned businesses; more transparency is being called for in both monitoring functions and contract award decision-making; a sharper focus is being given to federal contract awards to small businesses;  federal contract spending is predicted to drop; and government acquisitions are ”going green.” 

To help you track these developing trends, the Georgia Tech Procurement Assistance Center (GTPAC) presents this quick reference guide:

  • The National Association of Women Business Owners (NAWBO) recently submit comments on the U.S. Small Business Administration (SBA)’s proposed rule for the Women’s Procurement Program on behalf of its members.  You can find NAWBO’s views here, read the Small Business Administration’s summary of the Mar. 2, 2010 proposed rule here, and read the full text of the proposed rules here.  On July 28, 2010, the head of the SBA told the House Small Business Committee that the women’s small business contracting program will start before the end of 2010; details here.
  • There are new rules also being proposed for changes in the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program; an article containing details can be seen here. 
  • Increased calls for transparency, from both within and outside of government, are getting attention.   Pointing to the absence of a centralized federal database listing instances of contracting misconduct, the Project On Government Oversight (POGO) is now compiling and providing such data on its own.  You can find sortable details here.    In addition, the Sunlight Foundation combines data from the Federal Procurement Data System and the Federal Assistance Award Data System to create a free, searchable database of federal government contracting and spending, which you can access here.  Meanwhile,  the General Services Administration (GSA) and federal acquisition councils are seeking advice from the public on how best to publish contract information; details here.
  • In recent weeks, the volume has been turned up on the federal government’s contract spending with small businesses.  While it’s the government’s policy to award 23% of its contracts to small businesses, numerous reports show that not only has this goal been missed  but that large businesses – misclassified as small businesses — are receiving these set-asides.  A recent news article by the president of the American Small Business League summarizes this problem.  The Government Accountability Office (GAO) documents ineligible firms receiving government contracts designated for service disabled veteran owned small businesses here, and ineligible firms receiving contracts set-aside for small disadvantaged 8(a) firms here.  The White House, meanwhile, recently called for the establishment of a pair of interagency task forces to help federal agencies award more contracts to small businesses; details here.
  • The president’s proposed FY2011 budget includes $36 billion fewer federal contracting dollars.  This is about a 5% cut over the current year ending Sept. 30, 2010.  The new budget reflects a freeze on discretionary spending as well as an “insourcing” initiative, meaning fewer contractors and more government workers.  Read an article about an analysis of the proposed federal contracting budget here.  See details on how insourcing could hurt small businesses here.
  • More and more attention is being given to contractor performance as a factor in contract award decisions.  Click on the hyperlinks here to read articles about the Navy’s proposed “preferred contractor program” and the establishment of the Federal Awardee Performance and Integrity Information System (FAPIIS) which took effect on April 22, 2010.  You also can read about a bi-partisan effort in the Senate that could double the length of time contractors’ performance records remain active in government databases.
  • Energy efficiency and savings, green construction, green technology and smarter acquisition decisions — all continue to be emphasized in current government contracting.  Recent articles about each of these topics  here.

Keep watching www.gtpac.org to see reporting on the latest developments in all aspects of government contracting.

© 2010 Georgia Tech Procurement Assistance Center – All Rights Reserved.

Contractors caught gaming the system avoid punishment

Filed under Contracting News · Tagged with , , , , , , , , , , ,

July 29, 2010 by cs

Nearly eight months after a watchdog report found extensive fraud in a contracting program designed to help injured veterans launch a second career, the government has yet to suspend or debar any companies, according to witnesses at a hearing on Thursday.

In November, the Government Accountability Office reported that 10 ineligible companies had improperly received $100 million in set-aside and sole-source contracts that were reserved for service-disabled veteran-owed small business firms.

Five of the agencies cited in the report testified before the House Small Business Subcommittee on Contracting and Technology on Thursday, saying they have made process-oriented changes that will better equip them to catch fraud and malfeasance in the future.

As for punishing the 10 companies GAO named, agency officials were generally silent, citing ongoing investigations or a lack of evidence necessary to call for a suspension.

The lack of action frustrated subcommittee Chairman Glenn Nye, D-Va. “The only way that our veteran business owners can be confident that the program we have set out to provide them with tools to improve their lives; to show them that we care about their service to our country, is if you find instances of fraud and take action to root them out,” he said.

Nye has sponsored legislation that would institute fines and criminal penalties for companies caught gaming the service-disabled veteran-owned small business program. The bill, introduced in the House in November, also would require the Small Business Administration to dedicate more resources to program outreach.

The GAO report found various types of fraud. One company owner was not a service-disabled veteran. Another was owned by a service-disabled veteran who did not control the firm’s daily operations. Several reportedly acted as a conduit to pass-through the majority of the work to larger companies, or in the case of an Air Force contractor, to a firm where the veteran’s wife works.

The Air Force never disputed GAO’s findings, but on Thursday the Pentagon’s top small business contracting official told the panel the allegations were overstated and generally incorrect.

Linda Oliver, acting director of the Office of Small Business Programs at the Defense Department, attributed the $900,000 contract to “ignorance” on the part of the company and some inadvertent miscommunication by the contracting officer, whom she said took a “spanking” by the department for the mistake.

“There’s another side to explain all this,” said Oliver. She later told Nye that it’s too soon to know whether the issues GAO cited were indicative of a larger problem at Defense. “This may be the tip of the iceberg,” Oliver said. “I just don’t know.”

Lawmakers have said one problem is the program allows companies to self-certify as a service-disabled veteran-owned small business. Agencies then are reliant, because of a lack of resources and accurate data, on legitimate service-disabled entrepreneurs to spotlight instances of fraud.

“We rely on other small businesses to cry foul,” said Rep. Aaron Schock, R-Ill., the subcommittee’s ranking member. “Perhaps the agencies that are awarding the contracts to these small business set-aside preferences should be the ones to follow up and verify that; in fact, it’s small business people that are doing the work.”

Agencies argued they are taking steps to proactively and reactively respond to cases of fraud. For example, FEMA is exploring working with the Veterans Affairs Department to use its VetBiz database to validate the eligibility of some contractors. And VA is preparing to launch a Suspension and Debarment Committee for non-Federal Acquisition Regulation debarment actions.

“If there is actual fraud, we need to get into a debarring mode,” said Timothy Foreman, executive director of the Office of Small and Disadvantaged Business Utilization at VA and chairman of the new committee.

In fiscal 2008 — the last year for which data is available — agencies awarded nearly $10 billion, or roughly 1.5 percent of all contracts, to service-disabled veteran-owned companies. The federal statutory goal is 3 percent.

Joseph Jordan, SBA associate administrator of government contracting and business development, said he expects those numbers to rise, spurred in part by nearly $1.5 billion in Recovery Act awards to program contractors. “Overall, we’ve made progress over the past year, but as the GAO reminded us last year, there is more we can do,” Jordan said.

While lawmakers were pleased with the progress, some remain skeptical about the number’s legitimacy. “When the GAO report shows that some significant portion of that contracting pool is fraudulent,” Nye said, “there is a big asterisk next to that number for me.”

– By Robert Brodsky – NextGov.com –  07/16/2010

Obama directs government to withhold pay from delinquent contractors

Filed under Contracting News · Tagged with , , ,

June 25, 2010 by cs

President Obama signed a memorandum on June 18, 2010 establishing a “Do Not Pay” list, a single online destination where agencies can check the status of recipients of federal funds before sending payment.

In announcing the memorandum, Vice President Joe Biden and Office of Management and Budget Director Peter R. Orszag said the federal government annually wastes billions of dollars on payments made to the wrong person or company, in the incorrect amount or for the wrong reason. And agencies frequently do not check all the available databases before making payments.

Failing to check these databases can result in an agency paying a deceased person, or a contractor who has been debarred, officials said. According to Biden, during the past three years, federal auditors have reported that the government paid out benefits totaling more than $180 million to approximately 20,000 deceased Americans and more than $230 million in benefits to approximately 14,000 fugitive felons or incarcerated individuals ineligible for benefits.

These types of improper payments not only “erode the bottom line of our balance sheet, but also the bottom line of public confidence,” Biden said during a Friday press conference.

The memo directs Orszag to come up with a plan within 120 day to integrate all relevant federal databases so agencies can access them through a single entry point.

While the Do Not Pay list is being set up, the memo requires agencies to review current prepayment procedures and ensure they are reviewing available databases before releasing any federal funds. At a minimum, and when applicable, the memo will require agencies to cross-check the Social Security Administration’s list of deceased individuals, the General Services Administration’s list of suspended and debarred contractors, the Treasury Department’s list of recipients who owe the government nontax debt, the Health and Human Service Department’s list of parties excluded from participating in federal health care programs, and the Housing and Urban Development Department’s system determining the credit-worthiness of individuals applying for federal loans.

The administration also announced the expanded use of a tool they say has helped limit fraud and abuse under the Recovery Act. The fraud mapping tool allows agencies to go beyond the current markers used to flag potential fraud, such as the lack of a valid mailing address. It allows agencies to examine connections among and between contractors and individuals for anything suspicious.

For example, Orszag said, with the tool, an agency could more easily see on a map that five separate companies all are headquartered at a single house — with a pool and a boat in the backyard.

The tool, which only the Recovery Act Transparency Board now uses, will be expanded first to the Centers for Medicare and Medicaid Services, which combined had $65 billion in improper payments in 2009 — with fraud a significant contributor to those improper payments, Biden and Orszag said.

Biden said in addition to catching those committing fraud, he hopes the tool will act as a deterrent.

“Not only do we have sheriffs, but we have weapons, weapons we didn’t have before,” he said. “The more who know about these tools, the less inclined they’ll be to try [to commit fraud].”

The two announcements are another part of the administration’s effort to reduce wasteful spending across government, Orszag said. But Biden pointed out they are also an attempt to apply the best practices and lessons learned under the Recovery Act to daily spending in the federal government.

The vice president called spending under the stimulus “uncharacteristically responsible,” and said he and Recovery Act implementation leader Earl Devaney were, from day one of the effort, committed to ensuring the significant focus on reporting and responsibility on stimulus projects also applied to everyday spending.

“We hope the Recovery Act becomes a template for other spending,” Biden said.

– by Elizabeth Newell - GovExec.com –  June 18, 2010

SBA hears complaints about federal regulations

Filed under Contracting News · Tagged with , , , , , ,

May 24, 2010 by cs

Small-business owners had plenty to say about federal regulations on May 18th at a hearing by the U.S. Small Business Administration in Henrico County, Virginia.

They complained about an overabundance of regulatory agencies that make it difficult to run businesses. They talked about corruption, intimidation and unfair treatment by people in federal agencies. They named names.

Jerry Askew Sr., one of 11 businesspeople to testify, said he had been investigated for 14 years by the U.S. Department of Defense and unfairly was accused of violations. He runs Marine Environmental Services Inc. in Portsmouth. “I believe in my innocence,” he said. “I hope my voice is heard.”

Esther H. Vassar, national ombudsman for the SBA who came from Washington to hear their concerns, said two businesspeople refused to testify because they were afraid of government retaliation. She said the intent of the hearing was to create a more cooperative regulatory environment. “We are serious about hearing your concerns and working to resolve them.”

About 60 people attended. Also listening were Richmond SBA District Director Ron Bew, members of the Regional Regulatory Fairness board and representatives from federal regulatory agencies. Vassar urged regulators not to be quick to be punitive but rather to work with small businesses. She said most businesses want to comply with regulations but may need help understanding the regulations.

David Faria, who runs Technical Solution Providers in Fairfax Station, said his firm was listed as a top contractor for the Department of Defense. But everything broke down after two years. He said his company was marred by the whims and fancy of one government employee who wanted to give another company the contract. “I am here to testify about how one federal government employee can make a huge difference in destroying a business.” Allegations of wrongdoing were made against his company, but nothing ever stuck, he said. However, the government employee unfairly issued a “a cure notice” or sanction against his company, barring it from going after another federal contract, Faria said. “My humble plea is to make sure this doesn’t happen to any other company,” he said.

Henrico businessman Whit Baldwin said the regulatory environment has become overbearing, time-consuming and expensive for small businesses. “We accept a lot of risks, but every day it becomes more difficult for us,” said Baldwin, who runs HeloAir Inc., a helicopter transport business. Baldwin rattled off at least 20 state, local and federal agencies that he would need to contact for certification if he were to start his business today. “And that is just the snapshot.” If young adults were to ask him if he would start his business all over again, he would tell them they had lost their minds, he said.

Complaints also were lodged against the U.S. Department of Veteran Affairs, the U.S. Agency for International Development, the Fort Eustis Small Business Office, the U.S. Department of Housing and Urban Development and the U.S. Department of Transportation. Vassar said the agencies will have 30 days to respond to the complaints but may be granted extensions.

– By Carol Hazard – Richmond Times-Dispatch – Published: May 19, 2010

Page 1 of 212