Suspensions Are Just a SideShow

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

S

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.

Procurement Preview issue
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.

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