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Monday, March 27, 2023

GAO Warns That Debarred Contractors Could Still Win Federal Contracts

A new report from the Government Accountability Office (GAO) says the Department of Labor (DOL) determined that 60 contractors should be excluded from receiving new federal contracts for three years. 

But GAO’s review found that DOL didn’t consistently share key information with contracting agencies, increasing the risk that excluded contractors might win contracts.

DOL has found numerous violations of the Service Contract Act (SCA), leading to over $220 million in back wages for workers. The SCA is enforced by DOL and provides pay and benefit standards for service workers—such as security guards and janitors—on covered federal contracts. 

From fiscal years 2014 through 2019, the U.S. government obligated over $720 billion on contracts covered under the SCA, out of nearly $2 trillion in service contract obligations overall.

DOL completed over 5,000 SCA cases, which for many resulted in the awarding of back wages to federally contracted security guards, janitors, and other service workers, in fiscal years 2014 through 2019. GAO reports that DOL found SCA violations—primarily of wage and benefit protections—in 68 percent of cases. 

Employers across a range of service industries agreed to pay around $224 million in back wages. Sixty cases resulted in debarment—a decision to prevent an employer from being awarded new federal contracts for three years. DOL’s strategic plan emphasizes optimizing resources for resolving cases using all available enforcement tools. However, GAO found that DOL does not analyze its use of enforcement tools, such as debarment or employer compliance agreements. 

The Department of Defense (DOD) ranks first among federal agencies in contract spending, generally, and cases that focused on DOD contractors made up about 35 percent (1,843) of DOL’s completed SCA cases during this time frame. For fiscal years 2014 through 2019, DOD obligated around $2 trillion on its contracts, which represented 64 percent of total federal contracting obligations during that time. 

Other contracting agencies that had a relatively high number of contractors as the subject of SCA cases included the U.S. Postal Service, Department of Homeland Security and the Department of Veterans Affairs.

DOL told GAO that it faces various challenges to enforcing the SCA, including difficulty communicating with contracting agencies. For example, DOL officials told GAO that poor communication with contracting agencies, particularly with the U.S. Postal Service (USPS), can affect and delay cases, though USPS officials told GAO they were unaware of any communication gaps. 

GAO also found that contracting agencies may face SCA implementation challenges, including not having key information about SCA debarments and violations from DOL. When recording SCA debarments, GAO said DOL does not always include the unique identifier for an employer so that contracting agencies can accurately identify debarred firms. In addition, the watchdog found that DOL also lacks a process that consistently or reliably informs contracting agencies about SCA violations by employers. 

DOL officials said the debarment process can be lengthy and resource-intensive. One official described a years-long debarment case in which the contractor was able to obtain new contracts and continued to commit violations during the course of the lengthy debarment review. In addition, debarring contractors can be challenging when they hold multi-year contracts with the federal government. DOL officials said that since contractors may be permitted to complete existing contracts (unless the agency head directs otherwise), it is possible for a multi-year contract period to outlast the three-year debarment period. Debarment may be less effective, according to DOL officials, if the debarred contractor starts a new business under a different name or under a family member’s name and obtains new federal contracts during the debarment period.

The DOL officials that GAO spoke to noted that alternatives to debarment, such as using compliance agreements, can sometimes resolve cases faster and without litigation. 

DOL generally concurred with GAO’s recommendations:

  • Standardize data entry on contracting agencies associated with SCA investigations in WHISARD by providing guidance to staff on how to make these data more consistent.
  • Analyze information on enforcement actions, including compliance agreements.
  • Develop and implement written protocols to improve communication and collaboration between DOL and USPS to support SCA enforcement and implementation. The same recommendation was made to USPS.
  • Ensure that the unique company identifier designated by the Federal Acquisition Regulation (currently a Data Universal Numbering System number) is included in SCA debarment records in the System for Award Management whenever appropriate and available. 
  • Develop written procedures for consistently and reliably informing the relevant contracting agency about findings in SCA investigations that identify violations.

Read the full report at GAO

Kylie Bielby
Kylie Bielby has more than 20 years' experience in reporting and editing a wide range of security topics, covering geopolitical and policy analysis to international and country-specific trends and events. Before joining GTSC's Homeland Security Today staff, she was an editor and contributor for Jane's, and a columnist and managing editor for security and counter-terror publications.

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