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Project on Government Oversight

Should Debarred Contractors Be Allowed to Build Military Aircraft?

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February 11, 2011

Today, POGO submitted a public comment about a new rule limiting the ability of suspended or debarred contractors to do business with the federal government. The rule prohibits prime contractors from subcontracting with any entity that has been suspended, debarred, or proposed for debarment.

So far so good.

The problem is the rule contains exceptions for commercial item and commercially available off-the-shelf (COTS) item acquisition contracts. Commercial and COTS items are goods and services that are sold to the general public in significant quantities, such as food, computers, and office furniture. Since the competitive market forces of the commercial marketplace provide built-in accountability protections, the government purchases these goods and services through special procedures that circumvent various oversight mechanisms.

In the case of commercial item acquisition contracts, the rule prohibits prime contractors from subcontracting with suspended or debarred entities at the first-tier subcontracting level only. As for COTS item acquisition contracts, prime contractors will not be prohibited from subcontracting with suspended or debarred entities at any level. Additionally, COTS subcontractors do not have to disclose to the prime contractor whether they or any of their principals are suspended, debarred, or proposed for debarment at the time of the subcontract award.

POGO is concerned these exceptions will severely weaken the rule. Commercial item and COTS item acquisition contracts account for a substantial percentage of federal contracting—about 20 percent ($106 billion) last year. In the past, the government has designated some decidedly non-commercial items as “commercial,” including the C-130J aircraft.

Allowing suspended or debarred entities to work on commercial item or COTS item acquisition contracts puts billions of taxpayer dollars at increased risk of fraud, waste, and abuse and jeopardizes agency missions. Suspension and debarment should be based on considerations of responsibility or non-responsibility and risk to taxpayers, not the type of good or service being purchased.

The government must ensure that taxpayer money is not ending up in the hands of non-responsible contractors.

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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