Press Release

Majority of Top Contractors Could be Defunded by House Legislation

Last week, the House inadvertently took a large step forward in protecting taxpayers from misbehaving contractors. The House passed the "Student Aid" bill (H.R. 3221) that also included a ban on entities receiving any federal contracts or grants if they have "filed a fraudulent form with any Federal or State regulatory agency." Although intended to restrict ACORN, a nationwide community support organization, the language could be interpreted to cover all federal contractors and grantees.

"Without meaning to, the House took a landmark step in holding federal contractors accountable," observed POGO's executive director Danielle Brian. "Last year, we were fighting for a repeat offender provision to protect taxpayers from contractors with a pattern of misconduct. Members must have woken up on the other side of the bed because they revisited the issue and produced an improved accountability provision."

The Senate has yet to propose the broader contractor accountability language despite passing a provision to prevent ACORN from receiving certain housing and urban development appropriations (S. Amend. 2394 to H.R. 2996).

POGO's Federal Contractor Misconduct Database compiles instances of misconduct for the top contractors that have together received over $260 billion in FY 2007. Those same contractors have racked up over 750 instances of misconduct and paid over $27 billion in fines or penalties since 1995. A survey of that data shows that 62 federal contractors (listed below) have been involved in instances that might prohibit them from receiving future federal funds if the "Defund ACORN Act" becomes law. For example:

Boeing: Boeing agreed to pay the United States up to $54 million to settle two lawsuits that alleged it placed defective gears in CH-47D Chinook helicopters sold to the Army.

GlaxoSmithKline: In 2006, GSK agreed to pay approximately $3.4 billion to settle the IRS's charges that the company under-reported profits to avoid paying its full share of taxes between 1989 and 2005.

Northrop Grumman: Northrop Grumman Corp. agreed to pay $15 million in fines and remedial compliance measures to settle allegations that it committed 110 violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). The violations involved sales of modified LTN-72 and LTN-92 aircraft navigation systems, both in Northrop Grumman's own capacity and as successor to Litton Industries, Inc. (acquired by Northrop Grumman in 2001), between 1994 and 2003.