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GAO: Contractors get federal business despite violations

By Joe Davidson
Washington Post Staff Writer
Wednesday, October 13, 2010; 11:31 PM

When Uncle Sam dishes out billions of dollars in contracts to companies doing the government's work, you'd think he'd want to deal with firms that don't break his laws.

But a Government Accountability Office report says numerous contractors received government business even after they had been cited for violating laws designed to protect workers.

Consider this example:

The Labor Department's Occupational Safety and Health Administration (OSHA) hit a large petroleum company with $55 million in fines for labor law violations between fiscal 2005 and 2009.

A big chunk of the fines followed health and safety inspections "after a massive refinery explosion where there were 15 deaths and almost 200 injuries," GAO reported.

Yet in 2009, Sam awarded the firm's parent company more than $2 billion worth of work.

Perhaps he wanted to make sure it had enough money to pay the fines.

Here's another case:

Upon finding violations in a sugar refinery in 2008, OSHA said the company should pay $8.7 million in fines. Of the total, $5 million was related to a refinery factory explosion that killed 14 people and injured many more.

Then this: "The federal government obligated about $6.5 million on federal contracts with this firm during fiscal year 2009," said the report, signed by Gregory D. Kutz, managing director of forensic audits and special investigations for GAO.

Sam continues giving work to the violators, despite requirements that contractors be "responsible" and have "a satisfactory record of integrity and business ethics."

GAO found that 20 federal contractors were among companies that Labor cited for wage-and-hour violations. These contractors were told to pay more than $80 million in back wages.

Yet the government rewarded the firms with more than $9 billion in contracts in fiscal 2009.

That's not all: "None of the 20 federal contractors had been debarred or suspended from federal contracts," GAO said.

Similarly, seven companies hit with the largest OSHA fines, $3.7 million worth, in fiscal 2009 also received $180 million in contracts.

But again, GAO says: "None of the 7 federal contractors had been debarred or suspended from federal contracts."

Contractors can be cut off from the government's till for labor law violations, but they really don't have to worry about that.

"Certainly, there ought to be more meaningful sanctions for firms that have had these problems," said Rep. Robert E. Andrews (D-N.J.), chairman of the House Education and Labor subcommittee on health, employment, labor, and pensions, who requested the report. "It strikes me that the debarment remedy is just a rumor at this point. It hardly happens to anyone."

Furthermore, companies that violate labor laws also tend to perform poorly on contracts and to overrun projected costs for their work, according to Andrews.

The Professional Services Council, an organization that represents contractors, cautioned "against over-generalization about compliance by all contractors" and said there is "no blanket solution to how the government should address any of the cases highlighted in the GAO report. … In such cases, a one-size-fits-all solution would unfairly punish the contractor."

Alan Chvotkin, executive vice president and counsel of the Professional Services Council, said debarment and suspension "should only be applied to protect the government's interest and not imposed as an additional penalty."

As you might expect, labor leaders have a different view.

Colleen M. Kelley, president of the National Treasury Employees Union, said the report "underscores a danger in federal contracting ... namely, the willingness of some private companies to shortchange the wages and benefits of their employees, to risk their health and safety, and through environmental violations the health of the public at large, in pursuit of federal work."

A big part of the problem with federal contracting stems from the huge increase in government business given to companies during the Bush administration while federal staffing to monitor contractors was relatively flat. The Obama administration is trying to change that by beefing up the federal acquisition workforce.

"For too long, federal contracts have been awarded to 'bad actors,' companies whose actions should make them ineligible for the taxpayer funds that come with federal contracts," said Dan Gordon, administrator of the Office of Federal Procurement Policy. "This Administration is committed to breaking out of that pattern, to aggressively protect taxpayer dollars and the procurement system from those bad actors, and we have taken concrete steps to make that happen."

The bad actors hit federal taxpayers twice, according to Rep. Patrick J. Murphy (D-Pa.), who requested the report along with Andrews. He said some contractor employees are so poorly paid that they may qualify for Medicaid and food stamps.

"Some companies that continue to receive lucrative government contracts not only pay rock-bottom wages but have long histories of labor and workplace safety violations," he said. "This report makes clear that we have a lot of work to do to ensure that the federal contracting process encourages safe and good paying jobs."

A link to the GAO report can be found with this column at www.washingtonpost.com.

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