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58–347 PDF 2010

REWARDING BAD ACTORS: WHY DO POOR PERFORMING CONTRACTORS CONTINUE TO GET

GOVERNMENT BUSINESS?

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

MARCH 18, 2010

Serial No. 111–78

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

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

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

JUDY CHU, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

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

BLAINE LUETKEMEYER, Missouri

ANH ‘‘JOSEPH’’ CAO, Louisiana

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

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C O N T E N T S

Page

Hearing held on March 18, 2010 ............................................................................ 1

Statement of:

Scovel, Calvin L., III, Inspector General, U.S. Department of Transportation; Richard L. Skinner, Inspector General, U.S. Department of

Homeland Security; Donald A. Gambatesa, Inspector General, U.S.

Agency for International Development; Gregory H. Woods, Deputy General Counsel, U.S. Department of Transportation; Elaine C. Duke,

Under Secretary for Management, U.S. Department of Homeland Security; and Drew W. Luten III, Acting Assistant Administrator for Management, U.S. Agency for International Development .............................. 13

Duke, Elaine C. ......................................................................................... 53

Gambatesa, Donald A. .............................................................................. 35

Luten, Drew W., III ................................................................................... 60

Scovel, Calvin L., III ................................................................................. 13

Skinner, Richard L. ................................................................................... 27

Woods, Gregory H. .................................................................................... 47

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

Duke, Elaine C., Under Secretary for Management, U.S. Department

of Homeland Security, prepared statement of ............................................ 55

Gambatesa, Donald A., Inspector General, U.S. Agency for International

Development, prepared statement of .......................................................... 37

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

California, prepared statement of ................................................................ 10

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio, article dated October 10, 2005 ....................................................... 83

Luetkemeyer, Hon. Blaine, a Representative in Congress from the State

of Missouri, letter dated December 9, 2009 ................................................ 80

Luten, Drew W., III, Acting Assistant Administrator for Management,

U.S. Agency for International Development, prepared statement of ........ 62

Mica, Hon. John L., a Representative in Congress from the State of

Florida, followup question and response ..................................................... 77

Scovel, Calvin L., III, Inspector General, U.S. Department of Transportation, prepared statement of ...................................................................... 16

Skinner, Richard L., Inspector General, U.S. Department of Homeland

Security, prepared statement of .................................................................. 29

Towns, Chairman Edolphus, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 4

Woods, Gregory H., Deputy General Counsel, U.S. Department of Transportation, prepared statement of ................................................................. 49

(1)

REWARDING BAD ACTORS: WHY DO POOR

PERFORMING CONTRACTORS CONTINUE TO

GET GOVERNMENT BUSINESS?

THURSDAY, MARCH 18, 2010

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 10:09 a.m., in room

2154, Rayburn House Office Building, Hon. Edolphus Towns (chairman of the committee) presiding.

Present: Representatives Towns, Cummings, Kucinich, Tierney,

Watson, Quigley, Norton, Speier, Driehaus, Chu, Issa, Mica,

Bilbray, Jordan, Chaffetz, and Luetkemeyer.

Staff present: John Arlington, chief counsel, investigations;

Aaron Ellias, staff assistant; Craig Fischer, investigator; Neema

Guliana, investigative counsel; Adam Hodge, deputy press secretary; Carla Hultberg, chief clerk; Marc Johnson and Ophelia

Rivas, assistant clerks; James Latoff, counsel; Leneal Scott, IT specialist; Mark Stephenson, senior policy advisor; Ron Stroman, staff

director; Gerri Willis, special assistant; Alex Wolf, professional staff

member; Lawrence Brady, minority staff director; John Cuaderes,

minority deputy staff director; Frederick Hill, minority director of

communications; Adam Fromm, minority chief clerk and Member

liaison; Stephanie Genco, minority press secretary and communication liaison; Seamus Kraft, minority deputy press secretary; Stephen Castor, minority senior counsel; and Ashley Callen, minority

counsel.

Chairman TOWNS. Good morning and thank you all for being

here.

Today the committee continues its oversight of the Federal Government’s use of suspension and debarment, a process that is supposed to prevent taxpayer money from going to the bad apples of

the contracting world.

Suspension and debarment can be an effective tool for Federal

agencies to ensure contractor performance. Unfortunately, as we

will hear today, the suspension and debarment tool often goes unused, quietly rusting away in the procurement tool box.

More than $500 billion of the taxpayers’ money goes to Federal

contractors each year. It is a massive job to ensure that billions of

dollars in taxpayer money is spent effectively and wisely, and that

Federal dollars do not go to the incompetent and the unproductive,

the con men and the con women.

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Suspension and debarment is the last line of defense against

such abuse, and should only be used in the most seriously cases.

But suspension and debarment only protects our Government if

agencies use it.

In February of last year, we held a hearing on the operation and

use of the Excluded Parties List System. We found that some Government agencies were ignoring Federal regulations by awarding

funds to businesses that had been suspended or debarred. We also

found that Federal agencies took far too long to suspend or debar,

if they did it at all.

Now, a year later, it seems little has changed.

In three separate reports, the Inspectors General of the Department of Homeland Security, the Department of Transportation, and

the U.S. Agency for International Development found that their respective agencies have failed to use the suspension and debarment

system or have been so slow in using it that the poor performers

raked in millions and millions and millions in the time period.

For example, the DOT IG found that, on average, it took DOT

300 days to reach a suspension decision and 415 days to process

a debarment decision. These decisions are supposed to be made

within 45 days.

In one such delay, the IG found that one Kentucky company committed contract fraud by bribing an official to receive bid information. During the 10-months it took DOT to suspend this company,

they received $24 million in Recovery Act funds.

Similarly, at DHS, the IG found that DHS had only 10 debarment cases in 4 years, an incredibly low number for an agency that

spends an enormous percentage of its budget through contracting.

In one glaring example, there were no debarment actions by

FEMA, an agency that had well-publicized problems with contractors during Hurricane Katrina. That, to me, is very interesting.

Unfortunately, the news isn’t much better at USAID. The IG

found that GA Paper International and Ramtech Overseas, Inc. admitted that they had submitted more than 100 false claims for reimbursement. Though they agreed to pay $1.31 million to the Government, USAID never initiated a suspension or debarment action.

If you aren’t going to suspend or debar contractors for fraud,

what does it take?

As the old saying goes, ‘‘Fool me once shame on you, but fool me

twice, shame on me.’’ In this case, shame on our Government for

being fooled over and over and over again by the same contractors.

It is way past time for agencies to suspend and debar bad actors

and for agency managers to aggressively enforce this process.

As I have said before and I want to emphasize today, I am not

against contracting or contractors. I am against weak management

and poor contractor performance. I know that responsible contractors and the witnesses today share this view as well.

The failure to enforce the law against bad actors is unfair to responsible companies and it is unfair to the taxpayers whose money

we are using.

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I look forward to hearing from both management and the IGs

about what can be done to address this problem.

I will now yield to the ranking member of the committee from

California, Congressman Issa, for his opening statement.

[The prepared statement of Chairman Edolphus Towns follows:]

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Mr. ISSA. Thank you, Mr. Chairman, and thank you for holding

this hearing. As you recall, the first hearing held by this committee

after you became chairman was on substantially the same subject.

I will ask today that you join me in a letter asking for the GAO

to update their findings so that we can look forward to not only

having new facts, but, in all likelihood, new enforcement.

Chairman TOWNS. Without objection, I will join you on that.

Mr. ISSA. Thank you, Mr. Chairman.

The goal of today’s hearing is not just to shed light on an ongoing

issue, but to make sure that the industry of both contractors and

the Government agencies that oversee those contractors realize

that the time, as the chairman said, is long overdue to bring about

quick and predictable debarment and suspension.

Each of us may have different examples of those entities which

should be suspended or debarred. The truth is all of the chairman’s

likely candidates should be scrutinized and either cleared or taken

off the rolls, and all of my candidates, I suspect, should be either

evaluated and cleared or taken off the rolls. It is, in fact, in my

opinion, every single contractor’s responsibility to live up to a high

standard, and if there is any question from any quarter as to their

conduct, it should be thoroughly investigated.

Just yesterday, at the chairman’s directive, we reviewed the

question of both contractors and private individuals either, employees or Government contractors, who were seriously delinquent in

their taxes, whether they should also be ineligible for contract or

even employment.

Although there is not bipartisan support on how to achieve this,

there is bipartisan recognition that bad actors make for bad government.

Mr. Chairman, I will delve slightly into one partisan example,

but I do so for a reason. We in the Congress voted on a bipartisan

and overwhelming basis in the House and the Senate to defund

ACORN. Whether we agree with Federal court decisions now pending or not, it is clear that some members of the court believe that

the Association of Community Organizations for Reform Now

[ACORN], in their opinion, cannot be defunded by congressional

fiat. That begs the real question: Why is there were people repeatedly breaking laws, being indicted and even convicted, and still operating within that organization? In fact, funds still being received

even after it was shown that funds of the Federal Government had

been embezzled and covered up.

This is an example where, from this dais, we cannot bring about

effective enforcement. We should not, on a regular basis, take up

the question of any company or any organization. But in order to

live to that expectation that I think the chairman and I want us

to do, which is to never again have a House floor vote or a Senate

vote related to defunding an organization, we must call on our

agencies to do their job not only better, but much quicker.

So, Mr. Chairman, my apologies for something which has often

been considered to be partisan, but I believe that partisanship

would have been completely unnecessary and tough votes for people on both sides would have been unnecessary if in fact the use

of these tools had been aggressive. None of us would have questioned if an organization or an individual had been reviewed and

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properly cleared. But to not be reviewed, to go on receiving additional funds by any organization, including contractors and, quite

frankly, even the continuation of Federal employees, must in fact

reach a higher standard, one that the chairman made clear by having his first hearing on this subject and is making clear today by

having an additional hearing.

So I join with the chairman in all of his remarks and yield back

the balance of my time.

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

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Chairman TOWNS. Thank you very much. I thank the gentleman

from California for his statement and also thank him for the work

that he has done on this issue as well. Thank you.

Let me first check if anyone else has an opening statement. I

yield to the gentleman from Florida for a 5-minute opening statement.

Mr. MICA. Thank you very much, Mr. Chairman, for yielding. As

the Republican leader of the Transportation and Infrastructure

Committee, I take particular interest in today’s hearing, and thank

you for holding it. I wish we were doing an even better job in our

committee, Transportation and Infrastructure. We do have a lot of

responsibility as the largest committee in Congress and a lot of

oversight. But I am particularly interested in what you have found

here, and it does give me great concern. We have tried to conduct

regular overview of stimulus dollars, and I think that is very important because it was a huge amount of money. I think now it is

scored at somewhere around $862 billion.

Today, the President is going to sign a so-called jobs bill of $17 billion or $18 billion, however you figure it, and it also has a high

emphasis on infrastructure and T&I projects.

First of all, I am deeply concerned about getting that money out.

To date, as of March 3rd, the last report I had from our committee

staff, $48 billion in stimulus money that went through the Department of Transportation of those $862 billion, the $48 billion, only

18 percent had gotten out, which gives me great angst about what

the President is going to sign today, a much smaller amount, even

getting that money out and people not having jobs. My State rose

in unemployment in the January report to one of the top 10.

But the difficulty in getting money out is one thing. Oversight is

another thing. But then to find out that the Department of Transportation is not being a good overseer of those contractors and

those vendors who are getting some of this money. And if you read

the report—and, again, this is a very shocking report that has

come out by the Inspector General of DOT—it takes so long to

debar someone or find them ineligible that we may have in fact already given—and I have some reports and I am having our staff

investigate it—we may have given money to people who should not

be participating in this process.

So we aren’t getting the money out. We are possibly giving the

money to people who shouldn’t be eligible players in this, and,

again, it is deeply concerning and frustrating from our standpoint.

But I thank you for conducting this hearing. We are going to

dedicate some of our investigative staff to going after folks who,

now we are learning, again possibly should have been debarred or

disallowed in this process from receiving money who may have received that money; and we intend to also bring this report to our

DOT and T&I Committee, and we will continue to follow this. But

appreciate again your work, both the Inspector General and this

committee. Thank you.

Chairman TOWNS. I thank the gentleman from Florida for his

statement.

Now, at this time, we will introduce our panel of witnesses: Mr.

Calvin Scovel III, Inspector General of the U.S. Department of

Transportation. Welcome.

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Mr. Richard L. Skinner, Inspector General for the U.S. Department of Homeland Security. Welcome.

Mr. Donald A. Gambatesa, Inspector General for the U.S. Agency

for International Development. Welcome.

Mr. Gregory H. Woods, Deputy General Counsel for the U.S. Department of Transportation.

Ms. Elaine C. Duke, Under Secretary for Management of the

U.S. Department of Homeland Security. Welcome.

And Mr. Drew W. Luten III, Acting Assistant Administrator for

Management, U.S. Agency for International Development.

Let me welcome all of you to the committee.

It is a longstanding policy that we swear all of our witnesses in,

so if you would stand and raise your right hands.

[Witnesses sworn.]

Chairman TOWNS. You may be seated.

Let the record reflect that the witnesses all answered in the affirmative.

I would like to just go right down the line. As you know, the procedure is that the light starts out on green; then it goes to yellow,

which means start winding down; then it goes to red. Everywhere

in America red means stop.

So, Mr. Scovel, why don’t we start with you? Then we will come

right down the line, keeping that in mind.

STATEMENTS OF CALVIN L. SCOVEL III, INSPECTOR GENERAL,

U.S. DEPARTMENT OF TRANSPORTATION; RICHARD L. SKINNER, INSPECTOR GENERAL, U.S. DEPARTMENT OF HOMELAND SECURITY; DONALD A. GAMBATESA, INSPECTOR GENERAL, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT;

GREGORY H. WOODS, DEPUTY GENERAL COUNSEL, U.S. DEPARTMENT OF TRANSPORTATION; ELAINE C. DUKE, UNDER

SECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF

HOMELAND SECURITY; AND DREW W. LUTEN III, ACTING ASSISTANT ADMINISTRATOR FOR MANAGEMENT, U.S. AGENCY

FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF CALVIN L. SCOVEL III

Mr. SCOVEL. Mr. Chairman, Ranking Member Issa, members of

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

DOT’s Suspension and Debarment Program.

Over the last 4 years, the Department contract and grant obligations averaged $56 billion annually. Given the significant dollars at

stake, plus an additional $48 billion in ARRA funds, it is imperative that parties who should be suspended or debarred not receive

Federal contracts and grants. However, weaknesses in DOT’s S&D

program make these funds vulnerable to unethical, dishonest, or

otherwise irresponsible parties.

Today I will focus on two major weaknesses: first, delays in

DOT’s S&D decisions and reporting; and, second, the lack of effective management controls and oversight. These weaknesses were

found at the Federal Highway Administration, Federal Aviation

Administration, and Federal Transit Administration, which together represented more than 90 percent of DOT’s S&D activity

over a recent 3-year period.

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Over the past 2 years, we have reported on major delays in

DOT’s S&D decisions and reporting. Our work found that, on average, the operating administrations we reviewed took over 300 days

to reach a suspension decision and over 400 days to reach a debarment decision.

In one recent case, Federal Highways took 10 months after receipt of our suspension referral to suspend individuals charged

with bribery, conspiracy, theft, and obstruction of justice. Federal

Highways’ delay in making a suspension decision resulted in the

Commonwealth of Kentucky awarding $24 million in ARRA-funded

contracts to companies that we believe met the legal test to be considered affiliates of these individuals.

Several factors contribute to these delays. First, operating administrations generally do not rely on indictments or convictions to

establish the evidentiary basis for suspension or debarment. Instead, they often perform extra, time-consuming tasks such as researching additional information on the case and analyzing the

competitive impact of the case on Federal aid programs. Such tasks

are not required by regulations.

Second, operating administrations have not assigned sufficient

priority to their S&D workload. Instead, staff typically performs

this work as a collateral duty. Attorneys, for example, may be

pulled from their S&D duties to perform litigation and other assignments their administrations determine to be a higher priority.

We also found that DOT does not support its S&D decisions

within timeframes required by regulation. Nearly half of the S&D

decisions we reviewed were not entered into the Government’s Excluded Party Listing System within 5 days of making a decision.

DOT’s procurement office exceeded the 5-day requirement by as

much as 864 days and 14 cases took over 100 days. Such time gaps

allow unscrupulous contractors to go undetected by officials seeking

to identify excluded parties before awarding new contracts or

grants.

The Department’s lack of effective controls and oversight exacerbates these weaknesses. For example, DOT S&D policy requires officials to complete all necessary tasks for making a suspension decision or proposing a debarment within 45 days. Yet, the policy has

been subject to interpretation and operating administrations exceed

the 45-day limit.

DOT’s policy also assigns responsibility for monitoring its S&D

program to the Office of the Secretary and the Department’s nine

operating administrations. Without clear accountability, the Office

of the Secretary is unaware of the many S&D-related problems

within the Department and cannot take appropriate corrective action.

Finally, DOT lacks controls to ensure that data in the EPLS are

accurate. Unreliable data not only weakens contracting officers’

ability to confidently identify excluding parties, it also weakens the

usefulness of DOT’s annual S&D reports as an oversight tool. In

fiscal year 2008 alone, the annual report excluded 53 pending S&D

cases, leaving the Department without knowledge of those cases

that most merited immediate attention.

Since we issued our January report, DOT officials have stepped

up their efforts to address our concerns. Specifically, the Office of

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the Secretary and the administrations are working to increase priority in handling S&D cases and clearly identified responsibilities

and timeframes. Continued vigilance in these efforts will be critical

to close oversight gaps.

I would like to take this opportunity to thank the Department for

its recent efforts to finalize its S&D order. However, until our formal recommendation followup process is completed, we don’t feel it

would be appropriate for me to comment on the proposed order at

this time.

This concludes my statement, Mr. Chairman. I would be happy

to answer any questions you or other members of the committee

may have.

[The prepared statement of Mr. Scovel follows:]

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Chairman TOWNS. Thank you very much for your statement.

Mr. Skinner.

STATEMENT OF RICHARD L. SKINNER

Mr. SKINNER. Good morning, Chairman Towns, Ranking Member

Issa, members of the committee. Thank you for having me here

today to talk about the Department of Homeland Security’s Suspension and Debarment Program.

I think we can all agree that the private sector plays an important role in assisting Federal agencies in the performance of their

basic missions. I also think that we can agree, for the most part,

contractors doing business with the Federal Government are honest, ethical, and responsible companies and persons. Unfortunately,

there are those unscrupulous few who choose to take advantage of

its commercial or contractual relationship with the Federal Government by behaving dishonestly, unethically, or irresponsibly.

To protect itself from such unscrupulous people, the Federal Government has implemented a Government-wide Suspension and Debarment Program. This is perhaps the most effective tool in the

Government’s arsenal of enforcement devices. Unfortunately, it is

not always being used effectively or, in some cases, not being used

at all.

The under-utilization of suspension and debarment action is by

no means just a DHS problem, but appears to be a Governmentwide problem. Both the Department of Justice-led National Procurement Fraud Task Force and the Council of Inspectors General

on Integrity and Efficiency have concerns that Federal Suspension

and Debarment Programs are not being fully utilized.

In particular, we believe that there may be a lack of coordination

between Federal prosecutors and investigators and those officials

charged with implementing Federal Suspension and Debarment

Programs. We believe the significant cause of the ineffectiveness is

the tendency of investigators and prosecutors to not alert suspension and debarment officials about a matter until the case is completed, and the reluctance of many agency officials to take action

in the absence of an indictment or conviction.

A robust and transparent Suspension and Debarment Program is

needed at the Department of Homeland Security and other Federal

agencies. Contractors who have failed to perform or who have willfully violated Federal criminal and civil statutes should not be allowed to do business as usual with the Federal Government.

Acquisition management is just not a matter of awarding a contract, but an entire process that begins with identifying a mission

need and developing a strategy to fulfill that need through a

thoughtful, balanced approach that considers cost, schedule, and

performance. The intent of the process is to ensure that the Government acquires goods and services that represent a best value for

taxpayer dollars.

As our recent audit report points out, although the Department

of Homeland Security has suspension and debarment policies and

procedures, it has been reluctant to apply them against poorly performing contractors. We identified 23 instances where contracts

were terminated for default or cause, but were not reviewed to determine whether a suspension or debarment referral was warVerDate 11-MAY-2000 14:42 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 U:\DOCS\58347.TXT KATIE PsN: KATIE
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ranted. In fact, between 2004 and 2008, the Department initiated

only one debarment case for contractor performance, and only did

so at the urging of the Defense Contract Management Agency.

When asked to explain the absence of performance-based suspension and debarment actions, senior procurement officials throughout the Department said that they were reluctant to initiate such

actions because they were either too resource-intensive or too punitive in nature, or they would have too negative an impact on the

contractor pool. Instead, Department procurement officials said

that they preferred to use other administrative remedies, such as

cure notices, not exercising option years, and, in the most severe

cases, termination for convenience or cause or default.

The Department’s components also were not always reporting

pertinent contract performance data for poorly performing contractors in either DHS’s contractor performance tracking system or the

Government-wide past performance information retrieval system.

The Department terminated 23 contracts for cause between 2004

and 2008, yet only two were recorded in a Government-wide Past

Performance Information Retrieval System. As a result, critical

contract performance information has not been disseminated to

procurement officials within the Department or across Government

for use in making future source selection decisions.

The Department recognizes these shortcomings and, as you will

hear, has taken positive steps over the past 6 to 9 months to prove

both its performance reporting in its review of poorly performing

contractors. Policies and procedures intended to increase the Department’s awareness of poorly performing contractors are or will

be in place in the near future and steps are being taken to ensure

that all pertinent contract performance information is recorded in

appropriate agency and government-wide data bases.

Finally, the Department has advised us that it intends to conduct an oversight review during the fourth quarter of this year. Because we commend the Department for these actions and because

contracting is such a large part of the Department’s budget, my office also intends to continue to provide oversight of the Department’s acquisition management function, including the Suspension

and Debarment Program, over the months and years to come.

Mr. Chairman, members of the committee, this concludes my prepared remarks. At the appropriate time, I would be pleased to answer any of your questions.

[The prepared statement of Mr. Skinner follows:]

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Chairman TOWNS. Thank you very much for your opening statement.

Mr. Gambatesa.

STATEMENT OF DONALD A. GAMBATESA

Mr. GAMBATESA. Good morning, Chairman Towns, Ranking

Member Issa, members of the committee. I am pleased to appear

before you today to testify on behalf of the Office of the Inspector

General for the U.S. Agency for International Development and to

be joined by my colleagues from other oversight organizations and

representatives of agencies with whom we work. Today I would like

to share our assessment of USAID’s activities related to suspension

and debarment.

In October 2009, we concluded an audit of USAID’s suspension

and debarment practices. We found that suspension or debarment

had not been considered in all cases in which those exclusions

might have been warranted. Consideration of suspension and debarment was limited to cases investigated by our office that included criminal or civil prosecution, and action was not always

taken in response to other types of referrals. This limited approach

to suspensions and debarments resulted in actions in only nine

cases during the period covered by our audit, which was approximately 4 fiscal years.

When USAID took suspension and debarment actions, it did not

always do so properly. Some debarred entities were not entered

into the Excluded Parties List System and others were listed late.

Moreover, USAID sometimes failed to document that it had

checked the Excluded Parties List System to determine whether

firms were precluded from receiving Federal funds. The agency

could not establish that it had performed these checks in 20 of the

54 contracts we examined. However, our audit did not identify any

instance in which USAID issued contracts or grants to entities listed in the System.

We believe that USAID’s organizational approach to suspension

and debarment reduces its ability to use these exclusions effectively. At the time of the audit, the review, approval, and implementation of suspensions and debarments were managed by offices

and individuals with many varied responsibilities. Other Federal

agencies we surveyed had established units specifically dedicated

to suspension and debarment activities. We recommended that

USAID consider adopting a similar approach.

Overall, our report made 12 recommendations. We recommended

corrective measures to strengthen documentation related to suspensions and debarments, as well as improvements in policies, procedures, and guidance. We also recommended that USAID consider

alternative organizational approaches and take steps to identify

best practices. USAID managers agreed with nine recommendations and planned steps to address them.

The agency is still considering recommendations to enhance its

organizational approach and identify best practices. As of earlier

this week, action had not been taken to close any of the audit recommendations; however, I understand that significant progress is

being made in that effort.

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Many skilled and capable employees are committed to USAID’s

mission and the agency works with a host of implementing partners that demonstrate a similar dedication to their work and prove

high-quality services. By excluding ineligible entities, the suspension and debarment process reinforces the credibility and effectiveness of the agency’s efforts and those of its implementing partners,

and helps protect taxpayers’ dollars.

We look forward to continuing to work with USAID to strengthen

its suspension and debarment efforts.

Mr. Chairman, I thank you for the opportunity to address the

committee, and I appreciate your interest in our work. I would be

happy to answer any questions.

[The prepared statement of Mr. Gambatesa follows:]

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

Mr. Woods.

STATEMENT OF GREGORY H. WOODS

Mr. WOODS. Thank you, Mr. Chairman. Chairman Towns, Ranking Member Issa, members of the committee, thank you for the opportunity to appear before you with Inspector General Scovel to

discuss the suspension and debarment procedures of the Department of Transportation. My name is Greg Woods. I am the Deputy

General Counsel of the Department.

In the early years of my career, I prosecuted civil fraud cases at

the Department of Justice, and I know that fraud is a real threat;

it is not a hypothetical. The thousands of contracts and billions of

dollars funded by the Department of Transportation annually are

a tempting target, and I want to assure you that the Department

recognizes that threat and takes seriously its responsibility to protect the public’s funds.

Inspector General Scovel has identified real concerns regarding

the structure and implementation of our Suspension and Debarment Program. The Department has taken too long to process

many suspension and debarment referrals. We are fortunate that

the Department has not identified any instances where funds went

to criminals who should have been suspended or debarred. The Inspector General rightly observes, however, that flaws in our procedure created opportunities that too readily could have been exploited. We would much rather trust in good systems than in good

luck. The problems that he has identified must be fixed and fixed

fast.

Over the past year, the Department has implemented changes

that we believe will dramatically improve our suspension and debarment process. In response to the Inspector General’s first advisory regarding this area in May 2009 in an ARRA advisory, we met

with suspension and debarment officials throughout the Department to communicate the Department’s heightened expectations in

this area. Our suspension and debarment processes within the Federal Highway Administration, which is highlighted in the Inspector

General’s report, have been reconfigured to assign responsibility for

tracking and managing suspension and debarment cases to their

Office of Chief Counsel.

That change in management structure has already yielded results. We created a new centralized, electronic tracking system for

suspension and debarment matters and, most recently, as Inspector

General Scovel notes, we finalized a new order that will govern the

Department’s handling of suspension and debarment matters.

That order puts in place a framework that will address the concerns that we have identified in our program. It clearly defines the

role of our senior procurement executive to monitor the Department’s performance in this area; it clarifies the responsibility of our

operating administrations to take action within 45 days of notification of an action that would justify or warrant possible suspension

or debarment; and it implements a new data collection system that

will help the senior management of the Department monitor the

performance of suspension and debarment officials.

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The Department is very thankful for the work of Inspector General Scovel in this area. His examination identified issues that

should be and will be addressed promptly. We are.

I would be happy to answer any questions that you have, and I

ask that my written comments be placed in the record. Thank you,

sir.

[The prepared statement of Mr. Woods follows:]

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Chairman TOWNS. Without objection, so ordered. Thank you for

your statement.

Ms. Duke.

STATEMENT OF ELAINE C. DUKE

Ms. DUKE. Good morning, Chairman Towns, Ranking Member

Issa, and members of the committee. Thank you for hosting this

hearing this morning. I am Elaine Duke, the Under Secretary for

Management and Chief Acquisition Officer for the Department of

Homeland Security.

Successful contractor performance is important in terms of both

mission success and sound business practices. As we seek to use

contracts to provide critical mission capability, we must ensure

that we are being good stewards of the taxpayers’ dollars. Contract

oversight in the Department is a collaborative effort between our

program managers, contracting officers, and contracting officer

technical representatives. We measure this contract performance in

terms of cost, schedule, and performance; and when a contractor

fails to meet the terms of the contract, we must take appropriate

action based on the specific circumstances which give us different

remedies to address the performance.

When failing to perform a contract results in termination for default, the next step is evaluating whether the contractor should be

referred for suspension and/or debarment. Suspension and debarment are intended to protect the Government from continuing to

contract with an irresponsible contractor. The Federal Acquisition

Regulation sets forth the criteria that may result in suspension or

debarment, including fraud, violating antitrust statutes, bribery,

falsification of records, violation of Federal tax laws, violation of

Federal equal opportunity provisions, and other Federal statutes.

Further, a contractor’s willing failure to perform, history of failure

to perform, or unsatisfactory performance may require a suspension or debarment.

Since 2007, DHS has initiated suspension or debarment actions

against more than 240 contractors or individuals. The majority of

DHS actions are for immigration statute violations. In addition,

DHS has recently put additional procedures in place to improve our

execution of existing policies regarding terminations, suspensions,

and debarments.

Some of the recent actions we have taken include requiring contracting officers to assess all contract terminations for default or

suspension possibility; a mandatory review by the senior component suspending and debarring official of every contractor that is

terminated for default or cause to determine if suspension and/or

debarment is appropriate; notifying our DHS chief procurement officer of any termination exceeding $1 million to ensure the Department reviews the components decision on these terminations; and

requiring all DHS contracting personnel to input performance reviews into the contract performance data base.

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I look forward to working with our Inspector General, Mr. Richard Skinner, in going forward to continue to improve our administrative controls over the termination, suspension, and debarment

process, and I look forward to answering questions from this committee this morning.

[The prepared statement of Ms. Duke follows:]

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Chairman TOWNS. Thank you very much, Ms. Duke, for your

statement.

Mr. Luten.

STATEMENT OF DREW W. LUTEN III

Mr. LUTEN. Chairman Towns, Ranking Member Issa—when he

returns—and esteemed members of this committee, thank you for

extending the invitation to appear before you today. I am pleased

to provide you with an update on USAID’s progress to strengthen

processes and procedures related to suspension and debarment,

and to report on our implementation of the recommendations from

our Inspector General.

We found the October 2009 report from the USAID Inspector

General to be very timely. While we had made some progress since

the period covered by the report, which went up to 2007, we recognized that there were a number of things that we needed to do to

improve our capacity and our processes for handling suspensions

and debarments. We need to do this in order to put USAID in a

better position to be more proactive in overseeing contractor performance and compliance, and taking action as and when appropriate.

We take very seriously our duty to suspend and debar those parties who seek to defraud the Government or abuse the privilege of

receiving taxpayer funds. We have taken steps to address all of the

IG’s recommendations. Corrective action on six has been completed

and will be formally reported back to the IG shortly, and the rest

are in process, in varying stages of completion.

The biggest change that we have made was to approve the establishment of a separate division within our Office of Acquisition and

Assistance that will be responsible for partner compliance and

oversight. We made this decision after surveying several Federal

agencies. This division will be separate from the units that are responsible for soliciting and awarding and administering Federal

contracts and grants. It will report directly to the senior procurement executive, who is the suspension and debarment official.

The new division will have a dedicated staff to focus on suspension, debarment, and other oversight matters. It will develop case

files, evaluate facts, make recommendations for action, as well as

track the overall status and progress of its case load. An experienced procurement officer was assigned to build the division, and

recruitment of staff will occur over the coming months.

One of the other things that we have done is increase our interagency engagement on suspension, debarment, and compliance

matters, looking for information about firms and organizations, as

well as lessons learned from other agencies. We now have regular

representation at the Interagency Suspension and Debarment

Council and also serve on the EPLS Committee at GSA.

In the meantime, we are managing an expanding workload of

compliance matters. We are finding that the new Federal Acquisition Regulation provision on contractor business, ethics, and conduct which became effective in December 2008, is expanding our

reach in the area of compliance oversight. This clause provides for

contractor self-reporting of potential criminal violations, false

claims, overpayments, and other misconduct. We have developed

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standard procedures for reviewing and making decisions with regard to such disclosures from contractors. Each case is vetted by

a panel of specialists from multiple disciplines who review the reported information and the severity of the wrongdoing.

Each potential suspension and debarment or other compliance

action, however it is identified—by IG referral, through contractor

self-reporting, through interagency collaboration, or other sources—

is considered on its own merits under the criteria set forth in the

Federal Acquisition Regulation and our agency’s own non-procurement regulation with respect to suspension and debarment.

As an agency, in appropriate situations, in addition to seeking

suspension and debarment, as appropriate, we also find that there

are appropriate situations where an administrative compliance

agreement is the best practice to be applied under particular circumstances, considering the nature of the wrongdoing and, very

importantly, considering the response of the contractor or grantee.

All of these are taken into consideration.

In pursuing our foreign affairs mission, USAID works in more

than 80 developing countries around the world, often in difficult

conditions or in environments with underdeveloped financial and

governance systems. In appropriate circumstances, the compliance

agreement is a tool that allows us to help willing organizations,

both U.S. organizations and non-U.S. organizations, deal with problems, improve their capacity to operate effectively, and become accountable and recipients of U.S. funding.

In closing, I will just say again that our IG’s report was very

timely and has focused us on taking actions that we know that we

need to take. With improved policies, with a dedicated unit, with

better interagency collaboration, we are putting ourselves in a

much better position to proactively protect the taxpayer dollars

that are entrusted to us.

Thanks for the invitation to be here today. I would be happy to

take questions that you may have.

[The prepared statement of Mr. Luten follows:]

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Chairman TOWNS. Thank you very much.

Let me begin by first thanking all of you for your statements.

This would be to you, Mr. Woods, and to Ms. Duke and to Mr.

Luten. All of you, I am sure, know what is happening in your agencies. Why aren’t bad actors being suspended or debarred, is it the

red tape? What is the problem? Because you seem to know what

is going on.

We can start with you, Mr. Woods, and come right down the line.

Mr. WOODS. Thank you, Chairman Towns. Respectfully, what the

Inspector General identified in his report was that the Department

was taking too long in dealing with referrals that were made primarily by his office regarding people who had been indicted of

crimes, and, sir, we agree with the findings in his report that in

many instances we simply took too long, and thanks to his advisory

in May 2009 and his recent report, we have been taking steps to

try to speed up the processing of those suspension and debarment

procedures.

For us, thankfully, we haven’t yet seen instances where people

have gotten our money who should have been suspended or

debarred, but as I said in my introductory remarks, sir, that, I

think, in some ways is due to some luck. We have taken too long

from the referral to suspension or debarment, but so far we have

been fortunate to not find instances where somebody got money, a

bad actor got our money that should not have. We need to improve

our systems to make sure that doesn’t happen.

Chairman TOWNS. But that is too much money to leave up to

luck.

Mr. WOODS. I completely agree, sir. Our systems have to be improved and the Inspector General’s advice and advisories have been

taken well to heart.

Chairman TOWNS. Ms. Duke.

Ms. DUKE. I believe within DHS, and the data shows, it is part

of our startup. When the Department started, we merged 22 agencies and struggled with the administrative stand-up of the Department. Our contracting workload doubled early on in the Department, and this was one of the programs in the contract management acquisition management that we needed to put the building

block in place.

Now, the good news is our data does show the building blocks are

starting to work. For instance, as an IG report is a report of the

past, the data is correct in the IG’s report, but our data does show

we are increasing our suspension and debarments. In fact, we doubled in 2009 the debarments we did in 2008, and this year, in fiscal

year 2010, so far, just in the first half of the year, we have nearly

double what we have done in fiscal year 2009. We do have to still

make more systemic administrative controls, but I think our data

shows we are getting this situation administratively under control.

Mr. LUTEN. I think our issues have been similar to other agencies. In our case, expansion of mission and expansion of program

without adequate building of the infrastructure for stewardship, of

which this is a part, is part of the cause.

Part of it, as our IG has pointed out in his report, was lack of

focus and lack of organizational focus on this, which we are remedying. In fact, since the period covered by the report, but even beVerDate 11-MAY-2000 14:42 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 U:\DOCS\58347.TXT KATIE PsN: KATIE
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fore the issuance of the report, we were devoting more attention to

this. I think the report indicated that there were only nine actions

taken.

We now have 26 actions, suspension and debarment actions that

we have taken since 2003. We have 18 more active cases that are

under various stages of review. So it was increase in the program,

need to have the stewardship infrastructure catch up with the increase in the program. We are increasing the number of suspension

and debarment actions really since the period of the report that

was covered, and the new organizational changes will help us do

this more effectively.

Chairman TOWNS. The restructuring, when did that take place?

Mr. LUTEN. It has been approved and it is in the process of being

staffed now, so we approved it in January. I approved it in January

and we moved an officer to build the division. And even before that

we are just devoting more attention to suspension and debarment.

Chairman TOWNS. Thank you very much.

I yield 5 minutes to the gentleman from California, the ranking

member, Congressman Issa.

Mr. ISSA. Thank you, Mr. Chairman.

Where to begin sometimes is hard on these, but, Ms. Duke, do

you need additional tools in order to hold FEMA or any other part

of Homeland Security accountable?

Ms. DUKE. Two things. One is at the Federal level there is a new

system that is being deployed next week, it is the Federal Awardee

Performance and Integrity Information System. This is going to be

very helpful to DHS and all the other departments. What it does

is brings past performance and integrity and debarment information all together in one data base. This is a Federal initiative that

will be helpful.

Within DHS, I think the additional tool we need—and Mr. Skinner and I have talked about this—is just a better system to control

and bring visibility. We do not have a single authority in DHS

right now, and that is something we gained from the IG report and

are looking at, is how can we bring the administrative processes together under one leader. But in terms of authorities, I think we

have the appropriate authorities; we just need to fine-tune the administrative controls.

Mr. ISSA. Let me ask an old businessman’s question. I will just

run down each of you. In business, if I have a contractor who performs poorly, if I have a contractor who is under indictment, if I

have a contractor who has had three people arrested for selling

coke on the premises and I become aware of it, I look at my purchasing agent and I say this all scores, this all scores into the question of this company or this vendor.

If I have a contractor who fails their, in our industry, ISO 9000

or 9001, the actual quality, it scores. Do we have to give you authority to use scoring like that so that at least while somebody has

these documentable events—not tried in every court and appealed

all the way through the men and women here across the street in

black robes, but at least these are legitimate markers. Do we need

to give you the authority to say we are going to score that so these

individuals fall lower on their success rate of getting new contracts

and renewals?

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Mr. Scovel, start right down.

Mr. SCOVEL. Good morning, sir. Sir, we think the Department of

Transportation has every tool that they need and every——

Mr. ISSA. Well, clearly you are not using the tools. So that is the

question, if in fact we gave you an overt tool that said these

analyticals, maybe unproven, may be weighted in a renewal? Let’s

face it, at DOD, one of the biggest problems is you have a contractor who does a bad job and they get an automatic renewal. They

get to do a bad job on what they are doing and they often say, well,

but he met the minimums.

So I ask you again do you have that tool? Do you want that tool,

the tool to be able to use these kinds of performances—some extraneous, but in the consideration not of debarment, but of the question basically—it is more of a suspension question—of do they win

the new grant, do they win the new aware?

And I am thinking in my mind of ACORN, and I am thinking

of ACORN because I can understand why somebody would say,

look, they already have the grant, they have already hired the people. While they are going on their appeal on voter fraud, maybe we

won’t do it. But the question of new money. And we switch to Lockheed Martin, we could switch to Boeing. We could switch to any

company; fill in the blank. Do you have that tool? I think the answer is no, you don’t.

Mr. SCOVEL. No, we do not.

Mr. ISSA. Would you like to have that tool? And if not, why not?

That is the entire question and I just want those questions answered by each of you, if I could, please.

Mr. SCOVEL. Sir, from the point of view of my office, the Inspector General——

Mr. ISSA. I am talking about the agency each oversees more than

anything else.

Mr. SCOVEL. From the Department’s point of view you are asking.

Mr. ISSA. Yes.

Mr. SCOVEL. I must leave that question officially to the Department. From my point of view, sir, to the extent that discretion, unfettered discretion enters into the analysis, we would probably find

that problematical. And I am sure our work would result in findings of disparate treatment from case to case.

Mr. ISSA. OK. Mr. Skinner.

Mr. SKINNER. Yes, I agree.

Mr. ISSA. And obviously I am not suggesting that we invent discretion, but, rather, we document criteria that would allow for that,

such as indictment, such as adverse reporting. There would have

to be a list. But right now it appears as though groups that would

fail under that don’t meet the threshold for 400 days to get suspended or debarred.

Mr. Skinner. And my time is up, so if we could just be as quick

as possible.

Mr. SKINNER. Yes, I agree with Mr. Scovel. Right now, it is very,

very subjective. However, there are certain bars or parameters that

should be established. Indictments, arrests should weigh in very,

very heavily into your decision as to whether you want to proceed.

Right now, if you are convicted, you are prohibited unless there is

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a waiver, and it has to be justified. But there are performance

measures below that. You may not be convicted, you may not be

indicted; you may be terminated for cause. Those things I think

should have a greater weight than some of the other factors.

Mr. ISSA. They currently do. Yes, sir.

Mr. GAMBATESA. Yes, sir, I agree with Mr. Skinner that the convictions and indictments are obviously something that has more

weight. But in areas where there is an agreement or some sort of

settlement agreement to avoid prosecution, I think those should be

scored in some way, or under-performance should be scored in some

way.

Mr. ISSA. Mr. Woods.

Mr. WOODS. Sir, quickly, just to note, the majority of our funds

are passed through grants to the States, so the States are entering

into contracts with the direct contractors. I do believe that States

use information of that sort in order to determine the present responsibility of contractors using our funds.

Mr. ISSA. Ms. Duke, the person I really wanted to start with.

Ms. DUKE. Within DHS, I think the biggest tool we have is our

people. Recording past performance information is time-consuming,

but it is absolutely important. So, as we seek to buildup our contracting and our program management staff, I think the biggest

thing we could use is support in the budget. I know that is difficult

in such a tight year, but this is an important function, but it is

time-consuming to do this well; and I think throughout the Federal

Government that type of information is not recorded appropriately,

so it is not available for use——

Mr. ISSA. Yes, but I am only speaking—and I apologize, we have

really gone over—the tool of selectively not granting extensions or

new contracts or grants to individuals who have adverse reporting,

allowing that to be formally weighted in the process. And the reason I think the chairman and I probably are both interested in this

is we clearly want to get a tool that is easier to use than the 400-

day that we seem to never be able to get down, or the 300-some

day. That tool is all I wanted an answer on.

Ms DUKE. Yes, I believe the tool is there, and we need to use it.

Mr. ISSA. Mr. Luten.

Mr. LUTEN. We absolutely need to use the tools that are currently available and keep doing what we are doing to focus on

staffing and paying more attention. But the idea of additional criteria and criteria that are differentiated depending on which each

one is would be welcome, I think. I mean, I am not sure how it

would work, but it is a discussion that is probably worth having.

Mr. ISSA. Thank you.

Thank you, Mr. Chairman.

Chairman TOWNS. The gentleman’s time has expired.

I now yield 5 minutes to the gentleman from Illinois, Mr.

Quigley.

Mr. QUIGLEY. Thank you, Mr. Chairman.

Lady and gentlemen, I guess I am inclined to ask about specific

issues such as once an entity has been suspended or debarred, they

must be entered into the EPLS system within 5 days. That doesn’t

include those that are terminated, which seems to be a shortcoming

here.

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But listening to you and the fact that we are here the second in

a year going over the exact same things, I guess I wonder, to an

extent, if you were in my place, what difference does it make? You

begin to get the impression that the agencies, if they don’t like

something, they are not going to do it anyway; they are not going

to file data within the prescribed period, they are not going to pursue issues on a timely basis.

And here is my personal favorite: Department procurement officials characterize the process as being too resource-intensive, punitive, and negatively impact the size of the contractor pool. That is

my favorite. We want a large pool so even if we have inept, corrupt

people, we will have a larger pool. It is exactly what we are dealing

with in SELPA. So if someone could help me here explain, if you

are in my shoes, why bother if the agencies are going to act as

independent victims anyway?

Mr. Skinner, if you want to jump in.

Mr. SKINNER. May I respond? Yes, the responses that we received—and this was from procurement officials throughout the Department—concerning the procurement pool or being too punitive

or we just don’t have the resources, it is too resource-intensive is

something I think cannot be explained.

First of all, and I agree, if you are not performing and you have

a history of not performing, then you should be eliminated from the

pool. What I would suggest is, when I hear those types of responses

and I look at these contracts, I think the problem lies in the contracting officer or the contracting rep is not comfortable with the

way the contract was written to begin with, so they feel that they

may be vulnerable. That is, if we are going to terminate you for

lack of performance and a continued lack of performance, then we

have to demonstrate that we clearly articulated in the terms of

that contract that this is what we wanted as an end result. Unfortunately, we cannot always do that, so, therefore, they feel we may

be partially at blame for not clearly articulating the terms of the

contract and what goods and services we wanted at the end of the

road; and I think therein lies part of the problem.

The other thing I think is in fact a resource issue. The Department, at least in the Department of Homeland Security, we had to

dig the Office of Procurement throughout the Department and all

the components had to dig themselves out of a hole. They were

grossly understaffed. The urgency of the mission trumped good

business practice in the early days. That is starting to change and

we are starting to see evidence of that now as we buildup and have

a better training program, increased staffing, more experienced

staffing to address these other issues.

The third point that I would like to make is we have to hold

these people accountable. Like you said, why bother if you are not

going to be held accountable? And one of the ways of doing that I

would suggest is that—and we have discussed this throughout the

Department—is to start putting these types of performance indicators in your performance evaluation plan for the individual contracting officer, for the individual contracting technical rep, for the

project manager. Hold them accountable for their actions when

things cannot be explained.

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Mr. QUIGLEY. Just with yourself, sir, the issue of whether the entity has been suspended or debarred has to be entered into the

data base, would you add terminated as well?

Mr. SKINNER. In the——

Mr. QUIGLEY. Into the EPLS.

Mr. SKINNER. Oh, that is a separate data base. I think that data

base should be held exclusively for those that have been in fact

suspended or debarred. I think there are other ways through the

Government-wide tracking system and through the new system—

well, the new system will capture this, but through Past Performance Tracking Retrieval System, that information should be clearly

articulated in that system.

Mr. QUIGLEY. But we have already heard and read that agencies

aren’t even reading what is on this system, EPLS, in evaluating

and going forward with these entities. Is a separate system now

just going to confuse the issue; it is one more thing to check?

Mr. SKINNER. No, I don’t think—and I have yet to take a very

close look at it. I am sure my cohorts that are involved in the procurement acquisition or those in the community have. This is not

a new system. Well, it is a new system, but what it does, it collects

all the information from the various systems. So this new tracking

performance and integrity system will—it is one-stop shopping, so

to speak, is my understanding. So when you go in and put in a

DUNS number or a company name or an individual name, you

should be able to extract information that are in all these other

systems that are being maintained.

Mr. QUIGLEY. Thank you.

Mr. TIERNEY [presiding]. Thank you, Mr. Quigley.

Mr. Mica, you are recognized for 5 minutes.

Mr. MICA. Thank you.

You know, one of the things we have been trying to do is get the

stimulus money out. I am thinking maybe it is good we aren’t getting it out, because we probably are giving it to as many bad actors, since the system doesn’t seem to work to catch or stop them.

In the Kentucky case it took 300 days, Mr. Scovel, to reach a suspension, and then a debarment was 400 days, is that correct?

Mr. SCOVEL. Almost, Mr. Mica. It took about 10 months from the

time of my office’s referral of the indictment of individuals to the

Federal Highways Administration for Federal Highways to make

the suspension decision.

Mr. MICA. In the meantime, they had given $24 million in contract to a firm that had been indicted, I guess, or charges against

some of the principals.

Mr. SCOVEL. Twenty-four million dollars in recovery funds were

awarded to three companies. Well, a couple of the contracts were

awarded before the suspension decision was made and one after.

Mr. MICA. Well, there is obviously not a system to alert people

when prosecutorial action is taken, but when the suspension or debarment takes place, do we notify the States immediately? Is there

a State alert? Since most of these folks we heard a lot of the money

is passed through, like the stimulus, to the States. There is an

alert system?

Mr. SCOVEL. Yes. The have access as well to the Excluded Party

Listing Service.

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Mr. MICA. OK.

Mr. WOODS. That is correct, sir. In fact, our systems require that

each of the States, before they award a contract, check the EPLS

system and certify they haven’t been excluded.

Mr. MICA. But the problem we have is getting the money out in

a hurry, which we want to do. Mr. Oberstar and I tried to get it

out in a year. If it is 365 days and it takes 400 days for this process, we could be in fact awarding and people could have contracts

that really are bad actors. So we do have a problem. And some of

the remedial action may not cure the problem that has been mentioned today.

Ms. Duke, Homeland Security. OK, I have a bad actor question

for you. We are talking about contractors. I want to talk about employees. I notified your agency when one of my sheriffs got me,

when I was back home some months ago, and said what the hell

is going on in Washington? TSA is hiring people that we fired as

bad employees.

One sheriff told me three employees, one was a good guy and two

were bad guys. Two shouldn’t be working anywhere for the misconduct that they found them guilty of. They were hired by TSA,

working in TSA at one of the airports; he got information back.

And none of the three were ever checked or vetted. He went back

to his personnel office and they checked; they never had a call, a

comment from TSA or Homeland Security. We are hiring people in

sensitive security positions in your agency who are bad actors.

What is the problem?

Ms. DUKE. Well, we do do suitability checks on our employees

from a security standpoint. I will check——

Mr. MICA. How about just checking the previous employer? I

mean, that is the first thing I would do. I don’t have the biggest

personnel human resources operation in the world, but that is the

first thing we do. And I still don’t even know the resolution, because I am not sure if you even responded to my question yet.

Ms. DUKE. I do agree with you, Mr. Mica, that reference checks

in employment are very valuable, and I will look into that.

Mr. MICA. OK.

Finally, Mr. Luten, you were talking about additional criteria

there and all that, but it has been brought to my attention that one

of your contractors or guarantees is engaged in false claims at litigation with your agency and the Department of Justice. The Department of Justice and USAID, according to court filings, believe

that a company called Disaster Relief Construction, Inc. submitted

approximately $40 million in false claims. Has USAID taken any

action to suspend or debar that company?

Mr. LUTEN. I must say that I am not specifically familiar with

that case.

Mr. MICA. I don’t think they have. And if they haven’t, why not,

if that is the case?

Mr. LUTEN. Could we respond to you after this hearing?

Mr. MICA. Yes, I would like to see a response.

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Mr. LUTEN. We will answer that.

Mr. MICA. And I will ask unanimous consent that his response

be made part of the record.

Chairman TOWNS [presiding]. Without objection, so ordered.

[The information referred to follows:]

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Mr. MICA. Thank you.

Chairman TOWNS. I thank the gentleman from Florida.

Ms. Chu.

Ms. CHU. Mr. Gambatesa, in your testimony you stated that your

department had surveyed six other Federal agencies with active

suspension and debarment programs, and that four out of six had

established divisions or offices that were especially dedicated to

these activities. What are these six Federal agencies and what

were the respective agency track records with regard to S&D before

establishing these special divisions and afterwards, and should all

agencies have divisions or offices that are separate, just concentrating on this?

Mr. GAMBATESA. Well, we surveyed a large group in the Government, pretty much all agencies, and the six that responded were

I believe the Department of the Navy—I have them here somewhere—the U.S. Air Force, the Defense Logistics Agency, GSA, and

EPA all responded back to us.

And, I am sorry, the second part of your question?

Ms. CHU. The second part of my question is whether there should

be separate offices that handle suspension and debarment, and

whether that would make the process more efficient.

Mr. GAMBATESA. Obviously so. Our report recommended just

that, that USAID establish such an office, and my understanding

from Mr. Luten is that they are in the process of doing just that.

Ms. CHU. OK. And I am wondering, with the other agencies, are

you in the process of establishing a separate office?

Ms. DUKE. Within DHS, we are looking at it. We have three separate, very separate ways we have to consider debarment: one is

under grants or financial assistance, the second is under procurements; and the third is under immigration law. We believe now, to

be efficient and make sure that this is done quickly, that a decentralized look at it—because they are done by very separate groups

in DHS—is important, but we are looking at where in DHS, under

a centralized authority, should the three pieces come together. So

we are working with our Inspector General on seeing what is best

for our Department.

Mr. WOODS. Like DHS, we have a number of operating administrations within the Department of Transportation, each of which

has both procurement, buying things, and non-procurement grant

authority; and for each of those there is a separate suspension and

debarment official. What we have implemented now, and are

strengthening, have been strengthening over the course of the last

year, is centralizing responsibility for oversight of all of the suspension and debarment activities within the Office of the Secretary,

which sits astride the operating administrations and we have designated our Office of Senior Procurement Executive to fit that function.

Ms. CHU. Well, let me then concentrate on transportation, Mr.

Woods. The Inspector General found that your annual report is intended to be an oversight tool, but that the annual report was riddled with incomplete and inaccurate information, such as excluding

open cases from prior years, incorrect action dates, and duplicate

entries. How do you anticipate moving the agency forward and having annual reports that really close this oversight gap, and do you

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have the resources to do this overhaul and piece together information going back to 2005?

Mr. WOODS. Thank you. The Inspector General did identify deficiencies in the annual reports that were submitted for those years.

What we are doing in order to correct that is we are implementing

a new electronic system that will allow each of those operating administrations to input information to a centralized data base.

The system that we are putting in place will ultimately allow the

Inspector General to input the initiation of a suspension or debarment proceeding or a referral into that system, and that will allow

the Office of Senior Procurement Executive that I mentioned earlier to have direct visibility on a real-time basis to what each of the

operating administrations is doing.

So we are hoping we are both going to have more transparency

regularly and, because we are going to have more regular visibility

into the information that is being placed into the system, it will be

easier for them to compile the annual report, rather than going

back to the operating administrations and asking them to deliver

up the components that would comprise it. And I think that was

a big source of the failures in the reports that General Scovel pointed to.

Ms. CHU. And you——

Mr. WOODS. Sorry, in response to the second part of your question, a lot of this, again, as General Scovel pointed to, is really a

question of management and a need to focus the people that we

have working on this area more on their responsibilities and educating them in what those are. We are working on the process of

that and we are hoping that with the resources we currently have,

with enhanced management oversight and clearer procedures, we

will be able to get that done.

Ms. CHU. And you think you will be able to go back to 2005 and

correct the mistakes of the past?

Mr. WOODS. I believe that we can, yes, ma’am.

Chairman TOWNS. The gentlewoman’s time has expired.

I now yield to the gentleman from Missouri, Mr. Luetkemeyer.

Mr. LUETKEMEYER. Thank you, Mr. Chairman. If there is no objection, I would like to add to the record a copy of the letter that

Mr. Mica was referring to during his questioning of Ms. Duke with

regards to the two sheriff’s employees.

Chairman TOWNS. I am sorry, I didn’t hear that.

Mr. LUETKEMEYER. Mr. Mica referred to a letter that he was

talking about with Ms. Duke. He would like to just add that to the

record, if there is no objection to that.

Chairman TOWNS. Without objection.

Mr. LUETKEMEYER. Thank you, sir.

[The information referred to follows:]

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Mr. LUETKEMEYER. Thank you, Mr. Chairman.

As I have been listening to the comments this morning and going

through the testimony and some of the summaries, it is very troubling to see what is going on here. One of the comments was, additionally, the DHS IG reported that on at least 21 occasions the

agency failed to record a termination for default or cause in Government-wide past performance data bases. DOT: The staff, with

responsibility for suspension and debarment, viewed it a secondary

to their duties. Debarment and suspension decisions were not timely. USAID: The actions the agency did take were poorly executed.

As I have sat here on this committee over the past several

months, it seems as though—and this morning is symptomatic of

this—that we have an almost blatant disregard sometimes for the

rules; we have a lack of will to enforce the rules that are there; and

if not just totally incompetent. And it is very disturbing to me because there should be oversight over all of this. I mean, when you

get moneys to be distributed, there should be a process in place for

oversight immediately. That should be a part of the process of distribution of the money.

And this morning we talk about now we are going to take action

here, now we are going to take action here, now we are going to

do this. Where were you? Why didn’t we do something before? Why

did we have to come here? This should have been done months, if

not years, ago in all of these situations. This is ridiculous. You guys

are the first caretakers of the dollars, not us. We are the secondary

group here. You are the first caretakers.

I would like to ask how many of you are taxpayers? Show of

hands, anybody a taxpayer? All of you?

Chairman TOWNS. If not, we are going to invite IRS to our next

hearing. [Laughter.]

Mr. LUETKEMEYER. Remember, you all are under oath now. How

many of you are outraged about what is going on by a show of

hands? Any of you outraged about what is going on? Some of you

no? You are not upset that there are taxpayers’ dollars being wasted here, that people are getting contracts that shouldn’t be given

contracts? There are some of you that are not outraged? I didn’t see

six hands. So you don’t really care, Ms. Duke, is that right?

Ms. DUKE. I very much care, yes.

Mr. LUETKEMEYER. You are not outraged by what is going on?

Ms. DUKE. I am outraged if a company that should be debarred

is getting Federal dollars, yes.

Mr. LUETKEMEYER. Why hasn’t something been done before? Why

is it not? Why does it take a hearing like this to raise this issue?

Ms. DUKE. In DHS, in both the IG review and our review, we

have no records of a company that should have been debarred

not—or contract dollars going to a company that has been debarred

or is proposed for debarment. So I do agree that there are more

things that need to be done.

Mr. LUETKEMEYER. Well, in one of these descriptions here, a

summary of the report indicates that some individuals in the Department or the staff felt that the suspension or debarment was

viewed as secondary to their duties. Now, I have served in the private sector and I have served as a division director in the public

sector as well, and I can tell you that whenever you have this sort

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of attitude, it tells you one of two things: either you don’t care or

you have way too much money and they are willing to waste it; and

that has to stop.

Mr. Chairman, I yield back the balance of time.

Chairman TOWNS. The gentleman from Missouri yields back.

I now recognize the gentleman from Ohio, Mr. Kucinich.

Mr. KUCINICH. Mr. Chairman, thank you very much for holding

this hearing. I would like to ask some questions of Ms. Duke. And

I would ask you if you would pull the mic close so that we can hear

your responses.

You expressed in your testimony the importance of contractor

performance and mission success and sound business contractors.

Yet, the DHS IG found that between 2004 and 2008, a time period

that includes Hurricane Katrina and the well-publicized contractor

malfeasance that ensued, DHS had only 10 debarment cases. An

article in The Nation magazine, which, without objection, I would

like to submit for the record——

Chairman TOWNS. Without objection, so ordered.

Mr. KUCINICH [continuing]. Reported that the number of private

security companies registered in Louisiana jumped from 185 to 235

within 2 weeks of the hurricane. Former Department of Homeland

Security Spokesperson Russ Knock told the Washington Post, he

‘‘knew of no Federal plans to hire Blackwater or other private security firms that worked for New Orleans.’’ Yet, days later

Blackwater announced they were hired by DHS to guard reconstruction projects in Louisiana.

[The information referred to follows:]

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Mr. KUCINICH. When asked by Mr. Scahill, the reporter, on what

authority Blackwater employees were operating in New Orleans,

they replied, ‘‘they were under contract with the Department of

Homeland Security. We can make arrests and use legal force if we

deem necessary.’’

Now, does Blackwater still have a contract with Homeland Security, or their predecessor renamed company known as ‘‘Xe?’’

Ms. DUKE. I would have to check to see if any, but I do know

that they are on the list, so they wouldn’t have any new contracts.

I would have to check and get back to you for the record.

Mr. KUCINICH. So you don’t really know. I mean, this company

is infamous, but you really don’t know if they are working for you

or not.

Ms. DUKE. I would have to check to see if there are any residual

contracts before I gave you a precise answer.

Mr. KUCINICH. Well, we know that they were awarded a contract

with DHS, despite their reputation for complete disregard for lives

of people in Afghanistan and Iraq. I mean, it was so bad that they

ended up having to change their name to ‘‘Xe.’’ What I would like

you to find out if they are still working for DHS.

What would a contractor have to do, what kind of conduct or behavior would rise to the level of debarment?

Ms. DUKE. Well, there are several criteria. One is willful nonperformance; violations of integrity; violations of statute, such as

immigration law, drug-free workplace, environmental law. So there

are many different areas. The predominance throughout the Federal Government debarments are for violations of key statutes, not

for nonperformance.

Mr. KUCINICH. One of the things that the Inspector General’s report says, ‘‘The Department is reluctant to apply the policies and

procedures against poorly performing contractors. Department procurement officials characterize the suspension and debarment process as being too resource-intensive, punitive, and as negatively impacting the size of the contractor pool, and that the agency prefers

to use what the Inspector General called other administrative remedies.’’

Now, would you agree that the suspension and debarment procedure is intended to be punitive and that there are cases in which

contractors ought to be punished for egregious violations of law?

Ms. DUKE. The suspension and debarment system is to protect

the Government, and that is what I think it is——

Mr. KUCINICH. Is what?

Ms. DUKE. Is to protect the Government and the taxpayers’ dollars.

Mr. KUCINICH. Well, I know that, but I am trying to get some

response from you about do you feel you have enough resources to

pursue debarment, or are you not able to do it because you just

can’t get into debarment cases because they are so costly? What is

your philosophy on that? Would you rather not get into debarment

issues and just use administrative discipline?

Ms. DUKE. No, that is not true. In terms of—I think what Mr.

Skinner said earlier about the startup of the Department of Homeland Security and the shortage of the resources did contribute significantly. It is very time-consuming to record past performance

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and to do the full complement of contract administration, and I

think we are working toward two things: one is getting resources

on the management side. I think the second area we are looking

for is focusing not just on speed, but doing business well, as Mr.

Skinner said.

Chairman TOWNS. The gentleman’s time has expired.

Mr. KUCINICH. Mr. Chairman, my time has expired, but I would

ask the Chair this, that if the Chair would join me in a request

for information about the status of Blackwater and/or Xe with respect to Homeland Security.

Chairman TOWNS. Without objection, I would be delighted to do

so.

I now yield 5 minutes to the gentlewoman from California, Congresswoman Speier.

Ms. SPEIER. Thank you, Mr. Chairman. And I want to applaud

you for holding this hearing today. I think if this committee dedicated the next 6 months to really improving the response by these

agencies, we would have done a great service to the American people.

I believe that this is simply scandalous. To think that a company

that actually pled guilty in 2005, pled guilty in 2005, continued to

receive payments by the Federal Government for 2 additional years

before any action was taken to debar it is absolutely unacceptable.

There is no way that you can justify that under any set of circumstances.

Now, I believe that part of the problem is that the Inspector Generals don’t have any teeth. I think, based on what I have heard

today, you make recommendations and the various agencies can

take you up on those recommendations or not take you up on those

recommendations. For instance, Mr. Luten said that he agreed

with most of the recommendations by the Inspector General, but

not all of them.

So I have a question for you, Mr. Gambatesa. What recommendations did they not embrace and do you think that those recommendations should be embraced and, if so, what should we do

about it?

Mr. GAMBATESA. Thank you. Obviously, we think all the recommendations should be embraced or we wouldn’t have made

them. The three that they hadn’t reached management decision on

so far had to do with the restructuring of the office, establishing

a permanent office and consultation with the oversight board. To

say that the IGs don’t have teeth, our teeth, I think, is our ability

to press the agency and forward our reports to the Congress if the

agencies don’t respond to final action within the allotted period of

time that is required by the Inspector General Act. So I think in

that way we do. We also have the ability to elevate recommendations to the head of the agency if they are not responded to.

Ms. SPEIER. Well, with all due respect, this is a very busy place,

and we will hold a hearing and we will kind of flush it out, and

we will put a spotlight on it, and then we go about working on any

number of other issues; and another year passes by and then

maybe there is another hearing.

So I really believe that this committee needs to, one, introduce

a bill that requires that each of these agencies have an office of

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compliance, debarment, and suspension so that they are solely focused on looking at these contractors to see if in fact they have

complied with the law, complied with their contracts. I don’t think

that is going to happen otherwise.

There will be some effort made by some of these agencies to do

a little bit, but unless you have someone dedicated to this function,

it is not going to take place. And based on your comments, it

sounds like USAID is not all that interested in complying with that

recommendation.

And to you, Mr. Luten, I was just in Pakistan and I met with

one of your representatives there who was bemoaning the fact that

one of the contractors, a U.S. contractor, who had a large sum of

money was expected to build X number of schools and—I think the

number was 30, but don’t hold me to it—and, in fact, over the

course of the contract they had only built 5. Now, I don’t know how

you rank that. Is that nonperformance or is that circumstances beyond their control? But, to me, that is nonperformance. That person should no longer be a contractor with the United States of

America.

If this excluded party system is not even observed by the agencies, then it is not working, and we have to come up with a better

system; and that is why I think it is going to require Congress to

do some of the heavy lifting here in order to have some accountability, because the Inspector Generals can recommend, but you can

choose not to take them up on their recommendations, and you

might get a slap on the hand here, but that may be the end of it.

So to you, Mr. Luten, if you would just comment on whether or not

you think building 5 schools instead of 30 schools has met the performance requirements.

Mr. LUTEN. I would like to comment on the comments earlier to

Mr. Gambatesa. We accepted all of the recommendations that they

have provided. What the issue was that at the time the report was

issued, we immediately agreed to take nine recommendations and

needed to go make some management decisions on how to implement the remaining three. So we have completed action on six and

the action on the remaining six are in process.

Ms. SPEIER. Well, let me interrupt you. In your testimony you

said, as such, management agreed with the majority of OIG’s 12

recommendations offered through the audit process. That is what

you said in your testimony, your sworn testimony this morning.

Mr. LUTEN. OK, then that is in error. That was the written testimony.

Ms. SPEIER. That is what you also said.

Mr. LUTEN. I did? OK. We are acting on all of them and six have

been completed. We have taken the steps to establish a separate

unit to focus specifically on contractor and grantee compliance and

oversight that will improve our work with the EPLS system, as

well as engage better with the interagency to gather more information and do compliance oversight better, and we take this very seriously.

On Pakistan, I would have to go and get specific information.

The security conditions in Pakistan and Afghanistan are big factors

that may be an issue in that matter; I just don’t know the details

of that. But 5 out of 30 does sound——

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Chairman TOWNS. The gentlewoman’s time has expired.

Mr. LUTEN [continuing]. Does sound like it is clearly something

that needs to be looked at from a performance perspective.

Chairman TOWNS. I yield now 5 minutes to the gentleman from

California, Congressman Bilbray.

Mr. BILBRAY. Thank you, Mr. Chairman.

Lady, gentlemen, let me just say, as a former mayor and chairman of a county of over a million, I take a look at this and I just

can’t fathom how we would ever allow this in local government. I

mean, this is almost like the government version of too big to fail

is too big to be effective or even decent. I mean, some of this stuff

at a local level would just be nailed down really quick. There is not

a city manager that would survive with this kind of lack of response to a problem. There is not a building inspector or a public

works director that would survive 6 months with this kind of thing.

And I hate to say it, it sort of really reinforces the argument of a

lot of people in this town that Washington spending money has a

built-in inefficiency that we should avoid like the plague.

Now, Ms. Duke, when we got into Katrina—and I am going to

let you work on this because I am going to shift over to the gentleman next to you. But I looked at Katrina. I was down there. My

wife’s family is from New Orleans and we have a place in Mississippi, and I saw the way that was handled. How many people

that were in that fiasco of abuse and money switching and everything else, how many of them have been debarred and restricted

from access? I mean, I understand when you work with Louisiana

you have a State half under indictment and half under water, but

this thing is the Federal Government’s responsibility, not Louisiana’s responsibility.

Ms. DUKE. The DOJ Procurement Fraud Task Force has indicted

and convicted several contractors and individuals. FEMA has not

debarred anyone, to my knowledge; it has been handled through

the DOJ Procurement Fraud Task Force to this point.

Mr. BILBRAY. So, in other words, you have to be convicted before

FEMA is going to restrict your access to any more contracts?

Ms. DUKE. You do not have to be convicted. I mean, there has

been a conservatism that——

Mr. BILBRAY. Well, who has been restricted who hasn’t been convicted by FEMA?

Ms. DUKE. No one to this point.

Mr. BILBRAY. OK. That is what I mean. You may say that, but

in results——

USAID, one of the untold stories, in my opinion, after going to

Afghanistan and talking with people, is one of the great untold stories. Everybody has talked about the for-profit abuses in Iraq

under the Bush administration. No one seems to be talking about

the so-called non-profits and their abuses and their corruption in

the system in Afghanistan during the Bush administration.

And I think if there is one place that this committee should be

able to find bipartisan effort is to find out why have we totally ignored the abuses of the non-profits in Afghanistan at a time when

we all are very aware of the for-profit violations in Iraq?

Do you have any comments about the handling of those grants

and those programs in Afghanistan with the non-profits?

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Mr. LUTEN. They are subject to the same basic set of rules and

approaches. I would have to get back to you separately on what actions have been taken with respect to non-profits. Some of our suspension and debarment actions are with respect to non-profits, but

I don’t have the data specifically for Afghanistan. We also work

with organizations on compliance agreements. Sometimes compliance agreements are done in conjunction with investigations by the

Department of Justice or actions by the Department of Justice and

entered into in settlement cases; in some cases they are done apart

from a legal setting.

Mr. BILBRAY. OK. And let me just take—all of us should be responsible for this, but wouldn’t you admit that Congress, the oversight agencies, the media have not given the same attention to corruption or abuses in the non-profits, especially Afghanistan, that

has been focused on the for-profits in other countries? Wouldn’t you

agree that, culturally, at least the major appearance is that the

same hard standard is not being applied to the non-profits as it has

been, at least from the media and the attention by Congress, if not

by the agencies themselves, that we have done with the for-profits?

Mr. LUTEN. I am doing sort of a quick mental scan of news articles and so on, and there may be that impression, but that is not

our approach with respect to—we should be treating them the

same. It is Federal dollars——

Mr. ISSA. Would the gentleman yield?

Mr. BILBRAY. Yes, I would yield.

Mr. ISSA. Just a quick followup. Ms. Duke, if I understood you

correctly, as of 2007, 768 people were convicted, far more were

charged, and yet, related to Katrina, FEMA has zero debarments.

Ms. DUKE. That is correct, Mr. Issa.

Mr. ISSA. OK. Then on behalf of the committee, why wouldn’t we

author a bill that created immediate and automatic debarment at

the time of a conviction? You have discretion at the time of an accusation; you have discretion at the time of the indictment.

But why would the chairman and I not author a bill that would

simply create automatic debarment so that your failure of your

agency years later, and I have 2007, but you have made it clear

that you haven’t done anything as of 2010. This is not 400 days,

this is zero response. Do you have any answer for why the chairman and I shouldn’t simply author a bill and take it out of your

hands at least as to criminal convictions?

Ms. DUKE. It has to be dealt with either way. It is something we

will deal with. Such a bill would not be—no, I can’t say anything

about why——

Mr. ISSA. You wouldn’t oppose it, since obviously FEMA hasn’t

done anything about these 768 people that have been convicted?

Ms. DUKE. No, I would not oppose it at this point.

Mr. BILBRAY. To reclaim my time, it would sure be convenient

not to have our contracts being administered out of a Federal penitentiary cell, right?

Chairman TOWNS. The gentleman’s time has expired.

I now yield 5 minutes to the gentlewoman from California.

Ms. WATSON. Thank you so much, Mr. Chairman. Since I am just

now getting here, I don’t know if some of these questions have been

asked, but I will go over them too.

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Since 1975, USAID has experienced a gradual downsizing of its

staff. For instance, in 1990, USAID had nearly 3,500 people administering $5 billion a year in aid, but as of 2009 there were only

2,200 people overseeing more than $8 billion annually. And during

the Secretary’s confirmation hearings, Secretary of State Hillary

Clinton, she highlighted this issue, stating that USAID has half

the staff it used to have, while foreign aid and reconstruction efforts have been increasingly privatized.

How would you say the decrease in staff has affected USAID’s

ability to optimally implement Federal acquisition regulations? And

let me ask Mr. Gambatesa if you can respond.

Mr. GAMBATESA. Yes, thank you. In other audits also that we

have performed over the last few years, we found that there was

a lack of staffing in the contracting area and we have made recommendations to the agency for that improvement, and they have

taken action to hire contracting officers and contracting officer

technical representatives and others to oversee contracting problems. There was also a problem with training of contracting officers, we found in a previous audit report—not this one with suspension and debarment—and they have taken action on a number

of those issues.

I won’t speak for Mr. Luten, but in this specific audit of suspension and debarment, it wasn’t specifically brought out that the

problem was lack of staffing; however, the way the office is structured with a small number of individuals doing a number of different jobs, one would have to say that they need more people to

do the job more effectively. Even though we didn’t really look at

that specifically in the audit, one could draw that conclusion.

Ms. WATSON. Mr. Luten.

Mr. LUTEN. Yes. We have, in recent years, received the funding

and focused our attention on hiring additional staff, particularly

foreign service officers. This will include a substantial number of

foreign service officers in what you might call the stewardship

backstops, contracting officers, financial controllers, administrative

managers, as well as in technical specialties, because they are involved in procurement and grant making as well. This is going to

put us in a better position to manage the process of planning and

executing programs, engage more directly, provide better oversight.

There are a number of components to oversight in Federal procurement and grant making. Suspension and debarment is part of

it, but the rest of it is really important too, and we are putting ourselves in a better position to manage the increase in program resources that have been provided in recent years. So it is something

that has received attention in the last 3 fiscal years and we are

acting on that to build the capacity back toward where it should

be.

Ms. WATSON. The developing work that USAID undertakes in Afghanistan is critical to this administration’s mission in the region,

and the military alone cannot achieve long-term stability for the

Afghan people. One important USAID program is the Accelerating

Sustainable Agriculture Program to combat the cultivation of

opium poppies and to provide long-term economic opportunities to

Afghans. The program was started in November 2006 under a $102

million contract for Chemonics International. Unfortunately, a

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2008 audit reported by USAID’s Inspector General revealed that,

2 years into the program’s implementation, the contractor could not

prove that it had fulfilled any of the program’s eight project goals.

Mr. Luten, again, after the release of the IG’s audit report, did

USAID increase their oversight of the program and is there documented proof that this contractor has since improved their performance? And has Chemonics received any additional USAID contracts?

Mr. LUTEN. If you would permit, I would like to respond separately on the Chemonics contract. I will comment that the challenges in Afghanistan are significant, particularly security-related.

But if it is acceptable, we will provide you a separate response on

that contract in Afghanistan and your questions.

Ms. WATSON. I would like to have it in writing.

Let me ask Mr. Gambatesa has the Office of the Inspector General continued to review USAID’s Accelerating Sustainable Agriculture Program and their contractor?

Mr. GAMBATESA. Yes, we continue to do a number of oversight

activities in Afghanistan. I would have to get back to you with the

specifics on that program after the 2008 audit. I know we have

done some other work, but I don’t have it right here with me, but

I certainly can get that to you.

Ms. WATSON. Do you think——

Chairman TOWNS. The gentlewoman’s time has expired. Would

you like an additional minute?

Ms. WATSON. Just 30 seconds. I just wanted to——

Chairman TOWNS. All right. I would be delighted to yield an additional 30 seconds.

Ms. WATSON. OK.

Do you believe that USAID has the resources it needs to adequately monitor this contractor’s performance and the grant recipients? That was the basis of my original question.

Mr. GAMBATESA. In most of our audits we will look at reasons

why something isn’t working satisfactorily and, as I said earlier, oftentimes we come up with lack of oversight by contracting officers

or those responsible. There could be a lot of reasons for this, but

to say they do or don’t at this point is very difficult to say.

We have to attribute these things to something, and it is easy

to say they don’t have enough people to do it, but is that always

the reason? Sometimes it is lack of training; sometimes it is lack

of oversight of the contractors or grantees; or sometimes it is lack

of oversight by the contractors or grantees of their subs. And without getting into a specific audit, it is difficult to generally say what

the problem is, but those problems all exist in many of the audits

that we have done in Afghanistan.

Chairman TOWNS. Thank you very much.

Before we close, the ranking member asked a question or raised

an issue that I think I want to sort of explore a little further. He

asked what do we need to do from a congressional standpoint; do

you need additional tools in order to make this work? And the reason I want to stay with this is that I remember a couple of years

ago a gentleman at the airport, who indicated that he had been in

Washington working in Government for 40 years—he went back to

the Carter administration—he went on to tell me, in terms of how

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long he had been involved, and he said that there is something that

we do not look at when we come to these kinds of settings and talk

about waste and fraud and all of that. He said that some contracts

require the contractor purchasing special kinds of things. He says

maybe it is a kitchen, he used the example.

And he said you buy all this equipment for this particular company, which is paid for out of government dollars in many instances, and then they do not perform. And rather than go to somebody else, the fact that you have invested all this money in this

particular item, you say, well, we will ignore their behavior because

it will cost us too much to move to somebody else at this particular

time.

Is this an issue? Let me go right down the line. Is this a problem

in any way? Does this kind of thinking go into it as a reason why

sometimes there is not movement?

Unidentified SPEAKER. The cost-benefit of debarment.

Chairman TOWNS. Yes, the cost-benefit of debarment. That is

what we are really talking about.

Ms. DUKE. There are provisions that if you suspend or debar a

contractor, that you can re-procure and actually charge those costs

back. So if it is happening, it should not be happening that way

because we do have the ability to both deal with that contractor

terminate, that contract for default and recoup the taxpayers’ dollars in an effective way.

Chairman TOWNS. But the fact that it is a long process, does that

come into play as to why you don’t do certain—I am trying to get

a picture here why certain things are not happening.

Ms. DUKE. Mr. Chairman, I will have to say that I think that the

acquisition work force Federal-wide is under-resourced and there

was an indication or a question earlier that I didn’t get a chance

to answer—is it incompetence? I believe we have an extremely competent acquisition work force in DHS.

There is a shortage of people. In the 1980’s and 1990’s we cut

the acquisition work force and increased contracting dollars, and

we are suffering from that. The Department and our appropriators

have helped us to start to recover, but I think we and the Federal

Government are digging themselves out of a hole in that whole

area and not just on suspension and debarment, but about effectively managing contractor performance in general.

Chairman TOWNS. Anyone?

Mr. WOODS. Mr. Chairman, as you said, suspension and debarment is the last line of defense. I think within the Department of

Transportation, we are actively trying to keep fraud from happening before you get to this. From my information, for example, we

only had 24 suspension or debarments during the course of 2008,

but that doesn’t mean that we are not focused on stopping fraud

before people enter into contracts.

So 24 of the number of contracting actions that we are involved

in is a relatively small part of our activity. What we need to do is

focus more attention on that last line of defense in addition to all

the steps that we have been taking up to that point.

And to answer your question, I think that your involvement in

this process, along with the effective oversight of our Inspector

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Generals, has been very helpful in helping us to sustain management oversight of the program.

Chairman TOWNS. Mr. Luten.

Mr. LUTEN. Sorry, out of order here. I don’t think that the concerns about taking action and then needing to reprogram or re-procure are behind the delays or behind the weaknesses in the approach to suspension or debarment; I think it has been a lack of

focus. I think it has been a lack of resources devoted specifically

to suspension and debarment, and that is why we are in the process of refocusing and resourcing the effort.

I do absolutely agree with Ms. Duke’s comments that the Federal

procurement work force is solid, but the volume of dollars that

have gone through Federal contracts and grants in recent years

has escalated dramatically, and the infrastructure, the human infrastructure and the system’s infrastructure to keep up with that

has not caught up yet. So that is the overarching issue. Suspension

and debarment is a portion of that and, specific to this hearing, we

are going to do our part to focus our efforts on better suspension

and debarment activities.

Chairman TOWNS. Well, let me thank you for your testimony this

morning and to say to you that we really need to do better, and

we are willing to work with you to do better. If there is something

that we need to do, I know a couple Members mentioned possible

legislation, and I am not there yet, but the point of the matter is

that we have to make certain that tax dollars are not wasted. We

have an obligation and responsibility to make certain that the

money goes to do the kinds of things that we are saying they are

going to do.

So I want to thank you again for your testimony and let you

know that we will be following up on this, because we see it as

being very, very serious; and the fact that not too much is happening. So when you have a situation where not too much is happening, people continue to do whatever it is, and without any corrections. So the point is that we need your help in that regard and,

of course, the inspectors, when they make recommendations, I

think we should take them very, very seriously.

So thank you again for your testimony.

The committee will adjourn for 2 minutes.

[Whereupon, at 11:53 a.m., the committee proceeded to other

business.]

[Additional information submitted for the hearing record follows:]

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