Three Strikes and the Taxpayer is Out!

Despite previous criticisms by POGO, the GAO, and IGs, Congress has passed legislation (the Energy Policy Act of 2005) that provides a win-win situation for contractors and a threat to taxpayer interests. Signed by President Bush (Pub. Law 109-58 1007), the law grants the Secretary of the Department of Energy (DOE) with the authority to “enter into transactions” for research, development, and demonstration projects. Simply stated, like DoD and DHS, DOE will now have the ability to spend taxpayer money outside procurement rules and thus are inaccessible to public scrutiny and against the taxpayers' interest.

“Other Transactions” (OT) are free from the usual (but weak) controls and oversight mechanisms set forth in contracting statutes. Additionally, because of the secrecy surrounding such projects, OT authority is not subject to external checks or balances because it is exempt from the Freedom of Information Act (5 U.S.C. 552(b)(4)).

OT authority was created to lure “non-traditional” contractors who would bring innovative ideas to the government. The numbers, however, do not support that intent. According to DoD's Deputy Inspector General, 72% of the research and 97% of the prototype OT funding went to traditional DoD contractors in the late-1990s.

Senator McCain (R-AZ) has also taken issue with OT purchases, resulting in legislation (section 211 of the Department of Defense Authorization Act for Fiscal Year 2006 (pdf)) that would require DoD to purchase the $20 billion Future Combat System program (headed by Boeing and SAIC—two very traditional contractors) under general contract provisions rather than as an OT.

A bright spot exists—DOE can't exercise its OT authority until it has guidelines, publishes them in the Federal Register, and the public has the opportunity to comment. Check back with POGO for its comment and subsequent OT (mis)spending.