Some of the world’s largest companies have benefited from a little-known law that lets the Defense Department override decisions barring contractors accused or convicted of bribery, fraud, theft, and other crimes from doing business with the government.
International Business Machines Corp., Boeing Co., BP Plc, and several other contractors have received special dispensation to fulfill multimillion-dollar government contracts through “compelling reason determinations.” That process allows the Defense Department in rare cases to determine that the need to fulfill certain contracts justifies doing business with companies that have been suspended from government work.
The 22 determinations were released by the General Services Administration at the request of Bloomberg Government, allowing for the first collective examination of the cases and the system that allowed them.
The determinations, also referred to as waivers or overrides, included contracts to provide food services for Defense Department personnel at an Army base in Afghanistan, “vital” web-hosting services for an agency that serves the Pentagon and the U.S. intelligence community, and aviation fuel sold to the Defense Logistics Agency.
In some instances, contracting officials said the overrides were matters of life or death. Companies receiving waivers included some accused or convicted of major fraud, wire fraud, conspiracy, ethical bidding violations, and in the case of fuel-seller BP, an overall “lack of business integrity.”
In the most recent waiver case—issued just several weeks ago—an affiliate of one of South Korea’s largest conglomerates was suspended for allegedly bribing an Army contracting official and another man to deliver a $420 million contract involving expansion of a U.S. base south of Seoul. Despite indictments on charges of wire fraud and bribery and the resulting suspension, SK Engineering & Construction Co. urged that its contract be extended—and the Army agreed, stating that delays in finding a new contractor would result in slower ambulance response times to the base.
The law requires officials issuing such waivers to notify the GSA so the agency can maintain the notices on a “publicly accessible website to the maximum extent practicable.” Pentagon officials sometimes have not followed that requirement until scolded by the Government Accountability Office—and on occasion even that hasn’t been enough. Details surrounding four waivers by the Army and another four by the Air Force dating back more than 14 years still haven’t been provided to GSA.
“The law is not being properly enforced, and there’s a definite lack of transparency,” Neil Gordon, an investigator with the Project on Government Oversight, a Washington ethics watchdog group, told Bloomberg Government. “These are risky companies accused of serious crimes. It’s a real problem.”