As we wrote yesterday, The Recovery Act’s emphasis on accountability, transparency and oversight, has the potential of dramatically stepping up the fight against fraud down the road. This has been a major emphasis in general of the administration. As our colleague Jonathan Bruel wrote in the Business of Government blog, the President’s June announcement of the “Do Not Pay” list also provides a vehicle for agencies to make sure that improper payments to both individuals and contractors can be curtailed. This list includes contractors who have been disbarred, for example, deceased individuals, or fugitive felons.

 

The whole business of avoiding contractors who have had questionable records seems pretty obvious to us. If we were hiring a handyman for $200 to help repair the fixturees on our kitchen sink, we’d take it pretty seriously if we found that he had butchered someone else’s fixtures in the past. It doesn’t seem like there’s really a substantial difference between that and the federal government spending hundreds of millions of dollars. The problem of course, is that the feds can’t just pick up a phone and call a neighbor. (“Hello, Canada?”) Implementation of this kind of effort is pretty tricky for fraud, and is even trickier when it comes to performance-related issues.

 

Consider a report on Recovery Act contractor performance from the U.S. Environmental Protection Agency Office of Inspector General a few months ago. It reveals some pretty typical problems in this area. EPA contracting officers are required to complete contractor evaluations in a timely way,   using the National Institutes of Health Contractor Performance System. In April 2009, the Office of Management and Budget emphasized to agencies that this was an important requirement for the Recovery Act

 

But in its April review, the IG found that 83 percent of the required evaluations for its Recovery Act contracts hadn’t been completed in a timely manner.  On average, the evaluations were finished 109 days late. In its “At a Glance” summary, the IG makes a statement that is worth re-stating: “Consideration of contractor performance prior to award reduces the risk of providing funds to a contractor with a history of poor performance.”

 

In a report on federal contractors, the GAO cited a number of factors that contributed to this kind of problem, including a lack of management attention, consistency issues, and confusion about who was responsible for doing the evaluations. At the time, April 2009, the GAO noted that of 24,409 contracts in the Past Performance Information Retrieval System that required an assessment, only 31 percent had one.

 

As the EPA Inspector General pointed out, the issue is not just about incomplete databases, but about contracting officers using all the information that is available on contractor performance – past IG reports, for example, audits or the Financial Monitoring Review and information from the Defense Contract Audit Agency. “When EPA awarded funding to contractors and did not consider all sources of information, it increased the risk of fraud, waste, abuse and mismanagement of Recovery Act funds,” the IG report says.

 

The result: “EPA awarded $109 million in Recovery Act funds to contractors with cost control and other performance issues.”