[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HOW CONVICTS AND CON ARTISTS RECEIVE NEW FEDERAL CONTRACTS
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 26, 2009
__________
Serial No. 111-14
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
HOW CONVICTS AND CON ARTISTS RECEIVE NEW FEDERAL CONTRACTS
HOW CONVICTS AND CON ARTISTS RECEIVE NEW FEDERAL CONTRACTS
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 26, 2009
__________
Serial No. 111-14
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
52-280 WASHINGTON : 2009
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Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri TODD RUSSELL PLATTS, Pennsylvania
DIANE E. WATSON, California JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts MICHAEL R. TURNER, Ohio
JIM COOPER, Tennessee LYNN A. WESTMORELAND, Georgia
GERALD E. CONNOLLY, Virginia PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of BRIAN P. BILBRAY, California
Columbia JIM JORDAN, Ohio
PATRICK J. KENNEDY, Rhode Island JEFF FLAKE, Arizona
DANNY K. DAVIS, Illinois JEFF FORTENBERRY, Nebraska
CHRIS VAN HOLLEN, Maryland JASON CHAFFETZ, Utah
HENRY CUELLAR, Texas AARON SCHOCK, Illinois
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------
------ ------
------ ------
Ron Stroman, Staff Director
Michael McCarthy, Deputy Staff Director
Carla Hultberg, Chief Clerk
Larry Brady, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on February 26, 2009................................ 1
Statement of:
Kutz, Gregory, Managing Director for Forensic Audits and
Special Investigations, U.S. Government Accountability
Office; James Williams, Commissioner, Federal Acquisition
Service, U.S. General Services Administration; David
Drabkin, Acting Chief Acquisition Officer and Senior
Procurement Executive, U.S. General Services
Administration; Brigadier General Edward Harrington, U.S.
Army, retired, Deputy Assistant Secretary of the Army for
Procurement; Captain Michael Jaggard, U.S. Navy, retired,
Chief of Staff/Policy for the Deputy Assistant Secretary of
the Navy for Acquisition and Logistics Management; Frederic
M. Levy, McKenna Long & Aldridge LLP; and Scott Amey,
general counsel, Project on Government Oversight........... 61
Amey, Scott.............................................. 123
Drabkin, David........................................... 77
Harrington, Brigadier General Edward..................... 84
Jaggard, Captain Michael................................. 92
Kutz, Gregory............................................ 61
Levy, Frederic M......................................... 98
Williams, James.......................................... 71
Letters, statements, etc., submitted for the record by:
Amey, Scott, general counsel, Project on Government
Oversight, prepared statement of........................... 125
Bilbray, Hon. Brian P., a Representative in Congress from the
State of California, prepared statement of................. 163
Burton, Hon. Dan, a Representative in Congress from the State
of Indiana, prepared statement of.......................... 162
Connolly, Hon. Gerald E., a Representative in Congress from
the State of Virginia, prepared statement of............... 160
Drabkin, David, Acting Chief Acquisition Officer and Senior
Procurement Executive, U.S. General Services
Administration, prepared statement of...................... 79
Harrington, Brigadier General Edward, U.S. Army, retired,
Deputy Assistant Secretary of the Army for Procurement,
prepared statement of...................................... 86
Hodes, Hon. Paul W., a Representative in Congress from the
State of New Hampshire, prepared statement of.............. 161
Issa, Hon. Darrell E., a Representative in Congress from the
State of California:
Information concerning agency statistics................. 8
Prepared statement of.................................... 55
Jaggard, Captain Michael, U.S. Navy, retired, Chief of Staff/
Policy for the Deputy Assistant Secretary of the Navy for
Acquisition and Logistics Management, prepared statement of 94
Kutz, Gregory, Managing Director for Forensic Audits and
Special Investigations, U.S. Government Accountability
Office, prepared statement of.............................. 63
Levy, Frederic M., McKenna Long & Aldridge LLP, prepared
statement of............................................... 101
Towns, Hon. Edolphus E., a Representative in Congress from
the State of New York:
Letter dated February 26, 2009........................... 152
Memo dated February 20, 2008............................. 144
Prepared statement of.................................... 3
Watson, Hon. Diane E., a Representative in Congress from the
State of California, prepared statement of................. 155
Williams, James, Commissioner, Federal Acquisition Service,
U.S. General Services Administration, prepared statement of 73
HOW CONVICTS AND CON ARTISTS RECEIVE NEW FEDERAL CONTRACTS
----------
THURSDAY, FEBRUARY 26, 2009
House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:07 a.m., in
room 2157, Rayburn House Office Building, Hon. Edolphus Towns
(chairman of the committee) presiding.
Present: Representatives Towns, Issa, Kucinich, Tierney,
Clay, Watson, Lynch, Connolly, Norton, Davis, Cuellar, Foster,
Driehaus, Burton, McHenry, Bilbray, Jordan, Flake, Chaffetz,
and Schock.
Staff present: Ronald Stroman, staff director; Michael
McCarthy, deputy staff director; John Arlington, chief
investigative counsel; Leah Perry, senior counsel; Kwane Drabo,
investigator; Jason Powell, counsel; Katherine Graham, staff
assistant; Carla Hultberg, chief clerk; Linda Good, deputy
chief clerk; Jenny Rosenberg, communications director; Miriam
Edelman, special assistant; Lawrence Brady, minority staff
director; John Cuaderes, minority deputy staff director;
Jennifer Safavian, minority chief counsel for oversight and
investigations; Frederick Hill, minority director of
communications; Dan Blankenburg, minority director of outreach
and senior advisor; Adam Fromm, minority chief clerk and Member
liaison; Tom Alexander and Stephen Castor, minority senior
counsels; Ashley Callen, minority counsel; and Glenn Sanders,
minority Defense fellow.
Chairman Towns. The first thing I would like to do this
morning is welcome our new Members on both sides of the aisle,
of course, and Mr. Issa, the new ranking member, as well.
Today's hearing will kick off what I expect will be an
exciting and interesting 2 years for this committee as we carry
out our oversight responsibilities.
This committee has a long history of conducting vigorous
oversight and investigations, and we intend to renew and
continue that tradition in the 11th Congress as we continue to
work together to eliminate waste, fraud, and abuse.
Just a few days ago, Congress voted to approve billions of
dollars in economic stimulus funding, much of which will be
spent through government contracting. It will be a massive job
to ensure that this money is spent effectively and wisely, and
that Federal dollars do not go to the incompetent and the
unproductive, the con artists and the frauds.
One of the ways the Federal Government prevents this from
occurring is the suspension and debarment process to prohibit
people and companies with a poor record of integrity and
business ethics from receiving Federal funds. After the
Government has determined that a party is not a responsible
business partner and is therefore ineligible for Government
contracts, they are placed in a database called the Excluded
Party List System [EPLS]. Government contracting officers are
required to check the database to verify that a potential
contractor is not on the list before they enter into a contract
with the company.
Unfortunately, the Federal Government's attempts to prevent
ineligible parties from receiving Government contracts have not
always been successful.
Following an extensive investigation, the Government
Accountability Office [GAO], found that businesses and
individuals that have been excluded for the most serious
offenses, ranging from national security violations to tax
fraud, have improperly received Federal contracts and other
funds.
The results are truly shocking. The Army continued to do
business with a company even after they knew the company's
president had been convicted of attempting to smuggle nuclear
weapons equipment to North Korea. The Navy continued to do
business with a company whose owner had fled the country to
avoid prosecution for tax fraud. And the Navy gave new
contracts to a company that had been suspended for replacing
inspected fittings with low quality parts on an aircraft
carrier, risking lethal burns to the crew.
This begs the question: What is the point of having
suspension and debarment regulations if our own agencies
disregard them?
I could go on and on and on, but let me stop here.
There appear to be numerous instances where Federal
contracting agencies have failed to check the EPLS before
entering into a contract, failed to enter exclusion information
on a timely manner, and failed to terminate an existing
contract with the excluded company.
Part of the problem seems to be that no single agency
actively monitors the content and function of the database.
Moreover, the EPLS database is not integrated with the main GSA
Federal Supply schedule, making it impossible for a contracting
officer to check a single database to verify the eligibility of
a prospective contractor.
I think we can do better than that. We must do better than
that.
As I begin my chairmanship of this committee, I must say
that it is not enough for us to just identify the problems with
the system; we need to fix them.
I am not against contracting. I am not against contractors.
I am against weak management and poor contractor performance.
The flaws in the system are just as frustrating for
responsible companies that do high quality work as they are for
Congress and taxpayers.
I would like to thank the witnesses today who are here and,
of course, I look forward to hearing your testimony. But, more
important, I look forward to working with you to get a more
effective system that really eliminates waste, fraud, and
abuse.
[The prepared statement of Hon. Edolphus E. Towns follows:]
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Chairman Towns. At this time, I yield to the ranking member
of the committee.
Mr. Issa. Thank you, Mr. Chairman. I want to thank you, on
behalf of all of us on the dais, for finding a way to
facilitate the optimum way to address this hearing today.
As you and I have discussed, leading up to today's hearing,
this is a new era for this committee. In the previous Congress,
and one might say for many Congresses going back a decade, this
committee has sometimes held high profile hearings in which
``gotcha'' politics occurred. I take the blame for the
Republican side. I know the chairman feels that a new era
implies that his side may have at times had the same problem.
Those days are behind us.
Chairman Towns and I came to an agreement that the rules of
the committee will change, the practices of the committee will
change, because ultimately, for Government to change on this
dais, we must work together. Our enemy is not the contractor;
it is not the Federal work force. Our enemy is in fact not even
the Senate in this case, but, in fact, a long history of
politics getting in the way of consistent oversight and
returning to issues until they are properly resolved.
Outgoing Chairman Waxman left us with a list of 13,000
unresolved issues by the Bush administration. Chairman Towns
and I agreed that we are going to stay on top of that list
until it has been exhausted by the new administration. But
whether it is the 98,000 suggestions and findings in the last 8
years of the previous administration or the ones that will
come, it is not enough simply to have an administration make a
finding that they have done it, they haven't done it, they are
working on it; we have to look at some systemic issues.
Today, looking at this exclusion list I think is a good
start. It is not the finish; this is not a summit. This is in
fact talking about an ongoing process in which we want to
improve the accuracy of the list of who should be contacting
and, by definition, who should not be. In viewing this list--
and I think we will put just a pie chart up here--what we
discovered is it is large, but it is not that large. A hundred-
plus thousand records, even though some of them are lengthy, in
this day and age, is not large.
What we did discover is there is very little linking
between this database of 100,000-plus excluded parties and the
ongoing entry process that our 1101 and 1102 procurement
personnel use every day. That is, in fact, inexcusable. We need
to facilitate the ease and speed with which somebody preparing
a contract, large or small, can know that they have ticked off
by contractor, by person, a check to see whether or not a red
flag comes up.
However, no amount of good software and good interface
between databases makes up for a skilled work force doing their
job with diligence. Ultimately, we on the dais will be talking
today and asking you about specific instances in which someone
was known, or should have been known, to have serious doubt as
to whether they should be allowed, or their company should be
allowed, to participate in Government contracting on an ongoing
basis.
We are going to hear from, in a unique way, all of the
parties: the accusers and, in fact, those who have to live with
these findings, make changes, work together to improve our
procurement system. I am also pleased, as the minority, to have
Mr. Levy, who will talk about, from a contractor representative
standpoint, if you have made a mistake, how do you move beyond
that mistake; how do you proactively admit to the mistake, make
the changes, and the like.
I think this is a good balance. I thank the chairman for
his cooperation in starting off a new era in a new way. If this
committee is to be successful, this hearing, and all of our
hearings, and all of our staff on both sides will have to
present a united front. I believe today all of you will see we
are presenting a united front.
This committee is going after waste, fraud, and abuse. We
are also going after systemic problems that have long lingered
in which each Congress has faced with a finding that DOD can't
seem to get it right, DOD can't get this, or we need more funds
in order to accomplish something that we needed more funds in
the past to accomplish.
Mr. Chairman, I am going to ask unanimous consent to put
some anecdotal examples of downloads from this database for the
Army with 675 active listings on their exclusion list, the Navy
with 284, GSA with 266, and an excerpt from the Annual
Workforce Report of 2007, which cites a 20-year history of
1101, 1102, and other members of the procurement work force.
Chairman Towns. Without objection.
[The information referred to follows:]
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Mr. Issa. Thank you, Mr. Chairman. At this time, I look
forward to a good bipartisan effort to reform our procurement
process and yield back.
[The prepared statement of Hon. Darrell E. Issa follows:]
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Chairman Towns. In order to move things along, what I would
like to do is have one person on this side of the aisle do a 5
minute statement and then one person on the other side provide
a 5 minute statement. So I will just move on this side for 5
minutes, if anyone would like; and we can split it up.
Yes, the gentleman from Ohio, Congressman Kucinich.
Mr. Kucinich. I want to thank you for calling this hearing,
Mr. Chairman. And I am thankful that the Government
Accountability Office investigation has led to concrete steps
that our Government can take to ensure that criminal
contractors or contractors who engage in serious violations of
their contracts are not able to receive additional Federal
contracts. I regret that the U.S. Government continues to
expend precious tax dollars on companies that lack integrity
and should be, but are not currently, on the list of excluded
parties.
As we get into this oversight, I just want to call one
thing to your attention; it is a specific question about the
standards for disbarment. Listen to this case, Mr. Chairman.
The Kuwait and Gulf Link [KGL] Transport Co., is a Kuwaiti
company that provides contract transportation services to our
military in Iraq. They are required by contracts with the
Department of Defense to maintain liability insurance coverage.
As far as I can tell, they have never provided the Department
of Defense with evidence that complied with this requirement.
Here is why this is significant. On May 19, 2003, an
employee of KGL negligently jackknifed a tractor trailer,
causing a collision with a Humvee of one of our service
members, Lieutenant Colonel Dominic Rocco Baragona, and it cost
Lieutenant Colonel Baragona's life. He was a 1982 graduate of
the U.S. Military Academy, served our country for 21 years.
The Baragona family has been trying unsuccessfully for
years to get KGL to accept responsibility for the death. The
family's attorney made three separate efforts to serve KGL with
process; the company refused. The family's attorney sent a
representative to Kuwait to meet with KGL officials. Here was
their response, Mr. Chairman: we are a Kuwaiti company; we are
untouchable. This is what they say to the family of a dead GI.
Now, if these rules for debarment can't protect our
military, then who can they protect? I am going to be
interested to hear what this panel has to say, because if these
hearings mean anything, they ought to be able to at least
protect one person.
Thank you.
Chairman Towns. Thank you very much. Does the gentleman
yield back?
Mr. Kucinich. Yield back.
Chairman Towns. Mr. Flake, the gentleman from Arizona.
Mr. Flake. Mr. Chairman, I appreciate this hearing being
called. This is a matter that should be of great concern to all
of us. We are going to be spending a boat load of money here
with the stimulus, with the omnibus that we just passed, and we
need to make sure that it is spent wisely. I think a lot of us
are concerned that there simply aren't enough qualified
contractors out there to carry on this work.
A lot of us feel that there is simply too much Government
money being pushed out at any one time, so it is extremely
important that we have good oversight here, and that is why
this committee is going to be important moving forward on this
front. So I commend the chairman for holding the hearing.
I look forward to the testimony and also learning what your
feeling is. Are there enough qualified contractors out there? I
am glad that we are looking to make sure that those who have
committed fraud and whatever in the past are not going to be
eligible and aren't going to be getting these contracts, but I
am concerned that pushing this much money out there this fast
is going to be very difficult without lowering our standards
considerably as to who gets these contracts. So I look forward
to the hearing and thank the chairman for calling it.
Chairman Towns. Thank you.
The gentleman from Ohio yielded back 2 minutes, so if
someone else on that side would like to. Yes, the gentleman
from Illinois, Congressman Davis.
Mr. Davis. Thank you very much, Mr. Chairman. Let me just
thank you for calling this hearing. Also, I welcome your
comments and those of the ranking member. It is amazing to me
that we could be wasting and allowing so much money to go to
waste without the kind of followup and follow-through that is
necessary to prevent it. I am glad that you have opened our
hearing process this year, and I look forward to getting to the
depths of what is taking place with procurement, what is going
on, why it is happening, and, again, I thank you for calling
this hearing and look forward to working with this committee
for the next 2 years. I yield back.
Chairman Towns. Thank you very much.
Mr. Chaffetz has 2 minutes.
Mr. Chaffetz. Thank you. I appreciate the chairman for
calling this. This is of vital importance as we start to talk
about spending literally trillions and trillions of dollars. Of
particular concern, and one of the things I would appreciate
that your address at some point, was our President's call to
end no bid contracts. We just saw that Congress, yesterday,
passed 9,000 earmarks in one of the most egregious and
overspending bills I have ever seen, and I have only been here
a few days as a freshman.
Chairman Towns. That explains it. [Laughter.]
Mr. Issa. Wait until you have been here a while, Jason.
Mr. Chaffetz. For some of you, this is not as critical an
issue, but how are we going to deal with the call from the
President to end no bid contracts? How are we going to deal
with this with a lack of competition perhaps in some space, and
balance that out with the needs to get the job done in areas
that we need to get done? But please know how much the American
people are counting on you to address their issues and spend
their money wisely, and I appreciate hearing from you and
participating in the panel today.
Thank you, Mr. Chairman.
Chairman Towns. Thank you.
We will turn now to our first panel. It is committee policy
that all witnesses are sworn in, so if you would all stand and
raise your right hands.
[Witnesses sworn.]
Chairman Towns. Let the record show that all of the
witnesses have answered in the affirmative.
You may be seated.
Today we have appearing before us Mr. Gregory Kutz,
Managing Director of Forensic Audits and Special
Investigations, FSI, in the Government Accountability Office.
The mission of FSI is to provide Congress with high-quality
forensic audits and investigation of fraud, waste, and abuse,
and evaluations of security, vulnerabilities, and other
requested investigative services. Mr. Kutz and his team have
accomplished this mission today by providing our committee with
the report before us, and we want to welcome you as well.
We also have Mr. James Williams, the Commissioner of
Federal Acquisition Services within the General Services
Administration, which includes management and oversight of the
agency's Federal supply schedule. Previously, Mr. Williams was
the designated acting administrator of GSA from August 30,
2008, until January 20, 2009. Welcome.
Mr. David Drabkin is the Deputy Chief Acquisition Officer
and Senior Procurement Executive within the Office of the Chief
Acquisition Officer of GSA. In this capacity, Mr. Drabkin
oversees the agency's Excluded Parties List System [EPLS],
amongst other programs. Welcome.
Mr. Ed Harrington, is the Deputy Assistant Secretary of the
Army for Procurement as of December 8, 2008. Mr. Harrington is
a retired senior U.S. Army officer, having achieved the rank of
Brigadier General. Mr. Harrington has 28-plus years of
experience in weapons and information systems life cycle
acquisition, contracting management, and military logistics
operations. Welcome.
Mr. Michael Jaggard is Chief of Staff and Policy within the
Office of the Assistant Secretary of the Navy's Acquisition
Management. Prior to his retirement from the Navy in October
2001, Mr. Jaggard held the rank of Captain and served 30-plus
years to our Nation. Welcome.
Mr. Frederic Levy is a partner with McKenna Long &
Aldridge. Mr. Levy has represented and advised numerous
corporations concerning government contract negotiations, award
performance, and contract terminations. Mr. Levy's specialty is
the resolution of complex compliance and ethics issues. That is
really good. Welcome.
Your entire statements are in the record for all of you,
and let me just say that you all have 5 minutes to provide an
opening statement, and of course, thereafter Members have an
opportunity to raise questions.
So why don't we start with you, Mr. Kutz.
STATEMENTS OF GREGORY KUTZ, MANAGING DIRECTOR FOR FORENSIC
AUDITS AND SPECIAL INVESTIGATIONS, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE; JAMES WILLIAMS, COMMISSIONER, FEDERAL
ACQUISITION SERVICE, U.S. GENERAL SERVICES ADMINISTRATION;
DAVID DRABKIN, ACTING CHIEF ACQUISITION OFFICER AND SENIOR
PROCUREMENT EXECUTIVE, U.S. GENERAL SERVICES ADMINISTRATION;
BRIGADIER GENERAL EDWARD HARRINGTON, U.S. ARMY, RETIRED, DEPUTY
ASSISTANT SECRETARY OF THE ARMY FOR PROCUREMENT; CAPTAIN
MICHAEL JAGGARD, U.S. NAVY, RETIRED, CHIEF OF STAFF/POLICY FOR
THE DEPUTY ASSISTANT SECRETARY OF THE NAVY FOR ACQUISITION AND
LOGISTICS MANAGEMENT; FREDERIC M. LEVY, MCKENNA LONG & ALDRIDGE
LLP; AND SCOTT AMEY, GENERAL COUNSEL, PROJECT ON GOVERNMENT
OVERSIGHT
STATEMENT OF GREGORY KUTZ
Mr. Kutz. Thank you. Mr. Chairman and members of the
committee, thank you for the opportunity to discuss the
Excluded Parties List System. Today's testimony highlights the
results of our investigation into whether excluded parties were
improperly paid. My testimony today has two parts. First, I
will discuss the problems that we identified and, second, I
will discuss the key causes of these problems.
First, our testimony highlights 25 cases of individuals and
businesses that received millions of dollars improperly after
being suspended or debarred. As shown by the slides on the
monitors, our 25 cases include companies whose owners illegally
shipped parts to North Korea for its nuclear weapons program,
substituted inferior parts on an aircraft carrier, illegally
dumped chemicals into city sewers, made fraudulent purchases
using stolen Government credit cards, and falsified records for
required SEC filings. Additional activity for these 25 cases
includes: mail fraud, wire fraud, tax fraud, false statements,
money laundering, bribes, kickbacks, and bid rigging.
The individuals and businesses responsible for these acts
were supposed to be prohibited from continuing to receive
Government contracts and other payments. However, in these, and
likely many other cases, the system failed. Let me briefly
discuss two of these cases for you.
First, in July 2005, the Army debarred a German company and
its owner for attempting to smuggle 22 tons of ultra strong
aluminum pipes to North Korea. These pipes could have been used
to make weapons-grade uranium sufficient for several bombs in a
year. The monitor shows excerpts from the Army's debarment
memorandum, which states: ``The United States has a compelling
interest to discontinue any business with this morally bankrupt
individual, as continuing to do so would be irresponsible.''
Unfortunately, one Army command paid this company over $4
million for work ordered after this debarment. In total, the
Army paid this company $20 million after the owner was
convicted of violating German law.
You might be thinking that this command was unaware of this
debarment or, as they say, didn't get the memo. You would be
wrong. According to the Army, this command was aware of this
debarment, but, contrary to the memo you see on the monitors,
chose to continue doing business with this company.
Second, in April 2006, the Navy suspended a company for
product substitution. Specifically, a company employee
intentionally substituted non-conforming fasteners for steam
pipes on an aircraft carrier. According to the Navy, these
fraudulent acts endangered the lives of 3,117 Navy sailors
aboard the USS John F. Kennedy. Despite the suspension, within
a month, the Navy made three awards to this company for over
$100,000.
I am sure that by now you are wondering why the Federal
Government continued doing business with these fraudsters and
criminals, which leads to the second part of my statement, the
key causes of these problems. Overall, we found a broken system
and, in several cases, acts of deception by company owners.
Examples of the breakdowns include: missing data and errors
in the system, inadequate system search functions, agencies not
entering exclusions into the system in a timely manner, and
contracting officers not properly checking the system. Although
GSA and many agencies are involved, nobody appears to be
responsible for making sure that exclusions are properly
enforced.
As I mentioned, we also found acts of deception by several
owners. For example, one owner simply set up a new company with
a slightly different name and a new identifying number. In
another case, the owner's wife operated the company during the
debarment period using her maiden name. Given the lack of
effective oversight, just about any scheme could be used to
beat this system.
Finally, you are probably wondering why we have set this
Dragon skid body armor at the table. Let me explain. We bought
this body armor on the Federal Supply Schedule from a debarred
Government contractor. This company was debarred by the Air
Force for falsely labeling 590 of these vests as having been
tested, when in fact they were not. However, rather than
removing the company from the supply schedule, GSA listed it as
an approved vendor, with no warning that the company was
debarred.
In conclusion, I believe that the 25 cases I have described
for you here today are in fact the tip of the iceberg. Further
investigation would reveal dozens, and perhaps hundreds, of
similar cases. The last time I was before you, Mr. Chairman, I
testified that thousands of Government contractors, with
billions of dollars of unpaid Federal taxes, continued to
receive billions of dollars of new Government contracts.
Unfortunately, today's story is just as bad, or maybe it is
even worse. Stories like this cause taxpayers to lose faith in
their Government. How can we explain to taxpayers that millions
of their hard-earned dollars are being paid to known fraudsters
and criminals, including those that have violated our national
security interests?
Mr. Chairman, I want to commend you and the ranking member
for shining a spotlight on this important issue today. I look
forward to continuing to work with this committee on matters
related to fraud, waste, and abuse. I look forward to your
questions.
[The prepared statement of Mr. Kutz follows:]
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Chairman Towns. Thank you very much, Mr. Kutz.
At this time we will hear from you, Mr. Williams.
STATEMENT OF JAMES WILLIAMS
Mr. Williams. Good morning, Chairman Towns, Ranking Member
Issa, and members of the committee. I would like to thank the
committee for the opportunity to discuss the U.S. General
Services Administration's Excluded Parties List System [EPLS].
With me today is Mr. David Drabkin, the Acting Chief
Acquisition Officer for GSA, who will detail specific actions
GSA has taken to address issues raised by the GAO report
regarding the EPLS.
The EPLS is a valuable tool that helps protect the
Government's interest. Given the vast number of contract
actions that take place each year in which the EPLS is used in
accordance with the Federal Acquisition Regulation, the system
works today. However, we take all isolated incidents seriously
regarding EPLS and we have made, and will continue to make,
improvements to ensure the system works to continue to protect
the Government's interest.
In this regard, we appreciate the work of the GAO in
looking at the system and identifying the incidents set out in
the report and their causes. On December 12, 2008, GSA received
the GAO draft report setting out GAO's findings with regard to
EPLS. The draft report identified a range of deficiencies in
the maintenance, use, and operation of the EPLS. I am pleased
to report that Acting Administrator Prouty signed GSA's
response to the GAO draft report and agreed with the findings
and recommendations of the report. In fact, GSA has already
implemented many of the report's recommendations and GSA will
use the report's findings to enhance the use of the EPLS.
As part of our agency role of providing the Government's
centralized acquisition delivery systems, the Office of
Management and Budget designated GSA as the lead agency to
manage the Integrated Acquisition Environment [IAE]. The IAE is
an e-Government initiative to help streamline and improve the
Federal acquisition process. The IAE is composed of 10
acquisition systems that facilitate every phase of the
acquisition life cycle, from market research to contract
administration. Through the IAE, acquisition functions common
to all agencies are now managed centrally as shared systems.
The EPLS is one of the 10 IAE systems. It is an electronic
Web-based system that identifies parties excluded from
receiving Federal contracts and certain types of Federal
assistance and benefits. The EPLS keeps the Federal acquisition
community aware of agency suspensions and debarments across the
entire Government. While EPLS users are currently able to
search, view, and download both current and archived
exclusions, we intend to make the EPLS easier for them to use
and with more reliable results.
GSA's Federal Acquisition Service understands how important
our role is in the interagency contracting system. To that end,
we regularly refine our systems and guidance to agencies when
we become aware of issues, such as GAO's findings in its report
regarding our Multiple Award Schedules Program. As a result,
the Federal Acquisition Service is taking the following
actions: No. 1, adding reminders to our customer-facing e-tools
to ensure our prospective customers are aware of potential
excluded parties prior to placing scheduled orders; No. 2,
establishing and placing messages within our e-tools to remind
purchasers to check the EPLS prior to placing a task order;
and, No. 3, providing direct access links to the EPLS Web site
within our system's GSA Advantage, eBuy, and eLibrary to allow
for easy access to suspension and debarment information.
Moreover, the Federal Acquisition Service is currently
evaluating all of our training and will ensure that our
guidance directs the review of EPLS data at all appropriate
times in the acquisition process. The guidance will also
describe the steps necessary for removal of excluded entities
from the Schedules Program, where appropriate.
Mr. Chairman, Ranking Member Issa, and members of the
committee, GSA looks forward to working with this committee,
the GAO, and our Federal agency customers to make the EPLS a
more user-friendly and reliable Web-based tool so that it
remains a valuable acquisition tool. We thank the GAO and this
committee for helping promote awareness of the EPLS system and
its continued value as a tool that protects the Government's
interest.
That concludes my statement. I would be happy to answer any
of your questions. Thank you.
[The prepared statement of Mr. Williams follows:]
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Chairman Towns. Thank you very much, Mr. Williams.
At this time, Mr. Drabkin, we will hear from you.
STATEMENT OF DAVID DRABKIN
Mr. Drabkin. Chairman Towns, Ranking Member Issa, members
of the committee, thank you for inviting me to share with the
committee information concerning the Excluded Parties List
System [EPLS]; the rules governing suspension and debarment in
the Federal Government; GSA's administration of its suspension
and debarment program; and its leadership as managing partner
for the Integrated Acquisition Environment [IAE], of which the
EPLS is a part.
Mr. Chairman, Ranking Member Issa, in addition to serving
as GSA's Acquisition Chief Acquisition Officer and a member of
the FAR Council, I have held numerous positions within the
Federal Government and have served on a detail to the Senate
Homeland Security and Government Affairs Committee, all focused
on Government acquisition.
As is more fully described in my prepared statement, I have
devoted much of my professional life to procurement policy,
including serving as the head of a contracting activity, a
trainer, as an agency debarment official. I have also advised
contracting officers as a member of the Judge Advocate
General's Corps, then as a civilian attorney with the Army's
Judge Advocate General's Corps, a civilian attorney of the
Office of General Counsel in the Defense Logistics Agency, and
I was one of the Army's first fraud counsels and ran numerous
fraud counsel program within the Department of Defense. Nobody
is more committed to seeking out and reducing fraud in Federal
contracting.
I was also part of the DOD organization when we worked with
this committee in 1994 to write and pass the Federal
Acquisition Streamlining Act [FASA], and then I led the
implementation of FASA in the Federal Acquisition Regulation.
And all of that has bearing on some of the issues that are
raised in this report on suspension and debarment.
Suspension and debarment are not tools for imposing
punishment on contractors or individuals who have violated
Federal procurement rules or, for that matter, any other rule
or norm that reflects on the company or the individual's
present responsibility. Punishment is left to those departments
and agencies who oversee or regulate various aspects of
commerce or who are responsible for the enforcement of the
Nation's laws. Suspension and debarment are prophylactic
measures designed to protect the Government from doing business
with companies or individuals who are not presently
responsible. Presently responsible is measured by many factors,
which are all set forth in FAR Part 9.
We have developed tools over time to disseminate
information about those companies or individuals who have been
suspended or debarred. Those tools have evolved from written
publications to online interactive tools. We continue to evolve
those tools, making them more accurate and useful to Government
contracting personnel, and ensuring that the Government does
not do business with companies or individuals who have been
suspended or debarred.
As Jim mentioned, we are pleased to say that EPLS and the
suspension and debarment processes are working. And while the
GAO report does identify several instances where mistakes were
made, we do not believe the report demonstrates that any of
these mistakes were the result of deliberate attempts by
Federal contracting personnel to circumvent the rules or
systemic failures in EPLS. The system itself, sir, is not
broken.
Still, it gives those of us who devote our lives to
purchasing on behalf of this great Government, no pleasure to
learn that we make even one mistake. As GAO is aware, we have
training for our contracting officers on the requirements to
check EPLS before awarding a contract. We have changed the EPLS
so that now we require the use of the DUNS number, a unique
identifier to identify companies or individuals who are
suspended or debarred; and we have added the DUNS number to all
but 150 of our over 56,117 active records, and we are trying to
address the 150 records which don't include DUNS numbers now.
When we suspend or debar a company, we tell that company
what the consequences of suspension and debarment are in a
letter suspending or debarring the company. And had the GAO
representative shown you the full letter, it would have told
them that they are not eligible for awards of contracts, tasks,
or delivery orders in the base in the body of that letter.
We require contractors to certify, prior to submitting
offers, that they are not suspended or debarred. We conduct
reviews of our contracting offices to make sure that they are
following our guidance, and when we find that they are not, we
determine the reason and we correct it. And as you just heard
from Jim, GSA's Federal Acquisition Service will add features
to help make sure that our Schedule customers know that a
contractor has been suspended or debarred.
Last year, our contracting officers across the Federal
Government awarded over 11 million contracting actions. The
year before, almost the same number. There were a little more
than 28,700 of those individuals in the Government last year,
and they awarded $456 billion worth of contracts. In 1991, we
had over 33,000 contracting specialists who awarded over $190
billion. Last year, we did three times as much work with one-
sixth less people. It is not an excuse for making mistakes, but
it may well explain why, on occasion, mistakes are made.
Mr. Chairman, Ranking Member Issa, the EPLS is not broken.
Our rules are clear. Our contracting colleagues are trained. We
review our work and we are committed to improving our process,
and we do so regularly.
I am prepared to answer any questions the committee may
have.
[The prepared statement of Mr. Drabkin follows:]
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Chairman Towns. Thank you very much, Mr. Drabkin.
General Harrington.
STATEMENT OF BRIGADIER GENERAL EDWARD HARRINGTON
General Harrington. Chairman Towns, Congressman Issa,
distinguished members of the Committee on Oversight and
Government Reform, thank you for this opportunity to testify on
the Excluded Parties List System and the report on it by the
Government Accountability Office. I have a written statement
that I respectfully request be made a part of the record for
today's hearing.
Chairman Towns. Without objection.
General Harrington. I appreciate the efforts of Congress
and this committee to address this effective use of EPLS, and I
thank the Government Accountability Office for alerting the
U.S. Army to this very important issue.
Mr. Chairman, the Excluded Parties List System [EPLS], is
an essential tool for our contracting teams. As a result of the
GAO's findings, I released a policy alert to contracting
officers Army-wide to re-emphasize the requirement for
contracting officers to use EPLS. I reviewed the actions
covered by the GAO report, and it is clear that mistakes were
made. Contracting officers awarded contracts or orders to
suspended or debarred firms because EPLS was not checked.
Upon learning of these errors, the Army took immediate
action to retrain these contracting officers and implement
changes and local procedures. I am pleased to report to you
today that Department of the Army level procurement management
reviews this fiscal year show a significant improvement over
previous years in evaluating and awarding contracts to
responsible firms. Mr. Chairman, I am also pleased to report
that the Army is taking lasting and significant actions to
improve contracting in expeditionary operations, as well as our
institutional contracting functions. We are working to enable a
contracting mission that is agile and responsive to our war
fighters, while ensuring proper fiscal stewardship of taxpayer
dollars.
A critical important issue for us is the size, structure,
and training of the military and civilian acquisition work
force. From 1998 to 2006, the contracting work force declined
by 20 percent, while the workload and the number of dollars
associated with that workload experienced a fivefold increase.
The Army, with the help of Congress and the Secretary of
Defense, is making steady forward progress in addressing these
workload work force issues. As a result, the Army has added
more than 850 contracting professionals over the last 2 years.
This holistic focus on Army contracting will ensure that we
attract and retain additional military and civilian contracting
professionals who are trained to meet the increasingly complex
demands placed on them.
Mr. Chairman, Army contracting makes up 65 percent of total
Army expenditures. As stewards of the taxpayers' dollars, the
Army is doing a better job of managing and documenting
contractor performance, and I agree that greater emphasis is
rightfully placed on their management and oversight. We
appreciate the efforts of this committee to address the
effectiveness of the Excluded Parties List System.
This concludes my opening remarks, Mr. Chairman. I look
forward to your questions.
[The prepared statement of General Harrington follows:]
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Chairman Towns. Thank you very much, General Harrington.
Captain Jaggard.
STATEMENT OF CAPTAIN MICHAEL JAGGARD
Captain Jaggard. Mr. Chairman, Congressman Issa,
distinguished members of the committee, thank you for the
opportunity to discuss the Department of the Navy's use,
regulations, guidance, and training concerning the Government's
Excluded Parties List System. The Navy and Marine Corps are
absolutely committed to conducting our business dealings only
with responsible, ethical business partners.
The Federal Acquisition Regulation requires that purchases
and contracts be awarded only to responsible prospective
contractors, and it prohibits making a purchase or awarding a
contract unless the contracting officer makes an affirmative
determination of responsibility. One of the explicit elements
of this responsibility determination is having a satisfactory
record of integrity and business ethics. The FAR goes on to say
that contracting officers should use the EPLS in making this
determination of responsibility.
As a general rule, the FAR does allow the continuation of
contracts or subcontracts in existence at the time the
contractor was debarred, suspended, or proposed for debarment,
unless the agency head directs otherwise. However, unless the
agency head makes a written determination of compelling reasons
for doing so, the FAR explicitly prohibits placing orders or
exceeding guaranteed minimum under indefinite quantity
contracts, or placing orders under the Federal Supply Schedule
contracts or basic ordering agreements, or adding new work,
exercising options, or otherwise extending the duration of
current contracts or orders with listed contractors.
In May of last year, in response to GAO's preliminary
findings that some contracting officers may have been making
awards without first verifying whether or not the prospective
contractor was on the EPLS, our Department of the Navy
Acquisition Integrity Office investigated and found out that,
in some cases, what the GAO found was true. The circumstances
varied, but in a few cases the EPLS search function required an
exact match, so unless the firm's precise name was entered in
its entirety, a negative report would result. We understand
this has since been corrected.
Immediately upon learning of these errors, the AIO, in
conjunction with my office, issued a fraud alert titled
Required EPLS Verification Prior to Contract Award, and this
fraud alert was distributed to all of the Department's
contracting officers last year. Additionally, in order to
ensure contracting personnel stayed aware and vigilant on this
important matter, we followed up the fraud alert by
disseminating a training package on EPLS to all of our Navy and
Marine Corps contracting officers. The briefing contains a
concise, but thorough, articulation of the regulatory
requirements regarding EPLS, and it is an invaluable reference
tool for our contracting officers today.
Mr. Chairman, Congressman Issa, the GAO clearly identified
a few transactions that slipped through the cracks. However,
rest assured that the Department of the Navy does not condone
any violation as being acceptable. Through our fraud alert
issued last May, our targeted training initiatives and
improvements to the EPLS software, we believe the weaknesses
that allowed these actions to occur have been effectively
addressed.
I thank you for the opportunity to work with this issue
with this committee, and I welcome your questions, sir.
[The prepared statement of Captain Jaggard follows:]
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Chairman Towns. Thank you very much, Captain Jaggard.
Mr. Levy.
STATEMENT OF FREDERIC M. LEVY
Mr. Levy. Chairman Towns, Ranking Member Issa, members of
the committee, thank you for inviting me to testify today on
this very important topic. My name is Fred Levy. I am a partner
with the law firm of McKenna Long & Aldridge, where I have
practiced Federal procurement law for more than 30 years,
specializing in ethics and compliance issues, and particularly
in the area of suspension and debarment.
While I am here today to testify on my own behalf, I note
that for the past 3 years I have also served as co-chair of the
American Bar Association Public Contract Law Section's
Debarment and Suspension Committee; and in that capacity I have
worked closely with a number of agencies, suspension and
debarment officials, and Department of Justice representatives
to review, analyze, and comment upon legislative and regulatory
developments related to suspension and debarment.
Debarment and suspension from Federal contracts is an
important tool that enables the Government to ensure that its
contractors are presently responsible, and by that I mean that
they have in place the requisite corporate culture, as well as
the processes, procedures, and controls that are required to
perform contracts in an ethical and compliant manner.
A contractor that is debarred or suspended by any agency is
ineligible to receive not only new contracts, but any new work,
including new orders, throughout the executive branch, unless
an agency head determines in writing that there are compelling
circumstances to make such an award. That is the only
exception. Debarment and suspension also applies to
subcontracts in excess of $30,000.
The grounds for debarment or suspension are specified in
the Federal Acquisition Regulation [FAR]. They are broad and
provide agency suspension and debarment officials with wide
latitude. The grounds include conviction or civil judgment for
commission of a fraud in connection with obtaining or
performing a contract, including misrepresentation of
eligibility for award; commission of offenses involving theft,
falsification of documents, bribery or false statements; and
``any other cause of so serious or compelling a nature that it
affects the present responsibility of the contractor or
subcontractor.''
It is important to remember, as Mr. Drabkin said, that
debarment and suspension are not punitive measures. The
Government has criminal and civil remedies by which it can
recover damages and punish offenders. Their purpose is to
assure present responsibility and compliant contracts
performance going forward.
For that reason, the FAR requires that even if grounds for
debarment exist, that is not the end of the inquiry. The
suspension/debarment official must also consider 10 other
factors to assess whether the Government is protected from
similar wrongdoing in the future. Those factors include, for
example, the disciplinary measures taken by the contractor, the
corrective and remedial measures implemented, implementation of
revised controls and ethics programs, cooperation with the
Government's investigations, and whether the Government has
paid all liability and made restitution.
The suspension/debarment official's discretion in deciding
whether to debar provides the Government with substantial
leverage and it allows the suspension/debarment official to
play a role in shaping a company's ethics and compliance
culture. As a condition for continuing to do business, the
suspension/debarment official can require the contractor to
enter into an administrative compliance agreement that
influences the contractor's disciplinary actions; requires the
contractor to implement specific training processes,
procedures, and controls; and may also impose reporting
requirements and outside oversight. Such an agreement has
significant benefits for the Government: it prevents innocent
employees from losing their jobs because a company has to shut
down or cut its work force to do the reduced work; it maintains
competition, reducing no-bid contracting; and it maintains the
industrial base.
The EPLS is the tool used by the Government to ensure that
its acquisition personnel and other Government contractors know
who is ineligible. It is publicly available. I have it
earmarked as one of my favorites. The FAR requires contracting
officers to check it twice, to check it after receiving bids or
offers, and then again to check it before award. Today, it is
easy to use; it is like performing a Google search, and it does
allow use of some common search tools like ``and'' or ``or.''
I also note that the FAR places responsibility on
contractors as well to identify whether they are suspended or
debarred. All contracts in excess of $100,000 require the
contractor to certify whether it or its principals are
suspended, debarred, or proposed for debarment. If, as GAO
points out, there are situations where a listed contractor
received an award and the proper procedure for making that
exception was not followed, that is not appropriate, but it is
also not due to lack of law or regulation.
Rather, in my experience, it would appear to be principally
due to human error either in the listing process or because
someone failed to check the list. In my view, that stems from a
lack of training and an inexperienced and understaffed Federal
acquisition work force. And if a contractor intentionally
misrepresented their eligibility, there are numerous laws and
regulations to address that situation.
I do believe, however, that there are ways to improve the
suspension and debarment system. The ABA Committee on
Suspension/Debarment, which I co-chair, undertook a study last
year and identified a series of recommendations. They include:
strengthening the role of the Government's interagency
suspension and debarment committee; combining the different
rules governing suspension and debarment of contractors, and
suspension and debarment from non-procurement transactions such
as grants into one common set of rules; formalizing the ability
of suspension/debarment officials to enter into administrative
compliance agreements, that is now done on an ad hoc basis, and
making those agreements public; providing for a lead agency
when multiple agencies have an interest in a contractor, and
making a determination of responsibility, just like a
determination of non-responsibility, binding.
I would be glad to share a complete set of our
recommendations with the committee and to work with the
committee. With that, I will conclude my remarks, and I would
be pleased to answer any questions.
[The prepared statement of Mr. Levy follows:]
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Chairman Towns. Thank you very much, Mr. Levy.
At this time, we will start with the questions period, and,
of course, I will start.
I think it was Mr. Chaffetz who mentioned the stimulus
package, and it made me really think about it, and I want to
ask you, Mr. Kutz, I want to know are there guarantees to
ensure right now that none of the economic stimulus will go to
excluded corporations. Just 2 weeks ago we passed a $787
billion stimulus package, nearly a week ago, really, and a lot
of people and a lot of companies want a piece of that action.
In your opinion, are the loopholes in the system so big that
they need immediate attention to make sure that stimulus funds
aren't going to convicts or to con artists? And how do we
ensure that they are going to where they are supposed to go?
Mr. Kutz. I believe on the contract side there still is a
risk that this would happen, but probably the bigger
vulnerability of GSA is moving forward with some of the
proactive things is on the health care side. We are aware of
Medicaid providers in the system right now that are suspended
or debarred. So, for example, some of the stimulus money is
going to Medicaid. It would appear pretty clear that they are
going to get some of this money.
And I expect you also have other vulnerabilities we haven't
talked about today. You have the whole subcontracting
community. We didn't look at subcontracts. Subcontracts are
another risk. But hopefully some of the efforts that GSA has
taken over the last several years will pay fruit and there will
be less vulnerability to this happening. But I think the bigger
risk is on the part we haven't looked at yet.
Chairman Towns. Right. This question I would like to ask
all of you except Mr. Levy. Time and time again, GAO's report
highlights that taxpayer dollars have fallen in the hands of
companies and business owners that should not have ever
received even one contract with the Federal Government, let
alone several. For instance, it goes without saying that
Federal agencies should not contract with individuals convicted
of attempting to smuggle nuclear reactor parts into North
Korea.
Yet, the GAO exposed that the Department of the Army did
exactly that. Further, Federal agencies should not contract
with companies convicted of massive tax fraud or falsifying
filings with the Securities and Exchange Commission.
Nonetheless, the GAO discovered that agencies were actively
contracting with such irresponsible and untrustworthy
businesses.
What I can't seem to understand is why is this occurring.
Why are agencies awarding contracts to those crooks when the
Federal Acquisition Regulation specifically states that
contracts must be awarded only to responsible prospective
contractors, and even prohibits awarding a contract to a
company unless the contracting officer makes an affirmative
determination of responsibility.
Let's just run right down the line quickly.
Captain Jaggard. The only thing I could say in answer to
your question, sir, is the system is not perfect and people
make mistakes. In a few instances where the contracting officer
failed to check the EPLS because they mistakenly believed that
issuing a modification to a contract didn't require doing so.
We have taken corrective action to train people better on how
to properly use the system and not make those mistakes.
Chairman Towns. General.
General Harrington. Sir, a similar situation exists in the
Army. We made some mistakes; we had some misses. Not
intentional errors of omission, but just missing having to
perform that check. In other instances we found, as Mr. Jaggard
suggested also, modifications, delivery orders, task orders,
elements of a contract or in the process of a contract when
they were issued, there was not a check of EPLS made. We have
since strengthened the notice to the field that process has to
be performed even when issuing a modification or a task order
or delivery order.
Chairman Towns. Mr. Drabkin.
Mr. Drabkin. First of all, Mr. Chairman, let me assure you,
as I said in my statement, both written and oral, that we do
not want these mistakes to happen. Second, as Mr. Kutz noted
and as Jim said, we are taking steps systemically to address
the issues. Third, however, I just want to make sure that we
are all clear. GAO found 25 instances. We then went back and
did a search over the last 3 years--that would be about 30
million transactions--and we found 35 instances, including the
25 reported by GAO, where six companies who were suspended or
debarred got awards.
In addition, there is some confusion not explained fully in
the GAO report. For example, a number of their cases involved
awards made under the micro purchase threshold. The committee
may recall that when it passed FASA, when this committee
drafted the language for FASA, we made some decisions about
micro purchases, and one of those decisions was, because of
their value and the cost of the transaction to make those kinds
of purchases, we wouldn't require a host of the contracting
requirements that we would require for purchases over $3,000.
So when an administrative assistant takes a purchase card and
goes to a local vendor to buy $50 worth of paper, pencils, or
pens, they are not required to check the EPLS; and at least
three of the examples in the GAO report involved micro
purchases.
And the last thing I would say to is our office, working
with OMB and with my colleagues on the FAR Council at DOD and
NASA, are currently drafting the guidance to address how we are
going to implement the ARRA, the stimulus package; and in our
guidance we will again remind individuals to check the EPLS
list before they make award.
But, Mr. Chairman, mistakes happen in the system. They are
unfortunate. When we find them, we correct them. We are
committed not to make mistakes, but we do a lot of work and we
don't have a lot of people to do that work with.
Chairman Towns. Thank you very much. But remember, we are
talking about waste, fraud, and abuse here. I want you to know
that.
Yes, Mr. Williams.
Mr. Williams. Mr. Chairman, like everybody else in the
room, I believe we are the greatest country in the history of
the world and that our Government is based upon a system of
trust. And like the gentleman to my left, I have spent my
professional life trying to earn that trust of the American
people in spending taxpayer money wisely and effectively.
However, in these incidences, there are places where people
have made mistakes. Also, some of these are incidents where
people have actively tried to cheat the Government. And we take
every one of these incidents seriously. It is something that
chips away at that trust that we try to earn from the American
people. And when we learn about these things and the causes, as
GAO has pointed them out, we take steps to plug those
loopholes, to provide better training, to enhance the system,
to make sure that we can eliminate these. It may never be
foolproof, because there will be people who may make mistakes
and people who will try and cheat the system. It is our job and
our passion to make sure we do everything we can to eliminate
those mistakes and those people who try to cheat us.
Chairman Towns. Right. Mr. Kutz, you heard it, and I
brought them down the line so you would be able to hear what
was being said. Now I would like to get your response. Do you
believe like Mr. Drabkin stated, that the incidents are just
few and far in between and that they are so remote that we
really shouldn't even discuss it?
Mr. Kutz. Can I agree and disagree? I would like to agree
and disagree at the same time. I would agree, first of all,
that if you add up the money in the dollars, it is not
something that is going to be material. But I think the bigger
point here is the safety and security issue and protection of
the Government. We are talking about--let's use the North Korea
case. One exception, but very important. You are dealing with
someone that sold out to the North Korean government with
respect to their nuclear weapons program. The Army debarment
memo said that one instance put in jeopardy the lives of 37,000
troops in South Korea.
Look at this body armor here. This company sold 590 of
these to the U.S. Air Force, mislabeled, subsequently found to
not pass the tests. So materially wise, dollar-wise, yes, but
590 lives could have been jeopardized by the use of this.
Another example, the expired adhesives used on aircraft
engines. Again, are we talking about big dollars? No. But
people, U.S. soldiers and military people, flying these
aircraft are at risk of having substituted parts.
So I think we are talking more about the issues such as the
safety of our men and women in uniform than dollars here. So
that would be my position, Mr. Chairman.
Chairman Towns. Which is serious.
On that note, I yield to the ranking member.
Mr. Issa. Thank you, Mr. Chairman. I think I will kind of
pick up where you left off. I do want to ask one question to
set a tone, though.
Mr. Levy, what would you say would be the risk if we were
to have absolute zero contracting to any company immediately?
In other words, if we take this step and we don't just pick up
the 30, but we sort of make sure we catch them all, including
the micro and so on, briefly, what would be the potential risk
of, if you will, overuse of exclusion? Is there a risk there?
Mr. Levy. Well, I believe that there is a risk. I think
that, unfortunately, there are lots of individuals who, for
their own personal reasons or because of lack of training, make
mistakes. There are people who do it intentionally, there are
people that do it inadvertently, but that there are lots of
companies that are out there that encounter problems.
If the Government were immediately to debar and suspend any
such company, I think that you would put a lot of innocent
workers on the street. Oftentimes, these events that have been
discussed here are the working of a few individuals within a
large corporation; and there are a lot of people in those
companies who are well intentioned, who intend to comply with
the laws and the regulations, and those are the people who
would suffer when the company loses its work.
In addition, obviously, the Federal Government would lose
its supply base and it would lose its competition, and at this
particular time, when we are so worried about no bid contracts
and competition, it would seem to me that would be a very
unfortunate circumstance.
Mr. Issa. Well, Mr. Levy and Mr. Kutz, I think you both
would be a good sparring here. Because there is, and this was
not in your report as a wrongdoing, but there are in fact
people who are suspended or companies, for one activity, are
suspended while a theater commander or some other purchasing
authority makes a written finding that they should continue on
some other contract while that is remedied, etc.; in other
words, a partial suspension. Would you both agree that is
essential, that we not tell you to do to do absolute, but, in
fact, to deal with some of the examples here today, while
recognizing that there are valid reasons for the waivers?
Mr. Kutz, I particularly want to know from you because that
is one of our concerns, is there is a procedure in place.
Assuming these 30 or so exceptions are set aside for a moment,
because we don't want to tolerate those, that the basic policy,
the baseability for a purchasing authority to certify and thus
continue purchasing for some reason, is in fact a tool in
place. You are not suggesting we change that, are you?
Mr. Kutz. No, not necessarily. I think there are a lot of
facts and circumstances involved. For example, if the company
has been doing business with the Government for many decades,
has a fine history of performance, and it is an isolated case
or a lower level employee, that is one thing. If it is like
this German case, where it was the actual person that signed
the contract, owned the company, etc.; there were 3 years
involved in that one where the Army had a chance to get out of
it, basically. The guy was arrested 2 weeks after the contract
was let. Nothing was done for 3 years, and that was an
egregious case. I think there was a judgment involved and it
was a facts and circumstances.
Mr. Issa. All right. I might note for the record that the
gentleman who was convicted of being part of the bribing scheme
of Duke Cunningham was a Government contractor, and some of his
contracts went on for a period of time, fortunately, a short
period of time.
Let me followup along this line in a couple of areas. First
of all, can you tell us when this committee will receive the
final report? We only have a draft report up until now.
Mr. Kutz. It is just being released today. Today it is
being released.
Mr. Issa. OK, so today is our day. Second, I want to get
into the databases for a moment. These are Oracle databases.
All of your procurement is on Oracle databases. This is a
database that is in Oracle format, the EPLS, right? And it is
apparently less than 100 gig of data, so small enough that
people can go to Best Buy and buy a USB drive, download the
entire database and carry it around, isn't that correct?
Obviously, you are not carrying around an Oracle license, but
we did some downloading and discovered that this 100,000 or so
records is in fact that you could, overnight, update into other
databases. Is that your understanding, Mr. Kutz?
Mr. Kutz. I couldn't answer that question.
Mr. Issa. Well, let me ask everybody else here. Have any of
you, in your procurement, looked at the idea of synchronizing
this database and then integrating it so that it is a part of
your basic, every day, every contract overnight is updating
against that database and running it so that these 30 examples
couldn't happen again? Is there anybody who has done is from
the panel here? I saw a few heads shaking.
Mr. Drabkin. The answer, Mr. Issa, is no, and the reason is
because we do not have a consistent set of transactional tools
across the Federal Government. My colleagues in the Defense
Department can talk to you about the numbers of transactional
tools they have in GSA. We have three or four separate
transactional tools, and not every agency has a set of
transactional tools. So what you are asking, the linking of the
transactional tool to the database so that it knows, before it
gets ready to award a contract, that an individual company's
DUNS number appears in the database, it can't happen if you
don't have a system.
Mr. Issa. OK, so I am hearing about a self-inflicted wound.
Mr. Kutz, in the GAO report, will you be speaking to the need
to correct those self-inflicted wounds of databases that, in a
sense, were designed not to take advantage of this database,
which existed at the time of their latest revisions?
Mr. Kutz. Well, an example of integration of database, I
believe, would be the Federal Supply Schedule, because one of
the questions and one of the recommendations we had was that
companies that are debarred should potentially be taken off of
the GSA Supply Schedule. Apparently, data system issues and
integration issues within GSA are a reason why that may be
difficult. So that is an important aspect of the solutions.
Mr. Issa. OK, I don't want to take any more time than this
last question. The last question simply is, when I reviewed the
database, what I discovered, because it is a public database,
there are no social security numbers for individuals. So an
individual's unique identity is only as good as a common name
and a home address at some point in time.
Can you in fact commit to us today that will be corrected,
at least in a not-for-the-public database so that we can have
unique identities, like a DUNS number, for human beings?
Because it is very clear that companies don't commit crimes;
people in companies do. Is that something that is in your
report? And can I get a commitment from people here that is on
your priority?
Mr. Kutz. Well, I would just say 60,000 of the 70,000
active records are individuals, as you said, and individuals
are the ones that commit the crime, and they do not all have
social security numbers and they are not required fields at
this point.
Mr. Issa. Thank you.
I yield back and I thank the chairman for his indulgence.
Mr. Towns. Mr. Kucinich.
Mr. Kucinich [presiding]. I thank the gentleman.
Unidentified Speaker. If I may, Mr. Chairman----
Mr. Kucinich. I am going to go on to my questioning, so you
can take that up later.
Unidentified Speaker. Yes, sir.
Mr. Kucinich. Mr. Kutz, in your research and study, do you
come across information that was raised, that was probative,
but not acted upon to start procedures of suspension or
debarment?
Mr. Kutz. We didn't weren't given any, no.
Mr. Kucinich. You didn't look into any of that.
Mr. Kutz. Well, if we saw it, we would have had it, but we
didn't see anything.
Mr. Kucinich. Excuse me?
Mr. Kutz. We didn't necessarily see that in all the cases,
no.
Mr. Kucinich. So it is possible that there could be many
more instances out there that haven't been acted upon.
Mr. Kutz. Well, we know there are other cases. I mentioned,
for example, Medicaid providers. The scope of this job was
contractors, so we are talking about companies. As Mr. Issa
said, there are more people in the system that are individuals
that committed crimes, for example, health care fraud. There
are potentially many Medicaid providers out there at the State
level.
Mr. Kucinich. Well, when you put that bulletproof or
apparently bulletproof vest in front of--slightly bullet
resistant vest, thank you--that really sends a chilling message
out to everyone who serves this country, because your
responsibility here to members who are representing the Armed
Services is to protect the lives of our soldiers and those who
serve. That is a very serious responsibility. And it is not
enough to say, well, it just happens a couple of times that
somebody slips through the system. No. You have to have zero
defects. Otherwise, you are directly responsible for the deaths
of our soldiers.
Now, the thing that I want to say to General Harrington, I
read your statement saying that our Army will remain ever
vigilant to meet the needs of our war fighters with the urgency
demanded by life and death situations they face every day as
they superbly execute the global war on terror. Our war
fighters' success is directly linked to the success of our
contracting work force.
I think you are absolutely right when you say that, but I
am trying to square that with a record of a specific case, and
that is the case that I mentioned in my opening remarks. On May
13, 2003, an employee of KGL Transport Co. negligently
jackknifed a tractor trailer, causing a collision with a Humvee
of Lieutenant Colonel Dominic Rocco Baragona that took the
colonel's life. Here is somebody who served the country for 21
years, a graduate of the U.S. Military Academy. Do you know
anything about that case, General?
General Harrington. Yes, sir, I do.
Mr. Kucinich. What do you know about it?
General Harrington. The recent information I have is that
our Procurement Fraud Division served notice of suspension on
KGL for failure to comply with the service of process.
Mr. Kucinich. And what happens as a result of that?
General Harrington. Later, sir, KGL complied with that
service of process rule, so the suspension was stopped.
Mr. Kucinich. What does that mean, they complied?
General Harrington. As I understand it, sir, they responded
to the service of process. I don't have any further
information.
Mr. Kucinich. Are you familiar with a comment from KGL's
representative, saying they are a Kuwaiti company and they are
untouchable?
General Harrington. I am not familiar with that, sir.
Mr. Kucinich. Are they untouchable? Are they untouchable?
General Harrington. Well, sir, I know what we have done
with our Procurement Fraud Division.
Mr. Kucinich. If you are responsible for the death of a
U.S. serviceman, is that grounds for debarment? And if not, why
not?
General Harrington. Well, sir, I can tell you what has gone
on since then, and we will take a question for record to get
back with you with the full details.
Mr. Kucinich. I am just asking you generally speaking.
Let's step away from this case for a moment.
General Harrington. Yes, sir.
Mr. Kucinich. If a U.S. contractor is responsible for the
death of a U.S. service person and they were found to be
negligible, would that be grounds for debarment? And if not,
why not?
General Harrington. Well, sir, there would have to be an
investigation of that incident to determine----
Mr. Kucinich. Have you investigated this incident involving
Lieutenant Colonel Baragona?
General Harrington. Yes, sir. Procurement Fraud Division
has carefully----
Mr. Kucinich. Do you think there was negligence?
General Harrington. Well, sir, I can tell you what the
Procurement Fraud Division found.
Mr. Kucinich. What did they find out?
General Harrington. They carefully reviewed the matter,
concluded that there was not sufficient evidence to support
suspension at this time.
Mr. Kucinich. I would like you to produce for this
committee, of course, with the permission of the Chair, Mr.
Towns, all records relating to this finding. How in the world a
lieutenant colonel serving his country, just doing his job,
driving a Humvee, can end up getting killed by a U.S.
contractor and there not be negligence, I think the people of
the United States and everyone serving this country would be
interested.
General Harrington. Yes, sir.
Mr. Kucinich. So I am going to want to review this. I am
also going to ask Mr. Kutz for you to look at this case as
well.
My time is about to expire, but I can assure you, General
Harrington, that on behalf of this one serviceman and his
family, that this case is not going to go away and KGL is not
going to be able to avoid any responsibility they may have
under law. So I just am asking Mr. Kutz to look at it.
I have just been informed that we are going to recess for--
we can take a few more questions, at least, on each side.
The Chair recognizes the gentleman from California for 5
minutes. Then, after that, we will go to Mr. Davis, we will
take a 40 minute recess, and then we will come back with Mr.
Tierney.
Mr. Bilbray. Thank you, Mr. Chairman. Mr. Chairman, back in
the late 1970's, we were both mayors together when we were
young and spry. I think that any mayor will know, though, that
this situation with the death of military personnel, there is
this issue of--like we did with police officer fire; we may
have a wrongful death, and you draw is it an individual action
separate from the institution and separate from procedures, or
is it procedural and an obligation by the institution itself.
That is the kind of questions you want to address----
Mr. Kucinich. Would the gentleman yield?
Mr. Bilbray. Yes.
Mr. Kucinich. The information that was presented to myself
and to my staff was that in this specific case the company
refused to answer any questions and had taken a pretty arrogate
position with respect to this. So that is why I brought it up.
And I thank you for your observation.
Mr. Bilbray. And we ran into that all the time in the good
old days.
Let me just say, Mr. Williams, you were saying a system
where trust was based on trust. The last time I checked,
though, in this country, I looked at our money, in God we
trust. Everybody else has to verify.
I think I would like to go sort of--you wanted to address
the issue of social security numbers and personnel, the
contractors' names. Do you have any reference to that now? I
saw your eyes kind of flash on that thing, so I want to give
you a chance to jump on that.
Mr. Williams. Thank you, sir. Yes, I just wanted to point
out to the committee that we have in fact discussed the issue
of using social security numbers as a unique identifier for
people who are suspended or debarred.
But after consultation with a variety of agencies and
departments, including the Department of Justice, it was
determined that we could not use the social security number as
the public identifier, unique identifier for people who we
suspend or debar. That does create a problem for individuals
who are debarred, because not every individual gets a DUNS
number, which is usually done in the context of a commercial--
--
Mr. Bilbray. Is that because you are preempted by the
social security legislation right now that says it can only be
used for social security purposes?
Mr. Williams. I don't believe the current legislation was
current at the time we had this discussion, sir.
Mr. Bilbray. OK. Is there any reason why we don't use
eVerify on all our contractors to make sure they are who they
are and so that you are not coming back?
Mr. Williams. Sir, eVerify, as you probably know, was
promulgated as a rule. That rule has been suspended under the
Emanuel memo and is being reviewed by the new Secretary of
Homeland Security, and I don't know what the status will be of
the rule after that review.
Mr. Bilbray. With a system that is 98.6 percent efficient,
it seems like the one way to know people are who they are is
eVerify is probably the fastest and most simple way of doing
it.
Mr. Williams. Sir, I am unable to address whether eVerify
works or doesn't work, or whether it will be our policy or not
be our policy, until the Secretary of Homeland Security has
completed a review in accordance with the Emanuel memo.
Mr. Bilbray. OK. Going back to is there a process right now
that a contractor has to notify when they put in a bid or when
they are procurement that they have been disbarred or they have
suspended at any time? Is there any obligation for them to
notify?
Mr. Williams. Yes, sir. They are required to certify and to
maintain that certification as current in our system that is
called, the acronym is ORCA. It is an online system and there
is an absolute requirement for them to certify when they submit
a proposal, and then to update that certification if it changes
at any time.
Mr. Bilbray. What is the penalty for not following that
procedure?
Mr. Williams. There are no penalties, sir. We don't apply
penalties in the contracting process. But a false certification
could result in a determination that the contract was void ab
initio. It could result in the termination for default of the
contract. It could result in the suspension/debarment of the
contractor. The Justice Department could decide whether they
wanted to proceed against the contractor for a false
certification either civilly or criminally.
Mr. Bilbray. Could is open to interpretation. In other
words, you say you could do this, could do that, and could do
that. It seems to me there should be some minimum that says if
you do this and it is found you have done this, you at least
get this; you may get this, this, this, and this. What I am
worried about is there doesn't seem to be a minimum that could
happen from a direct violation of procedure. And any parent
will tell you there should be some minimum repercussion for not
playing by the rules.
Mr. Williams. But, sir, as you pointed out, when you were
the major of a city before becoming a member, you take each
case on its facts. You find out what happened and then you
apply the appropriate response to those particular facts. There
is no guaranteed result for any of these infractions; it all
depends on the facts. We have a process that seeks out the
facts, that conducts a hearing. We do have due process that is
due to the contractor before we can take any of these actions--
--
Mr. Kucinich. The gentleman's time has expired. Thank you.
Mr. Bilbray. Thank you, Mr. Chairman.
Mr. Kucinich. The Chair recognizes Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman.
Mr. Kutz, I would like to focus in on what, in my opinion,
is the most disturbing case GAO uncovered in its report.
Specifically, I am referring to the case involving the Army's
contract with the company called Optronics GmbH. As I
understand it, Optronics, or, at the very least, its president,
was convicted of attempting to smuggle nuclear bomb parts into
North Korea. Even though the Army was aware of the conviction,
it kept doing business with Optronics. Well, that is obviously
troubling to me, and I suspect would be troubling to a lot of
people.
The question that I have, and that I would like to know
from you, given the seriousness of this matter, is whether or
not the Army fully cooperated with GAO during the
investigation.
Mr. Kutz. I would say no. They were very slow to get us the
information. I have some of the notes here from my staff. We
requested information on this case and a number of other cases
in April 2008. It asked for data in several weeks. The first
data we got was in July, and it was incomplete; it was really
the debarment memorandum. We didn't get the actual memo that
justified that they said they legally had done this transaction
with this company until October, and we didn't actually get the
contract and relevant e-mails until November 2008; and that was
after committee staff finally had to call. So, no, I would say
that they were slow, not just on this one case, but on about
five cases.
Mr. Davis. It is also, then, my understanding that
committee staff here has had some difficulty getting
information from the Army. So I would like to ask you, Mr.
Harrington, why did the Army stall on providing the GAO and
committee staff with the information that they requested? Was
there something that the Army did not want us to know?
General Harrington. Sir, there is absolutely no intent on
the part of the Army to stall. We understood we provided the
information as rapidly as we could. An awful lot of that
information had to be researched and gathered from several
different locations. If there are specifics on that, please, I
would like to know, and we will go back and correct it. But we
have done everything we could to faithfully provide the
information that was asked for.
Mr. Kutz. Can I give you a specific?
Mr. Davis. Yes.
Mr. Kutz. There is a memo dated May 8, 2008. We got that
memo in October. Is that specific?
Mr. Davis. I think that is pretty specific.
Would you consider that to be timely in any kind of way?
Mr. Kutz. It is one page, by the way.
General Harrington. Sir, I would just say we will look at
the circumstances surrounding why it took that long.
Mr. Davis. Well, let me just ask you, Mr. Kutz, does GAO
believe that the Army had an escape clause where they didn't
have to keep doing business with this company?
Mr. Kutz. Yes, we do. In fact, we have a picture on the
monitor--if you could just take a quick look at that--that
shows the time line, which gives you a broad perspective of
this. This contract was awarded and signed by the individual
that was ultimately convicted in March 2003. Two weeks later he
was arrested, and the Army then extended his performance
contract--it was a 3-year contract.
They did the first extension, then, in March 2004. He was
then convicted in May 2004, and almost a year after that
conviction they extended the contract for another year.
Finally, the guy was debarred and the company debarred in July
2005. So there were several cases where they had outs, and I
want to read to you information from the contract, actually,
about one of those outs.
It was the contractors performing services in the Federal--
this is out of the contract: ``Contractors performing services
in the Federal Public of Germany shall comply with German law.
Compliance with this clause in German law is a material
contract requirement. Noncompliance by the contractor or
subcontractor at any tier shall be grounds for issuing a
negative past performance and terminating this contract.'' That
is out of the contract.
Mr. Davis. Let me just ask quickly, Mr. Harrington, could
you tell us why the Army felt that it was obligated to continue
doing business?
General Harrington. Sir, the contract was with Optronics,
not Mr. Tripple. Mr. Tripple was arrested, convicted, and
sentenced. He was removed as managing director on June 17,
2004. We feel his reach into the company was stopped at that
point because he was jailed.
With regard to the comment about compliance with German
law, if you read further into that clause, it is about making
sure that they comply with German law with respect to work
permits, identification requirements, and employee
qualifications.
Mr. Kucinich. The gentleman's time has expired.
Mr. Davis. Let me just ask Mr. Levy, if I could.
Mr. Kucinich. Mr. Davis, we have 2 minutes to get to the
vote. If you want, I will let you do a followup question when
we come back.
Mr. Davis. All right.
Mr. Kucinich. Then we go to Mr. Tierney.
We are going to recess for 30 minutes. I would ask all the
witnesses please return in about a half hour. We are in recess.
[Recess.]
Chairman Towns [presiding]. We have been joined by Mr.
Amey, of course, who did not hear us when we combined the
panel, so will you stand now and let me swear you in? Then we
can have your statement.
[Witness sworn.]
Chairman Towns. Let the record reflect that he answered in
the affirmative.
Mr. Amey is General Counsel of the Project on Government
Oversight [POGO]. Mr. Amey currently directs POGO's contract
oversight investigations, including review of Federal spending
of goods and services, the responsibility of the top Federal
contractors and conflicts of interests and ethics concerns that
have led to questionable Federal contract awards.
So we welcome you. At this time we would have you make your
opening statement and then we will have questions.
STATEMENT OF SCOTT AMEY
Mr. Amey. Thank you, Chairman. And I apologize for not
hearing the merger of the panel discussion.
Good morning, Chairman Towns, Ranking Member Issa, and
members of the committee. The bio you just provided I won't add
to, because I know I have limited time. But I thank you for
allowing me to testify today.
Suspension and debarment has been a process that has been
on POGO's radar for nearly 10 years. In fact, we released a
report in 2002 entitled, ``Federal Contractor Misconduct:
Failures of the Suspension and Debarment System.''
POGO requested that the Government review the suspension
and debarment system, especially as it applied to large
contractors with repeated histories of misconduct, including
the award of contracts to entities that defrauded the
Government or violated laws of regulations, that have had poor
work performance, or contractors that had their contracts
terminated for default.
That report, also in 2002, led POGO to release what we call
our Federal Contractor Misconduct Database, which is a database
of Federal contractors that have criminal, civil, and
administrative instances against them that also includes fines,
penalties, and settlements. We have over 800 actual and pending
cases in our database, and the total is over $25 billion worth
of settlements, penalties, fines, or restitution paid to
Federal, State, local, foreign governments, or private sector
entities since 1995.
Last year, Chairman Towns, former Chairman Waxman, and
Congresswoman Maloney spearheaded legislation to create a
comprehensive Government-run contractor performance and
responsibility database. I think today's hearing is showing
that there are some errors and some problems with the current
suspension/debarment system and that we need to consider how to
consolidate a lot of this data together and make it work
together, integrate it so that contracting officers and
suspension/debarment officials all have the most relevant,
accurate data in front of them to make contracting and
suspension and debarment decisions.
POGO recommends that this committee provide public access
to the Federal Contractor Responsibility and Performance
Database--currently, it will not be publicly available--that
they increase the scope of civil and administrative cases
included in that database to include cases settled with no
admission of guilt or liability. We feel that is still an
indication of a company's integrity and satisfactory record of
business ethics that needs to be highlighted for the Government
as well as the public.
To require that all administrative agreements are shared
among agencies and are made publicly available. This was a
recommendation that came from GAO in 2005. I know the former
head of OFPP, Mr. Dennett, was working on making those all
public, but I am unsure of the current status of that and
whether that plan has actually taken effect. And, again, it
goes back to previous GAO reports. That you implement all the
GAO's recommendations from today; that you also make
terminations and justifications publicly available.
The first panel talked about the terminations and
justifications, especially for continuing a current contract.
That they mandate that an offer or bidder that falsifies a
certification regarding responsibility matters is immediately
considered for suspension or debarment, and that those
decisions are made publicly available; that you consider the
use of background checks for company's principals, especially
contractors involved with classified or sensitive information;
and that you also take a look at this new pilot program for
subcontractors and try to marry up how many subcontractors are
out there currently working that may be on the Excluded Parties
List or have long track records of misconduct.
With that, I will conclude my remarks. I thank you for
inviting me to testify today. I look forward to working with
the entire committee in trying to fix the problems that have
been highlighted today. Thank you.
[The prepared statement of Mr. Amey follows:]
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Chairman Towns. Thank you. Sorry about the confusion.
At this time, I yield to Mr. Tierney.
Mr. Tierney. Thank you. I thank the gentleman for his
consideration.
Gentlemen, thanks for your testimony, but I have to tell
you I am a little bit troubled on this, and maybe it is a
misunderstanding. If I sit back and look at this, I think as
general people might look at it, I hear everybody saying it is
the system's fault, you know, we have this electronic list
system and it isn't working or whatever.
But I think there is a lot of human error involved here,
and I am hoping that it isn't sort of a cultural thing, that it
isn't just a casual attitude or sloppy attitude about making
entries. When you see 27 percent of the time DUNS numbers
aren't put in, I wonder where is the management in all this.
So let me ask what agency is taking responsibility for
making sure that all of this is going properly, that the
database is monitored and that we know when things aren't going
right?
Mr. Drabkin. Sir, that would be GSA. We are the managing
partner for the integrated acquisition environment, of which
EPLS is a part, my program manager and the director of that
program, sitting right behind me. We do have the responsibility
for managing the database on behalf of our other Federal agency
partners. We are checking the database. And as I mentioned in
my opening testimony, I am able to report today that only 150
of the current active 51,117 records lack DUNS numbers, and we
are in the process of getting those 150 records updated.
Mr. Tierney. You know, it is also a bit of an issue of
vigilance here. It is interesting to know that GAO went out
there and found 25 incidents, and then either you or somebody
else said, we found 35; and that is a small number compared to
all the numbers out there.
But why wasn't the check before GAO had to get involved?
Why wasn't that a regular course of business and who was
responsible for it not having been a regular course of
business? And what action was taken with respect to their
inability or unwillingness to do their job?
Mr. Drabkin. Sir, it is the responsibility of every single
contracting officer. That responsibility is laid out in the
regulation; it is laid out in the training that I provide
them----
Mr. Tierney. Because I have limited time, somebody is the
boss of all those people and somebody ought to have been
monitoring that to make sure, on a regular basis, that was
being done. Now, if somebody did that after the GAO put out
their report, I want to know why didn't somebody do it before
it got to the point the GAO did the report. Why wasn't it a
regular practice that somebody did the kind of scrub that GAO
did on this and made the corrections as you went along?
Mr. Drabkin. Sir, that is a good point, and I will take it
back to the FAR Council and we will look at what type of
guidance we can issue to see if there is a way to run a check
periodically to make sure----
Mr. Tierney. Well, there obviously is; somebody at the GAO
did it.
Mr. Drabkin. That is true, sir.
Mr. Tierney. It has been proven it can be done. GAO proved
it could be done and you proved it could be done.
Mr. Drabkin. That is correct, sir.
Mr. Tierney. So, I mean, it is just not very edifying to
sit up here and say, well, we read GAO's report and, gee, you
know, they are right, they got us, we made some mistakes, mea
culpa, whatever. It goes deeper than that. This never should
have happened. Either you want to try to minimize the number of
incidents and say it is only 35 and it is not a lot of money.
There are a lot of lives involved.
When the Truman Commission was in place, there were two
measures: one was how much money was saved; the other was how
many lives were saved. And I think that point was made by Mr.
Kutz earlier on that.
So I expect and I hope that you will go back and then
report to this committee exactly what the process is going
forward for that to be done on a regular basis and what you are
going to do about what might be a cultural problem out there,
either laziness or sloppiness or people not thinking. There is
a price to pay when they don't put the DUNS number in on a
regular basis.
Mr. Drabkin. The only issue I take, sir, with your comment
is obviously 35 errors out of 30 million transactions is not a
cultural problem. But I take your point.
Mr. Tierney. But 27 percent of the time not having a DUNS
number entered in may well be a cultural problem.
Mr. Drabkin. It took in a period of time when we were
transitioning to adding the DUNS number to the database, sir.
Mr. Tierney. Whatever. Twenty-seven percent is 27 percent,
and vigilance is vigilance.
Mr. Drabkin. Yes, sir.
Mr. Tierney. And the consequences are serious on that.
Mr. Drabkin. Yes, sir.
Mr. Tierney. So I expect that everybody is going to do
something on that.
I am still troubled by this Optronics case. General
Harrington, let me tell you the president of Optronics is
arrested 3 weeks after he gets a contract and the Army doesn't
disbar him or suspend him. Time goes on, he is convicted, he is
sentenced, and they are still doling out money to this guy, to
this company.
Now, you said something about, well, gee, he was in jail,
so we thought he was off the street, so we kept doing business
with the company. So is the idea here that as long as you form
a corporation, any agent of that corporation can commit a bad
act and the company still does get contracts with the
Government? Is that the deal?
General Harrington. Sir, the company was performing more
than satisfactorily in its contract obligations to the Army. It
was rated excellent in its performance.
Mr. Tierney. Tell me the excellent part about making sure
the Koreans got parts they weren't supposed to get.
General Harrington. They didn't get any parts, sir. Those
parts were confiscated before they ever got----
Mr. Tierney. Well, very good point. So if you want to pick
nits, let's go this way. What is the good contract part about
having it get to the point where they had to be confiscated,
and that this individual was responsible for that, his company
continues on getting money from the Government and from the
taxpayer?
General Harrington. Sir, the company was providing civilian
actors on the battlefield for Army training for a major
training event for two combat brigades entering combat into
Iraq. It was a deliberate set of decisions made to assess
whether or not that company ought to go on. Its performance was
rated as excellent. They were a capable company, irrespective
of the fact that the managing director had been jailed. He had
also been removed from the company.
Mr. Tierney. Does anything sound bizarre to you about that?
Maybe I am the only one hearing this oddly or whatever. There
are other companies that do this kind of work. There are other
companies now doing this work, in fact. And the Army makes a
decision to deal with somebody who has this kind of a
background, their principal officers? I just don't get it.
What is the reason for that? I mean, there has to be some
price to pay for people stepping out of line like this, not
saying, well, it is a little inconvenient for us to go find
somebody else, even though there are other qualified people out
there who can do it.
General Harrington. There is, likewise, sir, a process to
go search for other companies to perform that type of work at
the major training area. At that point, Optronics had over 500
people engaged in the performance of this contract at the
training area. An assessment was made to determine whether
other companies were available right then and there to continue
on with this work to be able to move these brigades into Iraq.
They were a part of a flow of combat brigades in and out of
Iraq and a part of the buildup going in. The critical element
here is that these soldiers get trained in actual realistic
scenarios before they have to enter into combat with
terrorists.
Mr. Tierney. Well, the inference that you are trying to
draw there is that nobody else could have done it and stepped
in there, and I think that simply is not accurate. Certainly,
at least you are acknowledging that it is not something you
didn't know about; there was a headline in the Washington Post
in August 2003, so you guys knew it and you consciously made
the decision to not go to other qualified people to do it, but
to let this company carry on.
General Harrington. That is exactly right, sir.
Mr. Tierney. I think that is short of astounding.
General Harrington. That is exactly right. We made a
deliberate decision to continue on.
Chairman Towns. The gentleman's time has expired.
Let me say, Mr. Drabkin, we will keep the record open to
hear what happened, when you go back and you talk about the
suggestion that was made by Congressman Tierney in reference to
discussion. We will hold the record open for that, because I
view this as being very serious.
And I want you to know this hearing is about the
possibility of legislation because any time you place troops in
jeopardy when you sell vests, bulletproof vests that don't
block bullets, and when you attempt to sell things to the
enemy, you just can't ignore those kinds of things. Now, we
want to try to see what we can do in terms of you fixing it.
But if you cannot fix it, then this is what this committee is
about. We want to get rid of waste, fraud, and abuse, but we
are also abut security as well.
Mr. Chaffetz.
Mr. Chaffetz. Thank you, Mr. Chairman.
Captain Jaggard, you alluded, in your impromptu testimony,
that there were instances where they didn't actually use or tap
into the system. How often does that happen? And is it normal
protocol to actually use or not use the system?
Captain Jaggard. In the 25 cases that are the subject of
the GAO report, for the Navy there were 7 of them. There were
two instances where the list was not properly checked by the
contracting officer.
Mr. Chaffetz. So is it common practice to use the system?
Captain Jaggard. It is required that they use the system,
and that is why we issued the fraud alert as soon as we found
out, to remind everybody that they are required to use the
system.
Mr. Chaffetz. So in this case the employee didn't use the
system that was in place?
Captain Jaggard. She mistakenly thought that you didn't
have to use the system for a modification to a contract, which
was the action which was involved, and she was wrong.
Mr. Chaffetz. Mr. Kutz, help me here with the math and the
understanding of what you found in your perspective. My
understanding is that, over the last 7 years, there have been
something like 70 million transactions, is that right, contract
actions? Does that sound right?
Mr. Kutz. I will trust Mr. Drabkin's numbers in that
respect.
Mr. Drabkin. Roughly.
Mr. Chaffetz. And that there are 70,000 either entities or
individuals that are listed within the system? How many
different contractors does that represent? If there are some 70
million transactions, or contract actions, I guess, how many
different vendors does that represent?
Mr. Drabkin. I will have to get back to you with an exact
number, but it averages about 250,000 to 300,000 vendors a
year, and across the years there are some vendors who remain
the same and there are some vendors who are added or deleted to
the base of vendors who do business with us; and that does not
take into account those vendors who sell to us through the
micro purchase program, because we don't report--we only
recently started that reporting process.
Mr. Chaffetz. So you are telling me there are 250,000 or so
different vendors, but, yet, we have 70,000 that are listed on
this?
Mr. Drabkin. That is 70,000 companies or individuals are
listed. There are a lot of individuals who are listed who have
never done business with us at all. For instance, there are
Congressmen who were convicted, there are citizens who were
convicted, never done business with us before, but we suspend
or debar them. There are individuals from companies who are
suspended or debarred, and the company may itself not be
suspended or debarred.
So 70,000 does not represent the number of companies, and
there is no direct correlation between that number and the
250,000 to 300,000 vendors we do business with on a day-to-day
basis across the Government.
Mr. Chaffetz. I guess at some point I would like to
clarify--our time is short here--how pervasive this problem is.
Are we dealing with 2 percent, 1 percent, a fraction of a
percent, 10 percent of the vendors are individuals that we are
having trouble with along the way, actually, at some point run,
into trouble where they have not met the criteria and end up in
this database?
I would ask you each--our time is so brief here--how in the
world are we going to deal with literally trillions, trillions
of new dollars going into the system with the resources that
you have within your own departments in terms of personnel and
the database. How in the world is that going to work? Anybody
want to take a stab at that one?
Mr. Williams. I will be glad to. We are concerned about
that, concerned about the capability and the capacity to be
able to spend that money wisely and effectively, and I will
tell you most of the major acquisition agencies are trying to
hire right now. What we are concerned about is the labor pool
we are trying to hire from that we are all trying to----
Mr. Chaffetz. How long does it take you to train somebody
to get up to speed to actually become an acquisition officer?
Mr. Williams. Well, to become a contracting officer,
usually about 5 years or so of training and working.
Mr. Chaffetz. Five years of training?
Mr. Williams. Five years of training. They start at the
lowest level, as a contract specialist, and then once they have
received all their training and the experience, and in the
judgment of a senior official that they have the training, the
business skills, the right ethics, then they are awarded a
contracting officer warrant.
Mr. Chaffetz. I have only got seconds here. Let me also ask
10 separate systems, is that correct? Is that what we are
dealing with here? The integration of the systems so that you
all can communicate with each other, how pervasive is that
problem and challenge, and what are we doing to rectify it?
Mr. Drabkin. There are 10 separate systems that make up
IAE. There is only one system for EPLS. That system and the
integration discussion I had with Mr. Issa was about
integrating that database with transactional systems that
actually award contracts. There are multiple transactional
systems throughout the Government. It is a tool that we lack.
Had we that tool, the instances of mistakes would be further
reduced.
Mr. Chaffetz. What are we doing to solve that? I know my
time is up here.
Mr. Drabkin. I am sorry, sir?
Mr. Chaffetz. Is there a plan to actually solve that
challenge?
Mr. Drabkin. No, sir.
Mr. Chaffetz. Thank you, Mr. Chair.
Chairman Towns. Thank you very much.
Mr. Davis, I understand that you were short-changed, and I
would like to correct that.
Mr. Davis. Mr. Chairman, you know I don't ever want to be
short-changed, especially being from Chicago. [Laughter.]
Chairman Towns. We yield to you 2 minutes.
Mr. Davis. Thank you very much, Mr. Chairman.
I would like to revisit the Optronics situation that we
were discussing when we left. Mr. Harrington indicated that the
Army had an obligation to continue doing business with
Optronics, and I will give them the benefit of the doubt on
that one. But then one reason I understand for continuing to do
business with a debarred company or individual is that there is
no other contractor that can provide specialized goods or
services.
Mr. Kutz, do you know what Optronics was selling or
providing to the Army?
Mr. Kutz. Yes, it was called Civilians on the Battlefield,
role play actors. They were acting as mayors, refugees,
villagers. The qualifications according to the contract were
they needed to understand English, for example, be willing to
work 10 hours a day, be properly clothed, overshoes, extra
socks, thermal undergarments, and they were not allowed to have
consumed any alcohol before becoming actors.
Mr. Davis. Role playing actors?
Mr. Kutz. Role play actors, yes, making probably $10 or $15
an hour, something along those lines.
Mr. Davis. Mr. Harrington, is that correct?
Colonel Harrington. Yes, sir, it is.
Mr. Davis. In your opinion, Mr. Kutz, was this a unique
service that could not have been done by another company?
Mr. Kutz. No. I believe someone was doing it before and
someone is doing it now, from what I understand.
Mr. Davis. Mr. Levy, could I ask you a question, if you
would comment? Do you think that there is--as an expert in
procurement, as a practicing attorney, do you think there was
any escape clause or any way that the Army could have escaped
or gotten out of this contract?
Mr. Levy. Gotten out of the contract altogether?
Mr. Davis. Yes.
Mr. Levy. Well, without having seen the contract, I think
the first thing----
Mr. Davis. Or not continue to do business at this juncture.
Mr. Levy. Well, that is two different questions, Mr.
Congressman. One is could they have gotten out of the contract
and two was did they need to award additional work. With regard
to the additional work, they had to make a compelling
circumstances determination, and that is what is being
discussed, and that would go not only to whether or not there
was another source, but whether there was another source that
could timely provide that particular service, or if it would
have impeded the Army's mission.
I don't know the answers to those questions, but those
would have been the questions to ask. And what would have been
the cost of standing down this particular contractor and
bringing in another company in the short-term. So those are, I
believe, the questions to ask in a compelling circumstances
determination.
With regard to whether they could have gotten out of the
contract altogether, without having seen the contract, but
typically--and assuming that the impropriety here did not
relate to the actual performance of that award--and as I heard
General Harrington say, they were performing excellently--then
typically within the Government contracts there is what is
called a termination for convenience clause, and that clause
permits the Government, for any reason, to terminate a contract
of its own volition so long as it is not done in bad faith.
But there are consequences to the Government of exercising
that clause, because the Government then is liable to the
contractor for all the costs it has incurred not only for
liquidated products and services delivered under the contract,
but for all the costs that are incomplete, has to pay the
contractor, make them whole. Whatever they have incurred in
terms of costs, they get reimbursed those costs plus a profit;
they get reimbursed the costs of putting together their
settlement proposal. So the Army would have had those costs
plus whatever costs it would have incurred to re-procure.
But as a technical, legal matter, they probably could have
gotten out of the contract.
Mr. Davis. Thank you very much.
Mr. Chairman, if I could just ask my last question.
General Harrington, if the president of Optronics was
arrested for violating German law nearly 3 weeks after having
been awarded the contract with the Army, why did the Army not
suspend the contract at that time or why did it take nearly a
year before the debarment of the company or the individual took
place?
General Harrington. Sir, the Army continued on with the
contract because the contractor personnel were performing
satisfactorily. There is a due process with regard to going
through the legal processes to debar. The Army recognized the
offense Heir Tripple had committed; it made a deliberate
decision to continue to engage the company because of the
criticality of the functions it was performing to help prepare
American soldiers to go directly into combat in Iraq.
When Mr. Tripple was jailed, there was a determination made
that his reach into the company was nil and that he had been
removed as managing director. And, again, the assessment was
that other companies that would have to come in to do that
would have to be issued solicitations, and that would be a 5-
to 6-month period where they would have to consider awarding a
contract to another offeror.
So the type of contract issued was what is called a
requirements contract. It is essentially an assurance by the
Government to the contractor that all requirements that have to
be performed are guaranteed to that contractor for that period
of performance. Were we to terminate for convenience, we would
have been held in breach of contract, and that was a proceeding
that we did not want to have to handle.
Mr. Davis. Thank you very much.
Thank you, Mr. Chairman. I will just note that between the
time of the arrest and the conviction, the Army paid Optronics
$11.5 million. That seems to be a lot of money to me.
I thank the gentlemen for your answers, and I yield back,
Mr. Chairman.
Chairman Towns. Thank you very much. Let me just sort of
pick up on that.
Mr. Kutz, do you agree with the statement made by General
Harrington?
Mr. Kutz. Some of the things we agreed on. I mean, I think
that they had opportunities to get out. Again, as Congressman
Davis said, the individual was arrested in 2003 and the
debarment didn't happen for several years, but he was convicted
in May 2004. Ten months after that they extended his
performance for the third year of the contract. If there was
any time they could have gotten out, it was right there they
could have actually gotten out of it.
Plus, we believe the language in the contract that I read
earlier for the record meant what it said, that a violation of
German law was a condition where they could have terminated.
They wanted to take the route that was more expeditious for
purposes of the role players on the battlefield rather than
deal with what the Army themselves had said was a morally
bankrupt individual, and doing what the Army did was
irresponsible. The Army said it was irresponsible, yet the Army
still did it.
Chairman Towns. Let me ask you, Mr. Amey. You have a
database as well. What is the difference between yours and
EPLS's database. Is there any difference?
Mr. Amey. Yes, sir.
Chairman Towns. What is the difference?
Mr. Amey. The EPLS is only a list of the suspended or
debarred contractors or proposed debarred contractors. POGO's
list includes companies that may have settled with or been
involved in litigation with another private party, a State
government, a foreign government. It also may be instances of
violations of Federal law and regulations that have not yet put
them on the EPLS.
So our database will incorporate EPLS into it. The actual
legislation requires criminal convictions, civil cases where
there is an admission of liability or a finding of liability,
and then administrative cases in which there is an admission of
liability. So it also includes suspended or debarred
contractors and contractors terminated for default. So it is
kind of three steps or four steps passed what is currently in
the Excluded Parties List.
Chairman Towns. Do you have any idea how much it costs to
maintain your database?
Mr. Amey. Our database currently is only the top 100
Federal Government contractors, and we will have a new list
come out because we saw that usaspending.gov just updated their
fiscal year 2007 data. But our list probably cost us $20,000 or
$30,000 to upkeep. Obviously, the way that it is implemented
based on the legislation that it will include contractors
receiving a certain threshold of money, so at that point it
will be a little more extensive than what we have, to say the
least. But I think it is a vital investment--and due to the
problems that we are hearing today--in protecting the taxpayer,
protecting the Government, and protecting war fighters.
Chairman Towns. What lesson should GSA learn from your
database and what you are doing?
Mr. Amey. Well, first of all, that it is possible. We were
told for many years it is not possible. What is the purpose? We
have gotten a lot of criticism from the contractors and the
contracting associations that it is not necessary, but I think
today shows us that it is. We need a better system. Somebody
earlier said the system isn't broke. I think it is. Twenty-five
instances may not be a lot, but it is also how many other
contractors are out there getting Federal money that are in the
risky side.
There have been policy shifts, as Representative Tierney
asked about, that we are going after more individuals than we
are companies, and that needs to be looked at. So we need to
restore contractor accountability, and all these systems
integrated together would provide a wonderful tool for the
Government to make better contracting decisions and hold
contractors accountable, and I think both those things are
missing.
Chairman Towns. Thank you very much.
At this time, I yield to the gentlewoman from Washington,
DC, Congresswoman Norton.
Ms. Norton. Thank you very much, Mr. Chairman. I must thank
you for this hearing. The GAO report is stunning. I have come
to ask a question, though, concerning what gets contracted out
after we have already discovered issues. This question should
go to Mr. Williams and Mr. Drabkin, I believe.
On the screen you will see, perhaps, if you can, the basis
for the question. The Inspector General of GSA, apparently, in
December 2007, reviewed the suspension and debarment program,
and the yellowed-out section reads: ``The Office of the Chief
Acquisition Officer should make every effort in the future to
avoid utilizing contractors to perform suspension and debarment
work'' is what the subject was.
I would like both of you to consider that advice from GSA
and I would like to ask you why is the responsibility of
maintaining EPLS contracted out to Information Sciences Corp.
How is contracting out the previous backlog--well, first of
all, let me ask you why is that first contract done.
Mr. Drabkin. I will address that issue; all of those
matters fall within my office. During the 2005 timeframe, when
Ms. Emily Murphy became our Chief Acquisition Officer, there
was a lack of attention paid to the suspension and debarment
function. When the IG brought to her attention that there was a
backlog of suspension and debarment cases, and when her office
had been basically decimated as a result of a reassignment and
retirement, every member of the office, Ms. Murphy decided to
help some existing Government employees catch up the backlog of
suspension and debarment cases. At no time----
Ms. Norton. Rather than hire somebody to do what the
Government was supposed to do.
Mr. Drabkin. She was in the process of hiring people,
Madam, but she had not finished the hiring process. I will tell
you that I would never have done that, and our office will not
do that in the future. But she was trying to eliminate the
backlog. None of the contractors perform decisionmaking
functions, but, nonetheless, this is the most sensitive thing
we do in GSA, and it is something that should not have involved
contractors and will never involve contractors in the future.
As to the management of the database, the database is
managed by a Government employee, has always been managed by a
Government employee. There is a contractor that provides
support, technical support in terms of operating the servers,
refreshing the software, but there is no contractor who enters
data into that database. There is no contractor who quality
controls the data in that database, but there is a contractor
who keeps the lights turned on, adds the software, the things
that our Government employee is not competent to do.
I hope that answers your question. But I want to assure you
in the strongest terms GSA, as long as I am there, will never
ever use a contractor to support any function in our suspension
and debarment office.
Ms. Norton. How many Government employees are actually
maintaining EPLS at this point?
Mr. Drabkin. We have one program manager who is responsible
for the maintenance of the program. Understand when I say
maintenance, I mean she is responsible for making sure that the
systems run. Every agency is individually responsible for
entering the data into the database.
So within GSA I have a program manager who manages the
database, but then I have a suspension and debarment office
which has six individuals in it currently, and we are about to
add more, who enter the data; and the Justice Department has an
office and the Agriculture Department and the Department of
Defense has several offices. So I don't have a total number of
people who actually enter data, but each department and agency
is responsible for entering its own data.
Ms. Norton. I am trying to understand what the Government
is paying for. The Government employees, I can find out easily.
As I understand it, GSA is charging Federal agencies upwards of
$1.5 million for fiscal year 2009, and there is only one person
maintaining EPLS?
Mr. Drabkin. And there is a contractor supporting the
actual maintenance of the servers, the software, etc., By the
way, we don't charge agencies----
Ms. Norton. Wait a minute. ISC, then----
Mr. Drabkin. We do not charge people for this service. The
ACE, which is a committee of the Chief Acquisition Officers
Council, annually meets, determines what work is going to be
done, develops a budget, and then assesses each member of the
Federal Government a share of that budget. But we do not charge
people for this service; this is a pass-the-hat----
Ms. Norton. So what are you charging people for?
Mr. Drabkin. We aren't charging for anything, Madam, we are
collecting a portion of the budget that is determined by the
committee of the Chief Acquisition Officers Council.
Ms. Norton. To be used for what purpose?
Mr. Drabkin. To be used for managing the EPLS database,
which includes one Federal employee and the contractor who
keeps the lights on on the system.
Ms. Norton. And ISC, as we understand it, provides the
following level of support. If this is not the case, I wish you
would let us know. One full-time project manager, one full-time
software developer, one full-time database administrator, one
full-time help desk attendant, one part-time system
administrator. There may be additional responsibilities that
they are not able to perform that could be subcontracted to
other entities. That is our information.
Mr. Drabkin. That and the hosting function of actually
hosting the database on equipment that they either own or
lease.
Ms. Norton. They have one full-time database administrator.
What in the world does he do if he can't get into the database?
Mr. Drabkin. He has no authority to enter data; he looks
over the database, but he is not a database--he doesn't enter
any data into the database. If you are asking me is it possible
that he or anybody else in the contractor's staff could play
with the data, the answer is I think it is possible. We have
not received any information, we have no reason to believe that
has ever happened.
Ms. Norton. I am counting 15 people that he dedicates to
this.
Mr. Drabkin. Yes, ma'am.
Ms. Norton. How many do you dedicate to it?
Mr. Drabkin. One. One Federal employee.
Ms. Norton. Do you see my problem there? You got 1, they
have 15, and yet they really don't have any major
responsibility.
Mr. Drabkin. I am sorry, I disagree. They have a very major
responsibility of keeping the database up and running. That is
different than adding the data.
Ms. Norton. And you believe that, in fact, that is really
all that is necessary for the Government to do, is to have that
single person dedicated to that task, as long as they have
these 15 people contracted to do most of the work.
Mr. Drabkin. I don't make the appropriations decisions on
how many people I can have in my agency.
Ms. Norton. Contracting decisions are not made by the
appropriators.
Mr. Drabkin. Ma'am, they decide whether I am going to get
personnel money or contracting money. I don't make those
decisions. When I get those decisions on whether I have
personnel money or contracting money, I then decide what to
contract for.
Ms. Norton. So you are saying that your budget, as sent by
the President or at least the prior President, forces you to
contract out these functions, because that is where the money
was?
Mr. Drabkin. I am saying that we follow the budget guidance
that we receive from both the Congress and the President, and
that this has not been an issue that we looked at, as to
whether to bring that function back in-house. It may very well
be that this administration asks us to look at doing that, but
that is not a matter that we have considered or studied.
Ms. Norton. What would it cost to bring it back in-house?
Mr. Drabkin. I have no idea, ma'am.
Ms. Norton. I would like you to provide to the chairman
what would be the cost of bringing those who are providing you
this outside service, what would be the cost if the Government
itself was providing that service.
Mr. Drabkin. We will do our best, of course, to respond to
any question you ask, but you need to take into consideration
that we are on a plan right now to consolidate the 10 databases
that we have in IAE into a single platform, which will create
greater efficiencies and, we hope, actually reduce the overall
cost of operating IAE by about half. It is a 3-year plan----
Ms. Norton. So what effect would that have on the----
Mr. Drabkin. We would not increase Federal employees.
Ms. Norton [continuing]. Difference between people
contracted out and people who in fact have responsibility in
the agency?
Mr. Drabkin. We would not, in this plan, increase Federal
employees. We would decrease contractor employees by achieving
efficiency.
Ms. Norton. So even though you are consolidating, you only
need one person? Even though you are putting all of this
together and one person is doing it now for far less, you still
would only have one person who is a Government employee?
Mr. Drabkin. Yes, ma'am. The program manager, the
functional director, the person who understands and makes the
decisions about how the program operates. And what we would buy
or continue to buy are people who perform non-discretionary
functions, essentially administrative functions.
And what we are looking for is the efficiencies by
combining our 10 databases into one over the next 3 year period
to actually reduce the number of contractors we need and the
dollars we pay contractors for providing the foundation, if you
will, the servers, the database----
Ms. Norton. Mr. Drabkin----
Chairman Towns. The gentlewoman's time has long expired.
Ms. Norton. Mr. Chairman, can I ask only that since he said
that there is going to be a consolidation, and seemed to imply
that, therefore, if he provides that data for the present
operation, it would not be valid because they are about to
consolidate, then I ask that he provide the data to the
chairman that I asked for the consolidated operation. What
would be the cost of bringing the people back into the
Government.
Chairman Towns. Without objection, we will hold the record
open for that information.
Mr. Drabkin. Thank you, sir, and we will take care of it.
Chairman Towns. Talking about holding the record open for
information, the Congressional Research Service did a very
extensive report on termination for convenience under the
Federal Acquisition Regulation, and I would like to also
include that in the record, because it appears that the Army
could have ended the contract with Optronic GmbH. Really, you
could have. But, anyway, we will put it in the record.
[The information referred to follows:]
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Chairman Towns. Let me just say, before I yield to the
ranking member, you know, these hearings really are for trying
to stop waste, fraud, and abuse, and we want to work with you
and we want you to work with us, because I think you are
concerned about waste, fraud, and abuse.
Also, we want to look at maybe as a result of the present
structure we need to examine prospective legislation. I don't
know. But I want you to understand that is what we are talking
about here.
Mr. Drabkin. Mr. Chairman, let me assure you that we all
would love to be able to work with your respective staffs to
look at ways to improve the process, because that is what we
are all interested in doing.
Chairman Towns. I yield to the ranking member, Congressman
Issa.
Mr. Issa. Thank you, Chairman. On that note, the chairman
and I were at the White House on Monday, and, in a sense, these
issues came up, including the whole fact that we limit head
count throughout Government, while not necessarily limiting
money. So we give you money and X amount of people. What are
you going to do with the money? We are going to make up for the
shortage of the people.
I might note, Mr. Chairman--I am sorry the gentlelady from
Washington, DC, has left, because, as you recall, we went
before House Administration and we asked for 30 more slots. No
more money, just authorization if we could find people who
wanted to work nearly as interns. Obviously, within a very lean
budget, if we could have those slots, and I haven't heard back
that we got them yet. So perhaps the gentlelady will join us in
trying to get more Government employees, rather than us
contracting out, because I too enjoy outsourced computer
services from Lockheed Martin and a number of others here in
the House, as the gentlelady from the District.
Taking a little off of that, because I don't know that we
can beat that horse any more right now, Mr. Drabkin, I was out.
I apologize. I serve on another committee, so I have been going
back and forth. I understand that Mr. Bilbray asked about
eVerify and you were aware of a letter from Chief of Staff Rahm
Emanuel that said that, in fact, that is in hiatus. Is that
roughly what you said? I wasn't here.
Mr. Drabkin. No, sir. I said pursuant to the Rahm Emanuel
memo, the Secretary of the Department of Homeland Security had
decided that she wanted a period of time to review the new rule
which we had published, but had not yet been implemented,
requiring contractors to use eVerify. And I believe Mr.
Bilbray's point to me was that if we used eVerify, that it
would reduce the instances of cases where contractors who were
debarred or suspended got contracts. I never engaged with him
on that issue because I, quite frankly, don't know.
Mr. Issa. Well, it came to my attention, and it was
interesting that an unelected, appointed individual writes a
memo and a confirmed cabinet officer stops a program that is
more than a decade old and has been quite a success.
But I want to bring it back to the issue here today.
eVerify is a system in which you don't get to see the social
security numbers, but you do put the social security numbers
into a database that has the social security numbers to see if
in fact the name and social security number you are putting in
match the individual, if the data that are in your procurement
contracts, including key individuals, officers, directors, and
so on, if that information, including social security--since we
have an obligation to only hire legal people in Government
contracting. And I have Camp Pendleton, so, trust me, we have
had to push a few off the base in San Diego over the years when
we discovered it wasn't true. So when we use that system, that
system has unique identity.
And I go back to my question earlier, particularly for the
GAO, why wouldn't we have a database in which the Web, to the
public, didn't show the social security number, but in fact
somebody entering that information from a database would be
sure of the person? Because I go back to the confusion of the
woman using her maiden name or, for that matter, the woman who
I think is in jail right now, who was part of the scandal on
the tankers some years ago, the refueling tankers.
A person's name, or surrogate name, or surname, or married
name, or alias, and a home address are both very easily
changeable, so isn't there a fundamental flaw in this database
unless we have a unique identity number for every corporation
and a unique identity number for every individual and the
system polls them both?
I will start with the GAO, since it is your study.
Mr. Kutz. Yes, and particularly the SSN right now is the
problem. So there needs to be some sort of a position taken as
to what are the options to move forward. I mean, if the option
is we are just not going to deal with it, that wouldn't
necessarily be acceptable. There has to be several
alternatives, and maybe something like you are talking about
here would be a valid option, because we do SSN checks in
criminal cases all the time and we give the social security
number, but we only get back hits. So we are not allowed access
into the system, for example.
Mr. Issa. Of course.
Mr. Kutz. So we do that all the time with the Social
Security Administration and agencies across the Government. So
I think that has merit.
Mr. Drabkin. And, Mr. Issa, I don't want to leave you with
the impression that the issue on social security number is
dead. What I meant to convey to you earlier was there had been
a Government-wide policy discussion on this matter. There had
been a decision not to adopt it Government-wide, although some
agencies are entering social security numbers. Most notably,
right now, HHS is not. And we have not had a Government-wide
decision, and I look forward to the new administration, when
they are settled in, to revisiting this matter for us, and it
may solve the problem. And we will be sure to report back to
you on our progress on this matter.
Mr. Issa. OK, we had two quick questions, because the time
is over. One is, is there anyone here that considers themselves
kind of a techie?
[No response.]
Mr. Issa. Well, then I will be the techie here for a
moment. Can any of you, in this day and age, not envision the
ease with which an individual could enter a social security
number--it could go into an encryption key that is not
available to anybody except the key holders--it then creates a
different number? That different number then checks against
looking for the identical not social security number, but
number created by the key that in fact then tells you whether
you have a match. So do any of you have a problem
understanding, in this day and age, you don't have to have a
plain view of a social security number that could lead to bad
conduct, and you don't have to ever even have it transmitted?
So are we talking about social security numbers as though
it is the old days and it is written on a piece of paper and
somebody might xerox it, or do we all understand that unique
identity number, for both a corporation and an individual, is
certainly within the grasp of the technology you already have
paid for?
I am seeing heads wave yes.
My closing question is just an anecdotal one, if the
chairman will indulge me, and it is for the Navy, because I
represent Camp Pendleton and the naval weapons stations. I had
to take note, when I downloaded the exclusion list, that GSA
had 266, the Army had 675, the Air Force had an almost
identical number, the Navy had 284. Is that because you do a so
much better job selecting your contractors? Because you are a
fairly large service. I was just interested to see how many
were on the active list of disbarred or suspended.
Captain Jaggard. If I understand your question correctly,
Mr. Issa, I think my answer to that question would be because
our new Acquisition Integrity Office is doing a much better job
of keeping up with the workload that they are required to
handle.
Mr. Issa. OK. And because I am a former Army officer, I
will ask the General is there a reason that 675 for the Army
means that you simply more aggressively go after these people,
so more are on the list?
General Harrington. Sir, I think it relates to the numbers
of transactions that are involved in our--it is really our
workload has increased fivefold and there is just that much
more solicitations, offers, and exposure to the contracting
arena.
Mr. Issa. I appreciate it. I just needed a little bit
multi-service----
Mr. Drabkin. Mr. Issa.
Mr. Issa. Yes, sir.
Mr. Drabkin. If the chairman will indulge me, just to fill
out the answer, part of this also has to do with our practice
of suspension and debarment. We have an unwritten rule amongst
us that the agencies with the most contacts with a contractor,
whether the suspension or debarment is brought to them
initially, is referred to them to determine whether they want
to take jurisdiction.
So the numbers themselves may not tell the whole story. It
could be that lots of contractors who do business with the Navy
had more contracts with the Army and the Army took
jurisdiction, and that is why the Army numbers--I know many
cases come to my office that I refer to my colleagues in the
services because they are our biggest customers. They take
those cases from us, which is why our numbers are lower, and
they handle it because they have the most contact with those
contractors.
Mr. Issa. Well, I want to see you the next time Army-Navy
play, because I need an honest referee. Thank you.
Mr. Drabkin. Sir, I wouldn't be honest. I bleed Army green.
[Laughter.]
Chairman Towns. Let me thank you for coming and, of course,
all the witnesses for attending today.
Before we adjourn, I remain extremely concerned that the
Federal dollars provided in the recently passed economic
stimulus package will fall into the hands of criminals and con
artists posing as legitimate business owners in light of the
GAO's findings. Therefore, I have addressed a letter to the
Acting Administrator of GSA, Mr. Paul Prouty, outlining the key
changes that must be implemented to ensure adequate management,
monitoring, and search capabilities of EPLS.
Mr. Drabkin and Mr. Williams, providing you with this
letter acts as an official notice to your Acting Administrator
that the recommendation of GAO and this committee should not be
taken lightly, because we are seriously trying to get rid of
waste, fraud, and abuse, and we want your help in that regard.
So, without objection, I enter this letter into the committee
record.
[The information referred to follows:]
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Chairman Towns. And, without objection, this committee now
stands adjourned.
[Whereupon, at 1:05 p.m., the committee was adjourned.]
[The prepared statements of Hon. Diane E. Watson, Hon.
Gerald E. Connolly, Hon. Paul W. Hodes, Hon. Dan Burton, and
Hon. Brian P. Bilbray, and additional information submitted for
the hearing record follow:]
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