HOW CONVICTS AND CON ARTISTS RECEIVE NEW

FEDERAL CONTRACTS

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

FEBRUARY 26, 2009

Serial No. 111–14

Printed for the use of the Committee on Oversight and Government Reform

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Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

HOW CONVICTS AND CON ARTISTS RECEIVE NEW FEDERAL CONTRACTS

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52–280 PDF 2009

HOW CONVICTS AND CON ARTISTS RECEIVE NEW

FEDERAL CONTRACTS

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

FEBRUARY 26, 2009

Serial No. 111–14

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

——— ———

——— ———

——— ———

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on February 26, 2009 ....................................................................... 1

Statement of:

Kutz, Gregory, Managing Director for Forensic Audits and Special Investigations, U.S. Government Accountability Office; James Williams,

Commissioner, Federal Acquisition Service, U.S. General Services Administration; David Drabkin, Acting Chief Acquisition Officer and Senior Procurement Executive, U.S. General Services Administration; Brigadier General Edward Harrington, U.S. Army, retired, Deputy Assistant Secretary of the Army for Procurement; Captain Michael Jaggard,

U.S. Navy, retired, Chief of Staff/Policy for the Deputy Assistant Secretary of the Navy for Acquisition and Logistics Management; Frederic

M. Levy, McKenna Long & Aldridge LLP; and Scott Amey, general

counsel, Project on Government Oversight ................................................. 61

Amey, Scott ................................................................................................ 123

Drabkin, David .......................................................................................... 77

Harrington, Brigadier General Edward .................................................. 84

Jaggard, Captain Michael ......................................................................... 92

Kutz, Gregory ............................................................................................ 61

Levy, Frederic M. ...................................................................................... 98

Williams, James ........................................................................................ 71

Letters, statements, etc., submitted for the record by:

Amey, Scott, general counsel, Project on Government Oversight, prepared

statement of ................................................................................................... 125

Bilbray, Hon. Brian P., a Representative in Congress from the State

of California, prepared statement of ........................................................... 163

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, prepared statement of .......................................................................... 162

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 160

Drabkin, David, Acting Chief Acquisition Officer and Senior Procurement

Executive, U.S. General Services Administration, prepared statement

of ..................................................................................................................... 79

Harrington, Brigadier General Edward, U.S. Army, retired, Deputy Assistant Secretary of the Army for Procurement, prepared statement

of ..................................................................................................................... 86

Hodes, Hon. Paul W., a Representative in Congress from the State of

New Hampshire, prepared statement of ..................................................... 161

Issa, Hon. Darrell E., a Representative in Congress from the State of

California:

Information concerning agency statistics ................................................ 8

Prepared statement of ............................................................................... 55

Jaggard, Captain Michael, U.S. Navy, retired, Chief of Staff/Policy for

the Deputy Assistant Secretary of the Navy for Acquisition and Logistics Management, prepared statement of ................................................... 94

Kutz, Gregory, Managing Director for Forensic Audits and Special Investigations, U.S. Government Accountability Office, prepared statement

of ..................................................................................................................... 63

Levy, Frederic M., McKenna Long & Aldridge LLP, prepared statement

of ..................................................................................................................... 101

Towns, Hon. Edolphus E., a Representative in Congress from the State

of New York:

Letter dated February 26, 2009 ............................................................... 152

Memo dated February 20, 2008 ............................................................... 144

Prepared statement of ............................................................................... 3

Page

IV

Letters, statements, etc., submitted for the record by—Continued

Watson, Hon. Diane E., a Representative in Congress from the State

of California, prepared statement of ........................................................... 155

Williams, James, Commissioner, Federal Acquisition Service, U.S. General Services Administration, prepared statement of ................................ 73

(1)

HOW CONVICTS AND CON ARTISTS RECEIVE

NEW FEDERAL CONTRACTS

THURSDAY, FEBRUARY 26, 2009

HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The committee met, pursuant to notice, at 10:07 a.m., in room

2157, Rayburn House Office Building, Hon. Edolphus Towns (chairman of the committee) presiding.

Present: Representatives Towns, Issa, Kucinich, Tierney, Clay,

Watson, Lynch, Connolly, Norton, Davis, Cuellar, Foster, Driehaus,

Burton, McHenry, Bilbray, Jordan, Flake, Chaffetz, and Schock.

Staff present: Ronald Stroman, staff director; Michael McCarthy,

deputy staff director; John Arlington, chief investigative counsel;

Leah Perry, senior counsel; Kwane Drabo, investigator; Jason Powell, counsel; Katherine Graham, staff assistant; Carla Hultberg,

chief clerk; Linda Good, deputy chief clerk; Jenny Rosenberg, communications director; Miriam Edelman, special assistant; Lawrence

Brady, minority staff director; John Cuaderes, minority deputy

staff director; Jennifer Safavian, minority chief counsel for oversight and investigations; Frederick Hill, minority director of communications; Dan Blankenburg, minority director of outreach and

senior advisor; Adam Fromm, minority chief clerk and Member liaison; Tom Alexander and Stephen Castor, minority senior counsels;

Ashley Callen, minority counsel; and Glenn Sanders, minority Defense fellow.

Chairman TOWNS. The first thing I would like to do this morning

is welcome our new Members on both sides of the aisle, of course,

and Mr. Issa, the new ranking member, as well.

Today’s hearing will kick off what I expect will be an exciting

and interesting 2 years for this committee as we carry out our oversight responsibilities.

This committee has a long history of conducting vigorous oversight and investigations, and we intend to renew and continue that

tradition in the 11th Congress as we continue to work together to

eliminate waste, fraud, and abuse.

Just a few days ago, Congress voted to approve billions of dollars

in economic stimulus funding, much of which will be spent through

government contracting. It will be a massive job to ensure that this

money is spent effectively and wisely, and that Federal dollars do

not go to the incompetent and the unproductive, the con artists and

the frauds.

One of the ways the Federal Government prevents this from occurring is the suspension and debarment process to prohibit people

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and companies with a poor record of integrity and business ethics

from receiving Federal funds. After the Government has determined that a party is not a responsible business partner and is

therefore ineligible for Government contracts, they are placed in a

database called the Excluded Party List System [EPLS]. Government contracting officers are required to check the database to verify that a potential contractor is not on the list before they enter

into a contract with the company.

Unfortunately, the Federal Government’s attempts to prevent ineligible parties from receiving Government contracts have not always been successful.

Following an extensive investigation, the Government Accountability Office [GAO], found that businesses and individuals that

have been excluded for the most serious offenses, ranging from national security violations to tax fraud, have improperly received

Federal contracts and other funds.

The results are truly shocking. The Army continued to do business with a company even after they knew the company’s president

had been convicted of attempting to smuggle nuclear weapons

equipment to North Korea. The Navy continued to do business with

a company whose owner had fled the country to avoid prosecution

for tax fraud. And the Navy gave new contracts to a company that

had been suspended for replacing inspected fittings with low quality parts on an aircraft carrier, risking lethal burns to the crew.

This begs the question: What is the point of having suspension

and debarment regulations if our own agencies disregard them?

I could go on and on and on, but let me stop here.

There appear to be numerous instances where Federal contracting agencies have failed to check the EPLS before entering into a

contract, failed to enter exclusion information on a timely manner,

and failed to terminate an existing contract with the excluded company.

Part of the problem seems to be that no single agency actively

monitors the content and function of the database. Moreover, the

EPLS database is not integrated with the main GSA Federal Supply schedule, making it impossible for a contracting officer to check

a single database to verify the eligibility of a prospective contractor.

I think we can do better than that. We must do better than that.

As I begin my chairmanship of this committee, I must say that

it is not enough for us to just identify the problems with the system; we need to fix them.

I am not against contracting. I am not against contractors. I am

against weak management and poor contractor performance.

The flaws in the system are just as frustrating for responsible

companies that do high quality work as they are for Congress and

taxpayers.

I would like to thank the witnesses today who are here and, of

course, I look forward to hearing your testimony. But, more important, I look forward to working with you to get a more effective system that really eliminates waste, fraud, and abuse.

[The prepared statement of Hon. Edolphus E. Towns follows:]

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Chairman TOWNS. At this time, I yield to the ranking member

of the committee.

Mr. ISSA. Thank you, Mr. Chairman. I want to thank you, on behalf of all of us on the dais, for finding a way to facilitate the optimum way to address this hearing today.

As you and I have discussed, leading up to today’s hearing, this

is a new era for this committee. In the previous Congress, and one

might say for many Congresses going back a decade, this committee has sometimes held high profile hearings in which ‘‘gotcha’’ politics occurred. I take the blame for the Republican side. I know the

chairman feels that a new era implies that his side may have at

times had the same problem. Those days are behind us.

Chairman Towns and I came to an agreement that the rules of

the committee will change, the practices of the committee will

change, because ultimately, for Government to change on this dais,

we must work together. Our enemy is not the contractor; it is not

the Federal work force. Our enemy is in fact not even the Senate

in this case, but, in fact, a long history of politics getting in the

way of consistent oversight and returning to issues until they are

properly resolved.

Outgoing Chairman Waxman left us with a list of 13,000 unresolved issues by the Bush administration. Chairman Towns and I

agreed that we are going to stay on top of that list until it has been

exhausted by the new administration. But whether it is the 98,000

suggestions and findings in the last 8 years of the previous administration or the ones that will come, it is not enough simply to have

an administration make a finding that they have done it, they

haven’t done it, they are working on it; we have to look at some

systemic issues.

Today, looking at this exclusion list I think is a good start. It is

not the finish; this is not a summit. This is in fact talking about

an ongoing process in which we want to improve the accuracy of

the list of who should be contacting and, by definition, who should

not be. In viewing this list—and I think we will put just a pie chart

up here—what we discovered is it is large, but it is not that large.

A hundred-plus thousand records, even though some of them are

lengthy, in this day and age, is not large.

What we did discover is there is very little linking between this

database of 100,000-plus excluded parties and the ongoing entry

process that our 1101 and 1102 procurement personnel use every

day. That is, in fact, inexcusable. We need to facilitate the ease and

speed with which somebody preparing a contract, large or small,

can know that they have ticked off by contractor, by person, a

check to see whether or not a red flag comes up.

However, no amount of good software and good interface between

databases makes up for a skilled work force doing their job with

diligence. Ultimately, we on the dais will be talking today and asking you about specific instances in which someone was known, or

should have been known, to have serious doubt as to whether they

should be allowed, or their company should be allowed, to participate in Government contracting on an ongoing basis.

We are going to hear from, in a unique way, all of the parties:

the accusers and, in fact, those who have to live with these findings, make changes, work together to improve our procurement sysVerDate 11-MAY-2000 11:34 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 U:\DOCS\52280.TXT KATIE PsN: KATIE
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tem. I am also pleased, as the minority, to have Mr. Levy, who will

talk about, from a contractor representative standpoint, if you have

made a mistake, how do you move beyond that mistake; how do

you proactively admit to the mistake, make the changes, and the

like.

I think this is a good balance. I thank the chairman for his cooperation in starting off a new era in a new way. If this committee

is to be successful, this hearing, and all of our hearings, and all of

our staff on both sides will have to present a united front. I believe

today all of you will see we are presenting a united front.

This committee is going after waste, fraud, and abuse. We are

also going after systemic problems that have long lingered in which

each Congress has faced with a finding that DOD can’t seem to get

it right, DOD can’t get this, or we need more funds in order to accomplish something that we needed more funds in the past to accomplish.

Mr. Chairman, I am going to ask unanimous consent to put some

anecdotal examples of downloads from this database for the Army

with 675 active listings on their exclusion list, the Navy with 284,

GSA with 266, and an excerpt from the Annual Workforce Report

of 2007, which cites a 20-year history of 1101, 1102, and other

members of the procurement work force.

Chairman TOWNS. Without objection.

[The information referred to follows:]

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Mr. ISSA. Thank you, Mr. Chairman. At this time, I look forward

to a good bipartisan effort to reform our procurement process and

yield back.

[The prepared statement of Hon. Darrell E. Issa follows:]

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Chairman TOWNS. In order to move things along, what I would

like to do is have one person on this side of the aisle do a 5 minute

statement and then one person on the other side provide a 5

minute statement. So I will just move on this side for 5 minutes,

if anyone would like; and we can split it up.

Yes, the gentleman from Ohio, Congressman Kucinich.

Mr. KUCINICH. I want to thank you for calling this hearing, Mr.

Chairman. And I am thankful that the Government Accountability

Office investigation has led to concrete steps that our Government

can take to ensure that criminal contractors or contractors who engage in serious violations of their contracts are not able to receive

additional Federal contracts. I regret that the U.S. Government

continues to expend precious tax dollars on companies that lack integrity and should be, but are not currently, on the list of excluded

parties.

As we get into this oversight, I just want to call one thing to your

attention; it is a specific question about the standards for disbarment. Listen to this case, Mr. Chairman. The Kuwait and Gulf

Link [KGL] Transport Co., is a Kuwaiti company that provides contract transportation services to our military in Iraq. They are required by contracts with the Department of Defense to maintain liability insurance coverage. As far as I can tell, they have never

provided the Department of Defense with evidence that complied

with this requirement.

Here is why this is significant. On May 19, 2003, an employee

of KGL negligently jackknifed a tractor trailer, causing a collision

with a Humvee of one of our service members, Lieutenant Colonel

Dominic Rocco Baragona, and it cost Lieutenant Colonel

Baragona’s life. He was a 1982 graduate of the U.S. Military Academy, served our country for 21 years.

The Baragona family has been trying unsuccessfully for years to

get KGL to accept responsibility for the death. The family’s attorney made three separate efforts to serve KGL with process; the

company refused. The family’s attorney sent a representative to

Kuwait to meet with KGL officials. Here was their response, Mr.

Chairman: we are a Kuwaiti company; we are untouchable. This is

what they say to the family of a dead GI.

Now, if these rules for debarment can’t protect our military, then

who can they protect? I am going to be interested to hear what this

panel has to say, because if these hearings mean anything, they

ought to be able to at least protect one person.

Thank you.

Chairman TOWNS. Thank you very much. Does the gentleman

yield back?

Mr. KUCINICH. Yield back.

Chairman TOWNS. Mr. Flake, the gentleman from Arizona.

Mr. FLAKE. Mr. Chairman, I appreciate this hearing being called.

This is a matter that should be of great concern to all of us. We

are going to be spending a boat load of money here with the stimulus, with the omnibus that we just passed, and we need to make

sure that it is spent wisely. I think a lot of us are concerned that

there simply aren’t enough qualified contractors out there to carry

on this work.

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A lot of us feel that there is simply too much Government money

being pushed out at any one time, so it is extremely important that

we have good oversight here, and that is why this committee is

going to be important moving forward on this front. So I commend

the chairman for holding the hearing.

I look forward to the testimony and also learning what your feeling is. Are there enough qualified contractors out there? I am glad

that we are looking to make sure that those who have committed

fraud and whatever in the past are not going to be eligible and

aren’t going to be getting these contracts, but I am concerned that

pushing this much money out there this fast is going to be very difficult without lowering our standards considerably as to who gets

these contracts. So I look forward to the hearing and thank the

chairman for calling it.

Chairman TOWNS. Thank you.

The gentleman from Ohio yielded back 2 minutes, so if someone

else on that side would like to. Yes, the gentleman from Illinois,

Congressman Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman. Let me just

thank you for calling this hearing. Also, I welcome your comments

and those of the ranking member. It is amazing to me that we

could be wasting and allowing so much money to go to waste without the kind of followup and follow-through that is necessary to

prevent it. I am glad that you have opened our hearing process this

year, and I look forward to getting to the depths of what is taking

place with procurement, what is going on, why it is happening,

and, again, I thank you for calling this hearing and look forward

to working with this committee for the next 2 years. I yield back.

Chairman TOWNS. Thank you very much.

Mr. Chaffetz has 2 minutes.

Mr. CHAFFETZ. Thank you. I appreciate the chairman for calling

this. This is of vital importance as we start to talk about spending

literally trillions and trillions of dollars. Of particular concern, and

one of the things I would appreciate that your address at some

point, was our President’s call to end no bid contracts. We just saw

that Congress, yesterday, passed 9,000 earmarks in one of the most

egregious and overspending bills I have ever seen, and I have only

been here a few days as a freshman.

Chairman TOWNS. That explains it. [Laughter.]

Mr. ISSA. Wait until you have been here a while, Jason.

Mr. CHAFFETZ. For some of you, this is not as critical an issue,

but how are we going to deal with the call from the President to

end no bid contracts? How are we going to deal with this with a

lack of competition perhaps in some space, and balance that out

with the needs to get the job done in areas that we need to get

done? But please know how much the American people are counting on you to address their issues and spend their money wisely,

and I appreciate hearing from you and participating in the panel

today.

Thank you, Mr. Chairman.

Chairman TOWNS. Thank you.

We will turn now to our first panel. It is committee policy that

all witnesses are sworn in, so if you would all stand and raise your

right hands.

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[Witnesses sworn.]

Chairman TOWNS. Let the record show that all of the witnesses

have answered in the affirmative.

You may be seated.

Today we have appearing before us Mr. Gregory Kutz, Managing

Director of Forensic Audits and Special Investigations, FSI, in the

Government Accountability Office. The mission of FSI is to provide

Congress with high-quality forensic audits and investigation of

fraud, waste, and abuse, and evaluations of security,

vulnerabilities, and other requested investigative services. Mr.

Kutz and his team have accomplished this mission today by providing our committee with the report before us, and we want to welcome you as well.

We also have Mr. James Williams, the Commissioner of Federal

Acquisition Services within the General Services Administration,

which includes management and oversight of the agency’s Federal

supply schedule. Previously, Mr. Williams was the designated acting administrator of GSA from August 30, 2008, until January 20,

2009. Welcome.

Mr. David Drabkin is the Deputy Chief Acquisition Officer and

Senior Procurement Executive within the Office of the Chief Acquisition Officer of GSA. In this capacity, Mr. Drabkin oversees the

agency’s Excluded Parties List System [EPLS], amongst other programs. Welcome.

Mr. Ed Harrington, is the Deputy Assistant Secretary of the

Army for Procurement as of December 8, 2008. Mr. Harrington is

a retired senior U.S. Army officer, having achieved the rank of

Brigadier General. Mr. Harrington has 28-plus years of experience

in weapons and information systems life cycle acquisition, contracting management, and military logistics operations. Welcome.

Mr. Michael Jaggard is Chief of Staff and Policy within the Office of the Assistant Secretary of the Navy’s Acquisition Management. Prior to his retirement from the Navy in October 2001, Mr.

Jaggard held the rank of Captain and served 30-plus years to our

Nation. Welcome.

Mr. Frederic Levy is a partner with McKenna Long & Aldridge.

Mr. Levy has represented and advised numerous corporations concerning government contract negotiations, award performance, and

contract terminations. Mr. Levy’s specialty is the resolution of complex compliance and ethics issues. That is really good. Welcome.

Your entire statements are in the record for all of you, and let

me just say that you all have 5 minutes to provide an opening

statement, and of course, thereafter Members have an opportunity

to raise questions.

So why don’t we start with you, Mr. Kutz.

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STATEMENTS OF GREGORY KUTZ, MANAGING DIRECTOR FOR

FORENSIC AUDITS AND SPECIAL INVESTIGATIONS, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; JAMES WILLIAMS,

COMMISSIONER, FEDERAL ACQUISITION SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; DAVID DRABKIN, ACTING

CHIEF ACQUISITION OFFICER AND SENIOR PROCUREMENT

EXECUTIVE, U.S. GENERAL SERVICES ADMINISTRATION;

BRIGADIER GENERAL EDWARD HARRINGTON, U.S. ARMY,

RETIRED, DEPUTY ASSISTANT SECRETARY OF THE ARMY

FOR PROCUREMENT; CAPTAIN MICHAEL JAGGARD, U.S.

NAVY, RETIRED, CHIEF OF STAFF/POLICY FOR THE DEPUTY

ASSISTANT SECRETARY OF THE NAVY FOR ACQUISITION

AND LOGISTICS MANAGEMENT; FREDERIC M. LEVY, MCKENNA LONG & ALDRIDGE LLP; AND SCOTT AMEY, GENERAL

COUNSEL, PROJECT ON GOVERNMENT OVERSIGHT

STATEMENT OF GREGORY KUTZ

Mr. KUTZ. Thank you. Mr. Chairman and members of the committee, thank you for the opportunity to discuss the Excluded Parties List System. Today’s testimony highlights the results of our investigation into whether excluded parties were improperly paid. My

testimony today has two parts. First, I will discuss the problems

that we identified and, second, I will discuss the key causes of

these problems.

First, our testimony highlights 25 cases of individuals and businesses that received millions of dollars improperly after being suspended or debarred. As shown by the slides on the monitors, our

25 cases include companies whose owners illegally shipped parts to

North Korea for its nuclear weapons program, substituted inferior

parts on an aircraft carrier, illegally dumped chemicals into city

sewers, made fraudulent purchases using stolen Government credit

cards, and falsified records for required SEC filings. Additional activity for these 25 cases includes: mail fraud, wire fraud, tax fraud,

false statements, money laundering, bribes, kickbacks, and bid rigging.

The individuals and businesses responsible for these acts were

supposed to be prohibited from continuing to receive Government

contracts and other payments. However, in these, and likely many

other cases, the system failed. Let me briefly discuss two of these

cases for you.

First, in July 2005, the Army debarred a German company and

its owner for attempting to smuggle 22 tons of ultra strong aluminum pipes to North Korea. These pipes could have been used to

make weapons-grade uranium sufficient for several bombs in a

year. The monitor shows excerpts from the Army’s debarment

memorandum, which states: ‘‘The United States has a compelling

interest to discontinue any business with this morally bankrupt individual, as continuing to do so would be irresponsible.’’

Unfortunately, one Army command paid this company over $4

million for work ordered after this debarment. In total, the Army

paid this company $20 million after the owner was convicted of violating German law.

You might be thinking that this command was unaware of this

debarment or, as they say, didn’t get the memo. You would be

62

wrong. According to the Army, this command was aware of this debarment, but, contrary to the memo you see on the monitors, chose

to continue doing business with this company.

Second, in April 2006, the Navy suspended a company for product substitution. Specifically, a company employee intentionally

substituted non-conforming fasteners for steam pipes on an aircraft

carrier. According to the Navy, these fraudulent acts endangered

the lives of 3,117 Navy sailors aboard the USS John F. Kennedy.

Despite the suspension, within a month, the Navy made three

awards to this company for over $100,000.

I am sure that by now you are wondering why the Federal Government continued doing business with these fraudsters and criminals, which leads to the second part of my statement, the key

causes of these problems. Overall, we found a broken system and,

in several cases, acts of deception by company owners.

Examples of the breakdowns include: missing data and errors in

the system, inadequate system search functions, agencies not entering exclusions into the system in a timely manner, and contracting officers not properly checking the system. Although GSA and

many agencies are involved, nobody appears to be responsible for

making sure that exclusions are properly enforced.

As I mentioned, we also found acts of deception by several owners. For example, one owner simply set up a new company with a

slightly different name and a new identifying number. In another

case, the owner’s wife operated the company during the debarment

period using her maiden name. Given the lack of effective oversight, just about any scheme could be used to beat this system.

Finally, you are probably wondering why we have set this Dragon skid body armor at the table. Let me explain. We bought this

body armor on the Federal Supply Schedule from a debarred Government contractor. This company was debarred by the Air Force

for falsely labeling 590 of these vests as having been tested, when

in fact they were not. However, rather than removing the company

from the supply schedule, GSA listed it as an approved vendor,

with no warning that the company was debarred.

In conclusion, I believe that the 25 cases I have described for you

here today are in fact the tip of the iceberg. Further investigation

would reveal dozens, and perhaps hundreds, of similar cases. The

last time I was before you, Mr. Chairman, I testified that thousands of Government contractors, with billions of dollars of unpaid

Federal taxes, continued to receive billions of dollars of new Government contracts.

Unfortunately, today’s story is just as bad, or maybe it is even

worse. Stories like this cause taxpayers to lose faith in their Government. How can we explain to taxpayers that millions of their

hard-earned dollars are being paid to known fraudsters and criminals, including those that have violated our national security interests?

Mr. Chairman, I want to commend you and the ranking member

for shining a spotlight on this important issue today. I look forward

to continuing to work with this committee on matters related to

fraud, waste, and abuse. I look forward to your questions.

[The prepared statement of Mr. Kutz follows:]

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Chairman TOWNS. Thank you very much, Mr. Kutz.

At this time we will hear from you, Mr. Williams.

STATEMENT OF JAMES WILLIAMS

Mr. WILLIAMS. Good morning, Chairman Towns, Ranking Member Issa, and members of the committee. I would like to thank the

committee for the opportunity to discuss the U.S. General Services

Administration’s Excluded Parties List System [EPLS]. With me

today is Mr. David Drabkin, the Acting Chief Acquisition Officer

for GSA, who will detail specific actions GSA has taken to address

issues raised by the GAO report regarding the EPLS.

The EPLS is a valuable tool that helps protect the Government’s

interest. Given the vast number of contract actions that take place

each year in which the EPLS is used in accordance with the Federal Acquisition Regulation, the system works today. However, we

take all isolated incidents seriously regarding EPLS and we have

made, and will continue to make, improvements to ensure the system works to continue to protect the Government’s interest.

In this regard, we appreciate the work of the GAO in looking at

the system and identifying the incidents set out in the report and

their causes. On December 12, 2008, GSA received the GAO draft

report setting out GAO’s findings with regard to EPLS. The draft

report identified a range of deficiencies in the maintenance, use,

and operation of the EPLS. I am pleased to report that Acting Administrator Prouty signed GSA’s response to the GAO draft report

and agreed with the findings and recommendations of the report.

In fact, GSA has already implemented many of the report’s recommendations and GSA will use the report’s findings to enhance

the use of the EPLS.

As part of our agency role of providing the Government’s centralized acquisition delivery systems, the Office of Management and

Budget designated GSA as the lead agency to manage the Integrated Acquisition Environment [IAE]. The IAE is an e-Government initiative to help streamline and improve the Federal acquisition process. The IAE is composed of 10 acquisition systems that

facilitate every phase of the acquisition life cycle, from market research to contract administration. Through the IAE, acquisition

functions common to all agencies are now managed centrally as

shared systems.

The EPLS is one of the 10 IAE systems. It is an electronic Webbased system that identifies parties excluded from receiving Federal contracts and certain types of Federal assistance and benefits.

The EPLS keeps the Federal acquisition community aware of agency suspensions and debarments across the entire Government.

While EPLS users are currently able to search, view, and download

both current and archived exclusions, we intend to make the EPLS

easier for them to use and with more reliable results.

GSA’s Federal Acquisition Service understands how important

our role is in the interagency contracting system. To that end, we

regularly refine our systems and guidance to agencies when we become aware of issues, such as GAO’s findings in its report regarding our Multiple Award Schedules Program. As a result, the Federal Acquisition Service is taking the following actions: No. 1, adding reminders to our customer-facing e-tools to ensure our prospecVerDate 11-MAY-2000 11:34 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 U:\DOCS\52280.TXT KATIE PsN: KATIE
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tive customers are aware of potential excluded parties prior to placing scheduled orders; No. 2, establishing and placing messages

within our e-tools to remind purchasers to check the EPLS prior to

placing a task order; and, No. 3, providing direct access links to the

EPLS Web site within our system’s GSA Advantage, eBuy, and

eLibrary to allow for easy access to suspension and debarment information.

Moreover, the Federal Acquisition Service is currently evaluating

all of our training and will ensure that our guidance directs the review of EPLS data at all appropriate times in the acquisition process. The guidance will also describe the steps necessary for removal

of excluded entities from the Schedules Program, where appropriate.

Mr. Chairman, Ranking Member Issa, and members of the committee, GSA looks forward to working with this committee, the

GAO, and our Federal agency customers to make the EPLS a more

user-friendly and reliable Web-based tool so that it remains a valuable acquisition tool. We thank the GAO and this committee for

helping promote awareness of the EPLS system and its continued

value as a tool that protects the Government’s interest.

That concludes my statement. I would be happy to answer any

of your questions. Thank you.

[The prepared statement of Mr. Williams follows:]

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Chairman TOWNS. Thank you very much, Mr. Williams.

At this time, Mr. Drabkin, we will hear from you.

STATEMENT OF DAVID DRABKIN

Mr. DRABKIN. Chairman Towns, Ranking Member Issa, members

of the committee, thank you for inviting me to share with the committee information concerning the Excluded Parties List System

[EPLS]; the rules governing suspension and debarment in the Federal Government; GSA’s administration of its suspension and debarment program; and its leadership as managing partner for the

Integrated Acquisition Environment [IAE], of which the EPLS is a

part.

Mr. Chairman, Ranking Member Issa, in addition to serving as

GSA’s Acquisition Chief Acquisition Officer and a member of the

FAR Council, I have held numerous positions within the Federal

Government and have served on a detail to the Senate Homeland

Security and Government Affairs Committee, all focused on Government acquisition.

As is more fully described in my prepared statement, I have devoted much of my professional life to procurement policy, including

serving as the head of a contracting activity, a trainer, as an agency debarment official. I have also advised contracting officers as a

member of the Judge Advocate General’s Corps, then as a civilian

attorney with the Army’s Judge Advocate General’s Corps, a civilian attorney of the Office of General Counsel in the Defense Logistics Agency, and I was one of the Army’s first fraud counsels and

ran numerous fraud counsel program within the Department of Defense. Nobody is more committed to seeking out and reducing fraud

in Federal contracting.

I was also part of the DOD organization when we worked with

this committee in 1994 to write and pass the Federal Acquisition

Streamlining Act [FASA], and then I led the implementation of

FASA in the Federal Acquisition Regulation. And all of that has

bearing on some of the issues that are raised in this report on suspension and debarment.

Suspension and debarment are not tools for imposing punishment on contractors or individuals who have violated Federal procurement rules or, for that matter, any other rule or norm that reflects on the company or the individual’s present responsibility.

Punishment is left to those departments and agencies who oversee

or regulate various aspects of commerce or who are responsible for

the enforcement of the Nation’s laws. Suspension and debarment

are prophylactic measures designed to protect the Government

from doing business with companies or individuals who are not

presently responsible. Presently responsible is measured by many

factors, which are all set forth in FAR Part 9.

We have developed tools over time to disseminate information

about those companies or individuals who have been suspended or

debarred. Those tools have evolved from written publications to online interactive tools. We continue to evolve those tools, making

them more accurate and useful to Government contracting personnel, and ensuring that the Government does not do business with

companies or individuals who have been suspended or debarred.

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As Jim mentioned, we are pleased to say that EPLS and the suspension and debarment processes are working. And while the GAO

report does identify several instances where mistakes were made,

we do not believe the report demonstrates that any of these mistakes were the result of deliberate attempts by Federal contracting

personnel to circumvent the rules or systemic failures in EPLS.

The system itself, sir, is not broken.

Still, it gives those of us who devote our lives to purchasing on

behalf of this great Government, no pleasure to learn that we make

even one mistake. As GAO is aware, we have training for our contracting officers on the requirements to check EPLS before awarding a contract. We have changed the EPLS so that now we require

the use of the DUNS number, a unique identifier to identify companies or individuals who are suspended or debarred; and we have

added the DUNS number to all but 150 of our over 56,117 active

records, and we are trying to address the 150 records which don’t

include DUNS numbers now.

When we suspend or debar a company, we tell that company

what the consequences of suspension and debarment are in a letter

suspending or debarring the company. And had the GAO representative shown you the full letter, it would have told them that they

are not eligible for awards of contracts, tasks, or delivery orders in

the base in the body of that letter.

We require contractors to certify, prior to submitting offers, that

they are not suspended or debarred. We conduct reviews of our contracting offices to make sure that they are following our guidance,

and when we find that they are not, we determine the reason and

we correct it. And as you just heard from Jim, GSA’s Federal Acquisition Service will add features to help make sure that our

Schedule customers know that a contractor has been suspended or

debarred.

Last year, our contracting officers across the Federal Government awarded over 11 million contracting actions. The year before,

almost the same number. There were a little more than 28,700 of

those individuals in the Government last year, and they awarded

$456 billion worth of contracts. In 1991, we had over 33,000 contracting specialists who awarded over $190 billion. Last year, we

did three times as much work with one-sixth less people. It is not

an excuse for making mistakes, but it may well explain why, on occasion, mistakes are made.

Mr. Chairman, Ranking Member Issa, the EPLS is not broken.

Our rules are clear. Our contracting colleagues are trained. We review our work and we are committed to improving our process, and

we do so regularly.

I am prepared to answer any questions the committee may have.

[The prepared statement of Mr. Drabkin follows:]

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Chairman TOWNS. Thank you very much, Mr. Drabkin.

General Harrington.

STATEMENT OF BRIGADIER GENERAL EDWARD HARRINGTON

General HARRINGTON. Chairman Towns, Congressman Issa, distinguished members of the Committee on Oversight and Government Reform, thank you for this opportunity to testify on the Excluded Parties List System and the report on it by the Government

Accountability Office. I have a written statement that I respectfully

request be made a part of the record for today’s hearing.

Chairman TOWNS. Without objection.

General HARRINGTON. I appreciate the efforts of Congress and

this committee to address this effective use of EPLS, and I thank

the Government Accountability Office for alerting the U.S. Army to

this very important issue.

Mr. Chairman, the Excluded Parties List System [EPLS], is an

essential tool for our contracting teams. As a result of the GAO’s

findings, I released a policy alert to contracting officers Army-wide

to re-emphasize the requirement for contracting officers to use

EPLS. I reviewed the actions covered by the GAO report, and it is

clear that mistakes were made. Contracting officers awarded contracts or orders to suspended or debarred firms because EPLS was

not checked.

Upon learning of these errors, the Army took immediate action

to retrain these contracting officers and implement changes and

local procedures. I am pleased to report to you today that Department of the Army level procurement management reviews this fiscal year show a significant improvement over previous years in

evaluating and awarding contracts to responsible firms. Mr. Chairman, I am also pleased to report that the Army is taking lasting

and significant actions to improve contracting in expeditionary operations, as well as our institutional contracting functions. We are

working to enable a contracting mission that is agile and responsive to our war fighters, while ensuring proper fiscal stewardship

of taxpayer dollars.

A critical important issue for us is the size, structure, and training of the military and civilian acquisition work force. From 1998

to 2006, the contracting work force declined by 20 percent, while

the workload and the number of dollars associated with that workload experienced a fivefold increase. The Army, with the help of

Congress and the Secretary of Defense, is making steady forward

progress in addressing these workload work force issues. As a result, the Army has added more than 850 contracting professionals

over the last 2 years. This holistic focus on Army contracting will

ensure that we attract and retain additional military and civilian

contracting professionals who are trained to meet the increasingly

complex demands placed on them.

Mr. Chairman, Army contracting makes up 65 percent of total

Army expenditures. As stewards of the taxpayers’ dollars, the

Army is doing a better job of managing and documenting contractor

performance, and I agree that greater emphasis is rightfully placed

on their management and oversight. We appreciate the efforts of

this committee to address the effectiveness of the Excluded Parties

List System.

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This concludes my opening remarks, Mr. Chairman. I look forward to your questions.

[The prepared statement of General Harrington follows:]

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Chairman TOWNS. Thank you very much, General Harrington.

Captain Jaggard.

STATEMENT OF CAPTAIN MICHAEL JAGGARD

Captain JAGGARD. Mr. Chairman, Congressman Issa, distinguished members of the committee, thank you for the opportunity

to discuss the Department of the Navy’s use, regulations, guidance,

and training concerning the Government’s Excluded Parties List

System. The Navy and Marine Corps are absolutely committed to

conducting our business dealings only with responsible, ethical

business partners.

The Federal Acquisition Regulation requires that purchases and

contracts be awarded only to responsible prospective contractors,

and it prohibits making a purchase or awarding a contract unless

the contracting officer makes an affirmative determination of responsibility. One of the explicit elements of this responsibility determination is having a satisfactory record of integrity and business ethics. The FAR goes on to say that contracting officers should

use the EPLS in making this determination of responsibility.

As a general rule, the FAR does allow the continuation of contracts or subcontracts in existence at the time the contractor was

debarred, suspended, or proposed for debarment, unless the agency

head directs otherwise. However, unless the agency head makes a

written determination of compelling reasons for doing so, the FAR

explicitly prohibits placing orders or exceeding guaranteed minimum under indefinite quantity contracts, or placing orders under

the Federal Supply Schedule contracts or basic ordering agreements, or adding new work, exercising options, or otherwise extending the duration of current contracts or orders with listed contractors.

In May of last year, in response to GAO’s preliminary findings

that some contracting officers may have been making awards without first verifying whether or not the prospective contractor was on

the EPLS, our Department of the Navy Acquisition Integrity Office

investigated and found out that, in some cases, what the GAO

found was true. The circumstances varied, but in a few cases the

EPLS search function required an exact match, so unless the firm’s

precise name was entered in its entirety, a negative report would

result. We understand this has since been corrected.

Immediately upon learning of these errors, the AIO, in conjunction with my office, issued a fraud alert titled Required EPLS Verification Prior to Contract Award, and this fraud alert was distributed to all of the Department’s contracting officers last year. Additionally, in order to ensure contracting personnel stayed aware and

vigilant on this important matter, we followed up the fraud alert

by disseminating a training package on EPLS to all of our Navy

and Marine Corps contracting officers. The briefing contains a concise, but thorough, articulation of the regulatory requirements regarding EPLS, and it is an invaluable reference tool for our contracting officers today.

Mr. Chairman, Congressman Issa, the GAO clearly identified a

few transactions that slipped through the cracks. However, rest assured that the Department of the Navy does not condone any violation as being acceptable. Through our fraud alert issued last May,

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our targeted training initiatives and improvements to the EPLS

software, we believe the weaknesses that allowed these actions to

occur have been effectively addressed.

I thank you for the opportunity to work with this issue with this

committee, and I welcome your questions, sir.

[The prepared statement of Captain Jaggard follows:]

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Chairman TOWNS. Thank you very much, Captain Jaggard.

Mr. Levy.

STATEMENT OF FREDERIC M. LEVY

Mr. LEVY. Chairman Towns, Ranking Member Issa, members of

the committee, thank you for inviting me to testify today on this

very important topic. My name is Fred Levy. I am a partner with

the law firm of McKenna Long & Aldridge, where I have practiced

Federal procurement law for more than 30 years, specializing in

ethics and compliance issues, and particularly in the area of suspension and debarment.

While I am here today to testify on my own behalf, I note that

for the past 3 years I have also served as co-chair of the American

Bar Association Public Contract Law Section’s Debarment and Suspension Committee; and in that capacity I have worked closely

with a number of agencies, suspension and debarment officials, and

Department of Justice representatives to review, analyze, and comment upon legislative and regulatory developments related to suspension and debarment.

Debarment and suspension from Federal contracts is an important tool that enables the Government to ensure that its contractors are presently responsible, and by that I mean that they have

in place the requisite corporate culture, as well as the processes,

procedures, and controls that are required to perform contracts in

an ethical and compliant manner.

A contractor that is debarred or suspended by any agency is ineligible to receive not only new contracts, but any new work, including new orders, throughout the executive branch, unless an

agency head determines in writing that there are compelling circumstances to make such an award. That is the only exception. Debarment and suspension also applies to subcontracts in excess of

$30,000.

The grounds for debarment or suspension are specified in the

Federal Acquisition Regulation [FAR]. They are broad and provide

agency suspension and debarment officials with wide latitude. The

grounds include conviction or civil judgment for commission of a

fraud in connection with obtaining or performing a contract, including misrepresentation of eligibility for award; commission of offenses involving theft, falsification of documents, bribery or false

statements; and ‘‘any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or

subcontractor.’’

It is important to remember, as Mr. Drabkin said, that debarment and suspension are not punitive measures. The Government

has criminal and civil remedies by which it can recover damages

and punish offenders. Their purpose is to assure present responsibility and compliant contracts performance going forward.

For that reason, the FAR requires that even if grounds for debarment exist, that is not the end of the inquiry. The suspension/debarment official must also consider 10 other factors to assess

whether the Government is protected from similar wrongdoing in

the future. Those factors include, for example, the disciplinary

measures taken by the contractor, the corrective and remedial

measures implemented, implementation of revised controls and

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ethics programs, cooperation with the Government’s investigations,

and whether the Government has paid all liability and made restitution.

The suspension/debarment official’s discretion in deciding whether to debar provides the Government with substantial leverage and

it allows the suspension/debarment official to play a role in shaping

a company’s ethics and compliance culture. As a condition for continuing to do business, the suspension/debarment official can require the contractor to enter into an administrative compliance

agreement that influences the contractor’s disciplinary actions; requires the contractor to implement specific training processes, procedures, and controls; and may also impose reporting requirements

and outside oversight. Such an agreement has significant benefits

for the Government: it prevents innocent employees from losing

their jobs because a company has to shut down or cut its work force

to do the reduced work; it maintains competition, reducing no-bid

contracting; and it maintains the industrial base.

The EPLS is the tool used by the Government to ensure that its

acquisition personnel and other Government contractors know who

is ineligible. It is publicly available. I have it earmarked as one of

my favorites. The FAR requires contracting officers to check it

twice, to check it after receiving bids or offers, and then again to

check it before award. Today, it is easy to use; it is like performing

a Google search, and it does allow use of some common search tools

like ‘‘and’’ or ‘‘or.’’

I also note that the FAR places responsibility on contractors as

well to identify whether they are suspended or debarred. All contracts in excess of $100,000 require the contractor to certify whether it or its principals are suspended, debarred, or proposed for debarment. If, as GAO points out, there are situations where a listed

contractor received an award and the proper procedure for making

that exception was not followed, that is not appropriate, but it is

also not due to lack of law or regulation.

Rather, in my experience, it would appear to be principally due

to human error either in the listing process or because someone

failed to check the list. In my view, that stems from a lack of training and an inexperienced and understaffed Federal acquisition

work force. And if a contractor intentionally misrepresented their

eligibility, there are numerous laws and regulations to address that

situation.

I do believe, however, that there are ways to improve the suspension and debarment system. The ABA Committee on Suspension/

Debarment, which I co-chair, undertook a study last year and identified a series of recommendations. They include: strengthening the

role of the Government’s interagency suspension and debarment

committee; combining the different rules governing suspension and

debarment of contractors, and suspension and debarment from nonprocurement transactions such as grants into one common set of

rules; formalizing the ability of suspension/debarment officials to

enter into administrative compliance agreements, that is now done

on an ad hoc basis, and making those agreements public; providing

for a lead agency when multiple agencies have an interest in a contractor, and making a determination of responsibility, just like a

determination of non-responsibility, binding.

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I would be glad to share a complete set of our recommendations

with the committee and to work with the committee. With that, I

will conclude my remarks, and I would be pleased to answer any

questions.

[The prepared statement of Mr. Levy follows:]

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Chairman TOWNS. Thank you very much, Mr. Levy.

At this time, we will start with the questions period, and, of

course, I will start.

I think it was Mr. Chaffetz who mentioned the stimulus package,

and it made me really think about it, and I want to ask you, Mr.

Kutz, I want to know are there guarantees to ensure right now

that none of the economic stimulus will go to excluded corporations.

Just 2 weeks ago we passed a $787 billion stimulus package, nearly

a week ago, really, and a lot of people and a lot of companies want

a piece of that action. In your opinion, are the loopholes in the system so big that they need immediate attention to make sure that

stimulus funds aren’t going to convicts or to con artists? And how

do we ensure that they are going to where they are supposed to go?

Mr. KUTZ. I believe on the contract side there still is a risk that

this would happen, but probably the bigger vulnerability of GSA is

moving forward with some of the proactive things is on the health

care side. We are aware of Medicaid providers in the system right

now that are suspended or debarred. So, for example, some of the

stimulus money is going to Medicaid. It would appear pretty clear

that they are going to get some of this money.

And I expect you also have other vulnerabilities we haven’t

talked about today. You have the whole subcontracting community.

We didn’t look at subcontracts. Subcontracts are another risk. But

hopefully some of the efforts that GSA has taken over the last several years will pay fruit and there will be less vulnerability to this

happening. But I think the bigger risk is on the part we haven’t

looked at yet.

Chairman TOWNS. Right. This question I would like to ask all of

you except Mr. Levy. Time and time again, GAO’s report highlights

that taxpayer dollars have fallen in the hands of companies and

business owners that should not have ever received even one contract with the Federal Government, let alone several. For instance,

it goes without saying that Federal agencies should not contract

with individuals convicted of attempting to smuggle nuclear reactor

parts into North Korea.

Yet, the GAO exposed that the Department of the Army did exactly that. Further, Federal agencies should not contract with companies convicted of massive tax fraud or falsifying filings with the

Securities and Exchange Commission. Nonetheless, the GAO discovered that agencies were actively contracting with such irresponsible and untrustworthy businesses.

What I can’t seem to understand is why is this occurring. Why

are agencies awarding contracts to those crooks when the Federal

Acquisition Regulation specifically states that contracts must be

awarded only to responsible prospective contractors, and even prohibits awarding a contract to a company unless the contracting officer makes an affirmative determination of responsibility.

Let’s just run right down the line quickly.

Captain JAGGARD. The only thing I could say in answer to your

question, sir, is the system is not perfect and people make mistakes. In a few instances where the contracting officer failed to

check the EPLS because they mistakenly believed that issuing a

modification to a contract didn’t require doing so. We have taken

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corrective action to train people better on how to properly use the

system and not make those mistakes.

Chairman TOWNS. General.

General HARRINGTON. Sir, a similar situation exists in the Army.

We made some mistakes; we had some misses. Not intentional errors of omission, but just missing having to perform that check. In

other instances we found, as Mr. Jaggard suggested also, modifications, delivery orders, task orders, elements of a contract or in the

process of a contract when they were issued, there was not a check

of EPLS made. We have since strengthened the notice to the field

that process has to be performed even when issuing a modification

or a task order or delivery order.

Chairman TOWNS. Mr. Drabkin.

Mr. DRABKIN. First of all, Mr. Chairman, let me assure you, as

I said in my statement, both written and oral, that we do not want

these mistakes to happen. Second, as Mr. Kutz noted and as Jim

said, we are taking steps systemically to address the issues. Third,

however, I just want to make sure that we are all clear. GAO found

25 instances. We then went back and did a search over the last 3

years—that would be about 30 million transactions—and we found

35 instances, including the 25 reported by GAO, where six companies who were suspended or debarred got awards.

In addition, there is some confusion not explained fully in the

GAO report. For example, a number of their cases involved awards

made under the micro purchase threshold. The committee may recall that when it passed FASA, when this committee drafted the

language for FASA, we made some decisions about micro purchases, and one of those decisions was, because of their value and

the cost of the transaction to make those kinds of purchases, we

wouldn’t require a host of the contracting requirements that we

would require for purchases over $3,000. So when an administrative assistant takes a purchase card and goes to a local vendor to

buy $50 worth of paper, pencils, or pens, they are not required to

check the EPLS; and at least three of the examples in the GAO report involved micro purchases.

And the last thing I would say to is our office, working with

OMB and with my colleagues on the FAR Council at DOD and

NASA, are currently drafting the guidance to address how we are

going to implement the ARRA, the stimulus package; and in our

guidance we will again remind individuals to check the EPLS list

before they make award.

But, Mr. Chairman, mistakes happen in the system. They are

unfortunate. When we find them, we correct them. We are committed not to make mistakes, but we do a lot of work and we don’t

have a lot of people to do that work with.

Chairman TOWNS. Thank you very much. But remember, we are

talking about waste, fraud, and abuse here. I want you to know

that.

Yes, Mr. Williams.

Mr. WILLIAMS. Mr. Chairman, like everybody else in the room, I

believe we are the greatest country in the history of the world and

that our Government is based upon a system of trust. And like the

gentleman to my left, I have spent my professional life trying to

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earn that trust of the American people in spending taxpayer money

wisely and effectively.

However, in these incidences, there are places where people have

made mistakes. Also, some of these are incidents where people

have actively tried to cheat the Government. And we take every

one of these incidents seriously. It is something that chips away at

that trust that we try to earn from the American people. And when

we learn about these things and the causes, as GAO has pointed

them out, we take steps to plug those loopholes, to provide better

training, to enhance the system, to make sure that we can eliminate these. It may never be foolproof, because there will be people

who may make mistakes and people who will try and cheat the system. It is our job and our passion to make sure we do everything

we can to eliminate those mistakes and those people who try to

cheat us.

Chairman TOWNS. Right. Mr. Kutz, you heard it, and I brought

them down the line so you would be able to hear what was being

said. Now I would like to get your response. Do you believe like Mr.

Drabkin stated, that the incidents are just few and far in between

and that they are so remote that we really shouldn’t even discuss

it?

Mr. KUTZ. Can I agree and disagree? I would like to agree and

disagree at the same time. I would agree, first of all, that if you

add up the money in the dollars, it is not something that is going

to be material. But I think the bigger point here is the safety and

security issue and protection of the Government. We are talking

about—let’s use the North Korea case. One exception, but very important. You are dealing with someone that sold out to the North

Korean government with respect to their nuclear weapons program.

The Army debarment memo said that one instance put in jeopardy

the lives of 37,000 troops in South Korea.

Look at this body armor here. This company sold 590 of these to

the U.S. Air Force, mislabeled, subsequently found to not pass the

tests. So materially wise, dollar-wise, yes, but 590 lives could have

been jeopardized by the use of this.

Another example, the expired adhesives used on aircraft engines.

Again, are we talking about big dollars? No. But people, U.S. soldiers and military people, flying these aircraft are at risk of having

substituted parts.

So I think we are talking more about the issues such as the safety of our men and women in uniform than dollars here. So that

would be my position, Mr. Chairman.

Chairman TOWNS. Which is serious.

On that note, I yield to the ranking member.

Mr. ISSA. Thank you, Mr. Chairman. I think I will kind of pick

up where you left off. I do want to ask one question to set a tone,

though.

Mr. Levy, what would you say would be the risk if we were to

have absolute zero contracting to any company immediately? In

other words, if we take this step and we don’t just pick up the 30,

but we sort of make sure we catch them all, including the micro

and so on, briefly, what would be the potential risk of, if you will,

overuse of exclusion? Is there a risk there?

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Mr. LEVY. Well, I believe that there is a risk. I think that, unfortunately, there are lots of individuals who, for their own personal

reasons or because of lack of training, make mistakes. There are

people who do it intentionally, there are people that do it inadvertently, but that there are lots of companies that are out there that

encounter problems.

If the Government were immediately to debar and suspend any

such company, I think that you would put a lot of innocent workers

on the street. Oftentimes, these events that have been discussed

here are the working of a few individuals within a large corporation; and there are a lot of people in those companies who are well

intentioned, who intend to comply with the laws and the regulations, and those are the people who would suffer when the company loses its work.

In addition, obviously, the Federal Government would lose its

supply base and it would lose its competition, and at this particular

time, when we are so worried about no bid contracts and competition, it would seem to me that would be a very unfortunate circumstance.

Mr. ISSA. Well, Mr. Levy and Mr. Kutz, I think you both would

be a good sparring here. Because there is, and this was not in your

report as a wrongdoing, but there are in fact people who are suspended or companies, for one activity, are suspended while a theater commander or some other purchasing authority makes a written finding that they should continue on some other contract while

that is remedied, etc.; in other words, a partial suspension. Would

you both agree that is essential, that we not tell you to do to do

absolute, but, in fact, to deal with some of the examples here today,

while recognizing that there are valid reasons for the waivers?

Mr. Kutz, I particularly want to know from you because that is

one of our concerns, is there is a procedure in place. Assuming

these 30 or so exceptions are set aside for a moment, because we

don’t want to tolerate those, that the basic policy, the baseability

for a purchasing authority to certify and thus continue purchasing

for some reason, is in fact a tool in place. You are not suggesting

we change that, are you?

Mr. KUTZ. No, not necessarily. I think there are a lot of facts and

circumstances involved. For example, if the company has been

doing business with the Government for many decades, has a fine

history of performance, and it is an isolated case or a lower level

employee, that is one thing. If it is like this German case, where

it was the actual person that signed the contract, owned the company, etc.; there were 3 years involved in that one where the Army

had a chance to get out of it, basically. The guy was arrested 2

weeks after the contract was let. Nothing was done for 3 years, and

that was an egregious case. I think there was a judgment involved

and it was a facts and circumstances.

Mr. ISSA. All right. I might note for the record that the gentleman who was convicted of being part of the bribing scheme of

Duke Cunningham was a Government contractor, and some of his

contracts went on for a period of time, fortunately, a short period

of time.

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Let me followup along this line in a couple of areas. First of all,

can you tell us when this committee will receive the final report?

We only have a draft report up until now.

Mr. KUTZ. It is just being released today. Today it is being released.

Mr. ISSA. OK, so today is our day. Second, I want to get into the

databases for a moment. These are Oracle databases. All of your

procurement is on Oracle databases. This is a database that is in

Oracle format, the EPLS, right? And it is apparently less than 100

gig of data, so small enough that people can go to Best Buy and

buy a USB drive, download the entire database and carry it

around, isn’t that correct? Obviously, you are not carrying around

an Oracle license, but we did some downloading and discovered

that this 100,000 or so records is in fact that you could, overnight,

update into other databases. Is that your understanding, Mr. Kutz?

Mr. KUTZ. I couldn’t answer that question.

Mr. ISSA. Well, let me ask everybody else here. Have any of you,

in your procurement, looked at the idea of synchronizing this database and then integrating it so that it is a part of your basic, every

day, every contract overnight is updating against that database

and running it so that these 30 examples couldn’t happen again?

Is there anybody who has done is from the panel here? I saw a few

heads shaking.

Mr. DRABKIN. The answer, Mr. Issa, is no, and the reason is because we do not have a consistent set of transactional tools across

the Federal Government. My colleagues in the Defense Department

can talk to you about the numbers of transactional tools they have

in GSA. We have three or four separate transactional tools, and not

every agency has a set of transactional tools. So what you are asking, the linking of the transactional tool to the database so that it

knows, before it gets ready to award a contract, that an individual

company’s DUNS number appears in the database, it can’t happen

if you don’t have a system.

Mr. ISSA. OK, so I am hearing about a self-inflicted wound. Mr.

Kutz, in the GAO report, will you be speaking to the need to correct those self-inflicted wounds of databases that, in a sense, were

designed not to take advantage of this database, which existed at

the time of their latest revisions?

Mr. KUTZ. Well, an example of integration of database, I believe,

would be the Federal Supply Schedule, because one of the questions and one of the recommendations we had was that companies

that are debarred should potentially be taken off of the GSA Supply Schedule. Apparently, data system issues and integration

issues within GSA are a reason why that may be difficult. So that

is an important aspect of the solutions.

Mr. ISSA. OK, I don’t want to take any more time than this last

question. The last question simply is, when I reviewed the database, what I discovered, because it is a public database, there are

no social security numbers for individuals. So an individual’s

unique identity is only as good as a common name and a home address at some point in time.

Can you in fact commit to us today that will be corrected, at

least in a not-for-the-public database so that we can have unique

identities, like a DUNS number, for human beings? Because it is

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very clear that companies don’t commit crimes; people in companies do. Is that something that is in your report? And can I get a

commitment from people here that is on your priority?

Mr. KUTZ. Well, I would just say 60,000 of the 70,000 active

records are individuals, as you said, and individuals are the ones

that commit the crime, and they do not all have social security

numbers and they are not required fields at this point.

Mr. ISSA. Thank you.

I yield back and I thank the chairman for his indulgence.

Mr. TOWNS. Mr. Kucinich.

Mr. KUCINICH [presiding]. I thank the gentleman.

Unidentified SPEAKER. If I may, Mr. Chairman——

Mr. KUCINICH. I am going to go on to my questioning, so you can

take that up later.

Unidentified SPEAKER. Yes, sir.

Mr. KUCINICH. Mr. Kutz, in your research and study, do you

come across information that was raised, that was probative, but

not acted upon to start procedures of suspension or debarment?

Mr. KUTZ. We didn’t weren’t given any, no.

Mr. KUCINICH. You didn’t look into any of that.

Mr. KUTZ. Well, if we saw it, we would have had it, but we didn’t

see anything.

Mr. KUCINICH. Excuse me?

Mr. KUTZ. We didn’t necessarily see that in all the cases, no.

Mr. KUCINICH. So it is possible that there could be many more

instances out there that haven’t been acted upon.

Mr. KUTZ. Well, we know there are other cases. I mentioned, for

example, Medicaid providers. The scope of this job was contractors,

so we are talking about companies. As Mr. Issa said, there are

more people in the system that are individuals that committed

crimes, for example, health care fraud. There are potentially many

Medicaid providers out there at the State level.

Mr. KUCINICH. Well, when you put that bulletproof or apparently

bulletproof vest in front of—slightly bullet resistant vest, thank

you—that really sends a chilling message out to everyone who

serves this country, because your responsibility here to members

who are representing the Armed Services is to protect the lives of

our soldiers and those who serve. That is a very serious responsibility. And it is not enough to say, well, it just happens a couple

of times that somebody slips through the system. No. You have to

have zero defects. Otherwise, you are directly responsible for the

deaths of our soldiers.

Now, the thing that I want to say to General Harrington, I read

your statement saying that our Army will remain ever vigilant to

meet the needs of our war fighters with the urgency demanded by

life and death situations they face every day as they superbly execute the global war on terror. Our war fighters’ success is directly

linked to the success of our contracting work force.

I think you are absolutely right when you say that, but I am trying to square that with a record of a specific case, and that is the

case that I mentioned in my opening remarks. On May 13, 2003,

an employee of KGL Transport Co. negligently jackknifed a tractor

trailer, causing a collision with a Humvee of Lieutenant Colonel

Dominic Rocco Baragona that took the colonel’s life. Here is someVerDate 11-MAY-2000 11:34 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00125 Fmt 6633 Sfmt 6633 U:\DOCS\52280.TXT KATIE PsN: KATIE
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body who served the country for 21 years, a graduate of the U.S.

Military Academy. Do you know anything about that case, General?

General HARRINGTON. Yes, sir, I do.

Mr. KUCINICH. What do you know about it?

General HARRINGTON. The recent information I have is that our

Procurement Fraud Division served notice of suspension on KGL

for failure to comply with the service of process.

Mr. KUCINICH. And what happens as a result of that?

General HARRINGTON. Later, sir, KGL complied with that service

of process rule, so the suspension was stopped.

Mr. KUCINICH. What does that mean, they complied?

General HARRINGTON. As I understand it, sir, they responded to

the service of process. I don’t have any further information.

Mr. KUCINICH. Are you familiar with a comment from KGL’s representative, saying they are a Kuwaiti company and they are untouchable?

General HARRINGTON. I am not familiar with that, sir.

Mr. KUCINICH. Are they untouchable? Are they untouchable?

General HARRINGTON. Well, sir, I know what we have done with

our Procurement Fraud Division.

Mr. KUCINICH. If you are responsible for the death of a U.S. serviceman, is that grounds for debarment? And if not, why not?

General HARRINGTON. Well, sir, I can tell you what has gone on

since then, and we will take a question for record to get back with

you with the full details.

Mr. KUCINICH. I am just asking you generally speaking. Let’s

step away from this case for a moment.

General HARRINGTON. Yes, sir.

Mr. KUCINICH. If a U.S. contractor is responsible for the death

of a U.S. service person and they were found to be negligible, would

that be grounds for debarment? And if not, why not?

General HARRINGTON. Well, sir, there would have to be an investigation of that incident to determine——

Mr. KUCINICH. Have you investigated this incident involving

Lieutenant Colonel Baragona?

General HARRINGTON. Yes, sir. Procurement Fraud Division has

carefully——

Mr. KUCINICH. Do you think there was negligence?

General HARRINGTON. Well, sir, I can tell you what the Procurement Fraud Division found.

Mr. KUCINICH. What did they find out?

General HARRINGTON. They carefully reviewed the matter, concluded that there was not sufficient evidence to support suspension

at this time.

Mr. KUCINICH. I would like you to produce for this committee, of

course, with the permission of the Chair, Mr. Towns, all records relating to this finding. How in the world a lieutenant colonel serving

his country, just doing his job, driving a Humvee, can end up getting killed by a U.S. contractor and there not be negligence, I think

the people of the United States and everyone serving this country

would be interested.

General HARRINGTON. Yes, sir.

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Mr. KUCINICH. So I am going to want to review this. I am also

going to ask Mr. Kutz for you to look at this case as well.

My time is about to expire, but I can assure you, General Harrington, that on behalf of this one serviceman and his family, that

this case is not going to go away and KGL is not going to be able

to avoid any responsibility they may have under law. So I just am

asking Mr. Kutz to look at it.

I have just been informed that we are going to recess for—we can

take a few more questions, at least, on each side.

The Chair recognizes the gentleman from California for 5 minutes. Then, after that, we will go to Mr. Davis, we will take a 40

minute recess, and then we will come back with Mr. Tierney.

Mr. BILBRAY. Thank you, Mr. Chairman. Mr. Chairman, back in

the late 1970’s, we were both mayors together when we were young

and spry. I think that any mayor will know, though, that this situation with the death of military personnel, there is this issue of—

like we did with police officer fire; we may have a wrongful death,

and you draw is it an individual action separate from the institution and separate from procedures, or is it procedural and an obligation by the institution itself. That is the kind of questions you

want to address——

Mr. KUCINICH. Would the gentleman yield?

Mr. BILBRAY. Yes.

Mr. KUCINICH. The information that was presented to myself and

to my staff was that in this specific case the company refused to

answer any questions and had taken a pretty arrogate position

with respect to this. So that is why I brought it up. And I thank

you for your observation.

Mr. BILBRAY. And we ran into that all the time in the good old

days.

Let me just say, Mr. Williams, you were saying a system where

trust was based on trust. The last time I checked, though, in this

country, I looked at our money, in God we trust. Everybody else

has to verify.

I think I would like to go sort of—you wanted to address the

issue of social security numbers and personnel, the contractors’

names. Do you have any reference to that now? I saw your eyes

kind of flash on that thing, so I want to give you a chance to jump

on that.

Mr. WILLIAMS. Thank you, sir. Yes, I just wanted to point out to

the committee that we have in fact discussed the issue of using social security numbers as a unique identifier for people who are suspended or debarred.

But after consultation with a variety of agencies and departments, including the Department of Justice, it was determined that

we could not use the social security number as the public identifier,

unique identifier for people who we suspend or debar. That does

create a problem for individuals who are debarred, because not

every individual gets a DUNS number, which is usually done in the

context of a commercial——

Mr. BILBRAY. Is that because you are preempted by the social security legislation right now that says it can only be used for social

security purposes?

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Mr. WILLIAMS. I don’t believe the current legislation was current

at the time we had this discussion, sir.

Mr. BILBRAY. OK. Is there any reason why we don’t use eVerify

on all our contractors to make sure they are who they are and so

that you are not coming back?

Mr. WILLIAMS. Sir, eVerify, as you probably know, was promulgated as a rule. That rule has been suspended under the Emanuel

memo and is being reviewed by the new Secretary of Homeland Security, and I don’t know what the status will be of the rule after

that review.

Mr. BILBRAY. With a system that is 98.6 percent efficient, it

seems like the one way to know people are who they are is eVerify

is probably the fastest and most simple way of doing it.

Mr. WILLIAMS. Sir, I am unable to address whether eVerify

works or doesn’t work, or whether it will be our policy or not be

our policy, until the Secretary of Homeland Security has completed

a review in accordance with the Emanuel memo.

Mr. BILBRAY. OK. Going back to is there a process right now that

a contractor has to notify when they put in a bid or when they are

procurement that they have been disbarred or they have suspended

at any time? Is there any obligation for them to notify?

Mr. WILLIAMS. Yes, sir. They are required to certify and to maintain that certification as current in our system that is called, the

acronym is ORCA. It is an online system and there is an absolute

requirement for them to certify when they submit a proposal, and

then to update that certification if it changes at any time.

Mr. BILBRAY. What is the penalty for not following that procedure?

Mr. WILLIAMS. There are no penalties, sir. We don’t apply penalties in the contracting process. But a false certification could result in a determination that the contract was void ab initio. It

could result in the termination for default of the contract. It could

result in the suspension/debarment of the contractor. The Justice

Department could decide whether they wanted to proceed against

the contractor for a false certification either civilly or criminally.

Mr. BILBRAY. Could is open to interpretation. In other words, you

say you could do this, could do that, and could do that. It seems

to me there should be some minimum that says if you do this and

it is found you have done this, you at least get this; you may get

this, this, this, and this. What I am worried about is there doesn’t

seem to be a minimum that could happen from a direct violation

of procedure. And any parent will tell you there should be some

minimum repercussion for not playing by the rules.

Mr. WILLIAMS. But, sir, as you pointed out, when you were the

major of a city before becoming a member, you take each case on

its facts. You find out what happened and then you apply the appropriate response to those particular facts. There is no guaranteed

result for any of these infractions; it all depends on the facts. We

have a process that seeks out the facts, that conducts a hearing.

We do have due process that is due to the contractor before we can

take any of these actions——

Mr. KUCINICH. The gentleman’s time has expired. Thank you.

Mr. BILBRAY. Thank you, Mr. Chairman.

Mr. KUCINICH. The Chair recognizes Mr. Davis.

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Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. Kutz, I would like to focus in on what, in my opinion, is the

most disturbing case GAO uncovered in its report. Specifically, I

am referring to the case involving the Army’s contract with the

company called Optronics GmbH. As I understand it, Optronics, or,

at the very least, its president, was convicted of attempting to

smuggle nuclear bomb parts into North Korea. Even though the

Army was aware of the conviction, it kept doing business with

Optronics. Well, that is obviously troubling to me, and I suspect

would be troubling to a lot of people.

The question that I have, and that I would like to know from

you, given the seriousness of this matter, is whether or not the

Army fully cooperated with GAO during the investigation.

Mr. KUTZ. I would say no. They were very slow to get us the information. I have some of the notes here from my staff. We requested information on this case and a number of other cases in

April 2008. It asked for data in several weeks. The first data we

got was in July, and it was incomplete; it was really the debarment

memorandum. We didn’t get the actual memo that justified that

they said they legally had done this transaction with this company

until October, and we didn’t actually get the contract and relevant

e-mails until November 2008; and that was after committee staff

finally had to call. So, no, I would say that they were slow, not just

on this one case, but on about five cases.

Mr. DAVIS. It is also, then, my understanding that committee

staff here has had some difficulty getting information from the

Army. So I would like to ask you, Mr. Harrington, why did the

Army stall on providing the GAO and committee staff with the information that they requested? Was there something that the Army

did not want us to know?

General HARRINGTON. Sir, there is absolutely no intent on the

part of the Army to stall. We understood we provided the information as rapidly as we could. An awful lot of that information had

to be researched and gathered from several different locations. If

there are specifics on that, please, I would like to know, and we

will go back and correct it. But we have done everything we could

to faithfully provide the information that was asked for.

Mr. KUTZ. Can I give you a specific?

Mr. DAVIS. Yes.

Mr. KUTZ. There is a memo dated May 8, 2008. We got that

memo in October. Is that specific?

Mr. DAVIS. I think that is pretty specific.

Would you consider that to be timely in any kind of way?

Mr. KUTZ. It is one page, by the way.

General HARRINGTON. Sir, I would just say we will look at the

circumstances surrounding why it took that long.

Mr. DAVIS. Well, let me just ask you, Mr. Kutz, does GAO believe

that the Army had an escape clause where they didn’t have to keep

doing business with this company?

Mr. KUTZ. Yes, we do. In fact, we have a picture on the monitor—if you could just take a quick look at that—that shows the

time line, which gives you a broad perspective of this. This contract

was awarded and signed by the individual that was ultimately convicted in March 2003. Two weeks later he was arrested, and the

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Army then extended his performance contract—it was a 3-year contract.

They did the first extension, then, in March 2004. He was then

convicted in May 2004, and almost a year after that conviction they

extended the contract for another year. Finally, the guy was

debarred and the company debarred in July 2005. So there were

several cases where they had outs, and I want to read to you information from the contract, actually, about one of those outs.

It was the contractors performing services in the Federal—this

is out of the contract: ‘‘Contractors performing services in the Federal Public of Germany shall comply with German law. Compliance

with this clause in German law is a material contract requirement.

Noncompliance by the contractor or subcontractor at any tier shall

be grounds for issuing a negative past performance and terminating this contract.’’ That is out of the contract.

Mr. DAVIS. Let me just ask quickly, Mr. Harrington, could you

tell us why the Army felt that it was obligated to continue doing

business?

General HARRINGTON. Sir, the contract was with Optronics, not

Mr. Tripple. Mr. Tripple was arrested, convicted, and sentenced.

He was removed as managing director on June 17, 2004. We feel

his reach into the company was stopped at that point because he

was jailed.

With regard to the comment about compliance with German law,

if you read further into that clause, it is about making sure that

they comply with German law with respect to work permits, identification requirements, and employee qualifications.

Mr. KUCINICH. The gentleman’s time has expired.

Mr. DAVIS. Let me just ask Mr. Levy, if I could.

Mr. KUCINICH. Mr. Davis, we have 2 minutes to get to the vote.

If you want, I will let you do a followup question when we come

back.

Mr. DAVIS. All right.

Mr. KUCINICH. Then we go to Mr. Tierney.

We are going to recess for 30 minutes. I would ask all the witnesses please return in about a half hour. We are in recess.

[Recess.]

Chairman TOWNS [presiding]. We have been joined by Mr. Amey,

of course, who did not hear us when we combined the panel, so will

you stand now and let me swear you in? Then we can have your

statement.

[Witness sworn.]

Chairman TOWNS. Let the record reflect that he answered in the

affirmative.

Mr. Amey is General Counsel of the Project on Government

Oversight [POGO]. Mr. Amey currently directs POGO’s contract

oversight investigations, including review of Federal spending of

goods and services, the responsibility of the top Federal contractors

and conflicts of interests and ethics concerns that have led to questionable Federal contract awards.

So we welcome you. At this time we would have you make your

opening statement and then we will have questions.

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STATEMENT OF SCOTT AMEY

Mr. AMEY. Thank you, Chairman. And I apologize for not hearing

the merger of the panel discussion.

Good morning, Chairman Towns, Ranking Member Issa, and

members of the committee. The bio you just provided I won’t add

to, because I know I have limited time. But I thank you for allowing me to testify today.

Suspension and debarment has been a process that has been on

POGO’s radar for nearly 10 years. In fact, we released a report in

2002 entitled, ‘‘Federal Contractor Misconduct: Failures of the Suspension and Debarment System.’’

POGO requested that the Government review the suspension

and debarment system, especially as it applied to large contractors

with repeated histories of misconduct, including the award of contracts to entities that defrauded the Government or violated laws

of regulations, that have had poor work performance, or contractors

that had their contracts terminated for default.

That report, also in 2002, led POGO to release what we call our

Federal Contractor Misconduct Database, which is a database of

Federal contractors that have criminal, civil, and administrative instances against them that also includes fines, penalties, and settlements. We have over 800 actual and pending cases in our database,

and the total is over $25 billion worth of settlements, penalties,

fines, or restitution paid to Federal, State, local, foreign governments, or private sector entities since 1995.

Last year, Chairman Towns, former Chairman Waxman, and

Congresswoman Maloney spearheaded legislation to create a comprehensive Government-run contractor performance and responsibility database. I think today’s hearing is showing that there are

some errors and some problems with the current suspension/debarment system and that we need to consider how to consolidate a lot

of this data together and make it work together, integrate it so

that contracting officers and suspension/debarment officials all

have the most relevant, accurate data in front of them to make contracting and suspension and debarment decisions.

POGO recommends that this committee provide public access to

the Federal Contractor Responsibility and Performance Database—

currently, it will not be publicly available—that they increase the

scope of civil and administrative cases included in that database to

include cases settled with no admission of guilt or liability. We feel

that is still an indication of a company’s integrity and satisfactory

record of business ethics that needs to be highlighted for the Government as well as the public.

To require that all administrative agreements are shared among

agencies and are made publicly available. This was a recommendation that came from GAO in 2005. I know the former head of

OFPP, Mr. Dennett, was working on making those all public, but

I am unsure of the current status of that and whether that plan

has actually taken effect. And, again, it goes back to previous GAO

reports. That you implement all the GAO’s recommendations from

today; that you also make terminations and justifications publicly

available.

The first panel talked about the terminations and justifications,

especially for continuing a current contract. That they mandate

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that an offer or bidder that falsifies a certification regarding responsibility matters is immediately considered for suspension or

debarment, and that those decisions are made publicly available;

that you consider the use of background checks for company’s principals, especially contractors involved with classified or sensitive

information; and that you also take a look at this new pilot program for subcontractors and try to marry up how many subcontractors are out there currently working that may be on the Excluded

Parties List or have long track records of misconduct.

With that, I will conclude my remarks. I thank you for inviting

me to testify today. I look forward to working with the entire committee in trying to fix the problems that have been highlighted

today. Thank you.

[The prepared statement of Mr. Amey follows:]

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Chairman TOWNS. Thank you. Sorry about the confusion.

At this time, I yield to Mr. Tierney.

Mr. TIERNEY. Thank you. I thank the gentleman for his consideration.

Gentlemen, thanks for your testimony, but I have to tell you I

am a little bit troubled on this, and maybe it is a misunderstanding. If I sit back and look at this, I think as general people might

look at it, I hear everybody saying it is the system’s fault, you

know, we have this electronic list system and it isn’t working or

whatever.

But I think there is a lot of human error involved here, and I

am hoping that it isn’t sort of a cultural thing, that it isn’t just a

casual attitude or sloppy attitude about making entries. When you

see 27 percent of the time DUNS numbers aren’t put in, I wonder

where is the management in all this.

So let me ask what agency is taking responsibility for making

sure that all of this is going properly, that the database is monitored and that we know when things aren’t going right?

Mr. DRABKIN. Sir, that would be GSA. We are the managing

partner for the integrated acquisition environment, of which EPLS

is a part, my program manager and the director of that program,

sitting right behind me. We do have the responsibility for managing the database on behalf of our other Federal agency partners.

We are checking the database. And as I mentioned in my opening

testimony, I am able to report today that only 150 of the current

active 51,117 records lack DUNS numbers, and we are in the process of getting those 150 records updated.

Mr. TIERNEY. You know, it is also a bit of an issue of vigilance

here. It is interesting to know that GAO went out there and found

25 incidents, and then either you or somebody else said, we found

35; and that is a small number compared to all the numbers out

there.

But why wasn’t the check before GAO had to get involved? Why

wasn’t that a regular course of business and who was responsible

for it not having been a regular course of business? And what action was taken with respect to their inability or unwillingness to

do their job?

Mr. DRABKIN. Sir, it is the responsibility of every single contracting officer. That responsibility is laid out in the regulation; it is

laid out in the training that I provide them——

Mr. TIERNEY. Because I have limited time, somebody is the boss

of all those people and somebody ought to have been monitoring

that to make sure, on a regular basis, that was being done. Now,

if somebody did that after the GAO put out their report, I want to

know why didn’t somebody do it before it got to the point the GAO

did the report. Why wasn’t it a regular practice that somebody did

the kind of scrub that GAO did on this and made the corrections

as you went along?

Mr. DRABKIN. Sir, that is a good point, and I will take it back

to the FAR Council and we will look at what type of guidance we

can issue to see if there is a way to run a check periodically to

make sure——

Mr. TIERNEY. Well, there obviously is; somebody at the GAO did

it.

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Mr. DRABKIN. That is true, sir.

Mr. TIERNEY. It has been proven it can be done. GAO proved it

could be done and you proved it could be done.

Mr. DRABKIN. That is correct, sir.

Mr. TIERNEY. So, I mean, it is just not very edifying to sit up

here and say, well, we read GAO’s report and, gee, you know, they

are right, they got us, we made some mistakes, mea culpa, whatever. It goes deeper than that. This never should have happened.

Either you want to try to minimize the number of incidents and

say it is only 35 and it is not a lot of money. There are a lot of

lives involved.

When the Truman Commission was in place, there were two

measures: one was how much money was saved; the other was how

many lives were saved. And I think that point was made by Mr.

Kutz earlier on that.

So I expect and I hope that you will go back and then report to

this committee exactly what the process is going forward for that

to be done on a regular basis and what you are going to do about

what might be a cultural problem out there, either laziness or sloppiness or people not thinking. There is a price to pay when they

don’t put the DUNS number in on a regular basis.

Mr. DRABKIN. The only issue I take, sir, with your comment is

obviously 35 errors out of 30 million transactions is not a cultural

problem. But I take your point.

Mr. TIERNEY. But 27 percent of the time not having a DUNS

number entered in may well be a cultural problem.

Mr. DRABKIN. It took in a period of time when we were

transitioning to adding the DUNS number to the database, sir.

Mr. TIERNEY. Whatever. Twenty-seven percent is 27 percent, and

vigilance is vigilance.

Mr. DRABKIN. Yes, sir.

Mr. TIERNEY. And the consequences are serious on that.

Mr. DRABKIN. Yes, sir.

Mr. TIERNEY. So I expect that everybody is going to do something

on that.

I am still troubled by this Optronics case. General Harrington,

let me tell you the president of Optronics is arrested 3 weeks after

he gets a contract and the Army doesn’t disbar him or suspend

him. Time goes on, he is convicted, he is sentenced, and they are

still doling out money to this guy, to this company.

Now, you said something about, well, gee, he was in jail, so we

thought he was off the street, so we kept doing business with the

company. So is the idea here that as long as you form a corporation, any agent of that corporation can commit a bad act and the

company still does get contracts with the Government? Is that the

deal?

General HARRINGTON. Sir, the company was performing more

than satisfactorily in its contract obligations to the Army. It was

rated excellent in its performance.

Mr. TIERNEY. Tell me the excellent part about making sure the

Koreans got parts they weren’t supposed to get.

General HARRINGTON. They didn’t get any parts, sir. Those parts

were confiscated before they ever got——

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Mr. TIERNEY. Well, very good point. So if you want to pick nits,

let’s go this way. What is the good contract part about having it

get to the point where they had to be confiscated, and that this individual was responsible for that, his company continues on getting

money from the Government and from the taxpayer?

General HARRINGTON. Sir, the company was providing civilian

actors on the battlefield for Army training for a major training

event for two combat brigades entering combat into Iraq. It was a

deliberate set of decisions made to assess whether or not that company ought to go on. Its performance was rated as excellent. They

were a capable company, irrespective of the fact that the managing

director had been jailed. He had also been removed from the company.

Mr. TIERNEY. Does anything sound bizarre to you about that?

Maybe I am the only one hearing this oddly or whatever. There are

other companies that do this kind of work. There are other companies now doing this work, in fact. And the Army makes a decision

to deal with somebody who has this kind of a background, their

principal officers? I just don’t get it.

What is the reason for that? I mean, there has to be some price

to pay for people stepping out of line like this, not saying, well, it

is a little inconvenient for us to go find somebody else, even though

there are other qualified people out there who can do it.

General HARRINGTON. There is, likewise, sir, a process to go

search for other companies to perform that type of work at the

major training area. At that point, Optronics had over 500 people

engaged in the performance of this contract at the training area.

An assessment was made to determine whether other companies

were available right then and there to continue on with this work

to be able to move these brigades into Iraq. They were a part of

a flow of combat brigades in and out of Iraq and a part of the buildup going in. The critical element here is that these soldiers get

trained in actual realistic scenarios before they have to enter into

combat with terrorists.

Mr. TIERNEY. Well, the inference that you are trying to draw

there is that nobody else could have done it and stepped in there,

and I think that simply is not accurate. Certainly, at least you are

acknowledging that it is not something you didn’t know about;

there was a headline in the Washington Post in August 2003, so

you guys knew it and you consciously made the decision to not go

to other qualified people to do it, but to let this company carry on.

General HARRINGTON. That is exactly right, sir.

Mr. TIERNEY. I think that is short of astounding.

General HARRINGTON. That is exactly right. We made a deliberate decision to continue on.

Chairman TOWNS. The gentleman’s time has expired.

Let me say, Mr. Drabkin, we will keep the record open to hear

what happened, when you go back and you talk about the suggestion that was made by Congressman Tierney in reference to discussion. We will hold the record open for that, because I view this as

being very serious.

And I want you to know this hearing is about the possibility of

legislation because any time you place troops in jeopardy when you

sell vests, bulletproof vests that don’t block bullets, and when you

135

attempt to sell things to the enemy, you just can’t ignore those

kinds of things. Now, we want to try to see what we can do in

terms of you fixing it. But if you cannot fix it, then this is what

this committee is about. We want to get rid of waste, fraud, and

abuse, but we are also abut security as well.

Mr. Chaffetz.

Mr. CHAFFETZ. Thank you, Mr. Chairman.

Captain Jaggard, you alluded, in your impromptu testimony, that

there were instances where they didn’t actually use or tap into the

system. How often does that happen? And is it normal protocol to

actually use or not use the system?

Captain JAGGARD. In the 25 cases that are the subject of the

GAO report, for the Navy there were 7 of them. There were two

instances where the list was not properly checked by the contracting officer.

Mr. CHAFFETZ. So is it common practice to use the system?

Captain JAGGARD. It is required that they use the system, and

that is why we issued the fraud alert as soon as we found out, to

remind everybody that they are required to use the system.

Mr. CHAFFETZ. So in this case the employee didn’t use the system

that was in place?

Captain JAGGARD. She mistakenly thought that you didn’t have

to use the system for a modification to a contract, which was the

action which was involved, and she was wrong.

Mr. CHAFFETZ. Mr. Kutz, help me here with the math and the

understanding of what you found in your perspective. My understanding is that, over the last 7 years, there have been something

like 70 million transactions, is that right, contract actions? Does

that sound right?

Mr. KUTZ. I will trust Mr. Drabkin’s numbers in that respect.

Mr. DRABKIN. Roughly.

Mr. CHAFFETZ. And that there are 70,000 either entities or individuals that are listed within the system? How many different contractors does that represent? If there are some 70 million transactions, or contract actions, I guess, how many different vendors

does that represent?

Mr. DRABKIN. I will have to get back to you with an exact number, but it averages about 250,000 to 300,000 vendors a year, and

across the years there are some vendors who remain the same and

there are some vendors who are added or deleted to the base of

vendors who do business with us; and that does not take into account those vendors who sell to us through the micro purchase program, because we don’t report—we only recently started that reporting process.

Mr. CHAFFETZ. So you are telling me there are 250,000 or so different vendors, but, yet, we have 70,000 that are listed on this?

Mr. DRABKIN. That is 70,000 companies or individuals are listed.

There are a lot of individuals who are listed who have never done

business with us at all. For instance, there are Congressmen who

were convicted, there are citizens who were convicted, never done

business with us before, but we suspend or debar them. There are

individuals from companies who are suspended or debarred, and

the company may itself not be suspended or debarred.

136

So 70,000 does not represent the number of companies, and there

is no direct correlation between that number and the 250,000 to

300,000 vendors we do business with on a day-to-day basis across

the Government.

Mr. CHAFFETZ. I guess at some point I would like to clarify—our

time is short here—how pervasive this problem is. Are we dealing

with 2 percent, 1 percent, a fraction of a percent, 10 percent of the

vendors are individuals that we are having trouble with along the

way, actually, at some point run, into trouble where they have not

met the criteria and end up in this database?

I would ask you each—our time is so brief here—how in the

world are we going to deal with literally trillions, trillions of new

dollars going into the system with the resources that you have

within your own departments in terms of personnel and the database. How in the world is that going to work? Anybody want to

take a stab at that one?

Mr. WILLIAMS. I will be glad to. We are concerned about that,

concerned about the capability and the capacity to be able to spend

that money wisely and effectively, and I will tell you most of the

major acquisition agencies are trying to hire right now. What we

are concerned about is the labor pool we are trying to hire from

that we are all trying to——

Mr. CHAFFETZ. How long does it take you to train somebody to

get up to speed to actually become an acquisition officer?

Mr. WILLIAMS. Well, to become a contracting officer, usually

about 5 years or so of training and working.

Mr. CHAFFETZ. Five years of training?

Mr. WILLIAMS. Five years of training. They start at the lowest

level, as a contract specialist, and then once they have received all

their training and the experience, and in the judgment of a senior

official that they have the training, the business skills, the right

ethics, then they are awarded a contracting officer warrant.

Mr. CHAFFETZ. I have only got seconds here. Let me also ask 10

separate systems, is that correct? Is that what we are dealing with

here? The integration of the systems so that you all can communicate with each other, how pervasive is that problem and challenge, and what are we doing to rectify it?

Mr. DRABKIN. There are 10 separate systems that make up IAE.

There is only one system for EPLS. That system and the integration discussion I had with Mr. Issa was about integrating that

database with transactional systems that actually award contracts.

There are multiple transactional systems throughout the Government. It is a tool that we lack. Had we that tool, the instances of

mistakes would be further reduced.

Mr. CHAFFETZ. What are we doing to solve that? I know my time

is up here.

Mr. DRABKIN. I am sorry, sir?

Mr. CHAFFETZ. Is there a plan to actually solve that challenge?

Mr. DRABKIN. No, sir.

Mr. CHAFFETZ. Thank you, Mr. Chair.

Chairman TOWNS. Thank you very much.

Mr. Davis, I understand that you were short-changed, and I

would like to correct that.

137

Mr. DAVIS. Mr. Chairman, you know I don’t ever want to be

short-changed, especially being from Chicago. [Laughter.]

Chairman TOWNS. We yield to you 2 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman.

I would like to revisit the Optronics situation that we were discussing when we left. Mr. Harrington indicated that the Army had

an obligation to continue doing business with Optronics, and I will

give them the benefit of the doubt on that one. But then one reason

I understand for continuing to do business with a debarred company or individual is that there is no other contractor that can provide specialized goods or services.

Mr. Kutz, do you know what Optronics was selling or providing

to the Army?

Mr. KUTZ. Yes, it was called Civilians on the Battlefield, role

play actors. They were acting as mayors, refugees, villagers. The

qualifications according to the contract were they needed to understand English, for example, be willing to work 10 hours a day, be

properly clothed, overshoes, extra socks, thermal undergarments,

and they were not allowed to have consumed any alcohol before becoming actors.

Mr. DAVIS. Role playing actors?

Mr. KUTZ. Role play actors, yes, making probably $10 or $15 an

hour, something along those lines.

Mr. DAVIS. Mr. Harrington, is that correct?

Colonel HARRINGTON. Yes, sir, it is.

Mr. DAVIS. In your opinion, Mr. Kutz, was this a unique service

that could not have been done by another company?

Mr. KUTZ. No. I believe someone was doing it before and someone

is doing it now, from what I understand.

Mr. DAVIS. Mr. Levy, could I ask you a question, if you would

comment? Do you think that there is—as an expert in procurement, as a practicing attorney, do you think there was any escape

clause or any way that the Army could have escaped or gotten out

of this contract?

Mr. LEVY. Gotten out of the contract altogether?

Mr. DAVIS. Yes.

Mr. LEVY. Well, without having seen the contract, I think the

first thing——

Mr. DAVIS. Or not continue to do business at this juncture.

Mr. LEVY. Well, that is two different questions, Mr. Congressman. One is could they have gotten out of the contract and two was

did they need to award additional work. With regard to the additional work, they had to make a compelling circumstances determination, and that is what is being discussed, and that would go

not only to whether or not there was another source, but whether

there was another source that could timely provide that particular

service, or if it would have impeded the Army’s mission.

I don’t know the answers to those questions, but those would

have been the questions to ask. And what would have been the cost

of standing down this particular contractor and bringing in another

company in the short-term. So those are, I believe, the questions

to ask in a compelling circumstances determination.

With regard to whether they could have gotten out of the contract altogether, without having seen the contract, but typically—

138

and assuming that the impropriety here did not relate to the actual

performance of that award—and as I heard General Harrington

say, they were performing excellently—then typically within the

Government contracts there is what is called a termination for convenience clause, and that clause permits the Government, for any

reason, to terminate a contract of its own volition so long as it is

not done in bad faith.

But there are consequences to the Government of exercising that

clause, because the Government then is liable to the contractor for

all the costs it has incurred not only for liquidated products and

services delivered under the contract, but for all the costs that are

incomplete, has to pay the contractor, make them whole. Whatever

they have incurred in terms of costs, they get reimbursed those

costs plus a profit; they get reimbursed the costs of putting together their settlement proposal. So the Army would have had

those costs plus whatever costs it would have incurred to re-procure.

But as a technical, legal matter, they probably could have gotten

out of the contract.

Mr. DAVIS. Thank you very much.

Mr. Chairman, if I could just ask my last question.

General Harrington, if the president of Optronics was arrested

for violating German law nearly 3 weeks after having been awarded the contract with the Army, why did the Army not suspend the

contract at that time or why did it take nearly a year before the

debarment of the company or the individual took place?

General HARRINGTON. Sir, the Army continued on with the contract because the contractor personnel were performing satisfactorily. There is a due process with regard to going through the

legal processes to debar. The Army recognized the offense Heir

Tripple had committed; it made a deliberate decision to continue to

engage the company because of the criticality of the functions it

was performing to help prepare American soldiers to go directly

into combat in Iraq.

When Mr. Tripple was jailed, there was a determination made

that his reach into the company was nil and that he had been removed as managing director. And, again, the assessment was that

other companies that would have to come in to do that would have

to be issued solicitations, and that would be a 5- to 6-month period

where they would have to consider awarding a contract to another

offeror.

So the type of contract issued was what is called a requirements

contract. It is essentially an assurance by the Government to the

contractor that all requirements that have to be performed are

guaranteed to that contractor for that period of performance. Were

we to terminate for convenience, we would have been held in

breach of contract, and that was a proceeding that we did not want

to have to handle.

Mr. DAVIS. Thank you very much.

Thank you, Mr. Chairman. I will just note that between the time of the arrest and the conviction, the Army paid Optronics $11.5

million. That seems to be a lot of money to me.

I thank the gentlemen for your answers, and I yield back, Mr.

Chairman.

139

Chairman TOWNS. Thank you very much. Let me just sort of pick

up on that.

Mr. Kutz, do you agree with the statement made by General

Harrington?

Mr. KUTZ. Some of the things we agreed on. I mean, I think that

they had opportunities to get out. Again, as Congressman Davis

said, the individual was arrested in 2003 and the debarment didn’t

happen for several years, but he was convicted in May 2004. Ten

months after that they extended his performance for the third year

of the contract. If there was any time they could have gotten out,

it was right there they could have actually gotten out of it.

Plus, we believe the language in the contract that I read earlier

for the record meant what it said, that a violation of German law

was a condition where they could have terminated. They wanted to

take the route that was more expeditious for purposes of the role

players on the battlefield rather than deal with what the Army

themselves had said was a morally bankrupt individual, and doing

what the Army did was irresponsible. The Army said it was irresponsible, yet the Army still did it.

Chairman TOWNS. Let me ask you, Mr. Amey. You have a database as well. What is the difference between yours and EPLS’s

database. Is there any difference?

Mr. AMEY. Yes, sir.

Chairman TOWNS. What is the difference?

Mr. AMEY. The EPLS is only a list of the suspended or debarred

contractors or proposed debarred contractors. POGO’s list includes

companies that may have settled with or been involved in litigation

with another private party, a State government, a foreign government. It also may be instances of violations of Federal law and regulations that have not yet put them on the EPLS.

So our database will incorporate EPLS into it. The actual legislation requires criminal convictions, civil cases where there is an admission of liability or a finding of liability, and then administrative

cases in which there is an admission of liability. So it also includes

suspended or debarred contractors and contractors terminated for

default. So it is kind of three steps or four steps passed what is

currently in the Excluded Parties List.

Chairman TOWNS. Do you have any idea how much it costs to

maintain your database?

Mr. AMEY. Our database currently is only the top 100 Federal

Government contractors, and we will have a new list come out because we saw that usaspending.gov just updated their fiscal year

2007 data. But our list probably cost us $20,000 or $30,000 to upkeep. Obviously, the way that it is implemented based on the legislation that it will include contractors receiving a certain threshold

of money, so at that point it will be a little more extensive than

what we have, to say the least. But I think it is a vital investment—and due to the problems that we are hearing today—in protecting the taxpayer, protecting the Government, and protecting

war fighters.

Chairman TOWNS. What lesson should GSA learn from your

database and what you are doing?

Mr. AMEY. Well, first of all, that it is possible. We were told for

many years it is not possible. What is the purpose? We have gotten

140

a lot of criticism from the contractors and the contracting associations that it is not necessary, but I think today shows us that it

is. We need a better system. Somebody earlier said the system isn’t

broke. I think it is. Twenty-five instances may not be a lot, but it

is also how many other contractors are out there getting Federal

money that are in the risky side.

There have been policy shifts, as Representative Tierney asked

about, that we are going after more individuals than we are companies, and that needs to be looked at. So we need to restore contractor accountability, and all these systems integrated together would

provide a wonderful tool for the Government to make better contracting decisions and hold contractors accountable, and I think

both those things are missing.

Chairman TOWNS. Thank you very much.

At this time, I yield to the gentlewoman from Washington, DC,

Congresswoman Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. I must thank

you for this hearing. The GAO report is stunning. I have come to

ask a question, though, concerning what gets contracted out after

we have already discovered issues. This question should go to Mr.

Williams and Mr. Drabkin, I believe.

On the screen you will see, perhaps, if you can, the basis for the

question. The Inspector General of GSA, apparently, in December

2007, reviewed the suspension and debarment program, and the

yellowed-out section reads: ‘‘The Office of the Chief Acquisition Officer should make every effort in the future to avoid utilizing contractors to perform suspension and debarment work’’ is what the

subject was.

I would like both of you to consider that advice from GSA and

I would like to ask you why is the responsibility of maintaining

EPLS contracted out to Information Sciences Corp. How is contracting out the previous backlog—well, first of all, let me ask you

why is that first contract done.

Mr. DRABKIN. I will address that issue; all of those matters fall

within my office. During the 2005 timeframe, when Ms. Emily

Murphy became our Chief Acquisition Officer, there was a lack of

attention paid to the suspension and debarment function. When the

IG brought to her attention that there was a backlog of suspension

and debarment cases, and when her office had been basically decimated as a result of a reassignment and retirement, every member

of the office, Ms. Murphy decided to help some existing Government employees catch up the backlog of suspension and debarment

cases. At no time——

Ms. NORTON. Rather than hire somebody to do what the Government was supposed to do.

Mr. DRABKIN. She was in the process of hiring people, Madam,

but she had not finished the hiring process. I will tell you that I

would never have done that, and our office will not do that in the

future. But she was trying to eliminate the backlog. None of the

contractors perform decisionmaking functions, but, nonetheless,

this is the most sensitive thing we do in GSA, and it is something

that should not have involved contractors and will never involve

contractors in the future.

141

As to the management of the database, the database is managed

by a Government employee, has always been managed by a Government employee. There is a contractor that provides support,

technical support in terms of operating the servers, refreshing the

software, but there is no contractor who enters data into that database. There is no contractor who quality controls the data in that

database, but there is a contractor who keeps the lights turned on,

adds the software, the things that our Government employee is not

competent to do.

I hope that answers your question. But I want to assure you in

the strongest terms GSA, as long as I am there, will never ever use

a contractor to support any function in our suspension and debarment office.

Ms. NORTON. How many Government employees are actually

maintaining EPLS at this point?

Mr. DRABKIN. We have one program manager who is responsible

for the maintenance of the program. Understand when I say maintenance, I mean she is responsible for making sure that the systems run. Every agency is individually responsible for entering the

data into the database.

So within GSA I have a program manager who manages the

database, but then I have a suspension and debarment office which

has six individuals in it currently, and we are about to add more,

who enter the data; and the Justice Department has an office and

the Agriculture Department and the Department of Defense has

several offices. So I don’t have a total number of people who actually enter data, but each department and agency is responsible for

entering its own data.

Ms. NORTON. I am trying to understand what the Government is

paying for. The Government employees, I can find out easily. As I

understand it, GSA is charging Federal agencies upwards of $1.5

million for fiscal year 2009, and there is only one person maintaining EPLS?

Mr. DRABKIN. And there is a contractor supporting the actual

maintenance of the servers, the software, etc., By the way, we don’t

charge agencies——

Ms. NORTON. Wait a minute. ISC, then——

Mr. DRABKIN. We do not charge people for this service. The ACE,

which is a committee of the Chief Acquisition Officers Council, annually meets, determines what work is going to be done, develops

a budget, and then assesses each member of the Federal Government a share of that budget. But we do not charge people for this

service; this is a pass-the-hat——

Ms. NORTON. So what are you charging people for?

Mr. DRABKIN. We aren’t charging for anything, Madam, we are

collecting a portion of the budget that is determined by the committee of the Chief Acquisition Officers Council.

Ms. NORTON. To be used for what purpose?

Mr. DRABKIN. To be used for managing the EPLS database,

which includes one Federal employee and the contractor who keeps

the lights on on the system.

Ms. NORTON. And ISC, as we understand it, provides the following level of support. If this is not the case, I wish you would let

us know. One full-time project manager, one full-time software deVerDate 11-MAY-2000 11:34 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00149 Fmt 6633 Sfmt 6633 U:\DOCS\52280.TXT KATIE PsN: KATIE
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veloper, one full-time database administrator, one full-time help

desk attendant, one part-time system administrator. There may be

additional responsibilities that they are not able to perform that

could be subcontracted to other entities. That is our information.

Mr. DRABKIN. That and the hosting function of actually hosting

the database on equipment that they either own or lease.

Ms. NORTON. They have one full-time database administrator.

What in the world does he do if he can’t get into the database?

Mr. DRABKIN. He has no authority to enter data; he looks over

the database, but he is not a database—he doesn’t enter any data

into the database. If you are asking me is it possible that he or

anybody else in the contractor’s staff could play with the data, the

answer is I think it is possible. We have not received any information, we have no reason to believe that has ever happened.

Ms. NORTON. I am counting 15 people that he dedicates to this.

Mr. DRABKIN. Yes, ma’am.

Ms. NORTON. How many do you dedicate to it?

Mr. DRABKIN. One. One Federal employee.

Ms. NORTON. Do you see my problem there? You got 1, they have

15, and yet they really don’t have any major responsibility.

Mr. DRABKIN. I am sorry, I disagree. They have a very major responsibility of keeping the database up and running. That is different than adding the data.

Ms. NORTON. And you believe that, in fact, that is really all that

is necessary for the Government to do, is to have that single person

dedicated to that task, as long as they have these 15 people contracted to do most of the work.

Mr. DRABKIN. I don’t make the appropriations decisions on how

many people I can have in my agency.

Ms. NORTON. Contracting decisions are not made by the appropriators.

Mr. DRABKIN. Ma’am, they decide whether I am going to get personnel money or contracting money. I don’t make those decisions.

When I get those decisions on whether I have personnel money or

contracting money, I then decide what to contract for.

Ms. NORTON. So you are saying that your budget, as sent by the

President or at least the prior President, forces you to contract out

these functions, because that is where the money was?

Mr. DRABKIN. I am saying that we follow the budget guidance

that we receive from both the Congress and the President, and that

this has not been an issue that we looked at, as to whether to bring

that function back in-house. It may very well be that this administration asks us to look at doing that, but that is not a matter that

we have considered or studied.

Ms. NORTON. What would it cost to bring it back in-house?

Mr. DRABKIN. I have no idea, ma’am.

Ms. NORTON. I would like you to provide to the chairman what

would be the cost of bringing those who are providing you this outside service, what would be the cost if the Government itself was

providing that service.

Mr. DRABKIN. We will do our best, of course, to respond to any

question you ask, but you need to take into consideration that we

are on a plan right now to consolidate the 10 databases that we

have in IAE into a single platform, which will create greater effiVerDate 11-MAY-2000 11:34 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00150 Fmt 6633 Sfmt 6633 U:\DOCS\52280.TXT KATIE PsN: KATIE
143

ciencies and, we hope, actually reduce the overall cost of operating

IAE by about half. It is a 3-year plan——

Ms. NORTON. So what effect would that have on the——

Mr. DRABKIN. We would not increase Federal employees.

Ms. NORTON [continuing]. Difference between people contracted

out and people who in fact have responsibility in the agency?

Mr. DRABKIN. We would not, in this plan, increase Federal employees. We would decrease contractor employees by achieving efficiency.

Ms. NORTON. So even though you are consolidating, you only

need one person? Even though you are putting all of this together

and one person is doing it now for far less, you still would only

have one person who is a Government employee?

Mr. DRABKIN. Yes, ma’am. The program manager, the functional

director, the person who understands and makes the decisions

about how the program operates. And what we would buy or continue to buy are people who perform non-discretionary functions,

essentially administrative functions.

And what we are looking for is the efficiencies by combining our

10 databases into one over the next 3 year period to actually reduce the number of contractors we need and the dollars we pay

contractors for providing the foundation, if you will, the servers,

the database——

Ms. NORTON. Mr. Drabkin——

Chairman TOWNS. The gentlewoman’s time has long expired.

Ms. NORTON. Mr. Chairman, can I ask only that since he said

that there is going to be a consolidation, and seemed to imply that,

therefore, if he provides that data for the present operation, it

would not be valid because they are about to consolidate, then I

ask that he provide the data to the chairman that I asked for the

consolidated operation. What would be the cost of bringing the people back into the Government.

Chairman TOWNS. Without objection, we will hold the record

open for that information.

Mr. DRABKIN. Thank you, sir, and we will take care of it.

Chairman TOWNS. Talking about holding the record open for information, the Congressional Research Service did a very extensive

report on termination for convenience under the Federal Acquisition Regulation, and I would like to also include that in the record,

because it appears that the Army could have ended the contract

with Optronic GmbH. Really, you could have. But, anyway, we will

put it in the record.

[The information referred to follows:]

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Chairman TOWNS. Let me just say, before I yield to the ranking

member, you know, these hearings really are for trying to stop

waste, fraud, and abuse, and we want to work with you and we

want you to work with us, because I think you are concerned about

waste, fraud, and abuse.

Also, we want to look at maybe as a result of the present structure we need to examine prospective legislation. I don’t know. But

I want you to understand that is what we are talking about here.

Mr. DRABKIN. Mr. Chairman, let me assure you that we all would

love to be able to work with your respective staffs to look at ways

to improve the process, because that is what we are all interested

in doing.

Chairman TOWNS. I yield to the ranking member, Congressman

Issa.

Mr. ISSA. Thank you, Chairman. On that note, the chairman and

I were at the White House on Monday, and, in a sense, these issues

came up, including the whole fact that we limit head count

throughout Government, while not necessarily limiting money. So

we give you money and X amount of people. What are you going

to do with the money? We are going to make up for the shortage

of the people.

I might note, Mr. Chairman—I am sorry the gentlelady from

Washington, DC, has left, because, as you recall, we went before

House Administration and we asked for 30 more slots. No more

money, just authorization if we could find people who wanted to

work nearly as interns. Obviously, within a very lean budget, if we

could have those slots, and I haven’t heard back that we got them

yet. So perhaps the gentlelady will join us in trying to get more

Government employees, rather than us contracting out, because I

too enjoy outsourced computer services from Lockheed Martin and

a number of others here in the House, as the gentlelady from the

District.

Taking a little off of that, because I don’t know that we can beat

that horse any more right now, Mr. Drabkin, I was out. I apologize.

I serve on another committee, so I have been going back and forth.

I understand that Mr. Bilbray asked about eVerify and you were

aware of a letter from Chief of Staff Rahm Emanuel that said that,

in fact, that is in hiatus. Is that roughly what you said? I wasn’t

here.

Mr. DRABKIN. No, sir. I said pursuant to the Rahm Emanuel

memo, the Secretary of the Department of Homeland Security had

decided that she wanted a period of time to review the new rule

which we had published, but had not yet been implemented, requiring contractors to use eVerify. And I believe Mr. Bilbray’s point to

me was that if we used eVerify, that it would reduce the instances

of cases where contractors who were debarred or suspended got

contracts. I never engaged with him on that issue because I, quite

frankly, don’t know.

Mr. ISSA. Well, it came to my attention, and it was interesting

that an unelected, appointed individual writes a memo and a confirmed cabinet officer stops a program that is more than a decade

old and has been quite a success.

But I want to bring it back to the issue here today. eVerify is

a system in which you don’t get to see the social security numbers,

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but you do put the social security numbers into a database that has

the social security numbers to see if in fact the name and social

security number you are putting in match the individual, if the

data that are in your procurement contracts, including key individuals, officers, directors, and so on, if that information, including social security—since we have an obligation to only hire legal people

in Government contracting. And I have Camp Pendleton, so, trust

me, we have had to push a few off the base in San Diego over the

years when we discovered it wasn’t true. So when we use that system, that system has unique identity.

And I go back to my question earlier, particularly for the GAO,

why wouldn’t we have a database in which the Web, to the public,

didn’t show the social security number, but in fact somebody entering that information from a database would be sure of the person?

Because I go back to the confusion of the woman using her maiden

name or, for that matter, the woman who I think is in jail right

now, who was part of the scandal on the tankers some years ago,

the refueling tankers.

A person’s name, or surrogate name, or surname, or married

name, or alias, and a home address are both very easily changeable, so isn’t there a fundamental flaw in this database unless we

have a unique identity number for every corporation and a unique

identity number for every individual and the system polls them

both?

I will start with the GAO, since it is your study.

Mr. KUTZ. Yes, and particularly the SSN right now is the problem. So there needs to be some sort of a position taken as to what

are the options to move forward. I mean, if the option is we are

just not going to deal with it, that wouldn’t necessarily be acceptable. There has to be several alternatives, and maybe something

like you are talking about here would be a valid option, because we

do SSN checks in criminal cases all the time and we give the social

security number, but we only get back hits. So we are not allowed

access into the system, for example.

Mr. ISSA. Of course.

Mr. KUTZ. So we do that all the time with the Social Security Administration and agencies across the Government. So I think that

has merit.

Mr. DRABKIN. And, Mr. Issa, I don’t want to leave you with the

impression that the issue on social security number is dead. What

I meant to convey to you earlier was there had been a Governmentwide policy discussion on this matter. There had been a decision

not to adopt it Government-wide, although some agencies are entering social security numbers. Most notably, right now, HHS is

not. And we have not had a Government-wide decision, and I look

forward to the new administration, when they are settled in, to revisiting this matter for us, and it may solve the problem. And we

will be sure to report back to you on our progress on this matter.

Mr. ISSA. OK, we had two quick questions, because the time is

over. One is, is there anyone here that considers themselves kind

of a techie?

[No response.]

Mr. ISSA. Well, then I will be the techie here for a moment. Can

any of you, in this day and age, not envision the ease with which

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an individual could enter a social security number—it could go into

an encryption key that is not available to anybody except the key

holders—it then creates a different number? That different number

then checks against looking for the identical not social security

number, but number created by the key that in fact then tells you

whether you have a match. So do any of you have a problem understanding, in this day and age, you don’t have to have a plain view

of a social security number that could lead to bad conduct, and you

don’t have to ever even have it transmitted?

So are we talking about social security numbers as though it is

the old days and it is written on a piece of paper and somebody

might xerox it, or do we all understand that unique identity number, for both a corporation and an individual, is certainly within

the grasp of the technology you already have paid for?

I am seeing heads wave yes.

My closing question is just an anecdotal one, if the chairman will

indulge me, and it is for the Navy, because I represent Camp Pendleton and the naval weapons stations. I had to take note, when

I downloaded the exclusion list, that GSA had 266, the Army had

675, the Air Force had an almost identical number, the Navy had

284. Is that because you do a so much better job selecting your contractors? Because you are a fairly large service. I was just interested to see how many were on the active list of disbarred or suspended.

Captain JAGGARD. If I understand your question correctly, Mr.

Issa, I think my answer to that question would be because our new

Acquisition Integrity Office is doing a much better job of keeping

up with the workload that they are required to handle.

Mr. ISSA. OK. And because I am a former Army officer, I will ask

the General is there a reason that 675 for the Army means that

you simply more aggressively go after these people, so more are on

the list?

General HARRINGTON. Sir, I think it relates to the numbers of

transactions that are involved in our—it is really our workload has

increased fivefold and there is just that much more solicitations, offers, and exposure to the contracting arena.

Mr. ISSA. I appreciate it. I just needed a little bit multiservice——

Mr. DRABKIN. Mr. Issa.

Mr. ISSA. Yes, sir.

Mr. DRABKIN. If the chairman will indulge me, just to fill out the

answer, part of this also has to do with our practice of suspension

and debarment. We have an unwritten rule amongst us that the

agencies with the most contacts with a contractor, whether the suspension or debarment is brought to them initially, is referred to

them to determine whether they want to take jurisdiction.

So the numbers themselves may not tell the whole story. It could

be that lots of contractors who do business with the Navy had more

contracts with the Army and the Army took jurisdiction, and that

is why the Army numbers—I know many cases come to my office

that I refer to my colleagues in the services because they are our

biggest customers. They take those cases from us, which is why our

numbers are lower, and they handle it because they have the most

contact with those contractors.

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Mr. ISSA. Well, I want to see you the next time Army-Navy play,

because I need an honest referee. Thank you.

Mr. DRABKIN. Sir, I wouldn’t be honest. I bleed Army green.

[Laughter.]

Chairman TOWNS. Let me thank you for coming and, of course,

all the witnesses for attending today.

Before we adjourn, I remain extremely concerned that the Federal dollars provided in the recently passed economic stimulus

package will fall into the hands of criminals and con artists posing

as legitimate business owners in light of the GAO’s findings. Therefore, I have addressed a letter to the Acting Administrator of GSA,

Mr. Paul Prouty, outlining the key changes that must be implemented to ensure adequate management, monitoring, and search

capabilities of EPLS.

Mr. Drabkin and Mr. Williams, providing you with this letter

acts as an official notice to your Acting Administrator that the recommendation of GAO and this committee should not be taken

lightly, because we are seriously trying to get rid of waste, fraud,

and abuse, and we want your help in that regard. So, without objection, I enter this letter into the committee record.

[The information referred to follows:]

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Chairman TOWNS. And, without objection, this committee now

stands adjourned.

[Whereupon, at 1:05 p.m., the committee was adjourned.]

[The prepared statements of Hon. Diane E. Watson, Hon. Gerald

E. Connolly, Hon. Paul W. Hodes, Hon. Dan Burton, and Hon.

Brian P. Bilbray, and additional information submitted for the

hearing record follow:]

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