Justice for Some

Noticeably absent from any of Webster’s numerous definitions of "Justice" is any mention of favoritism.  In fact, if you used the following definition of justice: "The quality of being just, impartial, or fair," favoritism could almost be considered an antonym of Justice.  That said, you almost can’t help but laugh at the irony of the Department of Justice receiving two letters on Wednesday from Senator Claire McCaskill, questioning whether or not favoritism played a role in the allocation of two of their FY 2007 competitive grant programs.

Those letters were announced in a press release which questioned the competition, or lack thereof, of both the Juvenile Justice and Delinquency Prevention Grant Program and the Edward Byrne Memorial Discretionary Grant Program. The former grant program has received a fair amount of attention already, Youth Today published a great story documenting the seemingly arbitrary nature in which OJJDP Director Robert Flores awarded the Juvenile Justice grants.  That story led to a subsequent letter of inquiry (pdf) from Representative Waxman to the Office of Juvenile Justice and Delinquency Prevention.

However, prior to McCaskill’s letter (pdf), the latter Edward Byrne Memorial Discretionary Grant Program had not received any public scrutiny to the best of my knowledge.  Although the Byrne Discretionary Grant Program has flown under the public radar, it has been something that POGO has been looking into for the past couple of months.

POGO is eagerly awaiting the Department of Justice’s response to Senator McCaskill’s letter regarding the Byrne Discretionary Grants.  If, in fact, it turns out that those grants, like the OJJDP grants, were awarded through favoritism rather than competition, it would raise some serious questions about the competitive grant process in general at the Department of Justice.

-- Jake Wiens

Note: If there are any FY 2007 Edward Byrne Memorial Discretionary Grants Program applicants that have anecdotal evidence of grant mismanagement, please call Jake Wiens at (202)-347-1122.

Bizarro World

We admit that when we first saw the piece in FCW.com Monday lauding former GSA administrator Lurita Doan and excoriating the (unnamed) Inspector General who had supposedly brought her down, we just chuckled and moved on.

But on second thought…maybe there really are people out there who believe this kind of tripe!  Who actually think Doan was the brave little David battling the big bad Goliath.  On the off-chance that Neal Fox is not the only person residing in this alternate universe, we offer a brief recitation of actual facts.

Fox, former assistant commissioner of acquisitions at GSA, does not mince words.  Doan battled "IG arrogance" and "fought a trend in which IGs have usurped authority that rightfully belongs to agency leaders."

Ahem.  What authority that rightfully belonged to her?  Was that the authority to pursue bad contracts that bilked the taxpayer?  As Sen. Chuck Grassley (R-IA) stated in reference to one egregious case, that of Sun Microsystems: GSA senior officials "put pressure on the contract officer to sign a potentially bad contract.  All the evidence suggests that this particular contractor had been overcharging the government for years."

GSA IG Brian Miller's original sin was apparently to point out that Sun had overcharged the federal government by more than $25 million dating back to 1997.  Although Grassley chastised Miller for taking too long to complete the audit and for producing reports that were "incomplete, poorly organized and lacked basic information," he supported the IG's conclusions that Sun had overcharged the government.

Another charge from Fox was that "IGs have become a threat to good government by deterring innovation, causing agencies to institutionalize inefficiencies and interfering with their core missions.  IGs have shown again and again how they can get their way by public arm-twisting and underhanded tactics."

In fact, during POGO's ongoing review of the IG system, we have found that innovative ideas on how to tackle continuing management challenges often emanate from the IG's office, even while the IGs resist becoming an arm of management.  If they must occasionally go public--whether in the press or on Capitol Hill--to bring attention to their findings and recommendations, so be it.

With Doan gone, Fox agonizes, we are left with "another setback for good government at the hands of IGs."  But at least, he consoles himself, the IGs have sustained some blows--"their tactics were exposed, and their abuse of power sent a shockwave through the government."

Let's talk about the kind of "good government" that Lurita Doan brought with her during her tumultuous tenure.  She arrived at GSA in May 2006, and, according to the Washington Post: "Soon after Doan was nominated to lead the GSA this spring, she promised outside vendors that she would make contracting with the agency much easier for both government bureaucrats and corporations.  After she assumed the post, she began trimming the budget proposal of the inspector general's office.  She wrote in her annual report that the office's budget and staff had 'grown annually and substantially' in the past five years."  The Post added that in fact the number of employees had only increased from 297 to 309 from 2000 to 2006.

Doan not only proposed slicing the IG's budget by $5 million, she also wanted to shift responsibility for contract reviews to small private contractors.

Doan became infamous for referring to Miller as a terrorist, for engaging in prohibited personnel activities, and for declaring virtual war on anyone who crossed her, including Members of Congress.

Fox's single most appalling statement, however, was when he noted with approval that:  "Other agencies, such as the CIA, began to push back on their own IGs.  That is a start."

In fact, the CIA director was strongly criticized for launching an unprecedented "review" of the activities of the CIA OIG.  Ultimately an "ombudsman" was established within the OIG to make nice-nice with a group of officers that has become a de facto union.  The CIA situation appeared regrettable on its face.  It would be completely unacceptable if other agencies took even baby steps in the same direction.

The legendary Sherman Funk, an early IG at the State Department, noted that being an IG is like "straddling the barbed wire fence."  The statute clearly requires the IGs to report to both their agency heads and the Congress; never a comfortable position.  But the statute further makes clear that IGs fall under only the "general supervision," not the day-to-day supervision, of their agency chiefs.  The law specifies that the chief can delegate that supervisory power only to his second in command.  And finally, Justice Clarence Thomas, one of this administration's favorite judges, has held that such "general supervision" really amounts to "nominal supervision."

We don't need to be unthinking cheerleaders for the IG community to say that letting a Neal Fox run amok through their chicken house doesn't help anybody--least of all the U.S. taxpayer.

-- Beverley Lumpkin

A Deafening Silence on Government Reform

Although we've been inspired by some of the proposals offered by the presidential candidates, there has been almost no meaningful discussion of late about the systemic problems that are plaguing the federal government.  In yesterday's Politico, Professor Paul Light--author of a seminal study looking into one of our favorite topics, the federal Inspector General system--argues that if the next president does not put forth any ideas for fixing the federal government, he or she might be facing a "string of meltdowns that will make the federal response to Hurricane Katrina look like a minor mistake."

In making the case that the government is "perilously close to the breaking point," Professor Light cites a number of problems that have been at the heart of our recent investigations, such as the decision to ground planes across the country following the release of an IG report showing that inadequate oversight by the FAA has led to the installation of substandard aircraft parts.  He also makes reference to an issue that we've been following for years: the "hidden work force of contractors and grantees that disguises the true size of government and diffuses accountability for what goes right and wrong."

Professor Light points to these and other disturbing trends as evidence that we might be heading toward a widespread "government meltdown" sometime in the near future.  As both parties begin gearing up for the general election in the fall, we can only hope that the candidates will heed POGO and Professor Light's advice by thinking more creatively about ways to improve government accountability.

-- Michael Smallberg

It Never Hurts to Ask

As agency officials continue to grapple with issues such as competitive sourcing and an aging federal workforce, they should keep in mind that an increasing number of young Americans are expressing an interest in public service, according to a new Gallup survey to be released today by the Council for Excellence in Government.

As reported by Stephen Barr in yesterday's Washington Post, the survey found that nearly a third of Americans under the age of 30 would seriously consider working for the government if asked by their parents, a teacher, or the next president.  The only problem, according to 60 percent of respondents younger than 30, is that nobody has asked them.

Patricia McGinnis, president and chief executive of the council, says that the survey underscores the "potential for the new president and administration, especially as we have the retirement wave getting under way, to ask people, not just millennials but older people as well, to serve. There's a sense that many would respond and step up, as they did when John F. Kennedy asked."

We at POGO yearn for an influx of public-minded young people seeking to fill the ranks of the federal government. Our biggest concern is that many see working as a "fed" as nothing more than a stepping stone to making big bucks in the private sector, rather than a opportunity to serve as a guardian of the public trust. We need a leader who will once again instill in young Americans the pride of becoming a civil servant.

-- Michael Smallberg

Do As I Say, Not As I Purchase

Loyal readers of this blog might recall a recent Government Accountability Office (GAO) audit that found widespread abuses of the purchase card program throughout the federal government (e.g., the luxurious steak-and-cocktail dinner hosted by U.S. Postal Service employees that cost taxpayers over $13,000).  But if the GAO report didn't convince you that federal agencies need to do more to strengthen accountability in their purchase card programs, maybe this week's headlines will change your mind.

One of the more ironic stories of purchase card abuse comes to us from Milwaukee, Wisconsin, where a U.S. Forest Service employee, Suzanne Poetz, has pleaded guilty to stealing $300,000 from her agency's program.  As part of her plea, Poetz admitted to over 150 instances of theft.  But the best part of all?  In 1998, Poetz received a Hammer Award from Vice President Al Gore--for developing the Agriculture Department's purchase card program.  (The Hammer Awards were given to federal employees whose work "resulted in a government that works better and costs less").

Another example of purchase card abuse was highlighted in the Houston Chronicle over the weekend.  A review by the Chronicle showed that NASA employees have used their purchase cards to pay for iPods, video games, jewelry, karate gear, and even clothes from the agency's headquarters.  In addition, some agency employees may have broken the law by not holding competitive bids for larger purchases.  As POGO's Scott Amey pointed out, "You have to ask: is somebody trying to get around competitive requirements?"

POGO has long argued that inadequate oversight in the purchase card program exposes federal agencies to wasteful and fraudulent expenditures.  We've also issued a number of recommendations for improving oversight and accountability in the program.  Hopefully these latest scandals will serve as yet another wakeup call for agency officials throughout the government.      

-- Michael Smallberg

Over and Doan With

On Tuesday, it was reported that Lurita Doan, embattled head of the General Services Administration, was forced to resign by the White House. She made the announcement to colleagues in an e-mail. The GSA issued a press release the next day.

Doan was appointed GSA Administrator in May 2006 and almost immediately began attracting controversy. She landed on POGO's radar within a matter of weeks with a high-ranking agency appointment that reeked of cronyism. Months later, we learned of her dislike for inspectors general, whom she reportedly compared to terrorists.

Things really started going downhill for Doan in 2007 with allegations of procurement improprieties and an Office of Special Counsel determination that she violated the Hatch Act by improperly using GSA resources to help elect Republicans. Doan's March 2007 appearance before the House Oversight and Government Reform Committee bordered on the absurd, with repeated claims of having "no recollection" of the meeting at which the Hatch Act violation occurred, except that there were "cookies on the table." Her performance at that and a subsequent hearing, combined with allegations that Doan tried to intimidate employees who were cooperating with the Committee's investigation, led an exasperated Rep. Henry Waxman (D-Calif.) to call for her resignation:

Nevertheless, Doan remained on the job, looking like she would ride out the remainder of Bush's second term. But this week, she was summoned to the White House and given the axe. The question everyone is asking is: why now?

There is speculation that Doan's departure has something to do with the recent exoneration of her agency's inspector general, Brian Miller. Miller was recently cleared of misconduct allegations in two separate whistleblower investigations, much to the displeasure of Doan. It may be that Doan's ongoing public spat with Miller, on top of all of her other problems, was the straw that broke the camel's back.

What's next for Lurita Doan? It seems likely we have not seen or heard the last of Doan, who was once a very successful government contractor and deep-pocketed GOP donor. POGO will be watching.

-- Neil Gordon

When Public Information Goes Private

As companies like Google and Microsoft forge ahead with ambitious projects to scan the collections of many prominent research libraries, some have raised concerns about giving private entities so much control over content that is typically open and free to the public.

In a similar vein, a number of open government advocates and legal pundits have recently turned their attention to a suspicious contract that will give Thomson West the digital rights to a massive compilation of legislative histories prepared by the Government Accountability Office (GAO).

Much of what we know about the Thomson West contract has been uncovered by internet archivist Carl Malamud--who runs a website at http://public.resource.org--with assistance from the Electronic Frontier Foundation.  As Malamud describes it, the GAO legislative histories are the "definitive dossiers that track a bill through the hearing process and into law.  If you want to divine the intent of Congress, this is where you go."

GAO staff have compiled more than 20,000 legislative histories covering most public laws from 1915 to 1995.  As it stands now, the histories can be viewed in either paper or microfiche form at the GAO onsite library.  You can also ask GAO for copies of the histories, at a cost of 20 cents per page. 

In an effort to preserve the histories, GAO wants to scan them and make them available in electronic format.  Digitizing the histories began as an in-house effort, but GAO recently awarded Thomson West a contract to take over and complete the project (see below).  Under the terms of the contract, Thomson West will scan all of the histories (including the documents already scanned in-house) at no cost to GAO.  Once it has scanned the histories, Thomson West can make them commercially available to the public, and can charge a fee to recover the cost of digitization (GAO staff will still be able to access the documents for free on their own special account).

Read this doc on Scribd: Contract Between Thomson West and GAO

As many bloggers have observed, however, there are pressing questions about the Thomson West contract that have yet to be answered.  Since taxpayers already paid for GAO staff to compile the legislative histories, why should the public have to pay again to view the histories online?  Why do government employees outside of GAO have to pay to view the histories?  Did GAO consider awarding the contract to any educational institutions or nonprofit organizations before deciding to go with a private company?  What happens if Thomson West decides to raise its fees or further restrict public access to the histories?

We don't mean to sound the alarm on all public-private collaborations; there are countless examples of the government utilizing the efficiency and ingenuity of the private sector to advance projects that serve the public's interest.  And it is certainly understandable that Thomson West would want to charge a fee to recover the cost of digitizing the extensive collection of legislative histories.

Nevertheless, as the government puts more and more information online, it should consider the ramifications of giving private companies like Thomson West exclusive control over materials that are of great interest to the public.

-- Michael Smallberg

Senator McCaskill Is the Engine of the Accountability Train

All aboard! Senator McCaskill (D-MO) is leading the way in promoting more accountability in the federal government. Last week, the Senate passed her bill to improve the Inspector General system. Now the freshman Senator from Missouri has drafted S. 2904, which will create a contractor responsibility database--similar to the one proposed by Rep. Maloney (D-NY) in H.R. 3033, which passed the House last week. In an editorial published on Sunday, the New York Times endorsed the idea of a contractor responsibility database, and applauded POGO's Federal Contractor Misconduct Database as an effective model for keeping track of risky contractors.  But there is still more work to be done.

S. 2905 differs from H.R. 3033 in that it expands the types of cases included in the contractor responsibility database. Currently, the Senate is considering proposing some of the provisions in S. 2905 as an amendment to the forthcoming Defense Authorization bill. One suggested change by a senior leader, however, would prevent public access to the database. Considering that the vast majority of the information is already public, I'm not sure why the public should be excluded, unless of course the contractors don't want taxpayers to have a user-friendly portal to see their comprehensive rap sheets.

-- Scott Amey

Say 'NYET!' to Mergers

In an important Washington Post op-ed today, former senior Department of Defense officials Dov S. Zakheim and Lt. Gen. Ronald T. Kadish (Ret.) point out that the lack of competition in the Pentagon's buying has led it to become a Soviet-style system:

The Government Accountability Office reported last month on how things are going with nearly 100 major U.S. defense systems. Not well, it seems. They have exceeded their original budgets and are, on average, almost two years behind schedule.

The GAO report lays bare a festering problem in our nation's military procurement system: Competition barely exists in the defense industry and is growing weaker by the day.

It was a different story just two decades ago. In the 1980s, 20 or more prime contractors competed for most defense contracts. Today, the Pentagon relies primarily on six main contractors to build our nation's aircraft, missiles, ships and other weapons systems.

It is a system that largely forgoes competition on price, delivery and performance and replaces it with a kind of "design bureau" competition, similar to what the Soviet Union used--hardly a recipe for success.

With less competition, contractors have few incentives to keep costs down and performance high. In essence, we are left with a few super-sized contractors that are holding all of the cards. As witnessed by the Air Force tanker deal and the recent IBM suspension, the government has few places to turn--it has, in effect, handcuffed itself.

The Pentagon pushed a policy in the mid-90s to consolidate the defense industry, which has led to the situation we have today. Zakheim and Kadish describe a fateful Clinton Administration "Last Supper" meeting that precipitated the mergers.

Even worse, however, was that the federal government paid for the defense contractor mergers under a policy which its opponents, including POGO, called "payoffs for layoffs." At the behest of defense contractors, the Pentagon and its friends in Congress paid the contractors billions of dollars to merge. At the time, POGO noted:

These mergers contain an even more fundamental problem: even if there are short-term savings for the government, in the long run any lower prices are likely to be offset by the effects of reduced competition from excessive corporate merging. The Pentagon has not yet fully examined the long-term government costs of reduced competition from the tremendous concentration currently underway in the defense industry.

The health care, homeland security, and IT industries are also following a similar path toward merger-mania. In some instances, new companies are being gobbled up by the large DoD contractors. Too much power, influence, and control over the government marketplace is not good for taxpayers. POGO agrees with Zakheim and Kadish--more oversight isn’t going to fix the problem. The government has to do something to increase competition and bring in the many small and mid-sized firms that can help the government meet its needs.

-- Beth Daley and Scott Amey

GAO Says Bajagua Project Has Many "Unresolved Issues"

A report released by the Government Accountability Office (GAO) last Thursday substantiated many of POGO's findings from our 2006 report on the Bajagua project.

The GAO report detailed numerous aspects of a questionable sweetheart deal to use federal funds to pay a private U.S. company, Bajagua, LLC, for a wastewater treatment plant in Mexico.  Bajagua's proposal faces numerous technical, regulatory and financial challenges.

The report found "that the Bajagua, LLC project includes more unresolved issues than the [South Bay International Wastewater Treatment Plant] upgrade, such as the need to obtain over 30 permits, approvals, and concessions from both U.S. and Mexican authorities; the need to resolve significant issues in its draft fee-for-services agreement with the USIBWC; and other legal and technical issues which could delay its schedule."

The Bajagua project would cost an estimated $200 million more in taxpayer dollars over twenty years than an alternative proposal put forth by the government.

All in all, the GAO's report confirms that the Bajagua project is a stinky deal that is bad for taxpayers and the environment of Southern California.

In 2007, POGO's report also generated investigative pieces in the Wall Street Journal and San Diego Magazine.

-- Nick Schwellenbach

Seven Years Later: The Jury Is Still Out on Outsourcing

POGO has written previously about the ongoing debate over the federal government's growing reliance on the private sector to perform public functions (see, for example, here and here). A recent article in the Washington Post about the current state of President Bush's competitive sourcing initiative will surely add more fuel to the debate.

In his 2001 President's Management Agenda, Bush made competitive sourcing--i.e., making commercial activities performed by the government subject to competition with the private sector--one of his key strategies for improving the federal government. Bush's original goal was for agencies to eventually put up for public-private competition no less than 10 percent of their full-time positions, but agencies have fallen far short of that goal. Private contractors are increasingly wary of participating in the competitions, which federal employees have won 83 percent of the time since 2003. But victories often come at a steep cost: To prove it can do the job better and more cheaply than a private contractor, the agency must often cut its staff to the bone, which depletes the federal workforce (ironically increasing the need for contractors) and takes a heavy toll on the morale of all government workers. The Bush administration has also been accused of overstating the cost savings of competitions.

Proponents of competitive sourcing believe that putting federal jobs up for competition with private firms saves money and improves performance. Opponents dispute the fiscal savings and worry about outsourcing a growing number of inherently governmental functions. POGO, which is in the process of investigating the outsourcing issue, tries to fairly present both sides of the debate, but accounts like the Post article only heighten our concerns.

-- Neil Gordon

Breaking News: House Voting Today on Contractor Database Legislation

At long last, the House is voting today on H.R. 3033 (the “Contractor and Federal Spending Accountability Act”), a bill introduced by Rep. Maloney (D-NY) that would essentially formalize POGO's Federal Contractor Misconduct Database, with centralized information on federal contractors who have broken the law and violated federal regs.  The bill comes at a crucial time, as government contracting spending has ballooned to $440 billion a year, with few safeguards in place to prevent irresponsible contractors from receiving future taxpayer dollars.

POGO supports the efforts of Rep. Maloney and her colleagues to improve accountability in the federal contracting system.  Not surprisingly, the bill has come under attack by contractors and their allies.  But we're not quite sure what contractors are so afraid of.  The bill wouldn't stop them from receiving contracts; it would just help procurement officials learn more about their corporate culture.  If anything, it would help separate the good contractors from the bad and the ugly.

Click here to watch the live debate on the House floor.

-- Michael Smallberg

UPDATE: The bill passed by voice vote!  Now on to the Senate, where we hear that several offices are interested in sponsoring a mirror bill...

UPDATE 2: Senator McCaskill (D-MO) just introduced a Senate companion bill, with plans to attach the language to the National Defense Authorization Act next week.

An "A" for Contracting Accountability

April has been a busy month for improving contracting accountability in the federal government.

On the eve of tax day, the House passed a bill to prevent contractor tax cheats from receiving large federal contracts and grants (H.R. 4881). The following day, the House Oversight Subcommittee on Government Management, Organization, and Procurement held a hearing on H.R. 5712, which would require all contractors--including those working overseas--to report criminal violations. Failure to do so would result in suspension or debarment from future government contracts. Although regulatory efforts are also being considered to close the reporting loopholes for overseas and commercial contracts, the Hill decided it might have to force such action.

After the GAO released its 17th report since 2001 detailing vulnerabilities in the government's purchase card program, the Office of Federal Procurement Policy issued a memo reminding agencies to reduce the risk of waste, fraud, and abuse, and to discipline employees for charge card misuse. There is also legislation pending, so let's hope that taxpayers will no longer have to foot the bill for trips to Vegas, dinners at posh restaurants, or cosmetic surgery. An organization can hope, ya know!

Recently, we also saw EPA officials go blow for blow with critics who questioned the agency's decision to suspend IBM from federal contracting. Although the suspension only lasted seven days, the EPA concluded that it had all of the evidence it needed to protect taxpayers against contractor misconduct. Interestingly, some of the same critics who questioned the EPA's actions have also accused POGO and others of demoralizing federal workers when we question government activities. Not a sermon, just a thought.

One release that received little attention was the PCIE/ECIE report to the President, which revealed that Inspectors General activities in 2007 saved taxpayers $16.5 billion and led to more than 10,000 successful criminal prosecutions and civil actions.

Of course, you'll have a tough time finding information on these accountability efforts at smartcontracting.org, a new site created by the Professional Services Council, a national trade association representing the government professional and technical services industry. The site is meant to "communicate the benefits and clear up the major misperceptions about contracting" and to serve as a "clearinghouse for reliable information on these important issues." But seeing as the site doesn't include much information on the reports mentioned above or the recent actions to improve the contracting system, it would appear that PSC is only interested in showing the world of contracting from the eyes of its very interested members.

H.R. 3033: you're on deck for the contracting hot seat.

-- Scott Amey

Senator McCaskill Digs In on Thunderbirds Sweetheart Deal Accountability

Yesterday, Senator Claire McCaskill sent a letter (pdf) to Air Force Secretary Michael Wynne with her concerns that insufficient accountability has been taken in regards to the favortism towards Strategic Message Solutions on the Thunderbirds Air Show Production Services (TAPS) contract.  She expressed "displeasure with the level of accountability that has been meted out on those associated with contracting improprieties."  In particular, she has questions about the "details undue command influence as well as command improprieties that appear to have risen all the way to the level of the senior uniformed official in your service, Air Force Chief of Staff General T. Michael 'Buzz' Moseley."

-- Nick Schwellenbach

Email to Gen. Moseley on Thunderbirds Contract: "I cannot support burning that kind of money to fix something that isn’t broken, when I am not buying fixes to things that are broken"

Below are email exchanges between General Ronald Keys, Air Combat Command (ACC) Commander, to General T. Michael "Buzz" Moseley, Air Force Chief of Staff.  Gen. Keys expressed concern that the Thunderbirds Air Show Production Services (TAPS) contract will cost far more than Keys initially was led to believe.  He stated that he finds it tough to swallow spending "big money" on public relations--i.e. the TAPS contract--at the expense of expenditures on current aircraft needs (an especially bad problem given that many aircraft are wearing out because of the conflicts abroad and aging).  Gen. Moseley waved him off and is more concerned about messaging and branding the Air Force for PR purposes through the use of the TAPS contract.  This looks bad, real bad for Gen. Moseley. 

These emails are from pages 211-212 of the Department of Defense Inspector General's (DoD IG) investigation report (pdf) of the "improper influence" of Major General Stephen M. Goldfein on the $50 million contract with Strategic Message Solutions for Thunderbirds Air Show Production Services:

1027. November 9, 2005,
General Ronald Keys, ACC Commander, e-mailed General Moseley, Chief of Staff. Keys wrote, “Boss, we asked for bids on this capability and they have come back. I know you said ‘press’ and ‘found’ some fy ’05 right-colored money to be able to acquire this capability. However, this is turning out to be an $8M per year project… something over $40M for the FYDP, and I cannot support burning that kind of money to fix something that isn’t broken, when I am not buying fixes to things that are broken… and may not be able to even fly mail to Chicago. I plan to pass on pursuing this and it will probably cost some small termination/bid prep costs, … but I can’t see spending big money here when we are talking about stopping aircraft mods and going to 75% BOS funding. I know this was somehow wrapped up in the Strategic Comm package so wanted to know your thoughts before I proceed. RK”

1028. November 10, 2005,
General Moseley responded to General Keys,
“Thanks for the SA Ron. Let me think about this one for a bit. It does fit into my strategic communication plan in a big way. I’d ask you not to terminate anything until I can get wrapped around this one a bit more. Thanks again”

1029. November 10, 2005,
General Keys responded to Moseley,
“Right, Boss…. That’s why I gave you the head’s up. I asked my folks to hold off until after the 21st, since that bloodletting would provide rationale and also to wait until I had talked to you. No one can give me a metric on people recruited (which we may or may not need), or opinion makers touched and changed at events like these. It would enhance getting out a message, but to whom? …. And the contract as written is really more focused at putting cockpit video etc to the ground during lulls in the performance. I would rather put it against the bills coming in to stand up the Adversary Threat Group and UAV COE. Additionally, I would like to re-open the bidding on block 52s to the T’Birds… block 40s would make more sense to me as I would then have the block 50 data-link and targeting pod surrogate IRST in my aggressor fleet to replicate the threat… I don’t see thrust as a driving addition to what the T’birds do and believe we should flipflop the transfer. Having said all of that, will await your direction on the Jumbotron… know you are consumed in the QDR and believe there is not a big rush on this for a couple of weeks. I’m out at Nellis for the Aviation Nation Celebration and then on to Whiteman but am up on e-mail.
Cheers, V/R Ron”

1030. November 14, 2005,
Moseley responded to Keys, “Ron…as we discussed at CORONA…I’m working my way through a bigger set of strategic comm options. And, this has been one I’ve liked – not just for TBird reasons – but for the “messaging opportunities” if we get the right people working this for me. Hold off in killing or deciding anything until I can get some non-QDR time to reflect on this a bit more. I’m prone to support it and pay the money and drive the message we want across the spectrum of options – from Mar through Nov every year at a variety of locations (and use the TBird shows as a vehicle to get at the public).
I’m prone to support it because it offers that spring board to other venues and other outreach opportunities. This will work even better as we get more sophisticated with our “market research” and “branding/marketing.” So, my notion has been this is more than a project to support a demo team & big screens. But, give me some time and I’ll come to closure soonest. Thanks again”

-- Nick Schwellenbach

Thunderbirds Investigation -- Air Force Response

Here is the Air Force's response (pdf) to the Department of Defense Inspector General's (DoD IG) investigation report (pdf) of the "improper influence" of Major General Stephen M. Goldfein on the $50 million contract with Strategic Message Solutions for Thunderbirds Air Show Production Services.

Of note, on pages seven and eight, is a memo to senior Air Force leaders from Secretary of the Air Force Michael Wynne and Chief of Staff "Buzz" Moseley and a statement from Moseley.  Both stress ethics.

However, the word on the street is that Moseley missed getting caught in a buzzsaw in this investigation, possibly due to the standards of evidence used to determine responsibility for wrongdoing.  More specifically, we hear that the "clear and convincing" evidence standard was used as opposed to the lower "preponderance of evidence" standard (UPDATE, note: "clear and convincing" would make sense in a criminal investigation, however, because it was declined for criminal prosecution by the Nevada Assistant U.S. Attorney, it was an administrative investigation).  Moseley comes up numerous times in the DoD IG report of investigations (pdf).

-- Nick Schwellenbach

Flawed Thunderbirds Contract Tainted with Improper Influence

Back in May 2006, POGO posted a blog entry about the Air Force improperly steering a $50 million contract to produce large-scale video shows during Thunderbirds Air Demonstration Squadron performances to a company connected to senior Air Force officers. POGO noted that the Department of Defense Inspector General and FBI were investigating the contract, which the Air Force voluntarily terminated after a competing bidder filed a protest.

Almost two years later, the DoD IG has finally released its findings in a redacted 251-page report. The report concludes that Air Force Maj. Gen. Stephen M. Goldfein and others went to improper lengths to steer the contract to Strategic Message Solutions (SMS), an inexperienced and ill-equipped company that tendered a bid twice as expensive as a competing vendor's. SMS also had close contacts with senior Air Force officers and members of the Thunderbirds. The report highlights an Air Force contracting process fraught with improper influence, irregular procedures, glaring conflicts of interest, and an award decision that "did not represent the best value for the Air Force." As it happened, the Thunderbirds fiasco occurred shortly after another major procurement scandal that sent Air Force acquisition chief Darleen Druyun to prison.

The U.S. Attorney's Office in Nevada, home of Nellis Air Force Base and the Thunderbirds, declined to prosecute the case. Goldfein, who is now Vice Director of the Pentagon's Joint Staff, and four other officers not named in the report received administrative punishments.

There has been talk around Washington that IGs, Congress, the GAO, and watchdogs have demoralized government employees and are causing them to leave government service. It's funny that POGO hears from many government employees who support our efforts, who state that their frustration results from government scandals rather than the reporting of them, and who have tried to fix the system from within only to be labeled as troublemakers and the enemy (where is Bunny Greenhouse now?). Taxpayers are also demoralized and many see the federal government transforming into nothing more than a corporate machine that protects special interests rather than the public's interest. The award of the Thunderbirds contract highlights many problems--actual and apparent conflicts of interest, concerns with the revolving door, improper influence in contracting, flawed deals, and wasted money. I would love to see how anyone can blame the DoD IG for conducting its investigation and exposing a deal that wasn't benefiting taxpayers.

-- Neil Gordon and Scott Amey

Roger's Ruminations, Part 2: Are We All Rowing Towards the Same Destination?

Editor's note: This is the second in a series of commentaries by Roger, a former corporate employee responsible for their company's sales to the federal government.  (Click here to read Roger's first post).

Some may call me naive, but good government is possible.  All of us have seen the awards for good government, we've met government employees who love their jobs, we've watched with wonder as Astronauts take space walks, and the majority of us got educated in public schools and universities.  But, just like in the private sector, we know that any organization that goes unchecked or whose employees don't share in a common goal is going to create its own.

Many of you may not remember the Northridge earthquake out in California.  The California Transportation Department and its contractors got the Los Angeles area freeways up and running ahead of schedule and up to code.  How did it happen?

The California economy was getting hit hard with major arteries closed, lost dollars for business, and lost tax revenues for state and local government.  It was in California's best interest to get those highways open fast.  The contractors are there to make a profit.  The state offered their contractors bonuses based on getting the job done ahead of schedule and disincentives for work finished late (this might sound familiar to all the parents out there trying to get their kids to do their homework).

The earlier the freeways were completed, the more money the contractors made and the faster life and the economy got back to normal.  The state was on-hand working long hours themselves reviewing plans and making sure the work was still done to code and that the workplace was safe.

The bottom line was everyone had reason to be working towards the same goal--government agencies and contractors alike.

We can see in an emergency getting extra help fast from contractors was key for the government's success.  In the earthquake example we can see how common goals and incentives can have a positive outcome.  But, how do you do that long term?

Government contractors are responsible to their shareholders, but the government is here for the benefit of us all. Is there a way for both to work to a common goal?

-- Roger

300,000 People With a Credit Card, and Uncle Sam Foots the Bill: What Were They Thinking?

Today was surely a sad day for the beleaguered defenders of the 1990's efforts to weaken taxpayer oversight of government contracting. You see, among their proudest accomplishments was handing out government credit cards, known as "purchase cards," like so many pieces of candy from the candy jar. A front page Washington Post article today provides ample evidence of the pitfalls of this program.

Those purchase cards have been hailed by trade publications, such as Government Computer News, as a great advancement. And, for contractors, what's not to love? Unlike those pesky "olden days" so full of despicable red tape, a few unethical government employees were now free to rack up thousands of dollars in taxpayer-funded spending.

As the years have worn on and a more realistic view on accountability in government spending has finally returned to Washington, D.C., the architect of the plan, former OMB official Steve Kelman, has gotten shriller in his commentary about what he calls "the fear industry." For example, his April 9th blog entry poo poos the efforts of hardworking contract officials in government to ensure the taxpayer's interests are protected by demanding to know more about what and how contractors are charging. According to Kelman: "Government contracting officials are afraid that, if they don't get this cost data, they risk attack from their inspector general, the media, or Capitol Hill for some purported contractor rip off." You see, getting cost data is smart. As is increasingly evident, "acquisition reform" as its proponents called it was less about getting better deals for the government, and more about satisfying the desire of the largest contractors to avoid meaningful price negotiations and oversight, thus ensuring an ever increasing feeding at the public trough.

No one will disagree that reforms were needed to make procurement more efficient and effective. But those "reforms" went too far and have led to the indulgent abuses the public has witnessed in the reconstruction efforts following Hurricane Katrina, and in Iraq and Afghanistan.  At least this time the GAO didn't find another example of a taxpayer-funded boob job (we couldn't resist).

-- Beth Daley

Steak and Cocktails? Lingerie? Charge It to the Taxpayer!

A report released this week by the Government Accountability Office (GAO) found widespread abuses in the use of federal agencies' credit cards. Over the years, government employees have used their "SmartPay" cards to pay for gambling, breast implants for one inventive and compassionate federal employee's girlfriend, online dating services, iPods and lingerie. And what would a report on government fraud, waste and abuse be without the obligatory lavish steak-and-cocktails dinner costing well into the five figures?

The GAO report, based on a representative sampling, found that 41 percent of the purchase card transactions occurring from July 2005 through September 2006 did not comply with federal purchasing guidelines, lacking proper authorization or documentation. Federal agencies were also unable to locate over $1.8 million worth of items identified in the audit. Overall, the report found that problems in the purchase card program were "unacceptably high."

POGO recommended 'common sense' rules of engagement several years ago, including consistent program internal controls, training for participants with proper authorizing rules, and rigorous audits on a monthly basis. No reason to forfeit accountability for efficiency.

This report is the culmination of a series of GAO audits conducted over the last several years on the purchase card programs at specific agencies such as the Department of Defense and the Department of Homeland Security. The audit was requested by Senators Norm Coleman (R-MN) and Carl Levin (D-MI). As Coleman told the press, "Too many government employees have viewed purchase cards as their personal line of credit. It's time to cut up their cards and start over."

The General Services Administration-managed purchase cards program was started in the 1990s to help agencies reduce transaction costs for small purchases and provide flexibility in making acquisitions. In fiscal year 2006, about 300,000 government employees made roughly $18 billion in acquisitions with the cards, purchasing everything from pens and pencils to computers, relocation expenses and vehicles.  The report recommends ways the GSA and Office of Management and Budget can minimize improper and abusive purchase card activities. Unfortunately, the GSA is already balking at the majority of the GAO's recommendations.  It is really hard to see why.

POGO's news alert on the GAO report, as well as links to our previous work on this issue, can be found here.

-- Neil Gordon

7-Day Itch

The EPA's suspension of IBM was lifted on April 3rd--only a week after it was levied. IBM was suspended for receiving and using a competitor's proprietary bid information in order to increase its chance of winning a contract award. Like any suspension of a large contractor, IBM's suspension created a big stir in the contracting world. POGO supported the EPA's action because suspension and debarment are important tools to prevent risky contractors from receiving federal money. Moreover, IBM has had a questionable past, entering into at least seven settlements with the federal government since 2004. Others condemned the suspension because it was linked to grand jury subpoenas rather than proven misconduct, there was no advance notice provided to IBM, the suspension was company-wide (and therefore many innocent business divisions and individuals were wrongly impacted), and such decisions prevent commercial businesses from entering the government marketplace.

So after seven days, what have we learned? The EPA is now convinced that IBM is a responsible contractor. The government believes that public-private agreements (and the promises within them) go a long way in establishing contractor responsibility. The government's reliance on large contractors is a big factor in government decisions. And, the decision to lift IBM's suspension may have been different if this were a small business (see Ray Bjorklund's quote in today's AP story).

As many of you know, federal contracting is complex and imperfect. We are talking about big money, politics, profits, power, influence, "best value" and so many other factors--as recently witnessed in the Air Force tanker contract award, bid protest, and subsequent fallout. I hope that EPA's decisions were aimed at protecting taxpayers. Finally, I appreciate EPA's effort to hold a contractor and its employees accountable, however short-lived, as well as IBM's willingness to promise to do the right thing.

-- Scott Amey

Feds Reverse Course: Some Crime Not OK

It appears that the Office of Management and Budget is ready to remove one of the two loopholes in its proposed rule (pdf) on contractor ethics and integrity. The proposed rule requires, among other things, the timely disclosure of a violation of federal criminal law in connection with the award or performance of any contract or subcontract. Failure to make a disclosure can result in suspension or debarment from future government contracts. Sounds great, but the proposed rule as written won't apply to contracts and subcontracts for commercial contracts and for work performed entirely outside the U.S.

Attorney General Michael Mukasey and Senator Grassley (R-IA) have voiced their displeasure with the loophole that would have exempted contractors performing abroad from the disclosure requirement. In essence, they agree that all contract criminal activity should be treated the same no matter where the contract is performed.

POGO agrees that the overseas contracting exemption should be removed from the proposed rule. We also wonder if the commercial item exemption should be questioned. The definition of commercial has been stretched to the limits, costing taxpayers money. Is there any reason why commercial contracts should fall under different rules, at least when were talking about criminal activity?

I know that contractor supporters argue that the contracting system adds red tape, scaring off commercial businesses that attempt to bring competitive, creative, and innovative supplies and services to the government. But is that really the case? Has anyone looked at commercial contracts to figure out the percentage offered by traditional verse nontraditional contractors? Previous government studies of OTAs (other transaction authority) revealed that the majority of work (72% of the research and 97% of the prototype OTA funding, see p. 15 (pdf)) was performed by traditional contractors. Should we provide so many breaks to commercial item/service contractors, especially when it involves criminal behavior?

-- Scott Amey

Government Subpoenas Result in Suspension for IBM

On March 27, 2008, the Environmental Protection Agency (EPA) suspended the International Business Machines Corporation (IBM) from receiving future federal money. In contracting speak, this means that IBM was "[suspended] by any Federal agency pursuant to Executive Order 12549 and the agency implementing regulations based on an indictment or other adequate evidence (a) to suspect the commission of an offense that is a cause for debarment or (b) that other causes for debarment under the agency regulations may exist."

Simply stated, IBM was included on the government's Excluded Parties List and is temporarily prevented from receiving future federal contracts. That action resulted from several federal grand jury subpoenas being served on the company and several employees requesting testimony and documents regarding interactions between employees of the EPA and certain IBM employees.

According to IBM's press release, the misconduct "relates to an investigation by the EPA of possible violations of the Procurement Integrity provisions of the Office of Federal Procurement Policy Act regarding a bid for business with the EPA originally submitted in March 2006. The temporary suspension applies to all Federal agencies and IBM business units." Suspending the entire company is a big step for the government, which in the past has only suspended a few divisions of Boeing rather than the entire company.

POGO's Federal Contractor Misconduct Database (FCMD) shows that IBM has had eight instances of misconduct (including alleged kickbacks and export and securities violations) since 1995 totaling more than $800 million in fines, penalties, and settlements. IBM ranked as the 45th largest contractor with nearly $1 billion in federal contract award dollars in 2005.

POGO applauds the EPA's decision to hold IBM accountable and hopes that the government doesn't waive or lift the suspension when the next federal business opportunity presents itself. That's the wrong message to send to contractors and the public. For years, we have promoted the concept of a government FCMD and a stronger suspension/debarment system as ways to prevent risky contractors from receiving taxpayer dollars. Fines, penalties, and settlements aren't working--going after a company's bottom line and potential future business might be the wake-up call that all contractors need to realize that the government and the public will hold them responsible for their actions.

-- Scott Amey

AEY & Efraim Diveroli: Subject to the Foreign Corrupt Practices Act?

Based on my quick Google search of the web for AEY, Efraim Diveroli and "Foreign Corrupt Practices Act," I haven't seen anyone ask the question (though someone may have): Is Efraim Diveroli's alleged bribery of Albanian government officials, if true, a violation of the Foreign Corrupt Practices Act?  It seems that it would be the case.  According to the New York Times:

As Mr. Diveroli began to fill the Army’s huge orders, he was entering a shadowy world, and in his brief interview he suggested that he was aware that corruption could intrude on his dealings in Albania. “What goes on in the Albanian Ministry of Defense?” he said. “Who’s clean? Who’s dirty? Don’t want to know about it.”

The way AEY’s business was structured, Mr. Diveroli, at least officially, did not deal directly with Albanian officials. Instead, a middleman company registered in Cyprus, Evdin Ltd., bought the ammunition and sold it to his company.

The local packager involved in the deal, Mr. Trebicka, said that he suspected that Evdin’s purpose was to divert money to Albanian officials.

The purchases, Mr. Trebicka said, were a flip: Albania sold ammunition to Evdin for $22 per 1,000 rounds, he said, and Evdin sold it to AEY for much more. The difference, he said he suspected, was shared with Albanian officials, including Mr. Pinari, then the head of the arms export agency, and the defense minister at the time, Fatmir Mediu.

...

The conversation, he said, showed that the American company was aware of corruption in its dealings in Albania and that Heinrich Thomet, a Swiss arms dealer, was behind Evdin.

...

Mr. Diveroli recommended that Mr. Trebicka try to reclaim his contract by sending “one of his girls” to have sex with Mr. Pinari. He suggested that money might help, too.

“Let’s get him happy; maybe he gives you one more chance,” he said. “If he gets $20,000 from you ... ”

At the end, Mr. Diveroli appeared to lament his business with Albania. “It went up higher to the prime minister and his son,” he said. “I can’t fight this mafia. It got too big. The animals just got too out of control.”

 

Perhaps Chairman Waxman should push the issue at his upcoming hearing.  Seems the Justice Department's Fraud section could have a field day if it looks into this, if hasn't already started to.

-- Nick Schwellenbach

Conflicts of Interest Rules Causing Conflicts

Personal and organizational conflicts of interests are red hot topics circulating around the federal government right now. (Organizational conflicts are created when a contractor has other activities or relationships with the government that could lead to partiality or an unfair competitive advantage--see FAR Subpart 9.5).

The GAO recently released three reports--GAO-08-169, GAO-08-572T & GAO-08-360--that discuss concerns with potential conflicts of interest when the government relies (or in some instances over-relies) on contractor employees. For example, government officials are governed under different rules than contractor employees, even those who work side by side. Additionally, some contractors have been questioned about their impartiality in awarding government contracts and making policy determinations.

In one recent case, the Calyptus Consulting Group was hired by GSA to help with past-performance evaluations on the Alliant IT contract. According to news reports, Calyptus evaluated the performance of two of its clients, Lockheed and Raytheon, raising questions of organizational conflict. That contract award was protested, and the Court of Federal Claims has set aside the awards in question and ordered appropriate injunctive relief.

Although there are rules aimed at preventing contractor employees from doing work that must be performed by public servants, ethics rules are very lax and require a high degree of self reporting. In an effort to head off any legislative action, the executive branch has been very active in proposing new ethics rules and requirements. As POGO has noted, however, these rules do not go far enough. Additionally, someone inside the government added a material exemption that has caused Members of Congress to question the government's commitment to holding contractors accountable.

Just yesterday, the FAR Councils put out two advanced notices seeking comments on whether additional personal and organizational conflict of interest regulations are needed to protect the integrity of the contracting process.

In what some are calling a warning shot to the executive branch, Sen. Joe Lieberman (D-CT) urged federal agencies "to step up efforts to guard against conflicts that could cost taxpayers millions of dollars a year."

All of these efforts have been made in response to the dramatic increase in federal contract spending, increased reliance on contractors to perform work once performed by government employees, and a call for greater contractor accountability. POGO will follow all of the bills and regulations, and we will counter any industry efforts to keep the status quo.

-- Scott Amey

22-Year-Old Arms Dealer Scandal Exposes Flaws in Federal Contracting

The news has recently been abuzz with the story of Efraim Diveroli, the 22-year-old self-described "super nice guy" from Miami Beach who was caught supplying the Afghan government with unreliable and obsolete munitions under a $300 million U.S. Army contract. Diveroli and his company, AEY Inc., are also believed to have dealt with illegal arms traffickers and covered up the fact that tens of millions of the rifle and machine gun cartridges he supplied were illegally obtained from China.

The Army awarded the contract to AEY early last year. According to an investigation published Thursday in the New York Times, problems with the munitions began cropping up last fall. In January, American officers in Afghanistan became concerned enough to suggest terminating the contract. A month later, Army contracting officials met with AEY and imposed more rigorous packaging standards. Yet the company again supplied another shipment of substandard cartridges.

This week, the Army suspended AEY from all future federal contracts. Neither Diveroli nor his company will be allowed to bid on any future government work until the allegations are resolved, but will still be allowed to provide ammunition already on order under the contract. AEY is also facing investigations by the Department of Defense’s inspector general and Immigration and Customs Enforcement.

How did a relatively new company run by a twenty-something land such a lucrative contract in such a vital national security area? The Times found a host of systemic problems. In 2006, Army contracting officials were under intense pressure to supply munitions to Afghan forces