Stan Soloway | Some missteps in the pursuit of transparency

Buylines | Policies, strategies and trends to watch

"It is possible to provide substantial degrees of transparency while protecting other rights and the reasonable needs of the marketplace." Stan Soloway

As the government seeks to ensure appropriate levels of transparency throughout its operations, several proposals have surfaced that raise troubling questions as to whether the drive toward transparency might not impinge on other important protections and priorities. The understandable desire for a more transparent government, if unabated, could actually have unintended and deleterious effects.

One proposal results from last year's Federal Funding and Transparency Act, co-authored by Sens. Tom Coburn (R-Okla.) and Barack Obama (D-Ill.). The law requires that a program be initiated to explore and test appropriate limits on the disclosure of subcontracting award and funding data. The Federal Acquisition Regulation Council has issued a proposed rule to implement that portion of the law. The proposal would require disclosure of the identity of each subcontractor, the amount of each subcontract award and other information.

Because a significant share of federal contract dollars flows down through multiple layers of subcontractors, it is not hard to understand why this provision was included in the legislation. At the same time, some of the required disclosures could involve divulging proprietary, competitive information.

Similarly, the executive branch, through the Defense Department, wants comments on a proposal that would, under the Freedom of Information Act, require the release of virtually the entirety of a company's Central Contractor Registration file.

This includes corporate revenues, which for privately held companies are not otherwise releasable, and the number of employees. Under this proposal, there would be only a limited number of exemptions, such as for security clearance levels, banking and financial information, or Data Universal Numbering System number.

Perhaps Rep. Henry Waxman (D-Calif.) has offered the most problematic proposal in his Clean Contracting Act. This proposal would require that every agency report to Congress on a quarterly basis any audit reports ? draft or final ? that identify more than $1 million in overcharges or questioned costs. Although the release to Congress of completed audits that identify such issues might be defensible, draft reports will undoubtedly mislead the Congress and the public.

Bill Reed, director of the Defense Contract Audit Agency, has told Congress that questioned costs do not equal wrongdoing. They are billed costs that are routinely subject to further discussion and negotiation.

Unfortunately, the evidence strongly suggests that Congress and the media nonetheless mistakenly view the existence of such discussions as prima facie, evidence of fraud and overcharging. We've already seen the rush to judgment when unredacted draft audit reports are made available to Congress and find their way onto congressional and other Web sites. As such, this legislation has real potential for unfairly and precipitously damaging companies that have done nothing wrong.

Transparency is important and the public clearly has the right to know where the government is spending its money and how well those funds are being managed.

That's one reason the government has warranted contracting officers who serve as its agents in these situations. We entrust them with the public's interest and rely on them to balance transparency, the requirements of a vibrant marketplace, and the legitimate rights of the suppliers involved. These needs are not mutually exclusive.

It is possible to provide substantial transparency while protecting other rights and the reasonable needs of the marketplace. But doing so requires balance and thought. Unfortunately, as the proposals on the table suggest, the trend could be headed in the opposite direction.

Stan Soloway is president of the Professional Services Council. His e-mail address is soloway@pscouncil.org.

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