Pentagon paid billions to defense firms that previously defrauded the government

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Photo - A report prepared in 2011 by Pentagon officials said the Department of Defense is spending billions of dollars buying products and services from companies that have records of defrauding the government on military contracts. (Photo by <a href="https://en.wikipedia.org/wiki/File:The_Pentagon_January_2008.jpg">David B. Gleason</a>, used under a Creative Commons license.)
A report prepared in 2011 by Pentagon officials said the Department of Defense is spending billions of dollars buying products and services from companies that have records of defrauding the government on military contracts. (Photo by David B. Gleason, used under a Creative Commons license.)
Watchdog,Secretary of Defense,Federal Budget,Corruption,Defense Spending,Pentagon,Military Budget,Waste and Fraud,Whistleblowers,Luke Rosiak

Like a battered spouse in an abusive relationship, the Pentagon paid billions of dollars to companies even though the same companies were known to have defrauded the government in the past, according to a report compiled by Department of Defense officials.

But the Pentagon's ability to research sanctions levied by DOD offices against contractors, and to monitor sanctioned contractors as they merge, acquire new names and become new companies, is as piecemeal and filled with guesswork as that of anyone trying to do such research from the outside, with limited integrated systems and unique identifiers, the report said.

And the big ideas of a panel that the Pentagon assembled to address contracting fraud consisted largely of updating a handbook and producing a podcast about fraud's ill effects.

Only 30 defense contractors were criminally convicted of fraud over a recent three-year period, and 11 have been paid a total of $354 million following their convictions, according to the 2011 report by the Pentagon's Office of the Under Secretary of Defense for Acquisition, Technology and Logistics.

The U.S. obtained civil judgments against 91 companies over the same period, between fiscal years 2007 and 2009, and had paid $4.9 billion to 35 of those same companies between the date of judgment and the end of 2010. And it suspended 43 companies for wrongdoing, but paid $3.9 million to six of them just after their suspensions were up, plus $3.5 million to three companies while they were still suspended.

"In certain instances, ordering continued through existing performance period to ensure mission accomplishment and for safety and mission requirements. In other instances, the contractor was placed on the debarment list after the contract was awarded and in placing orders under the contract, the EPLS list was not checked. In others, the Federal Acquisition Regulation was misinterpreted and/or training was inadequate," Defense officials said in the report.

It debarred, or banned, 164 companies, and paid $15 million to a dozen after. "Unfortunately, in some instances, contracting offices continued to obligate funds to some of the debarred contractors," Pentagon officials wrote.

It reached settlements with 120 other companies, and then paid $46 million for additional work to nine of them shortly after. Settlements don't prohibit companies from receiving future work, but generally indicate that the government was harmed by them in the past.

The data is incomplete and the department knows little about the companies defrauding it, however, in part because the sprawling agency doesn't subscribe to a basic research tool, investigators said.

Each of the Pentagon's various investigative offices, which compiled the data, uses its own system and "contract numbers are not always maintained in the records, nor are the Dun and Bradstreets."

"The [Dun & Bradstreet] identifier is considered essential for drawing accurate data on specific contractors from Federal Procurement Data System (FPDS). Because a company name is not a unique identifier for a legal entity, a search of FPDS using only a company name can result in errors," the report notes.

But another report by the same Pentagon office in 2011 says "the department does not have a license with Dun & Bradstreet and therefore, does not have access to the 'family tree' for all the companies."

Not to worry, though. In 2008, Congress mandated the creation of a Panel on Contracting Integrity, with a subcommittee led by the Pentagon's Inspector General and focused on fraud.

The subcommittee's big accomplishments, as touted to Congress in the report, were creating a Defense Acquisition University training module of Procurement Fraud Indicators and:

* Updating a handbook

* Creating a web site to "increase awareness of procurement fraud"

* Hosting a conference

* Creating a podcast about fraud

* Publishing an article.

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