How does a massive government contractor get banned from receiving more taxpayer money? Fraud? Bribery? Incompetence? Turns out, the world of government contracting is full of second chances.
Take airplane and defense behemoth Boeing. As we noted in our weekend story, the company got $15.9 million in stimulus funds for environmental monitoring at the same site where it had been fined for pollution. But there's a lot more to the story.
Boeing raked in $19 billion in government contracts in 2009, making it the second biggest federal contractor in the country. Its top client was the Air Force, which also gave Boeing a $892,000 stimulus contract for work at its Huntington Beach facility.
Yet last August, the company paid the government $25 million to resolve allegations that it performed defective work and overcharged the government on an entire fleet of Air Force refueling planes.
In 2006, Boeing paid a record $615 million settlement over allegations of fraud involving Air Force contracts. Boeing had hired the daughter and future son-in-law of the Air Force's top career procurement officer who had influence over billions of dollars in contracts – and then recruited the official for an executive position at the company. Boeing's former Chief Financial Officer served a brief prison sentence for his role in the scandal. The Deputy Attorney General at the time said, "The outcome of these investigations sends a clear message to those doing business with the government: harsh consequences await anyone whose conduct falls short of the highest legal and ethical standards."
A Boeing spokesman said the employees at fault were fired and there was "no wrongdoing on the part of the company."
"Boeing has a very robust ethics program, and we are widely recognized both by our government customers and by independent third parties for our ethics program," Boeing's Dan Beck wrote to California Watch. "Boeing does outstanding work for the Air Force, and they continue to turn to Boeing to meet their needs through competitive bid processes."
So what would Boeing have to do to get barred from government contracts? Companies as big as Boeing wield enourmous resources, expertise and manpower upon which the government depends.
According to federal regulations, officials must determine that each contractor has "a satisfactory record of integrity and business ethics." In extreme instances, the government can ban a company from contracts through the fairly rare debarment process – not to punish the contractor, but rather to protect the government. And officials have to take into account "mitigating factors" like whether the company cooperated with the government and fixed the problems.
Steven Schooner, a government procurement expert at George Washington University Law School, said the government has good information when determining whether to work with a contractor. "If they're still getting contracts," he said, "it's because it's still worth it for the government."
Many government prosecutions of giant contractors end in settlements without any admission of guilt. Companies like Boeing are quick to point that out. But Laura N. Chick, California's inspector general for stimulus money, said, "It's common sense to assume that most companies do not rush to pay settlement checks unless there's some issues they're worried about."
Chick doesn't believe that companies with past problems are irredeemable. But, she said, "At the very least, if we're going to give money to companies that have had a bad track record, we need to give that money with a very watchful eye."
(Here's how KCBS radio covered our story.)
Comments
via Twitter