To protect the government's interests, any agency can exclude (i.e., debar or suspend) parties from receiving federal contracts or assistance for a range of offenses. Exclusions of companies or individuals from federal contracts or other funding are listed in the Excluded Parties List System (EPLS), a Web-based system maintained by GSA. Recent allegations indicate that excluded parties have been able to receive federal contracts. As a result, GAO was asked (1) to determine whether these allegations could be substantiated and (2) to identify the key causes of any improper awards and other payments detected. GAO investigated parties that were excluded for offenses such as fraud, theft, and violations of federal statutes and received awards in excess of $1,000.

Businesses and individuals that have been excluded for egregious offenses ranging from national security violations to tax fraud are improperly receiving federal contracts and other funds. GAO developed cases on a number of these parties and found that they received funding for a number of reasons, including because agency officials failed to search EPLS or because their searches did not reveal the exclusions. GAO also identified businesses and individuals that were able to circumvent the terms of their exclusions by operating under different identities. GAO's cases include the following: (1)The Army debarred a German company after its president attempted to ship nuclear bomb parts to North Korea. As part of the debarment, Army stated that since the president "sold potential nuclear bomb making materials to a well-known enemy of the United States," there was a "compelling interest to discontinue any business with this morally bankrupt individual." However, Army told GAO it was legally obligated to continue the contract and paid the company over $4 million in fiscal 2006. In fact, the Army had several options for terminating the contract, but it is not clear if these options were considered. (2) The Navy suspended a company after one of its employees sabotaged repairs on an aircraft carrier by using nonconforming parts to replace fasteners on steam pipes. If these pipes had ruptured as a result of faulty fasteners, those aboard the carrier could have suffered lethal burns. Less than a month later, the Navy improperly awarded the company three new contracts because the contracting officer did not check EPLS. Most of the improper contracts and payments GAO identified can be attributed to ineffective management of the EPLS database or to control weaknesses at both excluding and procuring agencies. For example, GAO's work shows that entries may contain incomplete information, the database has insufficient search capabilities, and the points of contact for information about exclusions are incorrect. GAO also found several agencies that did not enter exclusions and others that did not check EPLS prior to making awards. Finally, GAO found that excluded parties were still listed on GSA's Federal Supply Schedule, which can result in agencies purchasing items from unscrupulous companies. To verify that no warnings exist to alert agencies that they are making purchases from excluded parties, GAO used its own purchase card to buy body armor worth over $3,000 from a company that had been debarred for falsifying tests related to the safety of its products.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Recommendations for Executive Action

Recommendation: To improve the effectiveness of the suspension and debarment process, the Administrator of General Services should take steps to ensure that the EPLS points of contact list is updated.

Agency Affected: General Services Administration

Status: Review Pending

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: To improve the effectiveness of the suspension and debarment process, the Administrator of General Services should strengthen EPLS search capabilities to include common search operators, such as AND, NOT, and OR.

Agency Affected: General Services Administration

Status: Review Pending

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: To improve the effectiveness of the suspension and debarment process, the Administrator of General Services should ensure that the EPLS database requires contractor identification numbers for all actions entered into the system.

Agency Affected: General Services Administration

Status: Review Pending

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: To improve the effectiveness of the suspension and debarment process, the Administrator of General Services should issue guidance to procurement officials on the requirement to check EPLS prior to awarding contracts and to suspension and debarment officials on the 5-day entry and contractor identification number requirements.

Agency Affected: General Services Administration

Status: Review Pending

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: To improve the effectiveness of the suspension and debarment process, the Administrator of General Services should place a warning on the Federal Supply Schedule Web site indicating that prospective purchasers need to check EPLS to determine whether vendors are excluded and explore the feasibility of removing or identifying excluded entities that are listed on the GSA Schedule.

Agency Affected: General Services Administration

Status: Review Pending

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.