Senator Barack H. Obama (D-IL) appeared recently before the Senate Federal Financial Management (FFM) Subcommittee to ask a question that should be heard more often from his colleagues: “How can we expect the American people to have confidence in us when all they hear about is overcharging and overpayments, pork-barrel projects like the Bridge to Nowhere, and money being wasted on frivolous expenses? How can we expect them to have confidence when the Administration and Congress seem unwilling or unable really to hold people accountable?” Obama noted that even United States Senators experience difficulty in obtaining quick, accurate information about Federal spending. He told the Subcommittee, chaired by Senator Thomas Coburn, M.D. (R-OK), that maintaining control of Federal spending is not a partisan issue:
“Whether you believe the government ought to spend more money or spend less, you should certainly be able to agree that the government ought to spend every penny efficiently and transparently. Democrats and Republicans can all agree that wasteful spending is unacceptable, whether it’s by FEMA [Federal Emergency Management Agency], HUD [Department of Housing and Urban Development], DOD [Department of Defense], or any other federal agency.”
Obama has teamed with Coburn, Senator Thomas Carper (D-DE), Ranking Member on the FFM Subcommittee, and Senator John S. McCain, III (R-AZ) to introduce S. 2590, the Federal Funding Accountability and Transparency Act, the purpose of which is to provide citizens with a website, managed by the Office of Management and Budget, which would list all organizations receiving Federal funds from 2007 onward, providing breakdowns based on the agency allocating the funds, the dollar amount given and the purpose of the grant or contract. The website would need to be updated “not later than 30 days after the award of any assistance requiring a posting.”
The Federal Funding Accountability and Transparency Act was approved recently by a unanimous vote of the Senate Homeland Security and Government Affairs Committee. This bill is receiving support from over 100 organizations, including the American Society of Newspaper Editors, Americans for Democratic Action, Concerned Women for America, Eagle Forum, Project on Government Oversight, National Taxpayers Union and the United States Chamber of Commerce. A similar bill passed the House of Representatives and Coburn is hopeful that his bill will be passed by the Senate this fall and signed by President Bush.
It is rare in Washington to assemble such a diverse coalition but a few examples demonstrate that there is good reason to demand greater transparency and accountability in contracting by the Federal government.
After Hurricane Katrina, the Federal Emergency Management Agency (FEMA), relying on emergency authority, issued four no-bid contracts related to temporary housing to Shaw Group, Inc., Bechtel Corporation, CH2M Hill Construction Inc. and Fluor Corporation. R. David Paulison, Acting Director of FEMA, was quoted in an October 7, 2005 Cox News Service story by Julia Malone entitled “FEMA To Put No-Bid Contracts Up For Rebidding” as promising the Senate Committee, “We are going to rebid all the no-bid contracts.” Because one and one-half months later the contracts had not been rebid, Coburn and Obama were able to secure passage of an amendment to the tax reconciliation bill expressing in a Sense of the Senate resolution that FEMA without delay should rebid the contracts. Obama and Coburn then met with Paulison who, according to Obama, told the Senators the contracts would be rebid.
The Associated Press reported nearly six months later, in a March 24, 2006 story, “FEMA Breaks Promise On Katrina Contracts,” posted on MSNBC, that the contracts would not be rebid, “including three that federal auditors say wasted significant amounts of money.” FEMA officials cited good performance and said the contracts actually had been extended. The Government Accountability Office (GAO) had issued a report at the same time criticizing the performance on a number of Katrina-related contracts, including three of the four temporary housing-related contracts cited above.
Obama stated on May 2, 2006 on behalf of an amendment that he and Coburn sponsored to stop no-bid contracts for the Gulf Coast: “The abuse doesn’t stop with these four contracts. We learned just two weeks ago that the Army Corps of Engineers missed an opportunity to negotiate a lower price on a $40 million contract for portable classrooms in Mississippi. Instead, a no-bid and overpriced contract was awarded to an out-of-state firm.”
Coburn and Obama have succeeded several times in passing amendments urging a cessation to no-bid contracting related to Katrina in excess of $500,000. Their amendment to the Emergency Supplemental Appropriations Bill was passed unanimously by the Senate, only to be stricken in conference. An amendment added to the Department of Defense Authorization Bill is now in conference. They also succeeded with a similar amendment to the Department of Homeland Security Appropriations Bill.
A report, “Dollars, Not Sense: Government Contracting Under The Bush Administration,” issued in June by the Special Investigations Division of the Minority Staff of the House Committee on Government Reform, “identifies 118 contracts collectively worth $745.5 billion that have experienced significant overcharges, wasteful spending, or mismanagement over the last five years.” Each case cited was the subject of reports from the GAO, the Defense Contract Audit Agency (DCAA), agency inspectors general and government officials which identified mismanagement. The report cited the specific concern that the awarding of non-competitive contracts has increased sharply. Non-competitive contracts represented $67.5 billion in 2000 but amounted to $145 billion in 2005. The report contends the lack of competitive bidding increased the likelihood that the contracts were overpriced.
One example of contractor abuse is the Alaska Native Corporations, granted eligibility by Congress in 1986 as “minority and economically disadvantaged” businesses that could receive sole-source contracts under the Small Business Administration’s ? 8(a) program. The Alaska Native Corporations received a special dispensation in the 1986 law establishing their business eligibility to receive sole-source contracts regardless of value. Regular small businesses cannot receive such contracts over $5 million for goods or $3 million for services. Shareholders of the Alaska Native Corporations must be Alaskan natives but the officers and employees need not be natives. The Corporations can also enter into partnerships with non-native companies and perform sole-source contract work provided that the Corporations control a majority of the equity and voting power. If the Corporations conduct 50% of the work they can subcontract to regular corporations.
Non-competitive contracts awarded by six agencies to the Corporations represented $265 million in 2000 and almost $1.1 billion four years later, according to a GAO report, “Contract Management: Increased Use Of Alaska Native Corporations’ Special 8(a) Provisions Calls For Tailored Oversight,” cited in “Dollars, Not Sense,” that warned that strict oversight of such contracts is needed:
“The GAO investigation found that federal agencies are awarding no-bid contracts to Alaska Native Corporations [in part because]?signing noncompetitive contracts with Alaska Native Corporations is faster and requires less effort than holding a competition?.
The GAO report identified specific instances where use of Alaska Native Corporations inflated contract costs. In one case, the State Department awarded a no-bid contract to an Alaska Native Corporation even though the Alaska Native Corporation’s proposed price was double the government’s cost estimate and the final price remained higher than the estimate. In another case, rather than buying water and fuel tanks directly from a manufacturer, the Army awarded a no-bid contract to an Alaska Native Corporation, which had the effect of adding an unnecessary layer of fees to the contract.”
Clearly the Congress and the public would benefit from the availability of more information about the size, scope and conditions of government contracts. However, as noted by Gary D. Bass, Ph.D., Executive Director of OMB Watch, the database is an essential first step; it will be up to Congress and watchdog groups to be vigilant in monitoring the contracts on the database. Congress has been notoriously weak in scrutinizing government programs and contracts as to whether Federal dollars are spent efficiently and economically and as to Congressional intent. Coburn, in chairing the FFM Subcommittee, has demonstrated what diligent oversight can accomplish. He has shone a light on shameful waste and abuse of taxpayer dollars.
Too much money has been wasted for too long by the Federal government. Now Coburn and Obama and a bipartisan coalition of Senators are threatening the beginning of the end to business as usual, with the Federal Funding Accountability and Transparency Act. If enacted, the readily searchable database would provide congressional staff and the public, including journalists, with information about how Federal money is spent and by whom. The database may not contain all the answers but it would present information to generate meaningful questions.
The more Americans learn about how their hard-earned dollars are handled?or really, mishandled?by Washington the more demand there will be for effective, far-reaching reform. Who will dare stop them? There are plenty of powerful politicians and lobby groups who recognize it is in their best interest to preserve the status quo. Let’s hope they fail and that Coburn, Obama and the people will prevail.