'Byzantine warren of fiefdoms' makes contracting fraud hard to stop

On a hot summer day in 2011, two men sat in a car outside of L’Enfant Plaza in Washington, D.C. Away from any offices, they arranged a secret deal -- a $1 million bribe from a contractor in exchange for a $1 billion federal contract.

What the federal contracting officer accepting the bribe didn’t know, however, that the car was wired and the other man was an informant.

David Williams, the U.S. Postal Service’s inspector general, said in a Sept. 6 speech that this example-- for which he gave no additional detail -- and other schemes prove that federal contracting fraud is lucrative -- and that the government needs reinforcements to stop it.

“Bribery, extortion, kickbacks, false claims, foreign corrupt practices, and that’s just the freshman course in this business,” he said.

In a time of increasingly rampant fraud in federal contracting, the government needs to establish data standards and allow no opting out of them, Williams said at an event highlighting how agencies can prevent waste, fraud and abuse. The event was hosted by FedInsider News.

The standards would allow investigators and auditors to have a governmentwide accounting system and an intelligent contract and grant numbering system, so they can quickly pinpoint details of a procurement. The system’s numbers need to reveal key information for investigators, including the who, what, where and when of a contract.

Williams mentioned the Digital Accountability and Transparency Act (H.R. 2146) as a means of standardizing contracting and grant data. The bill largely focuses on putting grant and contract dollar amounts on a single web portal. It would incorporate elements of the Office of Management and Budget’s USASpending.gov website and the American Recovery and Reinvestment Act’s spending tracking website Recovery.gov into a new online database. It would also set standards for reporting spending data—including grants, contracts, loans and internal expenses—by agencies and recipients. The House passed the legislation unanimously in April, but the Senate has not yet acted.

Standardization is critical, Williams said, and agencies should not have the opportunity to be exempted from the system.

“There should be zero tolerance for laughable claims that departments are too special to join,” he said. “The loudest advocates have the sickest of arguments, in my experience, of people who are demanding to be special.”

He said the current environment surrounding government contracting is a breeding ground for fraud.

“We have a Byzantine warren of procurement fiefdoms, each with their own contracts, accounting system and contract numbering system,” he said. There are “rickety silos, perfect breeding grounds for black swans. We have a labyrinth of dead ends and walled cities. If you try to look across government, you’re not going to get any further than the one part you’re operating in.”

Data mining tools may be primitive now, but could be the savior if the fiefdoms and the walls are broken down and put together again as one piece. In addition, investigators need more training, since it's “sort of at a laughable level” right now. Finally, procurement officials and investigators need to join forces, although, he said, suspicion is extremely high.

Camille Tuutti contributed to this report.