DoD contracts went to excluded vendors

By Jared Serbu
Federal News Radio

The Pentagon obligated millions of dollars in payments to contractors that were on lists of “excluded parties” because of previous fraud, a report made public Wednesday said.

The report, produced by the Defense Department’s office of the undersecretary of defense for acquisition, technology and logistics, found that between 2007 and 2009, DoD did business with at least 16 vendors who were either suspended or debarred at the time the funds were obligated. Congress mandated the report in the 2010 Defense appropriations bill.

The spending included nearly $3.4 million to five vendors who were suspended and almost $2 million to 11 debarred vendors.


DoD’s report explained that in some cases, contracting officers knowingly continued ordering from the excluded vendors “to ensure mission accomplishment and for safety and mission requirements.” In others, however, Defense officials failed to check the vendors against the governmentwide Excluded Parties Listing System.

“The Federal Acquisition Regulation was misinterpreted and/or training was inadequate with regard to EPLS – an issue subsequently addressed by commanders,” the report stated.

The report found that DoD and the justice system have adequate remedies to pursue and prosecute contractor wrongdoing, but said the review that led up to the report revealed the need for new guidance on EPLS within the DoD contracting community.

The report stated that the director of Defense Procurement and Acquisition Policy’s new guidance also will include instructions for using the new Federal Awardee Performance and Integrity Information System (FAPIIS).

Sen. Bernie Sanders (I-Vt.), who inserted language into the 2010 Defense spending bill mandating the report, made the information public. He seized on the report’s broader revelation that DoD had continued contracting with companies who had been subject to criminal or civil fraud judgments at some point.

The report found that DoD spent $345 million on payments to vendors that had been criminally convicted during the three-year period, $4.9 billion to vendors with civil judgments against them during that time and nearly $46 million to contractors that had reached out-of-court settlements related to fraud.

“With the country running a $14 trillion national debt, my goal is to provide as much transparency as possible about what is happening with taxpayer money,” Sanders said in a statement. “The sad truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money.”

The government in recent years has been aggressive in combating fraud. The Small Business Administration suspended GTSI for small business contracting violations.

The Environmental Protection Agency suspended IBM in 2008 as well for alleged procurement integrity violations.

DoD said its Panel on Contracting Integrity would examine the new report and make further recommendations to Defense leadership based on their review.

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