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GAO says DoD’s fraud assessment efforts should include examination of contractor ownership

Some companies doing business with the Defense Department have opaque ownership structures that may conceal who owns, controls, or benefits from the company.
This GAO illustration depicts how DoD’s use of an ineligible foreign manufacturer — that illegally exported sensitive military data and provided defective and nonconforming parts — led to the grounding of at least 47 U.S. fighter aircraft.

The Government Accountability Office (GAO) recently  identified fraud and national security risks to DoD from opaque ownership such as ineligible contractors receiving contracts and foreign firms receiving sensitive information through U.S.-based companies.

These risks, identified through GAO’s review of 32 adjudicated cases, include price inflation through multiple companies owned by the same entity to falsely create the appearance of competition, contractors receiving contracts they were not eligible to receive, and a foreign manufacturer receiving sensitive information or producing faulty equipment through a U.S.-based company.

For example, one case involved an ineligible foreign manufacturer that illegally exported sensitive military data and provided defective and nonconforming parts that led to the grounding of at least 47 fighter aircraft.

The GAO reports that DoD has taken some steps that could address some of the risks related to contractor ownership in the procurement process but has not yet assessed these risks across the department.  DoD, in coordination with other agencies, revised the Federal Acquisition Regulation (FAR) in 2014 to require contractors to self-report some ownership information.  In addition, DoD has taken steps to identify and use ownership information — for example, as part of its supply-chain risk analysis when acquiring critical components. DoD has also begun a department-wide fraud risk management program but, according to GAO, it has neither assessed risks of contractor ownership across the department nor identified risks posed by contractor ownership as a specific area for assessment.

GAO contends that assessing risks arising from contractor ownership would allow DoD to take a strategic approach to identifying and managing these risks, make informed decisions on how to best use its resources, and evaluate its existing control activities to ensure they effectively respond to these risks.

Keep reading this GAO report summary at: https://www.gao.gov/products/GAO-20-106#summary

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Pentagon nearly doubles use of Other Transaction Authority purchases

The Defense Department is embracing the alternative procurement method but could use more oversight of the deals, a Government Accountability Office audit found.

The Pentagon upped its use of purchases through other transaction authority, or OTAs, significantly over the past fiscal year, nearly doubling both the number of total OTA contracts and total investment.

In fiscal 2017, the Defense Department issued 384 new awards, modifications or orders for OTA contracts totaling $2.1 billion in obligations. In 2018, the Defense Department contracted 618 OTA awards totaling $3.7 billion, according to a Government Accountability Office audit released this week.

Based on data from the Federal Procurement Data System, the audit indicates the Pentagon has more than tripled its use of OTA contracts since it received enhanced authorities from the 2016 National Defense Authorization Act. In that year, Defense agencies issued only 248 OTA awards for approximately $1.4 billion.

Keep reading this article at: https://www.nextgov.com/emerging-tech/2019/11/pentagon-nearly-doubles-use-other-transaction-authority-purchases/161504/

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Bid protests hit 10-year low

Companies filed 16% fewer bid protests in fiscal 2019 than the year prior.

According to data released last Thursday by the Government Accountability Office (GAO), vendors filed 2,198 protests in fiscal 2019, 16% fewer than were filed in the previous year. Fiscal 2019’s total represented 22% fewer protests than GAO’s 10-year high-water mark—the 2,789 filed in fiscal 2016.

According to GAO, the agency closed 2,200 cases in fiscal 2019 and sustained 77 of the 587 total decisions decided on merit. Fiscal 2019’s 13% sustain rate—wherein GAO agrees with the bid protestor—was its lowest since fiscal 2015. A large number of bid protests are resolved when agencies agree to take corrective action rather than GAO carrying the protest to full conclusion.

Keep reading this article at: https://www.nextgov.com/cio-briefing/2019/11/bid-protests-hit-10-year-low/161168/

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Just 1 bidder is vying for 2 Pentagon programs worth $130 billion

The defense acquisition chief is looking into the Army’s disqualification of a second bidder to replace Bradley armored vehicles.

It’s a pretty widely accepted business principle that competition is good for business. But for two separate programs potentially worth a combined $130 billion, the Pentagon has just one possible bidder.

That’s prompted the U.S. Defense Department’s top weapons buyer to look into the U.S. Army’s $45 billion effort to replace the Bradley Fighting Vehicle. Service officials recently disqualified one potential competitor, leaving just one company to bid.

“I’m just getting more involved in that one right now,” Ellen Lord, defense undersecretary for acquisition and sustainment, said at a Friday press briefing.

DoD leaders have spent the past few years delegating the oversight of most major acquisition projects to the individual military services, a move intended to remove bureaucratic hurdles, speed up development and get weapons to troops faster. This marks the first time that Lord, who has held her job since August 2017, has publicly said she would step in to review one of those programs.

Keep reading this article at: https://www.defenseone.com/business/2019/10/just-one-bidder-vying-two-pentagon-programs-worth-130-billion/160718/

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The insidious threat of pay to play

The government contracting world is deeply vulnerable to fraud, says a former federal investigator.

News that a former FEMA administrator was arrested recently for taking bribes from a contractor — one who landed $1.8 billion in federal contracts to repair Puerto Rico’s electrical grid after Hurricane Maria — was hardly surprising to those of us who work in fraud risk management.

Why?  Because, unfortunately, the government contracting world is deeply vulnerable to fraud. Given the huge amounts of money at stake and the power that federal officials have in deciding winners and losers among contractors, this dynamic can lead to a “pay to play” scenario among the less ethical on both sides of the contracting relationship.

The volume and similarity of government corruption cases are striking. In the most recent FEMA case, the contractor provided the government official with helicopter rides, hotel accommodations, first-class airfare, and the use of a credit card in exchange for choosing his company to repair Puerto Rico’s electrical grid. Last year, charges were brought against the defense contractors who allegedly provided Navy officials with gifts and luxury items that included cash, checks, retail gift cards and flat-screen televisions in return for $6 million in government contracts.

Keep reading this article at: https://www.govexec.com/management/2019/09/insidious-threat-pay-play/159935/

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