[Congressional Record Volume 154, Number 65 (Wednesday, April 23, 2008)]
[House]
[Pages H2572-H2574]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CLOSE THE CONTRACTOR FRAUD LOOPHOLE ACT
Mr. TOWNS. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 5712) to require disclosure by Federal contractors of certain
violations relating to the award or performance of Federal contracts,
as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5712
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Close the Contractor Fraud
Loophole Act''.
SEC. 2. REVISION OF THE FEDERAL ACQUISITION REGULATION.
The Federal Acquisition Regulation shall be amended within
180 days after the date of the enactment of this Act pursuant
to FAR Case 2007-006 (as published at 72 Fed Reg. 64019,
November 14, 2007) or any follow-on FAR case to include
provisions that require timely notification by Federal
contractors of violations of Federal criminal law or
overpayments in connection with the award or performance of
covered contracts or subcontracts, including those performed
outside the United States and those for commercial items.
SEC. 3. DEFINITION.
In this Act, the term ``covered contract'' means any
contract in an amount greater than $5,000,000 and more than
120 days in duration.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
York (Mr. Towns) and the gentleman from Virginia (Mr. Davis) each will
control 20 minutes.
The Chair recognizes the gentleman from New York.
General Leave
Mr. TOWNS. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days in which to revise and extend their remarks.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New York?
There was no objection.
Mr. TOWNS. Mr. Speaker, I yield myself such time as I may consume.
H.R. 5712, the Close the Contractor Fraud Loophole Act, is a
commonsense solution to a problem that we never should have had in the
first place. When the administration wrote a new rule requiring Federal
contractors to report fraud and over billing on government contracts,
for some reason contracts performed overseas and commercial item
contracts were exempted from that requirement.
That didn't make sense to my colleague on the Subcommittee on
Government Management, Congressman Welch, because so much contract
fraud and waste has been seen on contracts in Iraq and Afghanistan. He
introduced this bill which will close these loopholes, and I salute him
for that.
The Justice Department believes the new rule is necessary because few
government contractors voluntarily disclose suspected instances of
fraud. But the exemptions in the rule as written would leave out
contractors like those in Iraq and Afghanistan, where we have spent
billions on reconstruction contracts over the past 5 years. Over that
period, the Justice Department has uncovered at least $14 million in
contract bribes in those two countries alone. Contractors must be held
to the same standards no matter where they perform their work.
Since Congressman Welch brought attention to this loophole,
introduced this bill, and called for the hearing our subcommittee held
last week, the administration has said it is leaning toward including
overseas and commercial item contracts in the final fraud reporting
rule. I am happy to hear that, but we cannot get them to guarantee that
these loopholes would be closed. That is why Mr. Welch's bill is
necessary, to make sure that loopholes are closed for good. Another way
to put it, this legislation will help them deal with a problem that
should not have occurred.
I want to thank Congressman Welch for bringing this problem to the
attention of the subcommittee. I would also like to thank the chairman
of our full committee, Congressman Waxman, and also thank the ranking
member of the full committee, Congressman Davis. And I would like to
thank the ranking member of the subcommittee, Congressman Bilbray, for
helping us bring this bill to the floor.
Mr. Speaker, at a time when our national security is of paramount
concern, criminals who cheat the government must be identified, stopped
and punished. H.R. 5712 will help make sure that taxpayer dollars are
used for their intended purpose, and not to line the pockets of corrupt
individuals or companies. So I urge my colleagues to support this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. DAVIS of Virginia. Mr. Speaker, I reserve the balance of my time.
[[Page H2573]]
Mr. TOWNS. Mr. Speaker, I yield 5 minutes to the Honorable Henry
Waxman, the chairman of the full committee.
Mr. WAXMAN. Mr. Speaker, I rise in strong support of H.R. 5712, the
Close the Contractor Fraud Loophole Act. This bill would create a
mandatory requirement for Federal contractors to disclose violations of
Federal criminal law or significant overcharges discovered with
relationship to a Federal contract. It would replace our current system
of voluntary disclosure.
Moving to mandatory disclosure has been recommended by the Justice
Department for good reason, the voluntary disclosure system is simply
not working. In fiscal year 2007, only three contractors participated
in the Defense Department's voluntary disclosure program.
{time} 1215
Congressman Welch introduced this bill after the administration
exempted contracts performed in Iraq and Afghanistan from a proposal to
make fraud reporting mandatory. This exemption made no sense. As this
committee's oversight has shown, fraud and over-billing are widespread
in Iraq.
The administration testified at a hearing before the Government
Management Subcommittee that these exemptions were included
inadvertently, and they said they made a mistake. This is a mistake
that needs to be corrected, and that's why I commend Congressman Welch
for pressing this issue and introducing this legislation. If we pass
this bill, the real winners will be the Federal taxpayers.
Prior to our committee markup on the bill, we worked with Ranking
Member Davis to address certain concerns he raised with the way the
bill was originally drafted. And I want to thank Mr. Davis for working
with us in a constructive manner to ensure passage of this bill.
The bill before us, H.R. 5712, as amended, would preserve
Representative Welch's original intent while at the same time
preserving the legitimate role of the regulatory process. The bill
requires that the Federal Acquisition Regulation be amended within 180
days to require disclosure of fraud for both domestic and overseas
contracts, and for commercial item contracts.
I urge Members to support H.R. 5712, as amended. It has been approved
by a bipartisan vote in our committee, and it ought to be
overwhelmingly approved in the House as well.
Mr. DAVIS of Virginia. I yield myself such time as I may consume.
(Mr. DAVIS of Virginia asked and was given permission to revise and
extend his remarks.)
Mr. DAVIS of Virginia. Mr. Speaker, I had serious concerns about this
legislation when it was originally introduced. The original version
would have required a Federal contractor to self-report to the agency's
IG if the contractor had reasonable grounds to suspect a violation of
criminal law or if a significant overpayment occurred on a contract
held by the contractor. A knowing failure to make such a report would
have been a cause for debarment or a suspension for all firms,
including those holding contracts performed overseas and contracts for
commercial items.
This original version, in my judgment, was an ill-considered attempt
to strengthen an ethics compliance program that's currently being
developed by the administration.
The concept of mandatory self-reporting by contractors of possible
criminal violations, based on reasonable grounds, would have been
unprecedented and obviously controversial. The rule proposed in the
Federal Register was the subject of more than 70 comments. As expected,
many of the firms subject to the rule expressed serious legitimate
concerns about the proposal.
In actuality, the bill as introduced didn't make as significant
change as intended to the substance of the proposed revisions. The
problem was the bill leapfrogged the statutorily designated process for
writing acquisition regulations, and would have encased in statute
draft language establishing a new reporting scheme yet to be thoroughly
vetted.
The subcommittee received testimony that the so-called loophole which
was alleged to have been snuck in at the 11th hour, was really an
inadvertent administrative error made by an overworked acquisition
policy staff.
None of the agencies providing testimony to the subcommittee,
including the Department of Justice, nor the contractor community,
supported this bill as it was introduced.
But I will say this to the author of the legislation and the
subcommittee chairman, we ended up working together, and the language
before us today was offered in his amendment at mark-up by Chairman
Waxman and myself. This will ensure that the Federal acquisition
regulation is revised to include a requirement that Federal contractors
notify the government of violations of Federal, criminal law or
overpayments in connection with the award or performance of contracts
or subcontracts.
In doing so, it will ensure the regulation is applicable to all
contracts, including those performed overseas and those for commercial
items.
The stated purpose was ultimately accomplished by this language but
accomplished through a more appropriate statutory acquisition
rulemaking process.
Again, as with the other contractor bills we're considering today, I
think that we would be better served if we would address some of the
underlying problems in the acquisition system, and that is getting in
good acquisition officials; whether they're contract managers,
contracting officers, contracting officers technical representatives,
trying to get more into government, educating them, training them and
making sure they have the tools appropriate to get the best value for
the tax dollars. That's where the real waste of government lies with
having good acquisition officials.
I think this version of the bill today is an adequate solution. I
want to thank again Chairman Waxman and Mr. Welch for working with us
to revise the language. I urge its adoption.
Mr. Speaker, today we rise to take up H.R. 5712, the Close the
Contractor Fraud Loophole Act. This legislation would revise an
administration-proposed contractor ethics and reporting program.
I had serious concerns about this legislation as it was originally
introduced. The original version of the bill would have required a
Federal contractor to self-report to the agency's Inspector General if
the contractor had ``reasonable grounds'' to suspect a violation of
criminal law or if a significant overpayment occurred on a contract
held by the contractor. A knowing failure to make such a report would
have been a cause for debarment or suspension for all firms, including
those holding contracts performed overseas and contracts for commercial
items.
This original version of the legislation was an ill-considered
attempt to ``strengthen'' an ethics compliance program currently under
development by the administration.
The concept of mandatory self-reporting by contractors of possible
criminal violations based on ``reasonable grounds'' is unprecedented
and controversial. The rule proposed in the Federal Register was the
subject of more than 70 comments. As expected, many of the firms
subject to the rule expressed serious and legitimate concerns about the
proposal.
In actuality, the bill as introduced did not make as significant a
change as intended to the substance of the proposed revisions to the
acquisition regulations. The problem was the bill leapfrogged the
statutorily designated process for writing acquisition regulations and
would have encased in statute draft language establishing a new
reporting scheme yet to be thoroughly vetted.
The Subcommittee on Government Management, Organization and
Procurement received testimony that the so-called ``loophole''--which
was alleged to have been ``snuck in at the eleventh hour''--was really
an inadvertent administrative error made by an overworked acquisition
policy workforce.
None of the agencies providing testimony to the Subcommittee,
including the Department of Justice, nor the contractor community,
supported H.R. 5712 as introduced. Instead, the stakeholders suggested
the well-established regulatory drafting process should be allowed to
continue to completion. They favored this rulemaking approach because
it would allow all interested parties the opportunity to submit
comments and have those comments considered in the deliberative
process.
Nevertheless, the Committee moved forward with the legislation.
Fortunately, Chairman Waxman, the bill's sponsor and I were able to
work out language which addressed some of the concerns raised at the
one hearing on the bill.
[[Page H2574]]
The language before us today, offered as an amendment at markup by
Chairman Waxman and me, would ensure the Federal Acquisition Regulation
is revised to include a requirement that Federal contractors notify the
Government of violations of Federal criminal law or overpayments in
connection with the award or performance of contracts or subcontracts.
In doing so, it would ensure the regulation is applicable to all
contracts, including those performed overseas and those for commercial
items.
The stated purposes of the introduced version of H.R. 5712 are
ultimately accomplished by this language, but accomplished through the
more appropriate statutory acquisition rulemaking process.
Again, as with the other so-called ``contractor bills'' we are
considering today, I continue to believe all would be better served if
we had spent our time trying to improve the operation of our
acquisition system--in order to better acquire the best value goods and
services our Government so desperately needs.
And in this case, I am certain we would have been be better off had
we allowed the regulatory process to go forward without any
interference at all from us.
Nonetheless, under the circumstances, I believe this version of the
bill we are considering today is an adequate solution, and I thank
Chairman Waxman and Mr. Welch for working with me on the revised
language.
Mr. TOWNS. Mr. Speaker, I would like to yield 5 minutes to the author
of this legislation, a person that has worked real hard and has done a
magnificent job, the gentleman from Vermont, Congressman Welch.
Mr. WELCH of Vermont. Mr. Speaker, one of the fundamental
responsibilities that this Congress has is to protect taxpayer dollars.
That has become an enormous challenge, as many of the taxpayer dollars
that are appropriated are paid to private contractors.
The growth in contracting in the past 6 or 7 years has exploded.
Procurement spending in 2000 was $213 billion. Procurement spending is
when we enter into a contract with a private company to deliver goods
or services. That amount exploded last year to $412 billion. Much of
that is going to Iraq and Afghanistan. Much of this is being subject to
waste, fraud and abuse.
The Oversight Committee under Mr. Waxman and Mr. Davis has done
vigorous oversight and identified in 2006 that there were 118 contracts
valued at $745 billion that were found by government auditors to
include a significant component of fraud, abuse and mismanagement. And,
in fact, it got worse.
In 2008, that report identified 187 contracts valued at $1.1
trillion, where they were plagued by waste, fraud and abuse.
The bottom line is, will we, as a Congress, Republicans and
Democrats, be vigilant in protecting taxpayer dollars? We have to do
that, especially when there is documented evidence of rip-offs, wicked
rip-offs that have occurred with taxpayer dollars in Afghanistan and in
Iraq.
There's two goals that we have. The first that we widely share is
that every taxpayer dollar will be accounted for, and that the
taxpayers who were working hard to support this government and our
troops will see that their money is spent on proper things that are in
the contract. We have to protect the taxpayer.
The second is we've got to protect the troops. If we are spending
money in Iraq and Afghanistan for the intended purpose of bringing our
troops home and improving our national security, any dollar that's
wasted that results in any additional injury, or one day prolonged in
the conflicts, is a dollar that is improperly wasted. We cannot do
that.
So I believe that this loophole, however it got there, by mistake or
by sleight of hand, however it got there, it's got to be closed.
Obviously, if you have a regulation, as it was written, that says we
will report fraud when it is a rip-off on a domestic contract, but we
won't when it's on a foreign contract, we're sending a very unambiguous
message. There's a green light to rip off taxpayers if the money is
being spent abroad. That's not a defensible position. And that's why
we're closing this loophole to make it absolutely clear that's
unacceptable.
Now I think it does make sense. What Congressman Davis proposed as a
new way of proceeding is fine with me. And here's why. The bottom line
is protecting the taxpayers and protecting our troops. And if we can
accomplish that better by finding a way that has bipartisan support, we
can all have more confidence that we'll be successful.
So I'm glad to work with Chairman Davis in order to have this get
done in a bipartisan way. I want to thank very much Chairman Waxman and
the great work of my chairman of the subcommittee, Mr. Towns, for
bringing this forward so quickly and so effectively.
Mr. DAVIS of Virginia. Well, let me thank my friend for calling me
Chairman Davis. It's with nostalgia that I use the terminology, but I
guess once a chairman, always a chairman. But I now recognize Mr.
Waxman as my chairman and a counterpart in a number of these issues.
I again enjoyed working with you on this legislation to bring it. I
would urge its adoption.
I yield back the balance of my time.
Mr. TOWNS. Mr. Speaker, I want to thank Chairman Waxman; I want to
thank Ranking Member Davis; and, of course, Ranking Member Bilbray for
his work; and, of course, Congressman Welch. This legislation is really
needed, and I was happy that we were able to move it to the floor very
quickly, because any time we can save money, and I think that this is
what this does, it saves the taxpayers money, and I just think we need
to salute Congressman Welch for his insight in being able to do just
that.
Mr. THOMPSON of Mississippi. Mr. Speaker, I rise today in support of
H.R. 5712, the ``Close the Contractor Fraud Loophole Act.''
The name of this bill really says it all. Today, as I speak, there is
a loophole in Government procurement regulations that allows some
contractors to avoid reporting violations of Federal law or
overpayments.
The privilege--and, yes, it's a privilege--of earning Federal dollars
carries with it certain responsibilities. One of those responsibilities
is to do your utmost to avoid fraud, violations of law, and
overpayments. Now, I understand that many large contractors have
thousands of employees, and sometimes there can be a bad apple. But
when a contractor learns of such a bad apple, it is its responsibility
to report what it learns to the Government, and to make the Government
whole for any loss.
Today, most contractors working in the United States are required by
regulation to do just this. But contractors working overseas, and a few
here in the U.S., fall outside this simple, commonsense reporting
requirement.
This is not right--contractors accepting Federal dollars should be
treated the same, whether they are performing the work in the United
States or overseas, and regardless of whether they are selling
``commercial items.''
I want to commend Mr. Welch and Chairman Waxman for recognizing this
problem, and for doing something about it. Now that they have acted,
the administration says that this loophole was a ``bureaucratic
mistake'' and should be closed. Yet, before Congress moved, the
administration was curiously slow to do anything to address this
``mistake.''
My committee has devoted a lot of time and energy to examining the
Department of Homeland Security's contracting practices. What we have
found is not always pretty. The Department is young, and has made some
poor contracting decisions. But poor decisionmaking and the occasional
inexperienced contracting officer is not a license for abuse, and it is
incumbent on any contractor who discovers such abuse to report it.
I hope the administration makes good on its word and closes this
loophole, but I'm mindful that it took congressional oversight and
action to stir them into action. This is oversight at it best, and make
no mistake, our oversight--of both the Government and the contractors
themselves--will continue. I encourage all of my colleagues to support
this legislation.
Mr. TOWNS. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from New York (Mr. Towns) that the House suspend the rules
and pass the bill, H.R. 5712, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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