Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Wednesday, May 28, 2008

Pentagon IG Report Exposes Cost of Contracting

The good folks at POGO have come into the possession of one Defense Department Inspector General's report published in March of this year.

This report was at the center of a congressional hearing that was commented on by Stan Collender in a blog post (and WaPo story) we flagged yesterday.

And according to the report:

The rapid growth of the DoD budget since 'FY 2000 leaves the. Department increasingly more vulnerable to the fraud, waste, and, abuse that undermines the Department's mission. At the same time, our ability to adequately cover high-risk areas and Defense priorities has become strained due to the fact that our staffing levels have remained nearly constant during this period while the nation's annual defense costs have grown from less than $300 billion to more than $600 billion.

The report underscores the fact that as fantabulous as privatizing government may appear to be (with the Magic of the Market_® and all), it requires a certain level of oversight or money starts getting disappeared. This nontrivial cost of oversight is all to often overlooked (intentionally and not) by proponents of outsourcing and privatization. While outsourcing government work to private firms may save a few bucks, it's entirely possible that the cost of oversight -- either of hiring contract officers or of "lost" funds -- exceeds the benefits.

Posted by Craig Jennings, 11:59:58 AM

Tuesday, May 27, 2008

House Launches "Fighting Contracting Abuse" Caucus

CongressDaily is reporting ($) that a few members of the House of Representatives are forming the "Smart Contracting Caucus" to pursue what Rep. Tom Davis (R-VA) called "thoughtful federal procurement reform." But Dan Friedman at CongressDaily isn't buying the spin:

Davis was a contracting lawyer and is the House's top backer of government contractors concentrated in his suburban Virginia district. He has long pushed to make contracting with federal agencies simpler for businesses. Since the 2006 election, Davis has negotiated with House Oversight and Government Reform Chairman Henry Waxman and other Democrats to remove provisions from several House-passed contracting reform bills after they drew particularly vocal industry opposition. With Davis leaving Congress this year, the caucus appears in part an effort to institutionalize his role.

While I like that folks in Congress are paying more attention to the horrific problems we have in the federal procurement system (here's the latest), I'm not sure if Davis is the best person to be heading up this caucus. Considering his opposition at one point to legislation to prevent companies that owe federal taxes from being considered for government contracts, his original support of a spending transparency bill that did not disclose contracts data, and his support of the largest corporations regardless of whether they have broken federal contracting laws, it's probably good he won't be around next year. If he was, they would probably have to rename it the "Fighting Contractor Abuse" Caucus.

Posted by Adam Hughes, 07:32:38 PM

Friday, May 23, 2008

Congress Sends Bush Fair Share Act

When the Senate unanimously approved the Heroes Earnings Assistance and Relief Tax (HEART) Act (HR 6081) on Thursday, two days after the House approved it 403-0, it also approved a measure that would force federal contractors employing American workers through offshore shell companies to pay Social Security and Medicaretaxes. If signed by the president, the bill's enactment would result in hundreds of billions of in new revenues.

The provision is based on the Fair Share Act of 2008 (HR 5602). U.S. PIRG has been a champion of the measure, and OMB Watch had signed on to a U.S. PIRG letter urging Senators to approve the provision.

And score another victory for PAYGO! The Fair Share Act is one of three provisions that fully offset the $1.3 billion tax bill. This is real victory for the fiscally responsible and advocates of fair tax policy .

Posted by Craig Jennings, 01:05:38 PM

Wednesday, May 21, 2008

Senate Restricting Public Access to Contractor Data

The U.S. Senate is moving to restrict public access to a new contractor misconduct database, part of a new proposal being spearheaded by the Project on Government Oversight and Sen. Claire McCaskill (D-MO). Apparently there is bipartisan objection to the proposal within the Homeland Security and Governmental Affairs Committee. Scott Amey at POGO has the rundown:

Now, I can see, at worst, allowing certain information to be stored in a "government only" section of the database. But throwing a blanket of secrecy over the entire database is absurd. A large percentage of the cases included in the proposed responsibility databases are already publicly available in SEC filings and DOJ or agency press releases.

This doesn't sit well with POGO and an eclectic list of 32 other groups that support an open and transparent government. Hopefully, Congress will decide that the public deserves to see scofflaws' rap sheets. The public should have access to a government sponsored comprehensive list of contractors (similar to POGO's Federal Contractor Misconduct Database) that defrauded the government, violated laws and regulations, had poor work performance, or had their contracts terminated for default.

Also see this good article from this morning on the issue from Robert Brodsky at GovExec.com.

Posted by Adam Hughes, 05:37:16 PM

Jackson May Not Have Been Only Bad Apple at HUD

Carol Leonnig at the Washington Post wrote a great article over the weekend that gets further into the weeds on contracting problems at the Department of Housing and Urban Development under former Sec. Jackson. Leonnig profiles three small businesses that received huge jumps in the size of federal contracts they received over the last five or so years, often times despite objections of career contracting officers. It appears awarding contracts as political favors might have extended well beyond Jackson to many other high ranking officials at HUD:

Federal investigators are still sorting through HUD contract awards to friends of Secretary Alphonso Jackson, who resigned last month amid a criminal probe. But some career staff members and agency observers say problems in the agency's contracting process run much deeper than Jackson and involve officials who promoted certain companies while rebuffing concerns about their performance and qualifications.

The three companies profiled began as very small operations with little or no federal contracting experience. Harrington, Moran and Barksdale Inc. (HMBI) had no federal contracts until FY 2004, when they received over $71 million. During the Bush administration, HMBI was received almost $223 million in federal contracts, 80 percent of which were awarded without full and open competition. The other two companies, National Housing Group which received almost $52 million) and Drayton, Drayton, and Lamar, Inc. (which has been awarded about $32.5 million) have even worse records for competition. The National Housing Group received 92.2 percent of its funding without competition while Drayton, Drayton, and Lamar comes in at an astounding 98.6 perent without competition.

What is truly troubling about this story is that the career contracting employees at HUD who attempted to do the right thing on behalf of taxpayers were moved out of their positions after they raised objections, cited evidence of wrongdoing, or claimed political manipulation. In one case, not only were the claims of the 33-year veteran contract officer vindicated by subsequent investigations, but the company in question has had a principal employee charged with fraud related to the contract. The two contract officers who are profiled in the Post story retired shortly after being moved into policy positions.

HUD officials deny any wrongdoing in any of the cases cited in the Post article, instead blaming the contractors who they repeatedly attempted to favor through sole-source contract awards. HUD spokesman Jereon Brown contributed quite an understatement when he said "not all contractors perform as well as expected." As we have advocated before many times, what will help deter these types of instances is access to data on contractor performance and copies of the actual contract. Then we'll be able to judge for ourselves how well contractors are performing and how wise an investment various federal contracts are.

Wash Post: HUD Repeatedly Dismissed Staff Concerns About Contracts

Posted by Adam Hughes, 10:50:55 AM

Friday, May 16, 2008

Unions Boost Wages of Lowest-Income Workers the Most

Shawn Fremstad posted yesterday on a new paper released this month by John Schmitt over at the Center for Economic and Policy Research. The paper studies the impact unions have on income and has some interesting findings:

Using national data for 2003 through 2007, we estimate that unionization raises the wages of the typical low-wage worker (one in the 10th percentile) by 20.6 percent, compared to 13.7 percent for the typical worker (one in the 50th percentile), and 6.1 percent for the typical high-wage worker (one in the 90th percentile). The traditional statistical approach applied to the same data produces an estimate of the average union wage premium of 11.9 percent, which is substantially lower than the union effect on low-wage workers (20.6 percent) and somewhat below the effect for the median- wage worker (13.7 percent).

Read the full report.

Posted by Adam Hughes, 03:32:21 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

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

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

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