OMB sews shut overseas contracting loophole

OMB will remove from a proposed federal-contracting rule language that would exempt companies working overseas and other contractors from fraud-reporting requirements, Bush administration officials will testify Tuesday.

"I am inclined to favor the elimination of [the] exemptions," Paul Denett, head of OMB's Office of Federal Procurement Policy, says in testimony prepared for a House Oversight and Government Reform Management Subcommittee hearing.

The panel session is aimed at examining a so-called mystery loophole in a regulation requiring efforts to find and report fraud on contracts worth $5 million or more.

Denett and other officials will testify the overseas exemption, which has generated an investigation by the full House committee and bipartisan criticism from lawmakers, was inserted by mid-level federal officials during a normal drafting process. The rule was based on Defense Department regulations that contain similar exemptions.

On April 3, CongressDaily reported a senior procurement official who said the loophole would likely be eliminated. Despite the change of the proposed rule, Rep. Peter Welch, D-Vt., will continue urging a passage of a bill requiring that the rule cover overseas contractors, aides said.