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Better, More Transparent Contracting

March 28, 2008 - by Donny Shaw

You may have noticed the article in yesterday’s New York Times about the immature and allegedly corrupt defense contractor, AEY Inc, that has been fulfilling its $300 million agreement to arm U.S. and Afghan troops fighting in the war on terror by sending them 40-year-old, defective ammunition in decomposing packaging. It’s an amazing piece of investigative reporting that should be read in full.

The article notes that “this week, after repeated inquiries about AEY’s performance by The Times, the Army suspended the company from any future federal contracting.” Now, I fully appreciate the power of journalism to bring things like this to the surface, but reading the article made me wonder about more efficient systems for holding recipients of federal contracts accountable.

I looked it up, and, sure enough, there is legislation pending in Congress that proposes a system that may fit the bill. The Government Contractor Accountability Act proposes the creation of a public database that lists the names and salaries of the most highly compensated officers of government contractors that receive more than 80 percent of their annual gross revenue from Federal contracts. If such a database existed, what The Times unearthed, that this huge contract was given to “a fledgling company led by a 22-year-old man whose vice president was a licensed masseur,” would have been easy for anyone to figure out with accessible public information. And if the people in charge of awarding the contracts knew that their decision may be scrutinized, they might make better decisions about who to hire.

In their overview of bills to improve federal contracting, OMB Watch provides more information about the bill and makes a really important suggestion for an easy way that it can be improved:

>Although publicly-traded firms are required by the Securities and Exchange Commission to disclose the names and salaries of top-level managers, many firms that contract with the federal government, like private security company BlackwaterUSA, are private entities for which this information is not publicly available. H.R. 3928 is intended to provide the federal government and citizens insight into whether federal contractors are adding value to federal procurement or simply lining the pockets of a select few individuals.
>The measure would provide this level of transparency by requiring federal contracting firms or grant recipients receiving more than 80 percent of their revenue from the federal government to disclose the names and salaries of their most highly compensated executives and would make this information available in the Federal Procurement Data System-Next Generation (FPDS-NG). During the committee markup, an amendment from Rep. Chris Murphy (D-CT) was adopted that would require disclosure of this information only from companies that have more than $25 million in gross revenues. The bill does not differentiate between for-profit and nonprofit companies.
>While this increased transparency is certainly welcome, it would be a mistake for Congress to solely add this information to the FPDS database. The database is a complex and hard-to-use data source that often confounds even the most expert analysts and government employees. It is not a sufficient vehicle for disclosure of this important information to the public. At a minimum, this data should also be included in the new government website designed for tracking federal contracts —, which is authorized under the Federal Funding Accountability and Transparency Act.

Pictured above is Efraim Diveroli, AEY’s 22-year-old president.

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