RIDDELL: Rooting out federal contracting fraud

Better procurement oversight could stem the flow of wasted dollars

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Strong Castle, a company headed by a former military prep-school student who never served in the armed forces, won Internal Revenue Service contracts potentially worth more than $500 million reserved for companies owned by disabled veterans.

OSI System Inc.’s Rapiscan unit, a Transportation Security Administration vendor that was accused of defrauding the government by falsifying test results of its software and providing $40 million in unusable equipment, is once again being considered for a multimillion-dollar agency contract, as if the controversy had never happened.

Senior management at the General Services Administration were found to have pressured midlevel contract officers to accept bloated pricing and unfavorable terms with information technology vendors such as Oracle Corp. and Deloitte Consulting LLP for contracts totaling more than $900 million.

In perhaps one of the most outrageous examples of U.S. procurement fraud, in June, it was found that supporters of the Taliban and al Qaeda in Afghanistan have been getting U.S. military contracts to help them build, train and sustain the Afghan army, as the U.S. withdraws its forces.

One thing is clear: President Obama’s administration has failed to keep crooked or inept vendors from winning work in the $500 billion-a-year federal market. The waste not only squanders federal funds in a time of cutbacks, it threatens the nation’s safety and national defense, and cheats American taxpayers. As Washington gears up for another round of budget talks this fall, procurement fraud needs to be addressed.

Six out of 10 executive branch agencies aren’t doing enough to root out incompetent or fraudulent businesses from winning new contracts, according to a 2011 Government Accountability Office report.

Agency officials fail to consult lists of excluded contractors before making new awards, and most federal branches continue to give business to companies they know are involved in misconduct rather than initiating suspension and debarment procedures, said Scott Amey, general counsel of the Project On Government Oversight, in his testimony before Congress on procurement fraud in June.

“Recently, we have seen contracts awarded to companies that have defrauded the government or violated laws or regulations, performed poorly on contracts, or had their contracts terminated for default or cause,” Mr. Amey said.

As the U.S. government looks to trim spending and reduce its $17 trillion deficit, this type of federal ineptitude isn’t acceptable. Period.

Rep. Darrell E. Issa, chairman of the House Oversight and Government Reform Committee, has indicated that he will introduce federal procurement legislation this fall. In February, the California Republican unveiled a draft bill, dubbed the Stop Unworthy Spending Act, and held a hearing discussing its merits in June.

Mr. Issa’s proposed legislation would dramatically overhaul the procurement procedures applicable to federal contractors. Currently, company punishment is handled by individual contracting agencies within each executive department — all being guided by their own culture and procedures as to how to aggressively pursue specific cases.

Under Mr. Issa’s bill, these 41 individual offices would be consolidated into one, which would be overseen by the General Services Administration. The act would standardize the agencies’ policies toward offending companies and allow for more transparency.

Opponents of the bill say it will lead to greater bureaucracy, giving way to slower contract awards and a more formal process that involves legal counsel. This may be true. However, with 1 in 6 federal dollars going to contractors, the government cannot afford to be careless with its procurement processes, which is exactly what it’s been doing with the fraud uncovered at the Internal Revenue Service, the Transportation Security Administration, the General Services Administration and Defense Department this year. Taxpayers deserve better, and the government needs to do better.

Kelly Riddell is a former a reporter for Bloomberg News.

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