Partisan fight develops over ethics on contracts


WASHINGTON - About 50 top contractors have kept getting government money despite guilty pleas or settlements in civil and criminal fraud cases since 1995, according to a recent General Accounting Office study.

Whether prospective contractors should be penalized for fraud or violating labor, environmental and other federal regulations is a hot Capitol Hill issue these days, pitting Republicans in Congress against the Clinton administration and big business against big labor.

The general idea of contractor reform was to allow federal agencies to deny business to contractors that lack a satisfactory record of integrity and business ethics, according to the proposal.

In unveiling the plan three years ago, Vice President Al Gore told an AFL-CIO convention: "We're going to send a message to companies that want to do business with the federal government: How you treat employees and how you treat unions counts with us."

Violations of federal tax, labor, environmental, antitrust, consumer protection, fraud, embezzlement, theft and bribery laws would be taken into account, according to the latest version of the proposal, released June 30.

One problem: If strictly interpreted, the proposed standard could disqualify 23 of the top 25 government contractors for recent violations of occupational safety and health rules, according to the Employment Policy Foundation, a pro-business Washington research group that focuses on workplace trends and policies.

Late Thursday, sympathetic House Republicans lined up for a 228-190 vote mostly along party lines to pass an amendment to kill the plan. The fight now moves to the Senate.

The GAO study in June detailed eight criminal cases in which government contractors had pleaded guilty to fraudulent or illegal contract behavior. The study also found that in 95 civil cases, companies settled 94 times and lost the 95th. All those contractors are still eligible for federal contracts, according to Democratic Sen. Tom Harkin of Iowa, who ordered the study.

A tougher contractor ethics standard is important to the integrity of government, said Joshua Gotbaum, acting deputy director for management at the White House Office of Management and Budget. But opponents say the proposal would give agencies the power to blacklist companies for minor offenses. "They've proposed a bad solution to a problem that may not even exist," said Ron Bird, chief economist at the Employment Policy Foundation. "We don't know if getting stuck with lemons is a big problem for government. "

Gotbaum responded: "Do we really think that contracting officers should feel compelled to do business with companies that have defrauded the government or broken other laws?" He said the Clinton proposal says "if there is someone whose integrity you doubt ... you don't have to do business with them."

Gotbaum said the proposal was offered because the current rule about contractor ethics is vague. Procurement officials at the General Services Administration and National Aeronautics and Space Administration said existing regulations are rarely invoked.

NASA's ethical disqualifications of contractors have been focused on financial aspects, said Scott Thompson, the agency's contract management director.

"It's really about politics, not procurement," said Steve Schooner, a professor of government contracts law at George Washington University Law School and a procurement law administrator at OMB when the rule change was proposed in 1997.

According to Schooner, the old business ethics rule was extended to cover labor, environmental, antitrust and other laws popular with Democratic constituents. The result, he said, was an incredibly complicated and burdensome addition to federal purchasing rules.

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