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TO PAY OR NOT TO PAYREDUCING IMPROPER PAYMENTS THROUGH
THE DO NOT PAY LIST
Rachel Cohn1101 New Hampshire Ave NW Apt 609
Washington DC 20037rlcohnlawgwuedu
Rachel Cohn is a JD Candidate at The George Washington University Law School and a member of the Public Contract Law Journal She wishes to thank Megan Bartley and Meg Nielsen for
their help and guidance throughout the writing process
TABLE OF CONTENTS
I The Recent Increase in Improper Payments3A What Are Improper Payments4B Efforts to Reduce Improper Payments65C The Do Not Pay List9D The Do Not Pay List is a Start but Not Enough 1110
II Information Databases Repeatedly Fail to Reduce Improper Payments12A Federal Procurement Data System1413B Past Performance Information Retrieval System1716C Excluded Parties List System2119D Federal Awardee Performance and Integrity Information
System2422III Plagued by the Same Defects The Do Not Pay List2725
A The Existing Databases Repeat the Same Mistakes 2826B The Do Not Pay List Does Not Rectify Problems in
Existing Lists2926IV Recommendation A Two-Part Solution3330
A Improving the Do Not Pay List Through Private Sector Analytics3330
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments3936
V Conclusion4038
i
ldquoIn total the [G]government made $116 billion in improper payments last year Imagine how many private and publicly traded
companies would shut down if they committed errors of this magnituderdquo1
In May 2007 the Government Services Administration (GSA)
debarred a chemical products company and its principals after the
Environmental Protection Agency and the Drug Enforcement Agency
discovered the company had conspired to defraud the Ggovernment
by affixing false manufacturing labels to chemicals being sold to
government agencies2 Despite debarment that same chemical
company has since received over $1 million in federal contract
awards from four different federal agencies including GSA3
One of the other agenciesAnother agency the United States
Department of Agriculture claimed it paid this same company over
$700000 after the debarment because it was exercising a one-year
option on an already existing contract and believed erroneously
that it was not required to check the database of debarred
1 Dave Dantus Agencies Must Erase Payment Errors to Cut Inefficiencies FEDE RAL TIMES (Nov 27 2011) httpwwwfederaltimescomarticle20111127ADOP061112703032 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 10 (2009) [hereinafter EXCLUDED PARTIES LIST SYSTEM] Contractors suspended debarred or proposed for debarment are excluded from receiving contracts and agencies cannot solicit offers from award contracts to or consent to subcontracts with these contractors absent extenuating circumstances FAR 9405(a) Contractors debarred suspended or proposed for debarment are also excluded from conducting business with the Government as agents or representatives of other contractors Id3 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 10
companies before exercising the option4 GSA on the other hand
claimed that the company it continued to do business with was not
the same company that it had previously debarred5 Although GSA
said it researched the company before awarding the contract a
GAO investigation revealed that the company in question did not
appear in GSArsquos search of the debarred contractor database
because the original database entry did not include the required
unique identifying information for the company6
Awarding subsequent contracts to a debarred company is just
one of many examples illustrating the depth of the Ffederal
Ggovernmentrsquos current improper payments problem For example
iIn September 2006 GSA suspended a construction company after it
found the companyrsquos president had ldquoused fictitious Social
Security numbers to open multiple GSA auction accounts to bid on
surplus propertyrdquo7 Despite this suspension which should have
prevented additional awards the Department of Interior (DOI)
made seven awards to the company in 2007 totaling overin amounts
exceeding $2300008 Interior DOI failed to check federal 4 Id The federal acquisition guidelines state however that options cannot be exercised with debarred parties unless the head of the agency makes a determination that the agency should continue the contract FAR 9405-1(b)(3)5 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 106 See Iid at 8 GSA had mistakenly entered the companyrsquos attorneyrsquos address into the database instead of the company address and even though the debarred company and the one GSA continued to do business with had the same name GSA officials mistakenly decided they were different companies Id7 Id at 128 Id
2
databases that should have listed the company as suspended but
even if it had those databases were out of date9
This Note will discuss the Ffederal Ggovernmentrsquos failed
attempts to solve the ongoing improper payments problem and
explain why the latest attempt yet again fails to improve upon
past endeavors Part I of this Note will provide background on
the causes and amounts of improper payments Part II will
examine previous efforts to reduce improper payments and identify
the factors which that thwarted the success of those programs
Part III will explain why the Do Not Pay List -ndash the Ffederal
Ggovernmentrsquos current approach to reducing improper payments ndash-
like itrsquos predecessors is unlikely to result in a more
successful solution to this ongoingsucceed in eliminating this
ongoing problem challenge Part IV will propose a novel two-
pronged approach to help minimize the Ffederal Ggovernmentrsquos
improper payments without building additional databases
I The Recent Increase in Improper Payments
Improper payments to contractors have increased
significantly in recent years from over $72 billion in fiscal
year 200810 to $116 billion in fiscal year 201111 The rate of
9 Id10 Tom Cohen White House Reports Billions of Improper Payments in 2009 CNNPOLITICS CNN (Nov 18 2009 144 AM) httpwwwcnncom2009POLITICS1118governmentimproperpaymentsindexhtml11 Adam Aigner-Treworgy Dir Lew Improper Federal Payments on the Decline CNNPOLITICS (Nov 15 2011 438 PM)
3
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
TABLE OF CONTENTS
I The Recent Increase in Improper Payments3A What Are Improper Payments4B Efforts to Reduce Improper Payments65C The Do Not Pay List9D The Do Not Pay List is a Start but Not Enough 1110
II Information Databases Repeatedly Fail to Reduce Improper Payments12A Federal Procurement Data System1413B Past Performance Information Retrieval System1716C Excluded Parties List System2119D Federal Awardee Performance and Integrity Information
System2422III Plagued by the Same Defects The Do Not Pay List2725
A The Existing Databases Repeat the Same Mistakes 2826B The Do Not Pay List Does Not Rectify Problems in
Existing Lists2926IV Recommendation A Two-Part Solution3330
A Improving the Do Not Pay List Through Private Sector Analytics3330
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments3936
V Conclusion4038
i
ldquoIn total the [G]government made $116 billion in improper payments last year Imagine how many private and publicly traded
companies would shut down if they committed errors of this magnituderdquo1
In May 2007 the Government Services Administration (GSA)
debarred a chemical products company and its principals after the
Environmental Protection Agency and the Drug Enforcement Agency
discovered the company had conspired to defraud the Ggovernment
by affixing false manufacturing labels to chemicals being sold to
government agencies2 Despite debarment that same chemical
company has since received over $1 million in federal contract
awards from four different federal agencies including GSA3
One of the other agenciesAnother agency the United States
Department of Agriculture claimed it paid this same company over
$700000 after the debarment because it was exercising a one-year
option on an already existing contract and believed erroneously
that it was not required to check the database of debarred
1 Dave Dantus Agencies Must Erase Payment Errors to Cut Inefficiencies FEDE RAL TIMES (Nov 27 2011) httpwwwfederaltimescomarticle20111127ADOP061112703032 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 10 (2009) [hereinafter EXCLUDED PARTIES LIST SYSTEM] Contractors suspended debarred or proposed for debarment are excluded from receiving contracts and agencies cannot solicit offers from award contracts to or consent to subcontracts with these contractors absent extenuating circumstances FAR 9405(a) Contractors debarred suspended or proposed for debarment are also excluded from conducting business with the Government as agents or representatives of other contractors Id3 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 10
companies before exercising the option4 GSA on the other hand
claimed that the company it continued to do business with was not
the same company that it had previously debarred5 Although GSA
said it researched the company before awarding the contract a
GAO investigation revealed that the company in question did not
appear in GSArsquos search of the debarred contractor database
because the original database entry did not include the required
unique identifying information for the company6
Awarding subsequent contracts to a debarred company is just
one of many examples illustrating the depth of the Ffederal
Ggovernmentrsquos current improper payments problem For example
iIn September 2006 GSA suspended a construction company after it
found the companyrsquos president had ldquoused fictitious Social
Security numbers to open multiple GSA auction accounts to bid on
surplus propertyrdquo7 Despite this suspension which should have
prevented additional awards the Department of Interior (DOI)
made seven awards to the company in 2007 totaling overin amounts
exceeding $2300008 Interior DOI failed to check federal 4 Id The federal acquisition guidelines state however that options cannot be exercised with debarred parties unless the head of the agency makes a determination that the agency should continue the contract FAR 9405-1(b)(3)5 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 106 See Iid at 8 GSA had mistakenly entered the companyrsquos attorneyrsquos address into the database instead of the company address and even though the debarred company and the one GSA continued to do business with had the same name GSA officials mistakenly decided they were different companies Id7 Id at 128 Id
2
databases that should have listed the company as suspended but
even if it had those databases were out of date9
This Note will discuss the Ffederal Ggovernmentrsquos failed
attempts to solve the ongoing improper payments problem and
explain why the latest attempt yet again fails to improve upon
past endeavors Part I of this Note will provide background on
the causes and amounts of improper payments Part II will
examine previous efforts to reduce improper payments and identify
the factors which that thwarted the success of those programs
Part III will explain why the Do Not Pay List -ndash the Ffederal
Ggovernmentrsquos current approach to reducing improper payments ndash-
like itrsquos predecessors is unlikely to result in a more
successful solution to this ongoingsucceed in eliminating this
ongoing problem challenge Part IV will propose a novel two-
pronged approach to help minimize the Ffederal Ggovernmentrsquos
improper payments without building additional databases
I The Recent Increase in Improper Payments
Improper payments to contractors have increased
significantly in recent years from over $72 billion in fiscal
year 200810 to $116 billion in fiscal year 201111 The rate of
9 Id10 Tom Cohen White House Reports Billions of Improper Payments in 2009 CNNPOLITICS CNN (Nov 18 2009 144 AM) httpwwwcnncom2009POLITICS1118governmentimproperpaymentsindexhtml11 Adam Aigner-Treworgy Dir Lew Improper Federal Payments on the Decline CNNPOLITICS (Nov 15 2011 438 PM)
3
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
ldquoIn total the [G]government made $116 billion in improper payments last year Imagine how many private and publicly traded
companies would shut down if they committed errors of this magnituderdquo1
In May 2007 the Government Services Administration (GSA)
debarred a chemical products company and its principals after the
Environmental Protection Agency and the Drug Enforcement Agency
discovered the company had conspired to defraud the Ggovernment
by affixing false manufacturing labels to chemicals being sold to
government agencies2 Despite debarment that same chemical
company has since received over $1 million in federal contract
awards from four different federal agencies including GSA3
One of the other agenciesAnother agency the United States
Department of Agriculture claimed it paid this same company over
$700000 after the debarment because it was exercising a one-year
option on an already existing contract and believed erroneously
that it was not required to check the database of debarred
1 Dave Dantus Agencies Must Erase Payment Errors to Cut Inefficiencies FEDE RAL TIMES (Nov 27 2011) httpwwwfederaltimescomarticle20111127ADOP061112703032 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 10 (2009) [hereinafter EXCLUDED PARTIES LIST SYSTEM] Contractors suspended debarred or proposed for debarment are excluded from receiving contracts and agencies cannot solicit offers from award contracts to or consent to subcontracts with these contractors absent extenuating circumstances FAR 9405(a) Contractors debarred suspended or proposed for debarment are also excluded from conducting business with the Government as agents or representatives of other contractors Id3 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 10
companies before exercising the option4 GSA on the other hand
claimed that the company it continued to do business with was not
the same company that it had previously debarred5 Although GSA
said it researched the company before awarding the contract a
GAO investigation revealed that the company in question did not
appear in GSArsquos search of the debarred contractor database
because the original database entry did not include the required
unique identifying information for the company6
Awarding subsequent contracts to a debarred company is just
one of many examples illustrating the depth of the Ffederal
Ggovernmentrsquos current improper payments problem For example
iIn September 2006 GSA suspended a construction company after it
found the companyrsquos president had ldquoused fictitious Social
Security numbers to open multiple GSA auction accounts to bid on
surplus propertyrdquo7 Despite this suspension which should have
prevented additional awards the Department of Interior (DOI)
made seven awards to the company in 2007 totaling overin amounts
exceeding $2300008 Interior DOI failed to check federal 4 Id The federal acquisition guidelines state however that options cannot be exercised with debarred parties unless the head of the agency makes a determination that the agency should continue the contract FAR 9405-1(b)(3)5 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 106 See Iid at 8 GSA had mistakenly entered the companyrsquos attorneyrsquos address into the database instead of the company address and even though the debarred company and the one GSA continued to do business with had the same name GSA officials mistakenly decided they were different companies Id7 Id at 128 Id
2
databases that should have listed the company as suspended but
even if it had those databases were out of date9
This Note will discuss the Ffederal Ggovernmentrsquos failed
attempts to solve the ongoing improper payments problem and
explain why the latest attempt yet again fails to improve upon
past endeavors Part I of this Note will provide background on
the causes and amounts of improper payments Part II will
examine previous efforts to reduce improper payments and identify
the factors which that thwarted the success of those programs
Part III will explain why the Do Not Pay List -ndash the Ffederal
Ggovernmentrsquos current approach to reducing improper payments ndash-
like itrsquos predecessors is unlikely to result in a more
successful solution to this ongoingsucceed in eliminating this
ongoing problem challenge Part IV will propose a novel two-
pronged approach to help minimize the Ffederal Ggovernmentrsquos
improper payments without building additional databases
I The Recent Increase in Improper Payments
Improper payments to contractors have increased
significantly in recent years from over $72 billion in fiscal
year 200810 to $116 billion in fiscal year 201111 The rate of
9 Id10 Tom Cohen White House Reports Billions of Improper Payments in 2009 CNNPOLITICS CNN (Nov 18 2009 144 AM) httpwwwcnncom2009POLITICS1118governmentimproperpaymentsindexhtml11 Adam Aigner-Treworgy Dir Lew Improper Federal Payments on the Decline CNNPOLITICS (Nov 15 2011 438 PM)
3
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
companies before exercising the option4 GSA on the other hand
claimed that the company it continued to do business with was not
the same company that it had previously debarred5 Although GSA
said it researched the company before awarding the contract a
GAO investigation revealed that the company in question did not
appear in GSArsquos search of the debarred contractor database
because the original database entry did not include the required
unique identifying information for the company6
Awarding subsequent contracts to a debarred company is just
one of many examples illustrating the depth of the Ffederal
Ggovernmentrsquos current improper payments problem For example
iIn September 2006 GSA suspended a construction company after it
found the companyrsquos president had ldquoused fictitious Social
Security numbers to open multiple GSA auction accounts to bid on
surplus propertyrdquo7 Despite this suspension which should have
prevented additional awards the Department of Interior (DOI)
made seven awards to the company in 2007 totaling overin amounts
exceeding $2300008 Interior DOI failed to check federal 4 Id The federal acquisition guidelines state however that options cannot be exercised with debarred parties unless the head of the agency makes a determination that the agency should continue the contract FAR 9405-1(b)(3)5 EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 at 106 See Iid at 8 GSA had mistakenly entered the companyrsquos attorneyrsquos address into the database instead of the company address and even though the debarred company and the one GSA continued to do business with had the same name GSA officials mistakenly decided they were different companies Id7 Id at 128 Id
2
databases that should have listed the company as suspended but
even if it had those databases were out of date9
This Note will discuss the Ffederal Ggovernmentrsquos failed
attempts to solve the ongoing improper payments problem and
explain why the latest attempt yet again fails to improve upon
past endeavors Part I of this Note will provide background on
the causes and amounts of improper payments Part II will
examine previous efforts to reduce improper payments and identify
the factors which that thwarted the success of those programs
Part III will explain why the Do Not Pay List -ndash the Ffederal
Ggovernmentrsquos current approach to reducing improper payments ndash-
like itrsquos predecessors is unlikely to result in a more
successful solution to this ongoingsucceed in eliminating this
ongoing problem challenge Part IV will propose a novel two-
pronged approach to help minimize the Ffederal Ggovernmentrsquos
improper payments without building additional databases
I The Recent Increase in Improper Payments
Improper payments to contractors have increased
significantly in recent years from over $72 billion in fiscal
year 200810 to $116 billion in fiscal year 201111 The rate of
9 Id10 Tom Cohen White House Reports Billions of Improper Payments in 2009 CNNPOLITICS CNN (Nov 18 2009 144 AM) httpwwwcnncom2009POLITICS1118governmentimproperpaymentsindexhtml11 Adam Aigner-Treworgy Dir Lew Improper Federal Payments on the Decline CNNPOLITICS (Nov 15 2011 438 PM)
3
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
databases that should have listed the company as suspended but
even if it had those databases were out of date9
This Note will discuss the Ffederal Ggovernmentrsquos failed
attempts to solve the ongoing improper payments problem and
explain why the latest attempt yet again fails to improve upon
past endeavors Part I of this Note will provide background on
the causes and amounts of improper payments Part II will
examine previous efforts to reduce improper payments and identify
the factors which that thwarted the success of those programs
Part III will explain why the Do Not Pay List -ndash the Ffederal
Ggovernmentrsquos current approach to reducing improper payments ndash-
like itrsquos predecessors is unlikely to result in a more
successful solution to this ongoingsucceed in eliminating this
ongoing problem challenge Part IV will propose a novel two-
pronged approach to help minimize the Ffederal Ggovernmentrsquos
improper payments without building additional databases
I The Recent Increase in Improper Payments
Improper payments to contractors have increased
significantly in recent years from over $72 billion in fiscal
year 200810 to $116 billion in fiscal year 201111 The rate of
9 Id10 Tom Cohen White House Reports Billions of Improper Payments in 2009 CNNPOLITICS CNN (Nov 18 2009 144 AM) httpwwwcnncom2009POLITICS1118governmentimproperpaymentsindexhtml11 Adam Aigner-Treworgy Dir Lew Improper Federal Payments on the Decline CNNPOLITICS (Nov 15 2011 438 PM)
3
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
improper payment peaked in fiscal year 2009 at 54212 This
represents approximately $1056 billion in improper payments in
fiscal year 200913 and an increase of over 37 from the $72
billion in improper payments in fiscal year 200814 In response
to these drastic increases the Ffederal Ggovernment has devoted
considerable resources to creating databases of contractor
information intended to prevent improper payments15
A What Are Improper Payments
The Office of Management and Budget (OMB) defines improper
payments broadly as ldquoany payment that should not have been made
or that was made in an incorrect amountrdquo under applicable
requirements16 Improper payments include both underpayments and
overpayments or erroneous transfers of federal funds17 They
also encompass wrongful denials of payment or service payments
httpwhitehouseblogscnncom20111115dir-lew-improper-federal-payments-on-the-decline12 Improper Payments Overview PAYMENT ACCURACY httpwwwpaymetaccuracygov (last visited Oct 21 2012)13 Id14 Cohen supra note 101110 15 See discussion infra Parts IB amp IC 16 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-10-13 ISSUANCE OF PART III TO OMB CIRCULAR A-123 APPENDIX C REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 REDUCING IMPROPER PAYMENTS 44 (2010) [hereinafter REQUIREMENTS FOR IMPLEMENTING EXEC O R DER 13520] OMB is responsible for government-wide budget development and execution as well as oversight of agency performance and financial management See Office of Mgmt amp Budget The Mission and Structure of the Office of Management and Budget OFFICE OF M GMrsquo T amp BUDGET THE WHITE HOUSE httpwwwwhitehousegovomborganization_mission (last visited Oct 21 2012) 17 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 4
4
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
made ldquoto an ineligible recipient or for an ineligible servicerdquo
and payments for which an agency is unable to discern the
accuracy due to lack of appropriate documentation18
OMB has identified and categorized three main causes of
improper payments (1) documentation and administrative errors
which occur when an agency lacks the requisite documentation ldquoto
verify the accuracy of the recipientrsquos claim for federal
benefitsrdquo (2) authentication and medical necessity errors which
occur when an agency is ldquounable to confirm that the [intended]
recipient meets all of the requirements for receiving paymentrdquo
and (3) verification errors which occur when the Ggovernment
fails to verify recipient information such as earnings assets
or work status19 Improper payments typically can arise when an
agency either lacks accurate information or fails to consult the
correct information regarding the intended recipient of
government funds prior to payment20
B Efforts to Reduce Improper Payments
18 Id19 PAYMENT ACCURACY supra note 12 Pursuant to Executive Order 13520 this website is maintained by the Director of the Office of Management and Budget See id Documentation errors are typically caused by errors made in processing or classifying benefit applications at the agency level Id Authentication errors generally occur when a medical service is provided to a patient who does not require such a service Id The vast majority of improper payments in all three categories however are unintentional errors rather than fraudulent or intentional misuses of government funds Id 20 See Iid
5
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Since the 1980s the President and various executive
agencies have implemented several initiatives and Congress has
passed legislation aimed at reducing improper payments
Pursuant to a 1986 executive order GSA created a government-wide
list of companies excluded from federal procurement and non-
procurement programs21 In 1990 and 1993 respectively Congress
passed the Chief Financial Officers Act22 and the Government
Performance and Results Act23 which each challenged agencies to
identify systematically measure and reduce improper payments by
requiring agencies to prepare annual performance plans including
strategies necessary to achieve such performance goals24 In
2002 Congress passed the Improper Payments Information Act
(ldquoIPIArdquo) which required OMB to quantify the amount of improper
payments reported by individual agencies25
21 EXEC ORDER NO Exec Order No 12549 3 CFR 189986 (1986) 22 Chief Financial Officers Act of 1990 Pub L No 101-576 104 Stat 2838 (1990)(codified as amended in scattered sections of 5 and 31 USC)5 USC sectsect 5313-5315 31 USC sectsect 501 901 1105 3501 9105 9106 (2006)23 Government Performance and Results Act of 1993 Pub L No 103-62 107 Stat 285 (1993) (codified as amended in scattered sections of 5 31 and 39 USC)31 USC sect 1101 nt (2006)24 See US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-00-10 FINANCIAL MANAGEMENT INCREASED ATTENTION NEEDED TO PREVENT BILLIONS IN IMPROPER PAYMENTS 5-7 n1 n2 (1999)25 Improper Payments Information Act (IPIA) of 2002 Pub L No 107-300 sect 2 116 Stat 2350 2350 (codified at 31 USC sect 3321 note (2006)) Nov 26 2002 IPIA was passed in response to a GAO report which recommended a coordinated approach to address the Ggovernmentrsquos improper payments problem US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-749 FIN MGMT FINANCIAL MANAGEMENT COORDINATED APPROACH NEEDED TO ADDRESS THE GOVrsquoTrsquoS IMPROPER PAYMENTS PROBLEMS 2 (2002)
6
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Since taking office in 2008 President Obama has emphasized
reducing government waste and increasing accountability and
transparency26 As part of his Accountable Government
Initiative President Obama set an aggressive goal challenging
his administration to reduce improper payments government-wide by
$50 billion and to recapture at least $2 billion by fiscal year
201227
Through a series of executive orders and memoranda
President Obama has sought to make reducing improper payments a
priority for federal agencies In November 2009 the President
Obama required the OMB Director to identify high priority federal
programs ndash- those programs issuing the highest dollar amounts of
improper payments28 OMB created a website where it
publishespublishing information about these high priority
programs including targets for reduction of improper payments29
In March 2010 President Obama issued a memorandum to expand the
use of payment recapture audits a process through which
accounting specialists and fraud examiners utilize technology to 26 See OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND AGENCIES CAMPAIGN TO CUT WASTE 1 (June 28 2011)27 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-04 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUDITS 1 (Nov 16 2010)28 Exec Order No 13520 74 Fed Reg 62m201 (Nov 20 2009) In response to the Order OMB issued guidance on how such programs were selected as well as how the annual or semi-annual agency improvement targets determined See REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13 520 OMB M-10-13 supra note 161515 at 529 PAYMENT ACCURACY supra note 121812
7
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
examine agency payment records and uncover duplicate payments
overpayments and fictitious vendors30
In June 2010 President Obama ordered the creation of a ldquoDo
Not Pay Listrdquo (the ldquoDNP Listrdquo)31 Touted as ldquoa single source
through which all agencies can check the status of a potential
contractor or individualrdquo32 Obama intended the DNP List to
provide information to federal agencies in ldquoa more timely and
cost- effective mannerrdquo33 In addition since the announcement
of the DNP List Congress has sought to keep the focuskept on
reducing improper payments in the spotlight by enacting related
legislation34 While improper payments are not a new problem 30 Memorandum on Finding and Recapturing Improper Payments 75 Fed Reg 12119 12119 (Mar 10 2010) In response OMB issued revisions to Part III to Appendix C of OMB Circular A-123 Managements Responsibility for Internal Controls which specifies responsibilities for agency officials determines the programs that are subject to the executive order establishes reporting requirements under the order and establishes procedures to identify outstanding improper payments See generally REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 OMB issued Parts I and II of Appendix C to OMB Circular A-123 in August 2006 as implementing guidance for IPIA (PUB L NO 107-300) and section 831 of the Defense Authorization Act for Fiscal Year 2002 (PUB L NO 107-107 codified at 31 USC sectsect 3561-3567) also known as the Recovery Auditing Act Id at 1 n1 National Defense Authorization Act for Fiscal Year 2002 Pub L No 107-107 115 Stat 1012 1019 (codified in 31 USC sectsect 3561-3567 (2006)) 31 Memorandum on Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg 35953 (June 18 2010)32 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT FACT SHEET DO NOT PAY LIST 1 (June 18 2010) 33 Id34 See eg generally Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 124 Stat 2224 July 22 2010 (2010) Signed into law on July 22 2010 the Improper Payments Elimination and Recovery Act (ldquoIPERArdquo) amended IPIA and
8
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
these recent efforts by the President and Congress seem to
indicate a renewed focus on reducing them
C The Do Not Pay List
The goal of the DNP List is to prevent improper payments
from being made in the first place35 Specifically it will
serve as a single source ldquothrough which all agencies can check
the [eligibility] status of a potential contractor or
individualrdquo recipient creating efficient access to information
to help reduce improper payments36
Although the ultimate plan is for the DNP List to exist as a
single database compiling the information and building the final
product is still a work in progress In the meantime the DNP
List exists only as a network of existing databases that agencies
are required to check prior to awarding a contract37 The
Treasury Department has been compiling this information to make
required OMB to issue guidance to federal agencies regarding the elimination of improper payments Id sect 2 In response to IPERA OMB re-issued Parts I and II to Appendix C of OMB Circular A-I23 OFFICE OF MGMT amp BUDGET EXEC OFFICE OF THE PRESIDENT OMB M-11-16 ISSUANCE OF REVISED PARTS I AND II TO OMB CIRCULAR A-123 1 (Apr 14 2011) Recently Congress has proposed additional legislation on improper payments See eg also Improper Payments Elimination and Recovery Improvement Act of 2011 (ldquoIPERIArdquo) S 1409 112th 112th Cong (1st Sess 1st Session2011) Companion bill HRHR 4053 was introduced in the House of Representatives in February 2012 HR 4053 112th Cong (2012) 35 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 3595336 FACT SHEET DO NOT PAY LIST supra note 323130 at 137 MEMORANDUM ON Enhancing Payment Accuracy Through a ldquoDo Not Pay Listrdquo 75 Fed Reg supra note 3329 at 35953
9
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
it available through a ldquocentral portalrdquo online38 This online
DNP List currently includes information from seven contractor
databases and other data sources are still being added39
D The Do Not Pay List is a Start but Not Enough
President Obamarsquos efforts and the creation of the DNP List
demonstrate progress but are not enough to neutralize the
increase in erroneous payments Previous pilot program efforts
and increased use of recovery audits decreased the rate of
improper payments in fiscal year 2010 to 52940 This amounts
to avoiding $38 billion n in avoided improper payments41
ldquoAgencies also reported recaptur[ing] $687 million in 38 Id S1409 sect 5(b)(1) sect 5(b)(1) 112th Cong (1st Session) supra note 323 at sect 5(b)(1) Jeff Zients Moving Aggressively on Improper Payments OMBLOG 1-2 (Sept 23 2011 255 PM) httpwwwwhitehousegovblog20110923moving-aggressively-improper-payments 39 Zients supra note 383736 Do Not Pay Portal DO NOT PAY POR TAL httpdonotpaytreasgovportalhtm (last visited Oct 21 2012) As of the date of this Note the online DNP List includes data from the Excluded Party List System with an Office of Foreign Asset Controls feed the Death Master File List of Excluded IndividualsEntities Excluded Party List System Debt Check Central Contractor Registration and The Work Number DO NOT PAY PORTAL httpdonotpaytreasgovportalhtm Id The online DNP List was intended to be completed by the end of 2011 Zients supra note 3736 In September 2011 OMB announced that the system was ldquoin production right now and will be available government-wide in a few monthsrdquo Zients supra note 38 at 2 Id The DNP online portal launched a Business Center in January 2012 which provides automated tools and single-entry access to three existing contractor databases GoVerify Business Center Preventing and Reducing Improper Payments U S DEPrsquoT OF THE TREASURY BUREAU OF TH E PUBLIC DEBT GOVERIFY BUSINE SS CENTER 4 ( Jan 11 2012) [hereinafter GOVERIFY] available at httpwwwfmstreasgovsfcGOVerify20Improper20Paymentspdf 40 PAYMENT ACCURACY supra note 1912 at 241 Zients supra note 383736 at 1
10
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
improper payments in fiscal yearFY 2010 mdash- the highest amount
recovered to daterdquo42 The overall amount of improper payments
however still increased in fiscal year 2010 to an all-time high
of $125 billion43
The Ffederal Ggovernment continued to make progress reducing
improper payments in fiscal year 2011 but the Ggovernment is not
on track to meet President Obamarsquos goal of reducing improper
payments by $50 billion by fiscal year 201244 In 2011 OMB The
administration reported that in Fiscal Year 2011 ldquothe
[F]federal [G]government cut improper payments by $17618 billion
in wasteful and improper payments and recaptured $12 billionrdquo
in improper payments45 For the first time in six years the
amount of total improper payments declined from the previous
year down to approximately $116 billion with the error rate
decreasing to 46946 Since the start of the Accountable
Government Initiative the Ffederal Ggovernment has avoided 42 Id 43 Ed OrsquoKeefe Government Made $125 Billion In Improper Payments Last Year WASH INGTON POST (Nov 17 2010 757 PM) httpwwwwashingtonpostcomwp-dyncontentarticle20101117AR2010111706323html Even though the rate of improper payments decreased in fiscal year 2010 the overall amount increased because the economic recession has lead to increased numbers of payments for unemployment insurance and Medicaid benefits Id44 See Adam Aigner-Treworgy supra note 11 INCREASING EFFORTS TO RECAPTURE IMPROPER PAYMENTS BY INTENSIFYING AND EXPANDING PAYMENT RECAPTURE AUD ITS supra note 27 at 1145 IdAdam Aigner-Treworgy supra note 1146 PAYMENT ACCURACY supra note 121212 Aigner-Treworgy supra note 441111 Significant decreases in the amount of improper payments came from Medicare Medicaid Pell Grants and Food Stamps Aigner-Treworgy supra note 4411
11
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
improperly paying out over $20 billion47 but still needs to
recover another $30 billion in the next year in order to meet
President Obamarsquos goal by the end of 20124849
[II] Information Databases Repeatedly Fail to Reduce Improper Payments While the Ffederal Ggovernment has made some significant
progress in reducing the rate of improper payments the
compilation of the DNP List is not an effective solution to this
end this ongoing problem The DNP List is unlikely to solve the
problem of improper payments because it is simply the next in a
series of failed attempts to create centralized access to a list
of entities that should not receive payment
The Ffederal Ggovernment has demonstrated a pattern of
creating ineffective lists intended to decrease improper
payments50 Over the last 18 years various agencies have
created numerous iterative lists that contracting officers and
other government officials must check before issuing an award or
payment There are four major lists which exemplify this
pattern (1)Federal Procurement Data System F(FPDS) (2) Past
Performance Information Retrieval System (PPIRS) (3) Excluded 47 As noted previously in this Section in 2010 the Government avoided making improper payments in the amount of $38 billion In 2011 the Government avoided making improper payments in the amount of $18 billion When totaled the total number avoided is approximately $218 billion PAYMENT ACCURACY supra note 1248 See discussion supra Part IB (discussing President Obamarsquos goals) 49 PAYMENT ACCURACY supra note 1250 See discussion infra Parts IIA-D
12
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Parties List System (EPLS) and (4) Federal Awardee Performance
and Integrity Information System (FAPIIS)51 Despite some
success each list suffers similar flaws that have thwarted the
success of those programs including (i) inaccurate and
incomplete data (ii) a flawed user interface and (iii) a lack
of accountability or centralized management52
A Federal Procurement Data System
The FPDS Federal Procurement Data System (ldquoFPDSrdquo) is the
Ffederal Ggovernmentrsquos ldquocentral archive of statistical
information on federal contractingrdquo53 FPDS aims to increase
trust and credibility among contracting professionals by
helpingallows contracting officials to examine data across
multiple agencies to make better contracting decisions54
However FPDS suffers from serious flaws which have prevented it
from serving as a single useful database of federal contracting
information55 FPDS contains incomplete data has a flawed user 51 See discussion infra Parts IIA-D52 See discussion infra Parts IIA-D53 Government Contract Records USAGOV httpanswersusagovsystemselfservicecontrollerCONFIGURATION=1000ampPARTITION_ID=1ampCMD=VIEW_ARTICLEampARTICLE_ID=11374ampUSERTYPE=1ampLANGUAGE=enampCOUNTRY=US (last visited Oct 21 2012)54 See id55 FPDS was modernized between 2003 and 2005 to create FPDS-NG in an effort to allow for more frequent data updates For the purposes of this Note FPDS and FPDS-NG are functionally equivalent as the system flaws occurring in FPDS continue to exist in FPDS-NG See ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL TO THE OFFICE OF FEDERAL PROCUREMENT POLICY AND THE UNITED STATES CONGRESS 434 438 (Jan 2007)
13
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
interface and lacks accountability and standards for data
accuracy56
FPDS data is inaccurate and incomplete because the
information coming it receives from its feeder systems is not
properly reported57 Not all Ggovernment agencies that use
contractors are required to report information to FPDS58 FPDS
data relies depends on individuals to prepare contract action
reports correctly and the system has no means to ensure that
56 See eg US GOVrsquoT ACCOUNTABILITY OFFICE GAOAIMD-94-178R OMB AND GSA FPDS IMPROVEMENTS 1-2 (1994) [hereinafter FDSP IMPROVEMENTS] (explaining that FPDS has not kept up with user needs because it lacks a forum for identifying and addressing user needs the system technology is inefficient and the system lacks standards for accuracy and completeness of data) ACQUISITION ADVISORY PANEL OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG supra note 55 4849 at 445 The GAO has long reported concerns with FPDS almost since its inception Id57 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-960R IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM-NEXT GENERATION 2-3 (2005)[hereinafter IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM] Like PPIRS infra note 6361 tThe majority of the data comprising FPDS comes from the Department of Defense which has repeatedly failed to input accurate data on a timely basis and has delayed time frames for updating data already in the system Id The Department of Defense represents 60 of the contracting actions in FPDS and is the largest contracting entity in the Ffederal Ggovernment Id A review of the Small Business Administrationrsquos (SBA) FPDS data indicated that approximately 97 of the contract actions in the audit conducted by SBA system ldquocontained one or more inaccurate or incomplete data elementsrdquo US SMALL BUS ADMIN OFFICE OF THE INSPECTOR G ENE RAL NO 10- 08 SBArsquoS EFFORTS TO IMPROVE TH E QUALITY OF ACQUISITION DATA IN THE FEDERAL PROCUREMENT DATA SYST EM MEMORANDUM AUDIT OF THE SBAS EFFORTS TO IMPROVE THE QUALITY OF ACQUISITION DATA IN THE FED PROCUREMENT DATA SYS REPORT NO 10-08 2 (Feb 26 2010)58 OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG REPORT OF THE ACQUISITION ADVISORY PANEL ACQUISITION ADVISORY PANEL supra note 55 4849 at 438
14
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
such data if prepared at all is done accurately59 Contracting
officials therefore lack cannot have confidence in the system
because contractor names and dollar amounts are often listed
erroneously60
FPDS also suffers from a flawed user interface The current
FPDS website allows users to generate data reports through
standard reporting templates or through an ldquorsquoad hocrsquo reporting
toolrdquo61 GAO analysts who were trained on these tools did not
find either one easy to use62 System time-outs and delays
occurred frequently while trying to utilize either reporting
tool63 Users were also unable to extract government-wide data
in a simple machine readable format and instead had to retrieve
data separately for each government agency from multiple archived
files64
Finally FPDS lacks accountability hampering accurate and
timely reporting In 1994 the GAO noted that FPDS ldquodoes not
have standards detailing the appropriate levels of accuracy and
59 US GOVrsquoT ACCOUNTABILITY OFFICE PSAD-80-33 THE FEDERAL PROCUREMENT DATA SYSTEM ndash MAKING IT WORK BETTER 9 (1980)60 See id Additional reports noted that much of the inaccurate or incomplete data existed as a result of flaws in the feeder systems See id61 IMPROVEMENTS NEEDED TO THE FEDERAL PROCUREMENT DATA SYSTEM GAO-05-960R supra note 575151 at 362 Id GAO trained analysts found that the ad hoc reports were time-consuming to build and could not subsequently be saved meaning they would have to be re-built by the user each time the feature is utilized Id63 Id64 Id at 4
15
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
completeness of FPDS datardquo65 For example there is no person or
entity responsible for overseeing the proper transmittal of
data66 Instead FPDS relies on voluntary contributions from
agencies for operational and enhancement funding67 As a result
it is incredibly difficult for FPDS to make changes and correct
flaws in its system making it unlikely to improve contracting
decisions and decrease improper payments
B Past Performance Information Retrieval System
The goal of Past Performance Information Retrieval System
(ldquoPPIRSrdquo) a repository of government contractorsrsquo prior
performance history is to share that information across
government agencies to better inform contract award decisions68
Created and run by the Naval Sea Logistics Center (NSLC) the
information in PPIRS is compiled from the Department of Defense
the National Institute of Health and the National Aeronautics
and Space Administration69 65 FDSP IMPROVEMENTS GAOAIMD-94-178R supra note 565049 at 266 See OFFICE OF THE FED PROCUREMENT POLICY OF THE US CONG ACQUISITION ADVISORY PANEL supra note 55 4849 at 44367 Id FPDS must rely on voluntary contributions because as part of the Integrated Acquisition Environment it is funded by agencies as a way to integrate and leverage the investments in automation across agencies Id68 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-374 FEDERAL CONTRACTORS BETTER PERFORMANCE INFORMATION NEEDED TO SUPPORT AGENCY CONTRACT AWARD DECISIONS 1 (2009) [hereinafter BETTER PERFORMANCE INFORMATION NEEDED] 69 GovWin Editor Past Performance Information Retrieval System (PPIRS) GOVWIN (Nov 23 2010 1642) httpgovwincomknowledgepast-performance-ppirs Most of the information in PPIRS comes from the Department of Defensersquos Contractor Performance Assessment Reporting System (ldquoCPARSrdquo) and the National Aeronautics and Space Administrationrsquos feeder
16
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Despite the NSLCrsquos efforts to create a single easily
accessible database for all past performance data PPIRS suffers
from a number of flaws which prevent it from reducing improper
payments to contractors with poor past performance records
incomplete data flawed user interface lack of guidance for how
agencies should use PPIRS information and general lack of
oversight
First PPIRS provides incomplete data Agencies
contributing information to PPIRS do not document and report all
relevant past performance information for each contract and they
often fail to report any information for certain types of
contracts70 For example PPIRS data from fiscal years 2006 and
2007 indicates that ldquoonly a small percentagerdquo of contracts were
accompanied by a performance assessment71 Similarly PPIRS data
typically fails to include helpful information such as
information about terminations for default and management of
subcontracts72 A report by the Department of Defense Inspector
system Id The civilian information in PPIRS came primarily from the National Institute of Healthrsquos Contractor Performance System before it was shut down in September 2010 due to architectural problems and the Ffederal Ggovernmentrsquos desire to consolidate further Id70 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 3 PPIRS lacked contractor past performance for contract actions involving task orders or deliveries placed against GSArsquos Multiple Award Schedules as well as for contracts above a certain monetary threshold as required by the FAR Id at 3 10-11 FAR 421502 71 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 372 Id at 3
17
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
General found CPARS which feeds into PPIRS ldquoto be so lacking in
completeness that contracting officials [using PPIRS] lsquodo
not have the information they needed to make informed
decisions aboutrelated to contract awards and other
acquisition mattersrsquordquo73
Second PPIRS has a flawed user interface For instance
PPRIS lacks the ldquotools and metrics that managers [require] to
properly oversee the timely documentation of past performance
evaluationsrdquo74 The database also lacks standard evaluation
factors and rating scales which makesmaking it difficult for
agency officials to compare data with meaningful aggregate
measures75
Third PPIRS does not guide agencies on how ndash- or even
whether -- to utilize the information in the system76
Contracting officers frequently make award decisions based on
factors other than past performance77 Further contracting
officers have difficulty relying on the past performance
evaluations in PPIRS because there is no guidance on how to use
73 Neil Gordon Jeepers Creepershellip Whatrsquos the Deal with PPIRS PROJECT ON GOVrsquo ERNMEN T OVERSIGHT (May 26 2009) httppogoblogtypepadcompogo200905jeepers-creeperswhats-the-deal-with-ppirshtml (quoting INSPECTOR GEN ERAL US DEPrsquoT OF DEF CONTRACTOR PAST PERFORMANCE INFORMATION 14 (1998))74 BETTER PERFORMANCE INFORMATION NEEDED GAO-09-374 supra note 686261 at 375 Id76 See id at 2-3 For many years agencies had broad discretion as to how to utilize PPIRS data if at all Id77 Id at 8
18
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
the past performance data objectively and assess its relevance to
a given award78
Fourth PPIRS suffers from a general lack of oversight79
Poor central management of the database prevents contracting
officials from correcting the flaws discussed above80 In 2005
the Office of Federal Procurement Policy which ldquoguide[s]s
federal agencies in establishing standards for to evaluatinge
past performancerdquo created goals to improve PPIRS81 ldquoThese
goals included standardizing the [PPIRS] ratings and
developing a centralized questionnaire systemrdquo to improve data
consistency82 Years later however these changes still have
not gone into effect and no funding has been dedicated for this
purposeprovided83 Furthermore the incomplete and inaccurate
programs feeding data into PPIRS have not been updated or
corrected84 The result is that PPIRS remains a flawed system
providing minimal assistance to contracting officials to
accurately determine past performance data and failing to help
reduce improper payments
78 Id at 979 Id at 380 See id81 Id82 Id83 Id at 3-484 See Iid at 43
19
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
C Excluded Parties List System
The Excluded Parties List System (ldquoEPLSrdquo) maintained by
GSA is the ldquoofficial government-wide system of records of
debarments suspensions[] and other exclusionary actionsrdquo85
Contracting officers are required to review EPLS after opening
bids or receiving proposals and again immediately prior to
contract award to ensure that no award is made to a listed
contractor86 Contracting officers are also required to check
EPLS again prior to awarding ldquonew workrdquo as defined by the FAR87
Like the other systems designed to avoid award of contracts
and payments made to ineligible recipients EPLS suffers from
multiple flaws which have inhibited its efforts at preventing
improper payments a flawed user interface and search
functionality incomplete data and poor management and
oversight
EPLS has been plagued by flawed search functionality and
user interface For instance EPLS lacks significant advanced
search tips as part of its basic search capabilities88 In 85 Frequently Asked Questions EXCLUDED PARTIES LIST SYSTEM httpswwweplsgoveplsjspFAQjsp (last visited Oct 21 2012) 86 Id (citing FAR 9405(d)(1) 9405(d)(4)) 87 Id (citing FAR 9405-1(b)) New work includes exercising options andor otherwise extending the duration of current contracts or orders FAR 9405-1(b) 88 See EXCLUDED PARTIES LIST SYSTEM supra note 2 at 21 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-09-174 EXCLUDED PARTIES LIST SYSTEM SUSPENDED AND DEBARRED BUSINESSES AND INDIVIDUALS IMPROPERLY RECEIVE FEDERAL FUNDS 21 (2009)GAO-09-174 supra note 2 at 21 EPLS users noted difficulty in finding contractors without being able to use
20
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
addition many agencies use automated systems for routine
purchases but EPLS is not compatible with these systems89 Even
after modifications to EPLS businesses excluded for ldquoegregious
offenses have resurface[d] and continue to receive federal
contracts rdquo90
EPLS also requires only a minimal amount of data to be
entered for each action and lacks substantial helpful data
EPLS does not require agencies to include compelling reasons
waivers for suspension or debarment determinations91 or require
data on administrative agreements ndash- which serve as an
alternative to suspension or debarment and keep contractors
eligible for new contract awards mdash- which help contracting
officers in considering new agreements92 While EPLS allows for
unique identification numbers to be recorded many agencies fail
to include this information or simply fill in the field with non-
common search operators such as ldquoandrdquo ldquonotrdquo and ldquoorrdquo Though EPLS added these search operators it still lacks advanced search tips Id at 2389 Id at 1990 Id at 2 (2009) The GAO found that agency officials frequently fail to search EPLS or their searches did not reveal the deficiencies as a result of system flaws Id at 3 Furthermore businesses that are listed as ineligible in EPLS remain listed on the GSA Federal Supply Schedule in violation of the FAR Id at 19 91 The FAR generally excludes suspended or debarred contractors from receiving contracts unless there is a ldquocompelling reasonrdquo FAR 940592 See US GOVrsquoT ACCOUNTABILITY OFFICE GAO-05-479 FEDERAL PROCUREMENT ADDITIONAL DATA AND REPORTING COULD IMPROVE THE SUSPENSION AND DEBARMENT PROCESS 3 (2005) [hereinafter ADDITIONAL DATA AND REPORTING]
21
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
identifying information93 As a result businesses are able to
circumvent a determination of exclusion by using different
identities94
As with PPIRS and FPDS EPLS suffers from ineffective
control and management95 Under EPLSrsquos structure the suspending
or debarring agency is independently responsible for entering
relevant data leading to inconsistent data entry96 Because
multiple federal agencies enter information this leads to
inconsistent and inaccurate data entry97 In a 2005 review GAO
found that the EPLS data was incomplete out of date and
contained incorrect contact information for a company as a means
for following up and verifying such data98 GSA has no incentive
or enforcement mechanism to ensure that agencies contributing
data to EPLS are doing so in an accurate or timely manner99 As 93 See EXCLUDED PARTIES LIST SYSTEM GAO-09-174 supra note 2 822 at 18 The identifying number typically used is a Data Universal Numbering System (DUNS) number Id at 2 During the period from June 29 2007 to January 23 2008 GAO found that 38 of the 437 EPLS entries agencies made lacked anno entry in the DUNS field Id at 18 GAO also found that ldquofor 81 additional firms entered into EPLS during the same period the excluding agency entered a DUNS number of ldquorsquo000000000rsquordquo or some other similar non-identifying information Id Therefore 119 firms in totalmdash27 percentmdash lacked an identifiable DUNS number during this seven month periodrdquo Id94 Id at 2 95 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 928583 at 4-65 96 Id97 See id98 See generally iId at 13-14id at 13-1699 For example the EPLS website even acknowledges in a disclaimer that it ldquobelieve[s] the information to be reliable the Government does not guarantee the accuracy completeness
22
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
a result the data in EPLS is insufficient to ensure excluded
contractors do not unintentionally receive new contracts100
D Federal Awardee Performance and Integrity Information System
The Federal Awardee Performance and Integrity Information
System (ldquoFAPIISSrdquo) contains specific integrity and performance
information on federal agency contractors and grantees101 FAPIIS
draws most of its data from EPLS PPIRS and CPARS but also
accepts additional data from contracting officers and
contractors102 The Ffederal Ggovernment intended for FAPIIS to
automatically notify the contractor when new information is
posted so that the contractor will have an opportunity to post
comments on the information103
Like the other systems FAPIIS has major flaws that prevent
it from solving the problem of improper payments such as its
timeliness or correct sequencing of the informationrdquo Important Notice ndash System for Award Management EXCLUDED PARTIES LIST SYSTEM httpswwweplsgov (last visited Nov 10 2012)100 See ADDITIONAL DATA AND REPORTING GAO-05-479 supra note 9286 Id at 3101 Federal Awardee Performance and Integrity Information System FAPIIS httpwwwfapiisgov (last visited Oct 21 2012)102 Lorraine M Campos et al Melissa E Beras amp Joelle EK Laszlo FAPIIS Flap-is Transparency Advocates Hate It Now Contractors Likely to Hate It Later GLOBAL REG ULATORY ENFORCEMENT BLOG (June 3 2011)httpwwwglobalregulatoryenforcementlawblogcom201106articlesgovernment-contractsfapiis-flapis-transparency-advocates-hate-it-now-contractors-likely-to-hate-it-later FAPIIS accepts additional data via the Central Contractor Registration database on an ongoing basis IId103 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 74 Fed Reg 45579 45580 (Sept 3 2009) (proposed rule)
23
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
search functionality User reviews have referred to FAPIIS as
ldquothe worst government website wersquove ever seenrdquo104 as well as ldquoa
steaming pilerdquo and ldquoa monumental failurerdquo105 Its search
functionality is notably poor Name searches in FAPIIS require
at least 4 characters so users cannot effectively search for a
company that is typically abbreviated such as ldquoIBMrdquo106
Alternatively a search for ldquoLockheed Martinrdquo produces over 300
results of companies and subsidiaries with the same name107 Like
EPLS FAPIIS also struggles to maintain an effective listing of
DUNS numbers for searchability108
Although one of the primary goals of FAPIIS is to provide
contracting officers and contractors an opportunity to comment on
the data being made available for review109 FAPIISrsquos challenging
user interface means it barely achieves this goal110 FAPIIS
104 Tom Lee FAPIIS May Be the Worst Government Website Weve Ever Seen SUNLIGHT FOUND ATION (Apr 19 2011 549 PM) httpsunlightfoundationcomblog20110419fapiis-may-be-the-worst-government-website-weve-ever-seen105 Greg Therkildsen FAPIIS is a Steaming Pile OMB WATCH (Apr 25 2011) httpwwwombwatchorgnode11628 see also Campos supra note 1029492106 Neil Gordon FAPIIS First Impressions PROJECT ON GOVERNMENT OVERSIGHT (Apr 18 2011) httppogoblogtypepadcompogo201104fapiis-first-impressions-html107 Id108 Id When searching for information about IBMrsquos 2008 suspension for example FAPIIS users were unable to ldquotrack down the company using the DUNS number provided in its suspension listingrdquo Id109 See Campos supra note 94110 See Campos supra note 10294
24
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
contains no guidance to help users figure out potential
problems111 Users have noted significant difficulty in providing
expressed uncertainty on the limits on the parameters regarding
contractors an opportunity to comment and defending themselves
against on reviews being posted about them112 While contractor
comments are supposed to be posted in FAPIIS along with the
Ggovernmentrsquos review it is unclear how many characters the
contractor can use to comment and how quickly a contractor must
act to protest the content so that it may protest the loss of a
contract based on the FAPIIS review of a posted review113 The
result is a huge burden on the contractor bears the weighty
burden of to continuecontinually monitoring the site for updated
reviews of its performance and eligibility114
In addition because FAPIIS draws its data from other
existing systems the content of the data found in FAPIIS is
necessarily incomplete and unreliable Further FAPIIS suffers
from a lack of inter-database communicationcentralization and
accountability115 The system was initially created as ldquoa one-
stop shop for contracting officers to review information about 111 Id112 Campos supra note 9492Id113 Id114 See id115 See Joseph D West et al The Federal Awardee Performance Integrity Information System BRIEFING PAPERS Oct 2011 at 2 Peter J Eyre Public Access to FAPIIS GOVERNMENT CONTRACTS LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiis
25
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
prospective contractors business ethics integrity and
performancerdquo116 EPLS and PPIRS are linked to FAPIIS117 so
incomplete data in those systems likely creates the same data
holes in FAPIIS FAPIISrsquos broad scope is also undercut by its
failure to include other databases which have subsequently been
incorporated into the DNP List such as Social Security databases
of ineligible recipients118
II[III] Plagued by the Same Defects The Do Not Pay List
The DNP List is likely to suffer the same fate downfalls as
the existing databases and will fail to create significant
improvements in reducing improper payments The DNP List already
suffers from many of the same common flaws that these other
databases have not been able to overcome Moreover the DNP List
fails to rectify the most important of these recurring problems
(i) incomplete and inaccurate data and (ii) lack of
accountability 116 Peter J Eyre Public Access to FAPIIS GOV rsquo T CONT LEGAL FORUM (Apr 15 2011) httpwwwgovernmentcontractslegalforumcom201104articlesreporting-and-disclosurepublic-access-to-fapiisEyre supra note Id117 FAR Case 2008-027 Federal Awardee Performance and Integrity Information System 75 Fed Reg 1405963 14066 (March 23 2010) (final rule) (codified at FAR pts 2 9 12 42 and 52) see also Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FED ERAL COMPUTER WEE K (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspx118 See Matthew Weigelt Homework Describe the Elements that Make Up FAPISS FEDERAL COMPUTER WEEK (May 27 2011 1126 AM) httpfcwcomblogsacquisitive-mind201105fapiis-gao-homework-assignmentaspxsupra note 117108
26
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
A The Existing Databases Repeat the Same Mistakes
The existing databases each fail to effectively prevent
federal agencies from paying money to ineligible recipients in
the form of contracts or benefits119 Because each list is only
partially effective the Ggovernment continues to create new
databases with the hope that each will be better than the last
Instead however each existing list is absorbed as a feeder for
a new list120 The most recent list the DNP List is the next
step in this series of failed attempts
Ultimately tThese databases exemplify a pattern of failure
because they each in turn suffer from similar defects which
prevent them from serving as effective tools in reducing improper
payments Each list provides incomplete or inaccurate data
suffers from its own presents a flawed search functionality or
user interface and lacks appropriate oversight and
accountability121 The databases frequently do not communicate
with each other beyond feeding each other incorrect and
incomplete information nor do they communicate with other lists
maintained by other federal agencies122
119 See discussion supra Part II 120 See eg discussion supra Part IID (noting that EPLS and PPIRS are linked to FAPIIS) 121 See discussion supra Part II 122 See discussion supra Part II
27
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
B The Do Not Pay List Does Not Rectify Problems in Existing Lists
The DNP List lacks the necessary accountability because it
does not help agencies identify the root causes of their improper
payments ldquo[A]bout half of all federal agencies have [not]
identified the root causes of their improper paymentsrdquo123 The
Improper Payments Elimination and Recovery Act (IPERIA) the
proposed legislation that would mandateing creation of the DNP
List attempts to penalize agencies for failure to improve their
improper payment rates but the DNP List does not help these
agencies figure out the root cause of the improper payments124
The DNP List does not improve the accountability for data
accuracy beyond that of the previous ineffective databases
Although IPERIA states that ldquoeach agency shall before payment
and award check the following databases to verify
eligibilityrdquo125 this only mandates an existing requirement Each
existing database imposes this requirement often through an
amendment to the FAR requiring contracting officers to check the
123 Jason Miller OMB Hangs Hopes on New Tools to Cut $50B in Improper Payments FED ERAL NEWS RADIO (Feb 8 2012 1003852 AM) httpwwwfederalnewsradiocomnid=513ampsid=2738888 The Department of Health and Human Services which has the largest incidence of improper payments has not met the 2002 improper payments law mandate to determine the root cause of improper payments in eight years Id124 See Improper Payments Elimination and Recovery Improvement Act of 2011 S 1409 sect 5 112th Cong (1st Sess 2011) generally IPERIA S 1409 112th Cong (1st Session) supra note 3233 125 Id at sect 5(a)(2)
28
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
respective list for ineligible recipients or negative past
performance reviews126
In addition like all the databases that came before it
IPERIA notes that a potential recipientrsquos presence on the DNP
List does not require that the person or entity be denied payment
of federal funds127 This vague language leaves the door open for
the DNP List to experience the same user error that plagues the
existing lists when users either fail to check the database
before issuing payment or pay funds to recipients despite their
presence on a list indicating they should not be paid
Another key flaw in the DNP List is that it like the lists
before it does not require contracting officials to rely solely
on the DNP List128 This undermines the goal of the DNP List
serving as the ldquosingle sourcerdquo for agencies129 If contracting
126 See eg FAR 9104-6 (ldquoBefore awarding a contract in excess of the simplified acquisition threshold the contracting officer shall review the FAPIISrdquo)127 S 1409 Id at sect 5(b)(4) ldquoWhen using the Do Not Pay List an agency shall recognize that there may be circumstances under which the law requires a payment or award to be made to a recipient regardless of whether that recipient is on the Do Not Pay Listrdquo Id Furthermore sectionsect 5(f) of the Act calls for the creation of yet another database ndash a database of individuals incarcerated at federal and state facilities Id sect 5(f) The additional database which will only be updated on a weekly basis indicates that the DNP List is not all-inclusive and there is room for the pattern of additional iterative lists to continue being developed as the Ffederal Ggovernment expands the scope of individuals and entities that need to be monitored via database so they do not receive improper payments See Iid 128 See id sect a(2) (noting that ldquoat a minimumrdquo an agency must check five other databases) 129 See FACT SHEET DO NOT PAY LIST supra note 32 at 1
29
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
officials can go elsewhere to verify payments the DNP List does
not have to cannot serve asbe the final word on accurate data
The DNP List also does not address the problem of agenciesrsquo
failure to communicate with each other Privacy issues
frequently prevent agencies from sharing information with one
another that could decrease improper payments130 For example
Social Security and Internal Revenue Service Information is
generally not accessible to other agencies as a source of
identifying information131 Allowing other agencies to access
such information to verify the identity of a potential recipient
of government funds would likely help reduce improper payments
but such access is currently not permitted due to privacy
concerns132 Rather than confront these privacy challenges the
DNP List continues to retrieve information from agencies and
other contractor information databases one at a time
perpetuating this problem133
The DNP Listrsquos lack of oversight and consequences for
failure to cross reference information compounds this information
sharing problem Beginning inAs of fiscal year 2011 ldquoagencies
are required to annually report annually information related to
130 Miller supra note 123110107 Michael OrsquoConnell Agencies Must Work Together to Reduce Improper Payments F EDE RAL NEWS RADIO (Nov 28 2011 1192214 AM) httpwwwfederalnewsradiocomnid=513ampsid=2648525 131 OrsquoConnell supra note 130114111132 Id133 See discussion supra Part IC Id
30
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
tracking and recovery of improper payments to the
improper payments websiterdquo134 At the same time the OMB
guidelines allow an agency that cannot meet the reporting
requirements to request relief by simply explaining why the
agency cannot report this data and how it plans to do so in the
future135 This guideline does not even attempt to address the
recurring problem of agencies failing to make their information
available to other agencies checking the list in a timely manner
and in fact compounds the problem by making allowances for late
data submissions
III[IV] Recommendation A Two-Part Solution
Instead of continuing repeating the cycle pattern of
creating iterative lists that do not effectively combat the
improper payments problem the Ffederal Ggovernment should
consider a novel two-part solution (1) utilizing analytics
technology from the private sector to develop a single working
database with sorting and searching functionality and (2)
imposing sanctions or similar compliance incentives for agencies
issuing award or payment to an entity on the DNP List absent
written justification
A Improving the Do Not Pay List Through Private Sector Analytics
134 REQUIREMENTS FOR IMPLEMENTING EXEC ORDER 13520 OMB M-10-13 supra note 161515 at 14135 OMB M-10-13 supra note 1515 Id at 10
31
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
The Government government has long acknowledged that there
is a significant technology gap between the Ffederal Ggovernment
and the private sector which contributes to a substantial
productivity gap136 As it has in other contexts the Ffederal
Ggovernment has looked to the public and private sector for
solutions to improper payments137 For example GAO suggested
specific strategies such as control activities risk assessment
and monitoring to reduce improper payments138 However these
proposals have had little practical effect on the Ggovernmentrsquos
improper payment reduction initiatives Rather than adopt a new
approach to managing payments agencies have continued to build
new databases on top of existing ones139
Private sector analytics companies are now tailoring their
technology to meet the needs of various agencies and reduce
errors in fund disbursement systems For instance consulting
companies utilize advanced analytics in the form of predictive
models to quantify the performance of agencyrsquos payables and
procurement data as well as design an automated system to help
prevent erroneous payments by discovering key patterns in the
136 Peter Orszag Director OFFICE OF MGMT AND BUDGET EXEC OFFICE OF THE PRESIDENT REMARKS BY PETER R ORSZAG AT CENTER FOR AMERICAN PROGRESS 3-4 (June 8 2010)Peter R Orszag Remarks to the Center for American Progress at 3-4 (June 8 2010) (on file with author) 137 US GOVrsquoT ACCOUNTABILITY OFFICE GAO-02-69G STRATEGIES TO MANAGE IMPROPER PAYMENTS LEARNING FROM PUBLIC AND PRIVATE SECTOR ORGANIZATIONS 1 8 (2001) 138 IdSee iId at 10-11139 See discussion supra Part IC
32
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
data140 Many prominent companies have already demonstrated that
technology from the private sector can drastically improve the
Ggovernmentrsquos ability to reduce improper payments141
Some state and local governments have started to take
advantage of advanced analytics demonstrating that the methods
employed in the private sector can and do work to achieve
government goals Other while some agencies have instead tried
to create their own analytics tools with less success For
example the Treasury Department recognizes that data analytics
can help reduce improper payments and is offering its own form of
predictive analysis service Data Analytic Services (DAS) in
conjunction with the DNP List142 DAS is offered for free to
agencies ldquoto help reduce fraud errors[] and payments made
to ineligible recipientsrdquo143 DAS is handled by the DNP Listrsquos
staff at Treasury however rather than provided by a private
analytics company144 Though DAS is still a relatively new
application Treasury has already released multiple updated
versions this year145 but to date has failed to provide any 140 See IBM GLOBAL BUS INESS SERVICE S THE POWER OF ANALYTICS FOR PUBLIC SECTOR BUILDING ANALYTICS COMPETENCY TO ACCELERATE OUTCOMES 2 (2011)141 See eg OVERSIGHT SYSTEM S Addressing the Do Not Payy Mandate Tthrough Automated Technology Continuous Transaction Monitoring 3 (2011) IBM GLOBAL BUS INESS SERVICE S The Power of Analytics for Public Sectorsupra note 140 123 at 2 (2011)142 Data Analytics Services DO NOT PAY httpdonotpaytreasgovdataanalyticshtm143 Id144 See generally GOVERIFY GoVerify Business Center supra note 393837 at 2145 See id at 12
33
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
verifiable results of the programrsquos success Thus Treasuryrsquos
attempt to incorporate its own analytics service into the DNP
List is well-intentioned but fails to achieve the unique
benefits of private sector technology
On the other hand the New York State Department of Taxation
and Finance reduced its improper payments with a program
developed by IBM that used predictive data to allow employees to
process refunds more efficiently146 The tax department processes
24 million business and personal tax returns annually and had
problems determining which refunds should not be paid and which
returns should be audited and investigated147 To help improve
these determinations IBM designed an analytics program to
ldquoleverage information to and transform the departmentrsquos
operationsrdquo148 IBMrsquos plan led to the creation of a new program
which identifies pending tax cases where the outcome may be
questionable149 The automated system which predicts the
questionability of tax returns builds on itself by saving
results of previous cases and adding those to its data rules150
The new system ldquohas saved the state more thanover $889 million
while allowing it to process refunds faster [a]nd
146 IBM GLOBAL BUS INESS SERV VICE S supra note 141123120 at 15147 Id148 Id149 Id150 Id
34
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
increas[ing] the percentage of audits that found questionable
refundsrdquo151
Similarly Alameda County Californiarsquos Social Service
Agency also reduced improper payments with IBM analytics152
Alameda County implemented the Social Services Integrated
Reporting System (ldquoSSIRSrdquo) which included built-in analytics but
was also customizable to their unique needs and easy to use153
SSIRS provided more accurate status of clients and their
activities automatic updates sent to case workers and payment
eligibility checks providing an ultimate return on investment of
631 and vastly improving the countyrsquos social services improper
payment issues154
The Ffederal Ggovernment has taken small steps to put
private sector analytics to work in various agencies but only
through individual agencies and not in a government-wide
capacity For example the Department of Defense has been
reducing improper payments with the information technology
company Oversight Systems155 Oversight Systems helped the DoD
implement a unique analytical tool called Business Activity
151 Id152 NUCLEUS RESEARCH ROI CASE STUDY IM BM B SSIRS ALAMEDA COUNTY SOCIAL SERVICES AGENCY 1 (2010)153 See Iid at 2154 Id at 4-5155 Oversight Systems Improper Payments and the IPIA PAYMENT ACCURACY Success Stories httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)
35
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Monitoring (ldquoBAMrdquo) that flags ldquopotential improper payment
transactions for further closer review before [the transactions]
is are completed and the money is spentrdquo156 This system also
helps identify the conditions that contributed to improper
payment so they can be addressed for the future157 As a result
BAM has prevented an estimated $23 billion in improper payments
since August 2008158
Other agencies including the United States Census Bureau
and the Internal Revenue Service have also sought to reduce
improper payments and reduce fraud through private analytics
companies159 Agencies that have used these services have seen
significant results in the reduction of improper payments as
well as general improvements in recordkeeping and operations160
It is clear that use of private sector analytics on a larger
scale would result in preventing greater numbers of improper
payments made by Ffederal Ggovernment agencies and
156 PAYMENT ACCURACY Success Stories PAYMENT ACCURACY httpwwwpaymentaccuracygovcontentsuccess-stories (last visited Nov 10 2012)157 OVERSIGHT SYSTEMS SYS ADDRESSING THE DO NOT PAY MANDATE THROUGH AUTOMATED TECHNOLOGY 8 (2011) 158 PAYMENT ACCURACY Success Stories supra note 156139135 Press Release Oversight Systems US Department of Defense Selects Oversight Systems to Extend the Oversight BAM Software Program for Improper Payments Reduction and Audit Assertion (May 17 2012)159 PRWeb US Census Bureau Selects Oversight Systems to Monitor Vendor Payments and Excluded Parties PRWEB ( Nov 30 2011) httpwwwprwebcomreleases201111prweb8999975htm (Nov 30 2011last visiting Oct 21 2012)160 See iId
36
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
simultaneously improve the quality of the data being supplied to
the existing databases of ineligible recipients rendering
improvements to the current systems feeding the DNP List161
B Impose Sanctions to Improve Contracting Decisions and Decrease Improper Payments
In order to effectively crack down on improper payments the
Ffederal Ggovernment should sanction agencies that issue an award
or payment to an entity on the DNP List absent written
justification Improper payments persist in part because
agencies are not penalized for this behavior so there is no
incentive to reduce errors162 Agencies that continue to award
contracts and issue improper payments to contractors should be
penalized for this behavior such that they are deterred from
making these improper payments in the future
161 It is also noteworthy that the Ffederal Ggovernment and various prominent institutions maintain similar lists of entities that American companies should avoid doing business with such as (1) Specially Designated Nationals List (Maintained by the US Dept of Treasuryrsquos OFAC) (2)the World Bank Listing of Ineligible Firms and Individuals and (3) US Dept of Commerce Bureau of Industry and Security Denied Persons List See eg THE WORLD BANK World Bank List of Ineligible Firms and Individuals THE WORLD BANK httpwebworldbankorgexternaldefaultmaintheSitePK=84266ampcontentMDK=64069844ampmenuPK=116730amppagePK=64148989amppiPK=64148984 (last visited Oct 21 2012) Though these entities are not designed to reduce the Ffederal Ggovernmentrsquos improper payments they serve analogous roles in various industries and could provide guidance on a more effective database to prevent the payment of funds to ineligible recipients See id162 See Improper Payments Elimination and Recovery Act of 2010 Pub L No 111-204 sect 3(c)(2) 124 Stat 2224 2233
37
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Currently IPERA provides for only the most basic
remediation in the event of agency non-compliance with the
statutory requirements163 The Act only requires that if the
agency has not complied it must submit a revised plan outlining
how it will comply164 After two years if the agency is still
found to be non-compliant the OMB Director may find that it
needs additional funds in order to effectuate a plan to become
compliant and may request those funds from Congress165 Thus the
agency that cannot comply with requirements to identify and
attempt to reduce its improper payments may actually get more
money in its budget for failing to operate more efficiently as
required166
There is noIPERIA currently does not create incentives for
agencies to comply especially when improper payments only make
up a relatively small proportion of their total program
disbursements167 IPERIA does not account for agency failure to
comply with its directives and does not appear to contemplate
sanctions of any kind168 Even if formal sanctions cannot be
immediately implemented in these situations the Ffederal 163 Id sect 3(c)(2)(A)IPERA Pub L No 111-204 sect 3(c) 124 Stat 2224 (2010) supra note 3332 164 Id165 Id166 See id167 PAYMENT ACCURACY supra note 1212 In fiscal year 2010 the government-wide improper payment rate was 529 Id168 See Improper Payments Elimination and Recovery Improvement Act of 2011 (IPERIA) S 1409 112th Cong (1st Sess 2011)generally S 1409 112th Cong (1st Session) supra note 3332
38
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
Ggovernment should contemplate forcing agencies or divisions of
agencies who maintain high improper payment rates to undergo an
evaluation by an outside party Whether this third party is
actually a private sector analytics company or another type of
auditor or consultant federal agencies who fail to comply the
first time cannot be left to their own devices to try again with
more funding The Ffederal Ggovernment must recognize this
problem and take steps to incentivize government agencies to
reduce improper payments
IV[V] Conclusion
While the DNP List will likely help to eliminate many
instances of improper payments it will not solve the problem to
the degree that President Obama is likely anticipating Instead
of fixing the flaws of previous databases the DNP List receives
data from these incomplete and inaccurate lists Additionally
the DNP List lacks accountability by failing to address the root
cause of such inaccuracies These flaws mean that instead of
providing an effective one-stop solution to improper payments
the DNP List will only continue the cycle of providing
contracting officials with erroneous data
Incorporating private sector analytics technology and
sanctions for noncompliance are necessary to separate the DNP
List from its predecessors Even though Treasury has taken steps
to include its own analytics to the DNP List this is
39
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40
insufficient to provide the individualized problem-solving to
agencies that can make using the DNP List worthwhile Similarly
a sanctions program will incentivize contracting officials to
contribute accurate information to and properly utilize the DNP
List With these changes the Ffederal Ggovernment can make
significant progress at eliminating improper payments
40