Fraud Notification Bill—A Step in Wrong Direction, PSC Testifies

April 15, 2008, Arlington, Va.—The Professional Services Council (PSC) testified Tuesday that legislation aimed at federal contractors (H.R. 5712) would do little to reduce fraud in government contracting, would raise numerous legal issues, and would increase administrative costs far beyond its benefits.

At a hearing before the Subcommittee on Government Management, Organization, and Procurement of the House Committee on Oversight and Government Reform, Colleen Preston, PSC Executive Vice President for Policy and Operations, questioned key provisions of the bill: mandatory reporting, foreign exemption, commercial items, and vague thresholds.

“We agree that stopping unethical behavior is the right goal, the only question is, how best to do that,” said Preston.

“There is no evidence to support the contention that a mandatory reporting program will actually result in reduced fraud or additional opportunities for redress by the government. Indeed, history suggests strongly that voluntary programs, properly structured and supported, are far more effective tools,” Preston continued.

PSC pointed out that the government is currently protected against fraudulent behavior by any number of criminal statutes, including the False Claims Act, by contract penalties it may impose, and by the Suspension and Debarment process. None of those protections would be affected by the proposed mandatory reporting program.

Preston also pointed out that even the Department of Justice supports the exclusion of commercial items contracts from the mandatory business ethics, compliance program and reporting requirement.

With regard to the overseas exemption, Preston explained that imposing the requirements would make it virtually impossible for the U.S. government to contract with host nation companies, particularly in regions where stimulating the local economy is a principal objective of U.S. foreign assistance and other activities.

“All contractors, anywhere in the world are subject to U.S. criminal fraud prosecution for their activities on U.S. contracts,” said Preston, but “it is unreasonable and impractical to expect a company in Africa or the Middle East to understand and be able to comply with the procedural requirements we impose on U.S. government contractors.”

Preston also expressed concern with the vagueness of the proposed reporting threshold, stating that under its current construct the language would likely result in every routine error being thrown into a criminal investigative process.

The full testimony is attached and is available online at http://www.pscouncil.org/pdfs/PSCHR5712Testimony04-15-07.pdf

 

Contact: Carrie Lake, PSC Communications Director, 703-875-8059 or lake@pscouncil.org.