Contractors resist US disclosure effort

Database lists fraud and shoddy work

SENATOR BERNARD SANDERS The Vermont independent said the public has a right to know when taxpayer dollars are being misspent or improperly used. SENATOR BERNARD SANDERS
The Vermont independent said the public has a right to know when taxpayer dollars are being misspent or improperly used.
By Bryan Bender
Globe Staff / August 30, 2010

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WASHINGTON — Defense companies and other major industries are hoping to block disclosure of their own fraudulent or substandard performance in federal contracts, despite a mandate this year by Congress that such potentially embarrassing information be released to the public.

Sensitive to concerns raised by the companies, the White House has delayed enacting the little-known disclosure provision while it studies the issue, officials said.

The controversy highlights the extent to which efforts to make the government more transparent often garner bipartisan support but then stall in the face of powerful interests seeking to limit public disclosure.

The White House, in a statement, acknowledged that “there will be legal and practical issues’’ that have to be addressed before the new law can be implemented.

“But we intend to do that as quickly as possible, in keeping with the administration’s commitment to increasing transparency in government contracting,’’ said Meg Reilly, a spokeswoman for the White House Office of Management and Budget.

At issue is a database that is cur rently kept secret, called the Federal Awardee Performance and Integrity Information System. Companies are required to fill the database with information about their failures on federal contracts, including civil, criminal, and administrative findings against them.

The database was established in 2008 for the private use of government officials who oversee contracts, but was not intended to be made public.

Contractors complain that disclosing all that information could lead to the unfair use of damaging information by watchdog groups, the media, and their rivals.

But Senator Bernard Sanders of Vermont, an independent who managed this summer to win a disclosure provision in a war spending bill that was signed by President Obama, said the public has a right to know when taxpayer dollars are improperly used or criminally misspent.

“We hand out over $500 billion a year to federal contractors, many of which have well-established histories of systemic illegal, fraudulent, and incompetent behavior,’’ Sanders said in a statement. “We cannot let these corporations continue to rip off American taxpayers. I strongly expect that this new public awareness will go a long way toward putting an end to handing out taxpayer-financed contracts to corporations with a history of fraud.’’

The disclosure requirement marks a major victory for government watchdog groups, which have long maintained that billions are lost to fraud or shoddy work. One group, the Project on Government Oversight, identified $12 billion paid in fines by federal contractors between 1995 and 2006, an indication of serious problems with many contracts.

More than a dozen groups, in a letter to congressional committees, hailed the provision “as a major advance in contractor accountability and transparency.’’ The groups have also lauded Sanders, who identifies himself as the only socialist in Congress and often has difficulty getting congressional backing for his proposals.

“This is one area where he has succeeded in forcing open the government,’’ said Danielle Brian, executive director of the Project on Government Oversight. “This is a major achievement.’’

In March, before the measure was passed, Obama supported the concept. “We’ll be able to see, before any new contract is awarded, whether a company plays by the rules, how well they’ve performed in the past,’’ Obama said at the time. “Did they finish the job on time? Did the company provide good value? Did the company blow their budget?’’

Within days of Obama signing the war funding bill, industry groups began urging the administration to exclude some information they contend could be damaging.

For example, they fear that data on criminal or civil proceedings for contract violations or private agreements they reached to avoid being suspended for lack of performance could give their competitors an unfair advantage or spark public pressure to blacklist vendors that should otherwise be qualified bidders.

Companies are required to submit information about civil, criminal, or administrative proceedings connected to a government grant or contract or a finding of liability of more than $5,000. They have to identify each federal contract or grant that was terminated for default and report any agreements reached to avoid a possible suspension or other action for violations.

“There is an incredibly broad category of information being collected,’’ said Peter Eyre, a contract attorney at Crowell Moring, a Washington lobbying firm that represents companies as diverse as Diebold, Oracle, Dow Chemical, and Industrial Defender in Foxborough.

For example, the database is supposed to include information such as a construction company’s workers’ compensation claims, something that may have no relationship to the firm’s ability to complete a contract but could sway the outcome of a government bidding competition, especially if that information is made public.

Others argue contractors should not have to reveal potentially self-incriminating information, such as explanations for alleged contract violations.

“Companies don’t have a Fifth Amendment right against self incrimination,’’ said John Chierichella, a contract attorney at the lobbying firm Sheppard, Mullin, Richter, & Hampton, which represents defense contractor General Dynamics and oil shipping conglomerate United Maritime Group, among other clients. He also said the government has multiple agencies responsible for investigating contractor fraud and abuse. “This is just the government asking contractors to do its job.’’

Alan Chvotkin, executive vice president of the Professional Services Council, a trade association that represents government contractors, believes the database will make “factoids available out of context’’ that could be unfairly used to bar a prospective bidder.

Other powerful industry voices opposed the creation of the database in the first place, including the National Defense Industrial Association, whose president told lawmakers this year that the information required for the database “appears to undermine the fundamental principles of due process.’’

Bryan Bender can be reached at