Pentagon may have violated contractor ethics rule, congressman says

The Defense Department may have violated the contractor responsibility rule when it awarded a $33 million logistics contract to a Houston-based company that has been accused of widespread race and sex discrimination, according to Rep. Nick Lampson, D-Texas. In a June 18 letter to Army Secretary Thomas White, Lampson said the Pentagon failed to determine that Eagle Global Logistics Inc. was a "responsible contractor" under the terms of the contractor responsibility rule, which was effective from Jan. 19 until April 3 this year. Although the Bush administration has suspended the ethics regulation and proposed its revocation in the Federal Register, the rule was in effect on March 30, when the Pentagon awarded the contract to Eagle. But in response to Lampson, White said the ethics rule did not apply to the Eagle contract because the acquisition was initiated before the regulation was issued.

At issue in the dialogue between Lampson and White is the process agencies must follow when they evaluate the ethics of companies they want to do business with. Contracting officers have long been required to determine that a contractor is "responsible" under the Federal Acquisition Regulation. The contractor responsibility rule spells out specific legal violations that contracting officers should consider in this process, including decisions by federal commissions. Eagle has persistently discriminated against women and racial minorities, according to the Equal Employment Opportunity Commission. In May 2000, the EEOC issued a 104-page "letter of determination" or report detailing numerous allegations of discrimination at the company. "There is believable witness testimony that [Eagle's president] told his subordinates not to hire blacks and he discouraged the hiring and promotion of women and minorities, especially for positions deemed most important by this…company," the report found. In January, the EEOC joined a discrimination lawsuit against Eagle that could affect more than 1,000 current, former and potential Eagle employees. Eagle has denied all allegations by the EEOC. The Pentagon was not aware of EEOC's investigation of Eagle when it awarded the logistics contract, according to White. "The contracting officer had no knowledge of any 'letter of determination' or [lawsuit] made by the EEOC regarding Eagle Global Logistics," he said. In Lampson's view, the contractor responsibility rule required the Pentagon's contracting officer to locate the EEOC report and consider it before awarding the contract to Eagle. White disagreed, arguing that the contractor responsibility rule did not apply to the Eagle contract and adding that the contracting officer properly vetted the company under existing regulations. For example, the officer obtained pre-award clearance on Eagle from the Office of Federal Contract Compliance Programs, a Department of Labor office that investigates contractors' affirmative action policies. The officer also checked the government's list of debarred and suspended contractors and found that Eagle was an eligible contractor. Approval from the compliance office played a key role in the Pentagon's decision to proceed with the contract, according to White. "In making the award, the contracting officer gave great deference to the Department of Labor's endorsement of Eagle Global Logistics' eligibility for the contract," he said. "I believe that the Department of Labor is in the best position to assess a firm's compliance with the applicable socio-economic policies of the federal government." But the compliance office does not conduct a comprehensive review of a contractor's employment practices when it provides pre-award clearance, according to a Department of Labor official who requested anonymity. Instead, the office checks to see whether it has reviewed a contractor within the past two years and whether the contractor is on the disbarred list. For contractors the office has never evaluated before, such as Eagle, the office can only deny pre-award clearance if the contractor is disbarred, the official said. "Unless they have already been or are being debarred, there is nothing we can do to stop the award process," said the official. The compliance office is now conducting a review of Eagle, according to the official. The office will inspect information such as the EEOC report during this larger review, the official said. The contractor responsibility rule is needed to ensure contracting officers are aware of existing allegations against a company, according to Lynn Reinhart, associate general counsel with the AFL-CIO. "If there was an ongoing proceeding involving violations of civil rights or environmental laws, that sort of information would be brought to the contracting officer's attention and it would be factored into the mix [for awarding a contract]," she said. The president of a leading association of contractors disagreed, saying a company deserves a legal hearing before it is banned from contract competition. "[The Eagle contract] is an example of the due process issues that the blacklisting rule creates," said Stan Soloway, president of the Professional Services Council. "You can't presume the outcome of adjudication. Simply relying on an EEOC finding that has not been fully adjudicated [to disqualify a contractor] is one of the real due process problems the blacklisting rule creates," he said.