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Transportation Department program fails to root out bad contractors

Banned firms eligible for federal tax dollars

- The Washington Times - Monday, September 30, 2013

A Transportation Department program designed to help women, minority and disabled owners compete for federal contracts, in fact, may be disadvantaging the very people it is intended to help by failing to root out bad actors.

The Transportation Department's Disadvantaged Business Enterprise program has continued to give money to contractors in the process of being debarred or suspended for defrauding taxpayers, depriving more deserving firms of millions of dollars, the agency's internal watchdog reports.

"Weaknesses in DBE program management and implementation have allowed ineligible firms to win DBE contracts and have left the majority of DBE firms without work," the department's inspector general said.

The report shines a poignant light on Uncle Sam's continuing inability to punish wayward contractors or protect taxpayers from instances of procurement fraud.

Federal agencies are supposed to suspend or debar federal contractors who have tried to defraud taxpayers, thus preventing them from getting new business.

But the Transportation Department's disadvantaged contracting program is so poorly managed that contractors that have been debarred or in the process of being suspended have won more funding, the report said. Nearly a third of the Transportation Department's inspector general fraud investigations involve the program, the report said.

A sampling of the program's contractors on eligibility lists in 26 states found three firms that were listed as permitted to receive contracts, despite being suspended or debarred.

One company was on contracting lists 20 months after it was disqualified for fraud and lying to government officials. A second remained listed despite being debarred for violating federal wage laws, and a third got an $8.1 million contract just weeks before its suspension was supposed to take effect for attempted tax fraud.

Because the inspector general sampled only some lists, it warned that the problems could be far more widespread. "Instances like those we found point to the possibility that other ineligible firms may be listed on state DBE directories," the report said.

The investigators blamed Transportation Department officials for failing to provide "guidance and training to safeguard against federally funded awards to firms that are suspended or debarred."

Agency officials brushed off the criticism, issuing a statement highlighting the success of the program instead of its red flags. "Thanks to the DBE program, small and disadvantaged businesses were able to successfully compete for contracting valued at more than $4.4 billion," the Transportation Department said.

"The department will continue to review existing guidance and program implementation to determine whether there are useful and cost effective means to make further improvements," it said.

Investigators remain unhappy, fearing the program is placing more emphasis on getting businesses qualified for the program than screening them or finding them work.

"Recipients focus most of their efforts on helping firms complete the lengthy DBE certification process, leaving few resources in place to help certified firms obtain DBE work on federally funded projects," the inspector general warned.

Private companies are supposed to submit annual paperwork showing they haven't been banned, but the inspector general said it can be unreliable. One company lied on its paperwork to show it was still eligible despite having been suspended.

The internal watchdog urged the Transportation Department to use far more vigilance to stop bad actors from remaining eligible for contracts.

"Suspension and debarment actions are among the government's strongest tools to deter unethical and unlawful use of Federal funds," the inspector general said. "Since DOT distributes several billion dollars annually through its DBE program, it is important that the Department strengthen its controls to ensure that suspended and debarred firms — such as those identified in our ongoing review — do not participate in the DBE program."

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