[Congressional Record (Bound Edition), Volume 153 (2007), Part 20]
[Senate]
[Pages 27376-27379]
[From the U.S. Government Publishing Office, www.gpo.gov]




             GENERAL SERVICES ADMINISTRATION INVESTIGATIONS

  Mr. GRASSLEY. Mr. President, I now wish to address this body about 
some investigations I have been doing over a long period of time.
  This is a report to my colleagues that senior executives at the 
General Services Administration may have failed to meet their 
responsibilities to the American taxpayers. These issues were carefully 
examined in two oversight investigations conducted by my staff. These 
investigations have uncovered a disturbing change of circumstances at 
the General Services Administration.

[[Page 27377]]

  In a nutshell, it is this way: These studies indicate that top-level 
General Services Administration management interfered in contract 
negotiations with Sun Microsystems. They put pressure on contract 
officers to sign a potentially bad contract. When that person refused, 
they had that contract officer removed under duress.
  All the evidence from this investigation suggests that this 
particular contractor had been overcharging the Federal Government for 
years. The contract officer believed the proposed terms were still not 
fair to the Government. Even worse, these reports also indicate that 
allegations of intimidation against the General Services Administration 
Office of Inspector General and its auditors may have been fabricated. 
This may have been done to cover high-level pressure on contract 
officers or maybe because the new contract was signed on terms dictated 
by the contractor. When I asked for audits of the new contract, this 
contractor resisted tooth and nail, and in the end they canceled the 
contract before audits could be completed. I want to repeat that, 
because this is the bottom line. When I asked for audits of this new 
contract, this contractor resisted tooth and nail, and in the end they 
canceled the contract before the audit could be completed. That ought 
to tell you something about that contract.
  I think it is important my colleagues know what my staff uncovered at 
the GSA, not merely for the purpose of pointing out mistakes but for 
the purpose of seeking solutions, because these investigations are 
about fixing a problem.
  Let me set the record straight. This is not some sort of witch hunt 
for the Administrator of GSA or anything else. Quite simply, this is 
oversight and investigation, or O&I, as we call it around here on the 
Hill.
  In doing this oversight and investigation work, I am fulfilling one 
of the most sacred responsibilities of a Member of Congress. As with 
all my investigations, I want to be certain every tax dollar is spent 
wisely and according to law--nothing more, nothing less. With that in 
mind, I want to address the findings of these investigations that are 
documented in separate staff reports.
  The oversight work began last September when I was informed 
Administrator Lurita Doan of the GSA was attempting to cut the 
inspector general's budget for audits. These are the policemen to see 
that the money we appropriate is spent wisely. It appeared that this 
administrator was attempting to neutralize the inspector general, 
especially in the area of oversight of Government contracts. This was a 
red warning flag, so I decided to dig deeper.
  The Administrator was alleging that the Office of Inspector General--
or I might refer to that as the OIG--was abusing its power by 
threatening and intimidating Government contracting officers and 
vendors. These allegations were raised by the Administrator in numerous 
statements, publicly and internally, and in letters to me. According to 
three separate witnesses, Administrator Doan even compared the 
inspector general officials to terrorists.
  These allegations concerned me for 2 reasons: First, I was extremely 
concerned that sworn Federal law enforcement agencies and agents, and 
accredited auditors, might be abusing their power. Second, if there was 
no factual foundation for these allegations, if they were fabricated, 
where did they come from and why did they come?
  I asked Administrator Doan to provide me with specific examples of 
the alleged intimidation. Since she had aired these allegations in 
public, I thought she would provide me with specific details to support 
the charges. The fact is, she could not. In reality, only one specific 
instance was brought to my attention. In the end, my staff could find 
no evidence whatsoever to support those allegations. Sadly, it appears 
as if that one specific allegation was fabricated to cover up intense 
top-down pressure on contract auditors to award a contract that was 
detrimental to the taxpayers.
  It was a bureaucratic smokescreen that opened a much larger can of 
worms. That can of worms was a contract awarded to Sun Microsystems, 
Inc. in 1999 for computer products and services. The inspector general 
had this particular contract under a microscope for several years. The 
IG audits indicated that Sun had failed to report significant discounts 
given to commercial contractors, as mandated by the contract; in other 
words, transparency when you are doing business with the Federal 
Government. Because this information was withheld--in other words, 
their commercial contract arrangements--Government customers paid much 
higher prices than Sun's commercial customers. The Government was 
losing money because of these unfair pricing policies, losses 
potentially in the tens of millions of dollars. These and other alleged 
contract violations, including potential fraud, were referred to the 
Department of Justice and now are in the Federal courts.
  The alleged fraud was first reported to General Services 
Administration management in February of 2005. GSA management had 
several options, including seeking a better contract, canceling that 
contract, or suspension. In fact, three GSA contracting officers who 
handled the Sun contract attempted all 3 remedies. In each case, 
intervention from upper management at GSA blocked those moves. Upper 
management turned a blind eye to the alleged fraud, preferring instead 
to do business as usual. Then they began applying serious pressure on 
the contracting officer to extend the contract with Sun for another 5 
years.
  In August of last year, the GSA contracting officer assigned to the 
Sun contract dug in his heels, holding out for a better deal, 
protecting the taxpayers of the United States. He believed the terms 
offered by Sun in negotiations were not fair to the Government.
  Now, if you ask senior GSA management, you get a very different 
story. Those individuals, including Ms. Doan and FAS Commissioner 
Williams, claimed this contracting officer was so intimidated, 
browbeaten, even, by OIG auditors, that he had to be replaced. The 
facts, however, do not support that allegation or explanation.
  The contracting officer and his immediate supervisor both deny 
experiencing any intimidation from the inspector general auditors. They 
say, in fact, it never even happened. The source of the allegations has 
changed her story several times. In fact, she continued to support the 
contracting officer's position in negotiations--a position that was 
fully aligned with the inspector general auditors' position--even after 
claiming he was being intimidated into that position by the same 
auditors. If that position was tainted by the inspector general auditor 
intimidation, why would she support it?
  One other fact seems to have escaped the GSA managers making these 
allegations. IG auditors have no direct influence over a contracting 
officer's career. The only person with that kind of authority is the 
contracting officer's supervisors, not the inspector general.
  There is some irony here too. The same GSA managers who accuse the 
OIG auditors of intimidating this contracting officer had themselves 
attempted in vain to intimidate him into awarding the contract.
  So it seems that GSA management tried to turn the concept of 
intimidation upside down. Now, why would they do that?
  The evidence suggests these allegations were a smokescreen to hide 
the actions of the General Services Administration management. They 
used it for cover while ramming through a contract that may be bad for 
the taxpayers. There should be no greater motivation for those in 
Government procurement than protecting the taxpayers' money. 
Contracting officers who are warranted by this Government should be 
allowed to fight in negotiations for the best deal for the taxpayers, 
saving money where they can. Any pressure, any suggestion, any direct 
involvement by management to thwart that mission would be out of line. 
What Administrator Doan, Commissioner Williams, and others did to short 
circuit this process, then, is entirely wrong. To turn up the pressure,

[[Page 27378]]

senior GSA officials, including Administrator Doan, were communicating 
directly with Sun Microsystems, Inc. and their lobbyists during 
negotiations. They made sure that contracting officer knew about that 
contact they were having. What kind of message does that send to a 
contracting officer fighting for a good contract to save the taxpayers' 
money? What kind of message does that send to the current and potential 
Government contractors, wherever they might be?
  I would say that, at the very least, it tells them that if you don't 
like the deal offered by the contracting officer, go over his or her 
head. Go to the very top. Get the problem fixed. Get the price you want 
out of the taxpayers. It also says if the contracting officer is in the 
way, get rid of the contracting officer and get one who will do the 
dirty deed.
  It would be bad enough were this the end of the story, but it isn't. 
After forcing out the contracting officer, GSA management assigned a 
new officer. It took her 9 days to negotiate a final deal with Sun. But 
what did the Government get?
  In interviews, this new contracting officer claimed that she didn't 
need to talk to IG auditors who had years of knowledge on the Sun 
contract. She claimed she could solve any impasse in negotiations by 
listening to what the contractor had to say. Many of the provisions she 
adopted were ones steadfastly opposed by the previous contracting 
officer--the very same ones that led to the so-called ``impasse'' and 
the removal of that contracting officer.
  The new contracting officer even admitted during questioning that she 
did not fully understand key provisions of the contract. She admitted 
making ``big oversights'' in some of the contract terms. I fear the 
Government got a contract based on terms that were dictated by the 
contractor. I ask you: Is this GSA management's idea of how to 
negotiate?
  After my staff interviewed the new contracting officer, I realized I 
needed to know more about the new contract. That is the one signed in 
September 2006. Was the Government continuing to lose money due to the 
unfair pricing and unreported discounts that they had with the 
commercial sector?
  As a Member of the Senate who cares deeply about oversight, I would 
have been remiss in not asking more questions. So on June 5, 2007, I 
asked the GSA inspector general to conduct an audit. I asked the IG to 
look at the terms of this new contract.
  Now, if this contract was such a ``good deal for America,'' as has 
been suggested by Sun on the one hand and GSA management on the other 
hand, then one would think Sun would rush to cooperate. Wouldn't they? 
Well, they did not. Instead, for 3 months, Sun complained to me, they 
procrastinated, they withheld information and fought the audit at every 
step. They also lashed out at the GSA inspector general, claiming 
bias--maybe because the IG had nailed him in the past. To his credit, 
IG Brian Miller held his ground and forged ahead with the audit.
  This is what happened, and sadly so, because you don't get to the 
bottom of it then. Sun chose to cancel this contract on September 13 of 
this year, without waiting for the completion of those audits. This 
entire situation is extremely unfortunate, possibly preventable, and 
certainly baffling. Why would Sun cancel a contract that it had fought 
so hard to get? Did Sun have something to hide?
  Government contracting, particularly multiple award schedule 
contracting, appears to be in serious jeopardy. Contracting officers 
are in short supply and are quitting in alarming numbers. They are 
overworked, they are stressed, and some try to juggle 100 or more 
contracts at any given time. With that kind of workload, assuring 
contract compliance is out of the question.
  One of the culprits here may be the industrial funding fee structure 
we use in Government. This is money that the GSA charges other agencies 
that tap into governmentwide contracts negotiated by GSA. These fees 
are the lifeblood of the General Services Administration and are 
responsible for the lion's share of the agency's budget. The incentive 
is to maximize fees and agency profits. This creates what has been 
described as a ``perverse incentive.'' Getting the best deal for the 
Government and the taxpayers gets lost in the drive for more contracts 
that generate more fees to fill that agency's coffers.
  I feel the Sun contract fiasco may be only the tip of the iceberg. I 
hope it is an exception, but many contracting officials suggested 
otherwise.
  Am I suggesting that Government procurement is broken beyond repair? 
No. I do think that GSA procurement officials have a lot of work to do 
to make sure these situations are corrected. They certainly need to 
clean up their act, and they will need to make hard choices to fix 
these problems.
  GSA has a professional force of contracting officers. GSA management 
needs to let them negotiate the best deal possible without interference 
from the top. Interference in that process as evidenced by the Sun 
negotiations may not violate the law, but it is not right and it does 
not protect the taxpayers.
  Senior GSA management needs to realize that what may be profitable or 
strategically important for the GSA may not always be in the best 
interests of the taxpayers. GSA managers also need to recognize the 
need for oversight and followup on awarded contracts. Contract officers 
need to be able to fight for the best possible deal for the taxpayers, 
even if it means the loss of a contract that is lucrative to the agency 
for their operating expenses, or for the vendor. GSA must never forget 
that the real customer is the American taxpayer.
  Today, I am forwarding three investigative reports to Administrator 
Doan, to the GSA inspector general, to the House and Senate oversight 
committees, and the White House Chief of Staff for review. These 
reports contain proprietary and privacy-protected information and will 
not be made public by me. The reports provide in great detail the 
results of these significant investigations into the allegations of 
inspector general auditor intimidation and top-level GSA management 
intervention in the Sun Microsystems contract negotiations.
  As I said, it is not my intent to point the finger at any one 
individual or company. My sole purpose is to get to the bottom of what 
may be a significant problem in Government contracting and, of course, 
get it fixed. I respectfully ask GSA Administrator Doan and the 
inspector general to address the problems identified in these reports 
and to take appropriate action in the future. I hope GSA will do a 
better job of protecting the taxpayers' money.
  I apologize to the chairman and ranking member of the Labor-HHS 
Subcommittee for taking this time, but I believed I needed to respond 
to some of the speeches that were made about the health program before 
I gave my report on my investigation.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Georgia.
  Mr. ISAKSON. Mr. President, before the distinguished ranking member 
leaves the floor, I wish to acknowledge a couple of things--one, my 
appreciation for his hard work on the SCHIP program and my 
understanding of his frustration with some of the misunderstandings 
that have taken place in the debate on all sides. For just a couple of 
minutes of the Senate's time, I wish to discuss how we got where we are 
and how we need to get to where we are going to be. But before he 
leaves, again, I commend the distinguished ranking member on his effort 
on behalf of children's health insurance and his effort to clear the 
record in hopes that, in the end, it will be a foundation for all of us 
to clear the record of misunderstandings. There is fault enough to go 
around, starting with the administration and then taking both sides of 
the issue. But I commend the chairman for his hard work.
  Ten years ago, I chaired the State Board of Education of Georgia when 
the SCHIP program was first authorized. I took it upon myself, in that 
capacity--the one that met closest with the children in need in 
Georgia--to initiate a broad program of registering

[[Page 27379]]

and getting the information out so that every poor child in Georgia who 
was eligible could be covered by SCHIP, which in Georgia is known as 
PeachCare.
  On the floor of this Senate earlier this year, I fought, along with 
Members from 17 other States, to get additional funding necessary on an 
interim basis because of the shortfalls that took place in the SCHIP 
program. I commend this Senate now on working to reauthorize SCHIP.
  We are in a dilemma. There are differences of opinion on the 
eligibility. There are differences of opinion on the amount of money. 
There are differences of opinion on how it should be raised. There have 
been statements that have been made that are correct and statements 
that have been made that are wrong. But if the House sustains the veto 
of the President, we find ourselves in a position I would like to 
address for a second, a position where there are enough agreements for 
us to make to come back to the floor and pass a SCHIP bill that can be 
reauthorized and pass this Senate almost without objection.
  Everybody in the Senate agrees SCHIP should be reauthorized. On the 
vote to extend the current program through November 16, on the 
continuing resolution, there was only one dissenting vote, and it was 
not about SCHIP. The questions are who should be eligible, how far the 
program should go, whether it should run in one direction or another, 
and how it should be funded. Just in the remarks made by the 
distinguished ranking member, as well as previous remarks made by the 
minority whip prior to Senator Grassley's remarks--both sent the signal 
that there is room in the middle.
  I hope the administration will understand that a lot of the 
frustration with the current state of SCHIP has been the waivers--13 of 
them--that have been granted by this administration to expand SCHIP 
during the last 10 years, beyond what the Congress and beyond what the 
Senate intended it to be.
  There is common ground in front of us, and it is the poor children of 
America. There is a good solution in front of us, and that is to see to 
it that SCHIP is what it started out to be. As Senator Grassley has 
said, the bill that went to the President and was vetoed did correct 
some of those waivers. As others have said, there are serious questions 
on the financing mechanism. But there is no question that this Senate 
should be ready and prepared, immediately when the veto is sustained, 
to go forward and find a compromise that works for the poor children of 
America.
  It is critical to me, as one who started in Georgia 10 years ago to 
register those eligible children, to see to it that they continue to 
get the promise that was granted by the Congress of the United States. 
It is equally important to me to see to it that we do not expand that 
program beyond what was intended and ultimately end up compromising the 
very poor children we started out to help.
  I commend the Senator on his remarks. I urge the administration to 
immediately aggressively pursue avenues of agreement so we can come 
together as a Congress before November 16 and unanimously pass a SCHIP 
bill that works for the poor children of America and is fiscally 
accountable to the taxpayers of the United States of America.
  Mr. President, I yield the remainder of my time, and I suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. HARKIN. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER (Mr. Casey). Without objection, it is so 
ordered.

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