POGO Praises Contractor Disclosure Rule, Advises Stronger Enforcement

By Neil Gordon | Filed under letter | November 15, 2018

General Services Administration
Regulatory Secretariat Division (MVCB)
1800 F Street NW
Washington, DC 20405

ATTN: Ms. Mandell

Submitted via Regulations.gov

Subject: IC 9000-0189, Identification of Predecessors

Dear Ms. Mandell,

The Project On Government Oversight (POGO) provides the following public comment regarding “Information Collection 9000-0189, Identification of Predecessors” (83 Fed. Reg.47342, Sept. 19, 2018). POGO is an independent nonprofit organization committed to achieving a more accountable and transparent federal government. A large part of our work involves investigating, exposing, and proposing ways to eliminate waste and corruption in federal contracting.

The Federal Acquisition Regulation (FAR) Council seeks comments regarding the renewal of the information collection requirement in FAR subpart 52.204-20, which requires offerors to identify if they are a successor to another entity that received a federal contract or grant within the last three years and, if so, to provide the Commercial and Government Entity code and legal name of the predecessor. Offerors report this information in the Federal Awardee Performance and Integrity Information System (FAPIIS), which must be checked by acquisition officials as part of their pre-award determination of the integrity and performance record of prospective contractors and grantees.¹

POGO supports this information-collection requirement as an important step in bringing greater transparency and efficiency to the federal acquisition process. There is a strong public interest in providing officials the information they need to adequately screen prospective contractors and grantees. Effective pre-award responsibility determinations can prevent poor performance, theft or misuse of government funds and resources, public health and safety hazards, and harm to our national security. The Government Accountability Office (GAO) has noted that “the relevant experience and past performance of key individuals and predecessor companies…may be useful in predicting success in future contract performance.”²

Predecessor information gives the government a more complete picture of the companies to which it entrusts over one trillion taxpayer dollars each year. Such data is especially critical now that the federal contracting marketplace—particularly in the defense and aerospace sectors—is undergoing rapid change marked by bigger and more-frequent mergers and acquisitions.³ Acquisition officials need to keep on top of these changes to ensure that past acts of misconduct and poor performance are not swept under the rug by corporate reorganizations or name changes.⁴

However, POGO is concerned that this disclosure requirement is not being followed. For example, Computer Sciences Corporation and HP Enterprise Services merged in 2017 to form a new company—DXC Technology. Both companies received federal contracts within the last three years, yet the FAPIIS record for DXC Technology currently lists no predecessor information. DXC Technology has also certified in the System for Award Management (SAM) federal vendor registration database that it has no predecessors and “is not a successor to a predecessor that held a Federal contract or grant within the last three years.”⁵ Given that the legal definition of a successor is “an entity that has replaced a predecessor by acquiring the assets and carrying out the affairs of the predecessor under a new name (often through acquisition or merger),”⁶ it would seem that disclosure in this instance is required.

The FAR Council should also consider expanding the information-collection requirement to include the names of key individuals associated with the offeror company and any past relationships they had with entities that received contracts or grants. Disclosure of this information would prevent individuals with past instances of misconduct or poor performance from “resurfacing” under a new business name.⁷ Such disclosure would be particularly critical for smaller business entities that might not be a successor in the legal sense, but are managed or controlled by personnel whose connection to a defunct entity might raise concerns about their performance and integrity.

Prospective contractors and grantees must disclose all required information so that the government can make informed award decisions. Offerors must be held accountable for their representations and certifications. To do so, the government should periodically audit vendor-entered FAPIIS and SAM data quality and address non-compliance through a system of sanctions ranging from warning letters to monetary fines, or through the suspension and debarment process.

If you have any questions, I can be reached at [email protected] or (202) 347-1122.

Sincerely,

Neil Gordon
Investigator

1 48 CFR 9.104-6(b)(1) (“When making a responsibility determination, the contracting officer shall consider all the information available through FAPIIS with regard to the offeror and any immediate owner, predecessor, or subsidiary identified by that offeror[.]”). 2 Government Accountability Office, In the Matter of Harbor Services, Inc., B-408324, August 23, 2013, p. 4. https://www.gao.gov/assets/660/657457.pdf (Downloaded October 26, 2018) 3 Daniel Cebul, “2017 surpasses aerospace, defense deal record by $5 billion,” DefenseNews, January 25, 2018. https://www.defensenews.com/industry/2018/01/25/2017-surpasses-aerospace-defense-deal-record-by-5-billion/ (Downloaded October 26, 2018) 4 Nathan Hodge, “Company Once Known as Blackwater Ditches Xe for Yet Another New Name,” Wall Street Journal, December 12, 2011. https://www.wsj.com/articles/SB10001424052970204319004577089021757803802. (Downloaded November 6, 2018) 5 General Services Administration, “System for Award Management,” https://www.sam.gov/SAM/. (Accessed November 15, 2018) 6 FAR 52.204-20(a)(2). 7 The GAO has found instances when businesses and individuals, by operating under different identities, were able to circumvent their exclusions from receiving federal funds. See“Excluded Parties List System – Suspended and Debarred Businesses and Individuals Improperly Receive Federal Funds,” GAO-09-174, February 2009. https://www.gao.gov/new.items/d09174.pdf (Downloaded November 13, 2018)