Clinton Calls on Bush to Close Loopholes Allowing Private Contractors to Hide Fraud, Waste and Abuse in Federal Contracts

Senator Urges Oversight and Accountability of Out-of-Control Contracting

April 17, 2008 -- WASHINGTON, DC – Senator Hillary Rodham Clinton today called on the Bush Administration to move quickly to close loopholes in proposed rules that would allow federal contractors to hide fraud, waste and abuse.

Hillary Clinton: Photo by Marc Nozell (CC)

In a letter to the Director of the Office of Management and Budget, Senator Clinton urged quick action to protect American taxpayers from the unchecked excesses of outside contractors and vowed to introduce legislation to ensure stronger oversight and accountability for federal contractors.

“The American people deserve a government that works for them, with efficiency, transparency, and accountability. Instead, the Bush Administration has outsourced vital government functions to unaccountable and sometimes unqualified private contractors and has turned a blind eye to rampant fraud and abuse,” Senator Clinton said. “We need to restore responsible oversight and accountability to this process immediately. If the Administration will not clean up its act, I will offer legislation to do it for them.”

The federal government is increasingly reliant on contractors both at home and abroad. A recent Government Accountability Office (GAO) report found that government-wide spending on contractor services has more than doubled in the last 10 years. Taxpayer spending on private contracts by the Federal Government was nearly $440 billion in fiscal year 2007, and that amount continues to increase. As contracting out has increased, so has waste, fraud, and abuse. Senator Clinton has called for a significant reduction in the federal government’s reliance on private contractors that perform inherently governmental functions and a reduction in the overall number of federal contractors.

Senator Clinton has been an aggressive critic of abuses of government contracts. She secured into law two measures to curtail wasteful and unnecessary practices that outsourced critical national security jobs to private firms and rewarded underperforming private contractors. One measure stopped DHS’s plan to downsize the Federal Protective Service, which is charged with protecting 9,000 non-military Federal buildings. The other provision barred DHS from giving award fees or bonuses to private contractors that do not meet the stipulations related to cost, schedule, and performance outlined in the contract. Additionally, Senator Clinton offered an amendment to the FY 2009 Budget Resolution calling for a one-year moratorium on abusive and unchecked no-bid contracts.

The text of Senator Clinton’s letter is below.

April 17, 2008

The Honorable Jim Nussle
Director
Office of Management and Budget
Eisenhower Executive Office Building
725 17th Street, N.W.
Washington, D.C. 20502

Dear Director Nussle:

As the Administration reviews the proposed regulation that would require federal contractors to disclose violations of federal criminal law to the oversight offices of federal agencies, it is critical that you ensure that the final rule takes every step to prevent criminal fraud and wasteful abuse of the contracting process.

I am relieved to learn that the agencies that oversee the integrity of the $440 billion in taxpayer dollars spent on contracts have acknowledged that requiring disclosure of criminal acts by federal contractors is good public policy. Moreover, it is reassuring that they also believe that the exemptions included in the original proposed rules for the largest contractors in the nation should be removed. However, I do have serious concerns with the prevailing view of the Administration that changes in current law are not necessary to address further fraud, waste and abuse.

My concern stems from the fact that the federal government is increasingly reliant on contractors to carry out its mission at home and abroad. Indeed, while many government functions have been outsourced to the private sector, it is not readily clear whether the savings, efficiency, and comparable effectiveness promised by contracting have been achieved. A recent Government Accountability Office (GAO) report revealed that government-wide spending on contractor services has more than doubled in the last 10 years. As a result, waste, fraud, and abuse within the federal government have soared.

Several recent audits and reports have outlined troubling problems with federal contracting practices:

* A GAO report recently revealed that 95 major programs with contractors at the Department of Defense (DOD) have exceeded their original budgets by a total of $295 billion and are, on average, delivered almost two years late.
* A recent report revealed that the DOD awarded a $300 million contract to a company run by a twenty-two year old who provided decomposed ammunitions to our allies in Afghanistan in order to fulfill his contractual obligation.
* The Inspector General of the Environmental Protection Agency (EPA) recently found that the agency has paid nearly $16 million in award fees over the past 10 years with no assurance that the contractors demonstrated a higher level of performance. In 2005, the GAO found that the DOD paid out $8 billion in bonuses on large contracts without regard to performance. The GAO found that despite paying billions in award fees, DOD had little evidence to support the assertion that these fees actually improved performance.
* Recent reports indicate that the State Department may be renewing its contract with Blackwater Worldwide even though the company is under investigation for violating the rules governing the use of deadly force in Iraq.

Taxpayer spending on private contracts by the Federal Government was nearly $440 billion in Fiscal Year 2007, and that amount continues to increase. Given all of the evidence thus far, it is necessary to address issues of reducing the number of overall contractors on the Federal Government payroll and indeed, the use of private contractors for inherently government functions. It appears that the existing oversight and integrity apparatus has been unable to keep pace with the burden presented by the exponential increase in contracting. If broad regulatory authority and skilled and professional oversight officers have proven to be insufficient in addressing the fraud problem, then there is a clear need for appropriate and effective changes in the law. These changes would, at a minimum, designate in law new and stronger disclosure and reporting obligations for contractors, and stronger oversight management, coupled with sufficient resources for federal agencies awarding contracts.

I will soon introduce legislation that will meet the larger goals of stronger oversight and accountability for contractors and ensure that strong standards of integrity, value, efficiency and effectiveness are enforced. Indeed, I hope not only to give the weight of statutory law to the necessary reforms in government contracting but also to ensure that the will and the ability to enforce those reforms are never diminished. In the interim, I urge you to take every step to expeditiously remove the contractor loopholes in disclosing and enforcing criminal actions and fraud against the American taxpayer before the final regulation is presented.

Thank you for your attention to this critical issue.

Sincerely,

Hillary Rodham Clinton

Source: Senator Hillary Clinton

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