spent and second americans deserve an efficient effective government that works for them our duty on the oversight and government reform committee is to protect these rights our solemn responsibility is to hold government accountable to taxpayers because taxpayers do have the right to know what they get from their government we with citizen watchdogs to deliver the facts to the american people bring genuine reform to federal bureaucracy this is the mission of the oversight and government reform committee i would like to thank all the witnesses on both panels for participating in todays hearing i hope this is an informative hearing where witnesses can share best practices and form relationships going forward that will encourage our mutual due diligence the federal government spends more than five hundred dollars billion on contracts each year most contractors are patriots who fulfill their contractual obligations to the federal government in spite of the mountains  federal forms and frustrations they provide indispensable products they deliver quality services to federal agencies but unfortunately this committee has examined instances in the past in which certain contractors tried to defraud the government where they demonstrate a pattern of inability to deliver on the contractual commitments one of the tools that agencies have to address this unethical fraudulent or chronically poor performing contractors is the remedy of suspension and debarment today we will hear testimony that while some agencies are effective in using this administrative remedy to weed out bad actors who waste taxpayer dollars other agencies are simply not fulfilling their responsibility to suspend or debar this hearing will explore the following question why is it that some agencies are able to uncover problems with their contractors and take dozens of suspension and debarment actions each year while other agencies with similar or larger contract spending initiative virtually no action while i hope it is because some agencies have high quality contractors and they have not experienced any contracting issues it is unlikely that there are no poor performing or dishonest contractors working for the agencies that have not suspended or debarred any contractors common sense would seem to suggest these agencies are not looking for and thus not uncovering fraud on the part of their contractors in some cases though these agencies may simply accept poor performance or staff may not complete up paperwork or help others avoid the same bad contractors in the future gaos work bears out our suspicion that agencies that focus on using the tool of suspension and debarment and make it a priority are successful at rooting out future waste and fraud by excluding the contractor from future business with the government or forcing the contractor to take needed corrective measures clearly it takes a concerted effort to identify candidates for suspension and debarment develop the necessary factual record and at the same time provide the required due process safeguards for contractors the alternative however is not an option agencies that put in the necessary work to implement a robust suspension and debarment program can expect to see returns in their investment in terms of programmatic fraud or waste avoided in addition because the government wide exclusion that can result from suspension or debarment actions having an effective suspension and debarment program also serves to strengthen the integrity of the overall contracting system it sends a clear message that dishonest contractors or shoddy work will not be accepted which protects taxpayer dollars from flowing to sub par contractors this committee is a watchdog for the taxpayers money but we also think it is reasonable to expect each agency to be diligent ferreting out bad actors they know in the contracting world so that we can stop contracting fraud the american people deserve our attention i would also like to thank chairman towns who held hearings on this same subject in two thousand and nine and in two thousand and ten he has put sunlight on this process and we will continue to do that until it is fixed i look forward to hearing the testimony today about how we can keep unethical contractors out of the federal system and now i would like to recognize the distinguished ranking member mister connolly for his opening statement mister connolly thank you mister chairman and thank you for calling this important hearing the gao report in the context of the final report of the commission on wartime contracting which we heard the other day should be a deafening alarm bell about wasteful spending that could be curbed through the use of functional suspension and disbarment programs the national security subcommittee held a hearing last month examining potentially corrupt department of defense contracting in afghanistan earlier this week the commission on wartime contracting told our committee that an estimated thirty one  billion has been lost to fraud or waste through contracting in iraq and afghanistan alone what is most extraordinary about this figure is not how large it is but that the commission told us that it isnt even comprehensive the federal government lacks not only the tools to manage overseas dod contracts but even the mechanisms to account fully for the money we lose if there is one lesson we could learn from this experience it should be that rushing into foreign wars unprepared can be incomprehensively expensive the gao report we are considering today is just as troubling as the commission on wartime contracting report gao reassures us that the department of defense oig recently reported that the one thousand seven hundred and seventy six dollars billion on contracting that is to say one dollar seventy cents trillion for those of us who would otherwise lose count of the zeroes it is approximately fifteen thousand percent more money than any agencies maybe we should consider the numbers of suspensions and debarments per contracting dollar for each one dollar billion dod has spent on contracts it issued an average of zero point nine suspensions and debarments by contrast the environmental protection agency which has a witness in todays hearing has issued forty two point six suspensions or debarments per billion dollars contracting dollar spent by this measure epa would seem to be far more attentive to protecting taxpayer dollars frankly than dod of course the number of suspensions and debarments per contracting dollar is only informative if we know that there is some fraud or waste that the suspensions or debarments should address the purpose suspension or debarment is to protect the taxpayers not to enact punitive measures against contractors most of whom are patriotic americans trying to serve the public as you indicated mister chairman in the case of dod we know from the recent commission report sadly that such fraud and waste is so rampant in iraq and afghanistan as to be virtually unquantifiable the united states has spent in excess of two hundred dollars billion in contingency contracting to support the wars in iraq and afghanistan over the last decade according to the final report of the commission on wartime contracting up to sixty dollars billion of those taxpayer dollars were lost to waste fraud and abuse i to appear before us today to discuss this important topic it is clear there is wide variation in the methodology used to determine suspension and debarment and replicating best practices to reduce waste mus be our only member of this particular panel so five or ten minutes we will give you a little bit of flexibility on the time there but we would like to be able to pummel you with random questions as well once you get through your testimony so in order to be able to receive your testimony obviously your written statement will be made part of the record as well you are recognized mister woods thank you mister chairman ranking member connolly thank you so much for inviting the government accountability office to be here this morning to address what you have all recognized is an extremely important topic in the area of government contracting  need a robust suspension and debarment process in order to ensure that the federal government does business only with responsible contractors and that we avoid doing business with dishonest  contractors those that commit illegal acts and those that are irresponsible and unethical i am very pleased to be able to release our report this morning which we did for this committee as objectives that this committee asked us to address our findings as a result of that work and our recommendations but first i would like to provide just a very very brief overview of the process first of all is a provision for extending that up to eighteen months if the attorney general so requests debarments on the other hand are for a fixed period of time generally three years although those can be extended loans loan guarantees and that sort of thing which are covered under the non procurement common rule or ncr but both procedures are somewhat similar and they are our first objective was to determine what entities are listed on the excluded parties list system the excluded parties list is a list maintained by the general services administration an electronic online system that contains all of the entities that have been subject to suspension proposed for debarment or debarred that as i said  maintained by the gsa the individual agencies that take the actions are responsible for entering data names et cetera into that epls system and our first objective is really to understand what is in that system frankly i was somewhat surprised at the numbers because as indicated in my testimony figure one on page four the vast majority of entities that are listed are listed as a result of statutory exclusions for example the department of health and human services might debar or exclude a contractor or an entity process the congress has decided that those entities shall be listed on that excluded parties list system now they may have had nothing to do with federal contracts but the consequence of listing on that system is that they are precluded from obtaining a federal contract when we looked at that we found that about eighty four percent of the cases in the excluded parties list system were as a result of  statutory debarments the remaining sixteen percent were either actions taken under the federal acquisition regulation or actions taken under the non procurement common rule our second objective was to look behind those numbers and to determine which agencies are active and which agencies are relatively inactive in the area of suspension and debarments at the request of this committee we focus procurement related actions so on that sixteen percent or so that are listed on the excluded parties list system as a result of either non procurement common rule actions or actions under the federal acquisition user of the suspension and debarment system we wanted to get a snapshot and an idea of what are the variables at play and what are the reasons why some agencies appear to be quite active in this area and other agencies less active so we chose a judgmental sample we wanted to get a mix of defense and civilian agencies within defense we chose the navy and defense logistics agency we wanted to look at some large agencies we looked at health and human services we looked at the department of homeland security within the department of homeland security we looked at two entities one that appeared to be relatively active in the area that was the immigration and customs enforcement  and one that appeared to be relatively inactive that was the federal emergency management agency we wanted to get a feel for what are the factors that really account for the variation in these numbers and we found that three factors account for that variation first the agencies with the active programs have a dedicated program with dedicated staff it happened that the staff on all of the four agencies that we looked at with active programs had dedicated full time staff the second factor was that each of the four agencies with the active programs and found is that the active agencies had detailed policies and procedures not just mirroring what is in the federal acquisition regulation but providing additional detail to their acquisition and non acquisition personnel on how to deal with contractors that are poor performers that have been convicted of certain transgressions or are simply unethical but detailed policies and procedures were an important component of an active process and the third component was an active referral process what that means is that  agencies went out of their way to train people on how to take advantage of the suspension and debarment process they had active inspectors general who routinely made referrals to th debarment official they had contracting officers who would also make a practice of making referrals to the suspension and debarment official so those are the three factors that we found at the four agencies with the most active programs conversely we found at six agencies that had less active programs we found an absence of those three factors  our third objective and again at the request of this committee was to take a look at the interagency coordination process for that we looked first at the committee that is called the interagency suspension  debarment committee this is a committee that was created by executive order in the mid s recently it received statutory recognition and statutory direction in the two thousand and nine defense authorization  where congress outlined specific responsibilities for this interagency committee so we wanted to take a look at how that committee was functioning and what are the challenges that it was facing briefly stated  the main function of that committee is to serve as the lead agency determination forum when an entity may be running afoul of the law may be suspected of some conduct that might lead to a suspension or debarment the first issue on the table is which agency ought to take responsibility to pursue that and that question gets resolved at this interagency suspension and debarment committee they often act very quickly through an email process or telephone to quickly decide on which agency needs to step forward and take responsibility personnel they have no budget and we found that that raised some issues for that committee in terms of having to borrow staff from the members that actually the chair and vice chair in particular that actually sit on that committee the second challenge that they faced was participation there are members on the committee from all of the major agencies and many of the second tier agencies if you will t simply do not participate to the level that one would expect for this important area and they were challenged for example in preparing a report that the congress directed in that legislation that i referred to earlier congress directed them to prepare a report on their activities and the activities of their member organizations and it took quite a while for them to get the cooperation of all of the agencies in order to prepare and submit that congressionally required  report we had a number of recommendations in our report and just very briefly first of all we wanted for the six agencies that had the relatively inactive programs we wanted them to adopt the practices that we outlined that we found at the agencies that had an active process all of the agencies concurred in that recommendation our second set of recommendations was directed to the office of federal procurement policy within the office of management and budget and that was for the office of federal procurement policy to issue a memorandum to all federal agencies outlining what it takes to have an active robust suspension and debarment program secondly we wanted the office of federal procurement policy to require and provide guidance to all agencies to cooperate with the interagency suspension dedicated staff how many staff are you talking about typically in these agencies is this one thousand people is this four people mister woods it did vary sometimes it was only one or two people sometimes it was more than ten less than twenty had part time staff or staff who had other responsibilities but one of their major responsibilities was to make the suspension and debarment process work mister lankford did you see a shift in effectiveness was it basically the size of the program where one agency may be very large for instance the department of the navy that you talked about obviously very large and a lot of contracts there they would submit a larger staff another agency with fewer people did you see a correlation in that as far as the number of people that were involved mister woods we did not see a correlation we did see differences and as you pointed out the navy had one of the larger staffs and many of them were full time but we did not observe a correlation between the size of the staff and the effectiveness of the program mister lankford okay the actual process of suspension and debarment that they have to go through the paperwork to fill out to complete is there anything in that process that you determined this is bulky this is difficult this is a disincentive to do suspension and debarment based on the actual bureaucratic red tape of doing it is there anything you discovered in possible to avoid that kind of red tape one of the hallmarks of the system is the action needs to be taken quickly because the whole purpose of suspensions and debarments is to protect the governments interest and often we need to move very quickly in order to be able to do that so the federal acquisition regulation requires that the procedures be streamlined and as informal as possible mister lankford obviously we will be visiting with people as we go through this from  or fema and other things that you have mentioned as well in your report on that specific recommendations that you have made as you have made these recommendations they have been received well by those agencies do you think it was just a matter of they were very busy in other areas and just didnt pay attention to the suspension and debarment areas what did you discover from that and what has the follow up been like mister woods first of all we were very pleased that all the agencies concurred with the recommendations what we found during the course of the review is that even at the  had the less active programs that steps were being taken at each of the agencies to get serious about the suspension and debarment process and there is a description in the report of several agencies with specific steps that those agencies are taking to do that mister lankford let me shift gears on you a little bit the statutory exclusions i know that was not a part of your total research on that how do you feel like that is being applied and who puts that on the reciprocal list on it just in your overview and looking at it is that a good thing to be able to have grants and contractors together on this reciprocal list and if so are agencies effective on getting to  list this is a bad actor in the grant world so that people in the contracting world can also know that as well mister woods we do not have any insight into the grant process because our review was just focused on contracts   to be honest i dont know the answer to that question as to the frequency but that is something that one could use the codes because when an agency enters an entity into the system they are also required  to use one of the many codes so that someone could identify the reason that the entity is listed and be in a position to answer your question mister connolly just seems to me mister chairman that non performance ought to be one of the reasons that is a pretty big one you make the point well said that obviously different agencies are subjected to different statutory criteria and therefore they have to conform to that that explains some variation among federal agencies for  terms and conditions for suspension and debarment but surely there ought to be a uniform process in every agency so that we dont have the kind of variation you have described in terms of active programs and less active programs  what is the reason for the fact that some agencies have inactive programs mister woods i think it is that they havent paid sufficient attention to it we found hhs for example is very active in fact that dod had the most but of course as i said in my opening statement that is to be expected but if you actually looked at it on a per billion dollar contracting dollar if you will actually they are far below some being listed and prevented from contracting for some period of time is that not correct mister woods yes sir there is catch all language if you will in the federal acquisition regulation that permits the suspension and debarment official to take action for other reasons that that official considers so serious as to warrant listing on the system mister connolly one of the criticisms one hears sometimes from contractors about that is that it can be first of all the penalty is  severe and a conflict of interest can sometimes be very much subjective judgment for example you may be a large contractor and you have been asked to provide your expertise for a federal advisory panel scientific panel defense panel intelligence panel and even in advance i know of cases where consent was gotten that if we do that we dont want to be prevented from bidding on some contracts subsequently are we also making sure that when we decide to lower the boom that we have determined that this is fair and that the entity has had a fair opportunity to make its case mister woods a couple of things first of all the decision to may be determining there is a conflict of interest mister woods and they would then therefore make a referral to the suspension and debarment official the other safeguard is that there are procedures  chairman and thank you mister woods for being here and for the work that gao does your report found that agencies with a quarter of the contract obligations of hhs have significantly more activity in this area specifically the department of interior with annual contract obligations of approximately twenty three dollars billion had ninety four percent procurement related or ninety four procurement related actions and ten grant related suspension  what it does or did lack in this area and would this have ben something is this something that you would say judging by all of the other studies that you did is  acceptable mister woods in response to your first question they lacked the three attributes that we specifically found at the agencies with the active programs they lacked the dedicated staff the policies and procedures and the active referral process when we talked to the officials at health and human services they in fact acknowledged that the suspension and debarment tool was level the federal acquisition regulation provides the policies and procedures and it is quite detailed what we would expect to see and in fact what we found at the agencies with the active programs was even further detail their implementing guidance in other words roles and responsibilities who actually implements and is charged with implementing the various provisions in the federal acquisition regulation we found those answers in the four agencies we did would just reassign two or three people to focus in on that we have the potential of finding a lot of bad contractors that we can protect the rest of the federal government from through suspension and debarment so we are not talking about a massive shift in agencies we are talking about even reassigning two or three people is that correct mister woods we are not talking about a massive shift and in fact some of the agencies complain to us that they cannot they are not in a position to devote full time people they are not in a position to hire people and we understand that  todays budget environment but reassigning people or carving out some part time responsibility for individuals for even a small number of individuals would have the kind of impact that you just little teeth what specifically would you recommend that we do in order to give that committee that kind of teeth that would at the very least allow them to collect more information or get the people that do not have active action needs to come from the office of federal procurement policy and we think it would be relatively simple and straightforward for the office of federal procurement policy to issue guidance to all federal agencies to cooperate much more fully with the interagency committee in terms of participation in the process in terms of responding to data requests in terms of providing staff where possible to support the activities of that committee the activities of the committee mister murphy so lets say that directive comes down and there is a requirement that data and information is provided the question is so what what does that really do just to have needed we have the office of management and budget that has the kind of teeth that you were referring to we have the office of federal procurement policy within omb who is charged with the responsibility for making this system work we think the legislatively would it be helpful do you think if we had some legislation that tightened up some of the reporting requirements and standardization issues your report has covered mister woods i am not sure additional legislation is needed at this point  congress was very clear a couple of years ago on the importance of the interagency committee on the roles and responsibilities that the congress expected that committee to play and the administration  issued a change to the federal acquisition regulation to reinforce and implement the direction that the congress gave i think again the pieces are there it is just a question of managing that and stressing the