The Project On Government Oversight (POGO) Blog

Morning Smoke: Follow the Money

Bailout Fraud Prosecutor Nets First Catch [TPMMuckraker]

Saxby's War [Nukes of Hazard]

Coast Guard Modernization Program Still Faces Challenges [Government Executive]

Lewis Testifies U.S. Urged Silence on Deal [The Wall Street Journal]

How Would You Save $100 Million? [Federal Eye]

Hearing: "Following the Money: A Quarterly Report by the Special Inspector General for the TARP" [Joint Economic Committee]

Hearing: "Follow the Money: State and Local Oversight of Stimulus Funding" [Senate Homeland Security and Governmental Affairs Committee]

Hearing: On measuring value and risk in services contracts [Defense Acquisition Reform Panel Subcommittee]

Contractor Misconduct - Earth Day Special

In honor of Earth Day, POGO has combed through the Federal Contractor Misconduct Database (FCMD) to find interesting environment-related facts and figures:

• Environmental violations are the most common of the 18 misconduct categories in the FCMD, comprising nearly 25 percent of the instances and 10 percent of the penalties.
• Of the instances in which a federal department is listed as the enforcement agency, or the authority primarily responsible for investigating or prosecuting the underlying case, the Environmental Protection Agency (EPA) lags slightly behind the Department of Energy as the most common enforcement agency in the FCMD.
• The lion's share of environmental violations by the top 100 contractors have been racked up by four energy companies: BP, Exxon Mobil, Royal Dutch Shell, and Valero. However, Lockheed Martin, General Electric and Honeywell have also amassed a sizable share.
• The largest environmental misconduct penalties in the FCMD each exceed half a billion dollars. BP settled a Clean Air Act lawsuit with the federal government in 2000 for $510 million. Last year, the U.S. Supreme Court ruled that Exxon Mobil owes victims of the Exxon Valdez oil spill $507.5 million in punitive damages (about one-tenth of what the trial court originally awarded).
• While Lockheed Martin leads all contractors in misconduct instances with 50, Exxon has the most instances since 2003 with 32--24 of which involve environmental matters.

-- Neil Gordon

Morning Smoke: New Subcommittee Hears from IGs on Contracting Fraud

At Hill Hearing, IGs Seek More Powers and Staffing to Oversee Contracting [The Washington Post]

Hiring 1000's for ATL Very Tough [DoD Buzz]

What Happens to Returned TARP Money? [Slate]

Challenges and Issues with the Further Aging of U.S. Air Force Aircraft [RAND]

Report Details Origins of Bush-Era Interrogation Policies [The Washington Independent]

Rare F.D.A. Meeting to Discuss Complaints on Device Approval [The New York Times]

Door Still Revolving Between Capitol, Lobbyists [USA Today]

Senate Homeland Security and Governmental Affairs Committee Considers Nomination of FEMA Administrator

Secretary Geithner, Meet the Congressional Oversight Panel

Treasury Secretary Timothy Geithner appeared for the first time before the Congressional Oversight Panel this morning, fielding questions on everything from the government's exit strategy for the AIG bailout to the possible conversion of the government's preferred stock holdings to common stock.

One of the more heated exchanges came when Panel Deputy Chair Damon Silvers asked Geithner to explain the rationale behind the Public-Private Investment Program (PPIP). As many commentators have observed, Silvers pointed out that the program will allow private investors to reap enormous profits while assuming almost no risk in the financing of the partnerships. He raised similar concerns about the “profound imbalance” of the government's stake in Citigroup. For instance, after converting the government's holdings in Citi to common stock, taxpayers are no longer guaranteed to receive interest payments from the government's preferred shares.

Geithner kept arguing that we have to think about the “broader prism” of the government's overall stabilization efforts, rather than focusing on the costs and benefits of rescuing individual firms like Citi. Nonetheless, we hope the Panel continues to defend taxpayers' interests when analyzing the effectiveness of the bailout. We've also been raising concerns about the potential for significant taxpayer losses through the PPIP's Legacy Loans Program, and we urge the Panel to consider whether the FDIC is exceeding its statutory authority by guaranteeing up to $1 trillion for the purchase of distressed loans.

Additional concerns about the PPIP were raised in the latest report from Neil Barofksy, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The 250-page audit report released today found that “aspects of PPIP make it inherently vulnerable to fraud, waste, and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.”

We're still making our way through the report, but we're glad to see that Barofsky is also taking a close look at executive compensation restrictions for the public-private partnerships, the controversy surrounding the full payments made to AIG's counterparties, and numerous allegations of TARP fraud.

As the government's bailout programs continue to place trillions of dollars at risk, we think it's safe to say that a TARP watchdog is a taxpayer's best friend.

-- Michael Smallberg

Did Lax Contract Oversight Lead to JSF Security Breaches?

As we pointed out this morning, and in a press release today, the Wall Street Journal has released information that confirms concerns POGO exposed last year about security vulnerabilities in the Joint Strike Fighter (JSF) program. Specifically, six current and former officials familiar with the fighter program told the Journal that the $300 billion program has been repeatedly broken into by computer spies.

The DoD IG expressed uncertainty about past allegations of breaches after POGO's initial release of the information, removing a report that alleged "that DoD advanced aviation and weapons technology, including classified information, at BAE Systems facilities or contained in Systems information technology systems may have been compromised or is at risk for unauthorized access" after determining they lacked the "sufficient appropriate evidence" to support the conclusion. When it was removed, we noted that several elements of the report had not been questioned, including the allegation that BAE Systems was not always cooperative with the Defense Security Service (DSS)--which means POGO's initial concerns about systemic problems at DSS may still remain. The most recent GAO analysis I could find of DSS was a 2005 report which found that "DSS cannot ensure that its approach to overseeing contractors under FOCI is sufficient to reduce the risk of foreign interests gaining unauthorized access to U.S. classified information." As the Journal notes, the Air Force is conducting an investigation into the alleged security breaches, and hopefully this investigation will reveal whether DSS's oversight played a role in any breach that may have occurred.

Lockheed Martin has denied the report, saying that to their knowledge, there hasn't been any classified information breach. And even the Journal notes--and Noah Shachtman at Danger Room highlights--it's not yet clear how much of the information was actually classified. There is also some humming on Twitter that this may be careful word choice on Lockheed's part in not explicitly denying any breaches into the JSF program, and that important (but unclassified) information may have been accessed.

For those who are wondering about BAE's role in any information leaks, and how this plays into the ongoing F-22 debate, it's worth noting that BAE systems has provided the F-22's electronic warfare suite; communication, navigation, and identification low-observable apertures; multi-spectral countermeasures; and stores management system.

-- Mandy Smithberger

DoD Celebrates Gains in Contract Competition, But More Needs to be Done

The percentage of contracts that were competitively awarded by the Department of Defense reached an all-time high last year.

So says the Department's Fiscal Year 2008 Competition Report, which found that DoD competitive obligations for the year totaled an all-time high of $252 billion, or 64 percent of its obligations. This percentage exceeded DoD's ten-year average of 61 percent.

“This is an outstanding accomplishment, given the relatively level contracting workforce handling the significant workload increase, and is evidence of the Department's commitment to competition,” boasts the report. Still, you have to be somewhat concerned that the other 36 percent of DoD contracts--over $141 billion--was NOT competitively awarded.

POGO has long worked toward increasing competition in federal contracting. Lack of competition is a particular problem in the defense industry, where mergers, acquisitions, and reorganizations have reduced the number of major hardware and weapons systems manufacturers from over 20 in the 1980s to just six today.

POGO is pleased to see the DoD taking steps to increase competition, but there is still plenty of room for improvement. The DoD's achievement loses its luster when you consider that, government-wide, the percentage of contract dollars subjected to some form of competition has hovered between 61 and 64 percent since 1997. Of course, during that same time contract spending has skyrocketed. More importantly, the government needs to reconsider its definition of competition. In FY2005 (see p. 7), it was determined that 20 percent of all so-called “competed” contract dollars involved just one bidder.

Why is competition in contracting important? In a nutshell, genuine competition between contractors means the government gets the best quality goods and services at the best value. Competition also prevents waste, fraud, and abuse, because contractors know they must perform at a high level or else be replaced. Therefore, the government must do all it can to ensure that full and open competition involving two or more bidders is the rule, not the exception.

-- Neil Gordon

POGO Updates Contractor Misconduct Database

POGO has updated the Federal Contractor Misconduct Database (FCMD) with a new top 100 ranking based on FY 2007 contract data.

The top 100 contractors received over $257 billion in contracts in FY 2007, a 14 percent increase over the previous year. This total represents over half of the $457 billion in contracts the government awarded that year. As of today, these 100 contractors have accumulated 673 misconduct instances and over $26 billion in monetary penalties since 1995.

Lockheed Martin still leads the pack, outpacing everyone else by almost $10 billion in contracts. Lockheed also has the most misconduct instances, with 50 instances of civil, criminal, or administrative misconduct since 1995.

Contractors that have fallen out of the top 100 are still included in the database. They don't appear on the home page, but you can find them by clicking on the links in the archived 2006 ranking, by doing keyword searches or by sorting the data. For example, click on the "Federal Contract $" column heading on the home page to sort the ranking in ascending order of dollar amount. The first 30 contractors in that list will be numbers 101 through 130. Their names also appear in the "Contractor" pulldown menu on the left margin, but selecting them from this menu only brings up their instances (if any), not their home pages.

-- Neil Gordon

Morning Smoke: WSJ Confirms POGO's Exposure of Breaches in Joint Strike Fighter Program

Computer Spies Breach Fighter-Jet Project [The Wall Street Journal] - POGO first exposed this breach in May 2008

Harman, AIPAC, NSA: What did I Know, and When Did I Know It? [SpyTalk]

Nonprofit Groups to Push for Exceptions to Lobby Rule [The New York Times]

DOJ Sits on Secret CIA Interrogation Memo [The Washington Independent]

Two Hearings on Banks Today [The Baseline Scenario]

About 20 Probes of Bailout Underway [USA Today]

Keeping a Close Watch on the Bailout

Even though the Treasury Department recently revamped its website for the Financial Stability Plan, it would probably take an advanced degree in finance to truly understand what the government is doing to rescue the nation's financial system.

Thankfully, the bailout received a healthy dose of transparency today, as OpenTheGovernment.org announced the launch of BailoutWatch.net, a collaborative effort by the Bailout Watch project to help the public track how the government and financial sector are spending trillions of taxpayer dollars on the mammoth bailout programs.

BailoutWatch.net will be an invaluable resource for anyone trying to learn more about the bailout. The site already offers a wealth of information, including federal reports, FOIA requests and responses, media coverage, a calendar of upcoming events, and a discussion among experts who are following the latest bailout issues. If you like what you see, there are also a variety of RSS feeds from BailoutWatch.net and from the core participating organizations, including POGO, the Center for Economic and Policy Research, the Economic Policy Institute, OMB Watch, OpenTheGovernment.org, and Taxpayers for Common Sense (click here to see the full list of organizations participating in the Bailout Watch project).

We hope that BailoutWatch.net and projects like Subsidyscope will help the public hold officials and banks accountable for the ongoing expenditure of trillions of taxpayer dollars. And as the GAO and Congressional Oversight Panel continue to criticize the Treasury Department for failing to articulate a clear strategy behind the bailout, we hope these new websites will also put pressure on the government to improve its explanation of the bailout programs.

-- Michael Smallberg

Give Me a "B" In Those Budget Cuts

Today President Obama convened his cabinet for the first time, ordering them to cut $100 million from their collective budgets. But to paraphrase Janet Jackson, President Obama, gimme a B. As POGO pointed out in February, there are $100 billion in savings opportunities for taxpayers. And Scott reported last week that a simple contract clause saved taxpayers $128 million. We've already seen this administration adopt several of our recommendations, including moves to scale back on expensive, unproven, and outdated weapons systems, but POGO thinks that it'd be less than audacious to ask agencies to cut back more.

-- Mandy Smithberger

Morning Smoke: WSJ Finds Sharp Decline in Lending Among TARP Recipients

Bank Lending Keeps Dropping [The Wall Street Journal]

Justice Dept. Memos' Careful Legalese Obscured Harsh Reality [The Washington Post]

Report Questions Ballooning Use of Cost-Plus Contracts [Government Executive]

What's Wrong with Obama's Order Barring Lobbyists from His Administration? [Slate]

Liddy Should Sell Goldman Sachs Stake, Lawmakers Say [Bloomberg]

Obama Names Washington Businessman as Chief Performance Officer [Government Executive]

Morning Smoke: Stiglitz Questions Bank Bailouts

Stiglitz Says White House Ties to Wall Street Doom Bank Rescue [Bloomberg]

New Memos: How Bush's Justice Dept. Approved Torture with Waterboards and Bugs [Mother Jones]

Army to Keep FCS Vehicle Money: Gates [DoD Buzz]

Issa Asks Federal Inspectors General: When Should Taxpayers Expect Implementation of Recommendations? [Congressman Darrel Issa]

The Military Requirement Is 243 [Air Force Magazine]

Private Sector Zips Past Government in Recovery Act Tracking [Government Executive]