Fraud, Failure No Deterrent to Federal Contract Awards

Media Contacts
Jenny Levin

Companies with immediate past histories of shoddy work and fraudulent practices still receive billions of dollars in federal contracts, according to a new report by the Maryland PIRG Foundation.

The report, Forgiving Fraud and Failure: Profiles in Federal Contracting, highlights nine representative examples of new, often no-bid contracts that were granted to companies with recent records of questionable performance.  Maryland PIRG Foundation report cites secretive practices, lax oversight, weak rules and lack of competition for the problems uncovered by the study.

In each of the cases profiled, companies received new contracts during or shortly after having negotiated settlements in cases of poor performance.  In several instances, contracts were actually awarded with less competition after problems surfaced than before.

“Yesterday’s congressional hearings involving the private security contractor Blackwater USA raised serious questions of accountability,” said David Kosmos of Maryland PIRG Foundation. “But whether the questions are about Blackwater, data breaches involving Unisys, or the contractors cited in the report, we should understand that these are not isolated events.  Congress must see the forest for the trees and pass systemic reform.”

Last year, Senator Barack Obama (Ill.) and Senator Tom Coburn (Okla.) championed a critical first step in opening up the contracting process.  They sponsored the Federal Funding Accountability and Transparency Act to establish a publicly accessible, searchable, online database of information on federal contractors. 

“The Federal Government spends billions of dollars on federal contracts with weak and sometimes no oversight.” said Senator Obama. “We have to shine more light on the ways of Washington and make sure public funds are used to further national interests rather than undermine them.  I applaud efforts to open government contracting to public scrutiny. The American people have a right to expect transparency and accountability.”

“Taxpayers have a right to know whether their dollars are being used efficiently and effectively.  This is an important report that sheds light on contracting abuses, which are far too common in the federal government,” said Senator Coburn, M.D.

Problems were found across the board and were not isolated to any particular agency. Questionable contracting decisions included:

  • purchases by the Army, Navy and Air Force for equipment from contractors that had previously delivered faulty or untested equipment;
  • purchases by the IRS for data management and security from companies that had recently experienced serious data breaches; and
  • purchases by the Federal Emergency Management Agency for relief efforts after Hurricane Katrina from companies that had recently been charged with defrauding the government.

“These examples show a pattern of turning a blind eye to serious problems when spending public funds,” said Kosmos.  “Fool me once, shame on you.  But these federal agencies have been fooled more than twice.  Shame on them for allowing the abuses to continue.”

Federal contracting cost taxpayers $422 billion last year, according to the report. Purchases ranged from goods and services for the Iraq war to hurricane relief efforts along the Gulf Coast.  Contracting has become the fastest growing portion of federal discretionary spending.

The report recommends taking immediate steps to establish accountability in the contracting process including: increasing disclosure of contract information; increasing competition; and strengthening the rules to screen bad actors.