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Home :  Federal Budget & Tax : 
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Wednesday, May 23, 2007

More Bad News for Head of GSA

This has not been a good week so far for the leader of the General Services Administration. Additional information on problems at GSA have catapulted Administrator Lurita Doan back into the headlines - and the news isn't good.

First up, Federal Times reported yesterday that the Office of Special Counsel has concluded in a forthcoming report that Doan violated the Hatch Act - a federal law that prohibits federal employees from partisan political activities while on the job. Apparently Doan participated in a January 26 lunch meeting with other political appointees where Scott Jennings, the White House deputy director of political affairs, gave a PowerPoint presentation that included slides listing Democratic and Republican seats the White House viewed as vulnerable in 2008, a map of contested Senate seats and other information on 2008 election strategy. Doan made statements at that meeting about trying to use GSA resources to help "our candidates." Doan has until June 1 to respond to the report before it is made public, after which the report will be sent on to the president with recommendations that could include suspension or termination.

As if this wasn't bad enough for Doan, the Washington Post published a superb article on problems with contracting policies at the GSA that are costing the Federal government hundreds of millions of dollars every year. The key passage from the article:

"This has been a scandal of great proportions," said David E. Cooper, until recently the director of acquisition and sourcing management at the Government Accountability Office, the investigative branch of Congress. "Our work and the work by the Defense Department inspector general and the GSA inspector general all show hundreds of millions, if not billions, that has been wasted."

While this issue may be larger than Doan, it surfaced because of reports that Doan used her influence last summer as GSA Administrator to renew a contract with Sun Microsystems despite the fact that many within the GSA had evidence that the company was significantly over charging the government. Despite ample evidence that Sun had not only over charged the government in the past, but would continue to over charge if the contract was renewed, Doan pushed to finalize the new contract. In fact, senior GSA officials went through three different contracting officers (Herman S. Caldwell Jr., then Mike Butterfield, and finally Shana Budd) before negotiations on the contract could be finalized. It is unclear if Doan had any direct involvement with those personnel changes, but it is clear that the first two officers had serious reservations about moving forward with the contract that Doan seems to have ignored.

Like any good Bush Administration appointee, Doan is unapologetic and claims no responsibility for inappropriate, unethical or illeagal behavior. She testified in March of this year that the agency made a good decision on behalf of taxpayers by renewing the contract with Sun Microsystems.



Posted by Adam Hughes, 03:55:35 PM



Statement, Hearing on IRS Privatization

OMB Watch contributed this statement to a hearing on the IRS private debt collection program.

At the hearing, which was held by the full House Ways and Means Committee, Rep. Charlie Rangel asked acting commissioner of the IRS Kevin Brown to not issue any more contracts to private debt collectors. Commissioner Brown did give a clear response, but Rep. Rangel seemed intent on reaching a compromise with IRS that contained the size of the program, making it unnecessary to immediately pass legislation that would end it.



Posted by Matt Lewis, 03:00:57 PM



Friday, May 18, 2007

You Might Have Thought I Was Done Talking About Contracting, But You'd Be Wrong

One thing lacking from the last couple of posts on privatization was good old-fashioned data. Well, here's one place to start- a thoughtful analysis of a couple of cases studies where local and state services were privatized. Apparently, privatizing certain services turned out to be much more expensive than when government did the work.

How come? First, contracted services can be complex (emph. mine).



Read More...

Posted by Matt Lewis, 10:15:36 AM



Thursday, May 17, 2007

More Deep Thoughts on Contracting

I wanted to revisit a post I did on contracting earlier this week. The point I was trying to make is that it's often assumed that everything government can do, the market can do better. So if it's feasible to outsource something, you should do it, because you'll save the taxpayer money.

So why exactly is the market superior? Well, I went digging through one of my favorite books from college- Charles Lindblom's The Market System. Here's what he says:



More on Contracting...

Posted by Matt Lewis, 04:15:04 PM



Tuesday, May 15, 2007

Comment on the CAP Contracting Report

A quick comment on the CAP report- it focuses on the surge in non-competitive contracts. But non-competitive bids are just the most obvious example of how market forces are not being applied in government contracting. The most damning observation that the CAP report makes is that even if these bids were competitive, the work wouldn't be done efficiently. Agencies need resources to hold contractors accountable, but they often don't have them. Congress needs to fulfill its constitutional role to conduct oversight, but often it doesn't. And sometimes contract oversight is being done by contractors, too. But who keeps them honest?

The upshot here is that price competition is not strong enough in government work to promote efficiency by itself. The principle virtue of the market- the capacity of the "invisible hand" to efficiently allocate resources- does not automatically pertain to government contracts. Agencies have to make an active effort to ensure that contractors do their job. That takes money- more money than might be saved by contracting out. So economy is not a self-evident reason to outsource government work.

The onus is on the contractors to show that, taking all costs into account, they do a better job than government workers. That hasn't been proven definitively, despite the ample evidence available since the surge in contracting began in 2000. Until that happens, it would seem that efficiency alone is insufficient ground on which to consider outsourcing government work.



Posted by Matt Lewis, 12:13:13 PM



CAP on Contract Reform

The Center for American Progress has a comprehensive new report on government contracting and how it could be reformed.

Selling products and services to the federal government has become an enormous industry in the United States. In 2005, federal contracts represented about 3 percent of U.S. gross domestic product, making it approximately the same size as the entire automobile industry, including the sale of imported cars and auto parts. Insuring that the government maintains a fair, open, and competitive market for the goods and services it purchases is important not only for maintaining the quality of key government services and minimizing their cost but also for setting ethical and performance standards that affect the broader economy.



Posted by Matt Lewis, 10:46:46 AM



Friday, May 11, 2007

New Report on Abusive and Wasteful Contracting Practices

In a new report to be released next Monday, the Center for American Progress details the horrendous state of the federal contracting process. The report examines what is presently known about the potential size and scope of wasteful and corrupt contracting within the federal government, provides the new Congress with useful guidance for developing a broader understanding of the problem, and outlines some steps that might be taken to restore greater transparency and accountability to the use of public funds in the procurement process.

The Washington Post reported this morning on the steep rise in non-competed, or no-bid contracts over the last 6 years - something we've noted using data from FedSpending.org. In fact, between FY 2000 and FY 2005, contracts that were not competed have increased over 110 percent, and contracts that had open competition but received only one bid have increased over 119 percent.

What's more, The Hill newspaper reported today that Henry Waxman, the House Oversight and Government Reform Committee chairman, is widening his investigations into contracting abuse at the Pentagon. Seems like the Center for American Progress report is coming out at just the right time.



Posted by Adam Hughes, 01:43:28 PM



House Passes Small Business Contracting Bill

Yesterday, the House of Representatives overwhelmingly passed by a vote of 409 - 13 a bill designed to increase the percentage of federal contracts awarded to small businesses and limit the bundling of small projects and work orders into gigantic contracts. The White House declared their opposition to H.R. 1873 earlier this week, but stopped short of saying President Bush would veto it should it reach his desk. That's a pretty good thing since the vote in the House is more than enough to override a veto by the president.

After the House Small Business committee approved the bill on April 24, it was sent to the Oversight and Government Reform committee, where a number of the bill's provisions were scaled back or weakened. Before the bill was passed on the floor however, amendments were adopted to restore the original version approved by the Small Business committee. This version would increase the federal government small business procurement goal to 30 percent.

The Senate Small Business committee is reported to be drafting similar legislation.



Posted by Adam Hughes, 11:20:01 AM



Thursday, May 10, 2007

House to Bar Tax Delinquent Companies from Contracts

In one of the more common-sense moves of the 110th Congress, the House Oversight and Government Reform Committee, Subcommittee on Government Management, Organization, and Procurement unanimously approved a bill yesterday to prevent companies who owe federal taxes from being considered for government contracts. The bill (H.R. 1870) would target companies that owe at least $2,500 and have not paid the IRS or started a payment plan within 180 days of getting an assessment.

During the mark-up, the bill's sponsor and subcommittee chairman Rep. Edolphus Towns (D-NY) offered an amendment that would help assuage concerns expressed by the Bush administration during hearings on the bill. The amendment would change the bill to incorporate the tax deliquency provisions into the regular contracting process. This change would still bar companies who owed taxes from receiving new contracts from the government, but would grant those companies due-process rights and opportunities to contest the government decision to bar them. Seems fair enough.

The bill moves now to the full House Oversight and Government Reform committee, where it may encounter opposition ($) from ranking member Rep. Tom Davis (R-VA), who apparently thinks it's alright for companies not to pay taxes.





Posted by Adam Hughes, 11:18:13 AM



Friday, May 04, 2007

BudgetBlog - Now in RSS!

If you use a newsreader, you can subscribe the BudgetBlog. You can find the feed here.

RSS? What's that?



Posted by Craig Jennings, 12:37:05 PM



Thursday, May 03, 2007

Temporary New Head of the IRS

A spokesman at the IRS announced yesterday that Deputy Commissioner Kevin Brown will become acting IRS commissioner May 4. Current Commissioner Mark Everson has accepted a position heading up the American Red Cross (see here and here for more on Everson's departure).

In much the way a senior in college decided to go to graduate school to put off a decision about what to do with their life, the IRS said Brown would only be the acting commissioner for 25 days. For him to continue beyond that time would require White House approval.

I don't know much about Kevin Brown (other than that I believe he pitched for a time for the Rangers and Dodgers and had a wicked sinker), but he has previously served as both counsel and then commissioner of the Small Business/Self-Employed Division at the IRS, which employs almost 44,000 workers and oversees the compliance programs for all individuals and small businesses. It serves 45 million taxpayers.

Brown has also served as chief of staff to Everson, and joined the IRS in 1998 as Assistant to the Commissioner. He also participated in advising the agency during the Restructuring and Reform Act of 1998.

At this point, there is no reason to believe that the White House will not approve of Brown's permanent appointment to be the IRS commissioner.



Posted by Adam Hughes, 09:31:33 AM



Wednesday, May 02, 2007

All You Ever Wanted to Know about Public Infrastructure Privatization

Business Week has an interesting article on public infrastructure privatization...

Steve Hogan was in a bind. The executive director of Colorado's Northwest Parkway Public Highway Authority had run up $416 million in debt to build the 10-mile toll road between north Denver and the Boulder Turnpike, and he was starting to worry about the high payments. So he tried to refinance, asking bankers in late 2005 to pitch investors on new, lower-interest-rate bonds. But none of the hundreds of investors canvassed was interested.

Then, one day last spring, Hogan got a letter from Morgan Stanley (MS) that promised to solve all of his problems. The bank suggested Hogan could lease the road to a private investor and raise enough money to pay off the whole chunk of debt. Now Hogan, after being inundated with proposals, is in hot-and-heavy negotiations with a team of bidders from Portugal and Brazil. "We literally got responses from around the world," he says.



Posted by Matt Lewis, 05:28:23 PM



Tuesday, May 01, 2007

IRS Privatization Debate Heats Up

Sens. Byron Dorgan (D-SD) and Patty Murray (D-WA) released a "Dear Colleague" letter, or a message between representatives, in favor of S. 335, a bill that would end the IRS private debt collection program.

The letter is part of the congressional war of words over the bills that would end the IRS program. Sen. Chuck Grassley (R-IA) and Rep. Bart Gordon (D-TN) have sent letters defending the program. Here's Grassley's letter, and here's the first and second part of Gordon's letter.

It doesn't seem random that these two legislators are taking up the charge to support this wasteful, risky program. One of the two private debt collectors whose contract has been renewed -the CBE Group- is based in Iowa. And Rep. Gordon's 2006 campaign received $2,000 in contributions from employees of Pioneer Credit, Inc- the other private debt collector whose contract has been renewed.



Posted by Matt Lewis, 05:19:20 PM




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