Georgia Tech Procurement Assistance Center

Government shutdown costing private-sector contractors $245 million every day

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As it rounds up its third week, the partial government shutdown isn’t only affecting hundreds of thousands of federal employees. Contractors are potentially losing out on $245 million each day the shutdown continues, Bloomberg estimates.

Private-sector organizations that serve federal agencies including the Department of Homeland Security, the United States Agency for International Development and the Environmental Protection Agency have been told to stop work on certain contracts, with little indication as to what happens next, the Washington Post reports.

Homeland Security’s Federal Emergency Management Agency (FEMA) last week posted a “blanket” stop work order affecting scores of open contracts, the Post reports. “Any work done after receipt of this notice is at your own risk and will not be reimbursed,” Bobby McCane, FEMA’s head of contracting activity, wrote to federal contractors. “I thank you for your assistance during this funding lapse.”

Keep reading this article at: http://fortune.com/2019/01/07/u-s-government-shutdown-private-sector/

Major design and construction company agrees to pay $9 million to settle false claims allegations

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URS E & C Holdings Inc., a successor in interest to the global design and construction company Washington Group International Inc. (WGI), has agreed to pay $9 million to settle allegations that WGI submitted false claims in connection with United States Agency for International Development (USAID) contracts, the Justice Department announced January 6, 2016.

Justice Dept. seal - Copy“Contractors who misrepresent their eligibility for government contracts undermine the government procurement process,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will take action to protect that process and to ensure that taxpayer funds are not misused.”

“Government contractors must be honest and forthright,” said U.S. Attorney Wendy J. Olson for the District of Idaho.  “This settlement protects the integrity of the federal procurement process.  Whether a situation involves procurement fraud, as in this case, or healthcare fraud or any other type of fraud and dishonesty, the U.S. Attorney’s Office for the District of Idaho seeks to hold those obtaining public funds accountable.”

USAIDThe settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s.  The contracts were awarded to a joint venture partnership between WGI, Contrack International Inc. (Contrack) and Misr Sons Development S.A.E. (HAS), an Egyptian company.  The United States filed suit under the False Claims Act and the Foreign Assistance Act, alleging that prior to the award of those contracts, the joint venture partners concealed from USAID that Contrack and HAS were partners in the venture, thus preventing USAID from evaluating their qualifications and eligibility, which was a precondition to contract award.  As a result, WGI and its partners allegedly received USAID-funded contracts for which they were ineligible.  The settlement resolves only WGI’s liability.  The United States previously settled with Contrack and is continuing to pursue its claims against HAS.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Idaho; and the USAID Office of Inspector General.

The case is United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation, Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (D. Idaho).  The claims resolved by this settlement are allegations only and there has been no determination of liability.

Source: http://www.justice.gov/opa/pr/urs-e-c-holdings-inc-agrees-pay-9-million-resolve-false-claims-act-allegations

Ban on contractor campaign gifts is Constitutional, says circuit court

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A 75-year-old prohibition on campaign contributions by individual federal contractors was upheld on Tuesday by a three-judge panel of the District of Columbia Circuit, a ruling favoring the Federal Election Commission’s position over two contractors for the U.S. Agency for International Development (USAID).

FederalElectionCommissionIn Wagner v. FEC, the appeals judges meeting en banc determined that the government has an interest in such a ban to “prevent corruption and the appearance thereof and, in so doing, to protect the integrity of the electoral system by ensuring that federal contracts were awarded based on merit.”

Plaintiffs Lawrence Brown and Jan Miller, longtime USAID employees who left and were hired back to write a report on science and regulation, wanted to exercise their free speech rights and give money to candidates, political parties and traditional political action committees in the 2012 elections. They cited the First Amendment, equal protection and due process.

Keep reading this article at: http://www.govexec.com/contracting/2015/07/ban-contractor-campaign-gifts-constitutional-says-circuit-court-panel/117307

SBA to include overseas contracts in rating agencies

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The Small Business Administration will begin to include overseas contracts as part of the baseline used to rate agency performance against small business contracting goals.

SBA logoCurrently about $100 billion a year in federal contracts — including contracts that support overseas projects — aren’t considered when the agency calculates small businesses’ share of procurement dollars annually. It’s been a bone of contention among the small business community, which argues that all awarded contracts should factor into individual ratings, as well as the overall goal of federal government to allocate 23 percent of contracts to small businesses.

“Overseas contracts, we couldn’t find a justification to continue to exclude that,” said John Shoraka, associate administrator of government contracting and business development at the SBA, during a keynote session at a procurement conference hosted by the Montgomery County Chamber of Commerce. “So coming into 2016, we’re working with the Office of Federal Procurement Policy, Defense, USAID and State on including those contracts in the base.”

Keep reading this article at: http://www.bizjournals.com/washington/blog/fedbiz_daily/2015/05/sba-to-include-overseas-contracts-in-rating.html

Former head of engineering firm fined $4.5 million for 20 years of contract fraud

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The former president, chief executive officer, and chairman of the board of a New Jersey-based international USAIDengineering consulting company was sentenced today to 12 months of home confinement and fined $4.5 million for conspiring to defraud the U.S. Agency for International Development (USAID) with respect to billions of dollars in contracts over a nearly 20-year period, U.S. Attorney Paul J. Fishman announced.

Derish Wolff, 79, of Bernardsville, New Jersey, previously pleaded guilty before U.S. District Judge Anne E. Thompson to a superseding information charging conspiracy to defraud the government with respect to claims. Judge Thompson imposed the sentence on May 8, 2015 in Trenton federal court.

According to documents filed in this case and statements made in court:

  • Wolff, the former president and CEO of Morristown, New Jersey-based Louis Berger Group Inc. (LBG), and the former chairman of LBG’s parent company, Berger Group Holdings Inc. (BGH), led a conspiracy to defraud USAID by billing the agency on so-called “cost-reimbursable” contracts – including hundreds of millions of dollars of contracts for reconstructive work in Iraq and Afghanistan – for LBG’s overhead and other indirect costs at falsely inflated rates.
  • USAID, an independent federal government agency that advances U.S. foreign policy by supporting economic growth, agriculture, trade, global health, democracy, and humanitarian assistance in developing countries, including countries destabilized by violent conflict, awarded LBG hundreds of millions of dollars in reconstruction contracts in Iraq and Afghanistan as well as in other nations. LBG calculated certain overhead rates and charged USAID and other federal agencies these rates on cost-reimbursable contracts, which enabled LBG to pass on their overhead costs to the agency in general proportion to how much labor LBG devoted to the government contracts.
  • From at least 1990 through July 2009, LBG, through Wolff and other former executives, intentionally overbilled USAID in connection with these cost-reimbursable contracts. The scheme to defraud the government was carried out by numerous LBG employees at the direction of Wolff.
  • Wolff targeted a particular overhead rate, irrespective of what the actual rate was, and ordered his subordinates to achieve that target rate through a variety of fraudulent means. From at least as early as 1990 through 2000, Wolff ordered LBG’s assistant controller to instruct the accounting department to pad its time sheets with hours ostensibly devoted to federal government projects when it had not actually worked on such projects.
  • At an LBG annual meeting in September 2001, Salvatore Pepe, who was then the controller and eventually became chief financial officer (CFO), presented a USAID overhead rate that was significantly below Wolff’s target. In response, Wolff denounced Pepe, called him an “assassin” of the overhead rate and ordered him to target a rate above 140 percent, meaning that for every dollar of labor devoted to a USAID contract, LBG would receive an additional $1.40 in overhead expenses supposedly incurred by LBG.
  • In response, Pepe and former controller Precy Pellettieri, with Wolff’s supervision, hatched a fraudulent scheme from 2003 through 2007 to systematically reclassify the work hours of LBG’s corporate employees, including high-ranking executives and employees in the general accounting division, to make it appear as if those employees worked on federal projects when they did not. At his plea hearing on Dec. 12, 2014, Wolff admitted that Pepe and Pellettieri, at Wolff’s direction, reclassified these hours without the employees’ knowledge and without investigating whether the employees had correctly accounted for their time, and at times did so over an employee’s objection.
  • In addition to padding employees’ work hours with fake hours supposedly devoted to USAID work, Wolff instructed his subordinates to charge all commonly shared overhead expenses, such as rent, at LBG’s Washington, D.C., office to an account created to capture USAID-related expenses, even though the D.C. office supported many projects unrelated to USAID or other federal government agencies.

On Nov. 5, 2010, Pepe and Pellettieri both pleaded guilty before then-U.S. Magistrate Judge Patty Shwartz to separate informations charging them with conspiring to defraud the government with respect to claims. Also on that date, LBG resolved criminal and civil fraud charges related to Wolff’s and others’ conduct. The components of the settlement included:

  • A Deferred Prosecution Agreement (DPA), pursuant to which the U.S. Attorney’s Office in New Jersey suspended prosecution of a criminal complaint charging LBG with a violation of the Major Fraud Statute; in exchange, LBG agreed, among other things, to pay $18.7 million in related criminal penalties; make full restitution to USAID; adopt effective standards of conduct, internal controls systems, and ethics training programs for employees; and employ an independent monitor who would evaluate and oversee the company’s compliance with the DPA for a two‑year period;
  • A civil settlement that required the company to pay the government $50.6 million to resolve allegations that LBG violated the False Claims Act by charging inflated overhead rates that were used for invoicing on government contracts; and
  • An administrative agreement between LBG and USAID, which was the primary victim of the fraudulent scheme.

In the settlement, the government took into consideration LBG’s cooperation with the investigation and the fact that those responsible for the wrongdoing were no longer associated with the company.

U.S. Attorney Fishman credited special agents of USAID-Office of Inspector General, under the direction of Special Agent in Charge Daniel Altman; the FBI, under the direction of Special Agent in Richard M. Frankel; the U.S. Department of Defense, Defense Criminal Investigative Service, under the direction of Special Agent in Charge Craig W. Rupert; and the former Office of the Special Inspector General for Iraq Reconstruction, under the direction of former Special Inspector General Stuart W. Bowen Jr., for the investigation leading to today’s sentencing. He also thanked the U.S. Attorney’s Office, District of Maryland, and the U.S. Department of Justice Civil Division for their roles in the case.

Source: http://www.justice.gov/usao-nj/pr/former-louis-berger-group-inc-chairman-ceo-and-president-sentenced-one-year-home

Agencies extended noncompetitive contracts past time limits, GAO says

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Agencies are letting noncompetitive contracts awarded on the basis of “unusual and compelling urgency” run past the one year limit they’re not meant to exceed.

The Federal Acquisition Regulation (FAR) limits the total period of contracts awarded using the urgency exception to one year, unless a determination from the head of the agency is made that exceptional circumstances apply.

Awarding a noncompetitive contract on the basis of urgency is necessary in select circumstances, such as combat operations or preventing unanticipated gaps in program support, says the Government Accountability Offices in a March 26 report,

But those contracts should be limited in duration to minimize the amount of time that the government is exposed to the risks of contracts that are awarded quickly without the benefits of competition, the watchdog says.

Keep reading this article at: http://www.fiercegovernment.com/story/agencies-extended-noncompetitive-contracts-past-time-limits-gao-says/2014-03-27 

 

Judge upholds service contractor campaign donation ban

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A federal judge has ruled a law banning government contractors from contributing to political candidates, parties and their committees should stand, Courthouse News Service reports.

U.S. District Judge James Boasberg issued a 19-page ruling against the three plaintiffs, two of which hold contracts with the U.S. Agency for International Development and the other with the Administrative Conference of the United States.

According to Fierce Government, the Federal Election Campaign Act of 1972 bans contributions from individuals with whom a federal agency has directly contracted with for personal services.

Personal services contractors also cannot donate to any super political action committee and must avoid in-kind contributions to super PACs, Geoff Whiting writes for Fierce Government.

More details at: http://www.fiercegovernment.com/story/court-no-political-contributions-personal-service-contractors/2012-11-07

USAID pushes for more competition, less onerous regulations

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The U.S. Agency for International Development is seeking to increase competition for its contracts and make its programs more accessible to small and disadvantaged businesses as part of a larger agency-wide reform effort.

Concerned that a reduction in contracting staff has led to an increased reliance on a fairly small group of contractors and nongovernmental organizations, USAID has made changes to its procurement program a key part of its reform.

In its plan for change, the agency says it is “falling short” in accessing the full range of talent in both U.S. businesses and organizations and those in developing countries.

USAID has started by promoting more competition within its programs, particularly focusing on setting aside more awards for small and disadvantaged businesses.

The agency has established a review board that looks at ways to make large contracts more accessible to small businesses, such as by splitting them into smaller pieces, said Aman S. Djahanbani, USAID’s chief acquisition officer.

“Broadening our partner base … just makes good business sense, and it furthers sustainable development,” Djahanbani said.

At the same time, the agency is trying to work with more of the organizations and companies that are local to a given country. Littleton Tazewell, senior adviser to USAID’s general counsel for implementation and procurement reform, said the agency often relies on intermediaries — such as U.S.-based contractors or international nongovernmental organizations — to work with local bodies.

“The idea here is to increase our direct engagement with local organizations,” said Tazewell, who said a deeper understanding of local
organizations will help USAID craft better solicitations.

The agency also is seeking to make its regulations and rules less burdensome to encourage more companies and organizations to compete for contracts and grants.

USAID acknowledged that some larger contractors or NGOs may see reduced work as a result of its procurement reform moves.

“Our partners need to realize that there is more competition,” said Djahanbani. “However, they definitely have a role to play — maybe a different role.”

For instance, he said, in some cases a local organization could serve as the prime contractor while an international or U.S.-based organization could function as a subcontractor.

Tazewell said USAID has engaged the companies and organizations it frequently uses as it reforms in an effort to identify their particular problems.

Still, USAID is only about 18 months into what it expects to be a five-year process, Tazewell said.

“We’re going to trip and make some mistakes along the way, but our expectation is at the end of that five-year process we’ll be a much better organization,” he said. “We will have a structure [and a] regulatory framework that allows for a broadened partner base that’s both local- and small business-oriented.”

— by Marjorie Censer – The Washington Post – published December 25, 2011 at
http://www.washingtonpost.com/business/capitalbusiness/usaid-pushes-for-more-competition-less-onerous-regulations/2011/11/28/gIQA1chUHP_story.html.

White House plans cuts to support service contracts

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The Obama administration will require federal agencies to cut spending for management support service contracts by 15 percent by the end of fiscal year 2012.

As part of the White House Campaign to Cut Waste, Office of Management and Budget officials will announce Thursday their plans to reduce the bill for those services from $40 billion in fiscal year 2010 to $34 billion.

Management support services include such functions as program management, acquisition planning and information technology development. Spending on those services rose four-fold from fiscal year 2000 through 2010, according to administration figures.Most of that jump occurred during President George W. Bush’s administration, which vastly increased the government’s contractor workforce, while allowing the corps of federal employees assigned to oversee the work of contractors to remain flat. As a result, in some cases contractors ended up managing contractors.

Jeffrey Zients, the administration’s chief performance officer and a deputy OMB director, and Dan Gordon, the federal procurement administrator, will lead the White House Forum on Accountability in Federal Contracting. Officials from the Department of Homeland Security, the Defense Department and the U.S. Agency for International Development also are on the agenda.

White House figures show that government spending on outside contractors declined last year for the first time in 13 years.

— By Joe Davidson – The Washington Post – 06:00 AM ET, 07/07/2011 at http://www.washingtonpost.com/blogs/federal-eye/post/white-house-plans-cuts-to-support-service-contracts/2011/04/15/gIQAz9IR1H_blog.html

U.S. bans contractor from further aid programs

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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

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