WASHINGTON – Billions of taxpayers' dollars are doled out to government contractors without appropriate oversight,according to witnesses at a hearing held by the House Committee on Oversight and Government Reform.
Thursday's hearing revealed government agencies responsible for overseeing contractors have flawed systems for reporting,recording and taking action against those who break the law or fail to fulfill their contractual obligations.
More than $500 billion of taxpayers' money goes to more than 160,000 federal contractors annually. No one at the hearing could estimate what percent of that sum is subject to lax oversight.
“It's a massive job to ensure that billions of dollars of taxpayer money is spent effectively and wisely,and that federal dollars don't go to the incompetent and the unproductive,the con men and the frauds,” said Committee Chairman Edolpus Towns,D-N.Y.
An initial hearing on this matter was held in February 2009,and the committee discovered government agencies had been awarding money to individuals and companies that had been suspended from doing business with the government. In addition,it found agencies took much too long to take action against contractors,if they did anything at all.
“Now,a year later,it seems little has changed,” Towns said.
Six federal agency representatives testified last week about procedural problems with punitive actions.
Agencies can suspend or debar contractors who commit crimes or don't do their jobs. Fraud,embezzlement,forgery,bribery,false statements and tax evasion are all causes for an 18-month suspension.
A criminal conviction for any of those charges,violation of a contract or employing illegal workers are causes for debarment,a three-year ban from federal work.
Suspension and debarment protect the government if agencies use it,but it appears they aren't,Towns said.
The Department of Homeland Security has been reluctant to use these actions against poorly performing contractors,said Richard Skinner,Homeland Security inspector general. He called the tactics “too resource intensive,too punitive in nature and having too negative an impact on the contractor pool.”
From 2004 to 2008,DHS had 10 debarment cases,only one because of contractor performance.
“That's an incredibly low number for an agency that spends an enormous percentage of its budget through contracting,” Towns said.
The Federal Emergency Management Agency did not file any cases during that time,though FEMA had well-publicized issues with contractors after Hurricane Katrina in 2005.
The U.S. Agency for International Development has an unsuccessful system for punishing contractors,according to an internal audit. USAID provides economic and humanitarian assistance in more than 80 developing countries.
It gave out $20 billion in grants and contracts from 2003 to 2007. During that time it conducted nine suspension and debarment cases for contracts worth $378 million,according to the audit. Only contractors investigated by the inspector general and convicted in criminal proceedings or faulted in civil cases were punished.
According to the audit,the agency did not investigate most referrals,rarely met time standards,had poor record keeping and often failed to check if contractors had previously been suspended or debarred.
In two cases,USAID did not take action against firms that made inflated claims for reimbursement,nor did the agency seek to punish entities for repeated unsatisfactory performance.
“There's been a blatant disregard for the rules – total incompetence,” said Rep. Blaine Luetkemeyer,R-Mo.,pounding his fists on the table. “This is ridiculous! You guys are the first caretakers of the dollars!”
The Department of Transportation suffers from many of the same problems as other agencies. Despite replacing its paper-based reporting system in 2007,cases have “slipped through the cracks” and are often not properly entered into the system,according to a review by Calvin Scovel III,DOT inspector general.
Cases take far too long to pass through the system,the review reveals. On average,it took more than 300 days to reach a suspension decision and more than 400 to reach a debarment decision,greatly exceeding the department's own 45 day deadline.
In one example,a fraudulent Kentucky company received $24 million in Recovery Act funds during the 10 months it took for DOT to suspend the company.
“We will not turn a blind eye to the squandering of taxpayer dollars on contractors who are guilty of waste,fraud and abuse,” said Rep. Darrell Issa,R-Calif.,the committee's senior Republican.
Committee members suggested requiring each agency to have a separate suspension and debarment office or taking punitive rights away from agencies by forming a new government panel.