Lax Debarment Actions Put Taxpayers in Double Jeopardy

0 Comments | Insight on the News, Sept 25, 2000 | by Sean Paige

Today it's become commonplace to hear or read of this company or that company, big as well as small, caught in the act of tipping off the government through some means or another. It's also fairly well-known that one way the government can retaliate against such companies, in addition to prosecuting them criminally or slapping them with a lawsuit, is simply barring them, on a temporary or permanent basis, from continuing to do business with the government.

But what was less well-known -- at least until some good investigative work by the Associated Press, or AP, is how rarely such "debarments" are being employed against companies that have a demonstrated history of cheating the taxpayers and how easily companies that have been debarred can get around the sanction and maintain their access to the governmental gravy train.

Hundreds of companies that have been prosecuted or sued for cheating the taxpayers, sometimes on multiple occasions, continue to receive government contracts, and some even have gained new contracts, according to the AP, because agencies either declined to debar them from doing government business or ignored earlier debarment actions. The offending companies range from one in Texas that sold the government faulty aircraft windshields for use on Coast Guard jets to an environmental cleanup company found guilty of falsifying labwork and bribing foreign officials.

An AP computer analysis found 1,020 companies that were sued or criminally prosecuted for defrauding the government during the last five years -- 737 of which avoided debarment and remained eligible for future government business. According to the AP, corporate offenders avoid debarments, or slip past them, because some agencies take a harder line against offenders than others, while others have grown as dependent on contractors as contractors are on them.

While the Department of Interior may bar a handful of companies every couple of years, and usually only for the most egregious acts of fraud, the Department of Veterans' Affairs has debarred about 700 companies and "aggressively audits" its contractors, according to the AP. The Department of Defense has trouble banning certain companies from government contracts, even if they get caught with their hands in the cookie jar, because they may have specialized abilities or facilities that are deemed critical to national security -- a problem worsened by the winnowing and consolidation of defense contractors since the Cold War's thaw. Some health-care companies get a free pass because the federal agency getting cheated worries that patients of the debarred company might suffer as a result of it.

And as one might expect, small-time offenders experience debarments more frequently than big-time because the latter have the lobbyists and lawyers.