House GOP eager to strip debarment provision from contracting bill

House Republicans are hoping to strip a controversial provision from a Democratic procurement oversight bill that could allow large federal contractors to be targeted for suspension or debarment based on the actions of a select few employees, according to a congressional aide who specializes in contracting measures.

The staffer, who requested anonymity because he is not authorized to speak on the record to the media, said the Contractors and Federal Spending Accountability Act (H.R. 3033) would place many of the country's largest and most influential contractors at risk of losing out on future government work.

"This has not been carefully thought out, and the consequences of it are not clear," the aide said earlier this week.

Sponsored by Rep. Carolyn Maloney, D-N.Y., the bill's primary provision is the creation of a public database that would track completed criminal, civil or administrative proceedings against federal contractors in the past five years.

The database proposal is opposed by the Bush administration and contracting trade groups who fear that it will be used to intimidate or blacklist unpopular companies. Sparking even greater concern in the procurement sector is a less publicized measure in the bill that calls for disciplinary action against contractors whose employees have violated the law.

The provision would direct federal officials to start suspension or debarment proceedings against any contractor with two judgments or convictions for the same offense during any three-year period as long as that offense constitutes a cause for debarment. Contractors would be allowed to defend themselves and avoid suspension or debarment by demonstrating that they have "corrected the conditions that gave rise to the violations."

An agency official would make the final verdict, and suspension or debarment would affect a company's ability to obtain contracts from all executive branch agencies.

Among the causes for debarment listed in the Federal Acquisition Regulation are fraud or other criminal offenses committed in connection with winning a contract. Contractors also could be debarred for a broad array of white-collar felonies such as bribery, embezzlement or tax evasion. And a catch-all provision cites the "commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a government contractor or subcontractor."

A spokeswoman for Maloney said the provision will not be retroactive and companies would not be punished for past judgments or convictions.

But critics argue that the provision sets an unfair standard for large contractors, which have more employees -- and therefore more opportunities -- to be involved in questionable behavior that could have little to no direct relationship to company management.

"The rule is supposed to protect the government from firms tainted by fraud," said the congressional staffer, pointing to Enron, for example, which was debarred after its wide-ranging corruption scandal was exposed. "This [bill] would not provide debarment officials with any wiggle room."

Despite objections from some Republicans, Maloney's bill won approval from the House Oversight and Government Reform Committee last week.

Opponents of the legislation were able to amend it to include only completed proceedings in the database, but the changes were not enough to pacify Rep. Tom Davis, R-Va., ranking member of the committee.

Davis said the bill's "two strikes and you're out" language could be devastating to a company such as Boeing Co., which has been found guilty or entered into settlements for violations of numerous federal laws, some of which are listed as causes for debarment under the FAR. The aerospace giant is the No. 2 contractor, according to procurement data from the General Services Administration, with more than $22 billion in federal contracts last year.

Under Maloney's legislation, Boeing's role in a high-profile 2003 Air Force procurement scandal could count as two similar adverse actions that would make the company eligible for debarment. Boeing's former chief financial officer Michael Sears and Darleen Druyun, a former Air Force acquisition executive who later took a job with the company, both pleaded guilty to conspiring to assist the contractor with a tanker lease contract.

Likewise, two former employees of KBR Inc., the former Halliburton subsidiary, were found guilty in 2005 and 2006 in separate schemes for accepting kickbacks from two foreign subcontractors -- crimes punishable under the FAR with possible debarment. KBR is the sixth-largest contractor, with just under $6 billion in federal contracts in 2006, and the most prolific company in Iraq.

"By approving this bill, the committee sanctioned the possible elimination of Boeing and other vendors from the government marketplace," Davis said. "Of course, I support the appropriate use of the debarment process to prevent bad actors from getting federal contracts. But it always has been a means to protect the government, not to punish businesses."

But Democrats contend that the bill does not change the reasons a company would face suspension or debarment, but rather forces federal officials to adopt a common standard to evaluate private contractors and enforce existing regulations.

"Right now, there is nothing stopping a fraudulent contractor from bouncing from federal agency to federal agency, fleecing U.S. taxpayers the whole way," Maloney said. "Congress can and should do more to fortify the federal procurement system, and show the door to contractors lining their pockets at the expense of hardworking taxpayers."

Scott Amey, general counsel for the Project on Government Oversight, a Washington watchdog group that unveiled a similar contractor misconduct database last year, said the intent of the bill was not to blackball large contractors, but rather to prevent the most risky companies from receiving future government work.

"One judgment or conviction might be the result of a few bad apples," Amey said, "but multiple related misconduct instances expose a pattern that requires government action."