Government continues to provide unethical contractors with work, GAO says

More than two dozen contracts were issued in fiscal 2006 and 2007 to businesses or individuals who at the time were under federal suspension or debarment, according to a new report from the Government Accountability Office.

"This is probably just the tip of the iceberg," said Gregory Kurtz, GAO's managing director of forensic audits and special projects before the House Oversight and Government Reform Committee on Thursday. "I believe that further investigation will find dozens or hundreds of other cases. These are the kinds of cases that cause taxpayers to lose faith in their government."

When the government decides to suspend or debar a contractor, they are placed in the Excluded Parties List System, a database maintained by the General Services Administration. Contracting officers are required to check the list before issuing a new award.

But according to GAO, contracting officers repeatedly failed to check EPLS or, in the Army's case, willfully ignored the suspension and debarment notice.

The president of defense contractor Optronics, a German military training company, was convicted in 2004 of attempting to illegally sell to North Korea aluminum tubes, which can be used to develop a nuclear bomb. In July 2005, more than a year after the conviction, the Army said there was a "compelling interest to discontinue any business with this morally bankrupt individual," and debarred the company from receiving further contracts.

But Army procurement officers disregarded the debarment notice and continued to pay the company an additional $4 million in fiscal 2006 through contract extensions and task orders from an existing training contract, the report said.

Despite grilling from lawmakers, Brig. Gen. Edward Harrington, the Army's deputy assistant secretary for procurement, would not acknowledge that extending Optronics' contract was a mistake, noting that the company's performance was rated as "excellent."

The general argued that the training Optronics was providing was a matter of national security, that it would have taken as long as six months to bring on a new contractor and the Army would have been obliged to pay the debarred firm in full if it canceled the contract.

"What is the point of having suspension and debarment regulations, if our own agencies disregard them?" asked committee Chairman Edolphus Towns, D-N.Y.

In other instances, GAO attributed errors to ineffective management of the EPLS database or to control weaknesses at both excluding and procuring agencies.

For example, in April 2006 the Navy suspended a company after one of the contractor's employees was caught sabotaging repairs on an aircraft carrier by using unsuitable parts to replace fasteners on steam pipes. If the pipes had ruptured as a result of faulty fasteners, hundreds could have died, the watchdog said.

But less than a month after the suspension the Navy awarded the same company three new contracts, worth more than $100,000, because a department contracting officer failed to check EPLS to verify the company's eligibility.

The problems were not limited to military agencies. In September 2006, GSA suspended a construction company after its president opened fraudulent GSA surplus property auction accounts using phony Social Security numbers.

Shortly thereafter, the Interior Department tried to check the contractor's eligibility in EPLS before making several awards to the company, but GSA had not yet noted the suspension in the system.

During its investigation, GAO successfully bought body armor worth more than $3,000 with a government purchase card through a GSA supply schedule from a company that had been debarred by the Air Force in 2007 for falsifying tests related to the safety of its products.

Jim Williams, commissioner of GSA's Federal Acquisition Service, acknowledged the mistakes, but noted they represented a few "isolated incidents" of human error, rather than a systematic breakdown. Nonetheless, GSA, as well as the Army and Navy, has sent out alert notices to agency contracting officers to remind them to check the EPLS.

"EPLS is not broken," said David Drabkin, GSA's acting chief acquisition officer.

But some lawmakers noted the database suffers from fundamental flaws, such as missing corporate identification numbers, an inadequate search function, obsolete contact information and an incompatibility with other government procurement databases.

"The egregious examples of contracting failures found by GAO not only led to waste but endangered lives," said Darrell Issa, R-Calif., the committee's ranking member. "Recommendations for fixing mistakes, including better training and technology, need to be implemented."