Civilian Acquisitions:

Selected Agencies' Use of Criminal Background Checks on Contractor Principals to Prevent Fraud

GGD-00-194R: Published: Sep 28, 2000. Publicly Released: Sep 28, 2000.

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Pursuant to a congressional request, GAO provided information on selected agencies' use of criminal background checks to help prevent contractor fraud, focusing on: (1) policies and practices for making contractor responsibility determinations and conducting criminal background checks on contractor principals; (2) efforts to suspend, debar, or otherwise prevent firms or contractor principals that have violated relevant federal laws and regulations from receiving government contracts; and (3) Office of Inspector General (OIG) completed contractor fraud investigations involving principals and whether the principals who committed fraud had criminal histories.

GAO noted that: (1) the Federal Acquisition Regulation (FAR) sets forth seven general standards that agencies' contracting officers are required to use in determining whether prospective contractors are responsible; (2) these standards require prospective contractors to have adequate financial resources to perform the contract, the ability to comply with contract schedules, satisfactory performance records, and satisfactory records of integrity and business ethics; (3) although FAR does not specifically require criminal background checks on contractor principals, agencies are not prohibited from performing such checks and may do so when they believe it is necessary or appropriate; (4) the Department of Housing and Urban Development (HUD), the Department of the Treasury, and General Services Administration (GSA) have acquisition regulations and guidance that implement and supplement the FAR requirements concerning the information that contracting officers are expected to obtain when making contractor responsibility determinations; (5) HUD's practices for making contractor responsibility determinations appeared consistent with the FAR and the HUD procurement handbook; (6) according to HUD acquisition officials, HUD's responsibility determinations do not include criminal background checks on contractor principals; (7) GAO found no evidence that criminal background checks were done; (8) according to Treasury and GSA officials, their contracting officers rely on certain types and sources of information to make responsibility determinations; (9) Treasury and GSA officials said that such determinations do not include criminal background checks on contractor principals; (10) as of March 2000, HUD was among the top five agencies regarding debarments; (11) according to HUD officials, most of these debarments were not related to acquisition activities; (12) the Department of Health and Human Services (HHS) and Office of Personnel Management (OPM) accounted for about 70 percent of debarments governmentwide; (13) like HUD, most of HHS' and OPM's debarments were not related to acquisitions; (14) rather, their debarments involved health care providers, such as doctors and nursing homes; (15) during fiscal years 1997 through 1999, the OIGs at the Departments of Agriculture, HUD, Justice, Transportation, Veterans Administration, and at GSA investigated a total of 151 contractor principals for allegedly committing fraud; (16) of these principals, 56, or 37 percent, were found to have committed fraud; and (17) eight of the 56 principals who committed fraud had criminal histories.

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