Fed Business Still Good for USIS, Despite Legal WoesTweet
February 26, 2014
The federal business forecast for embattled background-check contractor U.S. Investigations Services LLC (USIS) is bleak. Or is it?
As readers of this blog are aware, USIS is in deep legal trouble. The company responsible for screening whistleblower cause célèbre Edward Snowden and Navy Yard-shooter Aaron Alexis is facing a massive fraud lawsuit, a federal criminal investigation, and an unfair labor practices class action filed by former employees. At least eight USIS employees have been prosecuted since 2006 for falsifying background checks.
Yet the company continues to rake in the federal bucks. According to USAspending.gov, USIS has won more than $142 million in contracts so far this fiscal year. Even though the government is suing USIS for fraud and has insourced some of its work, the company remains an active federal vendor.
How did this happen? Once again, attention turns to the federal suspension and debarment system.
The law is clear: contracts can only be awarded to responsible vendors—those with satisfactory records of past performance, integrity, and business ethics. If a contractor acts in a way that impugns its present responsibility—say, by losing several employees in recent years to federal fraud busts and then suddenly getting hit with multiple legal actions alleging fraud and other disreputable practices—the government has broad discretion to impose a contracting ban through suspension or debarment.
The sticking point in the suspension and debarment process is the “present” part of present responsibility. Maybe the recent shakeup in USIS’s leadership and the company’s promises to improve oversight and cooperate with investigators convinced the government that USIS is presently responsible. The more cynical might believe USIS’s recent hiring of powerful D.C. lobbying firms McDermott Will & Emery and Podesta Group are keeping USIS in the government’s good graces.
A third possibility, suggested by Rep. Carolyn Maloney (D-NY) at a House Oversight Committee hearing earlier this month, is that USIS is simply too big to suspend or debar. The government depends on USIS to perform nearly half of the background checks assigned to contractors. With USIS banned from contracting, the government would either have to shift the workload to two other contractors—CACI Premier Technology and KeyPoint Government Solutions—or perform the work itself. Either scenario would entail a period of adjustment during which mistakes would inevitably occur. In short, the government figured “better the devil you know” and decided to stay with USIS, which has pledged to turn over a new leaf.
The uncertainty that hangs over USIS shows us once again the downside of the government’s over-reliance on contractors. We have seen the “too big to debar” phenomenon play out with other federal contractors in recent years, most notably BAE Systems and KBR, which continue receiving billions of dollars in contracts every year despite long histories of misconduct. BP avoided a contracting ban for more than two years after the 2010 Deepwater Horizon explosion and oil spill in the Gulf of Mexico. BP was suspended only after it pleaded guilty in November 2012 to numerous criminal counts arising from the incident. Similarly, in USIS’s case, the government could be waiting for a resolution of the civil and criminal matters before deciding whether to impose a suspension or debarment.
That’s why the Project On Government Oversight advocates requiring the agencies to make a suspension or debarment determination within a specific period of time. The purpose of suspension and debarment is to protect the government—and taxpayers—from poorly performing or unethical contractors. That can’t happen if the government drags its feet on suspension and debarment cases, waiting for the Justice Department or other agencies to take action.
Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.
Topics: Contract Oversight
Authors: Neil Gordon
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