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FDA Chief Halts Use of Gift Cards, Other Employee Incentives

By Robert O'Harrow Jr.
Washington Post Staff Writer
Thursday, May 21, 2009

The head of the U.S. Food and Drug Administration suspended the agency's use of gift cards and other informal bonuses to employees yesterday, after a report that the FDA had awarded a $41,030 contract last month to a company to supply the cards.

Agencies across the government issue the cards and other kinds of informal bonuses. The FDA's Center for Devices and Radiological Health arranged to buy 160 of the cards at $250 apiece to reward employees for their hard work, an agency spokeswoman said.

Acting FDA Commissioner Joshua Sharfstein announced the suspension after The Washington Post's Government Inc. blog published details of the April contract.

FDA officials said the contract was properly awarded. But Sharfstein said in an interview yesterday that he wanted to learn more about the criteria for such an award, how the cards were acquired and the precautions taken by agency officials to ensure the cards are properly awarded. He said that about 15 percent of FDA's employees -- as many as 1,500 in all -- received gift cards last year.

"My perspective is, we're the new team coming in. We are responsible for how the agency money is being spent," Sharfstein said. "It's really important that we're comfortable" with such incentives.

The review follows several years of troubles for the FDA. Congress has held a series of hearings that questioned the agency's handling of inspections of tainted vegetables, drugs and other products. Some lawmakers also have questioned management of the agency's budget and its allocation of resources, saying an overhaul was needed.

Gift-card bonuses are allowed under Office of Personnel Management rules, as long as they are of "nominal value" and are treated as taxable income. The OPM has been encouraging managers to use the cards and other types of informal bonuses for at least a decade, spokesman Michael Orenstein said.

"They are intended to reward good work," he said. "They're actual awards for going the extra mile."

The gift-card contract was issued after an office at the Center for Devices and Radiological Health conducted a competitive bidding process. A spokeswoman said the cards were an "end-of-the-year little bonus" for employees who had done well. The agency did not provide details about why the cards were issued or to whom.

FDA spokeswoman Judy Leon said the cards are easier to award than formal bonuses, which she said involve a complex process and more paperwork.

Leon said Sharfstein has called for an internal group to "review all compensation flexibilities and pay incentives in order to develop further guidance" before handing out any more cards. She said there is no indication of any fraud or abuse related to the gift cards.

"Everything that was done on this contract was done by the book," she said.

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