Pentagon issued millions in contracts to suspended and debarred vendors

The Defense Department issued contracts worth nearly $5.4 million to federally suspended and debarred contractors between fiscal 2006 and fiscal 2009, according to a Pentagon report released on Wednesday.

The report found Defense awarded five suspended contractors $3.4 million and 11 debarred contractors nearly $2 million. In some of these cases, department officials knowingly continued business with these contractors to "ensure mission accomplishment and for safety and mission requirements," the report noted.

In other instances, the report said, contracting officers neglected to check the Excluded Parties List System -- a database of all suspended and debarred contractors -- before making orders. "There is often a few days' lag time between the time a vendor is debarred and the notice is posted to the EPLS list. Generally, when the contracting activity became aware of the suspension or debarment, the funds were deobligated," the report said.

Additionally, the report found 30 federal contractors were criminally convicted of fraud between fiscal 2006 and fiscal 2009. Of those, only 14 were debarred and three were suspended.

Sen. Bernie Sanders, I-Vt., who commissioned the report as a provision of the fiscal 2010 Defense Appropriations Act, released the findings Wednesday. "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," Sanders said.

Forty-three contractors were suspended and 164 contractors were debarred for "fraud-related activities" during the three-year period, the report stated. During the same time, Defense awarded $19.2 million to contractors after their debarments and suspensions expired, as allowed by law.

"Suspensions and debarments are not permanent preclusions from government contracting and should not be used by the government as punishment," Professional Services Council Executive Vice President and counsel Alan Chvotkin said in a statement Thursday. "Rather they are prophylactic measures meant to protect the government from doing business with irresponsible actors. Thus, when those companies can demonstrate they are 'presently responsible,' such as by implementing corrective actions or paying fines, it is appropriate for the government to lift any ban so it may avail itself of every possible solution on the market to meet its missions."

This problem is not new. Nearly two years ago, the Government Accountability Office released a similar report, which said nearly two-dozen suspended and debarred vendors had been awarded contracts either because the government didn't consult the EPLS, or agencies willingly ignored a contractor's status for national security purposes.

"It is clear that DoD's current approach is not working and we need far more vigorous enforcement to protect taxpayers from massive fraud," Sanders said.

"DoD is very concerned about any fraudulent activity on the part of its contractors," the department said in a statement Thursday. "In addition to the criminal, civil penalties and sanctions imposed by the courts, DoD has numerous contractual and administrative remedies available, including suspension and debarment, when it is determined that it is not in the department's best business interests to contract with a particular company." Defense declined to comment further.

The report recommended Defense provide "additional guidance and training" on the EPLS to its contracting officers.

According to the report, Defense is hopeful the Federal Awardee Performance and Integrity Information System will improve its ability to avoid awarding suspended and debarred contractors in the future. FAPIIS is a database for contracting officers that combines the past five years of information on all federal vendors from a variety of disparate government records.

FAPIIS "responds to the continuing need for greater insight into potential contractor's integrity and business ethics," said the report, adding, Defense "needs to ensure that the contracting community utilizes that information in its award decision."

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