Energy bill provision would limit coverage of contractors’ legal expenses
Language contained in the latest version of an energy policy bill pending on Capitol Hill would limit the Energy Department's practice of reimbursing contractors for costs stemming from whistleblower lawsuits and certain other legal cases.
Between October 1997 and March 2003, the Energy Department spent $330.5 million helping contractors with a variety of legal wrangles, according to a new report by the General Accounting Office. Of that sum, $249.4 million went toward litigation fees and $81.1 million paid for judgments and settlements. Contractors paid $12 million out of their own pockets during the same period.
Energy spent the $330.5 million on 1,895 cases brought against contractors running the department's nuclear weapons laboratories and other facilities, according to the report (GAO-04-148R). More than half the cases involved workers' compensation claims, but about 100 cases concerned allegations of retaliation against whistleblowers.
Under current policy, the Energy Department reimburses contractors for "reasonable" expenses associated with whistleblower, discrimination, workers' compensation, personal injury and several other varieties of lawsuits, as long as there is no evidence that the contractor engaged in "willful misconduct, lack of good faith or failure to exercise prudent business judgment," the GAO report said.
The Energy Department is different from most other federal agencies in that contractors maintain and operate a large portion of its laboratories and other facilities, said Daniel Semick, an analyst in GAO's Natural Resources and Environment division. For example, the University of California runs Los Alamos National Laboratory, a nuclear facility in New Mexico, for the Energy Department.
But Rep. Edward Markey, D-Mass., has said that Energy's policy on payment of legal expenses forces taxpayers to shoulder the burden of some contractors' misdeeds. Markey added a provision to the Energy Policy Act being considered in Congress that prevents the department from reimbursing contractors for appealing when they lose whistleblower retaliation or wrongful termination cases. The provision would allow Energy to cover costs after-the-fact if contractors decide to appeal and win.
Markey's language made it into a compromise version of the Energy Policy Act, but the Senate has not approved that version. The Senate returns from recess on Jan. 20.
The Project on Government Oversight, a nonprofit watchdog group, praised Markey's language. Danielle Brian, the group's executive director, on Friday called the measure a "step in the right direction."
Whistleblowers are required to pay their own legal expenses if they bring a wrongful termination lawsuit against a contractor, Brian said. At the very least, contractors should have to cover the expenses of appealing cases decided against them, she said.
In the event that the Senate fails to pass the Energy Policy Act, Brian said she hopes that Markey's language could be incorporated into other legislation, or introduced on its own.
But Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based contractors association, said Energy needs the flexibility to decide whether to reimburse contractors for legal expenses on a case-by-case basis.
"No one is suggesting that the government should pay the costs of cases where there's willful misconduct," Soloway said. "But there are circumstances where the contractor is not in control."
For example, there are occasions when a contractor fires an employee because of requirements imposed by the government, Soloway said. In that circumstance, the contractor is simply acting as an extension of a federal agency and should not be responsible for court expenses, even if a case is decided against the contractor.
The existing policy, in which Energy denies contractors reimbursement only in circumstances of intentional misconduct, allows the department the needed flexibility, Soloway noted. "There's a lot of gray area" in lawsuits against contractors, he said, and many times contractors make honest mistakes and would be unfairly exposed if the government were unwilling to share some responsibility.