[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
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              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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