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Wednesday, April 17, 2024

Senators Call on GAO to Examine National Security Risks Posed by Federal Contractors Who Do Business With China

The Senators are asking GAO to examine how federal agencies are working to address this issue and to identify steps the federal government can take to ensure that contractors are working in the best interest of the American people – not foreign adversaries.

U.S. Senators Gary Peters (D-MI), Chairman of the Homeland Security and Governmental affairs Committee, and Josh Hawley (R-MO) are calling on the U.S. Government Accountability Office (GAO) to examine the national security risks posed by private consulting companies that concurrently contract with the U.S. government, as well as the Chinese government or Chinese state-run enterprises. 

Federal agencies, including the Department of Defense (DOD), extensively contract with consulting companies to provide advice on highly sensitive national security matters, such as defense budgets, information technology modernization, and the acquisition of new weapons systems. However, in their letter, the senators’ raised concerns that these contractors’ outside work with adversaries like the Chinese government could create conflicts of interest that undermine national security.

“Although firms doing business for the Chinese government or its associates may argue that structural divisions between corporate entities servicing the Chinese and American governments, respectively, are sufficient to eliminate security risks or conflicts of interest posed by their work – we remain concerned that information sharing within these companies may result in Chinese entities accessing or taking advantage of firms’ access to U.S. government data, classified or otherwise,” wrote the senators.

The senators cited reports that have shed light on potential conflicts of interest that were created by private consulting company’s work with the U.S. and Chinese governments. For example, for more than a decade, McKinsey & Company has received hundreds of millions of American taxpayer dollars to support sensitive national security projects. At the same time, McKinsey did not disclose to DOD that they were simultaneously contracting with Chinese state-owned companies. This has raised serious concerns about the reliability of advice provided by McKinsey consultants, the senators said, and questioned whether its work could give a foreign adversary insight into our national security strategies or other sensitive matters. 

In their letter, the senators also asked GAO to examine how federal agencies are working to address this issue and to identify steps the federal government can take to ensure that contractors are working in the best interest of the American people – not foreign adversaries.

The letter builds on a bipartisan law authored by Peters last Congress that will help identify and mitigate potential conflicts of interest in federal contracting. The Preventing Organizational Conflicts of Interest in Federal Acquisition Act, which has now been signed into law, requires agencies to identify potential conflicts for specific contracts early in the process. Federal contractors will be required to disclose other business relationships with entities that conflict with the specific work that an agency has hired them to do. Private companies under contract with the U.S. government would also have to disclose new potential business that opposes ongoing services they are providing to the American people. The law ensures federal contractors are aware of disclosure requirements and how working with agencies could impact other parts of their business. Finally, the law requires federal agencies to assess and update their procedures for determining whether contractors could have a conflict of interest.

Read the full text of the letter at the House Committee on Homeland Security and Governmental Affairs

author avatar
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.
Kylie Bielby
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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