Ombudsman blog archive
A Step in the Right Direction on Openness
Published: December 28, 2011
Identities of Defense contractors may no longer be concealed from public scrutiny without compelling justification under a “significant regulatory action” ordered by the Obama administration to increase transparency and accountability in all government spending.
A proposed rule published in the Federal Register on Nov. 29, and echoed in a Dec. 16 Pentagon advisory to its legion of contract officers, would “strictly limit” and “discourage” identifying recipients of unclassified contracts as “miscellaneous foreign contractors.”
That practice was brought to light for Stars and Stripes readers in an ombudsman column posted online July 12, 2010. (At 4,000 words, "Behind the Media Contractors' Veil" was too long for the newspaper.) All told, the column reported, the government spent more than $40 billion on “miscellaneous foreign contractors” during the previous decade.
The column identified established American public relations firms that had received millions of dollars in unclassified contracts for media services in Iraq and Afghanistan. Part of that work involved assisting Public Affairs operations that provide information to Stars and Stripes reporters, other journalists, readers and the American public at large.
(As ombudsman, I am directed by Congress to track “the state of the free flow of information to the armed forces via the Stars and Stripes.”)
Yet those American firms – with offices or headquarters in Washington, Los Angeles and New York City – were identified only as “miscellaneous foreign contractors” on usaspending.gov.
That Web site was created by legislation co-sponsored in 2006 by then-Sen. Barack Obama to raise public awareness and accountability for the trillion taxpayer dollars spent annually on unclassified contracts and grants.
Beginning two months after my column appeared, the White House Office of Management and Budget, the Defense Department and the General Services Administration all issued advisories in late 2010 cautioning against substituting a generic identifier like “miscellaneous foreign contractors” for a contractor’s name and specific ID number, called a DUNS number.
The new measures go further, mandating reform of the practice and an overhaul of contract-reporting procedures.
All official guidance issued in the last year and a half makes note, as did my column, that use of generic ID’s impedes compliance with the Transparency Act and thwarts the purpose for which usaspending.gov was created.
The Nov. 29 rule, along with the Dec. 16 Pentagon memo, takes clear, concrete steps to tighten contract-reporting policy and improve compliance with the Transparency Act.
In his memo, the director of Defense Procurement and Acquisition Policy, Richard Ginman, said that because a generic DUNS number “masks the true identity of the vendor,” it “shall not be used” in listing Defense contract transactions – he underlined “shall not” – except under the “rare conditions” detailed in the new seven-page-long rule.
According to that rule, the new policy limits allowable exceptions to “small-dollar” contract "actions valued at or below $25,000 that are awarded to a contractor that is—
“(A) A student;
“(B) A dependent of a veteran, foreign service officer, or military member assigned overseas; or
“(C) Located outside the United States and its outlying areas as defined in 2.101 for work to be performed overseas, and the contractor does not otherwise have a DUNS number;
“(ii) Contracts awarded to individuals for performance overseas; or
“(iii) Specific public identification of the contracted party could endanger the mission, contractor, or recipients of the acquired goods or services.”
This is much closer to the original intent of generic ID’s, which was to give officers in the field flexibility to “micro-purchase” goods and services on a local economy, protect the people who provided them from reprisal, and preserve operational security.
One of the most striking findings I encountered in my reporting was that some established U.S. firms seemed unaware that they had been labeled “miscellaneous foreign contractors.”
Indeed, some contractors’ Web sites openly touted the very same contracts that the government had listed as having gone to “miscellaneous foreign contractors.”
In one case, Pentagon officials and a senior executive even gave newspaper interviews about a particular contract that the Defense Department had nonetheless quietly listed as going to “miscellaneous foreign contractors.” (See "Behind the Media Contractors' Veil.")
One corporate spokesman expressed indignation to me that his firm had been so identified. A contracting executive at another said he had no explanation for his firm’s being listed as “miscellaneous foreign contractors.”
One possible explanation came from a DOD contract officer in Afghanistan. The officer, who reluctantly spoke with me by phone last winter on condition of anonymity, allowed that “miscellaneous foreign contractors” had become the “default” identifier for any contract listing that contained incomplete or inaccurate data on a vendor.
In other words, a couple of digits or letters dropped or swapped could produce a listing showing a contract had gone to “miscellaneous foreign contractors” instead of the actual recipient.
And that could conceal not only who is doing what but who is getting what, both in terms of public disclosure and internal recordkeeping.
The DOD’s Ginman noted that even when a generic ID is allowed, it must “never be placed on the actual contract document” because that “immediately makes any electronic processing of invoices, receiving reports, and payments impossible; and can, in fact, result in mis-directed payments.”
The Nov. 29 rule declares that “use of a generic number is contrary to the Transparency Act requirements to make publicly available the total amount of federal funding awarded to a contractor.”
This “adversely affects the transparency of the Government's data,” it continues, and “the contractor is not able to access and perform its own reporting requirements, such as Transparency Act subcontract reporting, because the contract is not associated with the contractor in Federal-wide processes.”
And that is of great concern to budget watchdogs like Lloyd Chapman, president of the American Small Business League, an advocacy group long critical of “miscellaneous foreign contractors” and the like.
Chapman worries that such devices can disguise big-corporation involvement in ostensibly small businesses, leading to underbidding and the diversion of contracts set aside by law for genuine small businesses.
“The problems in federal contracting are so massive, so horrific,” he said, that the DUNS number reforms may just be “a symbolic concession.”
One can understand Chapman’s skepticism.
At one extreme, the trade press consistently lists “miscellaneous foreign contractors” among top Defense contractors, right up there with Boeing and Lockheed Martin.
At the other end is John Brooks Rice.
The Associated Press reported in September 2010 that the Coast Guard had paid him $9,000 a month to monitor and rate news coverage of the BP oil spill in the Gulf of Mexico.
The contract identified Rice, a New Orleans man who occasionally works for FEMA, as “miscellaneous foreign contractors.”
Yet it still remains that commanders in operational situations must have latitude to buy goods and services in-country without excessive red tape or exceptional risk of reprisal to the providers or to their own forces.
At the same time, Americans, in uniform and out, have the right to know not only how their government is spending their money but also who is helping provide information that shapes public perceptions of national undertakings like war and military operations.
The Obama Administration’s new initiative is a step in the right direction, toward balancing vital, varied and sometimes even competing national interests.
