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PROTECTING TAXPAYER DOLLARS: ARE FEDERAL

AGENCIES MAKING FULL USE OF SUSPENSION

AND DEBARMENT SANCTIONS?

HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION

POLICY, INTERGOVERNMENTAL RELATIONS AND

PROCUREMENT REFORM

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

OCTOBER 6, 2011

Serial No. 112–91

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

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, INTERGOVERNMENTAL

RELATIONS AND PROCUREMENT REFORM

JAMES LANKFORD, Oklahoma, Chairman

MIKE KELLY, Pennsylvania, Vice Chairman

JASON CHAFFETZ, Utah

TIM WALBERG, Michigan

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

BLAKE FARENTHOLD, Texas

GERALD E. CONNOLLY, Virginia, Ranking

Minority Member

CHRISTOPHER S. MURPHY, Connecticut

STEPHEN F. LYNCH, Massachusetts

JACKIE SPEIER, California
(III)

C O N T E N T S

Page

Hearing held on October 6, 2011 ............................................................................ 1

Statement of:

Shaw, Steven A., Deputy General Counsel for Contractor Responsibility,

Department of the Air Force; Richard A. Pelletier, Suspension and

Debarment Official, U.S. Environmental Protection Agency; Nick

Nayak, Ph.D., Chief Procurement Officer, U.S. Department of Homeland Security; and Nancy J. Gunderson, Deputy Assistant Secretary,

Office of Grants and Acquisition Policy and Accountability, U.S. Department of Health and Human Services ................................................... 31

Gunderson, Nancy J. ................................................................................. 49

Nayak, Nick ............................................................................................... 43

Pelletier, Richard A. .................................................................................. 38

Shaw, Steven A. ........................................................................................ 31

Woods, William T., Director, Acquisition and Sourcing Management, Government Accountability Office ..................................................................... 7

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

Gunderson, Nancy J., Deputy Assistant Secretary, Office of Grants and

Acquisition Policy and Accountability, U.S. Department of Health and

Human Services, prepared statement of ..................................................... 51

Lankford, Hon. James, a Representative in Congress from the State

of Oklahoma, prepared statement of ........................................................... 4

Nayak, Nick, Ph.D., Chief Procurement Officer, U.S. Department of

Homeland Security, prepared statement of ................................................ 44

Pelletier, Richard A., Suspension and Debarment Official, U.S. Environmental Protection Agency, prepared statement of ..................................... 40

Shaw, Steven A., Deputy General Counsel for Contractor Responsibility,

Department of the Air Force, prepared statement of ................................ 33

Woods, William T., Director, Acquisition and Sourcing Management, Government Accountability Office:

Cover of GAO report entitled, ‘‘Suspension and Debarment, Some

Agency Programs Need Greater Attention, and Governmentwide

Oversight Could be Improved’’ .............................................................. 9

Prepared statement of ............................................................................... 13

(1)

PROTECTING TAXPAYER DOLLARS: ARE FEDERAL AGENCIES MAKING FULL USE OF

SUSPENSION AND DEBARMENT SANCTIONS?

THURSDAY, OCTOBER 6, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY,

INTERGOVERNMENTAL RELATIONS AND PROCUREMENT

REFORM,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:30 a.m., in room

2247, Rayburn House Office Building, Hon. James Lankford (chairman of the subcommittee) presiding.

Present: Representatives Lankford, Connolly, Murphy, Speier,

Kelly, Chaffetz, Walberg, Labrador.

Staff present: Ali Ahmad, communications advisor; Richard A.

Beutel, senior counsel; Will L. Boyington, staff assistant; Molly

Boyl, parliamentarian; Ashley H. Callen, counsel; Linda Good, chief

clerk; Jaron Bourke, minority director of administration; Paul

Kincaid, minority press secretary; Adam Koshkin, minority staff

assistant; Mark Stephenson, minority senior policy advisor/legislative director; Cecelia Thomas, minority counsel.

Mr. LANKFORD. We are going to wait just a couple of moments.

Our ranking member is on his way over. So we won’t be starting

immediately, but we will be starting promptly.

[Pause.]

Mr. LANKFORD. I want to give you a quick update, as well. We

have votes that have been called, of course, about 10:15 today. So

we are going to get started and go through this panel, opening

statements and such, and see how far we can get before they call

the votes, then we will make that judgment call as we go. Just

wanted to give everyone a quick scheduling update.

With that, the committee will come to order. The Oversight and

Government Reform Committee exists to secure two fundamental

principles. First, Americans have a right to know that the money

that Washington takes from them is well spent. And second, Americans deserve an efficient, effective government that works for

them.

Our duty on the Oversight and Government Reform Committee

is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers do have the

right to know what they get from their government. We will work

tirelessly in partnership with citizen watchdogs to deliver the facts
2

to the American people, bring genuine reform to Federal bureaucracy. This is the mission of the Oversight and Government Reform

Committee.

I would like to thank all the witnesses on both panels for participating in today’s hearing. I hope this is an informative hearing

where witnesses can share best practices and form relationships

going forward that will encourage our mutual due diligence.

The Federal Government spends more than $500 billion on contracts each year. Most contractors are patriots who fulfill their contractual obligations to the Federal Government in spite of the

mountains of Federal forms and frustrations. They provide indispensable products, they deliver quality services to Federal agencies. But unfortunately, this committee has examined instances in

the past in which certain contractors tried to defraud the Government, where they demonstrate a pattern of inability to deliver on

their contractual commitments.

One of the tools that agencies have to address this unethical,

fraudulent or chronically poor-performing contractors is the remedy

of suspension and debarment. Today we will hear testimony that

while some agencies are effective in using this administrative remedy to weed out bad actors who waste taxpayer dollars, other agencies are simply not fulfilling their responsibility to suspend or

debar.

This hearing will explore the following question: Why is it that

some agencies are able to uncover problems with their contractors

and take dozens of suspension and debarment actions each year,

while other agencies with similar or larger contract spending initiative virtually no action? While I hope it is because some agencies

have high quality contractors and they have not experienced any

contracting issues, it is unlikely that there are no poor-performing

or dishonest contractors working for the agencies that have not

suspended or debarred any contractors. Common sense would seem

to suggest these agencies are not looking for and thus not uncovering fraud on the part of their contractors.

In some cases, though, these agencies may simply accept poor

performance or staff may not complete the followup paperwork or

help others avoid the same bad contractors in the future.

GAO’s work bears out our suspicion that agencies that focus on

using the tool of suspension and debarment and make it a priority

are successful at rooting out future waste and fraud by excluding

the contractor from future business with the government or forcing

the contractor to take needed corrective measures. Clearly, it takes

a concerted effort to identify candidates for suspension and debarment, develop the necessary factual record and at the same time,

provide the required due process safeguards for contractors.

The alternative, however, is not an option. Agencies that put in

the necessary work to implement a robust suspension and debarment program can expect to see returns on their investment in

terms of programmatic fraud or waste avoided. In addition, because

the governmentwide exclusion that can result from suspension or

debarment actions, having an effective suspension and debarment

program also serves to strengthen the integrity of the overall contracting system. It sends a clear message that dishonest contrac-
3

tors or shoddy work will not be accepted, which protects taxpayer

dollars from flowing to sub-par contractors.

This committee is a watchdog for the taxpayers’ money. But we

also think it is reasonable to expect each agency to be diligent, ferreting out bad actors they know in the contracting world so that

we can stop contracting fraud. The American people deserve our attention.

I would also like to thank Chairman Towns, who held hearings

on this same subject in 2009 and in 2010. He has put sunlight on

this process, and we will continue to do that until it is fixed.

I look forward to hearing the testimony today about how we can

keep unethical contractors out of the Federal system.

And now I would like to recognize the distinguished ranking

member, Mr. Connolly, for his opening statement.

[The prepared statement of Hon. James Lankford follows:]
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Mr. CONNOLLY. Thank you, Mr. Chairman. And thank you for

calling this important hearing.

The GAO report in the context of the final report of the Commission on Wartime Contracting, which we heard the other day,

should be a deafening alarm bell about wasteful spending that

could be curbed through the use of functional suspension and disbarment programs. The National Security Subcommittee held a

hearing last month examining potentially corrupt Department of

Defense contracting in Afghanistan. Earlier this week, the Commission on Wartime Contracting told our committee that an estimated $31 billion to $60 billion has been lost to fraud or waste

through contracting in Iraq and Afghanistan alone.

What is most extraordinary about this figure is not how large it

is, but that the Commission told us that it isn’t even comprehensive. The Federal Government lacks not only the tools to manage

overseas DOD contracts, but even the mechanisms to account fully

for the money we lose.

If there is one lesson we could learn from this experience, it

should be that rushing into foreign wars unprepared can be incomprehensively expensive. The GAO report we are considering today

is just as troubling as the Commission on Wartime Contracting report. GAO reassures us that the Department of Defense OIG recently reported that the Services and DLA had an effective suspension and debarment process, apparently based on the fact that

DOD issues more suspensions and debarments than any other Federal agency. No wonder. Between 2006 and 2010, DOD spent $1,776 billion on contracting. That is to say, $1.7 trillion, for those of us who would

otherwise lose count of the zeroes. It is approximately 15,000 percent more money than any other agency spent on contracts, so it

should follow that DOD would also issue more suspensions and

debarments.

While it is very disturbing that some agencies have issued zero

suspensions and debarments, unless we are to assume that their

contracts are pristine, given the volume of DOD contracts and relative paucity of suspensions and debarments relative to the

amounts, we must be vigilant in reducing waste in that department.

Rather than looking only at the total number of suspensions and

debarments for agencies, maybe we should consider the numbers of

suspensions and debarments per contracting dollar. For each $1

billion DOD has spent on contracts, it issued an average of 0.9 suspensions and debarments. By contrast, the Environmental Protection Agency, which has a witness in today’s hearing, has issued

42.6 suspensions or debarments per billion dollars contracting dollar spent. By this measure, EPA would seem to be far more attentive to protecting taxpayer dollars, frankly, than DOD.

Of course, the number of suspensions and debarments per contracting dollar is only informative if we know that there is some

fraud or waste that the suspensions or debarments should address.

The purpose of suspension or debarment is to protect the taxpayers, not to enact punitive measures against contractors, most of

whom are patriotic Americans trying to serve the public as you indicated, Mr. Chairman.
7

In the case of DOD, we know from the recent commission report,

sadly, that such fraud and waste is so rampant in Iraq and Afghanistan as to be virtually unquantifiable. The United States has spent

in excess of $200 billion in contingency contracting to support the

wars in Iraq and Afghanistan over the last decade. According to

the final report of the Commission on Wartime Contracting, up to

$60 billion of those taxpayer dollars were lost to waste, fraud and

abuse. It is imperative that we improve suspension and debarment

procedures for DOD so that we don’t repeat the waste of money

identified by the Commission on Wartime Contracting.

I greatly appreciate the willingness of the representative from

GAO, DOD, HHS, DHS and EPA to appear before us today to discuss this important topic. It is clear there is wide variation in the

methodology used to determine suspension and debarment. And

replicating best practices to reduce waste must be our urgent task

so that those agencies have more uniformity and predictability in

this process.

I thank you again, Mr. Chairman.

Mr. LANKFORD. Thank you, Mr. Connolly.

Members may have 7 days to submit opening statements and extraneous material for the record.

We will now welcome our first panel. Mr. William T. Woods is

the Director of Government Accountability Office in the Acquisition

and Sourcing Management Team. Pursuant to committee rules, all

witnesses will be sworn in before they testify. Mr. Woods, would

you please rise and raise your right hand?

[Witness sworn.]

Mr. LANKFORD. Thank you. Let the record reflect the witness has

answered in the affirmative. You may be seated.

In order to allow time for discussion, and obviously we have already discussed this as well, the votes that are being called at

some point, I would like you to limit your testimony, you are the

only member of this particular panel, so 5 or 10 minutes, we will

give you a little bit of flexibility on the time there. But we would

like to be able to pummel you with random questions as well, once

you get through your testimony.

So in order to be able to receive your testimony, obviously your

written statement will be made part of the record as well. You are

recognized.

STATEMENT OF WILLIAM T. WOODS, DIRECTOR, ACQUISITION

AND SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

Mr. WOODS. Thank you, Mr. Chairman, Ranking Member

Connolly. Thank you so much for inviting the Government Accountability Office to be here this morning to address what you both

have recognized is an extremely important topic in the area of government contracting.

We need a robust suspension and debarment process in order to

ensure that the Federal Government does business only with responsible contractors, and that we avoid doing business with dishonest contractors, those that commit illegal acts and those that

are irresponsible and unethical.
8

I am very pleased to be able to release our report this morning,

which we did for this committee as well as the Senate Homeland

Security and Governmental Affairs Committee, addressing the suspension and debarment issue on a governmentwide basis. That report is GAO–11–739, and with the permission of the committee, I

would like to have that inserted into the record.

Mr. LANKFORD. Without objection.

[The information referred to follows:]
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Mr. WOODS. Thank you, Mr. Chairman.

My statement today will cover the work that we did to prepare

that report, the specific objectives that this committee asked us to

address, our findings as a result of that work and our recommendations.

But first, I would like to provide just a very, very brief overview

of the process. First of all, in terms of definitions, a suspension,

both suspensions and debarments are exclusions from the Federal

contracting process. Suspensions are a temporary remedy, generally lasting about 12 months. There is a provision for extending

that up to 18 months if the Attorney General so requests.

Debarments, on the other hand, are for a fixed period of time,

generally 3 years, although those can be extended as well.

Suspensions and debarments are covered in some detail in the

Federal Acquisition Regulation. There is also a parallel process for

grants, assistance, loans, loan guarantees and that sort of thing

which are covered under the Non-Procurement Common Rule

[NCR]. But both procedures are somewhat similar and they are reciprocal. In other words, if an entity is debarred under the Federal

Acquisition Procedures Rules, that entity is considered to be

debarred as well under the Non-Procurement Common Rule and

vice versa.

Our first objective was to determine what entities are listed on

the Excluded Parties List System. The Excluded Parties List is a

list maintained by the General Services Administration, an electronic online system that contains all of the entities that have been

subject to suspension, proposed for debarment or debarred. That,

as I said, is maintained by the GSA. The individual agencies that

take the actions are responsible for entering data, names, etc., into

that EPLS system.

And our first objective is really to understand what is in that

system. Frankly, I was somewhat surprised at the numbers. Because as indicated in my testimony, Figure 1 on page 4, the vast

majority of entities that are listed are listed as a result of statutory

exclusions. For example, the Department of Health and Human

Services might debar or exclude a contractor or an entity for health

care fraud. Export control violations are another matter where

statutes specifically provide that if a violation is found through a

judicial process or in some cases an administrative process, the

Congress has decided that those entities shall be listed on that Excluded Parties List System.

Now, they may have had nothing to do with Federal contracts.

But the consequence of listing on that system is that they are precluded from obtaining a Federal contract.

When we looked at that, we found that about 84 percent of the

cases in the Excluded Parties List System were as a result of these

statutory debarments. The remaining 16 percent were either actions taken under the Federal Acquisition Regulation, or actions

taken under the Non-Procurement Common Rule.

Our second objective was to look behind those numbers and to

determine which agencies are active and which agencies are relatively inactive in the area of suspension and debarments. At the

request of this committee, we focused just on the procurement-related actions. So on that 16 percent or so that are listed on the Ex-
11

cluded Parties List System as a result of either Non-Procurement

Common Rule actions or actions under the Federal Acquisition

Regulation.

I refer you to Appendix 1 on page 10 of the statement that lists all of the major agencies, those that have done about $2 billion or

more in contracting over the period that we looked at. We looked

back 5 years, from 2006 through 2010. As you have already correctly pointed out, the Department of Defense is far and away the

largest user of the suspension and debarment system.

We wanted to get a snapshot and an idea of what are the variables at play and what are the reasons why some agencies appear

to be quite active in this area and other agencies less active. So we

chose a judgmental sample. We wanted to get a mix of Defense and

civilian agencies. Within Defense, we chose the Navy and Defense

Logistics Agency. We wanted to look at some large agencies. We

looked at Health and Human Services, we looked at the Department of Homeland Security.

Within the Department of Homeland Security, we looked at two

entities, one that appeared to be relatively active in the area, that

was the Immigration and Customs Enforcement Bureau, and one

that appeared to be relatively inactive, that was the Federal Emergency Management Agency. We wanted to get a feel for what are

the factors that really account for the variation in these numbers.

And we found that three factors account for that variation.

First, the agencies with the active programs have a dedicated

program with dedicated staff. It happened that the staff on all of

the four agencies that we looked at with active programs had dedicated full-time staff.

The second factor was that each of the four agencies with the active programs, and for reference, you may want to refer to Figure

2 on page 5 of my statement, which has a graphic display of what

I am outlining at this point.

But the second factor that we found is that the active agencies

had detailed policies and procedures, not just mirroring what is in

the Federal Acquisition Regulation, but providing additional detail

to their acquisition and non-acquisition personnel on how to deal

with contractors that are poor performers, that have been convicted

of certain transgressions or are simply unethical. But detailed policies and procedures were an important component of an active

process.

And the third component was an active referral process. What

that means is that agencies went out of their way to train people

on how to take advantage of the suspension and debarment process. They had active inspectors general who routinely made referrals to the suspension and debarment official. They had contracting

officers who would also make a practice of making referrals to the

suspension and debarment official.

So those are the three factors that we found at the four agencies

with the most active programs. Conversely, we found at six agencies that had less active programs, we found an absence of those

three factors.

Our third objective, and again at the request of this committee,

was to take a look at the interagency coordination process. For

that, we looked first at the committee that is called the Interagency
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Suspension and Debarment Committee. This is a committee that

was created by executive order in the mid-1980’s. Recently, it received statutory recognition and statutory direction in the 2009 Defense Authorization Act, where Congress outlined specific responsibilities for this interagency committee. So we wanted to take a

look at how that committee was functioning, and what are the

challenges that it was facing.

Briefly stated, the main function of that committee is to serve as

the lead agency determination forum. When an entity may be running afoul of the law, may be suspected of some conduct that might

lead to a suspension or debarment, the first issue on the table is

which agency ought to take responsibility to pursue that. And that

question gets resolved at this Interagency Suspension and Debarment Committee. They often act very quickly, through an email

process or telephone, to quickly decide on which agency needs to

step forward and take responsibility for pursuing either a suspension or debarment against the entity.

But we found that this interagency committee faced challenges.

First major challenge was resources. They have no dedicated personnel. They have no budget. And we found that that raised some

issues for that committee in terms of having to borrow staff from

the members that actually, the chair and vice chair, in particular,

that actually sit on that committee.

The second challenge that they faced was participation. There

are members on the committee from all of the major agencies and

many of the second tier agencies, if you will, that do less activity

in the procurement arena in terms of dollar spending.

But participation in the monthly meetings of that committee is

not what it really should be. There are many agencies that simply

do not participate to the level that one would expect for this important area. And they were challenged, for example, in preparing a

report that the Congress directed in that legislation that I referred

to earlier, Congress directed them to prepare a report on their activities and the activities of their member organizations. And it

took quite a while for them to get the cooperation of all of the agencies in order to prepare and submit that congressionally required

report.

We had a number of recommendations in our report. And just

very briefly, first of all, we wanted for the six agencies that had

the relatively inactive programs, we wanted them to adopt the

practices that we outlined that we found at the agencies that had

an active process. All of the agencies concurred in that recommendation.

Our second set of recommendations was directed to the Office of

Federal Procurement Policy within the Office of Management and

Budget. And that was for the Office of Federal Procurement Policy

to issue a memorandum to all Federal agencies, outlining what it

takes to have an active, robust suspension and debarment program.

Second, we wanted the Office of Federal Procurement Policy to

require and provide guidance to all agencies to cooperate with the

Interagency Suspension and Debarment Committee.

Mr. Chairman, that concludes my prepared statement. I would

be happy to respond to questions the committee may have.

[The prepared statement of Mr. Woods follows:]
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Mr. LANKFORD. Thank you, Mr. Woods. With that, I would recognize myself.

Thank you for your report. It is very thorough. We do appreciate

that, and the details that you put into it from there.

You answered several of my questions that I had initially, and

that was dealing with the factors, both the three consistent factors

that you saw, and then those that were not being effective in suspension and debarment, those three factors being absent as well.

So that is very helpful to know.

When you talk about dedicated staff, how many staff are you

talking about typically in these agencies? Is this 1,000 people? Is

this four people?

Mr. WOODS. It did vary. Sometimes it was only one or two people. Sometimes it was more than 10, less than 20.

Mr. LANKFORD. Okay, so it is a small group from the agency that

has been set aside and specifically tasked full time to that.

Mr. WOODS. It ranged in terms of full time, sir. Some of the

agencies did have full time dedicated staff. But other agencies had

part time staff, or staff who had other responsibilities, but one of

their major responsibilities was to make the suspension and debarment process work.

Mr. LANKFORD. Did you see a shift in effectiveness? Was it basically the size of the program where one agency may be very large,

for instance, the Department of the Navy that you talked about, obviously very large and a lot of contracts there, they would submit

a larger staff, another agency with fewer people, did you see a correlation in that as far as the number of people that were involved?

Mr. WOODS. We did not see a correlation. We did see differences,

and as you pointed out, the Navy had one of the larger staffs, and

many of them were full time. But we did not observe a correlation

between the size of the staff and the effectiveness of the program.

Mr. LANKFORD. Okay, the actual process of suspension and debarment that they have to go through, the paperwork to fill out,

to complete, is there anything in that process that you determined,

this is bulky, this is difficult, this is a disincentive to do suspension

and debarment based on the actual bureaucratic red tape of doing

it? Is there anything you discovered in that?

Mr. WOODS. The process is relatively straightforward. The process is also, in the regulation, it specifically requires that agencies

adopt as informal a process as possible to avoid that kind of red

tape. One of the hallmarks of the system is, the action needs to be

taken quickly, because the whole purpose of suspensions and

debarments is to protect the government’s interest. And often we

need to move very quickly in order to be able to do that.

So the Federal Acquisition Regulation requires that the procedures be streamlined and as informal as possible.

Mr. LANKFORD. Obviously we will be visiting with people as we

go through this from HHS or FEMA and other things that you

have mentioned as well in your report on that. Specific recommendations that you have made as you have made these recommendations, they have been received well by those agencies? Do

you think it was just a matter of they were very busy in other

areas and just didn’t pay attention to the suspension and debar-
25

ment areas? What did you discover from that, and what has the

follow-up been like?

Mr. WOODS. First of all, we were very pleased that all the agencies concurred with the recommendations. What we found during

the course of the review is that even at the agencies that had the

less active programs, that steps were being taken at each of the

agencies to get serious about the suspension and debarment process. And there is a description in the report of several agencies

with specific steps that those agencies are taking to do that.

Mr. LANKFORD. Let me shift gears on you a little bit. The statutory exclusions, I know that was not a part of your total research

on that. How do you feel like that is being applied and who puts

that on the list? So when it is not a bad actor in the sense that

it is a statutory exclusion for whatever reason, how are they getting on that list and who is managing getting them off of that list?

Mr. WOODS. For example, let’s take health care fraud. That

would fall within the bailiwick of Health and Human Services. So

that agency would be responsible for putting entities that have run

afoul of health care provisions, be it payment provisions or outright

health care fraud, they would be responsible for putting those entities on the list.

Mr. LANKFORD. So they are getting them on there. Who is responsible for getting them off? If they have been cleared, let’s say

it has been 5 years, is it an automatic removal on that? Or for

those statutory areas, are they lifetime?

Mr. WOODS. Very often the statute will provide for a specific period of time, be it years, or whatever. When that period has expired, those entities should no longer be listed.

Mr. LANKFORD. But that is automatically being pulled? The agency is not having to pursue to go back and say, this needs to be

pulled now, it has now been 3 years?

Mr. WOODS. I believe so. But you may want to ask the second

panel about that.

Mr. LANKFORD. I want to be able to make sure, obviously, that

people that have been debarred for a period of time, that is actually

pulled off so they can be redeemed, I guess, at the end of it.

Let’s talk real quickly about grants as well. You mentioned obviously grants and the contracting world being together, and this reciprocal list on it. Just in your overview and looking at it, is that

a good thing, to be able to have grants and contractors together on

this reciprocal list? And if so, are agencies effective on getting to

this list? This is a bad actor in the grant world, so that people in

the contracting world can also know that as well.

Mr. WOODS. We do not have any insight into the grant process.

Because our review was just focused on contracts. But the reciprocal nature is one that the Congress decided in the mid-1990’s

ought to be part of the system. We didn’t come across any reason

to think that was an unwise decision, either then or now.

Mr. LANKFORD. Thank you, Mr. Woods.

With that, I yield to Mr. Connolly.

Mr. CONNOLLY. Thank you, Mr. Chairman, and welcome, Mr.

Woods.

By the way, where are you from?
26

Mr. WOODS. I am from the Boston area originally. Is my accent

giving me away?

Mr. CONNOLLY. A little bit. Fully rounded vowels.

Mr. WOODS. I wish Mr. Lynch were here. [Laughter.]

Mr. CONNOLLY. I also am from Boston. But Mr. Lynch talks more

like you than I do, probably, yes.

Thank you for your testimony. How often does suspension and

debarment occur based purely on non-performance criteria?

Mr. WOODS. There are various codes in the system. To be honest,

I don’t know the answer to that question, as to the frequency. But

that is something that one could use the codes, because when an

agency enters an entity into the system, they are also required to

use one of the many codes so that someone could identify the reason that the entity is listed, and be in a position to answer your

question.

Mr. CONNOLLY. Just seems to me, Mr. Chairman, that non-performance ought to be one of the reasons. That is a pretty big one.

You make the point, well said, that obviously different agencies

are subjected to different statutory criteria, and therefore, they

have to conform to that. That explains some variation among Federal agencies for terms and conditions for suspension and debarment.

But surely there ought to be a uniform process in every agency,

so that we don’t have the kind of variation you have described in

terms of active programs and less active programs. What is the

reason for the fact that some agencies have inactive programs?

Mr. WOODS. I think it is that they haven’t paid sufficient attention to it. We found HHS, for example, is very active in the Medicare fraud area, and in fact has a substantial number of entities

listed. But when you look on the procurement side, that agency

spends a fair amount of procurement dollars. But we were surprised to see that over the 4-year period that we looked at, they

had no suspensions and debarments based on the Federal Acquisition Regulation.

Mr. CONNOLLY. That is astounding.

You cited the fact that DOD had the most. But of course, as I

said in my opening statement, that is to be expected. But if you actually looked at it on a per billion dollar contracting dollar, if you

will, actually they are far below some other agencies, like EPA.

Given the fact, I don’t know, are you familiar with the report of the

Commission on Wartime Contracting that we heard from the other

day?

Mr. WOODS. I have looked at that report, yes, sir.

Mr. CONNOLLY. So the fact that there is an estimate of $31 billion to $60 billion of waste, fraud and abuse, how many contractors

were debarred or suspended based on that finding, do you know?

Mr. WOODS. I don’t know that, sir.

Mr. CONNOLLY. Presumably there ought to be some.

Mr. WOODS. One would think.

Mr. CONNOLLY. Yes. I mean, if it is at the higher end, you are

matching Medicare fraud, waste and abuse.

Mr. WOODS. That is certainly a lot of money, and we were

pleased that the Commission did focus on that and had specific recommendations as to how to improve the process.
27

Mr. CONNOLLY. Is conflict of interest one of the reasons for suspension and debarment?

Mr. WOODS. I don’t believe that that is listed in the Federal Acquisition Regulation as one of the specific causes called out in the

regulation.

Mr. CONNOLLY. But if a determination is made that there is a

conflict of interest, that you engaged in a conflict of interest either

in the RFP process or the proposal writing process or whatever it

might be, you could be subject to being listed and prevented from

contracting for some period of time, is that not correct?

Mr. WOODS. Yes, sir. There is catch-all language, if you will, in

the Federal Acquisition Regulation that permits the suspension

and debarment official to take action for other reasons that that official considers so serious as to warrant listing on the system.

Mr. CONNOLLY. One of the criticisms one hears sometimes from

contractors about that is that it can be, first of all, the penalty is

severe. And a conflict of interest can sometimes be very much subjective judgment. For example, you may be a large contractor and

you have been asked to provide your expertise for a Federal advisory panel, scientific panel, defense panel, intelligence panel.

And even in advance, I know of cases where consent was gotten

that if we do that, we don’t want to be prevented from bidding on

some contracts. Subsequently, somebody comes along in the IG’s office and determines, wait a minute, you were on this panel and you

have been on a contract, you won the contract, and we call that a

conflict, and you are going to be listed.

My time is up, but how are we also making sure that when we

decide to lower the boom that we have determined that this is fair

and that the entity has had a fair opportunity to make its case?

Mr. WOODS. A couple of things. First of all, the decision to list

someone or to exclude the party would be made by the agency suspension and debarment official, not by the Inspector General or

anyone else that might expect one doing it.

Mr. CONNOLLY. But the IG’s office may be determining there is

a conflict of interest.

Mr. WOODS. And they would then therefore make a referral to

the suspension and debarment official.

The other safeguard is that there are procedures for the entity

to bring contrary facts, to make arguments to the suspension and

debarment official as to why they should not be listed.

Mr. CONNOLLY. Thank you. My time is up, Mr. Chairman.

Mr. LANKFORD. Thank you. Mr. Walberg is recognized for 5 minutes.

Mr. WALBERG. Thank you, Mr. Chairman, and thank you, Mr.

Woods, for being here and for the work that GAO does.

Your report found that agencies with a quarter of the contract

obligations of HHS have significantly more activity in this area.

Specifically, the Department of Interior, with annual contract obligations of approximately $23 billion, had 94 percent procurementrelated, or 94 procurement-related actions and 10 grant-related

suspension and debarment actions. Department of Transportation,

with contract obligations of approximately $23 billion, had 11 procurement-related suspensions or debarments and 193 grant-related

actions.
28

HHS in contrast, though, has $80 billion in contract obligations,

and during the same time period, had zero procurement-related actions and 29 grant actions. In your opinion, is HHS failing in regard to suspension and debarment?

Mr. WOODS. We were surprised at those numbers as well, sir. We

did not look at the two agencies, Interior and Transportation. But

when we did look at Health and Human Services, we were surprised at the number, the absence of any activity in the suspension

and debarment arena, given the size of their procurement spending.

Mr. WALBERG. What it does, or did lack in this area, and would

this have ben something, is this something that you would say,

judging by all of the other studies that you did, is acceptable?

Mr. WOODS. In response to your first question, they lacked the

three attributes that we specifically found at the agencies with the

active programs. They lacked the dedicated staff, the policies and

procedures and the active referral process. When we talked to the

officials at Health and Human Services, they in fact acknowledged

that the suspension and debarment tool was under-utilized at their

agency.

Mr. WALBERG. Going along that line, then, if you could explain

what you mean by detailed policies or guidance. What does that

look like?

Mr. WOODS. Certainly. At one level, the Federal Acquisition Regulation provides the policies and procedures. And it is quite detailed. What we would expect to see, and in fact what we found at

the agencies with the active programs, was even further detail in

their implementing guidance. In other words, roles and responsibilities, who actually implements and is charged with implementing

the various provisions in the Federal Acquisition Regulation.

We found those answers in the four agencies. We did not find

those answers at the other agencies.

Mr. WALBERG. Okay. I yield back.

Mr. LANKFORD. Thank you for yielding on that. Let me do one

quick followup question, if the gentleman would yield.

Mr. WALBERG. I will yield.

Mr. Woods, just to clarify, if these agencies, very large as they

may be, would just reassign two or three people to focus in on that,

we have the potential of finding a lot of bad contractors that we

can protect the rest of the Federal Government from through suspension and debarment. So we are not talking about a massive

shift in agencies. We are talking about even reassigning two or

three people, is that correct?

Mr. WOODS. We are not talking about a massive shift. And in

fact, some of the agencies complain to us that they cannot, they are

not in a position to devote full-time people. They are not in a position to hire people. And we understand that in today’s budget environment.

But reassigning people or carving out some part-time responsibility for individuals, even a small number of individuals, would

have the kind of impact that you just described, sir.

Mr. LANKFORD. Terrific. Thank you for yielding, Mr. Walberg.

Mr. Murphy is recognized for 5 minutes.

Mr. MURPHY. Thank you very much, Mr. Chairman.
29

Thank you for your testimony. I want to talk to you a little bit

about the portion of your testimony related to the Interagency Suspension and Debarment Committee. The 2009 Defense Authorization gives them some increased powers and responsibilities. But

you clearly seem to suggest that there is a lot more that they could

do. They are a coordinating agency but have very little teeth.

What specifically would you recommend that we do in order to

give that committee the kind of teeth that would, at the very least,

allow them to collect more information or get the people that do not

have active programs at the table? Or maybe at an even sort of

next level, give them something more than just the power to convene and monitor? What do you suggest we do there?

Mr. WOODS. We think the action needs to come from the Office

of Federal Procurement Policy. And we think it would be relatively

simple and straightforward for the Office of Federal Procurement

Policy to issue guidance to all Federal agencies to cooperate much

more fully with the Interagency Committee in terms of participation in the process, in terms of responding to data requests, in

terms of providing staff where possible to support the activities of

that committee.

Mr. MURPHY. Does that committee have enough staff?

Mr. WOODS. That committee does not have any dedicated staff.

Mr. MURPHY. So where does that committee staff come from?

Mr. WOODS. The chair and the vice chair, at least during the period of our review, would use their own resources from their home

agency to carry out the activities of the committee.

Mr. MURPHY. So let’s say that directive comes down and there is

a requirement that data and information is provided. The question

is, so what? What does that really do, just to have more information or more resources at the Interagency Committee if they don’t

really have any power to compel particular agencies to step up and

change their practices?

Mr. WOODS. I am not sure that is really needed. We have the Office of Management and Budget that has the kind of teeth that you

were referring to. We have the Office of Federal Procurement Policy, within OMB, who is charged with the responsibility for making

this system work. We think the pieces, the mechanisms are there.

It is just a question of using those mechanisms.

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

Mr. LANKFORD. Thank you, Mr. Murphy.

With that, Mr. Woods, I appreciate very much your testimony.

I would like to take a short recess in order for the clerks to be

able to prepare for our second panel. We will try to do the testimony of our second panel and get that into the record and then we

may have to come back to be able to pummel you with questions

and be able to go through that process.

With that, we will take a short recess.

Mr. CONNOLLY. Mr. Chairman, could I just, before Mr. Woods

goes——

Mr. LANKFORD. You most certainly may.

Mr. CONNOLLY. Just a quick question. Legislatively, would it be

helpful, do you think, if we had some legislation that tightened up

some of the reporting requirements and standardization issues

your report has covered?
30

Mr. WOODS. I am not sure additional legislation is needed at this

point. The Congress was very clear a couple of years ago on the importance of the Interagency Committee, on the roles and responsibilities that the Congress expected that committee to play. And

the administration issued a change to the Federal Acquisition Regulation to reinforce and implement the direction that the Congress

gave.

I think, again, the pieces are there, it is just a question of managing that and stressing the importance of this area.

Mr. CONNOLLY. Thank you. Thank you, Mr. Chairman.

Mr. LANKFORD. I would think a day like today does stress the importance of that area.

Mr. CONNOLLY. Yes.

Mr. LANKFORD. Thank you, Mr. Woods.

We will take a short recess and reset.

[Recess.]

Mr. LANKFORD. I would like to go ahead and begin if we can.

We now welcome our second panel. Mr. Steven Shaw is the Deputy General Counsel for Contractor Responsibility at the Department of the Air Force, where he is also serving as the Air Force

Suspension and Debarment Official. Mr. Richard Pelletier is the

Suspension and Debarment Official for the Environmental Protection Agency. Dr. Nick Nayak is the Chief Procurement Officer at

the Department of Homeland Security. Ms. Nancy Gunderson is

the Deputy Assistant Secretary for the Office of Grants and Acquisition Policy and Accountability for the U.S. Department of Health

and Human Services, where she also serves as the Department’s

Suspension and Debarment Official.

As I have mentioned before, we are watching for votes, we are

tracking through those. We should have enough time to be able to

get everyone’s opening statement into that.

So pursuant to committee rules, all witnesses will be sworn in

before they testify. Would you please rise and raise your right

hands?

[Witnesses sworn.]

Mr. LANKFORD. Let the record reflect all the witnesses answered

in the affirmative. Please be seated. Thank you.

In order to allow time for discussion, I am going to ask that you

do limit your testimony to 5 minutes. Your entire written statement of course will be made part of the written record, and any

other written documents that you would like to submit to this committee, we will include.

I now would like to recognize Mr. Shaw for 5 minutes.
31

STATEMENTS OF STEVEN A. SHAW, DEPUTY GENERAL COUNSEL FOR CONTRACTOR RESPONSIBILITY, DEPARTMENT OF

THE AIR FORCE; RICHARD A. PELLETIER, SUSPENSION AND

DEBARMENT OFFICIAL, U.S. ENVIRONMENTAL PROTECTION

AGENCY; NICK NAYAK, PH.D., CHIEF PROCUREMENT OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY; AND

NANCY J. GUNDERSON, DEPUTY ASSISTANT SECRETARY, OFFICE OF GRANTS AND ACQUISITION POLICY AND ACCOUNTABILITY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

STATEMENT OF STEVEN A. SHAW

Mr. SHAW. Thank you, Mr. Chairman, Ranking Member

Connolly, members of the committee. Thank you for inviting me

here today. This is a very important subject that is dear to my

heart. I have been doing it for 15 years and find it to be extremely

important.

I also want to thank GAO for an outstanding report in this area,

even though they didn’t address the Air Force, they addressed

some important issues. Their recommendations are recommendations that we agree with. We have the three elements of active programs that they talk about. We have a dedicated staff. We have

written processes and procedures. And we have practices that encourage referrals.

I am hesitating on the referrals a little bit, because one of the

features of the Air Force is not to rely upon referrals. Referrals are

important, procedures to increase referrals are important. But we

do a lot more than deal with our in-box and respond to referrals

from other agencies. I will get to that in a second.

The areas that are somewhat unique perhaps to the Air Force

are at least why we think we are strong in this area, we think, are

both structural and policy related. The structural areas are the

full-time dedicated staff. We have through the entire 15 years of

my tenure in this position and before that had a full-time staff, and

more recently we have expanded that to a full-time field staff in

the AFMC, the Air Force Materiel Command, and in headquarters

for the non-MAJCOMS. So we have additional attorneys, so there

are somewhat upwards of 10 or 15 attorneys that we have in the

Air Force, even though there are only three in my office in headquarters Air Force.

Another unique part is that I am a full time debarring official.

That is very unusual in the Federal Government. I personally

think that is extremely important and I praise the Air Force for

doing that. It was before my time, it has nothing to do with me,

but I think that is an important feature. There are only three or

four agencies in the whole Federal Government that have the fulltime debarring official. I think that is an important feature for

some of the reasons that I will talk about.

Also, separation from the acquisition chain I think is critical in

this area. The Air Force, and the whole DOD, started doing this

in the early 1990’s as a result of an IG report, DOD IG report, recommending that it be structured that way. I agree with them, and

I think the Defense Department is doing that correctly that way.

We are independent of the acquisition chain. We certainly coordi-
32

nate with them and they are partners with us. But I don’t wait or

expect the acquisition people to approve of what I am doing. I am

empowered to do what is right.

And that is the third important feature of the Air Force, and that

is the empowerment. The senior leaders of the Air Force and of

DOD have supported what I have done throughout my tenure, recognize this as an independent area. I coordinate everything, but I

am empowered to do what is right. And the example that I used

in the written testimony attest to that.

Then another feature is, perhaps it is unusual or unique to the

Defense Department, and that is the fraud remedies program, I

also manage within the Air Force. So I am overseeing two missions.

One is coordinating and making sure the Air Force gets all the

remedies, criminal, civil, contract and administrative, done. We are

the inside lawyers, really, for the Justice Department in making

those kinds of decisions.

Because of that, we have real visibility into cases, and we can

reach out and do suspensions and debarments, even when nobody

refers them to us. That is where the outreach and the

proactiveness that I was talking about comes in, where we don’t

wait for referrals. We monitor cases from the investigators, their

case status reports. If there is some case that looks like it is necessary to do a suspension or debarment to protect the interests of

the Government, we will reach out to that investigator, ask for the

report and will do a debarment, even though nobody is asking us

to do that debarment. And even if people are objecting to it, we are

going to do it, if that is the right thing to do.

On the policy side of this, the fact-based cases is an important

part of what we do. I think there are a lot of agencies that only

do debarments or suspensions where there is an indictment or a

conviction. And I think that is ill-advised. That is just delegating

all of your power to the Justice Department. If they don’t have the

resources to do a case, they won’t do it. But we in the Air Force

are still worried about that, so we will reach out and do a debarment anyway, based upon facts.

Also, it is not necessary to do contract actions. The power of a

debarment under the FAR is not limited to fraud in a government

contract. If an Air Force contractor, for example, is committing

fraud on a commercial case or a personal income tax evasion, or

anything more than jaywalking, probably, we are going to be concerned about it. Because if they are defrauding a commercial customer, they are going to defraud us.

Finally, the carrot and the stick we use, I talk about this a lot,

because of the stick of debarment, we are able to influence

proactively the defense industry, I think. We go out and talk to the

defense industry and we give them incentives to improve their programs and processes, to avoid the fraud at the front end. So we are

trying to limit fraud and do risk management, rather than solely

doing the stick of debarment.

With that, I thank you and I will take any questions.

[The prepared statement of Mr. Shaw follows:]
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Mr. LANKFORD. Thank you, Mr. Shaw.

Mr. Pelletier.

STATEMENT OF RICHARD A. PELLETIER

Mr. PELLETIER. Thank you, Chairman Lankford and Ranking

Member Connolly and members of the subcommittee, for this opportunity to speak about the EPA suspension and debarment program. I am the suspension and debarment official [SDO], for the

agency.

Since 1981, EPA has had a robust program. Historically it has

been the leader in this area. For example, my predecessor was a

chairman of the ISDC, which you have heard some testimony

about, for 20 years. Also, in 2003, with members of the Air Force,

DLA and GSA, we formulated, the EPA actually led the formation

of the National Suspension and Debarment Training Program,

which is offered through the FLETC, the Federal Law Enforcement

Training Center down in Glencoe, Georgia.

Currently, I am still the coordinator for that program. Also, EPA

provides three of the six instructors for the three or four courses

that we offer each year.

Now, the EPA program has really two elements to it. It has a

statutory debarment and it also has the discretionary. The statutory are the Clean Air and the Clean Water Act. And the

discretionaries can be taken under either the non-procurement

rule, which you have heard some testimony about, as well as the

FAR Part 9.4. At EPA, we almost exclusively use the non-procurement common rule.

At our office, we have, in the EPA, we have two separate offices

that deal with suspension and debarment programs. There is my

office, as the Suspension and Debarment Official. I have a hearing

officer and a program analyst. We also have a Suspension and Debarment Division, which has a director, it has seven attorneys, has

a paralegal, two investigators, an auditor and some administrative

support personnel. All of us are full-time, and this is all we do, is

the suspension and debarment.

The way the cases work at EPA, the Suspension and Debarment

Division attorneys develop the case in close coordination with the

OIG, for example, or the Office of Enforcement that we have, or

any other State or Federal investigative body, or any public or private source that may provide us with information. Like Mr. Shaw

said, we do fact-based cases as well.

We coordinate, or the division attorneys coordinate through the

ISDC for lead agency. And then it is referred to my office for an

action. Then on proper notice, we provide the respondents the opportunity to be heard, to present information and arguments in opposition to the proposed debarment. When I make a final decision,

it is on behalf of not only the EPA but all Federal agencies.

Now, under the EPA non-procurement rule, as we have implemented it at EPA, there is an additional safeguard, in that the respondent can appeal my decision to the Director of the Office of

Grants and Debarment prior to taking any court action under the

Administrative Procedures Act. Just as a frame of reference, and

the numbers are not magical, but just as a frame of reference, in

the last fiscal year our initial numbers indicated we took 98 pro-
39

posed debarments and 111 suspensions, 115 discretionary

debarments and approximately 42 statutory debarments. Also, we

entered into three administrative agreements.

Now, the rate of EPA dollars spent, procurement to non-procurement, is approximately four to one. And that is why we use the

non-procurement rule rather than the FAR. Both rules are reciprocal. So you can, of course, any action under one is binding on the

other. Also, you can use the non-procurement rule for acquisition,

as well as non-acquisition matters. So it is available if you want

to do it for a contract direct acquisition process.

The written guidance that EPA has, we have implemented for example, the non-procurement rule as implemented by the agencies.

We did that through our 2 C.F.R. 1532. But also over the years,

we have supplemented with written guidance, SOPs, best practices

that have been learned since 1981, and put those into a written

form so it can be continued and consistently updated as we go

through the process.

Another factor that is important is, my superiors actively encourage our involvement, not only with the ISDC, but also with other

agencies, other organizations that are involved in this, such as the

ABA Subcommittee on Suspension and Debarment. We are very

proud of our rich history of protecting the taxpayers’ dollars. We

continue with this effort, and even in these hard times, we have

been able to continue to have the personnel necessary. I am

pleased to be able to talk about it today and I look forward to your

questions.

Thank you.

[The prepared statement of Mr. Pelletier follows:]
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Mr. LANKFORD. Thank you.

As you have just heard, the votes have been called. I would like

to receive both of your opening statement, then we will scoot out

for a recess from there.

Mr. Nayak.

STATEMENT OF NICK NAYAK

Mr. NAYAK. Thank you very much, chairman, ranking member.

I will abbreviate my statement and hope that it helps you guys.

I am the Chief Procurement Officer for DHS, overall contracting

at DHS. Sort of in a nutshell, we get this and we are going to get

it right. We are going to be a best practice agency.

Prior to my arrival, and I have been here for a little bit less than

a year, there was an IG review of DHS suspension and debarment.

We took that to heart. The Under Secretary for Management, who

is my boss, put together a task force. We studied all the best practice organizations, the Immigration and Customs Enforcement is

one of those best practices within DHS that we studied.

We came out with a model. And since I have been on board, so

a little bit less than a year, the Secretary approved the new program for suspension and debarment. It follows all the best practice

that GAO outlined. We are committed to getting this right. We are

going to have dedicated staff. We are going to have detailed policies

and procedures. We are going to have an active referral process.

And we are going to have a system for tracking referrals, suspensions and debarments. This is going to happen in short order, so

we look forward to following up with the committee over time.

I thank you.

[The prepared statement of Mr. Nayak follows:]
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Mr. LANKFORD. Thank you, Dr. Nayak. And you are right, you

definitely abbreviated it. I appreciate it.

Ms. Gunderson.

STATEMENT OF NANCY J. GUNDERSON

Ms. GUNDERSON. Thank you, Chairman Lankford, Ranking Member Connolly and members of the subcommittee, thank you for this

opportunity to appear before you to discuss the Department of

Health and Human Services’ grants and acquisitions policies and

practices, and in particular, our use of suspension and debarment

and our oversight practices.

As the Deputy Assistant Secretary for Grants and Acquisition

Policy and Accountability, I serve as the Department’s suspension

and debarment official and am responsible for providing department-wide leadership in the areas of grants and acquisition management. My office oversees and supports the Department’s 13

grants management offices and 10 procurement activities as they

award and administer grants and contracts in fulfilling HHS’ mission to enhance the health and well-being of Americans.

Fighting fraud and ensuring program integrity are central to fulfilling the Department’s mission. We appreciate the work of this

subcommittee and the GAO in highlighting the policies and practices from which HHS may learn.

The Department is committed to the effective use of suspension

and debarment as a tool to support successful grant and acquisition

management. HHS also believes that comprehensive pre-award

source selection and post-award administration practices help ensure satisfactory performance and reduce our need to resort to suspension and debarment as we focus our resources on these practices.

As reported by the GAO, HHS debarred 29 grant recipients between 2006 and 2010. In fiscal year 2011, we also debarred six

grant recipients, and these debarment cases were based on financial misconduct as investigated by our Office of the Inspector General, and scientific misconduct, as investigated by our Office of Research Integrity, in cooperation with the affected universities and

research institutions.

Through our contract administration processes from fiscal year

2009 through 2011, HHS terminated approximately 12 contracts

for default. In these cases, the associated performance issues were

not so serious in nature to impose either suspension or debarment.

In light of the GAO’s recommendations and in an effort to strengthen our suspension and debarment processes, we are in discussions

on how best to dedicate staff and resources to this function and related oversight activities, and in particular, to create a contractor

integrity team.

We are currently assessing the policies and practices of other

agencies for contract-related suspension and debarment in order to

tailor best practices to our organization and issue detailed policies

and procedures.

We also intend to create an electronic desk reference to implement the new policy and provide our contracting officers with associated reference materials and uniform decisionmaking tools regarding referrals for suspension and debarment, financial responsi-
50

bility determinations and other performance remedies. Additionally, we also plan to establish an electronic case referral and tracking process for both grant and contract-related concerns, which will

enable HHS to monitor and follow through on each case and identify consistent themes and vulnerabilities.

Finally, these policies and practices will be reinforced through

communication and training to ensure HHS’ grant and acquisition

communities understand their responsibilities and are able to identify and refer cases of fraud, misconduct and the abuse of the

public’s trust in the Department’s grants and acquisition programs.

HHS strongly agrees with the need to protect taxpayer dollars,

and is committed to using its grants and acquisition management

practices to serve as careful stewards of these funds.

Thank you for the opportunity to testify before the subcommittee

and about HHS’ use of suspension and debarment in dealing with

its grantees and contractors. I am glad to answer any questions

you may have.

[The prepared statement of Ms. Gunderson follows:]
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Mr. LANKFORD. Thank you, Ms. Gunderson.

With that, I would like to take a short recess. Let me give you

an update on what we have. We have several votes and then a motion to recommit. Unless you want to talk everybody out of doing

a motion to recommit, down there? No.

So it will take about probably 40 minutes or so, I would say, on

our votes and our time to be able to come back. We will get restarted here as soon as we can with our questions, and we will reengage again. I apologize for the delay, but we stand in recess until

we have finished up voting. Thank you.

[Recess.]

Mr. LANKFORD. We will come back into session.

Thank you again for giving us some grace, a chance to get away

and to be able to do the votes and come back in.

We have heard your testimony, received that, obviously have

your written testimony as well. We are going to get a chance to discuss some things and ask questions, feel free to just be able to

interact with us. Let us start running through those things as we

can at that point.

Mr. Shaw, let me start with you on something. You had made a

comment that I thought was very interesting about fact-based

cases, that you are not waiting for an indictment somewhere

through DOJ, you are doing your own fact-base cases. Two questions for that. One, if you could elaborate more on the process that

you do with that. And the second one is, what kind of due process

protections do you have in place to protect your contractors to

make sure that as you are doing your own fact-based research

here, that you don’t also have a contractor out there that is getting

stung inappropriately? How do you balance the two of those?

Mr. SHAW. Thank you.

First, it is a matter of looking at the evidence and not just relying entirely upon the fact of an indictment or a conviction. In the

FAR, it says an indictment or conviction is sufficient as a matter

of law. So a lot of agencies then use that as a security blanket.

Mr. LANKFORD. They are just exclusive to that? You are going

into the details?

Mr. SHAW. Right. So we look at the evidence, and if the evidence

meets the preponderance of the evidence standard of a debarment

or adequate evidence standard of a suspension, then we will do the

action. And probably half of our cases are that way, maybe more

than half. I think that is a significant difference in why we have

so many more numbers, or higher numbers.

Mr. LANKFORD. Do you feel like the contractors are still protected

in the process as well?

Mr. SHAW. Yes. There is actually a lot of procedures, they have

the right to come in within 30 days and meet with us personally.

Or if there is a genuine dispute of material fact, then they have

aright to a mini-trial, a fact-finding proceeding where under oath,

cross-examination of witnesses, that type of proceeding.

Mr. LANKFORD. So, Mr. Pelletier, that is what you were talking

about, basically this mini-trial that you all do with EPA as well?

Mr. PELLETIER. Yes, sir. If there is a dispute of a genuine material fact, then we likewise will have what we call a mini-trial, we

actually just call it a fact-finding hearing.
56

Mr. LANKFORD. Okay. Mr. Shaw, you had mentioned as well that

you were outside the procurement chain, and you felt like that was

better on that. Is anyone else in that same situation for your agency, where you are outside the chain? Mr. Pelletier.

Mr. PELLETIER. Yes, sir, we are not in the acquisition chain. We

are within the grants office. But it is a grants and debarment, so

it is geared toward both. And it is not strictly within the purview

of those that award the money. That is what really the thing we

are aiming at.

Mr. LANKFORD. Dr. Nayak. Ms. Gunderson.

Mr. NAYAK. Yes, in our new program, the suspension and debarment official unfortunately couldn’t be here today, because a family

member is gravely ill, we will be outside the procurement chain.

Mr. LANKFORD. Ms. Gunderson.

Ms. GUNDERSON. I provide oversight over our procurement function, but I am not directly responsible for the operations, the actual

awarding of contracts.

Mr. LANKFORD. It is in the same office, same group at that point?

Ms. GUNDERSON. Right.

Mr. LANKFORD. But say it to me again, the first thing you said?

Ms. GUNDERSON. I provide functional oversight over acquisition

function, but my office is not directly responsible for the award or

the administration of grants and contracts. So we are independent

from that function.

Mr. LANKFORD. Okay, great.

Mr. Pelletier, tell me a little bit about on the EPA section of it,

there is a list of Clean Water Act, Clean Air Act, obviously those

exclusions that are there. You had mentioned a four to one ratio

of non-procurement and procurement. Explain that to me again.

Mr. PELLETIER. The amount of money that the EPA awards, and

the procurement side, it is not as much, or it is nearly four times

as much in the non-procurement and the grants and interagency

agreements and things of that nature.

The way it works of course is that we simply will make a grant

to a State that then awards contracts. We keep a watch on those

situations. If there is still some reason to debar somebody that has

been receiving our money, whether it is by grant, through a contract with a State, we still will take action against them.

Mr. LANKFORD. But if you have somebody that has violated

Clean Water Act, Clean Air Act, they are going on the list at that

point?

Mr. PELLETIER. That is correct.

Mr. LANKFORD. Regardless of contract, is that just automatic, it

is discovered this person has violated the Clean Water Act, you

don’t even know if they do Federal contracts, they just automatically go onto the exclusions list as well?

Mr. PELLETIER. Yes, sir. That is the mandate of the statute. And

the way it goes is that we are notified of a conviction under certain

provisions with the Clean Water or Clean Air Act. Then we must

put them on the list if they meet the three criteria, which is a fact,

were convicted. And the limitation, because the statutories under

the Clean Air and Clean Water Act are limited debarments. It is

only if they are going to perform a contract at the violating facility

and they own, lease or control that facility.
57

To get off the list, they must submit information to the EPA

which we call a reinstatement request. And then it is somewhat

like a reverse debarment. At that point then we hear the evidence

and determine if they have, they must, I have to certify that they

have in fact cured all the violations that put them on the list in

the first place.

Mr. LANKFORD. Okay. So there is a process to be able to get out,

but the company has to initiate it. You all just leave them on the

list until the company or entity initiates a request to get off the

list?

Mr. PELLETIER. That is correct, sir.

Mr. LANKFORD. Okay. Let me talk a little bit about HHS. It is

obvious, it has come up multiple times, there have been some

issues there in the process on it. I am glad you are here, glad to

be able to go through the process. The challenge of it is, from your

testimony, two different times you said the words, ‘‘we intend to accomplish’’ this, and one other time you mentioned, ‘‘we are in discussion’’ about this. My only concern about that is, I need to know

when. Because obviously this has come up for a while. This is a serious issue. You all have been very active in pursuing fraud in

other areas to be able to get this into place.

So what I would like to request of HHS is that you get back to

this committee when those things are going to be resolved, when

the final process is complete, so we can have who the individuals

are that have been reassigned to oversee that, and what their basic

process is. These three factors that GAO discussed earlier. And the

actual person that is overseeing that, whether that is you or someone else, so we will know who is the responsible party for that.

That would be very helpful, it you would be able to get back to us.

So basically, when this is going to get accomplished and who the

person is that is going to be responsible for overseeing it. We have

to find a way to move from we intend to get this done to this is

actually done.

Do you want to respond to that?

Ms. GUNDERSON. No, thank you for that opportunity. We would

be happy to get back to you on our time lines and our specific

plans.

Mr. LANKFORD. Obviously, you know there is an issue, it came

up. You, I am sure, interacted in the process. Did you receive a

draft of the GAO report before it was all complete?

Ms. GUNDERSON. Yes, we had received a draft report.

Mr. LANKFORD. So you had time to be able to interact, so obviously you had time to prepare on this .

Our staff did a quick search, just a Google search, looking for

fraud, for instance, in NIH. There are a couple hits that came up

immediately, Department of Justice press releases, Temple Hills,

Maryland, man sentenced for bribing in purchasing, offer to do

business for his computer company. Then another one, Hyattsville

project manager pleads guilty to fraudulently obtaining money

under oath with an NIH contract. We then went to EPLS, and they

were not listed.

So we still have some of the same issues, obviously. I am not asking you to be aware of every single contract, every single case. But

just in the quick search of possible contracts that may be out there,
58

are they getting on EPLS yet, obviously they are still not. So we

have to move from intends to get it, I would just ask you to be able

to get that report to us as quick as you can, so we can know this

is covered.

You are very aware, as everyone else is, as well as FEMA and

every other agency looking at it, it helps the entire Federal Government avoid getting into a bad contracting situation when we know

one entity has done a bad contract, they have been debarred. Every

other contracting officer can then look at that as well.

So with that, I appreciate that, and I yield my time to Mr. Kelly

for 5 minutes.

Mr. KELLY. Thank you, Mr. Chairman.

Dr. Nayak, my concern is DHS, and it has to do with Katrina.

GAO found that DHS had 116 suspensions or debarments related

to Federal procurement from 2006 to 2010. Yet there were no

FEMA actions. As you know, DOJ has an entire task force dedicated to Hurricane Katrina fraud. They have convicted numerous

individuals of false statements and fraud in connection with FEMA

disaster relief assistance.

According to the fifth anniversary report of the Attorney General,

one of the principal types of fraud on which the task force concentrated is government contract and procurement fraud. Can you

explain why FEMA has not taken action against any party indicted, convicted or found to have engaged in Katrina-related

fraud?

Mr. NAYAK. Thank you for the question. Yes, I have been at DHS

for a little bit less than a year, so I don’t know how effective I will

be at sharing what I know about Katrina. But I can share some

things that FEMA is doing and some positive momentum that they

are gaining, as well as share with you what we are doing at the

departmental level that will affect everybody in DHS, including

FEMA.

So the information that is probably most relevant is just, there

is some positive momentum in FEMA around suspension and debarment. They actually have five individuals dedicated to doing

this now. In this fiscal year itself, there were 19 investigations, 15

referrals, 5 suspensions, 5 debarments of either grantees or contractors. So there is some positive momentum. Then again, coming

back to what we are doing at a departmental level, which is essentially following all the best practices, as has been shared here.

And then to add on to what Chairman Lankford just mentioned,

we should be done and have this up and running in the next 3

months or so.

Going back to the Katrina days, one of the nice things about putting this program in place at the departmental level is it will be

able to end the suspension and debarment official will be able to

go back and look at any actions that occurred during that timeframe.

So we have a program that will follow best practice and we will

report out on that over time.

Mr. KELLY. Okay, thank you. Thanks, Mr. Chairman.

Mr. LANKFORD. I am going to follow up on that as well. Dr.

Nayak, is it possible, when that is complete, your process, you say

it will be in the next 3 months, getting everything, that you would
59

submit that back to this committee, just so we could have that as

a record as well?

Mr. NAYAK. Very pleased to do it.

Mr. LANKFORD. That would be terrific.

Let me start a second round. If you want to be able to jump in

on a second round of questions, you can. I am going to give a moment for Mr. Connolly to be able to come and ask questions in a

moment as well.

Mr. Shaw, we talked a little bit about legislative fixes. And GAO

mentioned earlier it really feels like the legislation that is needed

is already in place, there is no additional legislation needed. I

would like to ask your opinion on that statement. Is there additional legislation that you would see? Or any of you, and you can

also think about this as well, that you would see, this would provide greater assistance to the agencies, and clarification?

Mr. SHAW. Yes, thank you, Mr. Chairman. I don’t see any legislation directly narrowly dealing with the suspension and debarment.

But I do have thoughts in two areas, unrelated areas, that could

help. One is the Program Fraud Civil Remedies Act, which I know

your committee is familiar with, which was passed in 1986 but has

not been used because it is so cumbersome, frankly.

Mr. LANKFORD. Now that is a shock, that there is a Federal instance that is cumbersome.

Mr. SHAW. So we are working on it, we expect that the Defense

Department will be having a proposal for a fix for that, that would

also have the suspending and debarring officials being the people

that would enter the penalties under that. So that relates to debarment, it gives greater visibility into other cases for debarment officials. It is sort of an automatic referral process.

The second area that would stir up referrals from the contracting

community particularly would be the use of proceeds from litigation

that relates to procurement fraud. If the proceeds or some portion

of the proceeds could go to the program that is victimized by the

fraud, and not just to the U.S. Treasury, then the agencies would

be able to fix the widget that was broken by the fraudulent contractor without taking it out of O&M funds. And that would encourage the contracting community to be more interested and

proactive in this area.

Mr. LANKFORD. So run that by me again, where you see the process. You are saying when they are found to be fraudulent, the recovery of that money from fraud is currently not going back into

the agency?

Mr. SHAW. That is right. If there is, if Smith Co. is convicted or

there is a civil judgment for false claims act against a hypothetical

Smith Co., and for having damaged a program, that KC–10 Air

Force program, that money, millions of dollars often, cases in that

situation, if the procurement money is closed, which is always the

case in these situations, because it takes a long time to investigate

these things. So the bad guy is being ordered to refund the money,

but the money does not go to the program that is being victimized.

It doesn’t go to Tinker, it doesn’t go to Oklahoma City Air Logistics

Center.

Mr. LANKFORD. I would think all of it needs to go to Tinker or

Oklahoma City on that. [Laughter.]
60

Mr. SHAW. So that would be helpful.

Mr. LANKFORD. Okay, that is very helpful to know.

Mr. Connolly brought up an issue on the contingency contracting.

In a wartime situation, obviously, contracts are going very rapidly.

A lot of new contractors going in. If you are dealing with Afghanistan and Iraq, a lot of foreign contracts are also getting engaged

on the ground. How are we handling the issues of debarments and

suspensions in a contingency operation?

Mr. SHAW. There is a memorandum of understanding within the

Defense Department, where the Army is the lead agency, the administrative agency for debarments and suspensions and for contracting, actually, contracting as a whole. So I hate to duck that

question.

Mr. LANKFORD. It is an Army question.

Mr. SHAW. Yes. The Air Force has done a lot of, a number of

debarments and suspensions from the theater. But the great majority of them are Army ones.

Mr. LANKFORD. Okay. We will try to follow up with that as well.

Because that obviously is important to us in a lot that is happening.

Just a moment.

Mr. Pelletier, tell me a little bit about the appeal process that

you have going. You discussed this in your testimony earlier, about

your appeal. When someone has a protest, they have been

debarred, you talked about the mini-trial type of situation, coming

in on appeal. Has that been effective? Or is that so cumbersome,

let me say it this way. We don’t want anything to stand in the way

of saying, if there is a good process for suspension and debarment,

we don’t want someone to say, I don’t want to go through that because it is so cumbersome and it is so bulky, I would rather not

even go through it, than to actually do it. So I am looking for, how

does that work for you?

Mr. PELLETIER. Yes, sir, it is actually easy in this respect. The

appeal process that we have built in at the EPA is that I make a

final decision to debar somebody or a decision to maintain a suspension. They have the right to appeal to the director of the division. It is a very easy process. They simply present whatever evidence they think why it should not be in place. And then the director has the opportunity to remand the case to me or uphold it. If

it is remanded to me, then I can review what was, why it was remanded and have a second opinion or dismiss it, depending on

what the circumstances are.

And then subsequently, of course, they have the right under the

Administrative Procedures Act to go to a district court. But it does

give, actually, what is easy about it, it gives the respondent, rather

than the choice of immediately incurring court costs and going and

hiring attorneys and doing anything that is involved, they can

make an appeal within the system. And they do get a second look.

Mr. LANKFORD. How long does that take? Before you get into the

Administrative Procedures Act and actually go into an outside

court, total process on that, give me an average.

Mr. PELLETIER. The internal one?

Mr. LANKFORD. Yes, internal.
61

Mr. PELLETIER. Internal, it is usually within 3 months it has

been up and back and a final decision again.

Mr. LANKFORD. So the whole process, 3 months, done?

Mr. PELLETIER. Yes, sir.

Mr. LANKFORD. That is fairly rapid for us.

Mr. PELLETIER. Yes, sir.

Mr. LANKFORD. You also mentioned you have 42 cases, and I

want to see if I got this number correct, that you felt were statutory exclusions. Was that from last year, you are saying?

Mr. PELLETIER. Sir, that is the preliminary number we have for

fiscal year 2011. It is a preliminary number.

Mr. LANKFORD. Those are individuals that have been included

because of Clean Water Act violations, Clean Air Act violations, a

total of 42. Is that nationwide?

Mr. PELLETIER. Yes, sir.

Mr. LANKFORD. Okay. That number is actually lower than I anticipated, is the reason I came back to it as well. That is not necessarily contractors, they are just individuals that have been found

in violation of Clean Water, Clean Air Acts and have been listed

out as saying, if they ever apply for a contract, there is an exclusion in this area, this plant, this location?

Mr. PELLETIER. That is correct.

Mr. LANKFORD. Okay. Terrific.

With that, I yield to Mr. Connolly.

Mr. CONNOLLY. Thank you, Mr. Chairman. Sorry to be a little

late getting back. I had a meeting.

Ms. Gunderson, you heard the testimony of the GAO representative, Mr. Woods, who noted that when it came to procurement,

there has not been a single suspension or debarment by HHS in

5 years. What is the value of the total procurement in that time

period?

Ms. GUNDERSON. The total value in that timeframe was about

$81 billion. In the last 2 years we have done around $19 billion annually.

Mr. CONNOLLY. Okay. Can you help enlighten us on why there

would not be a single suspension or debarment? All the contracts

are just that good?

Ms. GUNDERSON. We do take contractor oversight very seriously,

including the way in which we select and evaluate our contractors

prior to award and the way we administer those contracts during

performance. We have had contractor performance issues that we

have used other tools and flexibilities on, such as terminations for

default. And we do see suspension and debarment as a tool in our

tool box, per se, to manage concerns. But none of the issues we

have had have risen to that level.

Mr. CONNOLLY. Right. And presumably, you shared that view

with the GAO when they were looking at this issue in your agency?

Ms. GUNDERSON. Yes, we did, in our meeting.

Mr. CONNOLLY. What was their response to that?

Ms. GUNDERSON. Their response was very, it was generally acknowledging our premise, and we were delighted to see the recommendations around the three characteristics of the more active

agencies and are taking those into consideration for developing our
62

plans around improving policies and our referral practices and

dedicating staff to the effort.

Mr. CONNOLLY. Would it be fair for a layman to conclude that

the priority within HHS is Medicare?

Ms. GUNDERSON. It would be fair to conclude that. The Secretary

has come strongly on on all areas of program integrity, though.

Program integrity is one of her key strategic initiatives, as well as

encompassing our strategic plan.

Mr. CONNOLLY. Mr. Shaw pointed out that there are only three

Federal agencies, I believe, that have like the Air Force a full-time

dedicated debarment officer. Can we expect that HHS, given the

huge volume you are talking about, even though apparently in the

$81 billion of the last 5 years, nothing rose to this level, would it

make sense from your point of view, from the agency’s point of

view, to emulate the Air Force and have a full-time officer with respect to this set of issues?

Ms. GUNDERSON. That is one of the models we are looking at,

among all the others that are out across the Federal agencies. I do

serve as the suspension and debarment official because I have oversight over the acquisition and grants policies and the operations of

those functions. So currently, as it stands, it makes the most sense

to fit it within my organization.

And as I said, we are looking at other models that other agencies

have had.

Mr. CONNOLLY. When might this committee know when you have

finished looking at and have decided upon a plan of action?

Ms. GUNDERSON. The chairman has asked us to get back to the

committee on that, and we will be doing that.

Mr. CONNOLLY. Do you have a time line, however?

Ms. GUNDERSON. Generally speaking, we are looking within the

next 3 months at implementing these policies and a new plan.

Mr. CONNOLLY. Thank you.

And Mr. Nayak, you also outlined basically, if I heard you correctly, in your very concise and succinct testimony, thank you, that

you were going to essentially, enshrine pretty much, the recommendations of the GAO and get on with it. What is your time

line for doing that?

Mr. NAYAK. I also mentioned to the chairman, 3 months. By the

end of the calendar year.

Mr. CONNOLLY. Three months. It was such a good answer, I just

wanted to get it into the record a second time. [Laughter.]

Thank you, Mr. Chairman.

Mr. LANKFORD. It will be a terrific Christmas present to us, we

will be able to read it over New Year’s. I appreciate that.

I recognize Mr. Kelly.

Mr. KELLY. Thank you, Mr. Chairman.

From all of you, just your opinion on the mandatory debarments.

Mr. Shaw, if you would start, just kind of walk me through on

what you all think.

Mr. SHAW. Thank you, Congressman. I think that mandatory

debarments are a bad idea in the procurement area. I am not familiar enough with the Clean Water Act and all those. That may

work with regard to facilities. But in the procurement area, it takes

away an important tool that we have to fight fraud. And that tool
63

is the leverage that we can use with this carrot and stick that I

mentioned before, about working with contractors that are trying

to do it right and to changing their conduct and improving their

processes, so that they have risk management programs in place

where fraud won’t happen in the first place.

If there is a mandatory debarment, companies are going to tend

to think, well, why bother, and they are just going to obfuscate and

fight the investigations, rather than work proactively to avoid the

fraud in the first place.

And there is a lot of good, I think, we do in that area, both when

there is misconduct with such things as administrative agreements,

but also where there is no misconduct at all. We meet regularly

with all the major defense contractors to talk about their ethics

programs, even when they are not in trouble. So I oppose it.

Mr. KELLY. Mr. Pelletier.

Mr. PELLETIER. Sir, thank you . I agree in the sense that the

mandatory statutory debarments take away the key element of discretion. Like the Air Force, I am a full-time suspension debarment

official. Each agency has its own particular interest and information, or situation, that it has to deal with.

Allowing the suspension and debarment official to have that discretion as it deals with a contractor that may be, versus someone

that is bad, someone that has defrauded the government, somebody

that has made a mistake, somebody that doesn’t realize how the

Federal process works, but is quite willing to change and adjust,

we may have potentially a very good contractor or very good grants

person available to us. We don’t want to throw them out the window without a chance at getting back in the game.

So with the discretion that the suspension and debarment official

has, we can do things like enter administrative agreements, which

are basically commercial probation, if you will. We have a very

strict set of requirements that they have to meet. We monitor that.

They report back and a violation of an administrative agreement,

for example, is another grounds for debarment.

And at the end of the process, and it is usually 3 years, we far

more often than not end up with a better contractor or a better

grant, what we call a participant than we started off with. And I

think the best interest of the government has been protected.

Mr. KELLY. Dr. Nayak.

Mr. NAYAK. And so I am not as much of an expert as these gentlemen, but I would agree with them 100 percent where it comes

to contractors, and then statutorily, I am just not that much of an

expert to sort of give you a read on that. But happy to look into

it with the committee.

Mr. KELLY. That would be great, thank you.

Ms. Gunderson.

Ms. GUNDERSON. HHS does use the mandatory exclusions on the

health care side. That is not handled specifically by my office. It

is an authority under our Office of the Inspector General. But it is

a valuable tool that the Department uses to combat health care

fraud, patient neglect and those sorts of issues that arise to mandatory exclusion.

Mr. KELLY. Good. Thank you. I yield back, Mr. Chairman.
64

Mr. LANKFORD. I would like to yield a couple minutes to Mr.

Connolly.

Mr. CONNOLLY. Just a follow-up, thank you, Mr. Chairman.

Mr. Pelletier, it strikes me, based on our analysis in terms of per

billion dollars of contract dollars, you have a much higher debarment and suspension rate than does DOD. You would agree?

Mr. PELLETIER. Notwithstanding Mr. Shaw’s opinion to the contrary, yes. [Laughter.]

Mr. CONNOLLY. Yes. Well, so my question is this. To what do you

attribute that? We have a situation where DOD, per billion dollars

of contract, has a much lower rate than you do. HHS and procurement has zero rate, because according to Ms. Gunderson, they have

used other mechanisms.

If you are a Member of Congress listening to this, you are thinking, there seems to be a wide variety of judgment being exercised,

and that may be a good thing. But it is hard to get our arms

around in terms of predictability and accountability for the taxpayers we represent. I just want to give you the opportunity to

comment on your own observation of why this variability among

agencies and why does EPA apparently use this tool more frequently than some other agencies?

Mr. PELLETIER. First of all, sir, I couldn’t obviously comment on

to the why other agencies are or are not doing something or how

their programs work. Each one is unique.

But as I said in my statement, EPA is really the pioneer in this

area. We started in 1981, developing a program. And over the

years, as anything else, we developed an expertise in the area. And

perhaps, and one of the things in teaching, which we are very active in the national suspension and debarment training program,

one of the feedbacks we get from people that are in the class is,

we didn’t realize it was that easy to do.

So it may be that we have developed an expertise because of longevity that affords us a greased rail where we know how to do it,

because we have done it so many times.

Mr. CONNOLLY. And do you have dedicated, full-time, as Mr.

Shaw is for the Air Force?

Mr. PELLETIER. Yes, sir, I am the full-time.

Mr. CONNOLLY. You are it?

Mr. PELLETIER. I am it. And our staff at the division, that is

their job. We have seven attorneys on that, two investigators, an

auditor, and support personnel and a division director. That is all

we do, is suspension and debarment.

Mr. CONNOLLY. And just a final question. I assume, and Mr.

Shaw, you are free to answer as well, I think you already testified

to this, Mr. Shaw pretty much said, having that full-time dedicated

person makes sort of all the difference in making sure you have an

active program. Would you concur?

Mr. PELLETIER. It has worked well for our agency. We have a

senior person. And we have a dedicated person and it has proven

to be very, very effective.

Mr. CONNOLLY. Thank you very much.

Mr. LANKFORD. Let’s close out the hearing, but I want to give an

opportunity for any of the four witnesses to make any final com-
65

ments that you would like be able to get in on the record as well,

or a response to anything.

Mr. Shaw.

Mr. SHAW. I guess just a couple of observations. I have never

done an analysis, it is interesting, your mathematics is correct per

dollar. But I am wondering, well, first of all, let me say I think that

the number of debarments is a bad metric anyway for this whole

program, for this whole process. But it is an easy one, because the

numbers are what the numbers are. So it is important, and everybody at the end of the year always compares numbers.

What you are doing proactively to prevent fraud, and to encourage improvement in the culture of companies I think is much more

important. But having said that, even looking at the numbers

metrics, I think the better way of looking at it would be not the

number of debarments and suspensions per contract dollar, but

maybe the number per contract. And I don’t know how you would

get at that number. But a big difference in DOD from EPA and

ICE and other agencies, as we deal with big dollar contracts.

So for example, when I suspended Boeing several years ago on a $15 billion space launch program, that counted, I guess, three.

So I had three suspensions. But it was a $15 billion contract. And

all of the Air Force and defense contracts are big dollar amounts.

I think that maybe skews a little bit that 0.09 thing.

Mr. LANKFORD. Any other comments from any of the other witnesses?

We do appreciate your attendance, the work to be able to come

and to be able to be here. Your written statements obviously, probably the least favorite part of your week was to come and do a congressional hearing. So we do appreciate the time for you to be able

to be here.

With that, this committee is adjourned.

[Whereupon, at 12:20 p.m, the subcommittee was adjourned.]

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