GAO: Barred contractors get millions

At least 25 federal contractors convicted of fraud, theft of government credit cards, providing false information and other violations and crimes improperly received millions of dollars in additional federal contracts from 2003 to 2007, according to a study released today by the Government Accountability Office.

“This is the tip of the iceberg,” Gregory Kutz, director of forensic audits for GAO, told the House Oversight and Government Reform Committee in a hearing.

GAO examined the General Services Administration’s Excluded Parties List System that collects and distributes information on suspended and contractors barred from doing business with the federal government .

Federal contracting officers are forbidden from awarding contracts to suspended and debarred individuals or companies; however, the GAO identified 25 cases in which such contracts were awarded during suspensions or debarments.

The suspensions and debarments identified by GAO happened because of tax frauds, mail frauds, wire frauds, bribes, money laundering, bid rigging, kickbacks and other misconduct, the government auditors said. In one case, a contractor received additional contracting work despite being found guilty of illegally shipping aluminum pipes to North Korea that could be used to generate materials for nuclear weapons.

The mistakes happen because of several reasons, Kutz said, adding that In some cases, contracting officers forget or fail to examine the excluded parties list; some officers erroneously believe that the procedure does not apply to a contract extension or modification. In other cases, the database itself is faulty, with incomplete, misspelled or miscategorized information.

In other cases, contractors deliberately seek to deceive government authorities as they attempt to hide their suspensions and debarments, Kutz added. For example, contractor may transfer their operations to spouses by using a name that doesn't raise suspicions. Or the contract may supply incorrect data or set up a new corporation during the suspension.

Rep. Edolphus Towns (D-N.Y.), the panel's chairman, said the committee is considering additional safety measures against contractor frauds to improve oversight of the $787 billion to be spent under the new economic stimulus law.