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Project on Government Oversight

POGO fights to prevent multiple industry reps from determining how contractors account for their costs

Related Content: Cost Accounting Standards
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August 10, 2006 | By: Scott H. Amey, J.D.

The Honorable Robert J. Portman, Director
Office of Management and Budget
Eisenhower Executive Office Building
Washington, DC 20503

Dear Director Portman:

The Project On Government Oversight (POGO) is an independent nonprofit organization that investigates and exposes corruption and other misconduct in order to achieve a more accountable federal government. As such, POGO has a keen interest in government contracting matters, especially those relating to the ongoing activities of the Cost Accounting Standards (CAS) Board in the Office of Federal Procurement Policy (OFPP).

It is our understanding that, with the recent Senate confirmation of Paul Denett as Administrator of OFPP and Chairman of the CAS Board, serious consideration is being given to filling the two private-sector vacancies on the Board. There are two requirements of the organic statute for the CAS Board, at 41 U.S.C. § 422(a)(1)(B), concerning private-sector appointments:

(B) two individuals from the private sector, each of whom shall be appointed by the Administrator and --

(i) one of whom shall be a representative of industry; and

(ii) one of whom shall be particularly knowledgeable about cost accounting problems and systems.


Traditionally, the individual appointed under Sec. 422(a)(1)(B)(i) has been from the affected contractor industry, and the individual appointed under Sec. 422(a)(1)(B)(ii) has been from the public accounting profession or from academia (i.e., the “public member” position). In fact, no person appointed to the CAS Board under the public member position or its predecessor provision (all the way back to 1970) has ever been appointed from other than the public accounting profession or from academia. Thus, POGO was distressed to learn that consideration is being given to the appointment of Vic Avetissian, a registered lobbyist of the defense contractor Northrop Grumman Corp., to this important post determining how contractors account for their costs. We first learned of Mr. Avetissian’s potential appointment to the CAS Board when David Safavian, the now infamous former OFPP Administrator, was serving as Chairman of the CAS Board. Although Mr. Safavian was unable to complete the appointment process for Mr. Avetissian during his tenure, it is our understanding that Mr. Denett may be looking to complete this action shortly.

POGO opposes the appointment of Mr. Avetissian to the public member position for a number of reasons. First, as previously mentioned, no one other than a representative from the public accounting profession or from academia has ever been appointed to that position, and everyone appointed thus far has been a Certified Public Accountant (CPA). Mr. Avetissian would be the first person appointed to the public member position not meeting either characteristics. Second, the CAS Board statute already provides for the appointment of an individual from the affected industry under Sec. 422 (a)(1)(B)(i). The appointment of Mr. Avetissian to the public member position would place two industry representatives on the CAS Board, which might violate the law. Lastly, Mr. Avetissian is a registered lobbyist. The notion that a registered lobbyist for a large defense contractor would serve on the Board that devises accounting rules for government contractors poses a very serious conflict of interest.

Accordingly, POGO urges you to ensure that only an individual who is either from the public accounting profession or from academia is appointed to the CAS Board Member position established under 41 U.S.C. § 422(a)(1)(B)(ii). The integrity of the government contracting system must be restored by ensuring that senior policymaking decisions are made by independent civil servants rather than being driven by personal or private gain.

Thank you for your consideration of this most serious matter.

Sincerely,

Scott Amey
General Counsel

cc: Paul A. Denett, Office of Management and Budget,
Administrator of the Office of Federal Procurement Policy


 

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