Grassley Slams SEC for Culture of Retaliation at Regional Office

Senate Finance Committee Ranking Member Charles Grassley (R-IA) sent a scathing letter to Securities and Exchange Commission (SEC) Chairman Mary Schapiro last week raising concerns that an SEC regional office has been retaliating against whistleblowers and blatantly ignoring the Office of Inspector General’s (OIG) recommendations for disciplinary action.

Senator Grassley’s letter was posted yesterday afternoon by The Washington Post’s Zachary Goldfarb, who has more background on this incredible story over at Market Cop.

The OIG reported earlier this year that examiners at the SEC’s Fort Worth Regional Office (FWRO) were raising concerns about Allen Stanford’s Ponzi scheme as early as 1997—more than a decade before the SEC finally got around to cracking down on the $7.2 billion fraud. One of the first people to sound the alarm was veteran examiner Julie Preuitt.

Energy Department and Contractors Caught Passing Love Notes

Our buddies at Nuclear Watch New Mexico found a really interesting article in Sandia Lab News: “New Performance Evaluation Plan marks maturation of Sandia/NNSA relationship.” We would hardly call it a maturation—it’s more of an infatuation, as it further confirms our fears that the Department of Energy (DOE) is weakening accountability systems for the contractors who run our nuclear weapons facilities.

We’ve recently raised concerns about DOE’s move to “partner” with the contractors, but this newsletter almost makes us blush—with talk of moving towards a “more trusting” relationship, it provides more insight into the growing intimacy between the government and its contractors.

Unfortunately, the public may be less trusting of both National Nuclear Security Administration (NNSA) and the contractor now that one of the key documents used to measure the performance of the contractor—Performance Evaluation Plan (PEPs)—appears to have been rendered worthless.

According to Sandia’s newsletter: 

Morning Smoke: Grassley Questions SEC Response to Allegations of Whistleblower Retaliation

Grassley calls SEC response on alleged retaliation 'extremely disturbing' by Zachary Goldfarb [Market Cop]

Melting the fat off defense contracts by Paul Kawika Martin [Politico]

Another Leak Prosecution by Steven Aftergood [Secrecy News]

Nuclear security remains bulk of Energy budget by Katherine McIntire Peters [Government Executive]

Budget battles could crimp SEC's plans by Mark Schoeff Jr. [Investment News]

FINRA rebels prevail but change unlikely by Joseph Giannone [Reuters]

$1 Trillion Bought Older, Smaller Forces; Fix it, Mr. Gates by Winslow Wheeler [DoD Buzz]

Crisis panel to hear from Bernanke and Lehman's Fuld by Karey Wutkowski and Dave Clarke [Reuters]

Massive Spending Vs. Wise Budgeting by Paul McLeary [Ares]

HP Holds Navy Network ‘Hostage’ for $3.3 Billion by Noah Shachtman [Danger Room]

Morning Smoke: Oversight of Foreign Subcontractors Hampered by Corruption, Enforcement Obstacles

The Struggle to Police Foreign Subcontractors in Iraq and Afghanistan by Nick Schwellenbach [The Center for Public Integrity]

US wasted billions in rebuilding Iraq by Kim Gamel [Associated Press]

Drilling Rules Shake-Up Puts New Regulator in Spotlight by Stephen Power and Naureen Malik [The Wall Street Journal]

Spinal Fusion Device: A Bone of Contention for FDA by John Fauber [Milwaukee Journal Sentinel/MedPage Today]

It's Not Over Until It’s In the Rules by Gretchen Morgenson [The New York Times]

Report: Warnings about e-mails went unheeded in Bush White House by Ed O'Keefe [The Washington Post]

Wikileaks case could be the push to update espionage laws by Jill Aitoro [Nextgov]

SEC Wants Securitization Made Easy by Daniel Indiviglio [The Atlantic]

Charges Bring SEC Hopes for New Weapon by Sara Schaefer Munoz [The Wall Street Journal]

Morning Smoke: GAO Reports on Lack of Genuine Competition in Federal Contracting

Agencies are getting too attached to incumbent contractors, watchdog finds by Robert Brodsky [Government Executive]

BP Executives Say They Didn’t Know Who Commanded Rig by Joe Carroll and Katarzyna Klimasinska [Bloomberg]

Banks’ Self-Dealing Super-Charged Financial Crisis by Jake Bernstein and Jesse Eisinger [ProPublica]

Behind Scenes of Gulf Oil Spill, Acrimony and Stress by Clifford Krauss, Henry Fountain and John Broder [The New York Times]

Nod to national security advances whistleblower protection bill by Joe Davidson [Federal Diary]

A Big Surprise: Troubled Assets Garner Rewards by Eric Dash [The New York Times]

Navy Lost Control of Drone Over D.C. Due To 'Software Issue' by Kyle VanHemert [Gizmodo]

An Autopsy of Fannie Mae and Freddie Mac by Binyamin Appelbaum [Economix]

Court Rejects Fed's Latest Attempt to Keep Bailout Records Secret

As the debate continues over whether to give the Securities and Exchange Commission (SEC) more authority to withhold records under the Freedom of Information Act (FOIA), there was an important development last week on a separate FOIA controversy involving the Federal Reserve Board and its emergency bailout programs.

Last Friday, the full U.S. Court of Appeals in New York declined to reconsider its decision requiring the Fed to comply with Bloomberg’s FOIA request for records on the banks that accessed some of the Fed’s lending facilities in the early stages of the financial crisis. This latest ruling now sets the stage for a possible showdown before the Supreme Court.

POGO has been closely following this case over the past few months because it concerns one of the major unsolved mysteries from the financial crisis: which banks benefited from trillions of dollars in discount and emergency lending from the Fed?

New Item in Openness Floor: Ethics Program Reviews

Our opengov community has added a new item to the "Openness Floor," the set of minimum requirements that executive branch agencies must meet in order to be considered "open."

The new item falls into category A., Accountability & Influence:

8. Ethics Program Reviews conducted by the Office of Government Ethics.

The Office of Government Ethics (OGE) used to publish these periodic reviews of agency ethics programs, but now only releases them in response to Freedom of Information Act (FOIA) requests. Given recent concerns about certain agencies' ethics programs (we're looking at you, Interior), now might be a good time for agencies to take a more proactive approach.

We have updated our July blog post to reflect this new addition. You can also download the Floor as a .pdf:

• August 20, 2010 version of the Openness Floor
• May 14, 2010 version of the Openness Floor

The Openness Floor has been developed by a coalition of good government groups, with OpenTheGovernment.org and OMB Watch spearheading the process.

-- Bryan Rahija

Was BLM Manager's Relationship with Industry Too Obvious to Be Ignored?

One important note to the recent Inspector General (IG) report on Bureau of Land Management (BLM) manager-turned industry group president Steve Henke is that the investigation was provoked by a referral from the Government Accountability Office (GAO). That kind of GAO referral is, in our experience, rarely seen. It's great to see members of the oversight community work together and the IG deserves kudos for following through on the referral. But it's also clear that in the course of conducting reports raising concerns about BLM's use of categorical exclusions and land value oversight, GAO investigators were concerned that Henke was too close to oil and gas industry officials—and perhaps felt that those ties were so egregious that they simply couldn’t be ignored.

As this story unfolds, we’re starting to wonder if Mr. Henke’s attitude reflects broader attitudes towards ethics policies at his former agency. It's outrageous that Mr. Henke is so incredulous about the criticism being directed toward him. He violated ethics policies that were bright red lines—don't solicit money from industry, disclose gifts—and accelerating an application for a company that gave his son an internship raises questions about whether there was a quid pro quo relationship. Any BLM employee should know better, and as a manager, it was even more important for him to follow the rules and set an example. Because Mr. Henke was in management, these ethics failures are potentially indicative of a larger culture of cozy relationships with industry at BLM. Furthermore, since we’ve seen the same too-close-to-industry failures at the Minerals Management Service (MMS), we think the Department of Interior needs stricter rules and more consequences for bad actors across the board.

Morning Smoke: Bidding on $40 Billion Ground Combat Vehicle Gets a Reboot

Army to re-start bidding process for new $40B ground combat vehicle program by Roxana Tiron [The Hill]

Former Chief of Drilling Agency Says New Inspection System Is Needed by John Broder [NYT Green Blog]

SEC Makes Ousting Directors Easier by Jessica Holzer and Dennis Berman [The Wall Street Journal]

Despite Reform, Banks Have Room for Risky Deals by Nelson Schwartz and Eric Dash [The New York Times]

The Subprime Mortgage Crisis on Trial by Peter Henning [White Collar Watch]

On Doomed Rig's Last Day, a Divisive Change of Plan by Russell Gold and Ben Casselman [The Wall Street Journal]

Accountability for CIA's covert acts by Stephen Weissman [Politico]

Defense agency seeks 10 percent price reduction from suppliers by Katherine McIntire Peters [Government Executive]

Federal Contracting: Opportunities Exist to Increase Competition and Assess Reasons When Only One Offer Is Received [Government Accountability Office]

One If by Land, Two If by FAPIIS

Yes friends, FAPIIS is coming! Today, Washington Technology is reporting that FAPIIS will be publicly available by the end of the year. Although details will still be debated via public comments and the rule making process, we can see the two lights at the end of the tunnel.

-- Scott Amey

See also:

• Move Over FCMD Make Way for FAPIIS
• Contractors Ponder Next Move With Regard to FAPIIS
• New Law Paves the Way for Public Posting of FAPIIS
• Feast Your Eyes on FAPIIS

GSA Scheduling Conflict

GSA schedules are beneficial as intended, but are they a government nightmare in reality? The schedules offer pre-negotiated contracts to federal and state agencies looking to buy commercial goods and services. The prices, terms, and conditions are set, allowing a buying agency to find what it needs and place an order without the usual haggling and paper pushing.

This summer, however, some cracks have been appearing in the GSA schedule’s armor. The Justice Department has gone after two contractors, EMC and Oracle, for allegedly falsifying prices and not providing the government with discounts that they offered to other customers. Both suits were brought under the False Claims Act, and EMC has already settled with the government for $87.5 million. Another case (Ubl v IIF Data Solutions, Inc.), which DOJ has avoided (which is before the 4th Circuit), challenged the alleged fraud in setting schedule prices, as well as the authority for ordering agencies to alter pre-established terms and conditions on schedule contracts.

The same day that DOJ announced the suit against Oracle, a blog by Steve Kelman questioned the government’s ability to save money when using the schedules. Kelman wrote, “I think it’s time for a serious dialogue within government about how the government can obtain better value from the GSA schedules. The current situation is simply not, in my view, acceptable.” Reviewing the posted comments and the follow-up piece, many people agree that the government isn’t doing a good job of negotiating lower prices with schedule contractors.

Brace, for it!

POGO agrees 100% with Kelman on this one. (Sorry to disappoint those who enjoy the POGO v. Kelman battle of the blogs.) As the creator of many acquisition reforms that reduced government access to contractor information and comprehensive oversight, POGO doesn’t generally agree with Mr. Kelman, but today is a new day.

In response to these concerns an expert panel of government and industry representatives was tasked with looking at the schedules. The Multiple Award Schedule (MAS) Advisory Panel studied the schedules system for over a year and concluded that MAS schedules were not ensuring reasonable prices. That finding is spot on, but POGO was hoping that the Panel would recommend that contractor price data had to be more forthcoming so that the government could be positioned to negotiate lower prices. The problem, however, is that the Panel also recommended that many of the negotiating and oversight tools (the “Price Reduction Clause” and “most favored customer” pricing) that ensure lower prices should be scrapped. The Panel recommended that with increased competition at the delivery or task order level and additional transparency, the MAS program will ensure better deals for agencies and the taxpayer.

But as we have seen, contractors are failing to be forthcoming with their best offers, and the government does an inadequate job at leveraging its buying power and pursuing the best deal possible. That sounds crazy, but there may be a simple explanation. Contractors want to drive prices higher and so does the government. Yes, so does the government. The reason is the Industrial Funding Fee (IFF). The GSA MAS program is funded by a fee paid each quarter by the participating contractors based on gross sales for the period. The IFF was initially 1% until Congress petitioned GSA and had the fee reduced to .75% because GSA was making more from it than the cost to operate the program.

The IFF has been the subject of much criticism and POGO believes that Congress should appropriate money to agencies to end their reliance on it because it creates a perverse incentive to keep costs or prices high. In other words, agencies might not be seeking the best prices because program revenue would be lost.

I’m all for improving the GSA schedule system, but I’m not certain that the government is moving in the right direction. Competition and transparency are decent steps forward, but more has to be done to ensure that the government is taking advantage of the best deals and contractors are truly acting like the business partners they claim to be.

-- Scott Amey

Morning Smoke: White House Considering Ambitious Contracting Transparency Agenda

Push and Pull by Robert Brodsky [Government Executive]

Fighter spending gone bezerk? by Stephen Trimble [The DEW Line]

Meeting 2 [BP Deepwater Horizon Oil Spill and Offshore Drilling Commission]

How the Minerals Management Service's partnership with industry led to failure by Juliet Eilperin and Scott Higham [The Washington Post]

IG: Postal Service overpaid $6.8 billion to retirement fund by Stephen Losey [Federal Times]

Frank to hold hearing on regulation of Wall Street pay practices by Zachary Goldfarb [The Washington Post]

Early Exit of FASB Chairman Raises Anxiety by David Reilly and Michael Rapoport [The Wall Street Journal]