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Project on Government Oversight

Testimony of POGO's Danielle Brian on Government Contracting and the Negative Impact on Small Businesses

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November 8, 2005 | By: Danielle Brian

Written Testimony of Project On Government Oversight's Executive Director, Danielle Brian on Government Contracting and the Negative Impact on Small Businesses before the Senate Committee on Small Business and Entrepreneurship

I would like to thank Chairwoman Olympia Snow, Ranking Member John Kerry, and the entire Committee for this opportunity to provide written testimony for the record. I am the Executive Director of the Project On Government Oversight (POGO) which investigates, exposes, and seeks to remedy systemic abuses of power, mismanagement, and subservience by the federal government to powerful special interests. Founded in 1981, POGO is a politically-independent nonprofit watchdog that strives to promote a government that is accountable to the citizenry.

On May 17, 2005, POGO's General Counsel Scott Amey testified before OMB's Acquisition Advisory Panel (http://www.acqnet.gov/aap/), highlighting concerns in five areas that have been the target of contractor-driven "reforms." POGO recommended that the Panel strengthen federal government contracting laws and regulations in the following areas:

1. Cozy Negotiations - To make every effort to get the best value for the taxpayer, the government must promote aggressive arm's-length negotiations with contractors;

2. Inadequate Competition - To better evaluate goods and services and get the best value, the government must encourage "competition" so that it can correct the current trend of entering into non-competitive contracts in nearly 50 percent of government purchases;

3. Lack of Accountability - To ensure that taxpayer dollars are being spent responsibly, the government must regularly monitor and audit contracts after they are awarded;

4. Little Transparency - To regain public faith in the contracting system, the government must ensure that the contracting process is open to the public, including contractor data and contracting officers' decisions and justifications; and

5. Risky Contracting Vehicles - To prevent abuse, the government must ensure that certain contract types that have been abused in the past (including performance-based contracts, interagency contracts, time & material contracts, share-in-savings contracts, purchase card transactions, commercial item purchases, and other transaction authority) are only used in limited circumstances and are accompanied by audit and oversight controls.

All of those weaknesses have a negative impact on small businesses. For example, the second supplemental bill for Katrina increased the emergency "micro-purchase threshold" from $15,000 (generally $2,500 in non-emergency circumstances) to $250,000. That increase essentially eliminated competition in a large number of contracts. While full and open competition may not be possible in every circumstance considering the immediate needs, limited competitions (i.e., limited in solicitations or length of the bidding period) for less immediate purchases should be encouraged. By opening federal contracting to competition to all contractors (including small and minority owned businesses), the government would expand its opportunities beyond the currently closed club of federal contractors. In the reconstruction effort, the federal government should strive to award contracts to the best and brightest contractors and not rely on the familiar and convenient.

In addition, we have heard from small businesses and are familiar with media reports that Katrina contracts were bundled together into super-sized contracts, awarded via contracting vehicles (i.e., the schedules and interagency contracts), and/or were not publicly posted on FedBizOpps.gov, all of which exclude small businesses. As a result, agencies were able to steer work to the usual contracting suspects.

Equally troubling is the fact that many of those usual suspects have numerous instances of misconduct that should prevent them from receiving future government contracts. Large contracts were awarded to contractors (Bechtel, Halliburton, and Fluor) with histories of misconduct when other large or small contractors, with proven track records for being responsible, could have provided the same goods or services to the federal government. For years POGO has called on the government to create a centralized database that lists instances of contractor misconduct so that government procurement officials can make better informed contracting determinations prior to committing federal funds. Without such a tool for the procurement workforce, taxpayer dollars will continue to go to contractors with questionable records.

Attached to this testimony is POGO's list of contracting recommendations, many of which will level the playing field for small businesses. I would also like to announce that POGO is investigating and will be releasing a report on the federal procurement system and its negative impact on small businesses. Thank you for holding this extremely important hearing and please contact me or Scott Amey if you have any questions or comments.

POGO'S Government Contracting Recommendations

1. LACK OF COMPETITION

  • Pass legislation to repeal the $250,000 micro-purchase threshold
  • Require three (3) competitive bids for task or delivery orders for goods and services from companies already on federal schedules, IDIQs or GWACs
  • Conduct full and open competition for all non-urgent purchases
  • Conduct limited competitions for all urgent purchases
  • Treat Alaskan Native Corporations (ANC) like other 8(a) businesses, e.g. competing for contracts over $3 million (or $5 million for manufactured goods) and having a socially and economically disadvantaged owner

2. LACK OF TRANSPARENCY

  • Require public posting of all task and delivery order opportunities on FedBizOpps website
  • Require copies of task and delivery orders awards be made publicly available on the Federal Procurement Data System (FPDS) website
  • Require timely, consistent, and accurate contracting information from all federal agencies on the FPDS website

3. INADEQUATE OVERSIGHT

  • Change the definition of "commercial item" to only those items that are actually sold in substantial quantities in the commercial (non-governmental) marketplace
  • For non-commercial goods or services, apply Truth in Negotiations Act (TINA) and Cost Accounting Standards (CAS)
  • Rebuild and properly train staff in federal contracting and audit offices that have been cut to the bone over the past decades to ensure these functions are performed by career civil servants

4. CONTRACTOR MISCONDUCT

  • Create a centralized database which lists instances of contractor misconduct so that government procurement officials can make informed contracting determinations prior to committing federal funds
  • Require the consideration of past contractor misconduct in contract award determinations

5. INHERENTLY GOVERNMENTAL FUNCTIONS

  • Congress should revisit and study whether "inherently governmental functions" such as oversight and contract decisions, are being performed by political appointees or private contractors rather than career civil servants

6. THE REVOLVING DOOR

  • Close the loophole that allows former government employees to work for a different department or division of the same contractor they oversaw as a government employee
  • Political appointees and Senior Executive Service policymakers (people who develop rules and determine requirements) should take an oath that they will not receive compensation from contractors who were regulated by or benefitted from the policies the official formulated while in public service