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Policy Letter

Suspension and debarment: The record shows that the system is broken

by POGO's Scott Amey

Federal Times

Not surprisingly, many federal suspension and debarment officials have claimed the system is working. It's not.

Critics of the contractor suspension and debarment system, including the Project On Government Oversight for which I work, have made a strong case that the system is in disarray, is stacked heavily against small contractors, and is applied subjectively. According to the government's own data, of the 43,000 individuals, businesses and contractors currently banned from doing future business with the government, none is a large contractor.

In the past, POGO has illustrated the application of the suspension and debarment system in favor of large contractors. POGO's research found that from 1990 to 2003, the top 10 federal contractors had a total of 280 instances of misconduct or alleged misconduct and paid more than $2.97 billion in fines, penalties, restitution, settlements and cleanup costs. POGO sent Freedom of Information Act requests to 12 agencies for suspension or debarment records regarding their top contractors. Although POGO found multiple instances of contractor misconduct for many of those contractors, only one agency responded that it had records indicating that the specified contractors were ever considered for suspension or debarment. As a side note, one agency — the Agriculture Department — is still processing POGO's 2001 FOIA request.

Despite government assurances that a level playing field exists for small and large contractors, the government's track record illustrates the subjective nature of the system, and how irresponsible large contractors often receive new federal contracts.

Even in those few instances when large contractors have been suspended and have promised to alter their corporate culture, the government plays fast and loose with its own time-out system. For example, on July 24, 2003, Air Force officials announced that Boeing possessed thousands of pages of Lockheed Martin documents — a serious violation of federal law. As a result, the Air Force suspended three Boeing Integrated Defense System business units and three former Boeing employees from eligibility for new government contracts. During its suspension, which was lifted March 4, the government provided Boeing with three waivers, allowing the company to receive three rocket launch contracts worth more than $100 million.

To be fair, government officials have stated off the record to POGO that two of the three Boeing waivers were provided because the government did not want to have to reinvent the wheel — a step that would cost taxpayers and take years to complete. Some suspension and debarment insiders, however, have suggested that those dilemmas show how consolidation of the defense industry has tied the government's hands by reducing competition.

Other examples of the government playing fast and loose with the suspension and debarment system:

• On Jan. 7, 2004, the General Services Administration lifted the suspension of MCI, formerly WorldCom, despite ongoing federal investigations. The government's decision came only three days before the expiration of a long-distance telephone contract with the company, thereby allowing MCI's contract to be extended.

• On March 1, the government slapped Titan Corp. on the wrist by reaching a $28.5 million settlement when the company, accused of violating anti-bribery laws and assisting in the preparation of a false tax return, resolved criminal proceedings brought by the Justice Department and civil charges by the Securities and Exchange Commission. The next day, the Navy awarded Titan a contract to provide navigation systems installation support services for up to five years with a potential value of $125 million.

Despite some officials' assertions that all is well with the suspension and debarment system, the government's record shows that the current system provides little choice but to go soft on irresponsible large contractors. Waiving suspensions or repeatedly accepting a contractor's empty promises to improve its corporate culture neither protects the public nor sends the message that contractors must clean up their act. The suspension and debarment system clearly does not work, and the government needs to do more than deny the problem — the American public must be protected from risky contractors, both large and small.