[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





 PROTECTING TAXPAYER DOLLARS: ARE FEDERAL AGENCIES MAKING FULL USE OF 
                  SUSPENSION AND DEBARMENT SANCTIONS?

=======================================================================

                                HEARING

                               before the

                SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
                POLICY, INTERGOVERNMENTAL RELATIONS AND
                           PROCUREMENT REFORM

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 6, 2011

                               __________

                           Serial No. 112-91

                               __________

Printed for the use of the Committee on Oversight and Government Reform








         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform

                                _____

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

   Subcommittee on Technology, Information Policy, Intergovernmental 
                    Relations and Procurement Reform

                   JAMES LANKFORD, Oklahoma, Chairman
MIKE KELLY, Pennsylvania, Vice       GERALD E. CONNOLLY, Virginia, 
    Chairman                             Ranking Minority Member
JASON CHAFFETZ, Utah                 CHRISTOPHER S. MURPHY, Connecticut
TIM WALBERG, Michigan                STEPHEN F. LYNCH, Massachusetts
RAUL R. LABRADOR, Idaho              JACKIE SPEIER, California
PATRICK MEEHAN, Pennsylvania
BLAKE FARENTHOLD, Texas












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 6, 2011..................................     1
Statement of:
    Shaw, Steven A., Deputy General Counsel for Contractor 
      Responsibility, Department of the Air Force; Richard A. 
      Pelletier, Suspension and Debarment Official, U.S. 
      Environmental Protection Agency; Nick Nayak, Ph.D., Chief 
      Procurement Officer, U.S. Department of Homeland Security; 
      and Nancy J. Gunderson, Deputy Assistant Secretary, Office 
      of Grants and Acquisition Policy and Accountability, U.S. 
      Department of Health and Human Services....................    31
        Gunderson, Nancy J.......................................    49
        Nayak, Nick..............................................    43
        Pelletier, Richard A.....................................    38
        Shaw, Steven A...........................................    31
    Woods, William T., Director, Acquisition and Sourcing 
      Management, Government Accountability Office...............     7
Letters, statements, etc., submitted for the record by:
    Gunderson, Nancy J., Deputy Assistant Secretary, Office of 
      Grants and Acquisition Policy and Accountability, U.S. 
      Department of Health and Human Services, prepared statement 
      of.........................................................    51
    Lankford, Hon. James, a Representative in Congress from the 
      State of Oklahoma, prepared statement of...................     4
    Nayak, Nick, Ph.D., Chief Procurement Officer, U.S. 
      Department of Homeland Security, prepared statement of.....    44
    Pelletier, Richard A., Suspension and Debarment Official, 
      U.S. Environmental Protection Agency, prepared statement of    40
    Shaw, Steven A., Deputy General Counsel for Contractor 
      Responsibility, Department of the Air Force, prepared 
      statement of...............................................    33
    Woods, William T., Director, Acquisition and Sourcing 
      Management, Government Accountability Office:
        Cover of GAO report entitled, ``Suspension and Debarment, 
          Some Agency Programs Need Greater Attention, and 
          Governmentwide Oversight Could be Improved''...........     9
        Prepared statement of....................................    13

 
 PROTECTING TAXPAYER DOLLARS: ARE FEDERAL AGENCIES MAKING FULL USE OF 
                  SUSPENSION AND DEBARMENT SANCTIONS?

                              ----------                              


                       THURSDAY, OCTOBER 6, 2011

                  House of Representatives,
   Subcommittee on Technology, Information Policy, 
Intergovernmental Relations and Procurement Reform,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m., in 
room 2247, Rayburn House Office Building, Hon. James Lankford 
(chairman of the subcommittee) presiding.
    Present: Representatives Lankford, Connolly, Murphy, 
Speier, Kelly, Chaffetz, Walberg, Labrador.
    Staff present: Ali Ahmad, communications advisor; Richard 
A. Beutel, senior counsel; Will L. Boyington, staff assistant; 
Molly Boyl, parliamentarian; Ashley H. Callen, counsel; Linda 
Good, chief clerk; Jaron Bourke, minority director of 
administration; Paul Kincaid, minority press secretary; Adam 
Koshkin, minority staff assistant; Mark Stephenson, minority 
senior policy advisor/legislative director; Cecelia Thomas, 
minority counsel.
    Mr. Lankford. We are going to wait just a couple of 
moments. Our ranking member is on his way over. So we won't be 
starting immediately, but we will be starting promptly.
    [Pause.]
    Mr. Lankford. I want to give you a quick update, as well. 
We have votes that have been called, of course, about 10:15 
today. So we are going to get started and go through this 
panel, opening statements and such, and see how far we can get 
before they call the votes, then we will make that judgment 
call as we go. Just wanted to give everyone a quick scheduling 
update.
    With that, the committee will come to order. The Oversight 
and Government Reform Committee exists to secure two 
fundamental principles. First, Americans have a right to know 
that the money that Washington takes from them is well spent. 
And second, Americans deserve an efficient, effective 
government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold government accountable to taxpayers because taxpayers do 
have the right to know what they get from their government. We 
will work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people, bring genuine reform 
to Federal bureaucracy. This is the mission of the Oversight 
and Government Reform Committee.
    I would like to thank all the witnesses on both panels for 
participating in today's hearing. I hope this is an informative 
hearing where witnesses can share best practices and form 
relationships going forward that will encourage our mutual due 
diligence.
    The Federal Government spends more than $500 billion on 
contracts each year. Most contractors are patriots who fulfill 
their contractual obligations to the Federal Government in 
spite of the mountains of Federal forms and frustrations. They 
provide indispensable products, they deliver quality services 
to Federal agencies. But unfortunately, this committee has 
examined instances in the past in which certain contractors 
tried to defraud the Government, where they demonstrate a 
pattern of inability to deliver on their contractual 
commitments.
    One of the tools that agencies have to address this 
unethical, fraudulent or chronically poor-performing 
contractors is the remedy of suspension and debarment. Today we 
will hear testimony that while some agencies are effective in 
using this administrative remedy to weed out bad actors who 
waste taxpayer dollars, other agencies are simply not 
fulfilling their responsibility to suspend or debar.
    This hearing will explore the following question: Why is it 
that some agencies are able to uncover problems with their 
contractors and take dozens of suspension and debarment actions 
each year, while other agencies with similar or larger contract 
spending initiative virtually no action? While I hope it is 
because some agencies have high quality contractors and they 
have not experienced any contracting issues, it is unlikely 
that there are no poor-performing or dishonest contractors 
working for the agencies that have not suspended or debarred 
any contractors. Common sense would seem to suggest these 
agencies are not looking for and thus not uncovering fraud on 
the part of their contractors.
    In some cases, though, these agencies may simply accept 
poor performance or staff may not complete the followup 
paperwork or help others avoid the same bad contractors in the 
future.
    GAO's work bears out our suspicion that agencies that focus 
on using the tool of suspension and debarment and make it a 
priority are successful at rooting out future waste and fraud 
by excluding the contractor from future business with the 
government or forcing the contractor to take needed corrective 
measures. Clearly, it takes a concerted effort to identify 
candidates for suspension and debarment, develop the necessary 
factual record and at the same time, provide the required due 
process safeguards for contractors.
    The alternative, however, is not an option. Agencies that 
put in the necessary work to implement a robust suspension and 
debarment program can expect to see returns on their investment 
in terms of programmatic fraud or waste avoided. In addition, 
because the governmentwide exclusion that can result from 
suspension or debarment actions, having an effective suspension 
and debarment program also serves to strengthen the integrity 
of the overall contracting system. It sends a clear message 
that dishonest contractors or shoddy work will not be accepted, 
which protects taxpayer dollars from flowing to sub-par 
contractors.
    This committee is a watchdog for the taxpayers' money. But 
we also think it is reasonable to expect each agency to be 
diligent, ferreting out bad actors they know in the contracting 
world so that we can stop contracting fraud. The American 
people deserve our attention.
    I would also like to thank Chairman Towns, who held 
hearings on this same subject in 2009 and in 2010. He has put 
sunlight on this process, and we will continue to do that until 
it is fixed.
    I look forward to hearing the testimony today about how we 
can keep unethical contractors out of the Federal system.
    And now I would like to recognize the distinguished ranking 
member, Mr. Connolly, for his opening statement.
    [The prepared statement of Hon. James Lankford follows:]



    
    Mr. Connolly. Thank you, Mr. Chairman. And thank you for 
calling this important hearing.
    The GAO report in the context of the final report of the 
Commission on Wartime Contracting, which we heard the other 
day, should be a deafening alarm bell about wasteful spending 
that could be curbed through the use of functional suspension 
and disbarment programs. The National Security Subcommittee 
held a hearing last month examining potentially corrupt 
Department of Defense contracting in Afghanistan. Earlier this 
week, the Commission on Wartime Contracting told our committee 
that an estimated $31 billion to $60 billion has been lost to 
fraud or waste through contracting in Iraq and Afghanistan 
alone.
    What is most extraordinary about this figure is not how 
large it is, but that the Commission told us that it isn't even 
comprehensive. The Federal Government lacks not only the tools 
to manage overseas DOD contracts, but even the mechanisms to 
account fully for the money we lose.
    If there is one lesson we could learn from this experience, 
it should be that rushing into foreign wars unprepared can be 
incomprehensively expensive. The GAO report we are considering 
today is just as troubling as the Commission on Wartime 
Contracting report. GAO reassures us that the Department of 
Defense OIG recently reported that the Services and DLA had an 
effective suspension and debarment process, apparently based on 
the fact that DOD issues more suspensions and debarments than 
any other Federal agency.
    No wonder. Between 2006 and 2010, DOD spent $1,776 billion 
on contracting. That is to say, $1.7 trillion, for those of us 
who would otherwise lose count of the zeroes. It is 
approximately 15,000 percent more money than any other agency 
spent on contracts, so it should follow that DOD would also 
issue more suspensions and debarments.
    While it is very disturbing that some agencies have issued 
zero suspensions and debarments, unless we are to assume that 
their contracts are pristine, given the volume of DOD contracts 
and relative paucity of suspensions and debarments relative to 
the amounts, we must be vigilant in reducing waste in that 
department.
    Rather than looking only at the total number of suspensions 
and debarments for agencies, maybe we should consider the 
numbers of suspensions and debarments per contracting dollar. 
For each $1 billion DOD has spent on contracts, it issued an 
average of 0.9 suspensions and debarments. By contrast, the 
Environmental Protection Agency, which has a witness in today's 
hearing, has issued 42.6 suspensions or debarments per billion 
dollars contracting dollar spent. By this measure, EPA would 
seem to be far more attentive to protecting taxpayer dollars, 
frankly, than DOD.
    Of course, the number of suspensions and debarments per 
contracting dollar is only informative if we know that there is 
some fraud or waste that the suspensions or debarments should 
address. The purpose of suspension or debarment is to protect 
the taxpayers, not to enact punitive measures against 
contractors, most of whom are patriotic Americans trying to 
serve the public as you indicated, Mr. Chairman.
    In the case of DOD, we know from the recent commission 
report, sadly, that such fraud and waste is so rampant in Iraq 
and Afghanistan as to be virtually unquantifiable. The United 
States has spent in excess of $200 billion in contingency 
contracting to support the wars in Iraq and Afghanistan over 
the last decade. According to the final report of the 
Commission on Wartime Contracting, up to $60 billion of those 
taxpayer dollars were lost to waste, fraud and abuse. It is 
imperative that we improve suspension and debarment procedures 
for DOD so that we don't repeat the waste of money identified 
by the Commission on Wartime Contracting.
    I greatly appreciate the willingness of the representative 
from GAO, DOD, HHS, DHS and EPA to appear before us today to 
discuss this important topic. It is clear there is wide 
variation in the methodology used to determine suspension and 
debarment. And replicating best practices to reduce waste must 
be our urgent task so that those agencies have more uniformity 
and predictability in this process.
    I thank you again, Mr. Chairman.
    Mr. Lankford. Thank you, Mr. Connolly.
    Members may have 7 days to submit opening statements and 
extraneous material for the record.
    We will now welcome our first panel. Mr. William T. Woods 
is the Director of Government Accountability Office in the 
Acquisition and Sourcing Management Team. Pursuant to committee 
rules, all witnesses will be sworn in before they testify. Mr. 
Woods, would you please rise and raise your right hand?
    [Witness sworn.]
    Mr. Lankford. Thank you. Let the record reflect the witness 
has answered in the affirmative. You may be seated.
    In order to allow time for discussion, and obviously we 
have already discussed this as well, the votes that are being 
called at some point, I would like you to limit your testimony, 
you are the only member of this particular panel, so 5 or 10 
minutes, we will give you a little bit of flexibility on the 
time there. But we would like to be able to pummel you with 
random questions as well, once you get through your testimony.
    So in order to be able to receive your testimony, obviously 
your written statement will be made part of the record as well. 
You are recognized.

   STATEMENT OF WILLIAM T. WOODS, DIRECTOR, ACQUISITION AND 
     SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Woods. Thank you, Mr. Chairman, Ranking Member 
Connolly. Thank you so much for inviting the Government 
Accountability Office to be here this morning to address what 
you both have recognized is an extremely important topic in the 
area of government contracting.
    We need a robust suspension and debarment process in order 
to ensure that the Federal Government does business only with 
responsible contractors, and that we avoid doing business with 
dishonest contractors, those that commit illegal acts and those 
that are irresponsible and unethical.
    I am very pleased to be able to release our report this 
morning, which we did for this committee as well as the Senate 
Homeland Security and Governmental Affairs Committee, 
addressing the suspension and debarment issue on a 
governmentwide basis. That report is GAO-11-739, and with the 
permission of the committee, I would like to have that inserted 
into the record.
    Mr. Lankford. Without objection.
    [The information referred to follows:]



    
    Mr. Woods. Thank you, Mr. Chairman.
    My statement today will cover the work that we did to 
prepare that report, the specific objectives that this 
committee asked us to address, our findings as a result of that 
work and our recommendations.
    But first, I would like to provide just a very, very brief 
overview of the process. First of all, in terms of definitions, 
a suspension, both suspensions and debarments are exclusions 
from the Federal contracting process. Suspensions are a 
temporary remedy, generally lasting about 12 months. There is a 
provision for extending that up to 18 months if the Attorney 
General so requests.
    Debarments, on the other hand, are for a fixed period of 
time, generally 3 years, although those can be extended as 
well.
    Suspensions and debarments are covered in some detail in 
the Federal Acquisition Regulation. There is also a parallel 
process for grants, assistance, loans, loan guarantees and that 
sort of thing which are covered under the Non-Procurement 
Common Rule [NCR]. But both procedures are somewhat similar and 
they are reciprocal. In other words, if an entity is debarred 
under the Federal Acquisition Procedures Rules, that entity is 
considered to be debarred as well under the Non-Procurement 
Common Rule and vice versa.
    Our first objective was to determine what entities are 
listed on the Excluded Parties List System. The Excluded 
Parties List is a list maintained by the General Services 
Administration, an electronic online system that contains all 
of the entities that have been subject to suspension, proposed 
for debarment or debarred. That, as I said, is maintained by 
the GSA. The individual agencies that take the actions are 
responsible for entering data, names, etc., into that EPLS 
system.
    And our first objective is really to understand what is in 
that system. Frankly, I was somewhat surprised at the numbers. 
Because as indicated in my testimony, Figure 1 on page 4, the 
vast majority of entities that are listed are listed as a 
result of statutory exclusions. For example, the Department of 
Health and Human Services might debar or exclude a contractor 
or an entity for health care fraud. Export control violations 
are another matter where statutes specifically provide that if 
a violation is found through a judicial process or in some 
cases an administrative process, the Congress has decided that 
those entities shall be listed on that Excluded Parties List 
System.
    Now, they may have had nothing to do with Federal 
contracts. But the consequence of listing on that system is 
that they are precluded from obtaining a Federal contract.
    When we looked at that, we found that about 84 percent of 
the cases in the Excluded Parties List System were as a result 
of these statutory debarments. The remaining 16 percent were 
either actions taken under the Federal Acquisition Regulation, 
or actions taken under the Non-Procurement Common Rule.
    Our second objective was to look behind those numbers and 
to determine which agencies are active and which agencies are 
relatively inactive in the area of suspension and debarments. 
At the request of this committee, we focused just on the 
procurement-related actions. So on that 16 percent or so that 
are listed on the Excluded Parties List System as a result of 
either Non-Procurement Common Rule actions or actions under the 
Federal Acquisition Regulation.
    I refer you to Appendix 1 on page 10 of the statement that 
lists all of the major agencies, those that have done about $2 
billion or more in contracting over the period that we looked 
at. We looked back 5 years, from 2006 through 2010. As you have 
already correctly pointed out, the Department of Defense is far 
and away the largest user of the suspension and debarment 
system.
    We wanted to get a snapshot and an idea of what are the 
variables at play and what are the reasons why some agencies 
appear to be quite active in this area and other agencies less 
active. So we chose a judgmental sample. We wanted to get a mix 
of Defense and civilian agencies. Within Defense, we chose the 
Navy and Defense Logistics Agency. We wanted to look at some 
large agencies. We looked at Health and Human Services, we 
looked at the Department of Homeland Security.
    Within the Department of Homeland Security, we looked at 
two entities, one that appeared to be relatively active in the 
area, that was the Immigration and Customs Enforcement Bureau, 
and one that appeared to be relatively inactive, that was the 
Federal Emergency Management Agency. We wanted to get a feel 
for what are the factors that really account for the variation 
in these numbers. And we found that three factors account for 
that variation.
    First, the agencies with the active programs have a 
dedicated program with dedicated staff. It happened that the 
staff on all of the four agencies that we looked at with active 
programs had dedicated full-time staff.
    The second factor was that each of the four agencies with 
the active programs, and for reference, you may want to refer 
to Figure 2 on page 5 of my statement, which has a graphic 
display of what I am outlining at this point.
    But the second factor that we found is that the active 
agencies had detailed policies and procedures, not just 
mirroring what is in the Federal Acquisition Regulation, but 
providing additional detail to their acquisition and non-
acquisition personnel on how to deal with contractors that are 
poor performers, that have been convicted of certain 
transgressions or are simply unethical. But detailed policies 
and procedures were an important component of an active 
process.
    And the third component was an active referral process. 
What that means is that agencies went out of their way to train 
people on how to take advantage of the suspension and debarment 
process. They had active inspectors general who routinely made 
referrals to the suspension and debarment official. They had 
contracting officers who would also make a practice of making 
referrals to the suspension and debarment official.
    So those are the three factors that we found at the four 
agencies with the most active programs. Conversely, we found at 
six agencies that had less active programs, we found an absence 
of those three factors.
    Our third objective, and again at the request of this 
committee, was to take a look at the interagency coordination 
process. For that, we looked first at the committee that is 
called the Interagency Suspension and Debarment Committee. This 
is a committee that was created by executive order in the mid-
1980's. Recently, it received statutory recognition and 
statutory direction in the 2009 Defense Authorization Act, 
where Congress outlined specific responsibilities for this 
interagency committee. So we wanted to take a look at how that 
committee was functioning, and what are the challenges that it 
was facing.
    Briefly stated, the main function of that committee is to 
serve as the lead agency determination forum. When an entity 
may be running afoul of the law, may be suspected of some 
conduct that might lead to a suspension or debarment, the first 
issue on the table is which agency ought to take responsibility 
to pursue that. And that question gets resolved at this 
Interagency Suspension and Debarment Committee. They often act 
very quickly, through an email process or telephone, to quickly 
decide on which agency needs to step forward and take 
responsibility for pursuing either a suspension or debarment 
against the entity.
    But we found that this interagency committee faced 
challenges. First major challenge was resources. They have no 
dedicated personnel. They have no budget. And we found that 
that raised some issues for that committee in terms of having 
to borrow staff from the members that actually, the chair and 
vice chair, in particular, that actually sit on that committee.
    The second challenge that they faced was participation. 
There are members on the committee from all of the major 
agencies and many of the second tier agencies, if you will, 
that do less activity in the procurement arena in terms of 
dollar spending.
    But participation in the monthly meetings of that committee 
is not what it really should be. There are many agencies that 
simply do not participate to the level that one would expect 
for this important area. And they were challenged, for example, 
in preparing a report that the Congress directed in that 
legislation that I referred to earlier, Congress directed them 
to prepare a report on their activities and the activities of 
their member organizations. And it took quite a while for them 
to get the cooperation of all of the agencies in order to 
prepare and submit that congressionally required report.
    We had a number of recommendations in our report. And just 
very briefly, first of all, we wanted for the six agencies that 
had the relatively inactive programs, we wanted them to adopt 
the practices that we outlined that we found at the agencies 
that had an active process. All of the agencies concurred in 
that recommendation.
    Our second set of recommendations was directed to the 
Office of Federal Procurement Policy within the Office of 
Management and Budget. And that was for the Office of Federal 
Procurement Policy to issue a memorandum to all Federal 
agencies, outlining what it takes to have an active, robust 
suspension and debarment program.
    Second, we wanted the Office of Federal Procurement Policy 
to require and provide guidance to all agencies to cooperate 
with the Interagency Suspension and Debarment Committee.
    Mr. Chairman, that concludes my prepared statement. I would 
be happy to respond to questions the committee may have.
    [The prepared statement of Mr. Woods follows:]



    Mr. Lankford. Thank you, Mr. Woods. With that, I would 
recognize myself.
    Thank you for your report. It is very thorough. We do 
appreciate that, and the details that you put into it from 
there.
    You answered several of my questions that I had initially, 
and that was dealing with the factors, both the three 
consistent factors that you saw, and then those that were not 
being effective in suspension and debarment, those three 
factors being absent as well. So that is very helpful to know.
    When you talk about dedicated staff, how many staff are you 
talking about typically in these agencies? Is this 1,000 
people? Is this four people?
    Mr. Woods. It did vary. Sometimes it was only one or two 
people. Sometimes it was more than 10, less than 20.
    Mr. Lankford. Okay, so it is a small group from the agency 
that has been set aside and specifically tasked full time to 
that.
    Mr. Woods. It ranged in terms of full time, sir. Some of 
the agencies did have full time dedicated staff. But other 
agencies had part time staff, or staff who had other 
responsibilities, but one of their major responsibilities was 
to make the suspension and debarment process work.
    Mr. Lankford. Did you see a shift in effectiveness? Was it 
basically the size of the program where one agency may be very 
large, for instance, the Department of the Navy that you talked 
about, obviously very large and a lot of contracts there, they 
would submit a larger staff, another agency with fewer people, 
did you see a correlation in that as far as the number of 
people that were involved?
    Mr. Woods. We did not see a correlation. We did see 
differences, and as you pointed out, the Navy had one of the 
larger staffs, and many of them were full time. But we did not 
observe a correlation between the size of the staff and the 
effectiveness of the program.
    Mr. Lankford. Okay, the actual process of suspension and 
debarment that they have to go through, the paperwork to fill 
out, to complete, is there anything in that process that you 
determined, this is bulky, this is difficult, this is a 
disincentive to do suspension and debarment based on the actual 
bureaucratic red tape of doing it? Is there anything you 
discovered in that?
    Mr. Woods. The process is relatively straightforward. The 
process is also, in the regulation, it specifically requires 
that agencies adopt as informal a process as possible to avoid 
that kind of red tape. One of the hallmarks of the system is, 
the action needs to be taken quickly, because the whole purpose 
of suspensions and debarments is to protect the government's 
interest. And often we need to move very quickly in order to be 
able to do that.
    So the Federal Acquisition Regulation requires that the 
procedures be streamlined and as informal as possible.
    Mr. Lankford. Obviously we will be visiting with people as 
we go through this from HHS or FEMA and other things that you 
have mentioned as well in your report on that. Specific 
recommendations that you have made as you have made these 
recommendations, they have been received well by those 
agencies? Do you think it was just a matter of they were very 
busy in other areas and just didn't pay attention to the 
suspension and debarment areas? What did you discover from 
that, and what has the follow-up been like?
    Mr. Woods. First of all, we were very pleased that all the 
agencies concurred with the recommendations. What we found 
during the course of the review is that even at the agencies 
that had the less active programs, that steps were being taken 
at each of the agencies to get serious about the suspension and 
debarment process. And there is a description in the report of 
several agencies with specific steps that those agencies are 
taking to do that.
    Mr. Lankford. Let me shift gears on you a little bit. The 
statutory exclusions, I know that was not a part of your total 
research on that. How do you feel like that is being applied 
and who puts that on the list? So when it is not a bad actor in 
the sense that it is a statutory exclusion for whatever reason, 
how are they getting on that list and who is managing getting 
them off of that list?
    Mr. Woods. For example, let's take health care fraud. That 
would fall within the bailiwick of Health and Human Services. 
So that agency would be responsible for putting entities that 
have run afoul of health care provisions, be it payment 
provisions or outright health care fraud, they would be 
responsible for putting those entities on the list.
    Mr. Lankford. So they are getting them on there. Who is 
responsible for getting them off? If they have been cleared, 
let's say it has been 5 years, is it an automatic removal on 
that? Or for those statutory areas, are they lifetime?
    Mr. Woods. Very often the statute will provide for a 
specific period of time, be it years, or whatever. When that 
period has expired, those entities should no longer be listed.
    Mr. Lankford. But that is automatically being pulled? The 
agency is not having to pursue to go back and say, this needs 
to be pulled now, it has now been 3 years?
    Mr. Woods. I believe so. But you may want to ask the second 
panel about that.
    Mr. Lankford. I want to be able to make sure, obviously, 
that people that have been debarred for a period of time, that 
is actually pulled off so they can be redeemed, I guess, at the 
end of it.
    Let's talk real quickly about grants as well. You mentioned 
obviously grants and the contracting world being together, and 
this reciprocal list on it. Just in your overview and looking 
at it, is that a good thing, to be able to have grants and 
contractors together on this reciprocal list? And if so, are 
agencies effective on getting to this list? This is a bad actor 
in the grant world, so that people in the contracting world can 
also know that as well.
    Mr. Woods. We do not have any insight into the grant 
process. Because our review was just focused on contracts. But 
the reciprocal nature is one that the Congress decided in the 
mid-1990's ought to be part of the system. We didn't come 
across any reason to think that was an unwise decision, either 
then or now.
    Mr. Lankford. Thank you, Mr. Woods.
    With that, I yield to Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman, and welcome, Mr. 
Woods.
    By the way, where are you from?
    Mr. Woods. I am from the Boston area originally. Is my 
accent giving me away?
    Mr. Connolly. A little bit. Fully rounded vowels.
    Mr. Woods. I wish Mr. Lynch were here. [Laughter.]
    Mr. Connolly. I also am from Boston. But Mr. Lynch talks 
more like you than I do, probably, yes.
    Thank you for your testimony. How often does suspension and 
debarment occur based purely on non-performance criteria?
    Mr. Woods. There are various codes in the system. To be 
honest, I don't know the answer to that question, as to the 
frequency. But that is something that one could use the codes, 
because when an agency enters an entity into the system, they 
are also required to use one of the many codes so that someone 
could identify the reason that the entity is listed, and be in 
a position to answer your question.
    Mr. Connolly. Just seems to me, Mr. Chairman, that non-
performance ought to be one of the reasons. That is a pretty 
big one.
    You make the point, well said, that obviously different 
agencies are subjected to different statutory criteria, and 
therefore, they have to conform to that. That explains some 
variation among Federal agencies for terms and conditions for 
suspension and debarment.
    But surely there ought to be a uniform process in every 
agency, so that we don't have the kind of variation you have 
described in terms of active programs and less active programs. 
What is the reason for the fact that some agencies have 
inactive programs?
    Mr. Woods. I think it is that they haven't paid sufficient 
attention to it. We found HHS, for example, is very active in 
the Medicare fraud area, and in fact has a substantial number 
of entities listed. But when you look on the procurement side, 
that agency spends a fair amount of procurement dollars. But we 
were surprised to see that over the 4-year period that we 
looked at, they had no suspensions and debarments based on the 
Federal Acquisition Regulation.
    Mr. Connolly. That is astounding.
    You cited the fact that DOD had the most. But of course, as 
I said in my opening statement, that is to be expected. But if 
you actually looked at it on a per billion dollar contracting 
dollar, if you will, actually they are far below some other 
agencies, like EPA. Given the fact, I don't know, are you 
familiar with the report of the Commission on Wartime 
Contracting that we heard from the other day?
    Mr. Woods. I have looked at that report, yes, sir.
    Mr. Connolly. So the fact that there is an estimate of $31 
billion to $60 billion of waste, fraud and abuse, how many 
contractors were debarred or suspended based on that finding, 
do you know?
    Mr. Woods. I don't know that, sir.
    Mr. Connolly. Presumably there ought to be some.
    Mr. Woods. One would think.
    Mr. Connolly. Yes. I mean, if it is at the higher end, you 
are matching Medicare fraud, waste and abuse.
    Mr. Woods. That is certainly a lot of money, and we were 
pleased that the Commission did focus on that and had specific 
recommendations as to how to improve the process.
    Mr. Connolly. Is conflict of interest one of the reasons 
for suspension and debarment?
    Mr. Woods. I don't believe that that is listed in the 
Federal Acquisition Regulation as one of the specific causes 
called out in the regulation.
    Mr. Connolly. But if a determination is made that there is 
a conflict of interest, that you engaged in a conflict of 
interest either in the RFP process or the proposal writing 
process or whatever it might be, you could be subject to being 
listed and prevented from contracting for some period of time, 
is that not correct?
    Mr. Woods. Yes, sir. There is catch-all language, if you 
will, in the Federal Acquisition Regulation that permits the 
suspension and debarment official to take action for other 
reasons that that official considers so serious as to warrant 
listing on the system.
    Mr. Connolly. One of the criticisms one hears sometimes 
from contractors about that is that it can be, first of all, 
the penalty is severe. And a conflict of interest can sometimes 
be very much subjective judgment. For example, you may be a 
large contractor and you have been asked to provide your 
expertise for a Federal advisory panel, scientific panel, 
defense panel, intelligence panel.
    And even in advance, I know of cases where consent was 
gotten that if we do that, we don't want to be prevented from 
bidding on some contracts. Subsequently, somebody comes along 
in the IG's office and determines, wait a minute, you were on 
this panel and you have been on a contract, you won the 
contract, and we call that a conflict, and you are going to be 
listed.
    My time is up, but how are we also making sure that when we 
decide to lower the boom that we have determined that this is 
fair and that the entity has had a fair opportunity to make its 
case?
    Mr. Woods. A couple of things. First of all, the decision 
to list someone or to exclude the party would be made by the 
agency suspension and debarment official, not by the Inspector 
General or anyone else that might expect one doing it.
    Mr. Connolly. But the IG's office may be determining there 
is a conflict of interest.
    Mr. Woods. And they would then therefore make a referral to 
the suspension and debarment official.
    The other safeguard is that there are procedures for the 
entity to bring contrary facts, to make arguments to the 
suspension and debarment official as to why they should not be 
listed.
    Mr. Connolly. Thank you. My time is up, Mr. Chairman.
    Mr. Lankford. Thank you. Mr. Walberg is recognized for 5 
minutes.
    Mr. Walberg. Thank you, Mr. Chairman, and thank you, Mr. 
Woods, for being here and for the work that GAO does.
    Your report found that agencies with a quarter of the 
contract obligations of HHS have significantly more activity in 
this area. Specifically, the Department of Interior, with 
annual contract obligations of approximately $23 billion, had 
94 percent procurement-related, or 94 procurement-related 
actions and 10 grant-related suspension and debarment actions. 
Department of Transportation, with contract obligations of 
approximately $23 billion, had 11 procurement-related 
suspensions or debarments and 193 grant-related actions.
    HHS in contrast, though, has $80 billion in contract 
obligations, and during the same time period, had zero 
procurement-related actions and 29 grant actions. In your 
opinion, is HHS failing in regard to suspension and debarment?
    Mr. Woods. We were surprised at those numbers as well, sir. 
We did not look at the two agencies, Interior and 
Transportation. But when we did look at Health and Human 
Services, we were surprised at the number, the absence of any 
activity in the suspension and debarment arena, given the size 
of their procurement spending.
    Mr. Walberg. What it does, or did lack in this area, and 
would this have ben something, is this something that you would 
say, judging by all of the other studies that you did, is 
acceptable?
    Mr. Woods. In response to your first question, they lacked 
the three attributes that we specifically found at the agencies 
with the active programs. They lacked the dedicated staff, the 
policies and procedures and the active referral process. When 
we talked to the officials at Health and Human Services, they 
in fact acknowledged that the suspension and debarment tool was 
under-utilized at their agency.
    Mr. Walberg. Going along that line, then, if you could 
explain what you mean by detailed policies or guidance. What 
does that look like?
    Mr. Woods. Certainly. At one level, the Federal Acquisition 
Regulation provides the policies and procedures. And it is 
quite detailed. What we would expect to see, and in fact what 
we found at the agencies with the active programs, was even 
further detail in their implementing guidance. In other words, 
roles and responsibilities, who actually implements and is 
charged with implementing the various provisions in the Federal 
Acquisition Regulation.
    We found those answers in the four agencies. We did not 
find those answers at the other agencies.
    Mr. Walberg. Okay. I yield back.
    Mr. Lankford. Thank you for yielding on that. Let me do one 
quick followup question, if the gentleman would yield.
    Mr. Walberg. I will yield.
    Mr. Woods, just to clarify, if these agencies, very large 
as they may be, would just reassign two or three people to 
focus in on that, we have the potential of finding a lot of bad 
contractors that we can protect the rest of the Federal 
Government from through suspension and debarment. So we are not 
talking about a massive shift in agencies. We are talking about 
even reassigning two or three people, is that correct?
    Mr. Woods. We are not talking about a massive shift. And in 
fact, some of the agencies complain to us that they cannot, 
they are not in a position to devote full-time people. They are 
not in a position to hire people. And we understand that in 
today's budget environment.
    But reassigning people or carving out some part-time 
responsibility for individuals, even a small number of 
individuals, would have the kind of impact that you just 
described, sir.
    Mr. Lankford. Terrific. Thank you for yielding, Mr. 
Walberg.
    Mr. Murphy is recognized for 5 minutes.
    Mr. Murphy. Thank you very much, Mr. Chairman.
    Thank you for your testimony. I want to talk to you a 
little bit about the portion of your testimony related to the 
Interagency Suspension and Debarment Committee. The 2009 
Defense Authorization gives them some increased powers and 
responsibilities. But you clearly seem to suggest that there is 
a lot more that they could do. They are a coordinating agency 
but have very little teeth.
    What specifically would you recommend that we do in order 
to give that committee the kind of teeth that would, at the 
very least, allow them to collect more information or get the 
people that do not have active programs at the table? Or maybe 
at an even sort of next level, give them something more than 
just the power to convene and monitor? What do you suggest we 
do there?
    Mr. Woods. We think the action needs to come from the 
Office of Federal Procurement Policy. And we think it would be 
relatively simple and straightforward for the Office of Federal 
Procurement Policy to issue guidance to all Federal agencies to 
cooperate much more fully with the Interagency Committee in 
terms of participation in the process, in terms of responding 
to data requests, in terms of providing staff where possible to 
support the activities of that committee.
    Mr. Murphy. Does that committee have enough staff?
    Mr. Woods. That committee does not have any dedicated 
staff.
    Mr. Murphy. So where does that committee staff come from?
    Mr. Woods. The chair and the vice chair, at least during 
the period of our review, would use their own resources from 
their home agency to carry out the activities of the committee.
    Mr. Murphy. So let's say that directive comes down and 
there is a requirement that data and information is provided. 
The question is, so what? What does that really do, just to 
have more information or more resources at the Interagency 
Committee if they don't really have any power to compel 
particular agencies to step up and change their practices?
    Mr. Woods. I am not sure that is really needed. We have the 
Office of Management and Budget that has the kind of teeth that 
you were referring to. We have the Office of Federal 
Procurement Policy, within OMB, who is charged with the 
responsibility for making this system work. We think the 
pieces, the mechanisms are there. It is just a question of 
using those mechanisms.
    Mr. Murphy. Thank you. Thank you very much, Mr. Chairman.
    Mr. Lankford. Thank you, Mr. Murphy.
    With that, Mr. Woods, I appreciate very much your 
testimony.
    I would like to take a short recess in order for the clerks 
to be able to prepare for our second panel. We will try to do 
the testimony of our second panel and get that into the record 
and then we may have to come back to be able to pummel you with 
questions and be able to go through that process.
    With that, we will take a short recess.
    Mr. Connolly. Mr. Chairman, could I just, before Mr. Woods 
goes----
    Mr. Lankford. You most certainly may.
    Mr. Connolly. Just a quick question. Legislatively, would 
it be helpful, do you think, if we had some legislation that 
tightened up some of the reporting requirements and 
standardization issues your report has covered?
    Mr. Woods. I am not sure additional legislation is needed 
at this point. The Congress was very clear a couple of years 
ago on the importance of the Interagency Committee, on the 
roles and responsibilities that the Congress expected that 
committee to play. And the administration issued a change to 
the Federal Acquisition Regulation to reinforce and implement 
the direction that the Congress gave.
    I think, again, the pieces are there, it is just a question 
of managing that and stressing the importance of this area.
    Mr. Connolly. Thank you. Thank you, Mr. Chairman.
    Mr. Lankford. I would think a day like today does stress 
the importance of that area.
    Mr. Connolly. Yes.
    Mr. Lankford. Thank you, Mr. Woods.
    We will take a short recess and reset.
    [Recess.]
    Mr. Lankford. I would like to go ahead and begin if we can.
    We now welcome our second panel. Mr. Steven Shaw is the 
Deputy General Counsel for Contractor Responsibility at the 
Department of the Air Force, where he is also serving as the 
Air Force Suspension and Debarment Official. Mr. Richard 
Pelletier is the Suspension and Debarment Official for the 
Environmental Protection Agency. Dr. Nick Nayak is the Chief 
Procurement Officer at the Department of Homeland Security. Ms. 
Nancy Gunderson is the Deputy Assistant Secretary for the 
Office of Grants and Acquisition Policy and Accountability for 
the U.S. Department of Health and Human Services, where she 
also serves as the Department's Suspension and Debarment 
Official.
    As I have mentioned before, we are watching for votes, we 
are tracking through those. We should have enough time to be 
able to get everyone's opening statement into that.
    So pursuant to committee rules, all witnesses will be sworn 
in before they testify. Would you please rise and raise your 
right hands?
    [Witnesses sworn.]
    Mr. Lankford. Let the record reflect all the witnesses 
answered in the affirmative. Please be seated. Thank you.
    In order to allow time for discussion, I am going to ask 
that you do limit your testimony to 5 minutes. Your entire 
written statement of course will be made part of the written 
record, and any other written documents that you would like to 
submit to this committee, we will include.
    I now would like to recognize Mr. Shaw for 5 minutes.

   STATEMENTS OF STEVEN A. SHAW, DEPUTY GENERAL COUNSEL FOR 
CONTRACTOR RESPONSIBILITY, DEPARTMENT OF THE AIR FORCE; RICHARD 
     A. PELLETIER, SUSPENSION AND DEBARMENT OFFICIAL, U.S. 
   ENVIRONMENTAL PROTECTION AGENCY; NICK NAYAK, PH.D., CHIEF 
PROCUREMENT OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY; AND 
   NANCY J. GUNDERSON, DEPUTY ASSISTANT SECRETARY, OFFICE OF 
    GRANTS AND ACQUISITION POLICY AND ACCOUNTABILITY, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

                  STATEMENT OF STEVEN A. SHAW

    Mr. Shaw. Thank you, Mr. Chairman, Ranking Member Connolly, 
members of the committee. Thank you for inviting me here today. 
This is a very important subject that is dear to my heart. I 
have been doing it for 15 years and find it to be extremely 
important.
    I also want to thank GAO for an outstanding report in this 
area, even though they didn't address the Air Force, they 
addressed some important issues. Their recommendations are 
recommendations that we agree with. We have the three elements 
of active programs that they talk about. We have a dedicated 
staff. We have written processes and procedures. And we have 
practices that encourage referrals.
    I am hesitating on the referrals a little bit, because one 
of the features of the Air Force is not to rely upon referrals. 
Referrals are important, procedures to increase referrals are 
important. But we do a lot more than deal with our in-box and 
respond to referrals from other agencies. I will get to that in 
a second.
    The areas that are somewhat unique perhaps to the Air Force 
are at least why we think we are strong in this area, we think, 
are both structural and policy related. The structural areas 
are the full-time dedicated staff. We have through the entire 
15 years of my tenure in this position and before that had a 
full-time staff, and more recently we have expanded that to a 
full-time field staff in the AFMC, the Air Force Materiel 
Command, and in headquarters for the non-MAJCOMS. So we have 
additional attorneys, so there are somewhat upwards of 10 or 15 
attorneys that we have in the Air Force, even though there are 
only three in my office in headquarters Air Force.
    Another unique part is that I am a full time debarring 
official. That is very unusual in the Federal Government. I 
personally think that is extremely important and I praise the 
Air Force for doing that. It was before my time, it has nothing 
to do with me, but I think that is an important feature. There 
are only three or four agencies in the whole Federal Government 
that have the full-time debarring official. I think that is an 
important feature for some of the reasons that I will talk 
about.
    Also, separation from the acquisition chain I think is 
critical in this area. The Air Force, and the whole DOD, 
started doing this in the early 1990's as a result of an IG 
report, DOD IG report, recommending that it be structured that 
way. I agree with them, and I think the Defense Department is 
doing that correctly that way. We are independent of the 
acquisition chain. We certainly coordinate with them and they 
are partners with us. But I don't wait or expect the 
acquisition people to approve of what I am doing. I am 
empowered to do what is right.
    And that is the third important feature of the Air Force, 
and that is the empowerment. The senior leaders of the Air 
Force and of DOD have supported what I have done throughout my 
tenure, recognize this as an independent area. I coordinate 
everything, but I am empowered to do what is right. And the 
example that I used in the written testimony attest to that.
    Then another feature is, perhaps it is unusual or unique to 
the Defense Department, and that is the fraud remedies program, 
I also manage within the Air Force. So I am overseeing two 
missions. One is coordinating and making sure the Air Force 
gets all the remedies, criminal, civil, contract and 
administrative, done. We are the inside lawyers, really, for 
the Justice Department in making those kinds of decisions.
    Because of that, we have real visibility into cases, and we 
can reach out and do suspensions and debarments, even when 
nobody refers them to us. That is where the outreach and the 
proactiveness that I was talking about comes in, where we don't 
wait for referrals. We monitor cases from the investigators, 
their case status reports. If there is some case that looks 
like it is necessary to do a suspension or debarment to protect 
the interests of the Government, we will reach out to that 
investigator, ask for the report and will do a debarment, even 
though nobody is asking us to do that debarment. And even if 
people are objecting to it, we are going to do it, if that is 
the right thing to do.
    On the policy side of this, the fact-based cases is an 
important part of what we do. I think there are a lot of 
agencies that only do debarments or suspensions where there is 
an indictment or a conviction. And I think that is ill-advised. 
That is just delegating all of your power to the Justice 
Department. If they don't have the resources to do a case, they 
won't do it. But we in the Air Force are still worried about 
that, so we will reach out and do a debarment anyway, based 
upon facts.
    Also, it is not necessary to do contract actions. The power 
of a debarment under the FAR is not limited to fraud in a 
government contract. If an Air Force contractor, for example, 
is committing fraud on a commercial case or a personal income 
tax evasion, or anything more than jaywalking, probably, we are 
going to be concerned about it. Because if they are defrauding 
a commercial customer, they are going to defraud us.
    Finally, the carrot and the stick we use, I talk about this 
a lot, because of the stick of debarment, we are able to 
influence proactively the defense industry, I think. We go out 
and talk to the defense industry and we give them incentives to 
improve their programs and processes, to avoid the fraud at the 
front end. So we are trying to limit fraud and do risk 
management, rather than solely doing the stick of debarment.
    With that, I thank you and I will take any questions.
    [The prepared statement of Mr. Shaw follows:]



    
    Mr. Lankford. Thank you, Mr. Shaw.
    Mr. Pelletier.

               STATEMENT OF RICHARD A. PELLETIER

    Mr. Pelletier. Thank you, Chairman Lankford and Ranking 
Member Connolly and members of the subcommittee, for this 
opportunity to speak about the EPA suspension and debarment 
program. I am the suspension and debarment official [SDO], for 
the agency.
    Since 1981, EPA has had a robust program. Historically it 
has been the leader in this area. For example, my predecessor 
was a chairman of the ISDC, which you have heard some testimony 
about, for 20 years. Also, in 2003, with members of the Air 
Force, DLA and GSA, we formulated, the EPA actually led the 
formation of the National Suspension and Debarment Training 
Program, which is offered through the FLETC, the Federal Law 
Enforcement Training Center down in Glencoe, Georgia.
    Currently, I am still the coordinator for that program. 
Also, EPA provides three of the six instructors for the three 
or four courses that we offer each year.
    Now, the EPA program has really two elements to it. It has 
a statutory debarment and it also has the discretionary. The 
statutory are the Clean Air and the Clean Water Act. And the 
discretionaries can be taken under either the non-procurement 
rule, which you have heard some testimony about, as well as the 
FAR Part 9.4. At EPA, we almost exclusively use the non-
procurement common rule.
    At our office, we have, in the EPA, we have two separate 
offices that deal with suspension and debarment programs. There 
is my office, as the Suspension and Debarment Official. I have 
a hearing officer and a program analyst. We also have a 
Suspension and Debarment Division, which has a director, it has 
seven attorneys, has a paralegal, two investigators, an auditor 
and some administrative support personnel. All of us are full-
time, and this is all we do, is the suspension and debarment.
    The way the cases work at EPA, the Suspension and Debarment 
Division attorneys develop the case in close coordination with 
the OIG, for example, or the Office of Enforcement that we 
have, or any other State or Federal investigative body, or any 
public or private source that may provide us with information. 
Like Mr. Shaw said, we do fact-based cases as well.
    We coordinate, or the division attorneys coordinate through 
the ISDC for lead agency. And then it is referred to my office 
for an action. Then on proper notice, we provide the 
respondents the opportunity to be heard, to present information 
and arguments in opposition to the proposed debarment. When I 
make a final decision, it is on behalf of not only the EPA but 
all Federal agencies.
    Now, under the EPA non-procurement rule, as we have 
implemented it at EPA, there is an additional safeguard, in 
that the respondent can appeal my decision to the Director of 
the Office of Grants and Debarment prior to taking any court 
action under the Administrative Procedures Act. Just as a frame 
of reference, and the numbers are not magical, but just as a 
frame of reference, in the last fiscal year our initial numbers 
indicated we took 98 proposed debarments and 111 suspensions, 
115 discretionary debarments and approximately 42 statutory 
debarments. Also, we entered into three administrative 
agreements.
    Now, the rate of EPA dollars spent, procurement to non-
procurement, is approximately four to one. And that is why we 
use the non-procurement rule rather than the FAR. Both rules 
are reciprocal. So you can, of course, any action under one is 
binding on the other. Also, you can use the non-procurement 
rule for acquisition, as well as non-acquisition matters. So it 
is available if you want to do it for a contract direct 
acquisition process.
    The written guidance that EPA has, we have implemented for 
example, the non-procurement rule as implemented by the 
agencies. We did that through our 2 C.F.R. 1532. But also over 
the years, we have supplemented with written guidance, SOPs, 
best practices that have been learned since 1981, and put those 
into a written form so it can be continued and consistently 
updated as we go through the process.
    Another factor that is important is, my superiors actively 
encourage our involvement, not only with the ISDC, but also 
with other agencies, other organizations that are involved in 
this, such as the ABA Subcommittee on Suspension and Debarment. 
We are very proud of our rich history of protecting the 
taxpayers' dollars. We continue with this effort, and even in 
these hard times, we have been able to continue to have the 
personnel necessary. I am pleased to be able to talk about it 
today and I look forward to your questions.
    Thank you.
    [The prepared statement of Mr. Pelletier follows:]



    
    Mr. Lankford. Thank you.
    As you have just heard, the votes have been called. I would 
like to receive both of your opening statement, then we will 
scoot out for a recess from there.
    Mr. Nayak.

                    STATEMENT OF NICK NAYAK

    Mr. Nayak. Thank you very much, chairman, ranking member.
    I will abbreviate my statement and hope that it helps you 
guys.
    I am the Chief Procurement Officer for DHS, overall 
contracting at DHS. Sort of in a nutshell, we get this and we 
are going to get it right. We are going to be a best practice 
agency.
    Prior to my arrival, and I have been here for a little bit 
less than a year, there was an IG review of DHS suspension and 
debarment. We took that to heart. The Under Secretary for 
Management, who is my boss, put together a task force. We 
studied all the best practice organizations, the Immigration 
and Customs Enforcement is one of those best practices within 
DHS that we studied.
    We came out with a model. And since I have been on board, 
so a little bit less than a year, the Secretary approved the 
new program for suspension and debarment. It follows all the 
best practice that GAO outlined. We are committed to getting 
this right. We are going to have dedicated staff. We are going 
to have detailed policies and procedures. We are going to have 
an active referral process. And we are going to have a system 
for tracking referrals, suspensions and debarments. This is 
going to happen in short order, so we look forward to following 
up with the committee over time.
    I thank you.
    [The prepared statement of Mr. Nayak follows:]



    
    Mr. Lankford. Thank you, Dr. Nayak. And you are right, you 
definitely abbreviated it. I appreciate it.
    Ms. Gunderson.

                STATEMENT OF NANCY J. GUNDERSON

    Ms. Gunderson. Thank you, Chairman Lankford, Ranking Member 
Connolly and members of the subcommittee, thank you for this 
opportunity to appear before you to discuss the Department of 
Health and Human Services' grants and acquisitions policies and 
practices, and in particular, our use of suspension and 
debarment and our oversight practices.
    As the Deputy Assistant Secretary for Grants and 
Acquisition Policy and Accountability, I serve as the 
Department's suspension and debarment official and am 
responsible for providing department-wide leadership in the 
areas of grants and acquisition management. My office oversees 
and supports the Department's 13 grants management offices and 
10 procurement activities as they award and administer grants 
and contracts in fulfilling HHS' mission to enhance the health 
and well-being of Americans.
    Fighting fraud and ensuring program integrity are central 
to fulfilling the Department's mission. We appreciate the work 
of this subcommittee and the GAO in highlighting the policies 
and practices from which HHS may learn.
    The Department is committed to the effective use of 
suspension and debarment as a tool to support successful grant 
and acquisition management. HHS also believes that 
comprehensive pre-award source selection and post-award 
administration practices help ensure satisfactory performance 
and reduce our need to resort to suspension and debarment as we 
focus our resources on these practices.
    As reported by the GAO, HHS debarred 29 grant recipients 
between 2006 and 2010. In fiscal year 2011, we also debarred 
six grant recipients, and these debarment cases were based on 
financial misconduct as investigated by our Office of the 
Inspector General, and scientific misconduct, as investigated 
by our Office of Research Integrity, in cooperation with the 
affected universities and research institutions.
    Through our contract administration processes from fiscal 
year 2009 through 2011, HHS terminated approximately 12 
contracts for default. In these cases, the associated 
performance issues were not so serious in nature to impose 
either suspension or debarment. In light of the GAO's 
recommendations and in an effort to strengthen our suspension 
and debarment processes, we are in discussions on how best to 
dedicate staff and resources to this function and related 
oversight activities, and in particular, to create a contractor 
integrity team.
    We are currently assessing the policies and practices of 
other agencies for contract-related suspension and debarment in 
order to tailor best practices to our organization and issue 
detailed policies and procedures.
    We also intend to create an electronic desk reference to 
implement the new policy and provide our contracting officers 
with associated reference materials and uniform decisionmaking 
tools regarding referrals for suspension and debarment, 
financial responsibility determinations and other performance 
remedies. Additionally, we also plan to establish an electronic 
case referral and tracking process for both grant and contract-
related concerns, which will enable HHS to monitor and follow 
through on each case and identify consistent themes and 
vulnerabilities.
    Finally, these policies and practices will be reinforced 
through communication and training to ensure HHS' grant and 
acquisition communities understand their responsibilities and 
are able to identify and refer cases of fraud, misconduct and 
the abuse of the public's trust in the Department's grants and 
acquisition programs.
    HHS strongly agrees with the need to protect taxpayer 
dollars, and is committed to using its grants and acquisition 
management practices to serve as careful stewards of these 
funds.
    Thank you for the opportunity to testify before the 
subcommittee and about HHS' use of suspension and debarment in 
dealing with its grantees and contractors. I am glad to answer 
any questions you may have.
    [The prepared statement of Ms. Gunderson follows:]



    
    Mr. Lankford. Thank you, Ms. Gunderson.
    With that, I would like to take a short recess. Let me give 
you an update on what we have. We have several votes and then a 
motion to recommit. Unless you want to talk everybody out of 
doing a motion to recommit, down there? No.
    So it will take about probably 40 minutes or so, I would 
say, on our votes and our time to be able to come back. We will 
get restarted here as soon as we can with our questions, and we 
will re-engage again. I apologize for the delay, but we stand 
in recess until we have finished up voting. Thank you.
    [Recess.]
    Mr. Lankford. We will come back into session.
    Thank you again for giving us some grace, a chance to get 
away and to be able to do the votes and come back in.
    We have heard your testimony, received that, obviously have 
your written testimony as well. We are going to get a chance to 
discuss some things and ask questions, feel free to just be 
able to interact with us. Let us start running through those 
things as we can at that point.
    Mr. Shaw, let me start with you on something. You had made 
a comment that I thought was very interesting about fact-based 
cases, that you are not waiting for an indictment somewhere 
through DOJ, you are doing your own fact-base cases. Two 
questions for that. One, if you could elaborate more on the 
process that you do with that. And the second one is, what kind 
of due process protections do you have in place to protect your 
contractors to make sure that as you are doing your own fact-
based research here, that you don't also have a contractor out 
there that is getting stung inappropriately? How do you balance 
the two of those?
    Mr. Shaw. Thank you.
    First, it is a matter of looking at the evidence and not 
just relying entirely upon the fact of an indictment or a 
conviction. In the FAR, it says an indictment or conviction is 
sufficient as a matter of law. So a lot of agencies then use 
that as a security blanket.
    Mr. Lankford. They are just exclusive to that? You are 
going into the details?
    Mr. Shaw. Right. So we look at the evidence, and if the 
evidence meets the preponderance of the evidence standard of a 
debarment or adequate evidence standard of a suspension, then 
we will do the action. And probably half of our cases are that 
way, maybe more than half. I think that is a significant 
difference in why we have so many more numbers, or higher 
numbers.
    Mr. Lankford. Do you feel like the contractors are still 
protected in the process as well?
    Mr. Shaw. Yes. There is actually a lot of procedures, they 
have the right to come in within 30 days and meet with us 
personally. Or if there is a genuine dispute of material fact, 
then they have aright to a mini-trial, a fact-finding 
proceeding where under oath, cross-examination of witnesses, 
that type of proceeding.
    Mr. Lankford. So, Mr. Pelletier, that is what you were 
talking about, basically this mini-trial that you all do with 
EPA as well?
    Mr. Pelletier. Yes, sir. If there is a dispute of a genuine 
material fact, then we likewise will have what we call a mini-
trial, we actually just call it a fact-finding hearing.
    Mr. Lankford. Okay. Mr. Shaw, you had mentioned as well 
that you were outside the procurement chain, and you felt like 
that was better on that. Is anyone else in that same situation 
for your agency, where you are outside the chain? Mr. 
Pelletier.
    Mr. Pelletier. Yes, sir, we are not in the acquisition 
chain. We are within the grants office. But it is a grants and 
debarment, so it is geared toward both. And it is not strictly 
within the purview of those that award the money. That is what 
really the thing we are aiming at.
    Mr. Lankford. Dr. Nayak. Ms. Gunderson.
    Mr. Nayak. Yes, in our new program, the suspension and 
debarment official unfortunately couldn't be here today, 
because a family member is gravely ill, we will be outside the 
procurement chain.
    Mr. Lankford. Ms. Gunderson.
    Ms. Gunderson. I provide oversight over our procurement 
function, but I am not directly responsible for the operations, 
the actual awarding of contracts.
    Mr. Lankford. It is in the same office, same group at that 
point?
    Ms. Gunderson. Right.
    Mr. Lankford. But say it to me again, the first thing you 
said?
    Ms. Gunderson. I provide functional oversight over 
acquisition function, but my office is not directly responsible 
for the award or the administration of grants and contracts. So 
we are independent from that function.
    Mr. Lankford. Okay, great.
    Mr. Pelletier, tell me a little bit about on the EPA 
section of it, there is a list of Clean Water Act, Clean Air 
Act, obviously those exclusions that are there. You had 
mentioned a four to one ratio of non-procurement and 
procurement. Explain that to me again.
    Mr. Pelletier. The amount of money that the EPA awards, and 
the procurement side, it is not as much, or it is nearly four 
times as much in the non-procurement and the grants and 
interagency agreements and things of that nature.
    The way it works of course is that we simply will make a 
grant to a State that then awards contracts. We keep a watch on 
those situations. If there is still some reason to debar 
somebody that has been receiving our money, whether it is by 
grant, through a contract with a State, we still will take 
action against them.
    Mr. Lankford. But if you have somebody that has violated 
Clean Water Act, Clean Air Act, they are going on the list at 
that point?
    Mr. Pelletier. That is correct.
    Mr. Lankford. Regardless of contract, is that just 
automatic, it is discovered this person has violated the Clean 
Water Act, you don't even know if they do Federal contracts, 
they just automatically go onto the exclusions list as well?
    Mr. Pelletier. Yes, sir. That is the mandate of the 
statute. And the way it goes is that we are notified of a 
conviction under certain provisions with the Clean Water or 
Clean Air Act. Then we must put them on the list if they meet 
the three criteria, which is a fact, were convicted. And the 
limitation, because the statutories under the Clean Air and 
Clean Water Act are limited debarments. It is only if they are 
going to perform a contract at the violating facility and they 
own, lease or control that facility.
    To get off the list, they must submit information to the 
EPA which we call a reinstatement request. And then it is 
somewhat like a reverse debarment. At that point then we hear 
the evidence and determine if they have, they must, I have to 
certify that they have in fact cured all the violations that 
put them on the list in the first place.
    Mr. Lankford. Okay. So there is a process to be able to get 
out, but the company has to initiate it. You all just leave 
them on the list until the company or entity initiates a 
request to get off the list?
    Mr. Pelletier. That is correct, sir.
    Mr. Lankford. Okay. Let me talk a little bit about HHS. It 
is obvious, it has come up multiple times, there have been some 
issues there in the process on it. I am glad you are here, glad 
to be able to go through the process. The challenge of it is, 
from your testimony, two different times you said the words, 
``we intend to accomplish'' this, and one other time you 
mentioned, ``we are in discussion'' about this. My only concern 
about that is, I need to know when. Because obviously this has 
come up for a while. This is a serious issue. You all have been 
very active in pursuing fraud in other areas to be able to get 
this into place.
    So what I would like to request of HHS is that you get back 
to this committee when those things are going to be resolved, 
when the final process is complete, so we can have who the 
individuals are that have been reassigned to oversee that, and 
what their basic process is. These three factors that GAO 
discussed earlier. And the actual person that is overseeing 
that, whether that is you or someone else, so we will know who 
is the responsible party for that. That would be very helpful, 
it you would be able to get back to us.
    So basically, when this is going to get accomplished and 
who the person is that is going to be responsible for 
overseeing it. We have to find a way to move from we intend to 
get this done to this is actually done.
    Do you want to respond to that?
    Ms. Gunderson. No, thank you for that opportunity. We would 
be happy to get back to you on our time lines and our specific 
plans.
    Mr. Lankford. Obviously, you know there is an issue, it 
came up. You, I am sure, interacted in the process. Did you 
receive a draft of the GAO report before it was all complete?
    Ms. Gunderson. Yes, we had received a draft report.
    Mr. Lankford. So you had time to be able to interact, so 
obviously you had time to prepare on this .
    Our staff did a quick search, just a Google search, looking 
for fraud, for instance, in NIH. There are a couple hits that 
came up immediately, Department of Justice press releases, 
Temple Hills, Maryland, man sentenced for bribing in 
purchasing, offer to do business for his computer company. Then 
another one, Hyattsville project manager pleads guilty to 
fraudulently obtaining money under oath with an NIH contract. 
We then went to EPLS, and they were not listed.
    So we still have some of the same issues, obviously. I am 
not asking you to be aware of every single contract, every 
single case. But just in the quick search of possible contracts 
that may be out there, are they getting on EPLS yet, obviously 
they are still not. So we have to move from intends to get it, 
I would just ask you to be able to get that report to us as 
quick as you can, so we can know this is covered.
    You are very aware, as everyone else is, as well as FEMA 
and every other agency looking at it, it helps the entire 
Federal Government avoid getting into a bad contracting 
situation when we know one entity has done a bad contract, they 
have been debarred. Every other contracting officer can then 
look at that as well.
    So with that, I appreciate that, and I yield my time to Mr. 
Kelly for 5 minutes.
    Mr. Kelly. Thank you, Mr. Chairman.
    Dr. Nayak, my concern is DHS, and it has to do with 
Katrina. GAO found that DHS had 116 suspensions or debarments 
related to Federal procurement from 2006 to 2010. Yet there 
were no FEMA actions. As you know, DOJ has an entire task force 
dedicated to Hurricane Katrina fraud. They have convicted 
numerous individuals of false statements and fraud in 
connection with FEMA disaster relief assistance.
    According to the fifth anniversary report of the Attorney 
General, one of the principal types of fraud on which the task 
force concentrated is government contract and procurement 
fraud. Can you explain why FEMA has not taken action against 
any party indicted, convicted or found to have engaged in 
Katrina-related fraud?
    Mr. Nayak. Thank you for the question. Yes, I have been at 
DHS for a little bit less than a year, so I don't know how 
effective I will be at sharing what I know about Katrina. But I 
can share some things that FEMA is doing and some positive 
momentum that they are gaining, as well as share with you what 
we are doing at the departmental level that will affect 
everybody in DHS, including FEMA.
    So the information that is probably most relevant is just, 
there is some positive momentum in FEMA around suspension and 
debarment. They actually have five individuals dedicated to 
doing this now. In this fiscal year itself, there were 19 
investigations, 15 referrals, 5 suspensions, 5 debarments of 
either grantees or contractors. So there is some positive 
momentum. Then again, coming back to what we are doing at a 
departmental level, which is essentially following all the best 
practices, as has been shared here.
    And then to add on to what Chairman Lankford just 
mentioned, we should be done and have this up and running in 
the next 3 months or so.
    Going back to the Katrina days, one of the nice things 
about putting this program in place at the departmental level 
is it will be able to end the suspension and debarment official 
will be able to go back and look at any actions that occurred 
during that timeframe.
    So we have a program that will follow best practice and we 
will report out on that over time.
    Mr. Kelly. Okay, thank you. Thanks, Mr. Chairman.
    Mr. Lankford. I am going to follow up on that as well. Dr. 
Nayak, is it possible, when that is complete, your process, you 
say it will be in the next 3 months, getting everything, that 
you would submit that back to this committee, just so we could 
have that as a record as well?
    Mr. Nayak. Very pleased to do it.
    Mr. Lankford. That would be terrific.
    Let me start a second round. If you want to be able to jump 
in on a second round of questions, you can. I am going to give 
a moment for Mr. Connolly to be able to come and ask questions 
in a moment as well.
    Mr. Shaw, we talked a little bit about legislative fixes. 
And GAO mentioned earlier it really feels like the legislation 
that is needed is already in place, there is no additional 
legislation needed. I would like to ask your opinion on that 
statement. Is there additional legislation that you would see? 
Or any of you, and you can also think about this as well, that 
you would see, this would provide greater assistance to the 
agencies, and clarification?
    Mr. Shaw. Yes, thank you, Mr. Chairman. I don't see any 
legislation directly narrowly dealing with the suspension and 
debarment. But I do have thoughts in two areas, unrelated 
areas, that could help. One is the Program Fraud Civil Remedies 
Act, which I know your committee is familiar with, which was 
passed in 1986 but has not been used because it is so 
cumbersome, frankly.
    Mr. Lankford. Now that is a shock, that there is a Federal 
instance that is cumbersome.
    Mr. Shaw. So we are working on it, we expect that the 
Defense Department will be having a proposal for a fix for 
that, that would also have the suspending and debarring 
officials being the people that would enter the penalties under 
that. So that relates to debarment, it gives greater visibility 
into other cases for debarment officials. It is sort of an 
automatic referral process.
    The second area that would stir up referrals from the 
contracting community particularly would be the use of proceeds 
from litigation that relates to procurement fraud. If the 
proceeds or some portion of the proceeds could go to the 
program that is victimized by the fraud, and not just to the 
U.S. Treasury, then the agencies would be able to fix the 
widget that was broken by the fraudulent contractor without 
taking it out of O&M funds. And that would encourage the 
contracting community to be more interested and proactive in 
this area.
    Mr. Lankford. So run that by me again, where you see the 
process. You are saying when they are found to be fraudulent, 
the recovery of that money from fraud is currently not going 
back into the agency?
    Mr. Shaw. That is right. If there is, if Smith Co. is 
convicted or there is a civil judgment for false claims act 
against a hypothetical Smith Co., and for having damaged a 
program, that KC-10 Air Force program, that money, millions of 
dollars often, cases in that situation, if the procurement 
money is closed, which is always the case in these situations, 
because it takes a long time to investigate these things. So 
the bad guy is being ordered to refund the money, but the money 
does not go to the program that is being victimized. It doesn't 
go to Tinker, it doesn't go to Oklahoma City Air Logistics 
Center.
    Mr. Lankford. I would think all of it needs to go to Tinker 
or Oklahoma City on that. [Laughter.]
    Mr. Shaw. So that would be helpful.
    Mr. Lankford. Okay, that is very helpful to know.
    Mr. Connolly brought up an issue on the contingency 
contracting. In a wartime situation, obviously, contracts are 
going very rapidly. A lot of new contractors going in. If you 
are dealing with Afghanistan and Iraq, a lot of foreign 
contracts are also getting engaged on the ground. How are we 
handling the issues of debarments and suspensions in a 
contingency operation?
    Mr. Shaw. There is a memorandum of understanding within the 
Defense Department, where the Army is the lead agency, the 
administrative agency for debarments and suspensions and for 
contracting, actually, contracting as a whole. So I hate to 
duck that question.
    Mr. Lankford. It is an Army question.
    Mr. Shaw. Yes. The Air Force has done a lot of, a number of 
debarments and suspensions from the theater. But the great 
majority of them are Army ones.
    Mr. Lankford. Okay. We will try to follow up with that as 
well. Because that obviously is important to us in a lot that 
is happening.
    Just a moment.
    Mr. Pelletier, tell me a little bit about the appeal 
process that you have going. You discussed this in your 
testimony earlier, about your appeal. When someone has a 
protest, they have been debarred, you talked about the mini-
trial type of situation, coming in on appeal. Has that been 
effective? Or is that so cumbersome, let me say it this way. We 
don't want anything to stand in the way of saying, if there is 
a good process for suspension and debarment, we don't want 
someone to say, I don't want to go through that because it is 
so cumbersome and it is so bulky, I would rather not even go 
through it, than to actually do it. So I am looking for, how 
does that work for you?
    Mr. Pelletier. Yes, sir, it is actually easy in this 
respect. The appeal process that we have built in at the EPA is 
that I make a final decision to debar somebody or a decision to 
maintain a suspension. They have the right to appeal to the 
director of the division. It is a very easy process. They 
simply present whatever evidence they think why it should not 
be in place. And then the director has the opportunity to 
remand the case to me or uphold it. If it is remanded to me, 
then I can review what was, why it was remanded and have a 
second opinion or dismiss it, depending on what the 
circumstances are.
    And then subsequently, of course, they have the right under 
the Administrative Procedures Act to go to a district court. 
But it does give, actually, what is easy about it, it gives the 
respondent, rather than the choice of immediately incurring 
court costs and going and hiring attorneys and doing anything 
that is involved, they can make an appeal within the system. 
And they do get a second look.
    Mr. Lankford. How long does that take? Before you get into 
the Administrative Procedures Act and actually go into an 
outside court, total process on that, give me an average.
    Mr. Pelletier. The internal one?
    Mr. Lankford. Yes, internal.
    Mr. Pelletier. Internal, it is usually within 3 months it 
has been up and back and a final decision again.
    Mr. Lankford. So the whole process, 3 months, done?
    Mr. Pelletier. Yes, sir.
    Mr. Lankford. That is fairly rapid for us.
    Mr. Pelletier. Yes, sir.
    Mr. Lankford. You also mentioned you have 42 cases, and I 
want to see if I got this number correct, that you felt were 
statutory exclusions. Was that from last year, you are saying?
    Mr. Pelletier. Sir, that is the preliminary number we have 
for fiscal year 2011. It is a preliminary number.
    Mr. Lankford. Those are individuals that have been included 
because of Clean Water Act violations, Clean Air Act 
violations, a total of 42. Is that nationwide?
    Mr. Pelletier. Yes, sir.
    Mr. Lankford. Okay. That number is actually lower than I 
anticipated, is the reason I came back to it as well. That is 
not necessarily contractors, they are just individuals that 
have been found in violation of Clean Water, Clean Air Acts and 
have been listed out as saying, if they ever apply for a 
contract, there is an exclusion in this area, this plant, this 
location?
    Mr. Pelletier. That is correct.
    Mr. Lankford. Okay. Terrific.
    With that, I yield to Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman. Sorry to be a little 
late getting back. I had a meeting.
    Ms. Gunderson, you heard the testimony of the GAO 
representative, Mr. Woods, who noted that when it came to 
procurement, there has not been a single suspension or 
debarment by HHS in 5 years. What is the value of the total 
procurement in that time period?
    Ms. Gunderson. The total value in that timeframe was about 
$81 billion. In the last 2 years we have done around $19 
billion annually.
    Mr. Connolly. Okay. Can you help enlighten us on why there 
would not be a single suspension or debarment? All the 
contracts are just that good?
    Ms. Gunderson. We do take contractor oversight very 
seriously, including the way in which we select and evaluate 
our contractors prior to award and the way we administer those 
contracts during performance. We have had contractor 
performance issues that we have used other tools and 
flexibilities on, such as terminations for default. And we do 
see suspension and debarment as a tool in our tool box, per se, 
to manage concerns. But none of the issues we have had have 
risen to that level.
    Mr. Connolly. Right. And presumably, you shared that view 
with the GAO when they were looking at this issue in your 
agency?
    Ms. Gunderson. Yes, we did, in our meeting.
    Mr. Connolly. What was their response to that?
    Ms. Gunderson. Their response was very, it was generally 
acknowledging our premise, and we were delighted to see the 
recommendations around the three characteristics of the more 
active agencies and are taking those into consideration for 
developing our plans around improving policies and our referral 
practices and dedicating staff to the effort.
    Mr. Connolly. Would it be fair for a layman to conclude 
that the priority within HHS is Medicare?
    Ms. Gunderson. It would be fair to conclude that. The 
Secretary has come strongly on on all areas of program 
integrity, though. Program integrity is one of her key 
strategic initiatives, as well as encompassing our strategic 
plan.
    Mr. Connolly. Mr. Shaw pointed out that there are only 
three Federal agencies, I believe, that have like the Air Force 
a full-time dedicated debarment officer. Can we expect that 
HHS, given the huge volume you are talking about, even though 
apparently in the $81 billion of the last 5 years, nothing rose 
to this level, would it make sense from your point of view, 
from the agency's point of view, to emulate the Air Force and 
have a full-time officer with respect to this set of issues?
    Ms. Gunderson. That is one of the models we are looking at, 
among all the others that are out across the Federal agencies. 
I do serve as the suspension and debarment official because I 
have oversight over the acquisition and grants policies and the 
operations of those functions. So currently, as it stands, it 
makes the most sense to fit it within my organization.
    And as I said, we are looking at other models that other 
agencies have had.
    Mr. Connolly. When might this committee know when you have 
finished looking at and have decided upon a plan of action?
    Ms. Gunderson. The chairman has asked us to get back to the 
committee on that, and we will be doing that.
    Mr. Connolly. Do you have a time line, however?
    Ms. Gunderson. Generally speaking, we are looking within 
the next 3 months at implementing these policies and a new 
plan.
    Mr. Connolly. Thank you.
    And Mr. Nayak, you also outlined basically, if I heard you 
correctly, in your very concise and succinct testimony, thank 
you, that you were going to essentially, enshrine pretty much, 
the recommendations of the GAO and get on with it. What is your 
time line for doing that?
    Mr. Nayak. I also mentioned to the chairman, 3 months. By 
the end of the calendar year.
    Mr. Connolly. Three months. It was such a good answer, I 
just wanted to get it into the record a second time. 
[Laughter.]
    Thank you, Mr. Chairman.
    Mr. Lankford. It will be a terrific Christmas present to 
us, we will be able to read it over New Year's. I appreciate 
that.
    I recognize Mr. Kelly.
    Mr. Kelly. Thank you, Mr. Chairman.
    From all of you, just your opinion on the mandatory 
debarments. Mr. Shaw, if you would start, just kind of walk me 
through on what you all think.
    Mr. Shaw. Thank you, Congressman. I think that mandatory 
debarments are a bad idea in the procurement area. I am not 
familiar enough with the Clean Water Act and all those. That 
may work with regard to facilities. But in the procurement 
area, it takes away an important tool that we have to fight 
fraud. And that tool is the leverage that we can use with this 
carrot and stick that I mentioned before, about working with 
contractors that are trying to do it right and to changing 
their conduct and improving their processes, so that they have 
risk management programs in place where fraud won't happen in 
the first place.
    If there is a mandatory debarment, companies are going to 
tend to think, well, why bother, and they are just going to 
obfuscate and fight the investigations, rather than work 
proactively to avoid the fraud in the first place.
    And there is a lot of good, I think, we do in that area, 
both when there is misconduct with such things as 
administrative agreements, but also where there is no 
misconduct at all. We meet regularly with all the major defense 
contractors to talk about their ethics programs, even when they 
are not in trouble. So I oppose it.
    Mr. Kelly. Mr. Pelletier.
    Mr. Pelletier. Sir, thank you . I agree in the sense that 
the mandatory statutory debarments take away the key element of 
discretion. Like the Air Force, I am a full-time suspension 
debarment official. Each agency has its own particular interest 
and information, or situation, that it has to deal with.
    Allowing the suspension and debarment official to have that 
discretion as it deals with a contractor that may be, versus 
someone that is bad, someone that has defrauded the government, 
somebody that has made a mistake, somebody that doesn't realize 
how the Federal process works, but is quite willing to change 
and adjust, we may have potentially a very good contractor or 
very good grants person available to us. We don't want to throw 
them out the window without a chance at getting back in the 
game.
    So with the discretion that the suspension and debarment 
official has, we can do things like enter administrative 
agreements, which are basically commercial probation, if you 
will. We have a very strict set of requirements that they have 
to meet. We monitor that. They report back and a violation of 
an administrative agreement, for example, is another grounds 
for debarment.
    And at the end of the process, and it is usually 3 years, 
we far more often than not end up with a better contractor or a 
better grant, what we call a participant than we started off 
with. And I think the best interest of the government has been 
protected.
    Mr. Kelly. Dr. Nayak.
    Mr. Nayak. And so I am not as much of an expert as these 
gentlemen, but I would agree with them 100 percent where it 
comes to contractors, and then statutorily, I am just not that 
much of an expert to sort of give you a read on that. But happy 
to look into it with the committee.
    Mr. Kelly. That would be great, thank you.
    Ms. Gunderson.
    Ms. Gunderson. HHS does use the mandatory exclusions on the 
health care side. That is not handled specifically by my 
office. It is an authority under our Office of the Inspector 
General. But it is a valuable tool that the Department uses to 
combat health care fraud, patient neglect and those sorts of 
issues that arise to mandatory exclusion.
    Mr. Kelly. Good. Thank you. I yield back, Mr. Chairman.
    Mr. Lankford. I would like to yield a couple minutes to Mr. 
Connolly.
    Mr. Connolly. Just a follow-up, thank you, Mr. Chairman.
    Mr. Pelletier, it strikes me, based on our analysis in 
terms of per billion dollars of contract dollars, you have a 
much higher debarment and suspension rate than does DOD. You 
would agree?
    Mr. Pelletier. Notwithstanding Mr. Shaw's opinion to the 
contrary, yes. [Laughter.]
    Mr. Connolly. Yes. Well, so my question is this. To what do 
you attribute that? We have a situation where DOD, per billion 
dollars of contract, has a much lower rate than you do. HHS and 
procurement has zero rate, because according to Ms. Gunderson, 
they have used other mechanisms.
    If you are a Member of Congress listening to this, you are 
thinking, there seems to be a wide variety of judgment being 
exercised, and that may be a good thing. But it is hard to get 
our arms around in terms of predictability and accountability 
for the taxpayers we represent. I just want to give you the 
opportunity to comment on your own observation of why this 
variability among agencies and why does EPA apparently use this 
tool more frequently than some other agencies?
    Mr. Pelletier. First of all, sir, I couldn't obviously 
comment on to the why other agencies are or are not doing 
something or how their programs work. Each one is unique.
    But as I said in my statement, EPA is really the pioneer in 
this area. We started in 1981, developing a program. And over 
the years, as anything else, we developed an expertise in the 
area. And perhaps, and one of the things in teaching, which we 
are very active in the national suspension and debarment 
training program, one of the feedbacks we get from people that 
are in the class is, we didn't realize it was that easy to do.
    So it may be that we have developed an expertise because of 
longevity that affords us a greased rail where we know how to 
do it, because we have done it so many times.
    Mr. Connolly. And do you have dedicated, full-time, as Mr. 
Shaw is for the Air Force?
    Mr. Pelletier. Yes, sir, I am the full-time.
    Mr. Connolly. You are it?
    Mr. Pelletier. I am it. And our staff at the division, that 
is their job. We have seven attorneys on that, two 
investigators, an auditor, and support personnel and a division 
director. That is all we do, is suspension and debarment.
    Mr. Connolly. And just a final question. I assume, and Mr. 
Shaw, you are free to answer as well, I think you already 
testified to this, Mr. Shaw pretty much said, having that full-
time dedicated person makes sort of all the difference in 
making sure you have an active program. Would you concur?
    Mr. Pelletier. It has worked well for our agency. We have a 
senior person. And we have a dedicated person and it has proven 
to be very, very effective.
    Mr. Connolly. Thank you very much.
    Mr. Lankford. Let's close out the hearing, but I want to 
give an opportunity for any of the four witnesses to make any 
final comments that you would like be able to get in on the 
record as well, or a response to anything.
    Mr. Shaw.
    Mr. Shaw. I guess just a couple of observations. I have 
never done an analysis, it is interesting, your mathematics is 
correct per dollar. But I am wondering, well, first of all, let 
me say I think that the number of debarments is a bad metric 
anyway for this whole program, for this whole process. But it 
is an easy one, because the numbers are what the numbers are. 
So it is important, and everybody at the end of the year always 
compares numbers.
    What you are doing proactively to prevent fraud, and to 
encourage improvement in the culture of companies I think is 
much more important. But having said that, even looking at the 
numbers metrics, I think the better way of looking at it would 
be not the number of debarments and suspensions per contract 
dollar, but maybe the number per contract. And I don't know how 
you would get at that number. But a big difference in DOD from 
EPA and ICE and other agencies, as we deal with big dollar 
contracts.
    So for example, when I suspended Boeing several years ago 
on a $15 billion space launch program, that counted, I guess, 
three. So I had three suspensions. But it was a $15 billion 
contract. And all of the Air Force and defense contracts are 
big dollar amounts. I think that maybe skews a little bit that 
0.09 thing.
    Mr. Lankford. Any other comments from any of the other 
witnesses?
    We do appreciate your attendance, the work to be able to 
come and to be able to be here. Your written statements 
obviously, probably the least favorite part of your week was to 
come and do a congressional hearing. So we do appreciate the 
time for you to be able to be here.
    With that, this committee is adjourned.
    [Whereupon, at 12:20 p.m, the subcommittee was adjourned.]

                                 
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