Mistrust fosters oversight arms race

Lawmakers and acquisition leaders compete on measures to improve contractor oversight

Bush administration officials are rushing to rewrite a procurement rule that contains an ethics loophole they said they hadn’t noticed before it became a federal regulation. That loophole exempts contractors who perform government work overseas from complying with some ethics reporting rules.

Meanwhile, Congress is hurrying to close the same loophole. On April 23, the House passed the Close the Contractor Fraud Loophole Act (H.R. 5712) after some House members scolded administration officials for creating a bad regulation.

“It’s weak ground when your defense to conspiracy is a plea of incompetence,” Rep. Peter Welch (D-Vt.), who introduced the bill, told reporters. “I don’t trust the Bush administration on this.”

Saying they can’t trust regulatory officials to do their jobs, Welch and other lawmakers have turned to legislative action to make contractors more accountable. With lawmakers and acquisition leaders working on measures to improve contractor oversight, their work often overlaps. However, some political observers say the action on Capitol Hill might be making regulators work harder — and faster — to show Congress they have a common interest in better oversight of contractors.  

“We are doing something” about the ethics loophole, Paul Denett, administrator of the Office of Federal Procurement Policy, told a House subcommittee April 15. Denett said he would personally expedite the regulatory process to close the overseas ethics exemption.

“Give us a turn at bat,” Denett said. “You’ll be pleased with the outcome.”

A Federal Acquisition Regulation rule approved in November 2007 required contractors to voluntarily report fraud and abuses, post inspectors general hotline posters and have a business code of ethics. However, the rule exempted contractors that perform work overseas.

Administration officials said the ethics exemption for overseas contractors was a loophole that slipped passed numerous regulators and into federal procurement regulations by mistake. It was a drafting error, said David Drabkin, the General Services Administration’s acting chief acquisition officer.

Regulators hastily copied and pasted language from a long-standing Defense Department procurement regulation, which included the exemption. “They were in a hurry,” Drabkin said.

Procurement officials at the time were following directions from Sens. Joe Lieberman (I-Conn.) and Susan Collins (R-Maine),  the chairman and ranking member, respectively, of the Homeland Security and Governmental Affairs Committee. The lawmakers wanted regulators to require agencies to post fraud hotline posters, and they wanted regulations to reflect DOD rules on reporting fraud and abuses. And that is what the regulators did, Drabkin said.

However, Denett’s and Drabkin’s explanation about the loophole left some lawmakers still unconvinced.

“I hope the administration makes good on its word and closes this loophole, but I’m mindful that it took congressional oversight and action to stir them into action,” Rep. Benny Thompson (D-Miss.), chairman of the Homeland Security Committee, said April 23 on the House floor.

On April 3, Welch introduced the bill to close the ethics exemption for overseas contracts. The House passed the bill April 23 by voice vote.  

Reps. Henry Waxman (D-Calif.) and Tom Davis (R-Va.), chairman and ranking member of the Oversight and Government Reform Committee, agreed to give regulators six months after the bill became law to close the loophole on their own. After that, the statute would kick in.

Welch’s bill exemplifies a trend in which legislators and regulators are proposing legislation and regulations that essentially mirror each other.

For example, regulators have circulated a proposed rule that would restrict a compan y with delinquent taxes from receiving a government contract. Procurement officials took that action nearly nine months before Congress passed the fiscal 2008 omnibus spending bill in December 2007. The spending bill contains a provision that prevents a tax-delinquent company from performing government work in fiscal 2008. The administration’s proposed procurement rule covers all future fiscal years.

Meanwhile, Rep. Brad Ellsworth (D-Ind.) introduced a bill Dec. 19, 2007, that would make the tax-delinquency provision permanent. Ellsworth’s Contracting and Tax Accountability Act (H.R. 4881) would require that contracting bid proposals include a certification that the company making the offer is not a tax scofflaw.  

The House passed that bill by voice vote April 14 and sent it to the Senate for consideration. Senators have not acted on a complementary version of the bill (S. 2519), which Sen. Barack Obama (D-Ill.) also introduced Dec. 19, 2007.

Notice of a similar tax-delinquency oversight provision appeared in the Federal Register March 30, 2007. In that notice, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council proposed a rule that would require contractors to certify their tax delinquency status or certify whether they received a notice of an unsatisfied tax lien during the three years before they bid on a federal contract. If a contractor has unpaid taxes, an agency’s contracting officer could debar or suspend the company from federal work.

Acquisition regulators finalized that rule April 22.

In light of those actions, Davis questioned the purpose of passing the Ellsworth bill. In the oversight committee’s report on Ellsworth’s bill, Davis urged Congress to focus instead on the acquisition workforce.

Davis said he has concerns that the bill “will not remedy poorly defined requirements or provide us with a sufficient number of federal acquisition personnel with the right skills to select the best contractor and manage performance.”

Davis added that legislation can be “a blunt instrument to a process that needs delicate surgery.”

Agreeing with Davis, Denett said the rule-making process is more advantageous than legislation because it gives government, industry and other acquisition experts a chance to weigh in on a proposal.

Denett added that the various proposed acquisition rules that regulators are considering are without precedent in their rigor. For example, the rules would require contractors to have ethics programs and internal reporting processes. Regulators also are considering a rule to further regulate the use of government purchase cards and another to prevent personal and organizational conflicts of interest.

One proposed rule would require agencies to publish a notice on the Federal Business Opportunities Web site of all sole-source multiple-award awards that are valued at more than $100,000.

Lawmakers have also urged agencies to provide more transparency by publicizing  sole-source and no-bid contracts.

The difference between today’s executive/legislative branch relationships and past relationships is a lack of trust, some political observers say. Differences in policy views between legislators and regulators is nothing new, but the deep distrust is, said Harris Miller, a former deputy director of congressional relations at the Office of Personnel Management. Miller said Democrats and Republicans had their partisan views, but they worked together.

Miller, who is now chief executive officer of the Career College Association, said administration officials and lawmakers trusted each other in the past. However, by his actions, Denett hinted that the current climate has prompted acquisition officials to act quickly by issuing their own regulations to improve the oversight of contractors. 

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