What's Bothering Stan Soloway Now?

By Neil Gordon

According to Stan Soloway, president and CEO of contractor trade association the Professional Services Council, due process and fairness are becoming “increasingly quaint notions” for federal contractors.

Soloway’s commentary in this week’s Washington Technology is full of outrage. The target of his ire is the Commission on Wartime Contracting (CWC), which in its February interim report recommended automatic suspensions of contractors who are indicted for “contract-related” misconduct.

Soloway likens this to “declaring guilt before all facts are known.” Yet this sort of shoot-first-ask-questions-later approach seems to be acceptable behavior in the private sector. Back in January 2010, POGO blogged about defense contractor Agility, which had been accused—but not yet convicted—of defrauding the government. According to the U.S. Army Contracting Command, Agility was fired as a subcontractor on LOGCAP IV by DynCorp International. DynCorp’s contract with Agility stipulated that an indictment for any reason could result in termination.

As far as we know, Soloway never wrote a commentary decrying DynCorp’s rush to judgment.

Nevertheless, Soloway’s position seems to have traction among some high-ranking officials. At yesterday’s CWC hearing, Defense Undersecretary Ashton Carter, the Pentagon’s top contracting official, warned that the CWC’s mandatory suspension recommendation could have a “chilling effect” on contractors. “There is a potential unintended consequence of turning suspensions and debarments from tools to protect the government’s interest into tools that automatically punish contractors,” Carter testified. (The Federal Acquisition Regulation (FAR) provides that suspensions and debarments are to be imposed “only in the public interest for the Government’s protection and not for purposes of punishment.”)

Carter and Soloway believe that suspension and debarment officials should be afforded greater flexibility and discretion. POGO agrees. We also agree that the fundamental purpose of suspension and debarment is to protect the government and taxpayers’ interest. However, we realize that, as the CWC emphasized in its latest report, the government is not using suspension and debarment as often as it should.

Neil Gordon is a POGO Investigator.

Image: CWC's logo.

Related:

• Commission Concerned with Contingency Contracting
• Should Debarred Contractors Be Allowed to Build Military Aircraft?
• GTSI Is Back In Business: SBA Lifts Suspension of Major Contractor
• Poor Performance is Often Rewarded
• POGO's Scott Amey Testifies on Hill about Suspension and Debarment System Failures
• Testimony of POGO's Scott Amey on "Federal Contracting: Why Do Risky Contractors Keep Getting Rewarded With Taxpayer Dollars?"

Comments

[Golconda]

I hate to see two worthy organizations that contribute a lot to the acquisition debate duke it out as if they were in court.

This contretemps reminds me of that ole POGO bugaboo that says if a company settles a lawsuit with the government, and the government accepts that the firm has neither admitted nor denied wrongdoing, the firm's behavior still gets tagged as "misconduct" by POGO.

Wha happened to due process here?

[GovConMaven]

Stan –

Your “analysis” is flawed and misleading for a number of reasons. First, the Commission on Wartime Contracting (CWC) is recommending immediate suspension only in those instances where a firm has been criminally indicted for contract-related fraud or misconduct. This means that a grand jury has examined the facts and found probable cause to believe that a crime has been committed. If companies are not considered for suspension under these circumstances, I am not sure why the government would even have a suspension system.

You make a big point of the fact that the purpose of the debarment and suspension process is to protect the government from dealing with contractors that are not responsible, rather than to serve as punishment. This is a statement that no one would disagree with. However, you seem to assume that suspending a company is tantamount to punishment. I would argue, as would almost anyone other than a contractor advocate, that suspending a company from receiving additional contract awards when the company has been actively prosecuted by the U.S. Department of Justice and indicted by a grand jury based on probable cause, is pretty good reason to think that the government would be protecting its interests by not actively engaging in additional business with the company.

You take a cheap shot at POGO by mentioning the civil jury verdict that found POGO liable for $120,000, but that was overturned on appeal. You also misstate the reason for the Appeals Court decision in favor of POGO. You state that the jury verdict was overturned because POGO was denied “due process”. That was not the reason. The reason was because the Court found the jury instructions were in error when they did not specify that intent was an essential element of civil liability. There was no due process matter in issue. To conflate or intentionally confuse a civil matter with a criminal prosecution is is irresponsible for a person who is so concerned with ensuring due process.

Finally, and perhaps most importantly, you keep using the phrase PRESENTLY (as in original) to describe the concept of responsibility. I believe your view, which is popular among some in industry, is that a firm should not be found to be other than responsible, as long as the originating cause, or more specifically the people whose actions led to a potential finding of nonresponsibility, have been dealt with. This is a variation on the “few bad apples” theme. Under this theory, as long as a firm gets rid of the people whose actions precipitated the cause for a finding of nonresponsibility, and perhaps institutes a training or remediation plan, then all is well. Several larger contractors have employed this strategy after they were caught “flat-footed”. The problem with this line of reasoning is that no firm could ever be found to be presently nonresponsible as long as they got rid of the people who engaged in the conduct giving rise to the finding of nonresponsibility.

Accordingly, nonresponsbility findings should not simply rely on whether the “bad apples” have been dealt with, but rather whether the firm’s culture and business practices (whether overtly or less so) encouraged noncompliance with law or regulation.

The CWC’s recommendation that firms be presumptively suspended after they are criminally indicted for contract fraud or related contract misconduct is a reasonable approach. That the Professional Services Council and other contractor groups should be so concerned with this recommendation is not surprising, but definitely disconcerting.

[Stan Soloway]

Neil, we have not suggested in any way that companies that have a consistent history of unethical behavior should be allowed to get away with it or be the recipients of government contracts as long if they fail to address the internal culture and processes that might enable or tolerate such behavior. But, as usual, you succeeded in twisting things around. We do indeed believe in due process and are clearly bothered when policy proposals would significantly impact an individual’s or entity’s right to due process. Given POGO’s own experiences a few years ago, I’d think that would be something you’d fully embrace.

And we are indeed also bothered when, in discussing suspension and debarment, which are important tools the government has to protect its interests, folks blithely recommend fundamental and imbalanced changes to their role and purpose. Suspension and debarment are among the remedies available to the government to protect it from doing new business with firms that are not PRESENTLY responsible. They are not tools designed to punish firms for past action, whether for alleged or even proven wrongdoing. They are tools available to the government not only in its assessment of the compliance procedures a company had in place at the time of an incident, but, equally importantly, how the company responded in the aftermath of an incident. Hence the all important term “PRESENTLY” responsible. Just because a company stands accused of misconduct committed by one or even a group of its employees does not alone mean that the company is unethical or is not presently responsible. POGO's position that the existence of an indictment is, as one of your staff said, "pretty good evidence" of an unethical corporate culture is an extraordinarily naïve statement and is a heck of a legal standard by which to immediately suspend such a company from government work—which is what happens when a company is “proposed for debarment.”

Stuff happens in every institution, whether government or private sector, no matter how effective its culture or compliance program. And when stuff does happen, we should ask not only whether the institution had appropriate procedures in place at the time but also how the institution responded to the problem. Take POGO itself. In 2008, a jury found POGO improperly paid a government employee $120,000 in settlement money. POGO agreed to corrective action and presumably conducted the kind of internal training that probably should have already been in place. Did the original accusation provide “pretty good evidence” that POGO has an unethical culture? Does the eventual jury ruling mean that POGO is irresponsible today? That is precisely the standard you would insist government contractors be held to. Ironically, of course, the verdict in POGO’s case was later vacated because POGO was denied due process. I would guess that you and your lawyers felt strongly that POGO had been wronged. Yet you ridicule our insistence on due process. Interesting double standard, no?

[K-Man]

Soloway's a blowhard with a clientele that he must protect. You were right to point out that he forgot to mention that the CWC mandatory suspension (not "'proposed for debarment'" as Soloway wrote) proposal was for contract-related indictments only.

That's a great topic for debate, because suspension is based on present responsibility and indictments are a different contracting accountability measure that are often delayed. I would hope that the government would protect itself before that point so long as it has credible evidence to do so.

What's exciting here is that someone inside the government finally wants to hold contractors accountable. It's about time that the government take control of the contracting system, which has been run by contractors for way too long.