The Government's Business

Article excerpt

AT GATHERING OF TOP LAW ENFORCEMENT OFFICIALS held during the peak of the 2002 corporate crime wave, President Bush proclaimed that his administration's efforts to crack down on corporate crime were "sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed and you will be punished."

But months before, Bush administration officials had sent corporate criminals a very different message: we're open for business.

In 2001, the administration quietly repealed a contractor accountability standard passed by the Clinton administration, which clarified Federal Acquisition Regulation (FAR) standards for "integrity and business ethics" that prospective bidders for federal contracts were required to meet.

Government officials admit that without the rule, specific decisions regarding suspension and debarment are left to individual agencies. Critics say the lack of a consistent standard has allowed politics to influence enforcement of acquisition regulations. The evidence for that, they say, is clear from the administration's debarment of a few infamous companies (e.g. Enron) at the same time that other, less notorious, corporate criminals continue to receive federal contracts.

"The debarment process is obviously broken, and we need to find a way to fix it," says Danielle Brian, executive director of the government-watchdog group the Project on Government Oversight (POGO).

According to a 2002 POGO investigation of top federal contractors, between 1990 and 2001 the top 10 federal contractors had 280 instances of misconduct and alleged misconduct and paid more than $1.97 billion in fines, penalties, restitution, settlements and cleanup costs. Four of the top 10 government contractors had at least two criminal convictions. Yet only one of the top 43 contractors was ever suspended or debarred from doing business with the government--in that case for just five days.

The year after the POGO study, in 2003, the Air Force barred three Boeing space contract units from federal contracts after company employees had been caught with thousands of proprietary documents stolen from rival Lockheed Martin. Although it was one of the largest government sanctions ever against a military contractor, it only applied to the specific Boeing divisions involved. Industry analysts say the lost contracts represent less than 1 percent of the giant contractor's projected revenues through 2009.


When the FAR rule was first proposed, business leaders such as the U.S. Chamber of Commerce attacked it as a draconian "blacklisting" standard that threatened "the interests of American workers" [see "Controlling Corporate Scofflaws or Blacklisting?" Multinational Monitor, July/August 1999].

Yet a GAO investigation released in 2002 found that only 39 of 17,000 contractors awarded new contracts during 2000 might have been captured by the rules for violating one or more federal laws between 1997 and 1999.

"Suspension from government procurements is appropriate where adequate evidence shows that a company or person has committed misconduct related to business ethics and integrity, or other irregularities relevant to their present responsibility, and where a pending investigation or legal proceeding is examining those questionable activities," the GSA announced when it banned Enron and its accounting firm Arthur Andersen from federal contracts in March 2002, prior to the accounting firm's June 2002 conviction for obstruction of justice.

If anything, the repeal of the FAR rule has increasingly politicized the procurement process by reverting to the vague provisions that stood before the rule was enacted.

In May, for example, Public Citizen challenged a Department of Defense decision to grant an exclusive $36 million electricity contract to Reliant Energy for Andrews Air Force base and Walter Reed Army Medical Center while the company was under indictment for its role in creating the California energy crisis. …