Trade group weighs in on Blackwater, IBM

The Environmental Protection Agency appears to have skipped several customary steps in the federal suspension process when it briefly barred IBM from winning contracts with the government, according to officials from a leading contracting trade association.

On March 28, EPA suspended IBM after company employees allegedly obtained protected source-selection data from an agency official during contract negotiations. The suspension, which was lifted April 3, applied governmentwide.

Contracting officials from a trade association suggest, however, that EPA may have jumped the gun with its decision to suspend the company. Stan Soloway, president of the Professional Services Council, said the agency could have issued subpoenas, conducted a thorough internal investigation of the allegations or at least sent a notice of intent to IBM about its decision -- thereby providing the company with an opportunity to explain itself. Those steps do not appear to have been followed.

"Our concern is about the process…. There may have been a better and fairer process," Soloway said on Wednesday as he and other PSC officials met with reporters to discuss a host of issues affecting the contracting community.

The meandering discussion ranged from the Air Force's controversial decision to award a $35 billion contract to a foreign firm to build a fleet of aerial refueling tankers to questions about a loophole that could allow overseas contracts to be hidden from federal oversight.

The refueling tanker contract, awarded in March to Northrop Grumman and EADS, the European parent company of Airbus, has angered many lawmakers on Capitol Hill who argue the Air Force should have selected Boeing Co., in part because it would have created more domestic jobs. Rep. John Murtha, D-Pa., chairman of the House Defense Appropriations Subcommittee, has threatened to pull the funding for the contract if the Air Force does not reverse course. The Government Accountability Office is reviewing the contract after Boeing protested.

If GAO does not find reason to overturn the decision, officials doubt that Congress would act unilaterally to hand the contract to Boeing. "It's a tough decision either way you go," said Colleen Preston, PSC's executive vice president for policy and operations. "But it would be very difficult to abrogate the entire situation."

While politics unquestionably has become an issue with the tanker contract, it does not appear to have played a role in the State Department's decision last week to renew Blackwater Worldwide's private security contract in Iraq, according to Alan Chvotkin, executive vice president of PSC.

Chvotkin said State's decision appears to be "routine" and based strictly on the "resources" the department needed in Iraq. Only a select few companies are capable of supplying the number of private security contractors currently that Blackwater provides.

"Contracting is not driven by a political agenda as much as it appears to be," Soloway added. "It is driven by mission requirements."

Blackwater is under investigation by the FBI after its guards reportedly opened fire in a crowded Baghdad square last September, killing 17 Iraqi civilians and injuring two dozen others.

Questions also have been raised over how an overseas contracting loophole appeared in proposed changes to the Federal Acquisition Regulation.

Last year, the Justice Department proposed a rule that would require contractors to notify the government about evidence of contract abuse worth more than $5 million, but exempted all overseas contracts, including those in Iraq and Afghanistan. Contractors currently report evidence of abuse on a voluntary basis.

According to PSC, the overseas exemption was based on a 25-year-old Defense Department rule that dealt with the difficulty of applying U.S. ethical standards on foreign subcontractors.

Democrats have introduced a bill to close the loophole and plan to address the issue at an April 15 hearing of the House Oversight and Government Reform Committee.

Soloway suggested the rule, if applied overseas or otherwise, could lead to minor paperwork errors or billing mistakes being handed over to the Justice Department for investigation, rather than being handled quickly by the contracting officer. "Once you move it to that [Justice Department] environment, it changes everything," he said. PSC opposes the overall FAR rule change.

PSC also announced a new Web site -- smartcontracting.org -- that will serve as a clearinghouse for information about federal contracting. The site provides information about pending procurement legislation, myths about the acquisition community and links to recent policy reports.