Government Executive - Authors - Steven L. Schooner

Viewpoint: Stop The Obstruction and Authorize the Transition

Steven L. Schooner — Thu, 12 Nov 2020 15:00:16 -0500

To ensure “the orderly transfer of executive power” following presidential elections, Congress devised a system “to provide transition support to the winning candidates well before absolute certainty is reached by the Electoral College [in] December.” Despite the widely confirmed outcome of the 2020 Presidential Election, Emily Murphy, the administrator of the General Service Administration is frustrating Congress’ intent by failing to “ascertain” that Joe Biden is the successful presidential candidate and refusing to authorize the presidential transition. She remains silent on when she will do so, and many fear she’ll stall until the Electoral College convenes on December 14.

Sure, GSA continues to provide the same limited administrative support that all presidential candidates enjoy. But that’s insufficient for the Biden Transition Team to commence the kind of planning and coordination necessary for a smooth transition and continuity in governance.

As precious days are lost, experts agree that nothing prohibits Murphy from ascertaining the apparent election winner. Meanwhile, Murphy’s failure has real consequences. The coronavirus is spiking, and the trendline is deeply disturbing. The economy is reeling. National security risks abound, and the incoming team cannot receive classified briefings. Important work needs to be done.

Transitions Matter

Despite public unfamiliarity with the infrequent and short-lived transitions, the process is as complex as it is important. The Partnership for Public Service’s Center for Presidential Transition explains that, since 1963, the Presidential Transition Act tasks GSA with phased responsibilities commencing more than a year before the election, through the conventions, and, most relevant at the moment, after the election (when there is a change in administrations). In addition to making space and funds available,

GSA also serves a[s] liaison between transition teams and the federal government … to ensure that a president-elect’s “beach-head” team is cleared to enter each agency and be on the job immediately after inauguration of the new president. …[A] senior career official … coordinates transition planning across agencies … [and] compile[s] a report on modern transitions and develop a transition directory with comprehensive information on the officers, organization, and responsibilities of each federal agency.

Staggering numbers of new governmental officials need to be selected, vetted, hired, and onboarded. As the Brookings Institution explained:

During the pre-inauguration period, most presidents-elect try to choose the members of the Cabinet and perhaps a few other nominees for prominent positions …. This is the most personalized and ad hoc phase of the personnel selection process, where the president is usually deeply involved….

[But after] the inauguration … the president’s attention is pulled elsewhere …. [and] simply cannot commit much time to the selection of thousands of people who will fill positions in the new administration.

Michael Lewis’ The Fifth Risk and former Office of Government Ethics director Walter Shaub’s account of the “calamitous and chaotic presidential transition” from President Obama to Trump, bemoan how badly Trump misunderstood and disrespected the transition process. So it’s no surprise that, on the way out, he would undermine his successor’s transition.

It’s Over: There’s No Credible Dispute

Congress clarified that certainty need not precede the GSA Administrator’s “ascertainment.” Rather Congress specified that: “The terms “President-Elect” and “Vice-President-elect” ... shall mean such persons as are the apparent successful candidates.” (Emphasis added.)

There’s no credible dispute that Biden and Harris are the “apparent successful candidates.” Despite President Trump’s unsubstantiated claims to the contrary, no major news sources, polling services, projections, or credible analysts acknowledge any significant voter fraud or election irregularities that should cause concern. The New York Times reported that “top election officials across the country said … that the process had been a remarkable success despite record turnout and the complications of a dangerous pandemic.” A team of international election observers, invited by the State Department, generally praised the election process (and criticized President Trump’s unfounded allegations, which could undermine public confidence in the process.)

Trump’s flurry of lawsuits appear to be, in Macbeth’s words, “sound and fury, signifying nothing” and unlikely to change the result. Many were promptly dismissed, while others featured campaign attorneys conceding that little or nothing supported their cases—there has been no evidence of fraud, improper influence, nor late ballot acceptance. Even Republican consultant Karl Rove conceded in the Wall Street Journal that: “the president’s efforts are unlikely to move a single state from Mr. Biden’s column, and certainly they’re not enough to change the final outcome.”

This Isn’t 2000

At this point, even the most informed defense of Murphy’s inaction amounts to “whataboutism.” Sympathizers and Trump supporters point to delayed transition leading up to George W. Bush’s electoral college victory in 2000. That’s thin gruel.

Paul Light understood the legislative history to suggest that the 2000 transition should have been green-lighted despite “an exceedingly close popular vote, and … only a few electoral votes” ultimately separating Bush and Vice President Al Gore. Similarly, in his exhaustive analysis of the 2000 transition, Professor Todd Zywicki agreed, asserting that even “under the facts of the 2000 presidential election, the [GSA] Administrator had no statutory authority to withhold the transition resources.”

But 2020 is no 2000, where a razor-thin and hotly disputed outcome in Florida, ultimately resolved by the Supreme Court, produced a final electoral college margin of 271-266. Current projections envision Biden enjoying a 306-232 margin, a seemingly insurmountable margin for error.

In 2000, fewer than 600 votes—out of more than five million cast—separated Bush and Gore in Florida. That’s close! In 2020, Biden leads Trump by more than 10,000 votes in Arizona and Georgia, more than 20,000 in Wisconsin and Nevada, more than 50,000 in Pennsylvania—and, while Biden is projected to win all of these states, none are individually necessary for him to prevail. In 2020, the national popular vote margin was less than 545,000 (with Gore, not Bush, winning the popular vote). Currently, Biden is projected to win the popular vote by more than 5 million votes.

Time Is Fleeting

Neither waiting for the Electoral College on December 14 nor expecting President Trump to embrace longstanding norms for an orderly transition is justified. Whether she is affirmatively implementing Trump’s obstruction efforts or attempting to avoid controversy by doing nothing, Emily Murphy’s paralysis is affirmatively harmful. As Paul Light testified in December of 2000: “Time, not money, is the precious resource in a transition, which is why Congress allowed the Administrator to make a determination of the apparent successful candidates long before the electoral college meets.”

Similarly, Zywicki cautions us not to be distracted by the (relatively small sums of) transition funds, which, frankly, will get spent anyway. Rather, Congress sought to avoid the kind of wasteful delay we are currently experiencing, which is why it decided to authorize:

release of transition resources to the ‘apparent’ successful candidate, rather than awaiting an official announcement of a winner. Congress’s fears are a one-way street—the country will undoubtedly be harmed by delay in releasing the transition resources, but there will be minimal harm from releasing the resources to the apparent successful candidate. Money can be replaced; time cannot.

Duty Calls

Ironically, Murphy finds herself at the center of this controversy because Congress specifically chose GSA with an eye towards avoiding the kind of political influence that so permeates the outgoing administration. As Light explained:

Congress believed that the decision was ministerial, not political, in nature, and viewed the General Services Administration as one of several federal agencies that would make such determinations as part of the ordinary exercise of discretion following even close elections.

It’s charitable for Professor Keith Whittington to suggest that it “cannot reasonably be expected that the head of the GSA will act contrary to the will of the president[,]” but it’s not persuasive. Murphy’s inaction undermines Congress’ intent. She would do well to remember that her oath of office references “the duties of the office” and not the whims of the president. And, besides, what’s in it for her? Even if she wasn’t chilled by this week’s leadership purge at the Pentagon, she’ll certainly be vacating her position within two months.

Murphy’s foot dragging isn’t a crime, and nothing suggests she could or should be prosecuted for her loyalty to the outgoing president. With time, most will forget that she tolerated GSA’s conflict-ridden, emolument magnet Trump International Hotel lease or that she may have been less than forthcoming when Trump scuttled the FBI’s exodus from its crumbling headquarters. But this unnecessary obstruction of the orderly transfer of power won’t reflect well on her when the history of this period is written.

Congress left no doubt that it wanted “appropriate actions be authorized and taken to avoid or minimize any disruption.” The votes have been cast and counted. Ascertain the election outcome. Serve the public interest. Let the Biden transition officially begin.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School.

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We Need to Talk About Corruption

Steven L. Schooner — Tue, 29 Sep 2020 12:21:53 -0400

In 2020, the coronavirus pandemic confirmed a cruel form of American exceptionalism—the country’s exceptionally poor performance in handling the virus as measured in deaths and infections. Neither flag waving nor flyovers can mask other American failures, including climate change indifference, tolerance for gun violence, inadequate health care, gross income inequality, systemic racism and other ailments. We’ve got some serious issues to address.

Jennifer Taub points to another elephant in the room: white collar crime. In her new book, Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime (Viking), Taub bluntly proclaims: “[T]he United States has a serious corruption problem, and most of us know it.” The examples she recounts will be familiar to regular news consumers and span most sectors, including the entertainment world, Wall Street, politics and business. “Cheating the public—and getting away with it— is the new normal,” she writes.

No, not all wealthy and powerful people are corrupt. Rather, as Taub, explains:

The extremely wealthy and well connected have incentives and opportunities for crime and corruption.… Extreme wealth is criminogenic and … the upper classes provide one another with a kind of mutually assured immunity … Prosecutors also have insufficient incentives to pursue complex and time-consuming cases against respectable high-status individuals and business entities. And the tools they have to detect and punish offenders have been dulled by the courts … [T]he urgency to prioritize white collar crime is low when it’s hard for the public to see the victims.

Immunity Breed Impunity

The wealthy and powerful rarely go to jail, and, when they do, it’s for relatively brief stays at “Club Fed.” The post-2008 economic crisis’s shoulder-shrug of “too big to fail” subsequently morphed into “too big to jail.” It’s not just that “[c]ivil settlements are easier” to obtain than prison sentences. From resource allocation to recognition for individual federal attorneys, large media-friendly monetary recoveries offer greater return on investment for the Justice Department, even if large corporations and wealthy elites are largely unaffected by the eye-popping sums. (Well Fargo CEO John Stumpf resigned in “shame,” comforted by a $134 million exit payment. The impressive $1.9B sum recovered from London-based HSBC for laundering drug cartel money “was equal to around one month’s profits.”)

More broadly, Taub painstakingly presents data to demonstrate that the self-serving and irresponsible actions of “trusted business and government leaders” inflict far more damage and harm than “street crime” or “property” crimes such as burglary, larceny, and theft. While the financial crisis of 2008 cost millions of Americans their homes and jobs, “behemoth banks received trillions in government bailouts and backstops, and bankers themselves went on to earn billions of dollars in personal bonuses.” The rich and the powerful become richer and more powerful, while the public loses trust in our institutions. The accumulation of wealth and power is divorced from the means and the cost of that wealth generation, such as public ills ranging from degraded air and water quality, food poisoning, inflated consumer prices, reduced pension funds, opioid addition, poverty, social stratification and even suicide.

In her lengthy preface (a fine piece of long-form journalism), Taub paints the current situation in stark relief:

The big-money crowd can … use plundered wealth to help ensure that those elected to positions of power … will protect them and further their interests. At the top of the list is cutting taxes, promoting industries they invest in or control, and keeping them (and their dear friends and offspring) out of trouble, out of prison, and in the money. This furthers the wealth divide in America and undermines notions of fairness and meritocracy, paving the way for kleptocracy—government by thieves.

Public Corruption: Eroding Public Trust

Amidst the tsunami of reprehensible behavior, Taub’s description of Republican Senators Richard Burr’s and Kelly Loeffler’s exploitation of public office for private gain is uniquely maddening. On January 24, 2020, Anthony Fauci privately briefed Senators before the World Health Organization declared a “global health emergency” and weeks before the name COVID-19 was bestowed upon the nascent pandemic. On February 7, Burr, of North Carolina, published a reassuring op-ed about public preparedness. A week later, he dumped a jaw-dropping amount of stock in, among other things, the hotel and extended-stay market. Meanwhile, Loeffler, of Georgia, and her spouse, the chairman of the New York Stock Exchange, unloaded millions of dollars in stock between the briefing and mid-February, while buying stock in companies that sell telecommuting software and personal protective equipment.

Taub, a law professor, carefully details why it is so difficult to punish wealthy, powerful officials. She poignantly contrasts this privilege with the treatment of Eric Garner, whom police killed with a chokehold while arresting him for the nominal tax avoidance associated with selling loose cigarettes to pedestrians.

Follow the Money

Having co-founded the April 15, 2017, Tax March, part of a movement to reform the tax code, Taub offers a compelling perspective on tax policy and enforcement. Wealthy-friendly loopholes must be closed, coupled with an effort to reduce rampant tax evasion, she writes:

The IRS should audit the rich, because that’s where the money is. The Justice Department should investigate and prosecute wealthy tax evaders, because that’s where the crime is …

Unbelievably, audits of the top earners, including those who bring in more than $5 million per year—the most cost-effective to audit—have fallen by around 80 percent. Pressure is off the wealthy.

Sadly, Taub’s book went to press before the extraordinary New York Times coverage of Donald Trump's sustained, systemic record of tax avoidance.

Taub also advocates for more progressive taxation, highlighting the 2017 tax cuts. The CBO estimates that what Taub dubs “the Trump Tax Scam” will increase the deficit by $1.9 trillion. “Promise tax breaks and prosperity for all. Instead, deliver trillions of dollars in cuts for billionaires and big business … [Don’t] hold [y]our breath waiting for that mythical trickle-down effect,” Taub writes.

Words Matter

Sadly, we’ve hamstrung ourselves with obtuse definitions of corruption, white collar crime, fraud, and victimless crimes. This, in turn, obfuscates their cumulative impact.

The unfortunate shift … to an offense-based definition of white collar crime has real-world implications ... [B]y ignoring an offender’s social or corporate status ... we are catching a lot of small fish … while letting giant individual and corporate predators swim free. This approach can pump up the enforcement statistics without actually making a significant dent on preventing, punishing, and redressing the most damaging criminal activity by the most capable and recidivist offenders.

Meanwhile, our country has become “a money laundering mecca. Our legal system, corporate law firms, and accountants are eager to turn blood money into gold…, real estate[, o]r shiny cars and yachts.” Late in 2019, GAO began to focus on one aspect of this: “opaque ownership structures that may conceal who owns, controls, or benefits from the company.”

A Call To Action

Taub prescribes empowering prosecutors, more focus on victims, better protections and support for whistle-blowers and investigative journalists, and investing in better data collection and transparency so we can better understand the true costs of white collar crime. That’s a tall order. The wealthy invest heavily to redirect the Justice Department’s focus away from “elite crime.” All of which makes the perverse effects of the U.S. Supreme Court’s decision in Citizens United and its progeny, which opened the floodgates of big money into political campaigns all the more disturbing.

The timing of Taub’s book is no mistake. She wants you to think about the distorting power of big dirty money as you contemplate your vote.

If we continue to serve as a popular haven for global kleptocrats, maintain weak bribery prohibitions, allow big dirty money to flood our elections, secure implicit immunity for the upper class, allow corporate executives to commit crimes and walk away with no or very, very light sentences, we will continue to be the petri dish for another future corrupt, organized crime tied, friend to all dictators, lying, cheating, megalomaniac American president.

A generation ago, following the Watergate scandal, Congress passed new laws aimed at addressing government corruption and the influence of money in politics. If 2021 offers a similar opportunity, Taub’s work may help begin to restore public trust.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School.

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The VA Grand Challenge: Looking for Love in The Wrong Places

Steven L. Schooner and Nathaniel E. Castellano — Wed, 20 May 2020 09:48:50 -0400

Even before the current pandemic, our nation’s veterans were killing themselves at an alarming rate. So we were happy to learn that the Veterans Affairs Department is contemplating a “grand challenge” to develop evidence-based solutions to prevent suicide and reduce suicidal ideation. We applaud VA for seeking help, and we join former Office of Federal Procurement Policy Administrator Steve Kelman in supporting VA’s embrace of prize contests to solve this seemingly intractable problem.

But we worry that VA’s request for information seeking assistance administering the contest is misguided. Specifically, we fear that reliance on traditional procurement tools to outsource to a management consultant is unlikely to spark the strategic innovation VA needs and this problem deserves. We suggest VA throw out the procurement playbook and, instead, partner directly with the private organizations that have led the modern prize contest renaissance and with the Defense Advanced Research Projects Agency to leverage other transactions authority (OTA) and proven success running public prize contests.

The Promise of Prize Contests

There's a rich history of dramatic innovations unleashed by high-profile contests and prizes. The most popular historical anecdote dealt with the vexing problem of accurately determining a ship’s longitude at sea, culminating in the eponymous 1714 Longitude Prize. Last century’s dramatic history of flight was animated by contests including the 1908 Michelin Prize (won by Wilbur Wright) and the 1927 Orteig Prize (claimed by Charles Lindbergh in the Spirit of St. Louis). Recently, privately funded contests such as the 2004 Ansari XPrize (resulting in the public debut of then-maverick SpaceX) led to commercial players competing and partnering with, and ultimately, outperforming conventional government contractors.

Beyond anecdotal success, our research confirms that, for intractable problems, agencies should experiment with prizes and contests. Unlike traditional, bilateral R&D contracts where the government chooses a single business partner, prizes engage a theoretically infinite number of contestants who are only rewarded if and when a contestant satisfies the contest criteria. Deploying an unlimited number of highly motivated independent research initiatives increases the odds that the government unearths a solution and essentially eliminates the risk of paying for failed experiments.

The magic, of course, lies in incentives, something the government is often hesitant to exploit. Innovators rush to invest—and risk—their resources in contests to claim hefty financial rewards. But they equally crave the priceless imprimatur that accompanies success. Winning showers public attention, publicity that a public relations firm might promise but is unlikely to deliver.

Wrong Pond, Wrong Bait

Given the unique potential of prize contests to generate revolutionary solutions to longstanding problems, we applaud VA for turning to one to address the tragedy of veteran suicide rates. And we agree with VA that to pull off such a feat it would need help organizing and managing the contest. But VA got off on the wrong foot by thinking in conventional procurement terms to outsource the contest. Specifically, VA issued an RFI targeting the likes of those that self-identify as “R408 - SUPPORT- PROFESSIONAL: PROGRAM MANAGEMENT/SUPPORT,” and “NAICS Code: 541611 - Administrative Management and General Management Consulting Services.” The department reflexively asks for 10-page responses in Times New Roman, 12-point font detailing relevant past performance, income and numbers of employees, federal supply schedule participation, labor categories, and recommendations for appropriate NAICS codes.

By embracing the status quo of procurement contracting, VA turns its back to one of the fundamental promises of prize contests—the opportunity to solve long standing problems by cultivating novel solutions from non-traditional fields. Research suggests that that “the further the focal problem was from the solvers’ field of expertise, the more likely they were to solve it.” The original Longitude Prize winner was a clockmaker, not a navigator. Nicolas Appert, inventor of the modern practice of canning and recipient of Napoleon's 1795 Food Preservation Prize, was a confectioner.

Unsolicited Advice

Here’s our advice for VA: Throw out the procurement playbook. The whole point of contests is to avoid the conventional “ask.” Ask for the moon, and offer enough money that folks will think: “maybe, just maybe…” Something like this should get contestants’ attention:

Suicide Prevention Grand Challenge

The Veterans Affairs Department offers a prize of up to $1 billion to a competitor that can develop a solution – to be deployed by or in conjunction with the VA – that reduces the rate of veteran suicide by 10 percent or more during a single year. Additional awards of $100 million may be awarded for each additional annual reduction of 10 percent (up to a total of $2 Billion).

Some may complain that this is so open-ended and ambiguous that it’s impossible to know what the government is looking for. Perfect! VA doesn’t know what it’s looking for; but, hopefully, they’ll recognize it when they see it. Welcome to the wild world of prize contests.

We have never run a prize contest but VA could easily partner with those that have. Like other federal agencies, the department enjoys statutory authority to administer challenges. But instead of relying on its own authority and procuring a team of management consultants to help administer the prize, we encourage VA to think bigger. Reach out directly to partner with the government entities that have already proven their ability to administer a grand challenge: namely, DARPA. Using DARPA’s OTA flexibility, VA could tap private expertise, such as prize contest sponsors like the XPRIZE Foundation. We suspect that is the kind of consortium that the Strategic Institute could get behind.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University Law School. Nathaniel E. Castellano is an associate in the Government Contracts practice group at Arnold & Porter. The views expressed herein are the authors’ own.

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Viewpoint: Suspend The Trump Organization From Doing Business With Government

Steven L. Schooner, Kathleen Clark , and Scott Amey — Mon, 27 Jan 2020 15:03:18 -0500

The federal government should suspend the Trump Organization from doing business with agencies. The Trump family businesses should in fact be debarred, but the standard for suspension is lower, the case is more clear, and the permissible period for suspension—up to one year—is sufficient for the government to avoid the worst risks associated with doing additional business with the Trump family.

It’s difficult to imagine a contractor not already on the federal government’s excluded party list (or “blacklist”) that presents a stronger case for exclusion. The most likely reason Trump Org hasn’t been suspended is a fear of retaliation, which only underscores why the government must stop doing business with the Trumps.

Not a Close Call

Agencies most frequently suspend firms based upon adequate evidence of an offense indicating a lack of business integrity or business honesty that seriously and directly affects the contractor’s present responsibility. In 2020, only the willfully ignorant believe that Trump businesses embrace integrity and honesty.

By itself, the House of Representatives’ December 19 impeachment of President Trump, the Trump Organization’s principal owner and namesake, justifies a suspension. An indictment for bribery, falsification or destruction of records, making false statements, or tax evasion is enough for a federal suspension and debarment official to suspend a contractor. The articles of impeachment charge “high crimes and misdemeanors” including 1) soliciting a foreign government’s interference—the quid pro quo tied to Congressionally-approved aid to Ukraine—for corrupt purposes (personal political benefit); and 2) obstructing Congress. While impeachment proceedings are not completely analogous to trials (as the televised hearings demonstrate), the House’s impeachment is the procedural equivalent of a grand jury’s indictment.

More broadly, two seven-figure settlements between a contractor and a state attorney general within a few years is one more than Uncle Sam should tolerate. The former New York attorney general agreed to a $25 million settlement with the Trump Organization based on “adequate evidence” of “making false statements,” after “su[ing] Donald Trump for swindling thousands of innocent Americans … through a scheme known as Trump University.” Last year, the current New York attorney general caused the dissolution of the Trump Charitable Foundation and forced payment of nearly “$2 million for misusing charitable funds for [Trump’s] own political gain,” based on a case alleging “a shocking pattern of illegality, ... repeated and willful self-dealing...[&] clear and repeated violations of state and federal law[.]”

But that’s not all. The District of Columbia attorney general recently sued the Trump Organization for more than $1 million in unreasonable and improper payments from the not-for-profit Presidential Inauguration Committee to Trump’s Hotel. And that suit is unrelated to the 2017 D.C. and Maryland attorneys general lawsuit alleging that President Trump violates the Constitution’s Emoluments Clauses by continuing to accept money from foreign and domestic governments through transactions at GSA’s Trump International Hotel (blocks from the White House).

None of this is normal. Conversely, suspending and debarring risky contractors to protect the government from doing business with them is a common, routine, everyday occurrence. What’s uncommon and inexplicable is that the Trump Organization has not yet been suspended.

A Common Solution

To protect against unnecessary risk, the federal government only does business with “responsible” contractors. Before awarding individual contracts, contracting officers must affirmatively determine that prospective contractors are, among other things, qualified, sufficiently experienced, staffed, and possessing a “satisfactory record of integrity and business ethics.”

In addition to pre-award contracting determinations, agencies may exclude individuals or firms altogether—governmentwide—for extended periods of time. Any federal executive agency designated official may suspend firms for up to one year or debar them for up to three years. Once these individuals and firms have been suspended, debarred, or declared ineligible (and listed in the System for Award Management), agencies cannot award them contracts or solicit offers from them, nor can the excluded parties be subcontractors or agents to other contractors, unless their “timeout” is waived.

This isn’t unusual or exotic. During fiscal year 2018, agencies completed more than a dozen of these actions every business day—480 suspensions, 1,542 proposed debarments, and 1,334 debarments.

Yes, many of the Trump Organization’s improprieties have not been fully investigated or litigated. That’s normal. Agency officials may suspend contractors (or propose them for debarment) temporarily, while providing the contractor due process, including opportunities to appear with counsel, submit documentary evidence, and present witnesses to prove present responsibility. Pending the resolution of those proceedings, however, the contractor is ineligible to compete for government work.

This would have dramatically simplified matters when the White House attempted to bypass long standing transparency and competition mandates and award a lucrative, high-profile Group of Seven (G-7) conference, lodging, and hospitality contract to Trump’s Doral golf resort in Florida.

It would avoid a repeat of Vice President Pence visiting a Trump resort 180 miles away from his Ireland meetings or dozens of Air National Guard crews lodging at Trump’s Turnberry Resort in Scotland (raising skepticism regarding increased Air Force reliance on nearby Prestwick Airport). Sadly, it would probably prove insufficient to eliminate, although it might reduce, government expenditures on lodging, meals, and golf cart rentals at Mar-a-Lago or other Trump properties where the President mixes business and pleasure. But it’s a start.

An “Impeccable Standard”

The Federal Acquisition Regulations’ standards of conduct state that: “Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct.” Here, actions speak louder than words. President Trump has consistently demonstrated disdain for norms, rules, customs, and oversight of federal contracting by exploiting public office for private gain, embracing conflicts of interest, eschewing transparency, and disregarding compliance with statutory and regulatory requirements.

Trump ignored the Office of Government Ethics’ advice to divest his ownership interests before the inauguration and avoid the conflict of interest inherent in the GSA lease to operate the Trump International Hotel in Washington, making Trump, in effect, both landlord and tenant. Lev Parnas (indicted for conspiracy, false statements, and obstruction) and his colleague, Trump’s personal lawyer, Rudy Giuliani, have recast the hotel as an unsavory “breeding ground” for the “negotiations” at the heart of the impeachment hearings. In 2019, the Trump Organization began soliciting offers for the hotel, pitching a lucrative opportunity for potential buyers: "Tremendous upside potential exists for a new owner to fully capitalize on government related business upon rebranding of the asset," read the 46-page marketing brochure obtained by CNN.

Alas, even if a federal agency suspended the Trump Organization, GSA could continue its conflict-ridden and emolument-generating lease relationship, because, for “compelling” reasons, federal agencies may continue contracts with, and even award new contracts to, excluded firms.

The Citizens for Responsibility and Ethics in Washington’s tally of “conflicts of interest that stem from the president’s decision not to divest from the Trump Organization” chronicles 2,856 total conflicts (in 1,100 days), including 73 political events at Trump properties, 445 Presidential visits to Trump Organization businesses, 111 special interest group events at Trump properties, 65 foreign trademarks granted to Trump businesses, plus 130 foreign officials and 119 members of Congress who visited a Trump business.

A Pattern of Behavior

The recently filed federal court complaint protesting the award of the Defense Department’s high-profile, $10 billion cloud computing contract alleges that President Trump “launched repeated public and behind-the-scenes attacks to steer the … contract … to harm his perceived political enemy—Jeffrey P. Bezos, … owner of the Washington Post.” The Pentagon’s inspector general is investigating the $400 million border wall contract awarded to Fisher Sand & Gravel, after President Trump and Jared Kushner applied inappropriate influence, despite the firm’s checkered history and inability to meet the government’s operational requirements. Questions surround the relationship between private-prison and immigration detention behemoth GEO, its donations to a Trump super-PAC, and spending at a Trump resort. All of which falls well beneath federal contracting standards that require government business be “conducted in a manner above reproach.”

Smart folks avoid doing business with consistently untruthful people. Yet the Washington Post calculates that: “Three years [into] … office, President Trump has made more than 16,200 false or misleading claims.” And, since it’s impossible to separate the individual from the business, you can’t expect the “highest degree of public trust” from the Trump Organization in light of the company President Trump keeps, including a rogue’s gallery of attorneys, advisors, and associates who have been indicted, convicted, or willing to plead to criminal behavior. Consider Trump’s former personal lawyer, Michael Cohen, sentenced for campaign finance violations and tax evasion (involving hush money to hide Trump’s extramarital affairs, which suggests that President Trump’s 2017 financial disclosure report (Office of Government Ethics Form 278e) knowingly underreported his liabilities.

Pulitzer Prize winning reporter David Fahrenthold determined that: “nearly every organization [Trump] has led in the past decade is under investigation.” The New Yorker quipped: “the Trump Organization’s core competency is in profiting from misrepresentation and deceit and, potentially, fraud…. [M]any of [its] international deals also bore the hallmarks of financial fraud, including money laundering, deceptive borrowing, outright lying to investors, and other potential crimes.” Trump Organization resorts knowingly employed illegal immigrants and rarely used the e-Verify system (mandated for federal contractors) prior to New York Times investigative reporting. So it’s unlikely that the Trump Organization could demonstrate a “satisfactory performance record” with its well-documented history of bankruptcies, payment delinquencies, and frivolous litigation, and numerous ongoing investigations into tax evasion and money laundering (involving, but not limited to, cash real estate deals with Russian interests and questionable Deutsche Bank loans).

It’s true that not all contractor missteps, mistakes, misdemeanors, or even felonies, indictments, or convictions, lead to suspension or debarment. Firms avoid exclusion through negotiated administrative agreements, improvements to internal compliance programs or the firm’s ethical culture and corporate governance processes, punishment and elimination of bad actors, and reliance on independent third-party monitors. That’s not the Trump Organization’s style. A Financial Times discussion of Russian money laundering reported that former Trump Organization executive Abe Wallach quipped: “Donald doesn’t do due diligence.”

Do The Right Thing

Suspension and debarment officials at federal agencies know that, while it would take enormous personal courage for a government employee to suspend (or debar) the Trump Organization, the substantive case for doing so is simple. Follow the example of the whistleblowers, military officers, and ambassadors that shined a light on this administration’s corruption. Lay out the facts and apply the regulations. Suspend the Trump Organization, propose it for debarment, and allow the company’s executives to demonstrate that it is a “responsible contractor” the government should do business with. You’d be protecting the taxpayers, and you just might force the President to place the nation before his personal business interests.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School.

Kathleen Clark is Professor of Law at the Washington University in St. Louis and a leading expert on government ethics.

Scott Amey is the general counsel at the Project On Government Oversight, which operates the Federal Contractor Misconduct Database.

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Analysis: The President’s Hotel Donation Ruse

Steven L. Schooner and Kathleen Clark — Fri, 09 Mar 2018 17:07:52 -0500

Last week, a remarkable ethics episode briefly percolated to the top of the boiling cauldron known as the Trump administration news cycle. The Trump family appeared to acknowledge the public’s concern that foreign governments are attempting to influence the president by spending money at Trump hotels. Sadly, the response—a cynical, half-hearted gesture—merely reminded us that the Trumps do not take the Constitution seriously.

Trump Organization compliance officer George Sorial announced that the organization made an unspecified “voluntary contribution” to the Treasury Department, fulfilling Trump’s “pledge to donate profits from foreign government patronage at our hotels and similar businesses” while Trump is President. The theatrical announcement brought to mind Trump’s flamboyant January 2017 promise (made while surrounded with camera-friendly “files”) to put his businesses into a “trust.” Trump’s subsequent failure to establish a blind trust rendered the measure meaningless because Trump retains ownership of his businesses and may draw funds from them at any time.

A week later, Eric Trump confirmed a report that the voluntary donation was $151,470. For that low—and certainly inadequate—sum, the Trumps bought some positive news coverage from a few media outlets. Compliance experts and serious journalists were more skeptical. The announcement raised more questions than it answered and highlighted this administration’s disregard for norms of transparency, ethics, and the public interest. This was nothing more than a publicity stunt.

Access For Sale

Since the November 2016 election, individuals, corporations, special interest groups, and foreign governments understood they could influence President Trump by spending lavishly at Trump properties. Unlike campaign donations, which can be made only by U.S. nationals and must be publicly disclosed, Trump hotels welcome spending by all comers (including foreign citizens, governments, and companies) and require no public disclosure. Garry Trudeau aptly nailed this grift in a Doonesbury comic.

No Transparency, No Credibility

Sorial’s superficial announcement makes a mockery of the public’s expectations for transparency in governance. Even after an enterprising reporter uncovered the donated sum, it bears emphasis that we still have no idea which foreign governments patronized their properties, the amounts they spent, or the total amount of revenue the Trumps received. The Trump Organization failed to explain the methodology behind the figure, offered no supporting data, and provided no verification by an independent accountant or auditor. The glitzy brochure the Trump Organization published last year on this topic clarified that they prioritized their clients’ privacy and the Trump family brand’s value over any Constitutional obligations or respect for public service ethics requirements or norms. Their lack of transparency only exacerbates the problem and reinforces the public’s cynicism.

It’s impossible to give Trump the benefit of the doubt here, especially given the family’s well-documented record of overstating and misrepresenting its philanthropy. Indeed, last year, the Washington Post's David Fahrenthold won the Pulitzer Prize for reporting on Trump’s exaggerated and frequently unfulfilled charitable promises. Given the President’s perpetual disregard for facts, his multiple bankruptcies, and the Trump University fraud settlement, no prudent person or competent compliance official would “take his word for it.” Extensive documentary support would be necessary to assess the adequacy of the $151,470 sum, particularly in light of anecdotal evidence that the Kingdom of Saudi Arabia alone spent more than $250,000 at Trump’s Washington hotel during a six-month period that included the 2016 campaign, election, and inauguration.

Emoluments Aren’t Limited to Profits

Drilling down, Trump’s decision to donate “profits from foreign government patronage” fails to adequately address the problem of foreign governments lining Trump’s pockets. The Constitution prohibits the acceptance of “emoluments,” not “profits” as that term is understood in the modern, complex business vernacular. Emoluments are any benefits, advantages, gains or returns associated with payments from foreign governments. Yes, emoluments include profits, but they are by no means limited to profits.

This isn’t rocket science; it’s a rudimentary business principle. Every foreign dollar spent at a Trump property benefits the first family. Booking empty rooms in a month when a hotel is losing money may not generate a profit, but reducing the Trumps’ losses obviously provides a benefit. Also, the Trumps could easily manipulate—and minimize—what they deem a “profit” for their Washington hotel by accelerating the amortization of their up-front renovation costs.

Lowering the Standard

This latest publicity stunt conforms to the president’s pattern of behavior, which demonstrates that he does not take the Constitutional emoluments prohibition or his public responsibilities seriously. The President’s legal team—White House counsel Don McGahn, compliance attorney George Soriol, tax attorney Sheri Dillon, and fixer Michael Cohen—consistently eschew the aspirational standard of “do the right thing,” instead gravitating toward a standard of “do what you can get away with.” This tone set at the top has not been lost on cabinet officials and White House staff.

Unfortunately, this also reminds us of GSA’s disappointing failure to address one of the most dramatic conflicts of interest imaginable. We knew before the inauguration that the lease to operate the Trump International Hotel in the historic Post Office Pavilion would pose unprecedented conflicts of interest—both apparent and actual. GSA embraced the Trump administration’s laissez-faire disregard for public service ethics and, instead, chose to be fully complicit in an easily avoidable high-profile conflict. In so doing, GSA sullied its reputation, undercut its credibility, created a globally-recognizable public service corruption case study, and sent the worst possible message to the acquisition community and civil servants. GSA has demonstrated, through its actions, that longstanding policies on conflicts of interest are (to GSA) empty words, rather than important restraints necessary to maintain the public’s confidence in government. What a shame.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School. Kathleen Clark is Professor of Law at the Washington University in St. Louis and a leading expert on government ethics.

Image via Hunter Bliss/Shutterstock.com.

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Exploiting Public Office for Private Gain

Steven L. Schooner and Kathleen Clark — Sun, 29 Jan 2017 10:31:05 -0500

At no time in the modern era has the nation’s chief executive appeared not only willing, but eager to exploit the nation’s highest office for the benefit of his personal, family, and business wealth. Conflicts of interest—the divided loyalties associated with serving two masters—might seem vague to some, but the problem is real.

The details of President Trump’s business arrangements matter. For example, turning over operations to his sons may reduce the president’s distractions, but Trump’s ownership and interest in his businesses remain, and therein lies the rub.

Yes, the President Can Have a Conflict of Interest

At a Jan. 11 press conference, where Trump announced his new business arrangements, he incorrectly declared that he couldn’t have a conflict of interest. Walter Shaub, director of the U.S. Office of Government Ethics, sees it differently: “A president is no more immune to the influence of two masters than any subordinate official. In fact, our common experience of human affairs suggests that the potential for corruption only grows with the increase of power.”

But lost in the day’s hullaballoo was Shaub’s clarification: “We can’t risk creating the perception that government leaders would use their official positions for profit.”

Rather than bending over backwards to ensure that his actions are beyond reproach, Trump does the opposite. At that same press conference, Trump disclosed that he was “offered $2 billion to do a deal in Dubai with a very, very, very amazing man, a great, great developer from the Middle East, Hussein [Sajwani of DAMAC Properties].” He explained that he “turned it down,” as if to demonstrate he was putting the nation’s interests ahead of his own. But Mother Jones later detailed the access enjoyed by Sajwani (who has an ongoing project with Trump) and other “wealthy foreign business partners” to the Trump family during the inauguration festivities.

Additionally, Trump has offered no solution to resolving the conflict of interest surrounding the Trump International Hotel in Washington, where he is now both landlord and tenant. A growing body of evidence suggests that Trump has done nothing to resolve this blatant conflict. The General Services Administration, which administers the hotel’s lease, told lawmakers that it “received no communications from Mr. Trump” after he won the Republican primary nor after he won the election in November. In a Jan. 11 press release, GSA suggested that it was not involved in, or familiar with, the details of Trump’s conflict mitigation plan prior to the press conference. To date, GSA has offered no additional information.

There are many troubling signs that Trump already is profiting from his office. At the first of the year, Mar-a-Lago, the Trump Organization’s Palm Beach resort, doubled its initiation fee, from $100,000 to $200,000. For those seeking access to the President, it’s a smart investment. Earlier this month Trump designated Mar-A-Lago as his “Winter White House” and received local approval to land a helicopter at the property and build a heliport.

On Jan. 19, at a televised press conference, Sean Spicer, now the White House press secretary, endorsed the Trump International Hotel in Washington, concluding that: “It’s an absolutely stunning hotel. I encourage you to go there if you haven’t been by.” Later that day, Trump dined at the hotel, adding luster to the bragging rights of guests. As if to further promote the hotel, during the nationally televised inaugural parade itself, the president and his family exited the motorcade near the Trump International Hotel, drawing further attention to the property.

The ethical questions surrounding Trump’s judgment took an even darker turn late Friday, when the president, claiming to combat terrorism, issued an executive order barring citizens of certain countries from entering the United States. Yet, as the Washington Post noted, the countries targeted did not include three terrorism-plagued countries where the Trump Organization has business—Turkey, Indonesia and the United Arab Emirates. It's worth noting that the general manager of Trump Towers, Istanbul, had previously criticized the ban.

Problems to Come

Five days after Trump took office, the Trump Organization announced that it planned to open more than two dozen hotels in major metropolitan areas across the country. The opportunity to expand the brand proved too lucrative to resist. At the Jan. 27 joint press conference with British Prime Minister Theresa May, the president name-dropped, Turnberry, his Scottish golf course.

Of course, the president’s promise to retain additional ethics and compliance support might help reduce these conflicts, but the odds don’t look good.

Compliance and ethics mean more than working around the rules and defending an institution from attack. The ultimate goal is to create an institutional culture, an ethos from the top down, where "doing the right thing" comes first. That’s why appointments to the president’s ethics team have disappointed seasoned observers and strongly signaled a “Trump first” mentality:

To discuss his new business arrangements, the president turned his Jan. 11 press conference over to a private attorney, Sheri Dillon, whose practice focuses on tax controversies and litigation, rather than ethics or compliance.
George A. Sorial, a long-time Trump executive, was tapped as the Trump Organization's chief compliance counsel. Sorial defended the now notorious Trump University, characterizing the fraud lawsuit against it as “completely ridiculous,” prior to Trump paying $25 million to settle the suit. After the Better Business Bureau gave a negative rating to Trump University, Sorial threatened to sue the bureau if it did not withdraw the review.
For his external or independent ethics advisor, Trump appointed Bobby Burchfield, a well-known and successful litigator. Ethics and compliance experts bemoaned that Burchfield lacks the profile, credentials, or experience expected of attorneys retained for such a position.
The law firm's Jan. 11 white paper lacks most of the key aspirations that a seasoned compliance professional would include in an institution's code of conduct and, instead, reads like a declaration of what counsel anticipates Trump can get away with.

Public Office, Private Gain

We begin from the premise that federal ethics requirements make clear that a government “employee shall not use his public office for his own private gain” or “use or permit the use of his Government position … to endorse any product, service or enterprise.” While the regulation does not explicitly apply to the president, the principle it expresses – forbidding the use of public office for private gain — does apply to the president. Indeed, courts have recognized the trust or fiduciary obligation of government officials even in the absence of specific legislative or regulatory endorsements of those duties.

Ethics experts around the world understand that public corruption begins with the use – or more specifically, misuse – of public office for private gain. The basic principles regarding conflicts of interest recognized by the Senate Select Committee on Ethics begin with “The Prohibition on Profiting from One's Official Position.” The first discrete prohibition in the House Ethics Rules is that Members “should not in any way use their office for private gain.”

Looking abroad, the Organization for Economic Cooperation and Development publishes the widely used Managing Conflict of Interest in the Public Sector, a toolkit to assist developing countries in combatting corruption and building credible institutions. It includes a diagram, “How a conflict of interest can become corruption,” that shows how trust is destroyed when a public official misuses official power or resources for improper personal gain. We are saddened that such training appears necessary for the U.S. president.

The president, like other government officials, is in a position of trust, and owes certain legal obligations by reason of that position. He is entrusted with governmental power, but is required to use that power on behalf of the people, not himself or his private businesses.

At some point, the courts or Congress will be forced to determine whether income from the president’s business violates the Constitutions’ Emoluments provisions. Apologists for a new, populist President may roll their eyes, but legislators on both sides of the aisle must take responsibility for what lies ahead. Congress has the authority to curb this behavior. The time to act is now.

This is not idle speculation. Today, the public has no idea whether foreign governments, lobbyists, and special-interest groups are funneling money to the President through Trump’s hotels and other businesses. That’s exactly what the drafters of the Constitution and the well-established conflict of interest prohibitions sought to avoid.

We fear that the president is playing a dangerous game in which he wins financially but the public loses. Absent a change in direction, irreparable damage will be done to the presidency and to the nation.

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GSA's Trump Hotel Lease Debacle

Steven L. Schooner and Daniel I. Gordon — Mon, 28 Nov 2016 12:32:16 -0500

As the clock ticks down towards President-elect Donald Trump’s Jan. 20 inauguration, the window is rapidly closing on the General Services Administration’s opportunity to extricate itself from the Trump Organization’s lease of the historic Post Office Pavilion. The lease—in which Donald Trump would, in effect, be both landlord and tenant—now presents unprecedented and intolerable conflicts of interest.

As interest groups, domestic and foreign, contemplate booking rooms in the Pennsylvania Avenue landmark turned Trump International Hotel to curry favor with the President, it is easy to assume that Mr. Trump’s involvement in that lease presents challenges just as abstruse as his overseas business operations. Those overseas entanglements may, indeed, require analysis of the Constitution’s hitherto rarely discussed Emoluments Clause. Conversely, understanding and addressing the problems raised by the Trump Organization’s 60-year, $180 million lease is far simpler.

GSA need not wait for constitutional experts to weigh in, nor for Trump’s lawyers to craft a comprehensive solution to appropriately distance Mr. Trump from his entire web of business interests. The lease presents relatively straightforward government contracting issues, and the contracting agency with responsibility for addressing those issues is GSA. To protect the integrity of the federal government’s procurement process, GSA must end its lease arrangement with President-elect Trump now.

When In Doubt, Read the Contract

The Post Office Lease differs from many of Mr. Trump’s other business arrangements. That’s because, in writing the contract, the federal and D.C. governments determined, in advance, that elected officials could play no role in this lease arrangement. The contract language is clear: “No ... elected official of the Government of the United States ... shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom...”

The language could not be any more specific or clear. Donald Trump will breach the contract on Jan. 20, when, while continuing to benefit from the lease, he will become an “elected official of the Government of the United States.”

The lease agreement, like many government contracts, is a lengthy document. Yet this clause represents a material (that is, significant) contractual term. While we recognize that some of the statutory ethics rules that generally apply to federal officials exempt the president and vice president, the prohibition on benefiting from the Old Post Office Pavilion lease does not exempt Mr. Trump. The terms of the contract were freely agreed to by the Trump Organization. Had President Obama or Vice President Biden (or any other elected official of the U.S. Government) attempted to participate in the original lease agreement in 2013, we are confident that GSA would have rejected their proposal. The lease’s plain language (a term favored by the late Justice Antonin Scalia) makes clear that Mr. Trump will be violating the lease’s terms when he becomes an elected official on Inauguration Day.

An Important Policy

The lease’s language is not meaningless boilerplate. The clause is consistent with longstanding prohibition on entering into contracts with federal employees. The prohibition extends to any “business concern or other organization owned or substantially owned or controlled by one or more Government employees.” This “policy is intended to avoid any conflict of interest that might arise between the employees’ interests and their Government duties, and to avoid the appearance of favoritism or preferential treatment by the Government toward its employees.”

That perfectly describes the problem here. The Old Post Office Pavilion lease is between GSA—whose administrator President Trump will appoint—and Mr. Trump’s family-owned company. Specifically, the lessor is Trump Old Post Office LLC, which, of course, is part of the Trump Organization, a privately owned conglomerate, of which President-elect Trump is chairman, president, and majority stakeholder. The situation is a casebook example of both the appearance of a significant conflict of interest and an intolerable intermingling of an elected official’s governmental duties and his family’s personal financial interests.

During the campaign, Mr. Trump suggested he would step away from his business before taking office, turning the company over to his children, Donald, Jr., Ivanka, and Eric. Mr. Trump’s lawyers may argue that that should end the matter (pointing out that most government conflict-of-interest rules extend only to the individual, spouse, and dependent children, and not to adult children). While turning over the Trump Organization to the president’s adult children may address the lease language (though only if—a big if—it ensures the president fully divests and no longer receives “any benefit” from the lease), it in no way ends the problems with GSA’s lease.

The Kids Are Not Alright

As long as the president’s adult children control GSA’s leasing partner, GSA and its staff will confront what any reasonable person would view as the appearance of a conflict of interest. (This common-sense “reasonable person” test is frequently used to assess conflicts of interest.) The principles of ethical behavior for government officials demand that no individual serve two masters, that government officials not be in a position to choose between the public interest and their own personal benefit. That is the essence of a conflict of interest. That is why we would not tolerate a judge deciding a case involving a family member, or a case in which she or he stood to personally benefit financially from the outcome.

The GSA employees handling the Trump lease will be caught between their duty to protect the interests of the building’s landlord—that is, the government, the public, and the taxpayers—and their duty of loyalty to the GSA administrator, who will be appointed by, and serve at the pleasure of then-President Trump. Having the building’s tenant represented by “other” Trumps (the President’s offspring) is plainly insufficient to “avoid strictly any conflict of interest or even the appearance of a conflict”—particularly where the President’s name will remain as the hotel’s name, brand, trademark, and marquee.

To make matters worse, since the election, Mr. Trump’s adult children have assumed prominent roles in Trump’s official transition team and interacted with foreign officials, thus eliminating any independence or “walling off” that might exist in other circumstances. For those who were hoping to see Mr. Trump establish a blind trust to manage his business interest, this is neither a trust, nor blind.

Then, last week Trump appeared to backtrack even on that limited measure, disavowing his willingness to relinquish the company’s reins: “Prior to the election it was well known that I have interests in properties all over the world. Only the crooked media makes this a big deal!”

The Ethics Office Can’t Bail Out GSA

We are sympathetic to GSA’s quandary. Yet, despite media suggestions to the contrary, GSA cannot foist this challenging situation on the Office of Government Ethics. OGE is a policy shop. Its website explains that it “does not handle complaints of misconduct, nor does OGE have investigative or prosecutorial authority. OGE's mission is one of prevention.” GSA is the contracting agency that entered into the lease with the Trump Organization, and it must clean up this mess.

We do not understand how GSA or its inspector general failed to anticipate the possibility of this eventuality or devise an exit strategy (such as identifying an alternative lessor and preparing a contingent novation agreement) prior to Election Day. None of this happened quickly. Trump announced his candidacy in mid-June 2015, nearly two years after the lease was signed and more than 16 months before the election. GSA’s lack of advance planning does not excuse inaction now.

It’s Not Just Appearances

The federal procurement system, despite being complex and often too slow, has a 200-year record of transparency and integrity. To protect the contracting process from corruption, federal contracting regulations mandate that "Government business shall be conducted in a manner above reproach . . . to avoid . . . even the appearance of a conflict of interest in Government-contractor relationships."

Inside both federal agencies and government contractors, employees “look up and around” for cues and models of acceptable behavior. If the President discounts the importance of avoiding conflicts, disrespects transparency, and disparages the importance of compliance with contractual and regulatory requirements, we fear that the message will not be lost on the broader procurement community.

What the Trump lease presents is not just a hypothetical appearance of a conflict. In any long-term lease of property, it is normal that issues arise that need to be resolved. The Old Post Office lease is a particularly complicated and, for GSA, rather unusual, 60-year agreement that requires significant annual disclosure of detailed financial information. These extensive disclosures are followed by negotiations over escalation of the rent and any other payments that the Trump Organization must pay to the government. Just imagine GSA pressing the Trump organization for more detailed revenue and expense information, or the President’s children negotiating annual rent adjustments with a career civil servant who reports to the GSA administrator appointed by their father, who serves at his pleasure. Any reasonable person would worry about the undue pressures and the inherent risk of favoritism that the government might show to such a well-connected contractor.

Nonetheless, last week, the President-elect told the New York Times: "The law's totally on my side, the president can't have a conflict of interest[.]” He’s wrong.

While the President and Vice President are exempt from some of the ethics statutes, including some of the prohibitions related to conflicts of interest, many of the statutes that prevent conflicts of interest and corruption do constrain the president. For example, if the president wanted to award another hotel lease on a sole-source basis to a company he, or his adult children, controlled, he could not. The Competition in Contracting Act would prohibit it. Similarly, the president could not lawfully direct GSA to house official guests of the government or dignitaries at a hotel owned by him or his adult children.

Courting Disaster

Looking ahead, things may get worse before getting better. Last week, in announcing its $25 million settlement, the New York State Attorney General explained that the state had “sued Donald Trump for swindling thousands of innocent Americans . . . through a scheme known as Trump University. Donald Trump fought us every step of the way, filing baseless charges and fruitless appeals and refusing to settle for even modest amounts of compensation for the victims of his phony university.”

Such an announcement normally would prompt members of Congress to prod GSA to consider suspension or debarment proceedings against a contractor accused of such dishonest behavior. The Trump University settlement suggests that the New York attorney general found “adequate evidence” of “making false statements,” which satisfies the regulatory standard for a federal agency’s suspension and debarment officer to take action. Of course, knowingly breaching a contract would alone be a cause for concern. But we also fear that, over the next four years, other plaintiffs will sue, accusing the Trump Organization of committing, for example, tax evasion, or “other offenses indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor.” Yet every federal suspension and debarment officer would be caught between their duty to consider action to protect the public interest and their loyalty to their supervisors, the highest of whom will have been appointed by then-President Trump.

It’s Only Money

The government should immediately end the hotel lease relationship, before Trump becomes president. In a perfect world, Trump and the GSA would negotiate a mutually agreeable termination of the lease or a novation/transfer to an unrelated firm. Nothing thus far suggests that President-elect Trump appreciates the need to do so. As a result, GSA must take unilateral action.

In almost all federal government contracts, the government reserves the right to terminate the contract “for the convenience of the government” (with appropriate compensation due to the contractor), whenever “it is in the Government’s interest.” Unfortunately, the Trump hotel lease explicitly prohibits GSA from exercising that longstanding, well-established, Congressionally-mandated right.

Based on the agreement’s express terms, we believe that Trump has breached the contract. In the alternative, GSA should breach, or do whatever it takes to end, the contract. This unusual lease even envisions that the sovereign may appropriate—or effectuate a “total taking”—of the property (although we do not think such a step should be necessary).

Of course, the President-elect or his family business may sue GSA. The Trump organization is notoriously litigious, and we do not expect Trump to walk away from the lease and the prestigious property without a fight.

For the reasons explained above, we believe GSA can justify its termination in litigation. But the worst thing that can happen is that the government will be liable for monetary damages. (We are aware of no precedent in which the Trump organization could gain injunctive relief that would require GSA to continue the lease relationship.)

To the extent that damages could be awarded, we expect them to be nominal at best. Courts are skeptical of claims for anticipatory profits, primarily because any such recovery is, by its very nature, speculative. Regardless, it would be a price worth paying to preserve the integrity of our government and its contracting system. The faster GSA ends its business relationship with the Trump Organization, the better.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University Law School. Daniel I. Gordon is senior advisor to GW’s Government Procurement Law Program and was President Obama’s first administrator for federal procurement policy.

Image via Hunter Bliss/Shutterstock.com.

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Keeping Up With Procurement

Steven L. Schooner — Wed, 05 Jul 2006 00:00:00 -0400

One clear sign came in early 2005, when the congressionally mandated Acquisition Advisory Panel, made up of experts from the public and private sectors, called for study of the workforce. David Drabkin, deputy chief acquisition officer at the General Services Administration, says the panel did the right thing: "Reforms . . . cannot achieve their potential absent a workforce that is both appropriately qualified and sufficiently numerous to implement the reforms."

The Acquisition Organization methodology counts employees at about two dozen Defense agencies, regardless of actual occupations. The Refined Packard model counts civilian and military personnel in certain procurement occupations, and military officers under the 1990 Defense Acquisition Workforce Improvement Act. Neither approach is particularly effective.

An April report by the Defense Department inspector general criticizes both methodologies, but they tell the same simple story: The acquisition workforce hasn't changed much since 1999. But the IG confirmed what procurement experts already knew: A stable acquisition workforce can't get the job done. The reason is simple. Over the same period, Defense procurement spending increased by nearly $100 billion.

Although the reductions were part of an overall downsizing, the IG acknowledged that Congress "singled out this segment of the workforce for . . . major reductions." Using the then-mandated Acquisition Organization count, the workforce shrunk from 460,516 in fiscal 1990 to 230,556 in fiscal 1999.

Then, the 1996 Clinger-Cohen Act mandated DAWIA-comparable requirements for civilian agencies. The cuts also coincided with an aggressive era of acquisition reform that diluted agencies' ability to implement new procurement policies and flexibilities.

This inadequacy has been evident through subpar contracting solutions and scandals that continue unabated. In May, Rep. Henry Waxman, D-Calif., publicly criticized the practice of employing large contractors in the Gulf region that, in turn, delegate work to subcontractors. Also in May, Sen. Barack Obama, D-Ill., introduced legislation to increase competition for reconstruction contracts.

Yet neither the media nor Congress recognizes that increased reliance on larger contracts and decreased competition are predictable pathologies. This problem is not unique to Defense, which accounts for about two-thirds of federal procurement spending and employs the most experienced, trained and developed acquisition workforce.

What the numbers don't show is that overburdened operations don't quit -- they keep buying. For example, overwhelmed acquisition offices have driven agencies to rely more on loosely managed interagency contracts. Now the Government Accountability Office has added interagency contracting to its high-risk list.

Contract management has become the "neglected stepchild" of acquisition reform, says Steven Kelman, Office of Federal Procurement Policy administrator in the mid-1990s who is now at Harvard University's Kennedy School of Government. And the crisis will get worse before it gets better, because the lion's share of the workforce is retirement eligible.

In an intensely partisan era of massive deficit-spending, neither Congress nor the president sees political utility in investing in procurement personnel. Congress has failed to address insufficient staffing, yet remains enthusiastic about deploying auditors and inspectors general to Iraq and Louisiana to identify acquisition failures.

He favored the bureaucratic stalling tactic, demanding further study. But Congress needed no study or empirical data in the 1990s to justify its decade-long workforce reduction.

As the Senate prepares to confirm a new OFPP administrator, no bigger issue faces the procurement process. In the years it will take to reach agreement on the optimal head count, agencies could be replenishing acquisition offices. But the recent Defense IG report makes clear that no accurate picture will emerge any time soon. Waiting is like arranging the deck chairs on the Titanic. The time to address the problem is now.

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Keeping Up With Procurement

Steven L. Schooner — Sat, 01 Jul 2006 00:00:00 -0400

By any count, government has too few acquisition pros.

By now, it should be obvious that the federal government lacks a sufficient acquisition workforce to obtain the best value for the money it spends on goods and services. One clear sign came in early 2005, when the congressionally mandated Acquisition Advisory Panel, made up of experts from the public and private sectors, called for study of the workforce. David Drabkin, deputy chief acquisition officer at the General Services Administration, says the panel did the right thing: "Reforms . . . cannot achieve their potential absent a workforce that is both appropriately qualified and sufficiently numerous to implement the reforms."

But the solution is tough to find without determining the extent of the problem. It's difficult to figure out who performs the broad range of acquisition-related functions needed to buy $350 billion in goods, services and construction each year governmentwide. The discussion is constrained by two definitions of the workforce that grew out of the Defense Department's counting methods. The Acquisition Organization methodology counts employees at about two dozen Defense agencies, regardless of actual occupations. The Refined Packard model counts civilian and military personnel in certain procurement occupations, and military officers under the 1990 Defense Acquisition Workforce Improvement Act. Neither approach is particularly effective.

As dramatic as those figures might seem, they actually understate the crisis. The report failed to mention a similar study in 2000, when the IG detailed the way Congress systematically whittled away at the acquisition workforce throughout the 1990s. Although the reductions were part of an overall downsizing, the IG acknowledged that Congress "singled out this segment of the workforce for . . . major reductions." Using the then-mandated Acquisition Organization count, the workforce shrunk from 460,516 in fiscal 1990 to 230,556 in fiscal 1999.

It's easy to forget that this reduction coincided with and, in effect, gutted a congressional attempt to upgrade the qualifications of the procurement force. In 1990, Congress had established requirements for Defense contracting through DAWIA. Then, the 1996 Clinger-Cohen Act mandated DAWIA-comparable requirements for civilian agencies. The cuts also coincided with an aggressive era of acquisition reform that diluted agencies' ability to implement new procurement policies and flexibilities.

As a result, the government lacked enough qualified contracts professionals to meet its needs, even before Sept. 11. Since then, despite a spike in procurement spending for homeland security, military operations in Iraq and Afghanistan, and Katrina rescue and reconstruction, the government has not undertaken any meaningful effort to recruit staff to manage the increased burden. This inadequacy has been evident through subpar contracting solutions and scandals that continue unabated. In May, Rep. Henry Waxman, D-Calif., publicly criticized the practice of employing large contractors in the Gulf region that, in turn, delegate work to subcontractors. Also in May, Sen. Barack Obama, D-Ill., introduced legislation to increase competition for reconstruction contracts. Yet neither the media nor Congress recognizes that increased reliance on larger contracts and decreased competition are predictable pathologies. This problem is not unique to Defense, which accounts for about two-thirds of federal procurement spending and employs the most experienced, trained and developed acquisition workforce.

What the numbers don't show is that overburdened operations don't quit-they keep buying. For example, overwhelmed acquisition offices have driven agencies to rely more on loosely managed interagency contracts. Now the Government Accountability Office has added interagency contracting to its high-risk list.

Even when agencies forgo interagency contracts and keep their procurement functions in-house, limited resources force them to focus more on awarding contracts and less on managing them. This proves problematic as government uses more contractors to shore up its shrinking workforce. Contract management has become the "neglected stepchild" of acquisition reform, says Steven Kelman, Office of Federal Procurement Policy administrator in the mid-1990s who is now at Harvard University's Kennedy School of Government. And the crisis will get worse before it gets better, because the lion's share of the workforce is retirement eligible.

Despite increasingly poor results and data explaining the system's failures, the administration has made no effort to recapitalize the acquisition workforce. Before his resignation and arrest on obstruction charges in September, former OFPP Administrator David Safavian scoffed at calls to increase the acquisition workforce, saying agencies should "do more with less." He favored the bureaucratic stalling tactic, demanding further study. But Congress needed no study or empirical data in the 1990s to justify its decade-long workforce reduction.

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Procurement Proper

Steven L. Schooner — Wed, 24 Aug 2005 00:00:00 -0400

The media also reported the sale of Air Force procurement czar Darleen Druyun's home to a Boeing Co. attorney-long before the dramatic revelations of her improper dealings with Boeing that earned her prison time and prompted chaos in Boeing's executive suite.

Just as troubling as Druyun's conflicts of interest is the largely unpunished behavior of Air Force and Defense leaders. The recent Defense inspector general's report on the Boeing tanker deal leaves little doubt that senior Air Force acquisition and Defense officials "focused on supporting a decision to lease tanker aircraft from Boeing rather than developing objective acquisition information."

It's unclear how strongly federal leaders value procurement integrity. In assessing the Iraq procurement experience, the mandate to move quickly trumped not only fundamental compliance but the notion that planning before spending is a price worth paying. The Iraq process follows nearly a decade defined by a caution-to-the-wind, implement-now-manage-later approach to acquisition. It evolved through procurement tools such as other transaction authority, commercial purchasing, GSA schedules, governmentwide acquisition contracts, multiple-award contracts and purchase cards. Government agencies never stopped caring about procurement ethics. It just seemed that way. But a thin line separates perception from reality.

Acting Deputy Defense Secretary Gordon England's focus on restoring the primacy of integrity to acquisition is encouraging. "Ethical behavior is absolutely essential. Actions by the Department of Defense must always be above reproach," he told the Senate Armed Services Committee in June. But it's not easy. Public policy and ethics experts debate different approaches.

Traditional bureaucracies employ rule-based compliance, which emphasizes laws and regulations and a pervasive "Thou shalt not" commandment. Clear rules tell public officials how to behave. But critics such as David Osborne, co-author of Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector (Addison-Wesley, 1992), fear these rules stifle creativity. "You can't get people to do their best work if you're treating them like 1950s assembly-line workers," Osborne told the Harvard Business Review in 1994.

In contrast, the principle-based approach envisions an ethical high road. Organizations following this path emphasize the positive, and offer guidance rather than strict prohibitions. Morality-more constant than fluctuating rules, laws and regulations-is determined by examining the motivating principle behind the conduct. The American Society for Public Administration's code of ethics embraces this approach, offering five commandments for public servants: Serve the public interest, respect the Constitution and the law, demonstrate personal integrity, promote ethical organizations and strive for professional excellence. Proponents say these principles elicit the best, rather than the minimum, from individuals. Critics scoff that they are too abstract to meaningfully guide behavior.

The consequentialist approach evaluates outcomes as a moral indicator. Actions are judged in light of their consequences rather than the morality of the actions themselves. After the fact, would your boss be proud of what you've done? This resonates with proponents of the new public management movement, who favor accountability for performance.

It's pointless to suggest that a different ethics regime might have changed recent behavior that has compromised the public's trust. But it's time to start talking about it. The public is entitled to believe government can do better in the future.

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Procurement Proper

Steven L. Schooner — Mon, 15 Aug 2005 00:00:00 -0400

It's time to think about what motivates people to do the right thing.

Even if Rep. Randy "Duke" Cunningham, R.-Calif., is exonerated in a pending investigation into his relationship with a federal contractor, the appearance of impropriety has tainted public opinion. The worst-case scenario is another high-profile procurement scandal-the last thing the government's acquisition system needs.

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Mismanaged Competition

Steven L. Schooner — Sat, 15 May 2004 00:00:00 -0400

Agencies lack the skilled personnel they need to run public-private competitions.

If David Safavian, President Bush's nominee to head the Office of Federal Procurement Policy, is confirmed, he should listen to senior procurement executives who sense that the administration's relentless pressure to put federal jobs up for competition with private firms risks becoming a fool's errand. Agencies lack qualified acquisition, contract management and quality control personnel to effectively manage the projected competitive sourcing burden. Moreover, the crusade effectively guts another administration effort: to rely more heavily on performance-based service contracts.

Facing pressure during the 1990s to reduce government's size, agencies slashed their acquisition workforces. Without waiting to see if it would be more efficient, reformers traded acquisition personnel for increased purchasing flexibility. These reductions assured an aging and retirement-eligible workforce, and foreclosed an infusion of new blood.

No one should be surprised by the result. Comptroller General David Walker has said that "reductions in the acquisition workforce, along with . . . procurement reforms, including an increased reliance on services provided by commercial firms . . . have placed unprecedented demands on the federal acquisition workforce."

Despite a clear need for additional resources, OFPP steadfastly refused to call for increasing or upgrading the acquisition workforce. Nor can we expect congressional action with ballooning deficits looming.

Competitive sourcing depends on skilled professionals planning, competing, awarding and managing sophisticated long-term service contracts. But despite mandates to contract out government functions, the administration placed no concurrent emphasis on retaining or obtaining suitable acquisition personnel.

It's easy to forget that replacing government employees with contractors means more service contracts. And successful service contracts are tough to write. As OFPP noted in a May 1994 policy letter: "Contracting for services is especially complex and demands close collaboration between procurement personnel and the users of the service." If you've ever relied on a contractor to remodel your kitchen or bathroom, think how much time you spent choosing one, then looking over his or her shoulder.

The competitive sourcing initiative has exacerbated the crisis in the acquisition workforce. The General Accounting Office has reported that "the increasing significance of contracting for services has prompted-and rightfully so-a renewed emphasis . . . to resolve long-standing problems with service contracts. To do so, the government must face the twin challenges of improving its acquisition of services while simultaneously addressing human capital issues. One cannot be done without the other." (GAO-01-753T)

Public policy scholars, such as John Forrer and Jed Kee of The George Washington University, increasingly recognize this. "If government is to have a larger role and yet reduce its responsibilities as public provider . . . public servants will have to become better public contract managers," they wrote earlier this year. But simply demanding that people do more with less is irresponsible. It also flies in the face of OFPP's policy that, prior to contracting for services, agencies must ensure that "sufficient trained and experienced officials are available . . . to manage and oversee the contract administration function."

Instead, a decade of cuts and mounting demands has promoted a triage-type focus on buying. Agencies focus on awarding contracts not on managing those contracts once they've been awarded. "The administration of contracts once they have been signed has been the neglected stepchild" of procurement reform, says Steven Kelman, a chief architect of acquisition reforms during the Clinton administration. This lack of oversight hides significant downstream costs.

Nowhere is this more acute than with regard to service contracts. GAO's report notes that "it is becoming increasingly evident that agencies are at risk of not having enough of the right people with the right skills to manage service procurements." OFPP echoes this sentiment: "Reliance on service contractors [requires] a sufficient number of trained and experienced staff. . . . The greater the degree of reliance on contractors, the greater the need for oversight by agencies."

Acquisition personnel shortages also have contributed to the proliferation of poorly structured personal services contracts. This is particularly unfortunate because it neutralizes another significant acquisition reform initiative: performance-based service contracting.

In traditional contracting, the government delegates a task or function to a contractor, such as operating a mess hall, overhauling an aircraft engine or operating an information technology help desk. Under such contracts, drafting the statement of work is paramount. But under the performance-based service contracting model, agencies describe the work in terms of what is required rather than how the work should be accomplished.

Agencies have struggled to adopt performance-based service contracting as the norm. GAO recently reported that in fiscal 2001, the government awarded slightly less than a quarter of its service contract dollars through performance-based contracts (GAO-03-443).

At the same time, workforce reductions and outsourcing pressures have conspired to increase the government's reliance on personal services contracts, under which the government retains the function, but contractor employees staff the effort. Under such contracts, rather than using a performance-based approach, agencies all too often merely purchase labor.

Filling empty seats with substitute employees won't lead to increased quality, cost savings or efficiency. But outsourcing's convergence with a depleted acquisition workforce leaves procurement professionals with little choice.

Replacing hordes of civil servants with contractor personnel without proper planning, well-crafted contracts and careful contract management isn't efficient. Nor does it serve the public interest. Without sufficient skilled acquisition personnel, an aggressive competitive sourcing policy risks a high volume of poorly structured contracts. It's time to replenish and upgrade the acquisition community to address the burgeoning reliance on service contractors.

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The Open Market

Steven L. Schooner — Sun, 01 Jun 2003 00:00:00 -0400

Sharing information with vendors is the best way to ensure an open market.

s the federal government fosters openness and communication with its contractors, the concept of transparent procurement systems is taking hold around the globe. Procurement professionals and policy officials from more than 100 nations have met in various countries to exchange lessons and ideas.

In January, the World Trade Organization and World Bank gathered representatives from more than two dozen nations for a workshop in Tanzania on public procurement. Scores of nations, led by the World Trade Organization, are working toward a multilateral agreement to promote transparency in government procurement.

Transparent procurement systems broadcast the rules of the game. The United States, for example, makes procurement laws and regulations available in public libraries and on the Internet. The government widely advertises its needs and selection criteria through its official procurement Web site, FedBizOpps (www.fedbizopps.gov). Agencies announce award decisions, explain selection decisions through debriefings, and publish the outcomes of challenges by disgruntled bidders. Citizens can learn which firms received the government's business through the General Services Administration's Federal Procurement Data System.

SHEDDING LIGHT

Transparency describes the ability to see through all phases of the procurement process. It implies that everyone can play and anyone can win. Transparent systems still can favor certain players, such as domestic firms or small businesses-as our government often does-but those preferences are disclosed.

Transparency fosters competition by giving contractors insight into the selection process. Competition means better deals for governments.Transparency breeds efficiency by allowing government buyers and private sellers to share successes or failures. And it promotes public trust in government.

By helping producers of goods and services, exporters and importers conduct their business, the World Trade Organization hopes to show policy-makers and legislators the value of transparent governing. The benefits of transparency in procurement are a function of economics, not politics. Robert Hunja, senior procurement specialist at the World Bank, encourages developing countries to embrace effective advertising of procurement opportunities, a public bid process, disclosure of information on contractor evaluation and award procedures, and enforcement rights.

Technology can accelerate that process. "From Chile and Brazil to South Korea and India, the spread of e-government involves increasing use of the Internet to disseminate public information and to open up the bidding process," says Transparency International, a global watchdog organization that is active in more than 90 countries. Brazil's successful electronic procurement portal, ComprasNet, frequently is held up as a model of both transparency and efficiency.

IN THE SHADOWS

The United States has been a path-breaker and model for transparent procurement. But that's becoming less true. Our procurement system, and possibly our government, is drifting toward the shadows.

Each year, the public loses more insight into federal spending. The increased use of government purchase cards is one example. Without the steady stream of GAO reports highlighting trends in purchase card use and abuses, the public would know little about how the government spends its money. The proliferation of task order and delivery contracts, which require no advertising for potential bidders, and the use of acquisition flexibilities have resulted in a dearth of information about government purchases. These procurement tools are designed to cut red tape and increase efficiency, but in many ways they limit opportunities to share lessons and compete for business.

The U.S. Agency for International Development's reconstruction contracts in Iraq offer a textbook example. Early this year, AID quietly invited a few highly competent contractors to compete for eight multimillion-dollar contracts covering a wide range of activities including stevedoring operations, logistics, public school revitalization, public health and construction of roads, public buildings, hospitals and schools. Watchdog groups, foreign contractors, and the news media promptly trumpeted various conspiracy theories involving elected officials, campaign contributions and oil concerns.

People need proof that their government is fair to vendors and gets the best value. Critics say too much transparency limits the pursuit of efficiency and best value. It's true that buyers need flexibility to spend tax dollars wisely. But it's incumbent on them to show the public how wisely they used that flexibility. Without information, public trust is tenuous.

Good government depends on transparency. Marginal, if not ephemeral, savings fail to justify backsliding on this fundamental principle. A procurement system that undervalues public trust is no bargain.

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Badge Of Courage

Steven L. Schooner — Thu, 01 Aug 2002 00:00:00 -0400

Whistleblowers aren't the most popular lot among managers and co-workers, but the government needs them.

ight months after Sept. 11, FBI agent Coleen Rowley seized the nation's attention with her sensational memo to FBI Director Robert Mueller. The public was riveted by her allegations that top FBI officials had shaded and skewed the facts of the investigation into the attacks.

Despite claims that she tried to direct her complaints through the appropriate chain of command, Rowley ultimately chose to work outside the system. Anticipating that the FBI would suppress her allegations, Rowley provided a copy of her memo to the Senate Intelligence Committee.

Rowley feared reprisal. "Due to the frankness with which I have expressed myself . . . I hope my continued employment with the FBI is not somehow placed in jeopardy," she said in her memo.

It is not surprising that Rowley bypassed the primary channels for disclosure-the inspector general and the agency's Office of Professional Responsibility. Her memo criticized the Office of Professional Responsibility for applying a double standard, saying it insulated senior leaders while aggressively investigating and disciplining low-ranking personnel.

While the media canonized Rowley, managers shuddered. Whining to the boss is one thing. Leaking complaints outside the organization is another. Team players, most managers agree, would not air the agency's dirty laundry before Congress or the mass media.

Managers and executives often view whistleblowers as disgruntled employees, folks who don't play well with others, loners, or losers in the promotion sweepstakes. Consider Linda Tripp, whose secretive taping of her friend Monica Lewinsky's confidences and thinly veiled political agenda soiled her reputation in the mid-1990s, while prompting President Clinton's impeachment.

But to others, a whistleblower is a hero, willing to risk career and conformity for the greater good. In fact, Rowley has been compared with Sherron Watkins, the committed Enron employee whose anonymous memo to CEO Ken Lay made headlines last year. Watkins believed that sophisticated conspirators within Enron kept Lay in the dark about their questionable business transactions.

Whistleblowers often are flawed. Rowley is no exception. She concedes that, on Aug. 22, 2001, her own "pithy" advice in a hurried e-mail discouraged an attorney from seeking a search warrant against Zacarias Moussaoui, who was suspected of involvement in the 9-11 attacks. Rowley said in her memo: "I now wish I had taken more time and care to compose my response."

But who said whistleblowers must be perfect? Our government benefits from whistleblowers of all shapes and sizes.

The public, government employees, and those who work with the government can help understaffed and overburdened regulators fulfill their enforcement responsibilities.

The law protects government and private whistleblowers from recrimination. Congress frequently offers certain types of whistleblowers the potential for huge monetary rewards. For example, the qui tam provisions of the 1986 False Claims Act Amendments permit a whistleblower to sue in the name of government and, if successful, receive a healthy share of the government's monetary recovery.

Yet whistleblowers and watchdog officials are neither universally appreciated nor applauded. "Unfortunately, but not surprisingly, the citizens bringing such actions frequently have been special interest organizations with priorities of their own, often not consistent with those delineated by Congress. . . . [A] healthy skepticism about their motives . . . is appropriate," former Attorney General Dick Thornburgh wrote in the introduction to Citizen Suits and Qui Tam Actions: Private Enforcement of Public Policy by James T. Blanch et al. (National Legal Center for the Public Interest, 1996).

But who better to expose fraudulent use of the government's funds than contractors, health care providers or scientists working on government grants? Granted, qui tam is imperfect. Justice's failure to routinely dismiss frivolous suits sometimes leads to a form of extortion because firms prefer nuisance settlements to messy, public trials. But this failure does not indict the entire system. The balance is precarious, because monitoring is tricky.

In fact, whistleblowing isn't confined to blatant dishonesty and fraud. Some management pathologies and organizational behaviors elude conventional detection, yet are uniquely susceptible to whistleblowing. Senior managers can be blind to the bloated bureaucracy, stifling careerism and conformity that fosters inefficiency. Rowley's memo raises these and similar impediments to accomplishing the FBI's mission. Rather than being well-positioned to ferret out these organizational flaws, managers sometimes create and foster them.

Despite legal protections, whistleblowers like Rowley take extraordinary risks, jeopardizing their jobs and future career prospects. A whistleblower is considered a sacred cow but treated like the office pariah. But to maintain the public's trust, the government needs whistleblowers. Federal employees and contractors must have integrity and police those who work for and with them. If they won't, who will?

Professor Steven L. Schooner teaches at The George Washington University Law School. He previously served as associate administrator of the Office of Federal Procurement Policy and as a Justice Department attorney. ]]>

Suspensions Are Just a SideShow

Steven L. Schooner — Wed, 01 May 2002 00:00:00 -0400

Barring Enron and Arthur Anderson from obtaining new contracts with the federal government was pure political posturing.

uspensions and debarments of contractors normally protect the government from having to do business with incompetent and unscrupulous companies. But risk to the government didn't cause the General Services Administration's recent action barring Enron and Arthur Andersen from obtaining new contracts with the federal government. This was pure political posturing.

This high-profile witch-hunt began Jan. 25 with a letter from Office of Management and Budget Director Mitch Daniels to GSA Administrator Stephen Perry. The letter didn't cite problems with any of Enron or Andersen's government work. Rather, Daniels relied entirely upon recent press reports arising out of the Enron bankruptcy, with which the public is now intimately familiar. Daniels encouraged GSA to initiate suspension and debarment proceedings against the companies. Because suspension-unlike its more formal cousin, debarment-doesn't require any advance notice, GSA could easily comply.Daniels' role in prompting these suspensions is unprecedented. Normally considered a serious proceeding, suspension typically is initiated by a department or agency. Based upon problems with a contractor-or the disclosure of an improper practice on a specific contract-an agency can seek to suspend or debar the firm from future business with the government. In this case, however, GSA's general counsel, Raymond McKenna, concedes that neither Enron nor Andersen failed to perform contracts with, or in any way disappoint, GSA. The government's well-established suspension and debarment powers have rarely, if ever, been used this way. A common criticism is that the government never applies such sanctions against large, important government contractors. Instead, agencies most often issue suspensions and debarments to avoid doing business with small firms that get in over their heads or run afoul of the system.In fact, the government has a long history of prosecuting its contractors-or suing contractors for false claims-without suspending or debarring them. The only major defense contractor suspended in recent memory was General Electric. That action in 1992 also was a largely symbolic gesture. The government ultimately suspended GE for less than one week because it needed the company's expertise. It's not surprising that neither Enron nor Arthur Andersen is a significant government contractor. Last year, Andersen barely squeaked onto Government Executive's list of the top 200 federal contractors (Procurement Preview issue, August 2001). Enron didn't even make the list.Why, then, would the administration suspend these companies? Certainly, beating up on them generates voter-pleasing sound bytes. But there is more to this story. Every administration purports to be against fraud, tough on government contractors and in favor of accountability in procurement. But this administration isn't.One of George W. Bush's first actions as president was to eliminate the controversial Clinton administration labor responsibility rule. That so-called "blacklisting" rule would have broadened government buyers' discretion to avoid doing business with questionable firms. Killing that rule was a good decision, but the administration may now regret its timing.More importantly, oversight of the government's purchasing regime is at unprecedented lows. During the 1990s, Congress systematically eviscerated the government's acquisition workforce, while greatly expanding flexibility for government buyers. This Faustian bargain-greater buyer discretion in exchange for unjustified but politically popular personnel cuts-left a daunting legacy. Today, government buyers are overworked, under-trained and retirement eligible. The constant deluge of unfulfilled government needs means the remaining workforce must keep buying. The shadow government described by Brookings Institution scholar Paul Light - which converts civil servants into contractor personnel-increases the government's reliance on service contractors. Good service contracts are difficult to write and even harder to manage. Yet fewer resources remain to plan these procurements, monitor contracts, or supervise the buyers responsible for these activities. Those affected most dramatically by the 1990s workforce cuts were auditors, quality assurance personnel and accountants. As a result, a growing sense of lawlessness pervades a system that spends more than $200 billion each year.Nowhere is this more evident than with the government's high-volume purchases. Today, almost 700,000 government employees wield government purchase cards, indistinguishable from consumer credit cards. Despite their obvious efficiencies, the proliferation of these cards prompts concern. These cards permit government employees to avoid congressionally imposed rules that, among other things, require competition, implement social policies and provide the public with insight into the government's buying practices. Despite widespread incidents of fraud and misuse, agencies remain unwilling to rein in these practices. Recent General Accounting Office and Defense Department audits reveal that items purchased by federal employees for personal use include laptop computers, Palm Pilots, DVD players, jewelry, pet supplies and pizza. Meanwhile, Rep. Tom Davis, R-Va., recently introduced legislation that would multiply tenfold their authority to use these cards. If the Services Acquisition Reform Act (H.R. 3832), becomes law, more than 98 percent of the government's purchases would be exempt from normal constraints and meaningful oversight.Equally troubling is the proliferation of multiple award indefinite delivery/indefinite quantity (IDIQ) contracts. GAO and the Defense inspectors general constantly churn out reports criticizing the staggering volume of poorly defined work routinely awarded without competition under these contracts. These unregulated IDIQ contracts undermine normal procurement rules. In fact, it seems likely that despite suspension, Arthur Andersen could continue to obtain new government contract work under their existing IDIQ contracts, even at agencies where it had no prior or existing contracts.Although Congress has attempted to rein in these vehicles, powerful forces work against meaningful reform. Program managers now recognize that, when their agency contracting officers are unwilling to bend the rules, they can go elsewhere. Contracting officers employed by other agencies-now addicted to the franchise fees generated by interagency purchases-willingly provide customer satisfaction at the expense of existing policies and prudent business practices.Angela Styles, administrator of the Office of Federal Procurement Policy, recently told Congress that lax compliance with long-standing, fundamental procurement policies-which promote fairness, competition, transparency and integrity-are putting the taxpayers' dollars at risk. But neither President Bush's budget nor his priorities give the OFPP or agencies the assets or tools needed to address such problems.Suspending Enron and Arthur Andersen is a distracting side show. And don't be surprised if, by the time this issue is printed, GSA has lifted the suspensions based upon compliance programs suggested by the companies. If the administration wants integrity in public purchasing, it should restore meaningful oversight of the procurement system. Granted, funding oversight of seldom- seen buyers doesn't win votes. Accordingly, leadership is necessary to rebuild a dedication to and compliance with fundamental procurement rules.Surely, the suspensions' symbolism plays well in the heartland. And this type of pandering is relatively inexpensive. But you get what you pay for. It's time to focus on good government, not good theater.

Professor Steven L. Schooner teaches government contract law at the George Washington University Law School. He previously served as associate administrator of the Office of Federal Procurement Policy and as a Justice Department attorney. ]]>