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Penalties Are Weak for Misbehaving Contractors

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While much of the coverage of the Edward Snowden saga has focused on what’s going on at the NSA or where Snowden will find asylum, The Washington Post pointed the spotlight on another issue deserving of attention: misconduct at federal contractors such as Snowden’s employer, Booz Allen Hamilton. The corporation’s direct culpability in Snowden’s leak is still unclear, but this is certainly not the first time Booz Allen—or other federal contractors—have come under scrutiny. The Project On Government Oversight’s federal contractor misconduct database details numerous instances of wrongdoing, fraud, and violations at private companies employed by the government. But despite proven misconduct, most contractors never face serious penalties.

From The Washington Post:

Last year, the Air Force temporarily suspended the San Antonio division of [Booz Allen] from future contracts because it had obtained and distributed confidential Pentagon bidding data for its own competitive advantage. In 2006, the Justice Department said the company overbilled travel ex­penses, and the agency initially recommended that Booz Allen be barred from federal contracting.

Those incidents had little or no impact on Booz Allen’s success in recent years or on its ability to compete for federal contracts, which last year provided 99 percent of the company’s $5.8 billion in revenue.

POGO’s general counsel Scott Amey testified before Congress in June that although the federal government has the ability to suspend or debar contractors with histories of misconduct, the system to do so has been applied inconsistently and ineffectually. Standards of accountability vary from agency to agency and even when referrals for suspension or debarment are made to a Suspension and Debarment Official (SDO), the SDO doesn’t always respond appropriately. In one example, a bipartisan group of Senators raised concerns that delays in the suspension and debarment process were potentially allowing taxpayer money to reach terrorist groups. 

Deep connections between the contractors and the federal government and the scope of contracting work make the government even more reluctant to apply penalties.

“The government’s reliance on large contractors is often difficult to overcome,” said Scott Amey, general counsel to the nonprofit watchdog group, which maintains a contractor misconduct database. “Therefore, large contractors are in a powerful position to avoid suspension or debarment actions.”

Rep. Darrell Issa (R-Calif.) released a discussion draft of a bill entitled the “Stop Unworthy Spending (SUSPEND) Act” earlier this year. POGO supports many of these proposed reforms, but also has made several other recommendations including:

  • Mandating that investigators make referrals to SDOs after finding information that reasonably supports a basis for suspension and debarment;
  • Requiring that SDOs make a suspension or debarment determination within a set period after receiving a government referral;
  • Enhancing annual reporting to Congress; and,
  • Making suspension and debarment decisions publicly available.

An agency should never be in a position where it is so dependent on a contractor to perform certain functions that it cannot take appropriate actions to suspend or debar that contractor. If contractors can’t be trusted to run their businesses with integrity and to use taxpayer dollars honestly, then they should not be eligible to receive new contracts. We need to hold government contractors to a much higher standard.

Image by Flickr user Anders Vindegg.

By: Jana Persky
Intern, POGO

Photograph of Jana Persky Jana Persky is an intern for the Project On Government Oversight.

Topics: Contract Oversight

Related Content: Contractor Accountability, Suspension and Debarment

Authors: Jana Persky

Submitted by Dfens at: July 15, 2013
"Penalties are weak?" Hell, the penalties are totally non-existent. The fact of the matter is, there are no penalties for dragging out a development program and jacking up the price of a weapon. There is only financial reward for a contractor that does such things. Even at the subcontractor level, since the contractor gets to skim a free 10% or more off the top of any money they pass along to a subcontractor, do you really think they hold the subcontractor accountable for cost increases given the fact that any cost increases the subcontractor racks up only increase the amount of free money available to the contractor? Yeah, that happens.
Submitted by jalbertini at: July 13, 2013
Not only should these contractors be barred from more contracts, they should go to PRISON!
Submitted by bestpal2b at: July 13, 2013
First time I've heard that Issa would do anything that made sense. His scandal mongering seems to be his specialty.
Submitted by Anonymous at: July 13, 2013
Contractors should not get bids if their CEOs make more than a million dollars per year including perks.
Submitted by Tired Taxpayer at: July 13, 2013
Too many companies offer Govt. employees upon retirement, a job if the contract goes through with them or with their Lobby Group for life! The Tax payer foots the 2 bills, pension & pay.

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