WASHINGTON – Charging that it would be a disservice to taxpayers to exempt overseas contracts when holding bad actors accountable, Senator Chuck Grassley introduced a Sense of the Senate resolution against a loophole that might let government contractors off the hook if their work is not on U.S. soil.
Grassley’s resolution to the fiscal 2009 budget resolution responds to a proposed rule issued by the Federal Acquisition Regulatory Council that would otherwise tighten ethics and reporting requirements for federal contractors. The proposed rule contains a loophole that would exempt federal overseas contractors from reporting contract abuse. The Justice Department objected to the loophole for overseas contracts and the Office of Management and Budget is currently reviewing the proposed rule.
“There are government contracts around the world, so there’s the potential for fraud against American taxpayers around the world. It would be a disservice to taxpayers to exempt overseas contracts when holding bad actors accountable, and it’s a no brainer that this loophole should be rejected,” Grassley said. “This resolution is an important message that we need to hold ALL government contractors accountable, regardless of where they perform their work.”
Last month Grassley sent a letter to Office of Management and Budget Director Jim Nussle outlining his concerns and urging Nussle to ensure that the exemption is not included in the final rule.
Here is a copy of the text of Grassley’s letter to Nussle.
February 29, 2008
The Honorable Jim Nussle
Director
The Office of Management and Budget
725 17th Street, NW
Washington, DC20503
Dear Director Nussle,
I would like to bring to your attention serious concerns I have with one element of a proposed rulemaking published in the Federal Register on November 14, 2007, under Federal Acquisition Regulation (FAR) Case 2007-006. This new proposed rule was issued in response to a May 23, 2007, request from the Department of Justice (DOJ) to require government contractors to have a code of ethics and business conduct that establishes and maintains internal controls to detect and self-report improper conduct with the performance of government contracts. This new rule incorporates provisions of the DOJ request and supplements a similar proposed rule that was issued on February 16, 2007, that closed for comment on April 17, 2007.
First, I would like to clarify that I fully support the rationale for the revisions to the FAR recommended by DOJ and embodied in FAR case 2007-006. I applaud your staff at the Office of Federal Procurement Policy (OFPP) for acting on this important matter. The interests of the American taxpayer will be well served by the new requirements for contractors. The mandatory reporting requirement for contractors that discover fraud or other criminal violations will be particularly helpful in both the prevention and detection of fraud against the federal government.
However, I am deeply concerned with two provisions contained in the proposed rule that were not in the original February 16, 2007, rulemaking or requested by DOJ. These nearly identical provisions would specifically exempt contracts performed outside the from the new requirements contained in the FAR. One applies to government contractors, the other to subcontractors.
Overseas contracts pose significant problems for fraud and abuse because it may not be as easy to employ traditional forms of government oversight to keep these contracts free from fraud or abuse. As such, it is even more important that reporting of fraud or potential fraud be mandatory. Fraud against the government, even that which occurs abroad, is still fraud and should be detected and prosecuted to the fullest extent of the law.
This regulation is a big step forward in ensuring that American taxpayers are getting the best value for their dollar from government contractors. However, these two provisions threaten to exclude a significant class of government contracts that are ripe for fraud and abuse. Moreover, the American taxpayers are cheated when contract fraud is allowed to occur so it is a disservice to taxpayers to exempt overseas contracts when holding bad actors accountable.
Simply put, there is no reason these contracts should be excluded. I cannot understand why this exemption for contracts to be performed outside the was inserted into the proposed rule and I urge you to use your authority to ensure that it is not included in the final rule.
Thank you for your attention to this matter.
Sincerely,
Charles E. Grassley
United States Senator