Obama goes after tax-delinquent contractors

President Obama issued a memorandum on Wednesday designed to ensure that companies that are seriously delinquent on their taxes are not awarded federal contracts.

The order directs the Internal Revenue Service commissioner to review the certifications firms submit when bidding for federal contracts showing they are up-to-date on their taxes. The IRS chief is to report to the White House within 90 days on the accuracy of those certifications.

The directive also requires the Office of Management and Budget chief and other agency heads to evaluate how contracting officers and officials responsible for suspension and debarment respond when confronted with significant delinquencies. Obama asked the OMB director to issue recommendations within 90 days on how to improve the process of ensuring these contractors are not awarded new contracts. OMB also is to develop a plan to make contractor tax certifications available in a governmentwide procurement database.

In announcing the crackdown, Obama cited Government Accountability Office reports that have found "tens of thousands of such deadbeat companies that are being awarded government contracts." The White House noted the watchdog agency has determined these contractors owe more than $5 billion in taxes.

"You do your jobs, you support your families, you pay the taxes you owe -- because it's a fundamental responsibility of citizenship," Obama said. "And yet, somehow, it's become standard practice in Washington to give contracts to companies that don't pay their taxes."

Obama said the status quo is not only inefficient and wasteful, but fundamentally wrong.

"We need to insist on the same sense of responsibility in Washington that so many of you strive to uphold in your own lives, in your own families, and in your own businesses," he said.

The memo states that too often, government contracting officials lack the basic information they need to determine if a company bidding on a federal contract is behind on taxes. To this end, Obama called on Congress to supplement the memo with legislation to facilitate better communication between the IRS and federal procurement officials. Such measures were previously introduced by Sen. Claire McCaskill, D-Mo., and Reps. Brad Ellsworth, D-Ind., and Edolphus Towns, D-N.Y.

Obama also said he intends to include a provision in his fiscal 2011 budget proposal, which the administration is set to release on Feb. 1, that would allow the government to pay down contractors' outstanding taxes before compensating them directly for their products or services. The president included similar language in last year's request, but Congress did not approve it.