The Pentagon reported in January that it had awarded more than $270 billion in contracts to companies found guilty of fraud, and millions more to companies suspended or debarred from federal contracting. The Defense Department didn’t seem too worried about these findings, however. It assured the public that “existing remedies with respect to contractor wrongdoing are sufficient.”


Not if you consult the Federal Contractor Misconduct Database, developed by my organization, the Project On Government Oversight (POGO). Those “existing remedies” seem to be doing very little to stop the Pentagon from handing contracts to companies with long rap sheets.

The POGO database shows that the top 100-plus federal contractors, several of which the Pentagon cited in its report, have racked up more than $20 billion in fines, penalties, and restitution in hundreds of instances of fraud and other kinds of misbehavior since 1995. Our database also shows that very few of these contractors have ever been barred from federal contracting for breaking the law or performing poorly on a contract.

Part of the problem is that our government has grown too dependent on some of these companies. We saw this last year with BP. Despite its catastrophic oil spill in the Gulf of Mexico and numerous safety and environmental compliance problems at many of its other facilities, BP survived calls for debarment. It continues to supply fuel to the U.S. military. Likewise, companies such as Boeing, Lockheed Martin, and KBR are considered too integral to governmental operations to receive anything more than a slap on the wrist when they cheat on bidding as Boeing did, overbill like KBR, or provide deficient parts, which was one of Lockheed Martin’s many misdeeds.

Completely eliminating fraud, waste, and abuse in federal contracting is impossible. But these problems can be significantly reduced with a few simple changes.

First, the federal government must make its contracts more transparent. All contracts and related documents should be posted on a public website. When contractors cheat the government or perform poorly, that information should be made public on a site similar to POGO’s contractor misconduct database. This April, the government will begin posting information about contractor misconduct online. But pressure from industry groups persuaded the government to keep certain data on past performance hidden from public inspection.

Second, the government needs to strengthen its oversight. To prevent fraud, waste, and abuse from occurring in the first place, authorities must execute more frequent and more robust audits both before and after awarding contracts. The government’s contractor database must be kept up-to-date and carefully checked by officials before contracts are awarded. If there are red flags about a prospective contractor’s past performance, the government must be willing to stop doing business with them.

Finally, contractors must be punished more systematically when they break the law, cheat the government, or do not perform as promised. Although criminal prosecutions and civil and administrative enforcement actions often result in the recovery of federal funds, the contractor can just shrug it off as the cost of doing business if the government keeps buying its goods and services. The government must be able to ban large contractors for longer periods of time with suspensions and debarments.

If tougher sanctions are unfeasible due to the government’s reliance on particular companies for particular goods or services, it then needs to thoroughly re-examine its policies and enhance competition in the contracting marketplace. The government must stop relying so heavily on the usual suspects–especially when those suspects have ripped off our nation.

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Neil Gordon

Neil Gordon is an investigator at the Project On Government Oversight (POGO).

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