Excluded Parties List System:

Suspended and Debarred Businesses and Individuals Improperly Receive Federal Funds

GAO-09-174: Published: Feb 25, 2009. Publicly Released: Feb 26, 2009.

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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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In February 2009, we reported on control weaknesses associated with the General Services Administration's (GSA) Excluded Parties List System (EPLS). We recommended that GSA issue guidance to suspension and debarment officials on the 5-day entry and contractor identification number requirements. In response to our recommendation, GSA issued a memorandum in April 2010 to GSA suspension and debarment personnel, which states that GSA's new goal for the GSA Suspension and Debarment program is to make EPLS entries within 2 working days, but no later than 3 working days after a decision letter is signed. Further, the GSA memorandum reminds suspension and debarment personnel that all firm listings in EPLS must include a firm's Data Universal Numbering System (DUNS) contractor identification number. GSA has taken important steps toward improving the internal controls associated with the EPLS by issuing guidance on timeframes for EPLS entries and requirements for including a firm's contractor identification number in the EPLS.

    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

  2. Status: Closed - Implemented

    Comments: In February 2009, we reported on control weaknesses associated with the General Services Administration's (GSA) Excluded Parties List System (EPLS). We recommended that GSA improve the effectiveness of the suspension and debarment process by ensuring that the EPLS database requires contractor identification numbers for all actions entered into the system. In response to our recommendation, and according to GSA's work release notes, GSA noted that between June and September 2010, GSA added a capability to EPLS that requires that a firm's contracting identification number from the Data Universal Numbering System (DUNS) be entered when an EPLS user adds a new firm record or updates a firm's existing record in the EPLS. GSA has taken important steps toward improving the internal controls associated with the EPLS by ensuring that the EPLS database requires a contracting identification number when a user adds a new firm record or updates a firm's existing record in the EPLS.

    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

  3. Status: Closed - Implemented

    Comments: In February 2009, we reported on improper contracts and payments that we attributed to ineffective management of the General Services Administration's (GSA) Excluded Parties List System (EPLS). Specifically, we found that GSA's EPLS contained insufficient search capabilities for agencies to use to identify suspended and disbarred companies or individuals prior to approving contract awards or payments made to them. We recommended that GSA strengthen the EPLS's search capabilities so that the EPLS can support the use of search operators such as AND, NOT, and OR. In federal fiscal year 2011, and in response to our recommendation, GSA strengthened the EPLS's search capabilities by including these common search operators (AND, NOT, and OR) in an advanced search link that appears on the front page of the EPLS website. GSA's enhancement to the EPLS's search capabilities will better assist federal agencies in detecting companies or individuals who have been disbarred or suspended, potentially limiting the occurrences of improper contract awards and payments.

    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

  4. Status: Closed - Implemented

    Comments: In February 2009, we reported on control weaknesses associated with the General Services Administration's (GSA) Excluded Parties List System (EPLS). We recommended that GSA improve the effectiveness of the suspension and debarment process by taking steps to ensure that the EPLS points-of-contact (POC) list is updated. In February 2010, and in response to our recommendation, GSA completed steps to institute a capability where the EPLS sends quarterly emails to listed POCs to update and verify their status and information. POCs have 30 days to respond to the notice. After 30 days, a report is sent to the EPLS Administrators that provides a list of agencies who have verified their information and a list of agencies who have not. Undeliverable e-mails will be redirected back to EPLS and the correct POCs will be verified manually. GSA has taken important steps toward improving internal controls associated with the EPLS by taking steps to ensure that the EPLS POC list is updated.

    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

  5. Status: Closed - Implemented

    Comments: In February 2009, we reported on control weaknesses associated with the General Services Administration's (GSA) Excluded Parties List System (EPLS). We recommended that GSA improve the effectiveness of the suspension and debarment process by placing a warning on the Federal Supply Schedule Website, 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. In January 2010, GSA implemented a capability on its GSA Advantage Website that automatically warns prospective purchasers about excluded contractors identified in the EPLS, provides an online link to the EPLS website, and advises prospective purchasers to use EPLS to obtain additional information. In addition, in January 2010, GSA implemented a similar capability for those prospective purchasers that use GSA's eBuy and eLibrary Websites to obtain contractor quotes and additional contractor information. GSA has taken important steps toward improving internal controls associated with the EPLS by implementing a capability that automatically identifies excluded contractors listed under all of the GSA Schedules and advises prospective purchasers to check the EPLS for further 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

 

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