Thirty-Nine Federal Contractors Had Adjudicated Violations of Federal Environmental, Labor, or Antitrust Laws

We identified 39 federal contractors (involved in 47 cases), among the  16,819 contractors awarded new federal contracts in amounts of at least  $100,000 during fiscal year 2000, that had been found by a federal court or  adjudicated administrative decision to have violated one or more federal  environmental, labor or employment, or antitrust laws in cases closed by  enforcement agencies during fiscal years 1997 through 1999. As table 1  shows, 7 of these 39 contractors had been convicted of a crime in federal  court; 5 had a judgment in a civil case brought by the federal government  in federal court rendered against them; and 27 had an adverse decision by a  federal ALJ, board, or commission finding a violation of law. We did not identify any contractors that were  found by a federal court or adjudicated administrative decision to have  violated consumer protection or tax laws during this time frame. However, most of these cases  that involved alleged law violations were resolved before a court or  adjudicated administrative decision was made as to whether a violation of  law had occurred. The remaining cases were resolved with a wide range of  outcomes, including consent agreements and orders, before a decision by a  court or administrative adjudicator was reached as to whether a violation  of law had occurred. Additionally, contracting officers  would face significant difficulties in verifying or obtaining contractor  compliance history information. Moreover, the FAR rule may have created  the need for additional record keeping by contractors in order to monitor  their compliance histories. From these cases, we identified 39 contractors that were  found by a court or ALJ, board, or commission decision to have violated  federal law in the areas specified by the FAR rule. However, most of these  contractors would not have been required to report the law violations to  the contracting officer in the certification in their offers (that is, by  checking the box in the certification indicating that the prospective  contractor or its principals have had a violation) if they had been  prospective contractors. As shown in table 6, based on our conceptual  application of the revoked FAR rule’s certification criteria, 7 of the 39  contractors would have been required to report their violations in the  certification accompanying their offers. In addition, administrative agreements or settlements resolving cases were  not reportable under the FAR rule’s certification requirement. Although the FAR rule guidance stated that contracting officers  should give consideration to any administrative agreements entered into  with prospective contractors who take corrective action after disclosure of  an alleged law violation (in the initial charge or complaint filed by the  enforcement agency), the FAR rule did not specifically require prospective  contractors to report such agreements. In  fact, 18 of the 43 federal contractors who responded to our attempts to  verify their involvement in enforcement agency cases reported that they  did not currently have the capability to identify or track the various types of  enforcement actions taken against them. To quantify the extent to which federal contractors had violated federal  environmental, labor and employment, antitrust, consumer protection, and  tax laws, we did the following:   We focused on contractors that were awarded new federal contracts in  amounts expected to be at least $100,000 per contract and federal  enforcement agency cases closed during fiscal years 1997 through 1999  because these were the types of contracts and cases that would have  been covered by the FAR rule’s contractor certification requirement if it  had been applied beginning with fiscal year 2000, and   We used federal court or administrative decisions in determining  whether a case involving a contractor resulted in an actual adjudicated  determination of a violation of federal environmental, labor and  employment, antitrust, consumer protection, or tax laws because these  were the types of adjudicated decisions contracting officers were  instructed by the FAR rule to give the greatest weight in making their  responsibility determinations.
Why GAO Did This Study

Because of its interest in this area, Congress asked that we address the following questions: (1) To what extent have federal contractors violated federal environmental, labor and employment, antitrust, consumer protection, and tax laws (the areas of law specified in the Federal Acquisition Regulation (FAR) rule)? and (2) What FAR rule implementation issues were identified in our work in response to the first question?

What GAO Found

We identified 39 contractors among the 16,819 contractors that were awarded new federal contracts in amounts of at least $100,000 during fiscal year 2000 and that were found by a federal court or adjudicated administrative decision to have violated one or more federal environmental, labor and employment, or antitrust laws in enforcement agency cases that were closed during fiscal years 1997 through 1999. Of these 39 contractors, 7 had been convicted of a crime in federal court; 5 had a federal court judgment in a civil case brought by the federal government rendered against them, and 27 had an adverse decision by a federal Administration Law Judge, board, or commission indicating a violation of law. We did not identify any contractors that were found by a federal court or adjudicated administrative decision to have violated consumer protection or tax laws. We also identified another 3,403 contractors that were involved in enforcement agencies' cases covered by our review and closed during this 3-year period. However, most of these cases that involved alleged law violations were resolved before a decision by a court or administrative adjudicator was reached as to whether a violation of law had occurred. In most instances, these cases were resolved through some form of "administrative agreement" or "settlement" with the government in which the contractor typically did not admit--and sometimes specifically denied--the violation charged and which did not constitute a judgment or adjudicated administrative decision that a violation had actually occurred. We identified several FAR rule implementation issues through our work in determining the incidence of contractor violations in response to the first question. First, the FAR rule's contractor certification requirement focused on only certain types of law violations. As a result--on the basis of our conceptual application of the certification criteria specified in the revoked FAR rule--only 7 of the 39 contractors we identified as being found by a court or administrative decision to have violated the law would have been required to report the violations in their certifications if they were prospective contractors submitting an offer. The remaining 32 contractors with violations found by a court or administrative decision, as well the 3,403 contractors whose cases were otherwise resolved, would not have been required to report any noncompliance with the law. Further, although many cases were resolved through administrative agreements--and the FAR rule stated that contracting officers should take such information into consideration--the FAR rule did not require prospective contractors to report such agreements. Second, we found that contracting officers would face significant difficulties in verifying or obtaining contractor compliance history information. Third, the FAR rule may have required additional record keeping for some prospective contractors in order for them to track their companies' compliance with applicable laws and accurately certify as to their compliance when submitting their offers. Of the 43 federal contractors who provided us information on the issue of tracking their compliance history, 18 told us that they did not have the capability to identify or track all of the various types of enforcement actions that may have been taken against them.