[House Report 110-594]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-594

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



 
            GOVERNMENT CONTRACTOR ACCOUNTABILITY ACT OF 2007

                                _______
                                

 April 17, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Waxman, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3928]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 3928) to require certain large 
government contractors that receive more than 80 percent of 
their annual gross revenue from Federal contracts to disclose 
the names and salaries of their most highly compensated 
officers, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Legislative History..............................................     3
Section-by-Section...............................................     3
Explanation of Amendments........................................     4
Committee Consideration..........................................     4
Roll Call Votes..................................................     4
Application of Law to the Legislative Branch.....................     4
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     4
Statement of General Performance Goals and Objectives............     4
Constitutional Authority Statement...............................     4
Federal Advisory Committee Act...................................     4
Unfunded Mandates Statement......................................     5
Earmark Identification...........................................     5
Budget Authority and Congressional Budget Office Cost Estimate...     5
Changes in Existing Law Made by the Bill, as Reported............     6
Additional Views.................................................     7

    The amendment (stated in terms of the page and line numbers 
of the introduced bill) is as follows:
    Page 3, line 22, strike ``$5,000,000'' and insert 
``$25,000,000''.

                          PURPOSE AND SUMMARY

    H.R. 3928, the Government Contractor Accountability Act of 
2007, was introduced by Rep. Christopher Murphy on October 23, 
2007. The measure would increase accountability and 
transparency in federal contracting by requiring companies that 
receive more than 80 percent of annual gross revenue from 
federal contracts to disclose the names and salaries of their 
most highly compensated officers.

                  BACKGROUND AND NEED FOR LEGISLATION

    Each year the federal government spends billions of dollars 
to procure goods and services, making federal contracts one of 
the fastest growing components of the federal budget. In fiscal 
year 2006, the federal government spent over $400 billion on 
contracts with private companies.
    Although the government spends billions of dollars on 
private contractors, the American taxpayer and Congress know 
very little about the management practices, financial 
statements, and employment policies of these firms. Of these 
contractors, Blackwater USA has received particular attention 
and scrutiny. At a hearing before the House Committee on 
Oversight and Government Reform, Blackwater CEO Erik Prince 
refused to provide Congress with details of Blackwater's 
profits or his personal compensation.
    Blackwater has grown to become one of the world's largest 
providers of private military services. Prior to the war in 
Iraq, the company primarily offered training services for law 
enforcement and military personnel. But during the past six 
years, the company has expanded and diversified to include 
overseas security contracting.
    Blackwater's government contracts have grown exponentially, 
particularly since the start of the war in Iraq. Blackwater 
went from having government contracts worth less than a million 
dollars in 2001 to contracts worth more than half a billion 
dollars in 2006. In fiscal year 2001, Blackwater had $736,906 
in federal contracts. By 2006, Blackwater had over $593 million 
in government contracts, an increase of more than 80,000 
percent. In total, Blackwater has received over a billion 
dollars under its federal government contracts during fiscal 
years 2001 to 2006.
    H.R. 3928 would create disclosure requirements for 
privately held government contractors similar to existing 
requirements for publicly traded companies and nonprofit 
organizations. Publicly traded companies are required to 
disclose similar information on executive compensation to the 
Securities and Exchange Commission, and nonprofit organizations 
are required to disclose such information to the Internal 
Revenue Service on Form 990. These disclosures are publicly 
available. The rationale behind the requirements is to mandate 
transparency for entities that receive government benefits and 
public investment. Publicly traded companies receive access to 
government-regulated capital markets. Nonprofit organizations 
are tax-exempt and donations to non-profits are tax-deductible 
for the donor.
    Companies that derive the vast majority of their revenues 
from government contracts receive the benefit of a revenue 
stream generated by taxpayer dollars. Taxpayers should be able 
to review how their money is being spent.

                          LEGISLATIVE HISTORY

    H.R. 3928, the Government Contractor Accountability Act of 
2007, was introduced by Rep. Murphy on October 23, 2007, and 
was referred to the Committee on Oversight and Government 
Reform.
    The Subcommittee on Government Management, Organization, 
and Procurement held a hearing on H.R. 3928 on February 27, 
2008. The witnesses were Paul Denett, Administrator, Office of 
Federal Procurement Policy, Office of Management and Budget; 
John Hutton, Director, Acquisition and Sourcing Management, 
U.S. Government Accountability Office; Marcia Madsen, Partner, 
Mayer Brown and Chair, Acquisition Advisory Panel; Scott Amey, 
General Counsel, Project on Government Oversight; and Alan 
Chvotkin, Senior Vice President and Counsel, Professional 
Services Council.
    The Subcommittee held a markup to consider H.R. 3928 on 
March 11, 2008, and ordered the bill to be favorably reported 
by voice vote.
    The Committee held a markup to consider H.R. 3928 on March 
13, 2008, and ordered the bill, as amended, to be favorably 
reported by voice vote.

                           SECTION-BY-SECTION

Section 1: Short title

    The short title of the bill is the Government Contractor 
Accountability Act of 2007.

Section 2: Certification and other financial disclosure requirements 
        for certain government contractors

    This section directs federal government contracting 
officers to require ``covered contractors'' to submit for each 
contract entered into either (1) a certification that the 
contractor received 80 percent or less of its annual gross 
revenues from other federal contracts during the fiscal year 
preceding the fiscal year in which the contract is awarded; or 
(2) a statement disclosing the names and salaries of the 
contractor's principal executive officer, principal financial 
officer, three most highly compensated other executive officers 
or individuals, and directors. Such certifications and any 
annual updates that are required to be submitted are to be made 
publicly available in searchable form through the Federal 
Procurement Data System. The term ``covered contractor'' means 
an entity that (1) received more than $25 million in annual 
gross revenues from federal contracts in the preceding fiscal 
year and (2) is not a publicly traded company required to file 
periodic reports under section 13(a) or 15(d) of the Securities 
Exchange Act of 1934. The Administrator of the General Services 
is required to issue regulations to implement these provisions.

                       EXPLANATION OF AMENDMENTS

    Mr. Murphy offered an amendment, passed by voice vote, 
striking a provision that defined a ``covered contractor'' as 
an entity that received more than $5 million in annual gross 
revenues from federal contracts, and replacing it with a 
provision that defined a ``covered contractor'' as an entity 
that received more than $25 million in annual gross revenues 
from federal contracts.

                        COMMITTEE CONSIDERATION

    On Thursday, March 13, 2008, the Committee met in open 
session and favorably ordered H.R. 3928 to be reported, as 
amended, to the House by a voice vote.

                            ROLL CALL VOTES

     No roll call votes were held.

              APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to terms and conditions of 
employment or access to public services and accommodations. The 
bill does not relate to employment or access to public services 
and accommodations.

  STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report, including improving the efficiency and 
transparency of federal procurement.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by H.R. 3928. Article I, Section 8, Clause 18 of the 
Constitution of the United States grants the Congress the power 
to enact this law.

                     FEDERAL ADVISORY COMMITTEE ACT

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., section 5(b).

                      UNFUNDED MANDATES STATEMENT

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement on 
whether the provisions of the report include unfunded mandates. 
In compliance with this requirement the Committee has received 
a letter from the Congressional Budget Office included herein.

                         EARMARK IDENTIFICATION

    H.R. 3928 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI.

                           COMMITTEE ESTIMATE

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 3928. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     BUDGET AUTHORITY AND CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 3928 from the Director of 
the Congressional Budget Office:

                                                     April 8, 2008.
Hon. Henry A. Waxman,
Chairman, Committee on Oversight and Government Reform, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3928, the 
Government Contractor Accountability Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3928--Government Contractor Accountability Act of 2007

    H.R. 3928 would require certain privately owned companies 
that received more than 80 percent of their annual gross 
revenue from federal contracts to annually report the names and 
salaries of their highest-ranking company officials. The bill 
would apply to firms with more than $25 million in annual gross 
revenue. The legislation would require the General Services 
Administration (GSA) to promulgate new regulations and make the 
information publicly available through the Federal Procurement 
Data System.
    Based on information from GSA, CBO estimates that 
implementing H.R. 3928 would cost $2 million in 2009 and about 
$5 million over the 2009-2013 period, assuming the availability 
of appropriated funds. GSA would incur those costs to amend the 
Federal Procurement Data System and train employees to use it.
    H.R. 3928 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. This estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    No changes to existing law are made by H.R. 3928, as 
reported.

              ADDITIONAL VIEWS OF RANKING MEMBER TOM DAVIS

    H.R. 3928 would require any non-public company receiving 
more than $5 million from federal contracts and earning 80 
percent of its revenue from federal contracts to disclose: the 
names and salaries of the contractor's principal executive 
officer, principal financial officer, three other most highly 
compensated officers, as well as firm's directors--information 
which currently is available to government acquisition 
officials.
    Therefore, H.R. 3928 serves only one purpose: to embarrass 
Blackwater USA because the Chief Executive Officer of that 
privately held company performing under fixed-price government 
contracts refused to disclose his salary during a hearing on 
security contracting.
    Information regarding salaries of top company officials 
could be useful under certain cost-type contracts where the 
government reimburses a firm for its reasonable and allowable 
costs plus a fee. Under current acquisition regulations 
governing such contracts, such information is available to 
government contracting officials, In fact, procurement 
regulations place a ceiling on executive compensation costs 
which can be reimbursed under cost-type contracts.
    Moreover, this information is also available to acquisition 
officials (to the extent it is relevant) during the 
negotiations leading up to the award of a fixed-priced 
contract. Thus, H.R. 3928 has no acquisition purpose. The only 
purpose of this bill is to ``punish'' and embarrass privately 
held firms. It will accomplish nothing other than to discourage 
the participation of privately held firms in the government 
market--which will decrease competition and, ultimately, 
increase government costs.
                                                         Tom Davis.

                                  
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