Transportation IG finds gaps in contractor enforcement
A new report from the Transportation Department's inspector general found that millions of dollars in stimulus funds have been awarded to companies that the department could have suspended from doing business with the government.
The audit, which reported that the Commonwealth of Kentucky awarded more than $24 million in Recovery Act contracts, found serious gaps in Transportation's suspension and debarment procedures, including reviews dragging on for more than a year, unclear guidelines and poor management oversight.
"Not only do these delays put DoT and other federal agencies at risk of awarding contracts or grants to parties who should be suspended or debarred, but they also create funding risks that could impact the effective and efficient use of funds -- especially those awarded under [the American Recovery and Reinvestment Act]," the IG said.
Auditors highlighted one case in which taxpayer funds might have gone to an ineligible contractor.
In September 2008, the IG recommended that the Federal Highway Administration (FHWA) suspend several companies and individuals who had been indicted in a bribery case. The company officers, who allegedly bribed state officials to obtain confidential state documents to determine bid estimates, were charged with conspiracy and obstruction of justice.
In July 2009, 10 months after the initial referral, FHWA suspended several individuals, although it did not punish their respective companies. In the meantime, officials in Kentucky had awarded those businesses a pair of multimillion-dollar stimulus contracts.
"With better communication between FHWA and Kentucky's Transportation cabinet regarding the forthcoming suspensions, the awarding of the ARRA contracts may have been avoided," the report said.
Linda Washington, Transportation's assistant secretary for administration, said there was not enough evidence to suspend the companies that won the Recovery awards. The FHWA, however, has asked the IG to provide additional oversight of the two contracts, she said in response to the IG report.
Washington added that many of the problems the IG cited already have been addressed. "[Federal Highway Administration] in particular has substantially ramped up the resources and management attention devoted to suspension and debarment cases and has already completed significant accomplishments in the area," she said.
The long delays in executing suspensions are not uncommon. Transportation guidelines, established in 2005, set a 45-day deadline for making a suspension and debarment decision. Department officials also have a five-day window for reporting suspensions to the General Services Administration, which manages the Excluded Party Listing System, a governmentwide database of banned companies.
But Transportation has not come close to meeting those deadlines. As of March 31, 2009, the average processing time for executing a suspension at the Federal Highway Administration, Federal Aviation Administration and Federal Transit Administration was 301 days. Only 30 percent of suspensions were executed within 45 days. Processing times for debarments were even worse, averaging 415 days, according to the report.
Department employees told the IG they thought the 45-day period was merely a goal for conducting research and providing recommendations.
One problem the IG cited is Transportation officials have an unnecessarily high evidentiary threshold in suspension cases. While Transportation rules state an indictment or conviction is sufficient, officials often performed extra time-consuming tasks, such as gathering additional information and research not required by department policy, the report said.
The Federal Highway Administration, which processes the majority of Transportation suspension and debarment cases, told the IG that these additional steps allow companies, many of which are small businesses dependant on the government for work, an opportunity to demonstrate why they should not be suspended.
In other instances, IG found that the suspension and debarment workload was considered collateral duty and staff often would be pulled away for other assignments.
Some cases have been pending for several years without action because Transportation officials lack the necessary follow-up procedures to close cases, investigators found.
For example, the Federal Highway Administration waited more than four years to close a case involving a contractor that pleaded guilty in May 2005 to conspiracy, bribery and unlawful storage of hazardous materials. Ultimately, the Environmental Protection Agency -- which also employed the firm -- debarred the company and its principals in mid-2007.
According to a Federal Highway Administration suspension and debarment official, the case "slipped through the cracks." In September 2009, 27 months after EPA's debarment, the FHWA closed the case.
Meanwhile, nearly half the suspension and debarment decisions the IG reviewed were not entered into the Excluded Party Listing System within the required five days. The IG found 14 cases that took more than 100 days to be added to the database and one case that took a whopping 864 days.
In one case, the Federal Transit Administration failed to provide documentation until March 2007 on a business and four individuals it debarred in November 2006. According to FTA officials, staff misplaced paperwork on these decisions. No single office is responsible for managing the agency's suspension and debarment program.
The IG recommended that Transportation strengthen and revise its internal controls and modify its corresponding data systems. The department agreed with the recommendations.