Holding the Government Accountable

Senator Proposes Solutions to Contracting Fraud

An article appearing in the June 24th issue of Politico proposes steps towards eliminating waste and fraud in defense contracting. The authors, Sen. Bernie Sanders (I-VT) of the Senate Budget Committee and William Hartung of the New America Foundation, focus on two problems with the contracting system: the "revolving door" employment of former federal officials by contractors, and the government's use of private employees who participate in considering bids.

The authors write that the revolving door is a concern for two reasons. First, ex-officials working for contractors can use their contacts and influence at their former agencies to gain support within the government for their employers' bids. In a recently released report on which POGO has previously commented, the GAO estimates that as many as 400 former government employees may be working on contracts with their former agencies. Second, some government employees may favor certain contractors with the goal of securing jobs with those companies in the future. In an extreme case, an Air Force contracting official was convicted of fraud for securing jobs at Boeing for herself, her daughter, and her son-in-law while she was in charge of negotiating a $20 billion lease with the company. This case was one of several examined in a 2004 POGO report on the revolving door, "The Politics of Contracting."

While concerns about the "revolving door" are raised relatively frequently, the participation of privately contracted employees in the contract-awarding process is discussed far less often. Sanders and Hartung write that the GAO found that more than two-thirds of the defense agencies it surveyed had key offices with more private contractor employees than government workers, who are subject to conflict-of-interest rules that do not apply to contractors' employees.

Sen. Sanders and Mr. Hartung propose to require reporting of post-government employment, so lobbying of agencies by former employees can be tracked, and to extend conflict-of-interest laws to private contractors involved in the Pentagon decision-making process.

Fraud in defense contracting is a serious concern. Last week, POGO commented on a letter sent to the Department of Defense Inspector General by Rep. Henry Waxman (D-CA), Chairman of the House Oversight and Reform Committee, in which Rep. Waxman estimated that 7,000 contracts totaling $190 million, or about 4% of all defense contracts, may be criminally fraudulent.

Encouragingly, several government agencies are looking at changing their contracting practices. In place of hiring private contractors, the Department of Defense plans to receive assistance from the Department of Interior and the General Services Administration to help run its contracting operations. In the meantime, DoD, GSA, and NASA are soliciting public comment on contractor employees' conflicts of interests through July 17th. Instructions for submitting comments can be found here. One would also hope that the newly formed bi-partisan Wartime Contracting Commission, which POGO has been supporting since last year, will succeed in reforming defense contracting.

CORRECTION: The IG report and Rep. Waxman's estimate pertained only to defense contracts for commercial and miscellaneous payments in Iraq and the Middle East related to the global war on terrorism.