Category Archives: Oversight/Contract.Management

Federal Fraud Recoveries Decline in Fiscal Year 2017

Source: Project on Government Oversight, January 2, 2018

… The DOJ announced it had recouped $3.7 billion through settlements and judgments in False Claims Act cases in fiscal year 2017. This amount is nearly 23 percent lower than the previous fiscal year, but roughly in line with FY 2015’s total. This seems to be a trend: a historical analysis of DOJ’s fraud recoveries since 1986 (the year Congress substantially strengthened the False Claims Act) shows that, in recent years, a substantial drop-off occurs in non-election years. … As in past years, the largest share of the recoveries—about two-thirds—involved health care fraud. But a substantial sum also came from some of Uncle Sam’s largest contractors:

  • AECOM and Bechtel: $125 million to settle False Claims Act allegations that the contractors charged the government for deficient materials and services at the Hanford Nuclear Site. Separately, AECOM paid over $5.2 million to settle another fraud investigation involving its work at Hanford.
  • Agility: $95 million to settle a 12-year-old case accusing the company of overcharging the government for food supplied to U.S. troops in the Middle East.
  • Atlantic Diving Supply: $16 million for allegedly inducing the government to award small business contracts to companies misrepresenting their eligibility as socially or economically disadvantaged small businesses.
  • Huntington Ingalls Industries: $9.2 million to resolve claims of overbilling the government for work at its Mississippi shipyards.
  • Pacific Architects and Engineers: $5 million to settle allegations that it failed to properly screen and oversee personnel working on a contract to train Afghan security forces.
  • Sierra Nevada Corporation: $14.9 million for allegedly causing the government to pay inflated labor costs on contracts.
  • Defense contractors accounted for $220 million in fraud settlements and judgments.

Lockheed Martin, Boeing aerospace venture bilked U.S. for $90 million, lawsuit says

Source: Kirk Mitchell, The Denver Post, January 8, 2018

A whistleblower has settled a lawsuit filed against a Centennial aerospace company formed by Lockheed Martin and The Boeing Company that claimed the company defrauded the U.S. government out of at least $90 million by grossly overcharging for employee work hours. Whistleblower Joseph Scott filed the lawsuit on behalf of himself and the government against United Launch Alliance and United Launch Services, under the Federal Civil False Claims Act. Scott is a former ULA employee. … This wasn’t the first time ULA practices have come under scrutiny. In December 2016, ULA paid the government $100,000 to settle allegations that a subcontractor paid its employees kickbacks in order to win contracts. As a result, the U.S. paid higher costs to subcontractor Apriori Technologies between 2011 and 2015, Troyer has previously said. …

… ULA used a system called the Keith Crohn model that creates a grid using the cost of equipment to reach an employee cost. A labor value was placed on the grid for every item ordered through the company’s purchasing department. For example, any item that cost between $1 and $1,000 would be assigned a labor value of 8 hours. It didn’t matter what part it was, the lawsuit said. The U.S. bans arbitrary cost estimates when actual data is available that establishes the cost. ULA took advantage of the government’s practice of not auditing smaller projects. On projects above $100 million, the government audits bids and can reduce the contract price if the Defense Contract Audit Agency discovers discrepancies, the lawsuit says. In the first five to seven years of its existence, ULA often failed those audits. For larger audited launches, ULA began using historic data of actual prior labor costs, the lawsuit says.
But for smaller bids, ULA continued using its flawed estimates, knowing that it wouldn’t be audited, the lawsuit says. …

Unhappy with cleanliness, Chesterfield school leaders break ties with outside custodial service

Source: Vanessa Remers, Richmond Times-Dispatch, December 12, 2017

Chesterfield County School Board members will bring at least some of their custodial services back in-house, cutting ties with an outside contractor that school officials said couldn’t keep the county’s schools clean enough. School Board members voted unanimously Tuesday not to renew their contract with Tennessee-based Service Solutions Corporation. Instead, they moved forward with a hybrid plan in which the daytime custodial work will be done in-house and after-school cleaning will be completed by at least three outside contractors. … In the past two years, school officials charged SSC more than $400,000 in penalties for not meeting the contracted level of cleanliness. … To shift back to at least some in-house custodial work, School Board members supported hiring custodians to work as day porters, in addition to outsourcing after-school cleaning to at least three contractors. That could cost the school system approximately $19 million in the first year, according to a plan that has been proposed by staff. That’s about $7 million more than it pays now under the current SSC contract. The tab could increase to $23 million annually as the schools increase staff to achieve a higher “ideal” level of cleanliness. … The school system switched from providing custodial services in-house to an outside contractor three years ago, in part because the shift would save millions. But even before that switch happened, school officials said the internal system wasn’t staffed properly. …

Inmates removed from OKC halfway house, contract ended

Source: Dale Denwalt, NewsOK, December 5, 2017

The Department of Corrections has abruptly ended a contract with Catalyst Behavioral Services after years of issues at a downtown Oklahoma City halfway house and the death of an inmate who walked away from the work-release residential site last month. … The Corrections Department paid Catalyst $32.50 per inmate, per day. Expenditures last budget year totaled more than $1.5 million and the average bed count was 126. The decision to move inmates from the Walker and NW 8 Street site comes after the death of an inmate who walked away from the site Nov. 11. Ardmore police found the remains of Justin Sullivan and a woman inside a burned vehicle 16 hours before Catalyst staff discovered he was missing, the Corrections Department said. … Catalyst reportedly did not keep an accurate head count and at one point, Allbaugh noted, staff did not have a master key to get into inmate rooms. Non-inmates were able to freely enter the facility without security’s knowledge. … In response, the Corrections Department posted its own security staff on site since Nov. 23. It has ongoing concerns with Catalyst Behavioral Services’ staff training, their experience and ability to conduct proper inmate counts, as well as contraband control and proper searches. … The state oversees nine other halfway houses that are maintained by contracts with private businesses, including another site in Enid operated by Catalyst Behavioral Services that was not affected by Monday’s shuffle. …

Tennessee Lawmakers Give Correction Department A Short Leash To Fix Troubled Private Prisons

Source: Julieta Martinelli, Nashville Public Radio, December 12, 2017
 
The Tennessee Department of Correction is getting another year to show improvement. Officials voted to reauthorize the state agency for 12 more months after a scathing audit last month highlighted severe staffing and safety concerns at several private prisons.  The state agency oversees more than 20,000 inmates. About one third of them are housed in facilities managed by CoreCivic, a private contractor formerly known as Corrections Corporation of America.  Inmates, family members and even former employees have publicly called out conditions inside prisons like Trousdale Turner Correctional Center in Hartsville. The allegations came shortly after it opened last year. …

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State Audit Reveals Serious Staffing Concerns In Tennessee’s Largest Private Prison
Source: Julieta Martinelli, Nashville Public Radio, November 14, 2017

A state audit of the Department of Correction released on Tuesday highlights a number of issues plaguing prisons in Tennessee. The biggest issue is a shortage of correctional officers, which could put inmates and other prison staff at risk. The CoreCivic-managed Trousdale Turner Correctional Center, northeast of Nashville, and Whiteville Correctional Facility, near Memphis, operated with fewer than approved correctional officers and did not follow staffing guidelines required by the state. At Trousdale, which is the state’s largest prison, the audit found critical posts were even left unstaffed on multiple occasions. …

Read full report.

Better data, oversight needed to boost diversity in tech

Source: Bloomberg Government, Chris Cornillie, December 7, 2017

Federal technology contractors may soon need to meet higher standards for diversity or risk losing government business, according to new recommendations from the Government Accountability Office (GAO). In a report released Nov. 30, the government’s top watchdog calls on two government offices, the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP), to overhaul their efforts to, “combat discrimination and support equal employment opportunity for U.S. workers” in the technology industry. … According to the government’s top watchdog, deficiencies in EEOC and OFCCP data reporting processes challenged their ability to hold companies accountable for meeting employment targets for traditionally underrepresented groups. However, most of GAO’s criticism was aimed at OFCCP, which is responsible for enforcing nondiscrimination among federal contractors. The study found that OFCCP regulations allow contractors to report employment of racial and ethnic minorities using a single, combined metric, rather than reporting figures for each group individually. … Given the national debate on diversity in the technology industry — and in the workplace in general — GAO’s findings could have a significant impact on federal contracting. GAO called on OFCCP’s director to take steps toward requiring contractors to disaggregate employment data by racial and ethnic group. … Perhaps most significantly, GAO’s report may catalyze support for expanding diversity in federal contracting, especially in the IT space. … Perhaps most significantly, GAO’s report may catalyze support for expanding diversity in federal contracting, especially in the IT space. …

Read full report.

Pennsylvania lurches from one software boondoggle to another

Source: Joseph N. Distefano, Philly.com, December 1, 2017

The phones stopped working again at Pennsylvania’s unemployment-compensation offices Tuesday. “Due to vendor-related technical issues,” the state Department of Labor and Industry said. The same department has had to rely on what state auditors in May called “antiquated” software, written in the COBOL language used by punch-card programmers in the 1970s, since spending more than $160 million on a replacement system that failed. Elsewhere in Harrisburg, the Department of Human Services paid benefits to a couple of thousand dead people after computer systems failed to flag them as ineligible, auditors found last year. At the Department of Environmental Protection, the last full audit found water-quality reviews used “decades-old” data updated by hand. And after contractors were paid $800 million over the years, more than four times its projected cost since the 1990s, the Pennsylvania Statewide Radio Network still doesn’t work as designed.

… So Mr. Grove is sponsoring House Bill 1704, which would combine most state departmental IT offices and their short- and long-term planning, procurement, and cyber-security protection into a single Office of Technology. It would be part of the governor’s Office of Administration, under a director with the power to kill or suspend projects that run over budget or below standards. Pennsylvania IT contracts need “better controls” and “stronger clawback mechanisms” (performance bonds), so taxpayers can get their money back when the systems they buy don’t work, elected Auditor General Eugene DePasquale, a Democrat like Gov. Tom Wolf, said at a Nov. 14 hearing on the bill. … But Mr. Wolf’s appointees worry that the new office could “duplicate” and “conflict with” current procurement rules, Curt Topper, Mr. Wolf’s Department of General Services chief, told Mr. Grove at the hearing before Rep. Daryl Metcalfe’s Government Affairs Committee. …

Kansas’s ravaged economy a cautionary tale as Trump plans huge tax cuts for rich

Source: Dominic Rushe, The Guardian, December 10, 2017
 
Is Donald Trump about to turn America into Kansas? It’s a question some worried people who live in the state are asking as the Republican party pushes through the biggest tax overhaul in a generation – an overhaul that, they claim, bears an uncanny resemblance to a tax plan that left their midwestern home in disarray. After a failed economic experiment meant to boost economic growth blew a hole in the Kansas budget as big as a prairie sky (a $350m deficit in the current fiscal year and nearly $600m in the next) state jobs and services have been slashed.

… Sarah LaFrenz Falk, president of the Kansas Organization of State Employees ,who recently spoke to Congress about her fears about the Republican tax plan, said she sees an agenda in the Brownback plan – one that is mirrored in Trump’s plan: give huge tax breaks to super-rich donors [the rightwing, union-bashing Koch brothers are Kansas’s richest residents], then hand them a second win by cutting services, waiting for those services to buckle under the strain and then argue the private sector can do it better. … Kansas has already had one horrific example of private enterprise failure. In October lawmakers were “flabbergasted” to learn that the companies that now run Kansan foster homes had “lost” more than 70 children. Revelations about the unaccounted children came after it was revealed children had been left to sleep in local contractors’ offices because there were no places for them. The state is currently looking to privatise its largest prison, at Lansing, near Kansas City. CoreCivic, the company overseeing construction of the new prison, is subject to lawsuits in six states and was accused by state officials of grossly under-staffing facilities in Tennessee. …

… The details of Trump’s tax plan are still being worked out, but it looks certain to pass, and the fixed positions are big corporate tax breaks and a massive reduction for pass-through entities. … The bill looks set to add $1tn to the national debt. Republicans are already discussing paying for the plan by cutting social security and gutting Medicare and Medicaid, the two federally funded health insurance schemes. But, worryingly for Trump, Brownback’s tax plan proved not just disastrous for the state but also for Brownback and his supporters. … Brownback’s plan led to electoral defeat for his supporters in 2016, and the election of moderate Republicans he had fought with to pass his plan. His political career is now in limbo. …

Puerto Rico Still Waits for $4.9 Billion From U.S. Treasury

Source: Rebecca Spalding, Bloomberg, December 8, 2017
 
Over two months after Hurricane Maria devastated Puerto Rico, the island’s government still hasn’t received any of the $4.9 billion of short-term loans promised in the storm aid package Congress passed at the end of October.  Christian Sobrino, the governor’s representative on the island’s federal oversight board, confirmed Friday that no Puerto Rican entity has received any portion of the funds, which were requested for basic functions like making payroll. This week, the Puerto Rican government told the fiscal control board that the electric company, Prepa, and water utility, Prasa, would run out of money in December.  Sobrino said Friday that the island’s fiscal agency was in talks with the U.S. Treasury and Department of Homeland Security about the money and how it would be disbursed. …

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U.S. counters hedge fund’s attack on Puerto Rico oversight board (Abstract)
Source: Jim Christie, Reuters, December 7, 2017
 
The U.S. government defended on Wednesday the federal board overseeing Puerto Rico’s restructuring, countering a bid by a hedge fund that sought to get the U.S. territory’s bankruptcy-like case dismissed by attacking the board’s legality.  The restructuring is taking place under a special federal law known as the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) that provides for proceedings in U.S. District Court akin to those under Chapter 9 municipal bankruptcy. …

Bernie Sanders to unveil a $146 billion ‘Marshall Plan’ for Puerto Rico
Source: Jeff Stein, Washington Post, November 28, 2017

Hurricane Maria destroyed Puerto Rico’s decades-old electrical grid when it made landfall on Sept. 20, rendering millions of island inhabitants without power.  On Tuesday, Sen. Bernie Sanders (I-Vt.) will unveil an ambitious $146 billion Puerto Rico recovery plan he says will allow renewable power sources such as solar and wind to provide about 70 percent of the island’s energy needs within the decade.  The bill, which has the backing of San Juan Mayor Carmen Yulín Cruz, also calls on Congress to consider retiring Puerto Rico’s debt and would give the island billions in additional federal funding for transportation, health care and education in the hopes of stemming a feared mass exodus to the mainland. It would also allocate funds to the Virgin Islands, which were similarly devastated by Hurricane Maria. …

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Ige appoints new director for troubled state tax department

Source: Kevin Dayton, Honolulu Star Advertiser, December 6, 2017
 
Gov. David Ige today named Linda Chu Takayama as the new director of the state Department of Taxation in an effort to quickly replace outgoing director Maria Zielinski in what has emerged as a pivotal position in Ige’s administration.  Takayama is a lawyer who now serves as Ige’s director of the state Department of Labor and Industrial Relations, and previously served as state insurance commissioner. Zielinski abruptly resigned effective Tuesday in the wake of a report that revealed state tax officials instructed a supposedly independent consultant on which subjects it should address in its monitoring reports on the progress of a new $60 million tax computer system. … Ige is under intense pressure to efficiently execute the $60 million contract to replace the tax department’s old computer system. State government has had an embarrassing history of botched computer projects dating back to previous administrations, and the computer system for collecting state taxes is a critical piece of state infrastructure.  The project has already stirred controversy. Randy Perreira, executive director of the Hawaii Government Employees Association, wrote to Gov. David Ige on Oct. 31 to object to the decision to take control of the project away from Zielinski and TSM Program Manager Robert Su earlier this year. …