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Friday, May 16, 2008

Overseas Contractor Insurance Companies Bilking Taxpayers

Citing inflated profit margins, a recent report by the House Oversight and Government Reform Committee criticized providers of federally mandated insurance to the Pentagon of sticking taxpayers with exorbitant bills.

The Defense Base Act (DBA) requires that all contractors working for the federal government overseas purchase workers compensation insurance for its employees. The cost of the insurance is then passed on to the government. But unlike other federal agencies, the Pentagon has the authority to negotiate its own contracts.

At a hearing yesterday, before the House panel, GAO's John K. Needham testified that not only does the Pentagon pay higher insurance rates, but that it doesn't keep good enough records to figure out to obtain lower rates:

GAO previously reported that eight DOD prime contractors paid from $10 to $21 per $100 of salary cost, a rate that was significantly higher than the rates paid by State and USAID contractors—$2 to $5 per $100 of salary cost—through the agencies' respective single-insurer programs.

...

DOD continues to lack reliable aggregate data on the total cost of DBA insurance. Based on GAO's 2005 report, Congress directed DOD to identify methods to collect data on DBA insurance costs. While State, USAID, and Army Corps can obtain aggregate DBA cost data for their respective single insurer programs, DOD reported that it has not collected this data departmentwide. As GAO has previously reported, agencies can analyze financial data to leverage their buying power, reduce costs, and better manage suppliers of goods and services.

And usual-suspect Iraq contractor KBR is also featured in the report.

The largest private contractor in Iraq, KBR, paid its workers' compensation insurer, AIG, $284 million in premiums through 2005 under its contract to provide logistical support to the troops. In addition to receiving reimbursement for these expenses, KBR will receive an additional payment of $2.8 million to $8.4 million in profits for incurring these expenses. The insurer, AIG, will payout $73 million in claims and incur around $114 million in expenses, earning almost $100 million in profits.


Posted by Craig Jennings, 04:59:47 PM



Thursday, May 15, 2008

Best Spin Ever: Doan Fought for Accountability!

When I posted at the end of April that the book had closed on Lurita Doan, former head of the General Services Administration, (GSA) apparently I was wrong. She has resurfaced in interviews in GovExec magazine, on Federal News Radio and most recently in this border-line ludicrous column in Federal Computer Week by Neal Fox, the former assistant commissioner of acquisition at the GSA.

Now I've come across some interesting spin in Washington in my time here, but I think this one has to take the cake. There are too many strange, misleading, and frustratingly vague statements (e.g. "Some people who had backed IGs began to have doubts.") in Fox's article to jump into all of them (Beverley Lumpkin over at POGO has a good rundown refuting many of them that is worth reading). But the overall tone of the piece implies that IG offices are a danger to good government and need to be reigned in. This perspective needs to be soundly dismissed.

Fox's main point seems to be that a thirsting for power and arrogance at the IGs office was the main issue at GSA, not any particular issue or problem they were investigating (and there were plenty). Fox's point is mind-numbingly ironic considering many of the actions the IGs office was investigating can not be seen as anything else than a power grab by a pretty arrogant Ms. Doan herself (see strong-arming contracting officers and side-stepping contracting protocols to help friends). Worst of all, Doan's unprecedented actions to attempt to cut the IG office's budget and outsource its contracting oversight responsibilities to, of all places, private contractors, was a deliberate attempt to keep prying eyes away from her attempts to operate on her own outside of federal laws and regulations.

I'm still hopeful, as I think POGO was at first glance, that vague assertions and unsubstantiated ramblings like those contained in Fox's article won't influence anyone (that would be a shame). In these times of poor oversight and significant corruption and incompetence in the federal government, we need strong IG offices more than ever to help develop a more effective and accountable government.



Posted by Adam Hughes, 12:37:26 PM



GovExec Maps Out the Six Degrees of OSG Bloch

GovExec has a neat app that lays out OSG Scott Bloch's recent legal troubles called Six Degrees of Scott Bloch: A Scandal Scorecard



Posted by Craig Jennings, 11:18:46 AM



Wednesday, May 14, 2008

Ranks of Contracting Officers Grow, But Not Enough

Stephen Barr, who writes the Federal Diary column for the Washington Post, wrote on an interesting topic last week - the growth in federal contracting officers (COs) under President Bush.

Barr reported that the number of COs has increased 6.8 percent since President Bush took office, according to federal statistics. Barr also was correct in pointing out that there are concerns among many in Washington (both inside Congress and out) that despite these increases, there are still far too few COs and they receive sub par training and support in doing their jobs.

One of the most shocking things was that federal officials don't even know how many COs would be appropriate to have:

But how many contracting officers the government actually needs has not been determined, despite efforts by federal agencies, the Office of Personnel Management and the OMB over the past two years to develop plans for hiring and training contracting officers and specialists.

"We are still working real hard with OPM and the departments to try to figure out what the right number is," said Paul A. Denett, an Office of Management and Budget official in charge of government procurement policy. For his part, Denett added, "I believe we need to increase the hiring even more."

Let me give Mr. Denett a hint. You definitely need to hire more. While the COs workforce has increased 6.8 percent since Bush took office, federal contracting dollars have increased close to 100 percent - from $219.8 billion in FY 2001 to $430.1 billion in FY 2007. Those facts alone should be pushing the government to hire and better train more employees to oversee an immense area of discretionary spending by the federal government. That, plus the wide-ranging and seemingly continuous reports of waste, fraud, and abuse in federal contracting makes it almost shameful something hasn't been done already.



Posted by Adam Hughes, 02:58:17 PM



Wednesday, May 07, 2008

More on the OSC Raids

Yesterday, we noted that the FBI raided the home and office of Office of Special Counsel Scott Bloch. More news reports on the raids are out today. It appears that raids are part of a grand jury subpoenas related to the OSC's investigation of the use of federal resources for political activities by the White House, including Bloch's investigation of now-fired GSA head Lurita Doan.

The participation of the FBI and the grand jury, which is empaneled in Washington, indicates investigators are weighing criminal charges related to the [Office of Personnel Management] IG probe [of allegations by former OSC employees who say Bloch retaliated against them], such as obstruction of justice.

But OSC employees said the grand jury subpoenas seek a wide range of information that goes beyond Bloch's deletion of computer files or treatment of agency employees.

Investigators have demanded all files on OSC's investigation last year into allegations of improper political activity by Lurita Doan, the former head of the General Services Administration, who was forced to resign last week by the White House.

This bit in the CongressDaily (via GovExec) article deserves highlighting:

Republicans and other critics also have criticized Bloch for launching a wider investigation into political briefings White House officials conducted across the federal government. They have accused Bloch of trying to use the probe as leverage against possible moves by the White House to force his ouster due to his conduct at OSC.

Anyway, here are a couple more articles on the raids:

The New York Times, "F.B.I. Raids Office of Special Counsel"
McClatchy, "FBI agents sweep office, home of government watchdog"



Posted by Craig Jennings, 01:26:59 PM



Tuesday, May 06, 2008

FBI Raids Office of Special Counsel Office, Home

Wow.

FBI agents on Tuesday raided the offices of Special Counsel Scott J. Bloch, who oversees protection for federal whistleblowers. The agents seized computers and shut down email service as part of an obstruction of justice probe, NPR has exclusively learned.

FBI agents also searched Bloch's home and a Special Counsel field office in Dallas. A grand jury in Washington issued subpoenas for several OSC employees, including Bloch, according to NPR sources who spoke on condition their names not be used.

Those developments came about on a Tuesday morning that had seemed no different than any other weekday in the Washington headquarters of the Office of Special Counsel. But at 10 a.m., the OSC's national email system went down, and the FBI arrived.

And from TPM Muckraker, a reminder of what Bloch's deal is:

To refresh your memory, Bloch's agency is a little known one that is charged with investigating whistleblower complaints, Hatch Act violations, and the like -- but who is himself being investigated for retaliating against whistleblowers and politicizing his office. The Office of Personnel Management's inspector general has been conducting that investigation since 2005. The feds are apparently investigating whether Bloch tried to obstruct that investigation by deleting his hard drive, among other things.

To give you an idea how fraught this investigation is with unique issues, Bloch is not only busily investigating the White House for political briefings Karl Rove and his aides made to various agencies, but he's also conducting an investigation of the politicization at the Department of Justice and issues related to the U.S. Attorney firings -- a probe that he complained was being blocked by the DoJ. Of course, he can't do much to block the DoJ investigation of him.

We last wrote about Bloch in November, when the WSJ reported that he was being investigated for shredding documents (i.e. "a 'seven-level' wipe [of several office hard drives]: a thorough scrubbing that conforms to Defense Department data-security standards).



Posted by Craig Jennings, 04:19:06 PM



Friday, May 02, 2008

Ed. Dept: Bush's Reading First Flunks Test

When we last left Reading First -- the Bush Administration's "education program," in which the Education Department "inappropriately influence[d] the use of certain programs and assessments" and "created an environment that allowed real and perceived conflicts of interest" -- the president was decrying the slashing of its FY 2008 budget by congressional appropriators.

In March, at a Reading First program directors' meeting, Secretary of Education Margaret Spellings implored the directors to "fight fiercely" for the program because "[]y]ou have seen the benefits of this program." And Tennessee Reading First director James Herman claimed that the program "has made so much of a difference in the lives of so many people."

According to a report released Thursday by the Education Department that Reading First doesn't actually make a difference:

  • On average, across the 18 participating sites, estimated impacts on student reading comprehension test scores were not statistically significant.
  • Average impacts on reading comprehension and classroom instruction did not change systematically over time as sites gained experience with Reading First.


Posted by Craig Jennings, 12:25:49 PM



Thursday, May 01, 2008

Op-Ed Dismissive of Contractor Oversight, Calls for More Contractors

WaPo published an op-ed Monday in which former senior Department of Defense officials Dov S. Zakheim and Lt. Gen. Ronald T. Kadish (Ret.) note a recent GAO report that finds massive cost and schedule overruns in weapons acquisitions by the Pentagon. The report implicates a degradation of competition between contracting firms resulting in, according to Zajheim and Kadish (ZK, hereafter), "a kind of 'design bureau' competition, similar to what the Soviet Union used."

After complaining about an Air Force tanker project won by EADS, a European defense contractor, ZK conclude that what's really needed to curtail waste, fraud, and abuse in military contracting is increased competition in the defense market spurred by an increase in domestic defense firms. Without really explaining why, they also claim that "[m]ore regulations and bureaucratic restrictions on contractors are not the answer."

Although the consolidations helped contractors survive the spending cuts, they now threaten to undermine the industry. That's because many in Congress and at the Pentagon want to impose stricter oversight and controls on weapons manufacturing and development while simultaneously demanding more competition -- driving the system to an immature and evolving "globalized" marketplace.

Here's the thing though: Better oversight and better procurement practices may not "fix the problem," but because of the nature of the defense "market," it may be the government's only tool to increase acquisition value.



Read more...

Posted by Craig Jennings, 11:08:38 AM



Wednesday, April 30, 2008

First Jackson, Now Lurita Doan Falls

The long saga of General Services Administrator Lurita Doan has finally come to an end - the White House fired her yesterday. We have posted extensively on Doan's short tenure at the GSA on this blog, in our press room, and in the Watcher as well. It seemed there just was never enough print space to truly capture all the corrupt, illegal, and unethical behavior of Ms. Doan (also see here, here, here, and here).

My only question at this point is, why was she fired now? It's been 11 months since the independent Office of Special Counsel recommended to President Bush that Doan be fired for blatant violations of the Hatch Act - which prohibits the use of federal resources for partisan political activities. It certainly does seem like strange timing, but I suppose I should stop being surprised by the bizarre actions of this administration.

It is time to say farewell and good luck to Administrator Doan. Thanks, Ms. Doan, for wasting our money, helping out your friends with no-bid contracts, hiding the truth by interfering with oversight investigations, attempting to intimidate an Inspector General's office, violating federal law, keeping us entertained at many congressional hearings with your poor memory and shifty ways, and generally, making life interesting here at this watchdog organization. You certainly weren't dull.



Posted by Adam Hughes, 09:11:18 AM



Monday, April 28, 2008

Wesley Snipes Gets Three Years for Tax Evasion

On Friday, actor Wesley Snipes was sentenced to three years in prison for failing to pay federal income taxes for close to ten years. Snipes could have been sentenced to up to 16 years if he had been convicted of all charges, but he was not convicted of tax fraud and conspiracy back in February. He owes close to $20 million according to the IRS. Snipes maintains he was dupped, but the judge thought otherwise:

But U.S. District Judge William Terrell Hodges said Snipes exhibited a "history of contempt over a period of time" for U.S. tax laws, and granted prosecutors the sentence they requested — one year for each of Snipes' convictions of willfully failing to file a tax return from 1999-2001.

The Snipes case is the highest profile tax evasion prosecution since the billionaire Leona Helmsley was convicted of tax fraud in 1989.



Posted by Adam Hughes, 09:24:58 AM



Thursday, April 24, 2008

Feds Return Virtual Border Fence to Boeing

Here's a short item reported ($) in CongressDaily yesterday afternoon that as escaped most mainstream media coverage. Apparently the federal government, specifically officials at the Customs and Border Protection office, have decided to scrap continued work on a brand new, $20 million virtual fence along the Arizona-Mexico border. The initiative, called Project 28, was awarded to Boeing, Inc., as part of a $67 million contract to provide advanced border protection technologies.

Project 28 has experienced repeated delays (in June 2007 and again in February 2008) due to technical problems and software glitches since it began about 18 months ago, and now that the government has accepted the program infrastructure from Boeing, it found out it doesn't work. The Government Accountability Office (GAO) has testified before Congress that the technology provided under the contract "did not fully meet user needs and the project's design will not be used as the basis for future" development of border protection technologies.



Does Boeing owe the government $20 million? Find out...

Posted by Adam Hughes, 05:45:15 PM



Monday, April 21, 2008

SCHIP Rules Imposed in 2007 Violated Law

The Government Accountability Office and the Congressional Research Service have concluded that rule changes imposed by the Bush administration on the State Children's Health Insurance Program (SCHIP) in 2007 violated federal law: BNA reports:

In legal opinions released April 18, the Government Accountability Office and the Congressional Research Service said the SCHIP guidance is a rule for purposes of the Congressional Review Act (CRA) and so violates statutory requirements for congressional notice and review.

The Congressional Review Act was passed in 1996 and serves to keep Congress informed of rulemaking activities at federal agencies and makes sure those rules are submitted to Congress and the Comptroller General before they take effect. In this case, the SCHIP rules were published and used to deny a request by New York State to expand its SCHIP coverage to children from higher-income families (up to 250 percent of poverty, or $44,000 for a family of 3).

Unfortunately, $44,000 isn't a lot of money for a family of three in many parts of New York State, particularly NYC. Come to think of it, that isn't a lot of money for a family of three in many parts of the United States. Considering the prices of health care these days, restricting access to SCHIP for families in NY was an unfortunately decision from the Bush administration. This latest development gives some hope that it can be overturned.

Read the Opinions:
GAO Opinion
CRS Opinion

Posted by Adam Hughes, 09:37:46 AM



Wednesday, April 16, 2008

House Committee Approves Contractor Fraud Loophole Fix

By a voice vote, the the House Oversight and Government Reform Committee approved a bill (HR 5712) that would close a loophole in the Federal Acquisition Regulation (FAR) that excuses federal contractors working overseas from reporting fraud. The loophole was inserted into the federal procurement rules and was published in November of last year as part of a contracting oversight measure. Called a "drafting error" by GSA chief acquisition officer David Drabkin, the loophole exempts companies performing federal contracts overseas from mandatory reporting of employee contract fraud.

For more background on (with hints of Administration shenanigans), see:

AP: Administration says contracting fraud loophole was mistake
Brattleboro Reformer: Official says fraud loophole was a mistake
GovExec: House committee approves bill to close contracting loophole
GovExec: Much-derided overseas contracting loophole to be closed


Posted by Craig Jennings, 06:07:41 PM



Monday, April 14, 2008

House Passes HR 4881 - Contracting and Tax Accountability Act of 2007

By a voice vote, the House approved HR 4881. The bill, the Contracting and Tax Accountability Act of 2007, if signed into law, would bar firms that are delinquent in paying their federal income taxes from obtaining federal contracts.



Posted by Craig Jennings, 04:58:10 PM



Friday, April 04, 2008

IBM Suspension Lifted

POGO's Scott Amey flags this update on the government's suspension of IBM from obtaining federal contracts:

WASHINGTON (AP) — The government has lifted a week-old ban that prevented IBM from getting new federal contracts in an exchange for an agreement from the company to drop its protest of an $84 million Environmental Protection Agency contract it lost last year.

...

The two sides on Thursday signed an agreement in which IBM agreed to withdraw its protest from the Government Accountability Office and drop any interest in competing for the contract. The company will also refund the EPA any attorneys fees and costs the agency paid to IBM in regard to the filing of the protest.

Amey notes the general implications for government oversight of contractors:

So after seven days, what have we learned? The EPA is now convinced that IBM is a responsible contractor. The government believes that public-private agreements (and the promises within them) go a long way in establishing contractor responsibility. The government's reliance on large contractors is a big factor in government decisions. And, the decision to lift IBM's suspension may have been different if this were a small business (see Ray Bjorklund's quote in today's AP story).

As many of you know, federal contracting is complex and imperfect. We are talking about big money, politics, profits, power, influence, "best value" and so many other factors--as recently witnessed in the Air Force tanker contract award, bid protest, and subsequent fallout. I hope that EPA's decisions were aimed at protecting taxpayers. Finally, I appreciate EPA's effort to hold a contractor and its employees accountable, however short-lived, as well as IBM's willingness to promise to do the right thing.



Posted by Craig Jennings, 04:11:07 PM




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