Oversight pendulum swings wide

2007 Top 100 | Debarments, conflicts of interest and the revolving door draw the most scrutiny from congressional leaders

While federal contractors appear to be enjoying a temporary respite from the heat of increased congressional oversight, it probably will not last. Scrutiny of procurement practices and abuses appears to be growing and may be gaining momentum.

"The pendulum is swinging the other way," said William Shook, a procurement attorney at the Washington law firm Preston Gates and Ellis. "In the last 10 years, there was very little attention paid to procurement issues. This is the beginning of a long cycle."

The 110th Congress started off with a bang with the new Democratic majority, including Oversight and Government Reform Committee Chairman Rep. Henry Waxman (D-Calif.) holding hearings to examine federal procurement issues in major contracts such as the Homeland Security Department's $24 billion Coast Guard Integrated Deepwater System procurement, managed by a partnership of Lockheed Martin Corp. and Northrop Grumman Corp. (No. 1 and No. 3 on the Top 100, respectively), and the $8 billion Secure Border Initiative surveillance system, of which Boeing Co. (No. 2) won the first portion.

In the past several weeks, however, those issues have been pushed to a back burner because Washington has been preoccupied with the Iraq war, military health care and campus shootings.

But expert observers anticipate contracting oversight will soon return to the headlines, and the number of procurement-related concerns and reform proposals on the table will expand.

"The American public doesn't like the spectacle of post-Katrina waste and abuse," said Charles Tiefer, a law professor at the University of Baltimore and counsel at Preston Gates and Ellis.

Even critics of the expansion grudgingly acknowledge they are in for a long haul. "The momentum is going in the wrong direction," said Neal Fox, a consultant and former assistant commissioner for commercial acquisition at the General Services Administration. "For me, acquisition reform means relying more on vendors, so I think we're going in the opposite direction now."

Much is happening outside the media spotlight. Provisions to boost oversight are advancing in Congress ? with a growing number of federal contracting issues being discussed in committees, legislation receiving approvals in Congress, and the Coast Guard and other agencies tightening the reins on existing contracts.

Meanwhile, Waxman's committee continues to investigate. Within the past month, contractors have reported receiving requests for information on the number of employees they have deployed to federal agencies, their names and their previous government jobs, if any.

A committee staff member said no further information was available on the requests.
The initial focus has been on Waxman's Accountability in Contracting Act, which passed the House March 15.

Senate prospects for a stand-alone bill are not hopeful, but four key provisions of Waxman's bill were folded into the Iraq war supplemental legislation, though they were stripped out in the final package.

Those four provisions ? restrictions on sole-sourced contracting, encouragements for cost reimbursement, requirements for reports to Congress and requirements for justifications for sole sourcing ? and possibly others are likely to resurface in upcoming legislation, such as the Defense Authorization bill, said Trey Hodgkins, director of defense and intelligence at the Information Technology Association of America.

Procurement Reform

The $24 billion Integrated Deepwater System is also in the news. The multiyear modernization program by the Coast Guard involes design and procurement of vessels, aircraft, and communications and information technology systems. Since the initial contract was awarded in 2002, several inspector general and Government Accountability Office reports have brought to light serious design and structural problems with the vessels being procured, in addition to cost overruns and delays.

Waxman publicized the reports in a hearing in February, which led to the introduction of legislation to enhance oversight, submitted separately by Sens. John Kerry (D-Mass.) and Maria Cantwell (D-Wash.).

Coast Guard Commander Adm. Thad Allen announced April 17 that the agency would take over the lead systems integrator role for Deepwater. Cantwell's legislation, meanwhile, has gained Commerce Committee approval, and she intends to keep pressing forward on it.

"Deepwater is significant, and it is also indicative of wider concerns," said Karen Manos, a partner with the Gibson Dunn and Crutcher law firm in Washington. "It is not being viewed as just one program. There is concern that the entire system is broken."

The pool of procurement reform ideas is growing. Wider discussions have been initiated in the past several weeks on topics including:

  • Responsibility determinations, suspensions and debarments.
  • Revolving-door restrictions.
  • Organizational conflicts of interest and restrictions on lead systems integrators.

Responsibility Determinations

The House Homeland Security Committee held a hearing April 20 that highlighted the Project on Government Oversight's database of federal contractor lawsuits, settlements and guilty pleas.

Initially developed in 2002, the misconduct database now includes updated information. It lists items such as a $492,163 settlement paid by Boeing in April 2003 resulting from unspecified false claims in a Pennsylvania government contract case and a $7.1 million settlement fee paid by Lockheed Martin related to alleged false claims in a NASA contract.

In total, the database lists 641 settlements and infractions by federal contractors from 1988 to 2007 including: Lockheed Martin, 84 listings; Boeing, 50; Northrop Grumman, 36; Raytheon Co., 31; Unisys Corp., 14; General Dynamics Corp., 8; Computer Sciences Corp., 6; EDS Corp., 5; Science Applications International Corp., 5; IBM Corp., 4; and CACI International Inc., 1.

Tiefer and others said such databases can help a contracting officer determine if a contractor has consistently broken laws or regulations and thereby should be disqualified from participating in a federal contract. "I expect databases like the POGO database will be used, not immediately, but in the long haul."

But the databases are misleading if they list all settlements rather than only those with guilty pleas, because many companies settle a case for convenience's sake and are not necessarily guilty of wrongdoing, said Alan Chvotkin, senior vice president of the Professional Services Council, an industry group.

To strengthen responsibility determinations, Congress may also add consideration of whether a federal contractor has paid taxes or relocated to foreign soil ? or possibly whether the contractor has violated labor, immigration and environmental laws, though the last category is more politically controversial, Tiefer and Hodgkins said. A tax-related debarment provision was included in the Iraq war supplemental bill but later stripped out.

The strongest trend is increasing interest in debarment of contractors who have not paid taxes, with several pieces of legislation pending, such as the Contractor Tax Enforcement Act proposed by Rep. Ed Towns (D-N.Y.), which makes it easier for a contracting officer to obtain tax delinquency information about a contractor.

However, contractors are wary. "We are opposed to any use of debarment as punishment," Hodgkins said. Debarment is meant to protect the government, and there are other mechanisms in place to punish violators, he said.

Revolving Door

There is heightened interest in stopping, or at least slowing, the revolving door through which ex-government officials become federal contracting employees and are perceived as having an inside track to information that is anti-competitive and detrimental to other contractors.

Several pieces of legislation are now pending in Congress to clamp down on the practice, and Waxman's Account- ability in Contracting Act prohibits former federal contracting officials from returning to work as contractors in their former agency for at least a year.

The Center for Responsive Politics, a nonprofit public interest group, maintains a database of revolving-door employees. Media reports also have highlighted such situations, especially at DHS, where numerous officials have left the department to join the contracting workforce.

"DHS has had a strong odor of lobbying hanging over it," Tiefer said.

The Office of Government Ethics recently addressed the problem, issuing new regulations in March.

Starting June 6, senior executives who leave DHS for private employment will be barred from lobbying the entire department for a year. Such executives now are prohibited from advocacy activity for a year only in the component agency of DHS in which they worked.

Conflict of Interest

Waxman explicitly raised a concern about organizational conflict of interest in a February hearing with regard to the involvement of Booz Allen Hamilton Inc. in a homeland security contract. Though interest has dulled since then, as Waxman's committee has turned to other topics, observers say the conflict-of-interest issue is likely to reappear and gain strength.

Drawing the greatest attention at the moment are lead systems integrators in Deepwater and other contracts. Because the integrators both design and implement a solution, they are perceived as being more susceptible to conflicts of interest.
Provisions on tightening controls on lead systems integrators are contained in Cantwell's legislation and also are being addressed by the Coast Guard's procurement reform strategy.

Overall, the industry is likely to see enhanced interest in procurement controls at least throughout the next two years.

"Is Congress intent on holding contractors' feet to the fire? I believe it is," Shook said. "Will changes happen in the next six months? Probably not. In the next 18 months? Absolutely."

Staff Writer Alice Lipowicz can be reached at alipowicz@1105govinfo.com.

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