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War-zone contractors subject to more suspensions, debarments

Apr. 17, 2012 - 06:13PM   |  
By SARAH CHACKO   |   Comments

Government officials say they have gotten more aggressive in suspending and debarring companies that misbehave or perform poorly on overseas warzone contracts, such as for reconstruction and military support.

Contractor suspensions, which can ban a company from receiving new contracts for up to 18 months, at the State Department increased from none in 2009 to 19 halfway into fiscal 2012, according to Patrick Kennedy, the department's undersecretary for management. Kennedy testified on the issue Tuesday before the Senate Contracting Oversight Subcommittee.

Debarments, which can stop new contracts for up to three years, also increased from none in 2009 to six so far this fiscal year, he wrote.

Contractor suspensions and debarments have ticked up in the last couple of years following criticism that the government is lax on poor-performing contractors, agency officials told the subcommittee.

U.S. Agency for International Development, which scarcely used suspension and debarment in the past, took 63 suspension or debarment actions in 2011, Michael Carroll, USAID's acting inspector general, said in written testimony.

For instance, USAID recently suspended the Washington-based Academy for Educational Development (AED), one of its largest contract and grant recipients, for most of 2011 after finding evidence of serious corporate mismanagement, misconduct and a lack of internal controls, Carroll said.

AED allegedly failed to follow federal regulations regarding competition, adherence to contract specifications, and supervision of its subcontractors under two cooperative agreements for development programs in Pakistan and Afghanistan, according to a Justice Department news release.

AED paid USAID $5 million last year to settle the claims, according to the release. Its suspension was lifted in November.

"The changes that USAID has implemented in the structure of its suspension and debarment program have reinforced accountability in development assistance," Carroll said. "In recent years, we believe that USAID has generally exercised appropriate discretion in applying suspension and debarment authorities."

State and USAID changed their practices after reports issued over the last two years by the Commission on Wartime Contracting in Iraq and Afghanistan showed agencies did not suspend or debar poor-performing contractors. The commission concluded in August that the government lost as much as $60 billion to warzone contract waste and fraud.

USAID created a compliance division solely to handle administrative action referrals, including suspension and debarment, Carroll wrote. The State Department created a suspension and debarment log to track actions, started regular meetings with Office of Inspector General investigators to ensure cases are handled quickly, and provided training on suspension and debarment to grants and contracting officers, Kennedy wrote.

Agencies discussed their suspension and debarment improvements during the hearing on legislation introduced by the subcommittee chairwoman, Sen. Claire McCaskill, D-Mo., that would require agencies to automatically suspend or debar companies from government work when they are indicted on civil or criminal charges of contract fraud.

State, USAID and Defense officials said they oppose McCaskill's proposal for automatic suspensions and debarments because it would remove the suspension and debarment official's discretion to look at a problem contractor's remedial actions and then decide if suspension or debarment is needed.

"We do not believe that automatic suspension that denies contractors due process is in the government's interest," Richard Ginman, director of Defense procurement and acquisition policy, said in written testimony.

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