U.S. punishing more federal contractors for poor performance

The number of federal contractors that have been suspended or excluded from future contracts for poor performance has more than doubled in the past five years — a development that watchdogs inside and outside of government say is positive.

The Government Accountability Office reported last month that contractor suspensions and debarments rose from 1,836 in 2009 to 4,812 in 2013. The GAO, the investigative arm of Congress, said the numbers reflect greater oversight of projects that use taxpayer money — and show that more contractors are suffering consequences for overbilling, subpar performance or ethical breaches.


Critics outside government say most of the contractors that are being held accountable are small companies or individuals. Large corporations continue to escape scrutiny and sanctions, they say, and the number of suspensions or exclusions is a small fraction of the number of active federal contracts.

"The report didn't really raise any eyebrows over here," said Neil Gordon, an investigator with the nonprofit Project on Government Oversight. "You really can't tell from the numbers alone if things are getting better or not. We know for a fact that large companies aren't suspended or debarred to the extent that small companies are."


The push for better monitoring and enforcement can be traced to 2011, when the GAO studied 10 federal agencies and learned that the agencies that sanctioned the most contractors had dedicated staff and detailed policies to oversee contracts.

Agencies that needed to improve contract management included the Departments of Commerce, Health and Human Services, Justice, State and Treasury and the Federal Emergency Management Agency, the GAO said in 2011.

Those departments have shown improvement, the GAO reported last month, collectively increasing annual suspensions or debarments from 19 in 2010 to 271 last year. The GAO says many are communicating more effectively with auditors while also increasing training on how to refer contractors who perform poorly for sanctions. Many have also increased staffing for auditing and training.

"There's no question the attention at key agencies is increasing because of the recommendations the GAO made," said Alan Chvotkin, executive vice president of the Professional Services Council, a trade group for government contractors. "The numbers nevertheless reflect that a very, very small portion that the government procures every year rises to the level where the government feels it's in their best interest to suspend or debar somebody."

He says he welcomes the increased scrutiny: "Contractors need to be held accountable."

Calls for additional oversight increased during the wars in Iraq and Afghanistan, when military officials came under criticism for hiring private groups from the United States and overseas for projects later found to be plagued by mistakes, unfinished or useless.

Most recently, the launch of, the web portal for Americans to obtain insurance under the Affordable Care Act — an effort mostly contracted out to private companies — was troubled with glitches and delays.

Donald Cohen, executive director of the public advocacy group In the Public Interest, said managing contractors is "hard work."


"There's an increasing drumbeat and there's a story line that's growing in America about contractors taking advantage of public dollars, and that there's a lack of government capacity to oversee these contracts," Cohen said.

One point of privatizing or outsourcing government activities is to cut costs. But some of the savings comes from not paying government managers who would usually oversee such projects.

Cohen's group came up with a list of guidelines he says state and federal agencies should follow to make sure contractors do not take advantage of the public.

They include posting the specifics of contracts online for the public to track, requiring contractors to open their books and meetings, conducting regular audits and having enough auditors to effectively check contractors' work.

The group also recommended creating clauses that allow the government to cancel contracts if contractors do not live up to promises, banning any company that has broken laws, checking to see whether companies pay employees livable wages and rebidding contracts when they expire instead of renewing them automatically.

Contract language that holds contractors responsible for blown deadlines or budget overruns, Cohen says, can help stop private companies from requesting change orders or additional project money while the project is underway. Agencies simply approve these requests, he says, because contractors have the leverage of demanding the money or halting the project.


Government contract attorneys should change that, Cohen said, because the public wants more accountability if the government continues outsourcing projects.

"There's a growing awareness," he said.