Government Contracting: Adjudicated Violations of Certain Laws by
Federal Contractors (15-NOV-02, GAO-03-163).
Because of its interest in this area, Congress asked that we
address the following questions: (1) To what extent have federal
contractors violated federal environmental, labor and employment,
antitrust, consumer protection, and tax laws (the areas of law
specified in the Federal Acquisition Regulation (FAR) rule)? and
(2) What FAR rule implementation issues were identified in our
work in response to the first question?
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-163
ACCNO: A05531
TITLE: Government Contracting: Adjudicated Violations of Certain
Laws by Federal Contractors
DATE: 11/15/2002
SUBJECT: Contract administration
Contract oversight
Contractor personnel
Contractor violations
Source selection
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GAO-03-163
A
Report to Congressional Requesters
November 2002 GOVERNMENT CONTRACTING Adjudicated Violations of Certain
Laws by Federal Contractors
GAO- 03- 163
Letter 1 Results in Brief 5 Background 6 Thirty- Nine Federal Contractors
Had Adjudicated Violations of Federal Environmental, Labor, or Antitrust
Laws 14
FAR Rule Implementation Issues Identified in Determining Incidence of Law
Violations by Contractors 27 Agency Comments and Our Evaluation 32
Appendixes
Appendix I: Objectives, Scope, and Methodology 34
Appendix II: Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision 42
Appendix III: GAO Contacts and Staff Acknowledgments 68 GAO Contacts 68
Acknowledgments 68
Tables Table 1: Number of Federal Contractors with Adjudicated Violations
of Federal Environmental, Labor, Antitrust, Consumer, or Tax Laws 15 Table
2: Disposition of EPA and DOJ Environmental Law Cases
Involving Federal Contractors Closed during Fiscal Years 1997 through 1999
18 Table 3: Disposition of NLRB, DOL, and DOJ Labor and
Employment Law Cases Involving Federal Contractors Closed during Fiscal
Years 1997 through 1999 21 Table 4: Disposition of FTC and DOJ Antitrust
Law Cases Involving
Federal Contractors Closed during Fiscal Years 1997 through 1999 23 Table
5: Disposition of CPSC and FTC Consumer Protection Cases Involving Federal
Contractors Closed during Fiscal Years 1997 through 1999 25
Table 6: Federal Contractors That Would Have Been Required to Report a Law
Violation in the Certification in Their Offers under Our Conceptual
Application of the FAR Rule 29
Table 7: Percent of False Matches for Cases Reviewed 39
Abbreviations
ALJ Administrative Law Judge CERCLA Comprehensive Environmental Response,
Compensation and
Liability Act CFR Code of Federal Regulations CPSC Consumer Product Safety
Commission DOJ Department of Justice DOL Department of Labor DUNS Data
Universal Numbering System EIN Employee Identification Number EPA
Environmental Protection Agency EPCRA Emergency Planning and Community
Right- to- Know Act ERISA Employee Retirement Income Security Act FAR
Federal Acquisition Regulation FLSA Fair Labor Standards Act FMLA Family
and Medical Leave Act FPDS Federal Procurement Data System FTC Federal
Trade Commission GSA General Services Administration IRS Internal Revenue
Service NESHAP National Emission Standards for Hazardous Air Pollutants
NLRA National Labor Relations Act NLRB National Labor Relations Board
OFCCP Office of Federal Contract Compliance Programs OMB Office of
Management and Budget OSHA Occupational Safety and Health Administration
PWBA Pension and Welfare Benefits Administration TIN Taxpayer
Identification Number TSCA Toxic Substances Control Act WHD Wage and Hour
Division
Lett er
November 15, 2002 The Honorable Tom Davis Chairman, Subcommittee on
Technology
and Procurement Policy Committee on Government Reform House of
Representatives
The Honorable Stephen Horn Chairman, Subcommittee on Government
Efficiency, Financial Management, and Intergovernmental Relations
Committee on Government Reform
House of Representatives Each year the federal government awards billions
of dollars in contracts for goods and services. By statute, federal
agencies are required to award contracts to *responsible sources.* 1 This
statutory requirement has been implemented in the Federal Acquisition
Regulation (FAR), which requires that government purchases be made from,
and government contracts be
awarded to, responsible prospective contractors only. 2 In accordance with
the statutory definition of *responsible source,* 3 the FAR establishes *a
satisfactory record of integrity and business ethics* as one of the
general standards a prospective contractor must meet to be responsible. In
December 2000, amidst considerable controversy, a revision to the FAR (*
the FAR rule*) was promulgated through the regulatory rulemaking process
to clarify what constituted *a satisfactory record of integrity and
business ethics.* 4 This now- revoked FAR rule stated that a satisfactory
record of integrity and business ethics includes a record of satisfactory
compliance with the law, specifically environmental, labor and
employment, antitrust, consumer protection, and tax laws. It also required
prospective contractors to certify in their bids or proposals submitted in
response to government contract solicitations as to their compliance with
these laws within the past 3 years. Specifically, for federal government 1
10 U. S. C. S: 2305( b) (3) and (4) (C); 41 U. S. C.S: 253b (c) and (d)
(3). 2 FAR, 48 C. F. R. S: 9. 103( a). 3 41 U. S. C. S: 403( 7). 4 Federal
Acquisition Regulation; Contractor Responsibility, Labor Relations Costs,
and Costs Relating to Legal and Other Proceedings, 65 Fed. Reg. 80,256-
80, 266 (Dec. 20, 2000).
contracts expected to exceed $100,000, prospective contractors were to
certify whether, relative to these areas of law, they have been convicted
of a felony (or have felony indictments pending against them), have had a
federal court judgment in a civil case brought by the United States
rendered against them, or have had an adverse decision by a federal
administrative law judge (ALJ), board, or commission indicating a willful
violation of law. The FAR rule also provided guidance to agency
contracting officers when considering a prospective contractor*s
compliance history. Although the FAR rule was revoked in December 2001,
prospective
contractors are still required by statute and the FAR to be responsible
sources (including having a satisfactory record of business ethics and
integrity). As a result of the FAR rule revocation, the FAR itself does
not provide specific guidance to contracting officers on applying the
standard for a satisfactory record of business ethics and integrity (bid
protest decisions from courts and our Office that address the standard do,
however, continue to provide guidance). Also, prospective contractors no
longer have to certify, as they did under the FAR rule, as to their
compliance with environmental, labor and employment, antitrust, consumer
protection, and tax laws.
Because of your interest in this area, you asked that we address the
following questions:
To what extent have federal contractors violated federal environmental,
labor and employment, antitrust, consumer protection, and tax laws (the
areas of law specified in the FAR rule)?
What FAR rule implementation issues were identified in our work in
response to the first question? To determine the extent of contractor
violations, we gathered information on contractors that were awarded new
federal contracts of at least $100,000 5 in fiscal year 2000 and federal
enforcement agency 6 cases closed
5 For our purposes, each individual contract had to be a new contract
awarded during fiscal year 2000 with $100, 000 or more obligated against
it at that time. 6 We identified pertinent enforcement agencies by
referring to statutes and regulations in the environmental, labor and
employment, antitrust, consumer protection, and tax areas; consulting with
agency officials; and reviewing the U. S. Government Manual enforcement
agency Web sites and our past products.
during fiscal years 1997 through 1999 (October 1996 through September
1999). 7 These were the types of contracts and cases that would have been
covered by the FAR rule*s contractor certification requirement had it been
applied beginning with fiscal year 2000, 8 the last full fiscal year for
which contractor data were available at the start of our work. We then
matched the names of contractors listed in the Federal Procurement Data
System (FPDS)* which is maintained by the General Services Administration
(GSA)* shown as having new federal contracts
awarded in fiscal year 2000 to names in enforcement agency cases closed
during fiscal years 1997 to 1999. These names were in the databases
maintained by seven federal agencies responsible for enforcing or
administering many federal environmental, labor and employment, antitrust,
consumer protection, or tax laws. 9 However, the name- matching process
was sometimes imprecise because contractor names can vary widely due to
such factors as spelling, name combinations, and
parent/ subsidiary relationships. Nevertheless, this was generally the
only viable method available for identifying contractors involved in these
cases because, usually, common numeric identifiers were not available.
Therefore, due to name variations, we likely did not identify all of the
contractors involved in the cases in the databases maintained by the 7 The
total number of enforcement agency cases includes all cases closed by
those agencies during the applicable time period. However, for some
agencies not all of the cases involved enforcement actions. For example,
DOJ*s Executive Office for U. S. Attorneys tracks other types of cases
handled by local U. S. Attorneys reflecting the wide variety of types of
litigation in which the United States is necessarily involved. Further,
for some agencies, not all of these cases involved determinations of law
violations. For example, Environmental
Protection Agency (EPA) *Superfund* cases included in the total number of
enforcement agency cases we reported typically do not involve
determinations of law violations but rather the assessment of liability
for hazardous waste cleanup costs under the Comprehensive Environmental
Response, Compensation and Liability Act.
8 We limited our review to cases closed by enforcement agencies because
these cases reflected final dispositions and because of limitations in
obtaining information relating to ongoing litigation or enforcement
actions. Some cases that may have been covered by the FAR rule, such as
adverse district court or administrative law judge rulings, may have
remained open in an enforcement agency*s records where the contractor was
appealing the decision or continuing with further adjudicatory
proceedings. Such cases were not included in our review. 9 The laws
involved are those enforced or administered by the seven federal agencies
we identified and which provided us data on their closed cases. The seven
federal agencies are EPA, the Department of Labor (DOL), the Department of
Justice (DOJ), the National Labor Relations Board (NLRB), the Federal
Trade Commission (FTC), the Consumer Product
Safety Commission (CPSC), and the Internal Revenue Service (IRS).
enforcement agencies we examined. Conversely, we found some false matches*
companies with similar names involved in the cases but which were not the
same companies as the contractors. Where we detected false matches, we
eliminated them. See appendix I for further information about
the accuracy of the matches. When we matched a name associated with a
closed case involving a federal enforcement agency with the name of a
contractor, we reviewed the disposition of the case as characterized by
the agency in its database. Where a case resulted in an actual decision by
a court or an administrative adjudicator finding that a violation
(including convictions and plea
agreements in criminal cases) had occurred, we reported the numbers of
such cases under the *violation found* column in tables 2 through 5 of
this report corresponding to the areas of law for which the enforcement
agencies are responsible. Adjudicated violations were the type of
information on violations of laws that contracting officers were
instructed
by the FAR rule to give the greatest weight in making their responsibility
determinations. For cases that did not result in an actual decision (such
as those that were dismissed, withdrawn, or settled) or for cases that
generally could not have resulted in a determination of a law violation
(such as Environmental Protection Agency (EPA) *Superfund* cases involving
the assessment of liability for cleanup costs), we reported the total
number of such cases under the *other/ resolved before decision* column of
the respective tables because such cases were resolved either through a
process that did not involve a law violation determination or without an
actual adjudicated determination of a law violation.
To identify FAR rule implementation issues from our work in response to
the first objective, we analyzed information from the enforcement agency
cases we matched to federal contractors and considered what information
the contractors would have had to certify under the FAR rule*s
certification requirement. Additionally, we discussed FAR rule
implementation issues and concerns with (1) contracting officers and other
officials from the
federal agencies included in our review and (2) contractors involved in
the cases we selected for detailed review. Finally, we requested comments
on the results of our work from officials from the seven federal agencies,
DOD, NASA, and GSA, and the Administrator for Federal Procurement
Policy. 10 We conducted our work from July 2000 through October 2002 in
accordance with generally accepted government auditing standards. A more
detailed description of our scope and methodology is included in appendix
I.
Results in Brief We identified 39 contractors among the 16,819 contractors
that were awarded new federal contracts in amounts of at least $100,000
during fiscal year 2000 and that were found by a federal court or
adjudicated
administrative decision to have violated one or more federal
environmental, labor and employment, or antitrust laws in enforcement
agency cases that were closed during fiscal years 1997 through 1999. Of
these 39 contractors, 7 had been convicted of a crime in federal court; 5
had a federal court judgment in a civil case brought by the federal
government rendered against them, and 27 had an adverse decision by a
federal ALJ, board, or commission indicating a violation of law. 11 We did
not identify any contractors that were found by a federal court or
adjudicated
administrative decision to have violated consumer protection or tax laws.
We also identified another 3,403 contractors that were involved in
enforcement agencies* cases (not including IRS tax penalty assessments)
covered by our review and closed during this 3- year period. However, most
of these cases that involved alleged law violations were resolved before a
decision by a court or administrative adjudicator was reached as to
whether a violation of law had occurred. In most instances, these cases
were resolved through some form of *administrative agreement* or
*settlement* with the government in which the contractor typically did not
admit* and sometimes specifically denied* the violation charged and which
did not constitute a judgment or adjudicated administrative decision that
a violation had actually occurred.
10 The FAR is prepared, issued, and maintained; and the FAR system is
prescribed jointly by the Secretary of Defense, the Administrator of GSA,
and the Administrator of the National Aeronautics and Space Administration
(NASA), who, with the Administrator for Federal Procurement Policy, are
the members of the FAR Council. The FAR system was established for
implementing uniform policies and procedures for acquisitions by all
executive agencies. 11 Appendix II provides a description of criminal
cases from enforcement agencies where the contractor pled guilty (or no
contest), a plea agreement was reached, or the contractor was otherwise
convicted, and civil and administrative cases from enforcement agencies
where a violation of law was determined by a court or adjudicated
administrative decision.
We identified several FAR rule implementation issues through our work in
determining the incidence of contractor violations in response to the
first question. First, the FAR rule*s contractor certification requirement
focused on only certain types of law violations. As a result* on the basis
of our conceptual application of the certification criteria specified in
the revoked FAR rule* only 7 of the 39 contractors we identified as being
found by a court or administrative decision to have violated the law would
have been required to report the violations in their certifications if
they were prospective contractors submitting an offer. The remaining 32
contractors
with violations found by a court or administrative decision, as well the
3,403 contractors whose cases were otherwise resolved, would not have been
required to report any noncompliance with the law. Further, although many
cases were resolved through administrative agreements (settlements)* and
the FAR rule stated that contracting officers should
take such information into consideration* the FAR rule did not require
prospective contractors to report such agreements. Second, we found that
contracting officers would face significant difficulties in verifying or
obtaining contractor compliance history information. Third, the FAR rule
may have required additional record keeping for some prospective
contractors in order for them to track their companies* compliance with
applicable laws and accurately certify as to their compliance when
submitting their offers. Of the 43 federal contractors who provided us
information on the issue of tracking their compliance history, 18 told us
that they did not have the capability to identify or track all of the
various
types of enforcement actions that may have been taken against them. The
federal agencies involved in our review either had no comments or provided
us technical comments on a draft of this report. We made changes to this
report based on these technical comments where appropriate. Background
Prior to January 2001, the FAR had not provided any elaboration on what it
means for a prospective contractor to have *a satisfactory record of
integrity and business ethics.* The FAR simply restated the statutory
language that a *responsible source* is one that has a *satisfactory
record
of integrity and business ethics.* 12 In December 2000, the FAR Council
issued a final rule, effective January 19, 2001, to clarify what
constituted *a
satisfactory record of integrity and business ethics* in making contractor
responsibility determinations, 13 including satisfactory compliance with
the law, specifically environmental, labor and employment, antitrust,
consumer protection, and tax laws. According to the FAR Council, the lack
of guidance in the FAR as to what constitutes a satisfactory record of
integrity and business ethics had caused contracting officers to be
extremely reluctant to exercise their discretion in making this
determination; and, as a result, the government continued to award
contracts to firms that have violated procurement and other federal laws,
in some cases repeatedly. In
promulgating the FAR rule, the FAR Council surmised that by giving
contracting officers a clearer basis for declining to contract with such
businesses, the government could improve the integrity of the contracting
process, reduce the risk of fraud or noncompliance, and encourage
standards of integrity and compliance with the law. According to the FAR
Council, by ensuring that its contractors possess a satisfactory record of
compliance with the law, the government increases its confidence that a
contractor is a responsible, reliable company that will perform the
contract in an efficient, responsible, and timely manner and should also
reduce the
risk that compliance issues will interfere with performance of the
contract. 12 The term *responsible source* is defined at 41 U. S. C. S:
403( 7) as a prospective contractor who has (or has the ability to obtain)
adequate financial resources to perform the contract, the necessary
organization, experience, accounting and operational controls, and
technical skills, as well as the necessary production, construction, and
technical equipment and facilities; is able to comply with the required or
proposed delivery or performance schedule; has a satisfactory performance
record; has a satisfactory record of integrity and business ethics; and is
otherwise qualified and eligible to receive an award under applicable law
and regulation. Under the FAR, no purchase or award shall be made unless
the contracting
officer makes an affirmative determination of responsibility. The FAR
requires that in the absence of information clearly indicating that the
prospective contractor is responsible, the contracting officer shall make
a determination of nonresponsibility. Further, the FAR states that a
prospective contractor must affirmatively demonstrate its responsibility.
13 Federal Acquisition Regulation; Contractor Responsibility, Labor
Relations Costs, and
Costs Relating to Legal and Other Proceedings, 65 Fed. Reg. 80, 256 * 80,
266 (Dec. 20, 2000). The FAR rule was based on an earlier proposed rule
(65 Fed. Reg. 40, 830 * 40, 834 (June 30, 2000)), which replaced the
proposed rule published on July 9, 1999 (64 Fed. Reg. 37, 360 * 37, 361).
The FAR rule would have also revised cost principles to disallow charging
to the government the costs of influencing unionization decisions and
litigating proceedings brought by the government if there is a finding
that the contractor violated law or regulation. These cost principle
provisions are not addressed in this report.
The FAR rule provided guidance to contracting officers on the application
of the integrity and business ethics standard. Specifically, the FAR rule
stated that a contracting officer*s determination that a prospective
contractor has a satisfactory record of integrity and business ethics in
order to receive a government contract *can be made by examining a
prospective contractor*s record of compliance with the law.* The guidance
further stated that in making a responsibility determination based upon
integrity and business ethics, contracting officers *must consider all
relevant credible information* but should give the greatest weight to
violations of laws that have been adjudicated within the last 3 years
preceding the prospective contractor*s offer. 14 The guidance stated that
normally, a single violation of law will not give rise to a determination
of nonresponsibility, but evidence of repeated, pervasive, or significant
violations of the law may indicate an unsatisfactory record of integrity
and business ethics. The guidance instructed contracting officers to give
consideration to any administrative agreements entered into with
prospective contractors who take corrective action after disclosure of law
violations by an enforcement agency (i. e., after an initial charge or
complaint is filed against the contractor by the agency alleging a law
violation). The FAR rule specified that these prospective contractors,
despite findings of law violations by the enforcement agency, may continue
to be responsible contractors because they had corrected the conditions
that led to the alleged misconduct. On the other hand, according to the
FAR rule, failure of a prospective contractor to have complied with the
terms of an administrative agreement is evidence of a lack of integrity
and business ethics.
The FAR rule required contracting officers to consider information based
on the following, in descending order of importance.
Convictions of and civil judgments rendered against the prospective
contractor for
commission of fraud or a criminal offense in connection with obtaining,
attempting to obtain, or performing a public (federal, state, or local)
contract or subcontract; 14 The term *offer* means the *bid* or *proposal*
submitted by a prospective contractor in response to a solicitation issued
by the government.
violation of federal or state antitrust statutes relating to the
submission of offers; or
commission of embezzlement, theft, forgery, bribery, falsification or
destruction of records, making false statements, tax evasion, or receipt
of stolen property.
Indictments for the above offenses.
Relative to tax, labor and employment, environmental, antitrust, or
consumer protection laws
federal or state felony convictions;
adverse federal court judgments in civil cases brought by the United
States;
adverse decisions by a federal ALJ, board, or commission indicating
violations of law; or
federal or state felony indictments. Finally, the FAR rule stated that
contracting officers might consider other relevant information, such as
civil or administrative complaints or similar actions filed by or on
behalf of a federal agency, board, or commission, if such action reflects
an adjudicated determination by the agency.
To provide a mechanism for contracting officers to consider a prospective
contractor*s compliance history, the FAR rule amended existing
certifications 15 required to be included in solicitations where the
contract value is expected to exceed the simplified acquisition threshold
15 FAR, 48 C. F. R. S: 52. 209- 5, Certification Regarding Debarment,
Suspension, Proposed Debarment, and Other Responsibility Matters for
noncommercial item solicitations, and FAR, 48 C. F. R. S: 52. 212- 3( h),
Certification Regarding Debarment, Suspension or Ineligibility for Award
for commercial item solicitations.
($ 100,000). 16 Specifically, under the existing certification, 17 the
prospective contractor is to certify, by checking the appropriate box on
the form, whether, to the best of its knowledge and belief, it or its
principals 18
are or are not presently debarred, suspended, proposed for debarment, or
declared ineligible for the award of contracts by any federal agency;
have or have not, within the preceding 3 years, been convicted of or had
a civil judgment rendered against them for
commission of fraud or a criminal offense in connection with obtaining,
attempting to obtain, or performing a federal, state, or local government
contract or subcontract;
violation of federal or state antitrust statutes relating to the
submission of offers; or
commission of embezzlement, theft, forgery, bribery, falsification or
destruction of records, making a false statement, tax evasion, or
receiving stolen property;
are or are not presently indicted for, or otherwise criminally or
civilly charged by a government entity with commission of any of these
offenses.
The FAR rule added to this existing certification whether the prospective
contractor or its principals have, relative to tax, labor and employment,
environmental, antitrust, or consumer protection laws:
been convicted of a federal or state felony (or have federal or state
felony indictments pending against them); 16 The FAR authorizes certain
simplified acquisition procedures for the acquisition of supplies and
services the aggregate amount of which does not exceed the simplified
acquisition threshold of $100,000.
17 This existing certification predates the FAR rule, was effective
concurrently with (as modified by) the FAR rule, and still currently
applies to prospective contractors notwithstanding the revocation of the
FAR rule.
18 *Principals* for purposes of the certification means officers,
directors, owners, partners, and persons having primary management or
supervisory responsibilities within a business entity (such as a general
manager).
had a federal court judgment in a civil case brought by the United
States rendered against them; or had an adverse decision by a federal
ALJ, board, or commission
indicating a willful violation of law. The FAR rule specified that a
contractor needed to provide additional detailed information only upon
request of the contracting officer and generally only when that contractor
was the apparent successful offeror.
In January 2001, immediately after its effective date, several agencies
suspended their implementation of the FAR rule under an authorized FAR
*class deviation* procedure. 19 After further review, the FAR Council
temporarily set aside the rule in April 2001 because the 30- day effective
date did not give contractors and the government sufficient time to meet
the new obligations and responsibilities imposed by the rule. 20
Specifically, the FAR Council stated that government contracting officers
had not had
sufficient training, and prospective contractors had not had sufficient
time to establish a system to track compliance with applicable laws and
keep it current in order to properly fill out the certification. The FAR
Council recognized that it would take more time than it had anticipated
for
businesses to put the systems in place. After further consideration and
public comment, the FAR Council revoked the FAR rule in December 2001. 21
According to the FAR Council, the benefits of the FAR rule were outweighed
by the burdens imposed. The FAR Council stated that it was not clear that
there is a justification for including the added categories of
covered laws in the rule and its implementing certification, that the rule
provided sufficient guidelines to contracting officers to prevent
arbitrary or abusive implementation, or that the rule was justified from a
cost- benefit perspective.
In revoking the FAR rule, the FAR Council stated that it fully supports
the proposition that government contracts should be awarded to law-
abiding 19 FAR, 48 C. F. R. S: 1.404. GSA and several other agencies
issued individual class deviations under this authority. 20 The stay had
the effect of restoring the previous FAR language, including the earlier
version of the certification. 21 See 66 Fed. Reg. 17, 754- 17,760 (stay
and proposed revocation) (Apr. 3, 2001); 66 Fed. Reg. 66, 984- 66,991
(termination of stay and revocation) (Dec. 27, 2001).
entities and that the government should do business only with those
entities willing and able to comply with the laws enumerated in the FAR
rule. According to the FAR Council, the problem lies in the means for
ensuring that the entities with which the government conducts business are
good corporate citizens and adhere to the myriad of regulations and laws.
The FAR Council determined that the existing suspension and debarment
process is the proper vehicle to accomplish this goal. Specifically, the
FAR Council noted that the suspension 22 and debarment 23 rules contain
well established and defined decision- making criteria and due process
safeguards, which have evolved through case law precedent and agency
practices. The FAR Council noted that an agency debarring official is
authorized to consider a company*s responsibility at any time whether the
company is a current competitor for a government contract or not; and if
the debarring official should determine that the company is not
responsible, the official may impose a debarment of the company. This
debarment is effective with regard to all federal agencies as well as to
many state and local governments that choose to use a debarment list of
their
own. According to the FAR Council, when a question of a company*s honesty
and integrity is raised, reliance on debarment and suspension remedies
provides effective intervention.
While the decision to debar or suspend a contractor is made within the
discretion of the agency involved, the determination of a contractor*s
responsibility (including whether it has a satisfactory record of business
ethics and integrity) continues to be mandatory for each contract award.
Although the FAR rule was revoked, the statutory standard of a
satisfactory record of business ethics and integrity remains one of the
standards required for a prospective contractor to be considered a
responsible source
for the award of a government contract. This standard continues to be
implemented in the FAR. However, as a result of the FAR rule revocation,
the FAR itself no longer provides specific guidance to contracting
officers on applying the standard. Nonetheless, contracting officers are
not entirely
without guidance since they do have available legal interpretations from
the courts and the Comptroller General as to the application of the 22
Suspension means action taken by the government under FAR procedures to
temporarily
disqualify a contractor from government contracting and government-
approved subcontracting. The causes for suspension are listed in FAR, 48
C. F. R. S: 9.407- 2.
23 Debarment means action taken by the government under FAR procedures to
exclude a contractor from government contracting and government- approved
subcontracting for a reasonable, specified period. The causes for
debarment are listed in FAR, 48 C. F. R. S: 9. 406- 2.
standard. These interpretations are in the context of bid protest
decisions addressing challenges to responsibility determinations in the
award of government contracts. 24 Also, while prospective contractors no
longer (as a
result of the FAR rule revocation) have to specifically certify as to
their compliance with environmental, labor and employment, antitrust,
consumer protection, and tax laws, prospective contractors must still
certify as to debarment, suspension, and the offenses listed in the
existing
certifications. A contracting officer must still check whether a
prospective contractor is suspended or debarred before awarding a
contract.
We issued two reports several years ago that addressed the issue of
federal contractors who had violated nonprocurement- related laws. 25 Our
October 1995 report identified federal contractors found by the NLRB to
have violated the National Labor Relations Act (NLRA), and our August 1996
report identified contractors charged with Occupational Safety and Health
Act violations by the Occupational Safety and Health Administration
(OSHA). In the first report, we found that 80 firms with over 4,400
federal contracts valued at over $23 billion in fiscal year 1993 had
violated the NLRA as determined in adjudicated decisions of the NLRB.
These contractors accounted for 2 percent of the nearly 200,000 federal
contracts in effect in fiscal year 1993 that were being performed by over
57, 000 parent firms. However, 6 of the 80 firms with NLRA violations
accounted
for almost 90 percent of the $23 billion in contracts. In the second
report, we identified 261 firms that had federal contracts in effect in
fiscal year 24 For example, the U. S. Court of Federal Claims recently
referred to the more extensive debarment regulations for guidance in
considering the application of the standard for a satisfactory record of
business ethics and integrity. Impresa Construzioni Geom. Domenico Garufi
v. U. S., 52 Fed. Cl. 421, 425 (May 3, 2002). The Comptroller General has
also issued a number of legal decisions over the years that consider the
application of the
business ethics and integrity standard. See, for example, Blocacor, LDA,
B- 282122. 3, Aug. 2, 1999, 99- 2 CPD P: 25 (agency reasonably would have
found firm nonresponsible for illegal dumping of hazardous materials
containing asbestos during performance of earlier contract); Service Deli,
Inc., B- 276251, Mar. 14, 1997, 97- 1 CPD P: 110 (determination by
contracting officer that offeror, should it be in line for award, would be
nonresponsible for lack of integrity is reasonable because of criminal
conviction in connection with obtaining, attempting to obtain, or
performing a public contract); Standard Tank Cleaning Corp., B- 245364,
Jan. 2, 1992, 92- 1 CPD P: 3 (contracting agency reasonably determined
firm was nonresponsible based upon information from various state agencies
that showed a history of environmental violations). 25 U. S. General
Accounting Office, Federal Contractors and Violations of Labor Law,
GAO/ HEHS- 96- 8 (Washington, D. C.: Oct. 24, 1995); and Occupational
Safety and Health: Violations of Safety and Health Regulations by Federal
Contractors, GAO/ HEHS- 96- 157 (Washington, D. C.: Aug. 23, 1996).
1994 that had been *initially charged* with OSHA violations that carried a
possible fine or penalty of more than $15, 000 for noncompliance with
health or safety regulations. We did not include or discuss the resolution
of any of these cases in the report, such as the adjudicated outcome.
Thirty- Nine Federal We identified 39 federal contractors (involved in 47
cases), among the
Contractors Had 16, 819 contractors awarded new federal contracts in
amounts of at least
$100,000 during fiscal year 2000, that had been found by a federal court
or Adjudicated Violations adjudicated administrative decision to have
violated one or more federal of Federal environmental, labor or
employment, or antitrust laws in cases closed by Environmental, Labor,
enforcement agencies during fiscal years 1997 through 1999. As table 1
shows, 7 of these 39 contractors had been convicted of a crime in federal
or Antitrust Laws
court; 26 5 had a judgment in a civil case brought by the federal
government in federal court rendered against them; and 27 had an adverse
decision by a federal ALJ, board, or commission finding a violation of
law. 27 These 39 contractors had 39 different contracts of $100,000 or
more totaling approximately $855 million. 28 We did not identify any
contractors that were found by a federal court or adjudicated
administrative decision to have
violated consumer protection or tax laws during this time frame. 26 Since
we only used closed cases, we did not review pending federal indictments
in criminal cases (the FAR rule required pending felony indictments in the
five areas of law to be reported by a prospective contractor and
considered by a contracting officer). We also limited our review to
federal criminal convictions (including plea agreements) reported in
agency databases. The FAR rule encompassed state felony convictions and
indictments as well. Because of time and resource constraints, we did not
attempt to match contractor names with names of parties indicted or
convicted in state criminal proceedings.
27 In the administrative enforcement area an adverse decision could
include charges or complaints by an enforcement agency alleging a law
violation that the contractor does not contest through the adjudicatory
process and that become final orders of the administrative tribunal.
However, all the cases with adjudicated violations that we matched to
contractors involved contested allegations resulting in actual
administrative decisions on the merits. 28 GSA*s database showed that in
fiscal year 2000, 82, 622 contractors had a total of 162, 212 federal
contracts in effect for goods and services valued at over $203 billion. Of
these, 16, 819 contractors were awarded 29, 032 new federal contracts in
fiscal year 2000 in amounts of at least $100, 000 for each contract,
totaling approximately $62 billion.
Table 1: Number of Federal Contractors with Adjudicated Violations of
Federal Environmental, Labor, Antitrust, Consumer, or Tax Laws
Number of contractors by type of adjudication Administrative
(federal ALJ, Criminal
Civil (federal Board, or
Area of law (federal court) court) Commission) Total violators
Environmental 7 2 2 11
Labor and employment a 0 2 25 27
Antitrust 0 1 0 1
Consumer protection 0 0 0 0
Tax 0 0 0 0 Total 7 5 27 39
a Because the table reports on the number of contractors with adjudicated
violations, we listed the one contractor with violations adjudicated in
both federal court and administratively only under Civil (federal court).
Source: GAO analysis of enforcement agency data.
In addition, we identified another 3,403 contractors involved in another
6,705 cases 29 closed during the 3- year period covered by our review and
listed in the databases of one or more of the agencies responsible for
enforcing or administering federal environmental, labor and employment,
antitrust, consumer protection, or tax laws (not including IRS tax penalty
assessments, which are discussed below). However, most of these cases
that involved alleged law violations were resolved before a court or
adjudicated administrative decision was made as to whether a violation of
law had occurred. The resolution usually involved some kind of
*administrative agreement* (settlement). Although the agreements reflect
that the enforcement agency charged the contractor with a violation, the
contractor typically did not admit (or deny) 30 any wrongdoing, and
sometimes the agreement actually contained language whereby the contractor
specifically denied any violation. In these cases, the parties 29 We
identified a total of 3, 442 contractors involved in the 6,752 cases
closed during fiscal years 1997 to 1999. As mentioned earlier, due to name
variations, we likely did not identify all of the contractors involved in
the enforcement agency cases (see app. I).
30 We did not construe contractors as conceding or admitting to law
violations in the administrative agreements we reviewed.
reached some alternate resolution, usually involving the contractor taking
corrective action, assuring compliance with the law, and agreeing to make
some form of payment to the government. Many of these agreements also
provided for penalties and remedies if the contractor did not abide by the
agreement. Even though a federal court or an administrative adjudicator,
such as an ALJ, typically approved the agreement (i. e., through a consent
order) and the case was considered *adjudicated* on that basis, this
approval did not constitute an adjudicated decision that a violation had
actually occurred. We recognize, of course, that enforcement agencies
often attempt to reach agreements with alleged violators to achieve
compliance instead of litigating cases to the point of an adjudicated
decision. As set out below, we report on the number of cases that were
resolved before an adjudicated decision was reached or that were otherwise
resolved* cases that include agreements between enforcement agencies and
alleged violators for achieving compliance.
Eleven Federal Contractors EPA has administrative law enforcement
authority in the majority of Had Adjudicated Violations
federal environmental statutes, including (1) the Clean Air Act (regulates
of Federal Environmental
air emissions and authorizes EPA to establish air quality standards to
Laws protect public health and the environment); (2) the Clean Water Act
(regulates discharges of pollutants into the waters of the United States
by giving EPA authority to implement pollution control programs and to set
water quality standards and by prohibiting the discharge of any pollutant
from a point source into navigable waters unless a permit is obtained);
(3) the Resource Conservation and Recovery Act (authorizes EPA to regulate
the generation, transportation, treatment, storage, and disposal of
hazardous waste); and (4) many others, such as the Toxic Substances
Control Act, the Emergency Planning and Community Right- To- Know Act, and
the Federal Insecticide, Fungicide, and Rodenticide Act. EPA may issue
administrative orders assessing civil penalties and directing compliance.
31 EPA may also bring civil or criminal enforcement actions, in 31 These
administrative actions are subject to a formal administrative adjudication
process.
which case the Environment and Natural Resources Division of the DOJ or
local U. S. Attorneys handle the matter. 32 EPA and DOJ also handle cases
under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), which provides a
federal *Superfund* to clean up hazardous- waste sites. Actions under
CERCLA typically involve the assessment of liability of responsible
parties for cleanup costs rather than the determination of a statutory or
regulatory violation. Where EPA performs a cleanup, it will seek to
recover the
cleanup costs from financially viable parties once a response action has
been completed. However, CERCLA can be violated, for example, where a
party fails to comply with an order or agreement or fails to report
hazardous substance releases as required.
We matched 443 contractors (involved in 698 cases) to cases closed by EPA
during fiscal years 1997 through 1999. We also matched 75 contractors
(involved in 124 cases) to cases closed by DOJ during this period.
Further, as shown in table 2, contractors involved in 11 of the cases were
found by a
court or adjudicated administrative decision to have violated one or more
environmental laws. These 11 cases involved 11 contractors.
32 The U. S. Army Corps of Engineers has environmental protection
responsibilities for wetlands and waterways under the Rivers and Harbors
Act and the Clean Water Act that it implements through the issuance of
permits. Although the Corps has an administrative hearing process, these
proceedings are not formal adjudications under the Administrative
Procedure Act. Accordingly, we did not match with federal contractor names
the parties involved in those proceedings. However, the Corps can pursue
further civil or criminal
action by referring matters to the local U. S. Attorney for litigation.
Such legal proceedings would have been captured in our matching of DOJ
environmental compliance cases. Civil or criminal cases referred to DOJ by
other federal agencies with specific environmental law enforcement
responsibilities, such as the Fish and Wildlife Service of the Department
of the Interior (endangered species) and the Department of Commerce
(marine sanctuaries) would also be included in the DOJ cases.
Table 2: Disposition of EPA and DOJ Environmental Law Cases Involving
Federal Contractors Closed during Fiscal Years 1997 through 1999
Violation Other/ Resolved
Environmental laws found a before decision b Total Responsible agency/
case disposition Environmental Protection Agency
Criminal 4 1 5
Civil c 0 295295 Administrative c 2 396398
Subtotal 6 692 698 d Department of Justice e Criminal 3 0 3
Civil c 2 119121
Subtotal 5 119 124 Total 11 811 822
a Violation found * A federal court or adjudicated administrative decision
found a violation of law. b Other/ Resolved before decision * Cases that
did not involve a determination of law violation (such as liability for
hazardous waste cleanup under CERCLA), cases where no violation was found,
cases closed before a decision was made by a federal court or an
administrative adjudicator (such as administrative agreements and consent
orders), and cases that were otherwise closed/ resolved. c Only selected
cases were reviewed and verified. d We excluded from this analysis 11
additional cases involving federal contractors because EPA*s data showed
that the cases were combined with other cases and did not show the cases*
final disposition and 81 other cases involving federal contractors because
EPA*s data did not show the disposition of the cases. e DOJ environmental
cases managed by DOJ*s Environment and Natural Resources Division or U. S.
Attorneys. Source: GAO analysis of enforcement agency data.
Twenty- Seven Federal NLRB administers the National Labor Relations Act,
the primary federal
Contractors Had law governing relations between labor unions and employers
in the private
Adjudicated Violations of sector. The act guarantees the right of
employees to organize and to Federal Labor and bargain collectively with
their employers or to refrain from such activity. NLRB*s statutory mission
is to prevent and remedy unlawful acts, called Employment Laws
unfair labor practices, by either employers or unions. The agency does not
act on its own motion but processes charges or allegations of unfair labor
practices against an employer or labor organization. If, after an
investigation, the NLRB finds reasonable cause to believe a violation of
the
law has occurred, the agency can seek a voluntary settlement to remedy the
violation. If settlement efforts fail, a formal complaint can be issued
and the case is heard by an ALJ. The case can be appealed to the full
Board for a final agency determination.
The U. S. Department of Labor (DOL) is responsible for enforcing federal
labor and employment laws. We focused our work on the following DOL
offices:
The Wage and Hour Division (WHD) works to enhance the welfare and
protect the rights of the nation's workers through enforcement of the
federal minimum wage, overtime pay, record keeping, and child labor
requirements of the Fair Labor Standards Act; the Family and Medical Leave
Act; and employment standards and worker protections provided
in certain other laws. Additionally, WHD administers and enforces the
prevailing wage requirements of the Davis- Bacon Act, the Service Contract
Act, and other statutes applicable to federal contracts for construction
and for the provision of goods and services.
The Pension and Welfare Benefits Administration (PWBA) is responsible
for promoting and protecting the pension, health, and other benefits of
the over 150 million participants and beneficiaries in over 6 million
private sector employee benefit plans under the Employee Retirement Income
Security Act of 1974 (ERISA).
The Office of Federal Contract Compliance Programs (OFCCP) enforces
equal opportunity standards and affirmative action for women, minorities,
Vietnam era veterans, and persons with disabilities employed by more than
200,000 contractors and subcontractors that participate in the federal
procurement process. Applicable authorities include Executive Order 11246
(Equal Opportunity in Federal Employment), the
Rehabilitation Act of 1973, the Vietnam Era Veterans* Readjustment
Assistance Act of 1974, and the Americans With Disabilities Act of 1990.
33 33 Because OFCCP*s mission specifically involves equal employment
opportunity issues among federal contractors, we did not include in our
review the Equal Employment
Opportunity Commission (EEOC), which has related jurisdiction over laws
prohibiting discrimination in the workplace and, in particular, laws
prohibiting discrimination in compensation. We did, however, match one
contractor to a civil case brought by EEOC and tracked by DOJ. This case
is reported in appendix II.
The mission of OSHA, as defined in its enabling legislation, the
Occupational Safety and Health Act, is to *[ a] ssure so far as possible
every working man and woman in the Nation safe and healthful working
conditions.* This mandate involves standards development, enforcement
(such as through workplace inspections), and compliance assistance so that
employers maintain safe and healthful workplaces. These agencies have
formal administrative adjudication processes for complaints filed in
enforcing the laws for which they are responsible. Under certain
circumstances, DOL may also debar contractors for violations of certain
labor laws or declare them ineligible for failure to
satisfy the equal opportunity or affirmative action obligations of federal
contracts. For the time period covered by our review, we matched 29
contractors (involved in 34 cases) to cases closed by NLRB; 2,847
contractors (involved in 5,128 cases) to cases closed by DOL; and 6
contractors (involved in 6 cases) to cases closed by DOJ *3 of the DOJ
cases were handled by DOJ*s Civil Rights Division, and 3 cases were
handled by U. S. Attorneys. As shown in table 3, contractors involved in
30 of the NLRB cases, 4 of the DOL cases, and 1 of the DOJ cases were
found to have violated one or more federal labor or employment laws by a
federal court or adjudicated
administrative decision. In total, 27 different federal contractors were
involved in these 35 cases identified as having labor and employment law
violations. The remaining cases were resolved with a wide range of
outcomes, including consent agreements and orders, before a decision by a
court or administrative adjudicator was reached as to whether a violation
of law had occurred. 34 34 For example, if a compliance review or
complaint investigation by OFCCP indicates a
material violation of the equal opportunity clause of a federal contract
and if the contractor is willing to correct the violation or deficiency, a
written conciliation agreement may be entered into providing for necessary
remedial action. According to OFCCP, when a federal contractor agrees
through a conciliation agreement to correct the compliance issue, that
contractor is deemed to be in compliance.
Table 3: Disposition of NLRB, DOL, and DOJ Labor and Employment Law Cases
Involving Federal Contractors Closed during Fiscal Years 1997 through 1999
Other/ Resolved Labor and employment laws Violation found a before
decision b Total
Responsible agency/ case disposition National Labor Relations Board
Administrative c 30 4 34 Subtotal 30 4 34 Department of Labor
Civil 1 1 2
Administrative d, e 3 5,123 5,126 Subtotal 4 5,124 5, 128 c Department of
Justice f
Civil c 1 5 6 Subtotal 1 5 6 Total 35 5,133 5, 168
a Violation found * A federal court or adjudicated administrative decision
found a violation of law. b Other/ Resolved before decision * Cases that
did not involve a determination of law violation, cases where no violation
was found, cases closed before a decision was made by a federal court or
administrative adjudicator (such as administrative agreements and consent
orders), and cases that were otherwise closed/ resolved. c NLRB
administrative cases include ALJ and Board decisions (we did not include
cases for which the NLRB, under its statutory authority, obtained
injunctive relief in federal court because these cases are still pending
full review by the Board or enjoin conduct the Board has already found
unlawful). d Only selected cases were reviewed and verified.
e We excluded from this analysis 557 additional cases involving federal
contractors because DOL*s data did not show the disposition of the cases.
We also excluded another 67 DOL cases that were decided by an ALJ, Review
Commission, or appeals court ruling because the cases were not included in
our case selection and the final disposition of the cases could not be
determined. f Labor and employment compliance action cases managed by the
DOJ*s Civil Rights Division or U. S. Attorneys. Source: GAO analysis of
enforcement agency data.
One Federal Contractor Was The Bureau of Competition of the Federal Trade
Commission (FTC) and Convicted in Federal Court DOJ*s Antitrust Division
enforce the federal antitrust laws. FTC enforces of Violating Federal the
Federal Trade Commission Act, which prohibits unfair methods of Antitrust
Laws
competition. DOJ*s Antitrust Division has responsibility for enforcing the
Sherman Antitrust Act, which prohibits conspiracies or agreements that
restrain trade, fix prices, divide market territories or groups of
customers, boycott other firms, or use coercive tactics with the intent
and effect of
injuring competition. Both FTC and DOJ have jurisdiction under the Clayton
Antitrust Act, which prohibits mergers and acquisitions of stock or assets
that may substantially lessen competition or that tend to create a
monopoly and which bars certain forms of price discrimination. Both
agencies also are responsible for reviewing proposed corporate mergers
under the Hart- Scott- Rodino Act. FTC uses both administrative and
judicial remedies to enforce the law through litigation before
administrative law judges or in federal court. DOJ investigates and
prosecutes criminal violations of federal antitrust laws; and where
criminal prosecution is not
appropriate, DOJ may institute a civil action seeking a court order
forbidding future violations of the law and requiring steps to remedy the
anticompetitive effects of past violations.
We matched 22 contractors (involved in 25 cases) to cases closed by FTC
and 7 contractors (involved in 7 cases) to cases closed by DOJ during
fiscal years 1997 through 1999. As shown in table 4, in 1 of the 32 cases
the
contractor was convicted of violating federal antitrust laws in federal
court after pleading guilty in a case prosecuted by DOJ. 35 This case is
described in appendix II. None of the other 31 cases* including proposed
merger reviews 36 *involved a decision by a federal court or
administrative adjudicator that a violation of antitrust law had or had
not occurred; i. e., the contractors and the government settled or the
case was otherwise resolved.
35 One of the charges in this case (see app. II for a case description)
involved bid rigging on government contracts, which is a criminal
antitrust violation. A prospective contractor would currently have to
report such a criminal conviction in the certification accompanying its
offer notwithstanding the revocation of the FAR rule certification. 36 In
merger cases where the merger is challenged and the competitive concerns
are resolved before the merger is consummated (such as through consent
orders), no law violation has occurred.
Table 4: Disposition of FTC and DOJ Antitrust Law Cases Involving Federal
Contractors Closed during Fiscal Years 1997 through 1999
Other/ Resolved Antitrust laws Violation found a before decision b Total
Responsible agency/ case disposition Federal Trade Commission c Civil 0 1
1
Administrative 0 24 24 Subtotal 0 25 25 Department of Justice d
Criminal 1 1
Civil 6 6 Subtotal 1 6 7 Tot al 1 31 32
a Violation found * A federal court or adjudicated administrative decision
found a violation of law. b Other/ Resolved before decision * Cases that
did not involve a determination of law violation, cases where no violation
was found, cases closed before a decision was made by a federal court or
administrative adjudicator (such as administrative agreements and consent
orders), and cases that were otherwise closed/ resolved. c FTC has
independent authority to litigate all but civil penalty and criminal
antitrust cases. FTC administrative cases include ALJ and Commission
decisions. d Antitrust cases managed by DOJ*s Antitrust Division or U. S.
Attorneys. Source: GAO analysis of enforcement agency data.
No Federal Contractors Had The mission of federal agencies that enforce
federal consumer protection
an Adjudicated Violation of laws is generally to either ensure consumer
product safety or stop
Federal Consumer deceptive or unfair trade practices against consumers.
The Consumer Protection Laws Product Safety Act of 1972 consolidated
federal safety regulatory activity
for consumer products within the Consumer Product Safety Commission
(CPSC), whose jurisdiction encompasses about 15, 000 types of products. 37
CPSC can impose civil penalties and take other enforcement action for
violations of federal consumer product safety standards through
administrative adjudication and judicial processes. Protecting consumers
against unfair, deceptive, or fraudulent practices is a mission of FTC
under the Federal Trade Commission Act. FTC is also responsible for
enforcing several laws, such as the Truth- in- Lending Act and the Fair
Credit Reporting Act, that prohibit specifically defined trade practices.
FTC enforces its consumer protection mandate (as well as trade regulations
issued by the Commission) through administrative actions and federal court
litigation.
We matched no contractors to the cases that were closed by CPSC during
fiscal years 1997 through 1999. We matched 12 contractors (involved in 13
cases) to FTC consumer protection cases closed during this period. As
shown in table 5, all of these cases were resolved before a court or the
FTC reached any adjudicated decision as to a violation of consumer
protection law. Specifically, FTC and the contractors settled all the
cases through the use of administrative agreements.
37 Several other federal agencies have roles ensuring consumer product
safety. For example, certain food products, drugs, and cosmetics are
covered by the Food and Drug Administration of the Department of Health
and Human Services; and automobiles and trucks are within the jurisdiction
of the National Highway Traffic Safety Administration of the Department of
Transportation. However, because CPSC*s jurisdiction is so broad, we
limited our review to that agency.
Table 5: Disposition of CPSC and FTC Consumer Protection Cases Involving
Federal Contractors Closed during Fiscal Years 1997 through 1999
Other/ Resolved Consumer protection laws Violation found a before decision
b Total
Responsible agency/ case disposition Consumer Product Safety Commission 0
0 0
Federal Trade Commission Civil 0 4 4
Administrative c 0 99
Total 0 13 13
a Violation found * An adjudicated federal court or administrative
decision found a violation of law. b Other/ Resolved before decision *
Cases that did not involve a determination of law violation, cases where
no violation was found, cases closed before a decision was made by a
federal court or administrative adjudicator (such as administrative
agreements and consent orders), and cases that were otherwise closed/
resolved. c FTC administrative cases include ALJ and Commission decisions.
Source: GAO analysis of enforcement agency data.
No Federal Contractors Had The Internal Revenue Service (IRS) is a branch
of the Department of the an Adjudicated Violation of
Treasury and administers the Internal Revenue Code enacted by Congress.
Federal Tax Laws
IRS records as unpaid taxes or assessments amounts that taxpayers have
identified that they owe but have not paid in tax returns they file, and
amounts it determines are owed by taxpayers through its various
enforcement programs. IRS can make formal deficiency assessments of tax,
penalties, and interest.
Penalties levied by IRS are meant to encourage voluntary compliance with
the Internal Revenue Code. By law, IRS imposes penalties against taxpayers
for such things as failure to properly deposit employment taxes, failure
to pay tax by the applicable due date, failure to file a tax return, and
underpaying quarterly estimated taxes. Taxpayers may choose to pay the
penalty, challenge the penalty assessment within IRS, negotiate a
compromise, or await enforcement action through the judicial process. 38
IRS levies these penalties administratively; but the assessment itself is
not the result of an administrative adjudication process, such as through
an ALJ. IRS does not handle civil or criminal tax law cases; this is done
by DOJ, which maintains the records on all closed cases, whether
adjudicated in the U. S. Tax Court, the Court of Federal Claims, or the U.
S. District Court. IRS does, however, track the payment status of those
taxpayers owing taxes or assessed penalties in its accounts receivables.
These are the data we matched against GSA*s FPDS list of contractors to
identify contractors with at least one tax- related penalty. 39 During tax
periods covering fiscal years 1997 through 1999, 7,864 of 13,058
contractors 40 were assessed at least one penalty by IRS during this
period. IRS assessed the penalties against the 7,864 contractors
administratively; but because these assessments themselves were not the
result of formal adjudication, we did not count these cases in our tally
of enforcement agency cases. However, we searched the DOJ data for tax
cases it handled. We matched no contractors to tax cases that were closed
by DOJ
during fiscal years 1997 through 1999 where a court decision found the
contractor had violated federal tax laws. We matched one contractor, a
security services company, to a case handled by DOJ where a stipulated
judgment was entered in federal court in which the company, as
successorin-
interest of the taxpayer (whose assets and business had been acquired 38
Prior to making a formal deficiency assessment of tax, penalties, and
interest, IRS sends the taxpayer several notices of the proposed
assessment, including a 90- day statutory notice, giving the taxpayer an
opportunity for Tax Court review. During this period, IRS may not take
action to collect the deficiency.
39 The IRS data we used included only penalties outstanding at the time of
our matching because penalties are dropped from this data system once they
are paid. Due to privacy issues concerning IRS taxpayer information, we
did not review contractor cases in which IRS assessed penalties. 40 The
universe of 13, 058 contractors was different from the universe of
contractors matched to the other agencies* case data because we were able
to match company taxpayer identification numbers (TIN), instead of company
names, between IRS and GSA*s FPDS databases. Although matching this common
denominator between the databases was more precise, the number of
contractors meeting our criteria, which is described in appendix I, was
smaller because, among other things, contractors or subsidiaries with
different names may have the same TIN. As a result, the number of
contractor names was larger than the
number of TINs.
by the company), agreed to pay $170, 000 in full satisfaction of its
predecessor*s unpaid tax liability.
According to an IRS chief counsel official, large corporations, which
include many government contractors, almost universally run afoul of some
tax law provision, which could result in a penalty assessment. Of the
7,864 contractors we matched to a penalty, 75 percent had each been
assessed one or more penalties totaling under $11,000. The median amount
that contractors were assessed for one or more penalties was $1,944. About
2 percent, or 138 of the 7,864 contractors, had been assessed more than $1
million in penalties* one- fourth of these were Fortune 500 companies, and
one- fifth were state and local agencies or universities. 41 FAR Rule The
numerous public comments on the FAR rule, as well as the FAR
Implementation Issues Council*s published analysis and discussion of these
comments, identified and addressed numerous FAR rule implementation
issues. However, in this Identified in report we are limiting our analysis
and reporting of implementation issues
Determining Incidence under the revoked FAR rule to those we identified in
determining the
of Law Violations by incidence of contractor law violations. We found that
few contractors in our review would have actually had to report past
violations in the FAR rule Contractors
certification accompanying their offers. Additionally, contracting
officers would face significant difficulties in verifying or obtaining
contractor compliance history information. Moreover, the FAR rule may have
created the need for additional record keeping by contractors in order to
monitor their compliance histories.
As described earlier, the objective of the FAR rule was to provide
clarifying revisions to the existing regulatory language in the FAR about
what constitutes a satisfactory record of integrity and business ethics.
The FAR
rule stated that a satisfactory record was one that included satisfactory
compliance with the law, specifically environmental, labor and employment,
antitrust, consumer protection, and tax laws. The FAR rule also instructed
contracting officers to consider all relevant credible information, giving
the greatest weight to violations that have been
adjudicated within the last 3 years preceding the prospective contractor*s
offer. To provide this information to contracting officers, the FAR rule
41 These amounts are totals of outstanding accumulated assessments
incurred by the taxpayer and may remain on IRS*s records for extended
periods, depending on the status of
collection efforts.
included a certification requirement that required prospective contractors
to indicate whether they had or had not, within the past 3 years, relative
to environmental, labor and employment, antitrust, consumer protection, or
tax laws:
been convicted of a federal or state felony (or had any federal or state
indictments currently pending against them); or
had a federal court judgment in a civil case brought by the United
States rendered against them; or had an adverse decision by an ALJ,
board, or commission indicating a willful violation of law. Few
Certifications Would
As discussed earlier in this report, 6,752 enforcement agency cases that
Have Indicated Law were closed during fiscal years 1997 through 1999
involved federal
Violations contractors that were awarded new federal contracts of at least
$100, 000 in fiscal year 2000. From these cases, we identified 39
contractors that were found by a court or ALJ, board, or commission
decision to have violated
federal law in the areas specified by the FAR rule. However, most of these
contractors would not have been required to report the law violations to
the contracting officer in the certification in their offers (that is, by
checking the box in the certification indicating that the prospective
contractor or its principals have had a violation) if they had been
prospective contractors. As shown in table 6, based on our conceptual
application of the revoked FAR rule*s certification criteria, 7 of the 39
contractors would have been required to report their violations in the
certification accompanying their offers. The violations by the other 32
contractors did not meet the FAR rule criteria for reporting and thus
would not have been required to be reported. For example, misdemeanor
criminal convictions would not have been reported because the FAR rule
required only felony convictions and indictments to be reported.
Similarly, most of
the adjudicated decisions by an ALJ, board, or commission would not have
been reported because the decisions did not find a *willful* violation of
the law, the criterion in the FAR rule certification. Willfulness is a
specific legal standard that excludes less serious or inadvertent
violations of law. For example, in 30 of the 34 NLRB cases we matched to
contractors, NLRB determined that there were violations of law, yet none
of these violations were specifically determined to be *willful*
violations. Indeed, our review indicated that in the majority of the
enforcement agencies* administrative cases, the determination of
*willfulness* was not involved at all.
Table 6: Federal Contractors That Would Have Been Required to Report a Law
Violation in the Certification in Their Offers under Our Conceptual
Application of the FAR Rule
Number of matched Areas of law covered Number of contractors
contractors with reportable by the FAR rule matched with violations a
violations b
Environmental 11 5 Labor and employment 27 1 Antitrust 1 1 Consumer
protection 0 0 Tax 0 0
Tot al 39 7
a Violations found by a federal court or adjudicated administrative
decision. b Violations found by a federal court or adjudicated
administrative decision that also met the FAR rule certification criteria.
Source: GAO analysis.
In addition, administrative agreements or settlements resolving cases were
not reportable under the FAR rule*s certification requirement. Even if
such agreements were incorporated into a judicial or administrative order,
they did not constitute a decision rendered against the contractor by a
court or administrative adjudicator finding a violation of law; rather,
they constituted the contractor*s and the government*s agreement on
resolving
the matter* typically without an admission of wrongdoing by the
contractor. Although the FAR rule guidance stated that contracting
officers should give consideration to any administrative agreements
entered into with prospective contractors who take corrective action after
disclosure of an alleged law violation (in the initial charge or complaint
filed by the
enforcement agency), the FAR rule did not specifically require prospective
contractors to report such agreements. Thus, it is unclear how contracting
officers would have become aware of such agreements in making their
responsibility determinations.
The FAR Council indicated that the certification intentionally was not as
broad as the FAR*s responsibility standard of *a satisfactory record of
integrity and business ethics.* The FAR Council considered the
certification as an implementation measure designed to provide the
contracting officer with the information that the FAR Council anticipated
would be most useful in making the responsibility determination. Thus, the
FAR Council recognized the *relatively narrow focus* of the certification
and stated that it reflected the FAR Council*s attempt to craft a
certification that is clear and that does not impose an undue reporting
burden on prospective contractors. However, it is unclear whether the
*relatively
narrow focus* of the certification was intended to be as narrow as it
actually would have been in practice* at least in regard to adjudicated
administrative decisions and administrative agreements and settlements.
Further, it is not clear how contracting officers were supposed to
consider all relevant credible information about a prospective
contractor*s
compliance history, even that limited to adjudicated decisions, when such
limited information would have been required to be reported by
contractors. Contracting Officers Would
The FAR rule required contracting officers to consider all relevant
credible Face Significant Difficulties information regarding a
contractor*s compliance history in determining
Verifying or Obtaining whether a prospective contractor had a satisfactory
record of integrity and
Contractor Compliance business ethics in order to make a responsibility
determination. As
discussed above, the FAR rule established a certification in which
Histories
prospective contractors report certain compliance information. However,
unless reported by prospective contractors themselves, contracting
officers would face significant difficulties obtaining or verifying
compliance history information on prospective contractors that are
eligible for competing for government contracts. A large majority of the
32 contracting officers we contacted from the agencies covered by our
review reported that they did not have timely access to enforcement agency
databases that captured prospective contractors* compliance history
information. Although a large majority of these contracting officers also
reported that they use GSA*s list of debarred contractors 42 as a source
of information for evaluating a prospective
contractor*s record of compliance with laws and regulations, this list
does not contain compliance history information on prospective contractors
that have not been debarred or suspended, that is, those that are eligible
to
compete for government contracts (the vast majority of prospective 42
*List of Parties Excluded from Federal Procurement and Nonprocurement
Programs.* This list is compiled and published by GSA and searchable
online at http:// epls. arnet. gov. It contains the names of parties that
are currently (or have been) suspended or debarred from doing business
with the federal government as well as other relevant information, such as
the cause of the debarment. Contracting officers are required to check
this list prior to awarding a contract.
contractors). 43 Some compliance information is accessible by the public
on the World Wide Web (Web) sites maintained by some enforcement agencies,
such as EPA, NLRB, OSHA, CPSC, and FTC. Although we were able to use some
of these Web sites, few of the contracting officers
reported that they routinely used such sites. A contracting officer would
have to first know which agency was responsible for an enforcement area
and then spend time locating the relevant portion of the Web site before
attempting to locate compliance information or to perform a query.
However, even with access to enforcement agency databases and Web sites,
contracting officers would still run into some of the same challenges we
faced matching contractors to enforcement cases. The case information
contained in enforcement agency databases and Web sites was not posted for
the specific purpose of assisting contracting officers in considering
federal contractors* compliance records. Generally, the only common
identifier between federal enforcement agencies and prospective
contractors for matching purposes is the company name. The namematching
process can be imprecise (described in detail in app. I) and requires us
to perform numerous sorts/ matches to test and compare numerous variations
in the spelling or configuration of company names. Further, the amount of
relevant enforcement case information varied
widely and was often limited. There is no comprehensive and centralized
resource providing contracting officers with compliance history
information on prospective contractors eligible to compete for government
contracts. 44 While enforcement agency databases and Web sites may be
available in some cases that can be used
for obtaining or verifying prospective contractors* compliance history,
the attempted use by contracting officers of such resources (especially on
a routine basis) could be, based on our experience, difficult and
extremely 43 Contracting officers themselves also provide certain
information to the Federal Procurement Data System, a database of federal
contractors maintained by GSA that contains a variety of information, such
as the contractor*s name and location, agency awarding the contract,
principal place of contract performance, and dollar amount of the
contract awarded. This database does not contain information on
contractors* compliance histories.
44 This does not necessarily mean that contracting officers are unable to
obtain relevant contractor compliance history information. For example,
besides sources already mentioned, a contracting officer may become aware
of such information through other channels, such as from other contracting
officers. See U. S. General Accounting Office, National World War II
Memorial: Construction Contractor Selection, GAO- 02- 247R (Washington, D.
C.: Nov. 30, 2001) at page 6.
time consuming. This is because of the numerous enforcement agencies
involved, the difficulties inherent in the matching process, the varying
amounts of information available, and any necessary follow- up and
analysis of compliance information from such sources that a contracting
officer would have to make in determining a prospective contractor*s
responsibility.
Additional Record Keeping The FAR rule would have amended the existing
*Certification Regarding
by Contractors May Have Debarment, Suspension, Proposed Debarment, and
Other Responsibility Been Necessary Matters,* which covers such things as
whether the prospective contractor or its principals are presently
debarred or have had a conviction for
contract fraud. This certification contains language informing prospective
contractors that nothing in the certification should be construed to
require establishment of a system of records in order to render, in good
faith, the required certification. However, the FAR Council, in addressing
the
paperwork burden of the rule, acknowledged that implementation of the FAR
rule would probably require most large businesses and some small
businesses to establish a new system or to augment a current system to
track compliance with applicable laws. Further, as described above, in
later
suspending the rule, the FAR Council stated that the rule*s effective date
did not give prospective contractors sufficient time to establish such a
system and keep it current in order to properly fill out the
certification. In fact, 18 of the 43 federal contractors who responded to
our attempts to verify their involvement in enforcement agency cases
reported that they did not currently have the capability to identify or
track the various types of enforcement actions taken against them.
Agency Comments and We provided copies of a draft of this report to the
heads of DOL, EPA, DOJ,
Our Evaluation FTC, CPSC, NLRB, IRS, DOD, NASA, and GSA and to the
Administrator for
Federal Procurement Policy, OMB, for their review and comments. DOJ (Civil
Division, Civil Rights Division, Executive Office for U. S. Attorneys,
Environment and Natural Resources Division, and Criminal Division), CPSC,
IRS, DOD, NASA, GSA, and OMB had no comments. Program officials in DOL,
EPA, DOJ*s Antitrust Division, FTC, and NLRB provided written or oral
technical comments that we incorporated in this report as appropriate.
Unless you publicly announce the contents of this report earlier, we plan
no further distribution of its contents until 30 days from the date of
this report. We will then send copies of this report to the Chairman and
Ranking
Minority Member, House Committee on Government Reform; Ranking Minority
Member, Subcommittee on Technology and Procurement Policy; and Ranking
Minority Member, Subcommittee on Government Efficiency, Financial
Management, and Intergovernmental Relations, House Committee on Government
Reform; Chairman and Ranking Minority Member, Senate Committee on
Appropriations; Chairman and Ranking Minority Member, House Committee on
Appropriations; and Chairman and Ranking Minority Member, Senate Committee
on Governmental Affairs. Copies of this report will also be sent to the
Director of OMB; the Secretary
of Labor; the Administrator of EPA, the Chairman of FTC, the Commissioner
of Internal Revenue, the Chairman of NLRB, the Chairman of CPSC, and the
Attorney General. We are also sending copies to the Administrator for
Federal Procurement Policy and the Secretary of
Defense, the Administrator of NASA, and the Administrator of GSA. Copies
will be made available to others upon request. In addition, this report
will be available at no charge on the GAO Web site at http:// www. gao.
gov. If you have any questions, please contact me at (202) 512- 2834 or
ungarb@ gao. gov. Major contributors to this report are acknowledged in
appendix III.
Bernard L. Ungar Director, Physical Infrastructure Issues
Appendi Appendi xes x I
Objectives, Scope, and Methodology As discussed in this report, the
objectives of this assignment were to determine:
the extent to which federal contractors had violated federal
environmental, labor and employment, antitrust, consumer protection, and
tax laws; and issues surrounding the implementation of the now- revoked
Federal
Acquisition Regulation rule (* the FAR rule*) on contractor responsibility
45 that we identified in response to the first objective. To quantify the
extent to which federal contractors had violated federal environmental,
labor and employment, antitrust, consumer protection, and
tax laws, we did the following: We focused on contractors that were
awarded new federal contracts in amounts expected to be at least $100,000
per contract and federal enforcement agency cases closed during fiscal
years 1997 through 1999 46 because these were the types of contracts and
cases that would have been covered by the FAR rule*s contractor
certification requirement if it had been applied beginning with fiscal
year 2000, and
We used federal court or administrative decisions in determining whether
a case involving a contractor resulted in an actual adjudicated
determination of a violation of federal environmental, labor and
employment, antitrust, consumer protection, or tax laws 47 because these
were the types of adjudicated decisions contracting officers were
instructed by the FAR rule to give the greatest weight in making their
responsibility determinations. 45 Federal Acquisition Regulation;
Contractor Responsibility, Labor Relations Costs, and Costs Relating to
Legal and Other Proceedings, 65 Fed. Reg. 80, 256 * 80, 266 (Dec. 20,
2000). 46 These were cases provided by federal enforcement agencies in
response to our request for data on closed cases brought by these agencies
to enforce or administer the laws for which
they are responsible. We identified the pertinent enforcement agencies by
referring to statutes and regulations in the five areas of law; consulting
with agency officials; and reviewing the U. S. Government Manual,
enforcement agency Web sites, and our past products.
47 The laws involved are those enforced or administered by the agencies we
identified and which provided us data on their closed cases (see previous
note).
Using these criteria, we performed computerized matches between
contractors (names or numeric identifiers where available) listed in the
Federal Procurement Data System (FPDS) maintained by the General Services
Administration (GSA) as having new federal contracts awarded in fiscal
year 2000 and names or identifiers in cases closed during fiscal years
1997, 1998, and 1999 listed in the databases maintained by seven federal
agencies responsible for enforcing or administering federal environmental,
labor and employment, antitrust, consumer protection, or tax laws. 48
Although the FAR rule also included the consideration of certain state law
violations, as agreed with the requestors, we included only federal law
violations in our review based on federal court and administrative
adjudications. Our matching process involved three steps: (1) identifying
and obtaining
the appropriate databases and assessing the reliability of these
databases, (2) performing computerized matches of contractors, and (3)
verifying the accuracy of selected matches. We then reviewed a selection
of cases in detail to provide descriptions and examples of these cases.
Identifying and obtaining the databases: From each relevant agency or
division, we obtained data dictionaries describing the variables
maintained in the database or databases used to track enforcement cases
and reviewed these dictionaries for variables relevant to the process of
matching cases to the FPDS database of contractors. From this review,
along with discussions with officials at each agency, we determined the
records and types of variables needed from each database for fiscal years
1997 through 1999, including the following:
variables to aid in matching names of parties in enforcement agency
cases to the contractor database (i. e., name, address, taxpayer
identification number (TIN) or data universal numbering system (DUNS)
number);
variables to aid in identifying the particular case in question for
further review (i. e., case identification number, court docket number,
case opening and closing dates); and 48 The seven federal agencies are the
Environmental Protection Agency (EPA), Department of Labor (DOL),
Department of Justice (DOJ), National Labor Relations Board (NLRB),
Federal Trade Commission (FTC), Consumer Product Safety Commission (CPSC),
and Internal Revenue Service (IRS).
variables to aid in describing the nature and severity of the case (i.
e., type of alleged violation, outcome of case, penalties or fines
assessed, any available narrative description of the alleged violation
and case). We clarified any uncertainties about appropriate processing of
the databases and interpretation of the variables through discussions with
agency and division contacts. For agencies without appropriate electronic
data available, we obtained case information through agency Web sites or
from hard copies of reports. To assess the reliability of the data used
for matching purposes in our report, including the FPDS, we (1) reviewed
existing documentation related to the data sources and (2) electronically
tested the data to identify obvious problems with completeness or
accuracy. We determined that the data were reliable enough for the
purposes of this report. GSA has stated that the figures produced from the
FPDS are only as accurate, timely, and
complete as the data provided by the reporting agencies.
The matching process: In an effort to determine the number of
contractors with adjudicated violations of federal environmental, labor,
antitrust, consumer protection, and tax laws in fiscal years 1997 through
1999 and that received a federal contract in fiscal year 2000, we matched
each enforcement agency*s case data for fiscal years 1997 through 1999
against the FPDS fiscal year 2000 contractor data. The fiscal year 2000
FPDS data maintained by GSA consisted of 162,212 unique contracts; 82, 622
unique contractor names; 58, 711 TINs and 67,275 DUNS numbers. From the
database received, we selected new contracts awarded in fiscal year 2000
that had total obligations of at least $100, 000 during the fiscal year by
summing the dollar amounts for all such records having the same contract
number. This database contained 29, 032 unique contracts; 16,819 unique
contractor names; 14, 318 unique TINs; and 16, 506 unique DUNS numbers. 49
49 The database from IRS was matched to the FPDS database using only TINs.
Unique TINs (13, 072) used to match against IRS* database were derived by
selecting new contracts worth at least $100, 000 and then selecting
contractors that had unique TINs. The number of unique
contractors and unique TINs differ because there could be several
different contractor names per TIN, and any cases with invalid TINs were
not used in the match. The different names per TIN occur from
misspellings, mistakes, and subsidiaries using the parent company*s TIN.
Before matching, we checked agency data to ensure the case closed dates
were within the period fiscal years 1997 through 1999 and checked the
validity of certain fields, such as the fields containing the TINs, DUNS,
or closed dates. We further examined the agencies* data and had additional
discussions with agencies* officials to determine which variable( s)
should be used to perform the matches and manipulated the databases as
needed to obtain final databases with one name or identifier per record.
When available in an agency database, we matched on numeric identifiers,
that is, TINs, DUNS, or both.
When matching contractors* names, we found a wide variation in the way
names were spelled and abbreviated across databases. To compensate for
these variations, we developed computer programs aimed at making these
names as standard as possible by removing words* such as *Inc.,* *Co.,*
*Company,* *Jr.,* *LTD,* etc.* at the end of a field for all databases in
the name- matching process. Removing such words increased the chance of a
match between FPDS and agency data. Specifically, matches resulted when a
name in the FPDS database was spelled exactly like the name in the agency
database. If the company name was not spelled identically in both
databases, it would not have been identified as a match. For example, if
one database contained the name *ABC* and another contained *A Better
Company,* a match would not have been identified. Due to time and resource
limitations, we could not correct inconsistencies, misspellings or
abbreviations to improve the matching process. 50 For each agency we
determined the base numbers of identifiers used for matching: the number
of unique names (i. e., companies* names) in federal enforcement agency
cases after our standardization process, the number of unique DUNS
numbers, and the number of unique TINs. For agencies that tracked
criminal, civil, and/ or administrative cases separately (EPA, DOL*s
Pension and Welfare Benefits Administration, DOJ*s Environment and Natural
Resources Division, and the Executive Office for U. S. Attorneys), 50 We
explored other options to enable us to match contractor and names in
enforcement
agency cases that were similar and possibly the same company. These
procedures required standardization of each word in each name and,
ideally, a second identifier (such as state or ZIP code) in addition to a
name to help narrow possible matches to those more likely to be the same
company. However, a second identifier was rarely available in these
databases. We found that a large amount of false matches occurred in the
absence of a second identifier, and we were unable to develop procedures
to reduce the number of false matches, given the time and resources
available.
we processed these case types separately. After the matching process, we
determined the number of matches with a unique identifier (name or number)
and the number of unique contractor/ case matches. Databases often
contained more than one name considered to be part of one case; in
those instances, we determined the number of matches on the case level.
Within the agencies or divisions that tracked criminal, civil, and/ or
administrative cases separately, we added the matches found. Therefore,
for these agencies or divisions, there could be duplicate contractors
within the matched cases. Verifying the accuracy of selected matches:
For most agency databases
used in this analysis, there was no common numeric identifier available
for matching federal contractors to names in enforcement agency cases. The
matching process therefore was often limited to attempting name matches.
Due to the imprecise nature of name matching, we know that we have errors,
both in missing true matches that are likely in the database, and in
calling two companies a match when in fact they are not the same company.
This latter error can occur for a variety of reasons as well, such as two
distinct companies actually having the
same name, or abbreviations or misspellings of one company name making it
look identical to another when in fact it is not. Even when we were able
to match using numbers, such as DUNS or TIN, errors in data entry* for
either agency or FPDS data* could lead to missing true
matches or identifying false matches. Although there is no way to
determine how many true matches we missed* if we could determine them, we
would then be able to call them matches* it is possible, and perhaps
useful, to make some kind of assessment of our *false positives,* that is,
name matches that were in fact not the same company.
Although verification of a representative sample of the matches would be
desirable, this approach was untenable, given the time and resources
available. However, we looked at the false positive cases we found in
doing our case file reviews (see below for methodology details of this
review). For all cases in which it appeared that the contractor was found
by an federal court or adjudicated administrative decision to have
violated the
law, as well as for a selection of the remaining enforcement agency cases
(involving compliance actions) chosen on the basis of the highest dollar
contract award amounts for fiscal year 2000, we determined whether we had
made a valid match between contractor and enforcement agency case by
contacting the named contractor. This match rate, however, cannot be
viewed as an unbiased estimate because the selection of cases was not
randomly chosen and, for most agencies, was not a large enough selection
of cases. The rate, however, does provide some information for
understanding how successful our matching process was. Table 7
summarizes the number of false matches found in these case file reviews.
Table 7: Percent of False Matches for Cases Reviewed Number of Enforcement
agency/ division responsible for contractors
Number of enforcing federal environment, matched to
matched Number of false
Percent of false labor/ employment, antitrust, consumer
enforcement contractors* cases
matches in matches for cases protection and tax laws agency cases
reviewed reviewed cases
reviewed Department of Labor Offices:
Safety and Health Administration 1, 156 41 11 27 Federal Contract
Compliance Programs 178 24 0 0 Wage and Hour Division 1, 531 16 0 0
Pension and Welfare Benefits Administration 1 1 0 0
Subtotal 2, 866 82 11 N/ A Department of Justice Divisions:
Antitrust 5 5 1 20 Environment and Natural Resources 70 18 1 6 Civil
Rights 3 3 0 0 Executive Office of the U. S. Attorneys Criminal a 22 36 26
72
Civil 40 23 4 16
Subtotal 140 85 32 N/ A Environmental Protection Agency Criminal a 12 27
11 41
Civil 148 16 1 6 Administrative 290 29 0 0
Subtotal 450 72 12 N/ A National Labor Relations Board a 32 37 3 8
Consumer Product Safety Commission 2 2 2 100 Federal Trade Commission a 37
38 3 8 Internal Revenue Service N/ A N/ A N/ A N/ A Total b 3, 527 316 63
20
a The number of cases reviewed is larger than the number of contractors
matched because some contractors had multiple cases reviewed.
b Represents the total number of times each contractor is listed in each
of the agency databases; thus, contractors listed in more than one
database will be counted more than once in this total number. As reported
earlier in this report, we matched 3,442 unique contractor names to 6,752
cases. Source: GAO analysis of GSA and enforcement agency data.
Detailed case review: For a selection of the federal contractors matched
with enforcement agency cases during the time frame, we contacted matched
contractors in order to verify the match, request information regarding
the case, and gather information regarding implementation issues
surrounding the FAR rule as it would have applied to federal contractors.
We also requested information about the cases from each enforcement
agency. Within the matched cases from each agency*s database, we reviewed
(1) all cases where it appeared that the contractor would have been
required to certify to its noncompliance with the law under the FAR rule
and (2) a selection of at least 10
contractor cases chosen on the basis of the highest dollar contract award
amounts during fiscal year 2000. Contract award amounts reflected the
total dollars obligated for a new contract awarded to a contractor in
fiscal year 2000, based on the FPDS database. For those databases where
there were only a small number of matches, such as in the case of the
DOJ*s Antitrust Division, all cases were reviewed rather than those
showing the highest total dollars obligated.
We also attempted to verify enforcement agency case information with
contractors and to obtain more detailed information about the case
characteristics from them. We called the company and asked for the
contracting and/ or procurement office. In some cases, we were referred to
the company*s legal department. After explaining our
mission, we set up an appointment with the cognizant official from each
company that agreed to discuss the matter with us. To prepare the official
for the interview we faxed a list of questions, and, upon request, a copy
of the Federal Register notice of the FAR rule. We then interviewed each
official via telephone and in some cases received written responses.
During the telephone interviews, we verified the company*s information,
including its address and DUNS number, the contract information we had
obtained from the FPDS, and the case information we had obtained from our
respective enforcement agencies. When a match was determined to be
correct, we used the
case in describing the characteristics of the enforcement agency cases
involving contractors that had been closed during fiscal years 1997
through 1999.
To identify issues surrounding the implementation of the FAR rule from our
work, we compared the names in enforcement agency cases that we matched to
the federal contractors covered by our review to the FAR rule
certification requirement. We also considered conceptually whether the
contractors would have been required to report the violations in the
certifications accompanying their offers if they had been prospective
contractors. Additionally, we discussed implementation issues regarding
the FAR rule with (1) agency contracting officers and other officials from
the seven federal enforcement agencies included in our review and (2)
contractors involved in the enforcement agency cases that we selected for
detailed review. Through these discussions, we identified access that
contracting officers have to the compliance history of prospective
contractors and contractor record keeping as implementing issues arising
from the FAR rule. Finally, we discussed the results of our work with
officials from the seven federal enforcement agencies and OMB, as well as
with FAR Council members. We conducted our work from July 2000
through October 2002 in accordance with generally accepted government
auditing standards.
Agency Cases Where a Law Violation Was Found by a Federal Court or
Adjudicated
Appendi x II
Administrative Decision Date( s) and description of alleged incident
Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a Environmental laws
Cases from the Environmental Protection Agency: Criminal cases
Poultry company 1994 The Environmental Protection Agency*s
1998 Under the January 1998 plea Jan. $1, 630
to (EPA) Criminal Investigation Division agreement, the company pled
1998 1995 received a complaint from the U. S. Fish guilty in U. S.
District Court to a and Wildlife Service that the company*s
two- count information charging it chicken manure processing plant had
with (1) negligent and unlawful been directing its runoff toward vernal
discharge of approximately 11 pools located in an adjacent national
million gallons of storm water
wildlife refuge. An investigation polluted with decomposed chicken
revealed that the pollution was the manure into the wildlife refuge in
result of a broken pipe that had been violation of the Clean Water Act,
used to convey storm water from a
and (2) the knowing and unlawful manure storage yard to farm grounds
taking of an endangered species in used to store storm water. Polluted
violation of the Endangered water containing ammonia, nitrogen, Species
Act (by discharging and other byproducts of the chemical polluted water
which eliminated a decomposition of chicken manure
protected species of tadpole leaked through cracks in the pipe, shrimp
from pools on the refuge). flowed into vernal pools at the refuge, The
company was required to pay and killed tadpole shrimp and other
fines totaling $485,684 to the aquatic life.
National Fish and Wildlife Foundation (to be used in restoration efforts)
and an assessment of $14, 315 as restitution for the natural resource
damage costs incurred by the U. S. Fish and Wildlife Service during the
investigation of this case. The company had also agreed to make
improvements in the amount of
$750, 000 to its storm water retention and distribution system. The case
was also referred to
EPA*s Suspension and Debarment Division, and the company*s facility was
declared ineligible (for about a year) for federal grants, loans,
contracts or subcontracts.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Aircraft support July Company and an individual indicted in May
Company pled guilty in October Jan. $12, 618 and maintenance 1993 May 1998
for two counts each of 1998 1998 in a pretrial settlement to a
1999 company violating the Clean Water Act and the misdemeanor (one count)
for Resource Conservation and Recovery violating the Rivers and Harbors
Act for a discharge of paint stripping
Act and agreed to pay a $125, 000 waste. The discharge was discovered
penalty and received 1 year of during an evacuation of the company*s
probation. The U. S. Attorney facility (located at an airport) due to a
provided the individual involved break in a nearby river levee. Law
pretrial diversion and his
enforcement officers observed a indictment was dismissed.
fluorescent green liquid streaming from a transportable tanker on the
tarmac. The officers described the odor as a strong paint stripper smell
and estimated 100 gallons was on the tarmac surface along with more having
already emptied into a storm drain. Water- related 1997 Charges filed
against an individual in
Feb. Under the October 1998 plea Oct. $114
services and February 1998 and the company in 1998 agreement, the company
was 1998 products May 1998 for allegedly causing an sentenced to a fine of
$25, 000 and company illegal discharge of ammonium a special assessment of
$125. hydroxide into a river, killing 200 fish,
The individual reached a plea and for failing to file the required
agreement in October 1998 and notification under the Emergency was
sentenced to 12 months* Planning and Community Right- To probation and a
$500 fine. Know Act.
Ammunition Jan. Company charged with negligently Nov. Under the February
1996 plea Apr. $1, 160 manufacturer 1992 introducing zinc, in excess of
amounts 1995 agreement, the company was 1997 set forth in the federal
pretreatment sentenced to a $35,000 fine and a regulations, into a public
sewer system,
special assessment of $325. violating its industrial wastewater discharge
permit under the Clean Water Act.
Administrative cases
Electronics Jan. Company charged with discharging
Aug. Under the March 1997 Mar. $2, 832
manufacturer 1988 wastewater, which contained copper in
1991 administrative decision and order, 1997 to excess of the amount
allowed by law, the company was assessed a civil Nov. into navigable
waters, which violated penalty of $125,000. 1990
the Clean Water Act.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Technicalservices Apr. Company charged with distribution of Nov. Under the
March 1998 final
Mar. $241 company 1992
an unregistered pesticide to two other 1994 administrative order, the
company 1998 to Jul. companies in the United States and was assessed a
penalty of 1994
with exporting the pesticide to two $13,000.
companies located in a foreign country without a bilingual label in
violation of the Federal Insecticide, Fungicide, and Rodenticide Act.
Cases from the Department of Justice: Criminal cases
Safety equipment Mar. An investigation by the EPA*s Criminal Apr. In April
1997, the company pled Apr. $6, 384 manufacturer 1993
Investigation Division involving the 1997 *nolo contendere* (no contest)
to 1997 to
Federal Bureau of Investigation (FBI) the charge it illegally stored Dec.
and Defense Criminal Investigation
hazardous waste in violation of 1994 Service led to a one- count charge
RCRA and was sentenced to a against the company for the illegal
$350, 000 fine. storage of highly toxic and explosive chemical sludge and
waste at its chemical division without a permit in violation of the
Resource Conservation
and Recovery Act (RCRA). The hazardous waste originated from an
experimental high- energy fuel the company*s chemical division produced
for the U. S. Air Force in the late 1950s. In 1985, the company
repurchased waste fuel from the military and
reprocessed it. After ceasing the reprocessing operation, the company
stored the resulting waste at an
unpermitted area at the chemical division for a period of years. Under
RCRA, hazardous waste must be moved off site within 90 days or moved to a
permitted hazardous waste facility. The company failed to designate the
waste as hazardous at the time it was generated and did not store or
dispose of it in a timely manner, as required.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Aircraft repair and 1990
Following an investigation by EPA*s Aug. In October 1996, the company 1998
$316
refurbishment to
Criminal Investigation Division involving 1996 pled guilty in U. S.
District Court to company
1993 the FBI, the company was charged with a felony charge for the illegal
knowingly disposing of hazardous disposal of the hazardous waste waste and
causing hazardous waste to
and was sentenced to pay a be disposed of on and into the ground
$75,000 fine and required to at its facility without the required sponsor
a 1 day free seminar on permit, in violation of RCRA. The
hazardous waste laws for company used chemical degreasers industries
engaged in paint and strippers on engine parts in the
stripping and engine cleaning cleaning process, and the hazardous
operations. waste generated was regulated under RCRA. The government
alleged that the company disposed of hazardous waste chemicals through a
drain in its
engine- room floor and dumped ignitable hazardous waste into a septic tank
designed to leach its contents into
the ground. Waste disposal
1989 A 4- year investigation by EPA*s
Nov. Company pled guilty in December Mar. $761 company to
Criminal Investigation Division and the 1996 1996 to one count of
conspiracy to 1998 1992 FBI revealed that approximately 4, 591
violate the Clean Water Act, one truck loads (each containing about
count of mail fraud, and one count 5,000 gallons of waste) were illegally
of violating the Clean Water Act disposed on approximately 1,577 days and
agreed to pay a fine of $3 at municipal sewage treatment plants
million. The company also agreed by the company. The company
to make a remedial contribution of collected sludge and grease from $1. 5
million to programs/ customers and hauled it to four publicly
organizations that address owned treatment plants. In order to
environmental concerns in the dispose of the waste at certain plants areas
affected by the case and pay and to avoid paying higher disposal $642, 312
in restitution to treatment fees, the company directed employees
plants affected by the crimes. to provide false or unrepresentative Based
on cooperation with the samples of their loads and falsely
government, the employees record the loads as raw sewage. involved
received probationary sentences ranging from 1 to 2
years and fines ranging from $3, 000 to $25,000.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a Civil cases
Food industry Not In a civil action seeking injunctive relief Dec.
In August 1997, a U. S. District Sept. $965
company available and assessment of civil penalties, the 1996 Court
imposed a civil penalty of 1997 United States alleged that the company
$12.6 million against the company and two others discharged pollutants and
two others for thousands of into navigable waters in violation of the
violations of the Clean Water Act Clean Water Act. at two pork
slaughtering and
processing plants. The court had earlier ruled that the companies could be
held liable for over 5,000 violations of phosphorus limits, as well as 500
more violations of other limits on discharges from the plants. In
addition, the court had entered an order holding the
companies responsible for the submission of at least 15 false monthly
reports and the destruction of over 2 years worth of records. Companies
appealed but the appeals court affirmed lower court ruling that companies
were liable and, with one exception, affirmed the calculation of the
penalty. The appellate court remanded the case back to the lower court to
correct the amount of money the companies saved by not installing the
necessary pollution control equipment. After
remand, the parties stipulated that the final penalty was $12,361,315,
which the defendants paid.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Dredging 1993 The United States, on behalf of the Aug. In April 1999, a
federal district
1999 $40, 354 company National Oceanic and Atmospheric 1997 court found
the dredging company Administration, brought action for
strictly liable for the damage damages against a dredging company
caused by the violation of the for a violation of the National Marine
National Marine Sanctuaries Act Sanctuaries Act (which imposes strict and
awarded the United States liability for damage or injury to any
compensatory damages as well as sanctuary resource). Tugboats from
response and assessment costs. the dredging company and another firm The
company appealed the towed rafts with 500- foot lengths of
judgment and the United States dredge pipe along the Florida coast. cross-
appealed on the issue of While proceeding through a marine
damages. In July 2001, the sanctuary, one of the pipes dragged appeals
court affirmed the the sea bottom, creating a pipe scar
judgment against the company about 13 miles long. The flotilla also and
remanded the issue of went off course and one of the tugs damages to the
district court. went aground in 7 feet of water in the sanctuary. The
grounding and efforts to extricate the boat left behind a channel 120
meters long, 8- 10 meters wide, and 2 meters deep, destroying 7,495 square
meters of sea bottom consisting of turtle grass, manatee grass, and finger
coral. Administrative cases
None Labor and employment laws
Cases from the Department of Labor: Civil cases
Heavy equipment July An employee was severely injured Jan. The U. S. Court
of Appeals June $21, 912 manufacturer 1992 when he was struck in the head
by a 1993 affirmed the OSHA citation and
1999 bolt thrown from a flywheel during upheld the penalty assessment of
maintenance operations; the company $49,000. was issued citations for
violating the Occupational Safety and Heath Administration (OSHA)
standards regarding machine guarding.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a Administrative cases
Construction Nov. Issued two citations for not complying Nov. The
Occupational Safety and May
$12, 793 company 1996 with OSHA standards regarding eye
1996 Health Review Commission 1999 and face protection and scaffold
affirmed one citation for an OSHA requirements. Employees were violation
but reclassified the observed atop wooden scaffolds, which
violation as de minimis and did not have standard guardrails on declined
to assess a penalty or either end; and an employee was enter an abatement
order. A drilling holes in metal frames without
second citation was vacated. wearing eye protection. Heavy equipment Mar.
As a result of two accidents where
July Under the OSHA administrative Mar. $21, 912 manufacturer 1994
employees had fingers amputated, the
1994 law judge decision, the company 1999 company was issued citations for
was assessed a penalty of $9, 020. violating OSHA standards regarding
machine guarding by not providing a pneumatic press with a guard or device
to keep the operator*s hands from the
point of operation. Heavy equipment Aug. Company was issued citations for
Aug. The Occupational Safety and Dec. $21, 912
manufacturer 1993 violating OSHA standards regarding 1993 Health Review
Commission 1998 machine guarding of five of the affirmed the citation and
the
company*s hydraulic presses. assessment of $22, 000 in penalties.
Cases from the National Labor Relations Board (NLRB): Administrative cases
Grocery store Julyto Complaint alleged that the company
Mar. In a February 1997 decision, the 1997 $145
company Sept. violated the National Labor Relations 1996 NLRB adopted the
Administrative 1995
Act (NLRA) by (1) disparately enforcing Law Judge*s (ALJ) September its
no- solicitation policy, thereby 1996 decision that the company assisting
employees in filing a
had violated the NLRA and decertification petition by permitting
adopted the ALJ*s recommended antiunion solicitation by employees in order
that the company (1) cease violation of company rules while
and desist from its unfair labor prohibiting prounion solicitations and
practices and (2) post notice of the by (2) engaging in surveillance of
order at its facility and file a sworn employees* union activities by
certification of a responsible confiscating prounion materials from
official attesting to the steps taken employees and copying them.
to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Electrical July Complaint alleged that contractor Aug. In an April 1998
decision, the
1998 $157 contractor 1996 violated NLRA by refusing to hire a
1996 NLRB adopted the ALJ*s April union organizer and by advising an 1997
decision that the contractor employee that the contractor would not
had violated the NLRA and hire anyone who had anything to do
adopted the ALJ*s recommended with the union.
order, as modified, that the company (1) cease and desist from its unfair
labor practices and (2) offer the union organizer employment and make him
whole for any loss of earnings and benefits suffered as a result of the
discrimination, post notice of the order at its place of business, and
file a sworn certification attesting to the steps taken to comply.
Propane company Apr.to Complaint alleged that, after the union
Apr. In an October 1997 decision, the Oct. $411 May
notified the company that it was 1996 NLRB adopted the ALJ*s February 1997
1996
engaged in an organizing campaign at 1997 decision that the company the
company*s facility, the company had violated the NLRA and
violated the NLRA by reducing work adopted the ALJ*s recommended schedules
of employees who
order that the company (1) cease supported union activities, threatening
and desist from its unfair labor to close the facility if the employees
practices and (2) notify the union selected the union as their collective
of any decision affecting the terms bargaining agent, and laying off an
and conditions of employment, employee as retaliation for the
restore the seniority and other selection of the union as the
benefits of the laid off employee, employees* collective bargaining agent.
make certain employees whole for any loss of earnings and benefits
suffered as a result of the
discrimination, post notice of the order, and file a sworn certification
attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Food services and Mar. Complaint alleged that the company Mar. In a June
1997 decision, the NLRB 1997 $386
uniform company 1997 violated the NLRA by refusing the 1997 granted the
NLRB General union*s request to bargain following the Counsel*s motion for
summary union*s certification as the exclusive judgment and concluded that
the collective- bargaining representative of company*s refusal to bargain
the employees.
constitutes an unfair labor practice in violation of the NLRA and ordered
the company to (1) cease and desist from refusing to bargain and (2)
bargain with the union, post notice of the order at its facility, and file
a sworn
certification attesting to the steps taken to comply.
Electrical Feb. Complaint alleged that the company, in Mar. In a March
1997 decision, the 1997 $116 construction 1996 violation of the NLRA,
terminated
1996 NLRB affirmed the ALJ*s earlier company several employees when they
were
decision that the termination of the engaged in protected activities. The
employees for the walkout was an employees walked off the job in protest
unfair labor practice in violation of of a supervisor that they had the
NLRA and adopted the ALJ*s complained about in earlier
recommended order that the encounters.
company (1) cease and desist from discharging or disciplining employees
for engaging in concerted protected activities and (2) reinstate the
employees to their former jobs and make them whole
for loss of earnings and benefits, remove any reference in personnel files
to the unlawful discharges,
post notice of the order at its facility, and file a sworn certification
attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Dairy products July Complaint alleged that the company Aug. In a September
1998 decision, the
1998 $11, 802 company 1998 failed to bargain with the union as the 1998
NLRB granted the NLRB General
exclusive collective bargaining agent in Counsel*s motion for summary
violation of the NLRA. judgment and concluded that the company*s refusal
to bargain with the union was an unfair labor practice in violation of the
NLRA and ordered the company to (1)
cease and desist from refusing to bargain and (2) bargain with the union
on terms and conditions of employment, post the order at its facility, and
file a sworn
certification attesting to the steps taken to comply.
Telecommunications Oct.
Complaint alleged that the company Feb. In a November 1997 decision, the
1998 $67, 063 company 1995 discontinued a paycheck- cashing
1996 NLRB adopted the ALJ*s July 1997 service (that was provided to
decision that the company violated employees during working time) the NLRA
(because the unilateral without first negotiating with the union
discontinuation of the checkcashing as required under its collective
service was an unfair bargaining agreement, in violation of labor
practice) and adopted the the NLRA. ALJ*s recommended order that the
company (1) cease and desist from the practice without first giving the
union notice and an opportunity to bargain and (2)
restore the check- cashing services and bargain collectively with the
union, post notice of the order, and file a sworn certification attesting
to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Tire retread Mar.
Complaint alleged that company May
In a May 1998 order, the NLRB 1998 $100 company 1996 violated the NLRA by
prohibiting its
1996 adopted the ALJ*s February 1998 employees from talking with other
decision that the company violated employees in an effort to discourage
the NLRA by engaging in unfair union activity, making unilateral labor
practices and adopted the changes to an employee selfimprovement ALJ*s
recommended order that the
training program without company (1) cease and desist notifying the union
and giving it an from prohibiting its employees opportunity to bargain,
and failing to from talking in order to discourage provide certain
employee- related
union activity, from refusing to information requested by the union.
bargain in good faith with the union by unilaterally changing
established terms and conditions of employment, and failing and refusing
to furnish the union with the requested information and (2) restore
certain labor practices, post notice of the order, and file a
sworn certification attesting to the steps taken to comply.
Automotive plastic Jan. Complaint alleged that the company
Apr. In a November 1997 order, the 1998 $160
parts to
held a union steward to a higher 1996 NLRB adopted the ALJ*s
manufacturer Mar. standard for disciplinary purposes by September 1997
decision that the 1996
strictly interpreting and enforcing its company violated the NLRA (by work
rules against union stewards. holding union stewards to a higher The
company allegedly issued standard for disciplinary purposes numerous
written disciplinary warnings
and issuing numerous written and suspended a union employee to
disciplinary warnings and discourage union activities in violation
suspending the union steward of the NLRA.
because of his union activities in order to discourage union activities)
and adopted the ALJ*s recommended order that the company (1) cease and
desist from its unfair labor practices and (2) make the union steward
whole for losses incurred as a result of the discrimination, remove from
the employee*s personnel file any
reference of the unlawful disciplinary action, post notice of the order,
and file a sworn certification attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Heavy equipment Oct. Complaint alleged that the company, in Not In a
December 1996 decision, the
1997 $21, 912 manufacturer 1993 violation of the NLRA, unlawfully
available NLRB affirmed the ALJ*s June
suspended an employee for engaging 1996 decision that the company in a
protected activity (wearing a button violated the NLRA and adopted
advertising his position on a matter the ALJ*s recommended order, as
relating to a labor dispute), threatened
modified, that the company (1) employees with indefinite suspension cease
and desist from prohibiting for exercising their lawful right to strike
employees from or disciplining in protest, and refused to accept the
them for wearing union buttons or unconditional offer of employees to
insignia, threatening to indefinitely return to work after striking to
protest
suspend employees for engaging the suspension. in protected, concerted
strikes, and refusing to accept employees* unconditional offer to return
to work from a strike and (2) make the suspended employee and
employees who engaged in the strike whole for any loss in earnings or
other benefits, remove any reference of the unlawful
suspension in the personnel file of the suspended employee, post notice of
the order, and file a sworn certification attesting to the steps taken to
comply. The NLRB also agreed with the ALJ that these and earlier
violations of the NLRA in other cases warranted the
issuance of a broad remedial order that the company cease and desist from
any other manner interfering
with, restraining, or coercing employees in the exercise of the rights
guaranteed them by the
NLRA.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Software Mar. Complaint alleged that company June
In an August 1997 decision, the 1997 $44, 658
company 1993 violated the NLRA by interrogating 1993 NLRB affirmed the
ALJ*s March employees of a subcontractor
1996 decision that the company concerning their union membership violated
the NLRA (through and activities, threatening various interrogations,
promises, subcontractor employees with threats, and warnings related to
termination of the subcontract (which union membership and activities)
would effectively result in their but reversed the ALJ*s separate
discharge) because of union finding of a violation concerning
membership and activities, promising the discharge of several
unionrepresented
the employees certain benefits if they employees. The would discontinue
their union NLRB remanded the case to the membership and activities, and
by ALJ for further action and held in warning the employees that the
abeyance the Board*s issuance of company would not recognize or an order
remedying the unfair bargain with the union and that union
labor practices pending action on membership and activities were futile.
the remand. Nut processing 1993 Complaint alleged that company
Not On remand from an appeals court, 1998 $4, 773 company discriminatorily
assigned a returning
available the NLRB found that the proximity striker to a low- paying job
cracking and of the discriminatory job inspecting nuts, rather than to a
job in assignment (which it held violated her prestrike position as a
forklift driver
the NLRA) to the election because of concerns arising from her increased
the likelihood that it had participation in the strike. The an impact on
the employees* discriminatory job assignment
choice during the election. The continued for 2 weeks preceding a
NLRB set aside the election and representation election among striking
ordered a new election. and replacement employees, which the union lost.
Armored car May
Complaint alleged that company June
In a September 1998, decision, the 1998 $132 company 1998 violated the
NLRA by refusing the
1998 NRLB found that the company*s union*s request to bargain following
the failure and refusal to bargain with union*s certification as the
exclusive the union violated the NLRA and collective bargaining
representative of ordered the company to (1) cease the employees.
and desist from refusing to bargain with the union, and (2) recognize and
bargain on request with the
union on terms and conditions of employment, as well as post notice of the
order at its facility and file a sworn certification to the steps taken to
comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Power company Apr. Complaint alleged that the company
May In a March 1998 decision, the 1998 $12, 050 1995 unilaterally changed
its employee
1995 NLRB adopted the ALJ*s February retirement benefits without affording
1997 decision that the company the union the opportunity to bargain
violated the NLRA by failing to over the changes, in violation of the
fulfill its bargaining obligation NLRA.
(because the future retirement benefits of currently active unionized
employees are subject to mandatory bargaining), and adopted the ALJ*s
recommended decision, as modified, that the company (1) cease and desist
from making unilateral changes in employee retirement benefits without
providing the union notice and an opportunity to bargain and
(2) bargain on request with the union, restore retirement benefits to
their previous level, post notice of the order, and file a sworn
certification attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Fire protection Apr. Complaint alleged that the company June
In a May 1999 decision, the NLRB 1999 $230 systems company 1994 engaged in
unfair labor practices by,
1994 affirmed the ALJ*s January 1997 among other things, laying off an
decision, with certain employee because of his insistence on
modifications, that the company being paid subsistence pay to which he
violated the NLRA and adopted was entitled under the collective the ALJ*s
recommended order, as bargaining agreement, calling an
modified, that the company (1) employee a *troublemaker* and telling cease
and desist from coercing him that he would be laid off for
employees by calling them pursuing a grievance, telling employees
*troublemakers* and telling them they would lose their jobs if they they
will be laid off for pursuing refused to cross a picket line, and
grievances, telling employees they refusing to meet and bargain in good
will lose their jobs if they refuse to faith with the union. cross a
picket line, telling employees they have to resign from the union to
continue working and/ or promising additional
benefits if they do, and a number of other unfair labor practices, and (2)
bargain in good faith with the union concerning terms and conditions of
employment, restore to employees the terms and conditions of employment
applicable before the strike and make them whole for any losses suffered
as a result of the unlawful unilateral changes, offer a laid- off employee
reinstatement to his former job and make him whole for
any loss of earnings and benefits, remove any reference to the unlawful
layoff from the employee*s personnel files, post notice of the order, and
file a sworn certification attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Telecommunications Aug. In 1993 the company began a testing Oct. In a
September 1999 decision, the
1999 $177 company 1994 procedure for a new customer service 1994 NLRB
affirmed the ALJ*s October position. An employee applying for the
1995 decision that the company position did not pass the structured
violated the NLRA (by failing to interview test and the union filed a
provide the union with the grievance on her behalf. Subsequently,
requested testing information
the union requested specific relevant to processing the information about
the testing
grievance) and adopted the ALJ*s procedure, which the company refused
recommended order that the to provide citing the possibility of
company (1) cease and desist compromising or impairing the validity from
refusing to bargain in good of the interview process. Complaint
faith with the union, and (2) alleged unfair labor practices under the
bargain collectively in good faith NLRA.
with the union regarding the requested information, post notice of the
order, and file a sworn certification attesting to the steps taken to
comply.
Electrical Feb. Complaint alleged that supervisor told Feb. In a June
decision, the NLRB 1997 $1, 696 contractor 1995 employees that current or
past
1995 affirmed the ALJ*s November 1996 membership in a union is a *big
strike* decision that the company violated against employees* chances of
being the NLRA and adopted the ALJ*s
hired and threatened to discharge recommended order that the employees if
the union succeeded in
company (1) cease and desist organizing, in violation of the NLRA.
from telling employees that union membership is a *big strike* against
their chances of being
hired and from telling employees that referrals of applicants who are
union members will not be pursued because the company does not want to
hire union personnel and (2) post notice of the order and file a sworn
certification attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Concrete Apr.to Complaint alleged that company
May In a September 1999 order, the
1999 $161 company May
committed numerous unfair labor 1997 NLRB adopted the ALJ*s July 1999 1997
practices in violation of the NLRA, decision that the company violated
including threatening employees with the NLRA by engaging in serious loss
of benefits and vacations, loss of unfair labor practices and adopted
employment, loss of jobs, unspecified the ALJ*s recommended order that
reprisals, transfer, violence, and
the company (1) cease and desist closure of the business if employees from
threatening its employees for selected the union as their
engaging in union activities, representative for purposes of
interrogating its employees about collective bargaining, interrogating
union activities, creating the employees about their union activities,
impression it is engaging in creating the impression of surveillance
surveillance of employee union of employee union activities, etc.
activities, threatening to sell the business in retaliation of employee
support for the union, threatening
its employees with loss of economic benefits to persuade them to reject
the union, disparately treating employees who support the union and
permitting abusive conduct against them, giving a larger than normal
hourly wage increase during the period preceding the
representation election to persuade employees to reject the union and (2)
post notice of the order and file a sworn certification attesting to steps
taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Telecommunications Dec. Complaint alleged that the company
May In an April 1998 order, the NLRB 1998 $69, 257 equipment 1995
did not provide information requested 1997 adopted the ALJ*s March 1998
company
to by the union necessary for and relevant
decision that the company violated May to the union*s performance of its
duties the NLRA and adopted the ALJ*s 1997
as exclusive bargaining representative, order that the company (1) cease
namely the processing of a grievance and desist from failing and refusing
regarding the recall rights of a laid- off to furnish, and delaying the
employee. furnishing of, information
requested by the union necessary for and relevant to the union performance
of its collective bargaining duties and (2) post
notice of the order at its facilities and file a sworn certification
attesting to steps taken to comply. Electrical Jan.
Complaint alleged that company May
In a March 1997 decision, the 1997 $278 contractor to
violated the NLRA by interrogating 1995 NLRB affirmed the ALJ*s October
Mar. employees about their affiliation with 1996 decision that the company
1995 and/ or membership in the union,
violated the NLRA, and adopted threatening denial of employment the ALJ*s
recommended order, as because of union activities, and modified, that the
company (1) isolating, transferring, and laying off
cease and desist from threatening employees because of union affiliation
employees with nonhire because or support.
of their union affiliation, terminating employees because of their union
support or affiliation,
and refusing to accept applications from employees and refusing to hire
employees because of their
union affiliation and (2) offer reinstatement to certain employees to
their former
positions, offer to hire certain applicants, make certain employees and
applicants whole for any loss of earnings and other benefits, remove
reference to the unlawful discrimination from personnel files, post notice
of the
order at its facility, and file a sworn certification attesting to steps
taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Building July Complaint alleged that company Not In an August 1998 order,
the
1998 $566 maintenance 1996
engaged in numerous unfair labor available NLRB adopted, with
modifications, company to
practices designed to thwart union*s the ALJ*s May 1998 decision
Jan. organizational efforts, including
finding that the company violated 1998
discharging employees, prohibiting the NLRA, and adopted the ALJ*s
employees from wearing union insignia recommended order, as modified,
while at work, and threatening that the company (1) cease and employees
because of their support for
desist from discharging and/ or not the union.
recommending employees for rehire because they engage in union activities,
prohibiting employees from wearing union insignia at work, threatening
employees that they will not get work, will be terminated, or will be
the object of reprisals if they support the union, and from numerous other
actions and (2) reinstate an employee to her former job, offer certain
applicants employment to jobs to which they applied, make certain
employees whole for any loss of earnings or benefits, remove any reference
to
the unlawful discharges or refusals to hire from personnel files, post
notice of the order, and file a sworn certification attesting to the steps
taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Automobile parts Feb. Complaint alleged that company Not In an October
1997 decision, the 1998 $100
painting company toApr. engaged in unfair labor practices in available
NLRB adopted, with modifications, 1996 violation of the NLRA by setting up
the ALJ*s May 1997 decision that surveillance to record union organizing
the company had violated the activity and interfering with the right of
NLRA, and adopted the ALJ*s employees to organize and by recommended
order, as modified, engaging in certain acts to discourage
that the company (1) cease and union membership, including the desist from
creating the discharge of union supporters, from the impression that
employees* union date certain employees presented an activity is under
surveillance,
organizing petition to the plant prohibiting employees from manager to the
date of the election distributing union literature in (which the union
won) and thereafter.
nonwork areas on nonwork time, threatening employees with reprisals for
engaging in union activity, and from several other actions, and (2) remove
from personnel files any reference to unlawful warnings given certain
employees, post notice of the
order at its facility, and file a sworn certification attesting to the
steps taken to comply.
Blood services July Complaint alleged that the organization July In an
August 1997 decision, the 1997 $4, 216
organization 1996 announced wage increases to 1996 NLRB affirmed the ALJ*s
March
employees the day prior to a union 1997 decision that the
representation election in order to organization violated the NLRA (by
influence the outcome of the voting.
announcing the wage increase the day prior to the election) and adopted
the ALJ*s recommended order that the organization (1) cease and desist
from announcing a wage increase in order to dissuade employees from
selecting the union as their collective bargaining representative and (2)
post copies of the order and file a sworn
certification attesting to the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Security services May Complaint alleged that the company
May In a July 1998 decision granting 1998 $62, 158 company 1998 refused
the union*s request to bargain
1998 the NLRB General Counsel*s in violation of the NLRA following the
motion for summary judgment, the union*s certification as employees* NLRB
found that the company exclusive collective bargaining agent.
violated the NLRA and ordered it to (1) cease and desist from refusing to
bargain with the union and (2) bargain on request with the union and to
post notice of the order at its facilities and file a sworn certification
attesting to the
steps taken to comply. Energy products Mar. Complaint alleged that the
company
Apr. In an August 1998 decision, the 1998 $323, 340
company toApr. violated the NLRA when it permanently 1995 NLRB affirmed
the ALJ*s August 1995
laid off the collective bargaining unit 1996 decision finding a violation
of employees and subcontracted the work the NLRA and adopted the ALJ*s in
order to cut costs, which was
recommended order that the prohibited by the collective bargaining
company (1) cease and desist agreement.
from subcontracting work of employees and permanently laying them off
during the term of the collective bargaining agreement, and (2) reinstate
employees to their former jobs, make whole the employees for loss of
earnings and benefits, comply with the respective collective bargaining
agreements and bargain in good faith and obtain the consent of the
union before making changes in the terms and conditions of employment,
post notice of the order at its facilities, and file a sworn certification
attesting to steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Food services and May Complaint alleged that the company
May In a July 1997 decision, the NLRB 1997 $386 uniform company 1997
refused to bargain with the union
1997 granted the NLRB General following the union*s certification as the
Counsel*s motion for summary exclusive bargaining representative of
judgment and concluded that the the employees, in violation of the
company*s refusal to recognize NLRA.
and bargain with the union violated the NLRA and ordered the company to
(1) cease and desist from refusing to bargain and (2) bargain on request
with the union, and to post notice of the order and file a sworn
certification attesting
to the steps taken to comply. Tire retread
Sept. Complaint alleged that the company Oct. In a December 1996 decision,
the
1997 $100 company 1996 violated the NLRA by refusing to 1996 NLRB granted
the NLRB General
bargain with the union following the Counsel*s motion for summary union*s
certification as the exclusive judgment and concluded that the bargaining
representative of the company*s refusal to bargain with employees. the
union violated the NLRA and ordered the company to (1) cease and desist
from refusing to bargain and (2) bargain on request with the union and to
post notice of the order at its facility and file a sworn certification
attesting to the steps
taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Heavy equipment Nov. Complaint alleged that the company Not In December
1996 decision, the 1997 $21, 912
manufacturer to unfairly restricted an employee*s union
avail. NLRB affirmed the ALJ*s May Dec. activities and suspended and
1995 decision that the company 1993 discharged the employee for his
violated the NLRA and adopted, as protected union activities, and
modified, the ALJ*s recommended committed various acts of threats, order
that the company (1) cease surveillance, and intimidation, in
and desist from restricting the violation of the NLRA. display of union
materials from an employee*s toolbox, restricting
employees who are union officials from walking around and talking with
other employees in the work area, interfering with an employee*s right to
talk to a union
officer on nonworktime, threatening employees with discharge for having
engaged in protected activity or for wearing union insignia, and
suspending or discharging employees because of the protected activity and
(2) rescind the *gag order* imposed on an employee, offer full
reinstatement to the employee to
his former position, make the employee whole for any loss of earnings or
benefits, remove from the employee*s personnel file any references to the
unlawful discharge, post notice of the order at its facility, and file a
sworn certification attesting to steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a
Heavy equipment June Complaint alleged that the company Not In a January
1997 order, the NLRB 1997 $21, 912
manufacturer 1993 changed its grievance procedures and available adopted
the ALJ*s October 1996 implemented an employee cash award
decision that the company*s program without bargaining with the
refusal to designate any member union, in violation of the NLRA. of
management to meet union officials at certain grievance meetings violated
the NLRA and adopted the ALJ*s recommended
order that the company (1) cease and desist from unilaterally eliminating
a step of the grievance
procedure (by failing and refusing to designate a representative of
management to participate) and from making any cash award to any member of
the bargaining unit without reaching agreement or impasse with the union,
and (2) post at its facility notice of the
order and file a sworn certification attesting to the steps taken to
comply. Heavy equipment Jan.
Complaint alleged that the company June
In an August 1997 decision, the 1997 $21, 912
manufacturer 1994 engaged in unfair labor practices when 1994 NLRB
affirmed the ALJ*s decision it removed union notices from bulletin of July
1996 that the company
boards and walls. violated the NLRA and adopted, with modification, the
ALJ*s
recommended order that the company (1) cease and desist from removing
posted union notices and signs advertising union events, and (2) post
notice
of the order at its facilities and file a sworn certification attesting to
the steps taken to comply.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a Cases from the Department of Justice: Civil cases
Aerospace, Not In an employment discrimination case Feb. In September
1998, a U. S. District 1998 $148, 248
munitions, & available brought by the U. S. Equal Employment 1998 Court
granted partial summary defense systems Opportunity Commission (EEOC), the
judgment to EEOC and the company
EEOC alleged that the company and employee, finding that the the
employee*s union failed to company and the union failed to accommodate the
employee*s religious reasonably accommodate the
beliefs, violating Title VII of the Civil employee*s religious beliefs
under
Rights Act of 1964 (which makes it Title VII; the subsequent appeal
illegal for employers and labor unions was dismissed in August 1999 to
discriminate against any individual
after the parties stipulated in because of his religion). Specifically, a
March 1999 to a settlement which union security clause required gave the
employee the requested company employees to pay *union religious
accommodation and a fees* even if they did not join the union payment of
$20, 000.
and the employee objected and requested his fee be paid to a charity
instead based on religious grounds. The company did not agree to the
proposed accommodation because it was contractually bound to collect his
*union fees* and the union refused since it believed the employee*s
objection to paying union fees was not recognized under current labor law.
(Continued From Previous Page)
Date( s) and description of alleged incident Fiscal
year 2000 federal Date Date contract Type of case case
amount company Date Description
opened Resolution of case closed
($ 000) a Antitrust laws Cases from the Federal Trade Commission: Cases
from the Department of Justice: Criminal cases
Military insignia 1990
Under the one- count felony charge filed July Pursuant to the plea
agreement,
Nov. $209 retailer to
in U. S. District Court, the company was 1996 the Antitrust Division of
the
1996 1993 alleged to have conspired to fix prices Department of Justice
and the and rig bids for military insignia sold to
company jointly recommended to the Army Air Force Exchange Service the
court, and the court imposed, a for resale to U. S. military personnel, in
fine of $300, 000 for the violation. violation of the Sherman Act, which
prohibits conspiracies in restraint of trade. The company carried out the
conspiracy by discussing with other
companies the prospective bids for bulk insignia contracts, designating
the company that would be the low bidder, and submitting intentionally
high bids. The company also conspired with other military insignia
companies by discussing and agreeing on the level of price increases on
the Exchange Service contract that covered some 4,000 different military
insignias.
Note: This appendix lists criminal cases from enforcement agencies where
the contractor pled guilty (or no contest), a plea agreement was reached,
or the contractor was otherwise convicted, and civil and administrative
cases from enforcement agencies where a violation of law was determined by
a court or adjudicated administrative decision. a Fiscal year 2000 federal
contract amount is the total dollars (in thousands) obligated during
fiscal year
2000 as shown in GSA*s Federal Procurement Data System file information.
Source: GAO analysis of enforcement agency data.
Appendi x I II
GAO Contacts and Staff Acknowledgments GAO Contacts Bernard L. Ungar (202)
512- 2834 Sherrill H. Johnson (214) 777- 5600 Acknowledgments In addition
to those named above, Michael Rives, Tyra DiPalma- Vigil,
Syrene Mitchell, Derrick Collins, Adam Couvillion, Ray Occhipinti, Bill
Scott, Elwood White, Adam Vodraska, Delois Richardson, Michele Fejfar,
Susan Wallace, and Donna Leiss made key contributions to this report.
(240419)
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a
GAO United States General Accounting Office
Page i GAO- 03- 163 Adjudicated Contractor Violations
Contents
Contents Page ii GAO- 03- 163 Adjudicated Contractor Violations
Page 1 GAO- 03- 163 Adjudicated Contractor Violations United States
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Appendix I
Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix II
Appendix II Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
Court or Adjudicated Administrative Decision
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix II Agency Cases Where a Law Violation Was Found by a Federal
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Appendix III
United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300
Address Service Requested Presorted Standard
Postage & Fees Paid GAO Permit No. GI00
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