Chuck Grassley

United States Senator from Iowa

Instagram

Flickr

Twitter

Facebook

Oversight of the General Services Administration

Oct 17, 2007


Oversight of the General Services Administration


Floor Statement


Mr. President, I come to the floor today to report that senior executives at the General Services Administration (GSA) may have failed to meet their responsibilities to the American Taxpayers.

 

These issues are carefully examined in two oversight investigations conducted by my staff.   These investigations have uncovered a disturbing chain of circumstances at GSA.

 

In a nutshell:

 

They indicate top level GSA management interfered in contract negotiations with Sun Microsystems. They put pressure on the contract officer to sign a potentially bad contract; and when he refused, they had that contract officer removed under duress. All the evidence suggests that this particular contractor had been overcharging the government for years.

 

The contract officer believed the proposed terms were still not fair to the government. Even worse, these reports also indicate that allegations of intimidation against the General Services Administration Office of Inspector General auditors may have been fabricated. This may have been done to cover high level pressure on the contract officer. Or, maybe because the new contract was signed on terms dictated by the contractor.

 

When I asked for audits of the new contract, this contractor resisted – tooth and nail - and in the end, they cancelled the contract before the audits could be completed.

 

I think that it is important that my colleagues know what my staff uncovered at GSA - not merely for the purposes of pointing out mistakes, but for the purpose of seeking solutions. These investigations are about fixing the mistakes. 

 

Let me set the record straight right up front.  This is not some sort of witch hunt for the Administrator of GSA or anyone else.

 

Quite simply, this is oversight and investigations – O & I work, I call it.

 

In doing this work, I am fulfilling one of my most sacred responsibilities as a U.S. Senator. As with all my investigations, I just want to be certain that every tax dollar is spent wisely and according to law. Nothing more. Nothing less.

 

With that in mind, I want to address the findings of these investigations that are documented in separate staff reports.

 

The oversight work began last September when I was informed Administrator Lurita Doan at GSA was attempting to cut the Inspector General’s budget for audits. It appeared she was attempting to neutralize the IG - especially in the area of oversight of government contracts.  This was a red warning flag. I decided to dig deeper.

 

The Administrator was alleging that the Office of the Inspector General, or OIG, was abusing its power by threatening and intimidating government contracting officers and vendors.  These allegations were raised by her in numerous statements, both publicly and internally, and in letters to me.  According to three separate witnesses, Administrator Doan even compared the Inspector General officials to terrorists.

 

These allegations concerned me for two reasons.  First, I was extremely concerned that sworn Federal law enforcement agents and accredited auditors might be abusing their power.

 

Second, if there was no factual foundation for these allegations – if they were fabricated, where did they come from and why?

 

I asked Administrator Doan to provide me with specific examples of the alleged intimidation.  Since she had aired these allegations in public, I thought she would provide me with specific details to support the charges.  She could not.  In reality, only one specific instance was brought to my attention. 

 

In the end, my staff could find no evidence to support those allegations. Sadly, it appears as if that one specific allegation may have been fabricated to cover intense top-down pressure on the contract officer to award a contract.

 

It was a bureaucratic smokescreen that opened a much larger can of worms.

 

That can of worms was a contract awarded to Sun Microsystems, Inc. in 1999 for computer products and services.

 

The IG had this particular contract under the microscope for several years.  IG audits indicated that Sun had failed to report significant discounts given to commercial customers as mandated by contract. Because this information was withheld, government customers paid much higher prices than Sun’s commercial customers. The government was losing money because of these unfair pricing policies; losses, potentially, in the tens of millions of dollars.  These and other alleged contract violations - including potential fraud, were referred to the Department of Justice and are now in federal court.

 

The alleged fraud was first reported to GSA management in February 2005.

 

GSA management had several options, including seeking a better contract, cancellation, or suspension.   In fact, three GSA contract officers, who handled the Sun contract, attempted all three remedies.  In each case, intervention by upper management at GSA blocked those moves. Upper management turned a blind eye to the alleged fraud, preferring instead to do business as usual. And then they began applying serious pressure on the contract officer to extend the contract with Sun for another five years.

 

In August of last year, the GSA contract officer assigned to the Sun contract dug in his heels, holding out for a better deal.  He believed that the terms offered by Sun in negotiations were not fair to the government.

 

The contract officer was then subjected to intense pressure by senior management. They wanted him to award the contract even if the terms were unfavorable to the government.  Both the contracting officer and his supervisor reported being told by the head of the Federal Acquisition Service (FAS), the arm of GSA responsible for the Sun contract, that Administrator Doan wanted the contract awarded.   At that point the contracting officer, knowing that he could not in good faith accept the proposed terms, stepped down.

 

The evidence examined by the staff seems to suggest that top level officials dislodged the contract officer with intense pressure. GSA Managers felt that this contracting officer was causing the “impasse” in negotiations by holding out for a deal intended to protect the Government. For that, he had to be removed.

 

Now, if you ask senior GSA management, you get a very different story.  Those individuals, including Ms. Doan and FAS Commissioner Williams, claim that this contracting officer was so intimidated, brow beaten even, by the OIG auditors that he had to be replaced.

            The facts, however, just do not support this explanation.

 

The contracting officer and his immediate supervisor both deny experiencing any intimidation from IG auditors.  They say it never happened. The source of the allegations has changed her story several times.  In fact, she continued to support the contracting officer’s position in negotiations – a position that was fully aligned with the OIG auditors’ position - even after claiming he was being intimidated into that position by the same auditors.

 

If that position was tainted by OIG auditor intimidation, why would she support it? 

 

And one other fact seems to have escaped the GSA managers making these allegations. IG auditors have no direct influence over a contracting officer’s career.  The only person with that kind of authority is a contract officer’s supervisor – not the IG.

 

There is some irony here, too.

 

The same GSA managers, who accused OIG auditors of intimidating this contracting officer, had themselves attempted in vain to intimidate him into awarding the contract.

 

So, it seems GSA management tried to turn the concept of intimation upside down. Why would they do that?

 

The evidence suggests these allegations were a smoke screen to hide the actions of GSA management. They used it for cover while ramming through a contract that may be bad for the taxpayers.

 

There should be no greater motivation for those in government procurement than protecting the taxpayer’s money.  Contracting Officers, who are warranted by this Government, should be allowed to fight in negotiations for savings.  Any pressure, suggestion, or direct involvement by management to thwart that mission would be out of line.

 

What Administrator Doan, Commissioner Williams – and others - did to short-circuit this process was wrong.

 

To turn up the pressure, senior GSA officials, including Administrator Doan, were communicating directly with Sun and their lobbyists during negotiations. They made sure the contract officer knew about it.

 

What kind of message does that send to a contracting officer fighting for a good contract?  What kind of message does that send to current and potential government contractors?  I would say that, at the very least, it tells them that if you don’t like the deal offered by the contracting officer – just go over his or her head.  Go to the very top and get the problem fixed.  It also says if the contracting officer is in the way, you get rid of him and get one who will do the dirty deed. 

 

It would be bad enough were this story to end here.  But it doesn’t.

 

After forcing out the contracting officer, GSA management assigned a new officer.  It took her just nine days to negotiate a final deal with Sun. But what did the government get?

 

In interviews, this new contracting officer claimed that she didn’t need to talk to the IG auditors who had years of knowledge on the Sun contract.  She claimed that she could solve any impasse in the negotiations by listening to what the contractor had to say. Many of the provisions she adopted were ones steadfastly opposed by the previous contract officer – the very same ones that led to the “impasse” and his removal.

 

The new contracting officer even admitted during questioning that she did not fully understand key provisions in the contract.

 

She admitted making “big oversights” in some of the contract terms.  I fear the government got a contract based on terms dictated by the contractor.  I ask you, is this GSA management’s idea of how to negotiate?

 

After my staff interviewed the new contract officer, I realized I needed to know more about the new contract. That’s the one signed in September 2006. Was the government continuing to lose money due to unfair pricing and unreported discounts?

 

As a member of the U.S. Senate who cares deeply about oversight, I would have been remiss in not asking more questions.

 

So on June 5, 2007, I asked the GSA IG to conduct an audit. I asked the IG to look at the terms of this new contract.

 

Now, if this contract was such a “good deal for America,” as has been suggested by Sun and GSA management, then you would think Sun would rush to cooperate.  They did not.  Instead, for three months, Sun complained to me, procrastinated, withheld information, and fought the audit at every step.

 

They also lashed out at the GSA IG, claiming bias maybe because that IG had nailed them in the past.  To his credit, IG Brian Miller held his ground and forged ahead with the audit.

 

Sadly, Sun chose to cancel this contract on September 13, 2007, without waiting for the completion of those audits.

 

This entire situation is extremely unfortunate, possibly preventable, and certainly baffling. Why would Sun cancel a contract it fought so hard to get? Did Sun have something to hide?

 

Government contracting, particularly multiple award schedule contracting, appears to be in serious jeopardy.  Contracting Officers are in short supply and are quitting in alarming numbers. They are overworked. They are stressed.

 

Some try to juggle one hundred or more contracts at any time.  With that kind of workload, assuring contract compliance is out of the question.

 

One of the culprits here may be the Industrial Funding Fee structure. This is money GSA charges other agencies that tap into government-wide contracts negotiated by GSA.  These fees are the lifeblood of GSA and are responsible for the lion’s share of the agency’s budget. The incentive is to maximize fees and agency profits.  This creates what has been described as the “perverse incentive.” Getting the best possible deal for the government and taxpayers gets lost in the drive for more contracts that generate more fees to fill the agency’s coffers.

 

I fear the Sun contract fiasco may be only the tip of the iceberg.  I hope it is the exception, but many contracting officials suggest otherwise.

 

Am I suggesting that government procurement is broken beyond repair?  Absolutely not.  I do think that GSA procurement officials have a lot of work to do.  They certainly need to clean up their act. They will need to make hard choices to fix these problems.

 

GSA has a professional force of contracting officers.  GSA management needs to let them negotiate the best deal possible without interference from the top. Interference in that process – as evidenced in the Sun negotiations may not violate the law, but it isn’t right.

 

Senior GSA management needs to realize that what may be profitable or strategically important for GSA, may not always be in the best interest of the taxpayers.

 

GSA managers also need to recognize the need for oversight and follow-up on awarded contracts.

 

Contract officers need to be able fight for the best possible deal for the taxpayers, even if means the loss of a contract that is lucrative for GSA and for the vendor.  GSA must never forget who the real customer is – the American Taxpayers.

 

Mr. President, today I am forwarding three investigative reports to Administrator Doan, the GSA IG, House and Senate Oversight Committees, and the White House Chief of Staff for review.  These reports, which contain proprietary and privacy protected information, will not be made public by me.

 

The reports provide, in great detail, the results of these significant investigations into the allegations of IG auditor intimidation and top-level GSA management intervention in the Sun Microsystems contract negotiations.

 

As I said, it is not my intent to point the finger at any one individual or company.  My sole purpose is to get to the bottom of what may be a significant problem in government contracting. And get it fixed.

 

I respectfully ask GSA Administrator Doan and the IG to address the problems identified in these reports and take appropriate corrective action. In the future, I hope GSA will do a better job protecting the taxpayer’s money.

 

I yield the floor.