Committee to review gaps in contractor suspension and debarment

Federal agencies have failed repeatedly to comply with suspension and debarment regulations, allowing poor performing and unethical companies to continue winning government work, according to a key congressional panel.

The House Oversight and Government Reform Committee will hold a hearing on Thursday morning to examine three recent inspector general reports that found agencies had suspended or debarred far too few deficient contractors and that officials often disregarded rules in favor of other administrative remedies.

For example, between 2004 and 2008, the Homeland Security Department had only 10 debarment cases. But the department's IG found at least 23 other instances where officials terminated contracts for default or cause, but never reviewed the incidents to determine whether suspension or debarment referrals were warranted.

The February report noted DHS has suspension and debarment policies in place but is reluctant to follow them.

"Department procurement officials characterized the suspension and debarment process as being too resource intensive [and] punitive, and as negatively impacting the size of the contractor pool," the IG noted.

The watchdog said agencies' reluctance to pursue suspension and debarment could result in increased costs to taxpayers. Inadequate contractors also appear to be slipping by at the U.S. Agency for International Development, which took only nine suspension and debarment actions between 2003 and 2007, accounting for less than 2 percent of its contract and grant awards, according to an October 2009 report by the agency's IG.

When USAID did take debarment actions, officials often sent final notifications months late or not at all, and they failed to enter information into the government's Excluded Parties List System database, according to the report.

Meanwhile, the Transportation Department's inspector general reported in January that state officials likely awarded Recovery Act funds to an ineligible contractor.

In September 2008, the IG recommended the Federal Highway Administration suspend several companies and individuals who had been indicted in a bribery case. About 10 months after the initial referral, the agency suspended several individuals, although it did not punish their respective companies. In the meantime, officials in Kentucky awarded those businesses $24 million in stimulus contracts.

On average, Transportation takes 300 days to reach a suspension decision and more than 400 days to decide a debarment case, the IG found. Transportation guidelines, established in 2005, set a 45-day deadline for making such determinations.

The IG found Transportation officials have an unnecessarily high evidentiary threshold in suspension cases. While agency rules state an indictment or conviction is sufficient, officials often performed additional time-consuming tasks such as gathering information and conducting research not required by department policy, the report said.

Problems following suspension and debarment rules are not new. In February 2009, the Government Accountability Office found that in fiscal 2006 and fiscal 2007, agencies awarded more than two dozen contracts to businesses or individuals who at the time were under federal suspension or debarment.

The three IGs are scheduled to testify during Thursday's hearing, as are senior management officials representing each of the agencies.