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Project on Government Oversight

Feds Reverse Course: Some Crime Not OK

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April 3, 2008

From POGO's blog:

It appears that the Office of Management and Budget is ready to remove one of the two loopholes in its proposed rule (pdf) on contractor ethics and integrity. The proposed rule requires, among other things, the timely disclosure of a violation of federal criminal law in connection with the award or performance of any contract or subcontract. Failure to make a disclosure can result in suspension or debarment from future government contracts. Sounds great, but the proposed rule as written won't apply to contracts and subcontracts for commercial contracts and for work performed entirely outside the U.S.

Attorney General Michael Mukasey and Senator Grassley (R-IA) have voiced their displeasure with the loophole that would have exempted contractors performing abroad from the disclosure requirement. In essence, they agree that all contract criminal activity should be treated the same no matter where the contract is performed.

POGO agrees that the overseas contracting exemption should be removed from the proposed rule. We also wonder if the commercial item exemption should be questioned. The definition of commercial has been stretched to the limits, costing taxpayers money. Is there any reason why commercial contracts should fall under different rules, at least when were talking about criminal activity?

I know that contractor supporters argue that the contracting system adds red tape, scaring off commercial businesses that attempt to bring competitive, creative, and innovative supplies and services to the government. But is that really the case? Has anyone looked at commercial contracts to figure out the percentage offered by traditional verse nontraditional contractors? Previous government studies of OTAs (other transaction authority) revealed that the majority of work (72% of the research and 97% of the prototype OTA funding, see p. 15 (pdf)) was performed by traditional contractors. Should we provide so many breaks to commercial item/service contractors, especially when it involves criminal behavior?

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO’s investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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