Archives for July 2018

07/6/2018

OMB Confirms Agencies Required to Disclose Earmarks, Declines to Enforce

The White House Office of Management and Budget (“OMB”) has confirmed that all executive branch agencies are required to disclose attempts by congressional and other outside force to influence the merit-based decision-making process for federal spending. These efforts to earmark federal spending must be disclosed on agency websites within thirty days of their receipt. But OMB has refused to issue new guidelines directing agencies to comply with the rule.

OMB’s reaffirmation came in a letter during litigation declining Cause of Action Institute (“CoA Institute”) and Demand Progress’s 2015 petition for rulemaking that asked the agency to enforce President George W. Bush’s Executive Order 13,457.

Background

In 2008, during the congressional debate over the earmark ban, President Bush issued EO 13,457, both to take a position in the ongoing debate and in an attempt to foreclose members of Congress from evading the ban by going directly to agencies. Part of the order relied on transparency as a tool to dissuade these “executive branch earmarks” by requiring agencies to publish efforts to influence their decision making on their website within thirty days of receiving such communications. The order also directed agencies not to fund these “non-statutory” earmarks. Shortly after, OMB issued a memorandum instructing agencies how to comply with the order while implementing recent appropriations law.

CoA Institute had concerns that agencies were not complying with the order and conducted an investigation into which agencies were properly disclosing executive branch earmarks; only the Departments of Justice and Energy had published any meaningful content on their website.

In 2015, CoA Institute joined with Demand Progress and asked President Obama’s White House to depoliticize federal spending decisions by upholding the order. We filed a petition for rulemaking asking the Obama OMB “to issue a rule ensuring the continuing force and effect of Executive Order 13457[.]”

In November 2017, after two years of not receiving a response, CoA Institute sued OMB over its failure to act on the petition. With a new administration now in the White House, we urged President Trump’s OMB to issue updated guidance ensuring that agencies followed the order and disclosed earmarking efforts.

OMB Declines Petition, Confirms Executive Order Still in Effect

Due to the lawsuit, OMB has finally responded. Although OMB declined to issue a new memorandum, it confirmed that “EO 13457 Remains In Force [because] No Executive Order has been issued that displaces, alters, or withdraws EO 13457 and [because] OMB is also not aware of any judicial decision vacating EO 13457.”

Therefore, agencies are still obligated both to refuse to fund non-statutory earmarks and disclose any attempts to influence their decisions within thirty days. The Trump Administration, however, refuses to make them live up to their responsibilities.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute. You can follow him on Twitter @JamesValvo.

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07/6/2018

Carelessness, Certifications, and Millions of Dollars: The SBA’s Mishandling of Federal Contracts

The Office of the Inspector General (“IG”) for the Small Business Administration (“SBA”) released a report last month detailing its findings from an agency-wide audit of the Women-Owned Small Business Contracting Program (“Program”). The Program provides greater access to federal contracting opportunities for women-owned small businesses (“WOSBs”) and economically disadvantaged women-owned small businesses (“EDWOSBs”) that meet Program requirements. The IG found that an astounding 81% of the audited contracts awarded on a sole-source basis (i.e., without competitive bidding) within a sixteen-month time-period from 2016 to 2017 may have been given to firms that were ineligible for the Program. The total value of the contracts awarded to potentially ineligible firms exceeds more than $52 million.

Previous audits conducted in 2015 by the SBA IG and in 2014 by the U.S. Government Accountability Office (“GAO”) warned that the Program was vulnerable to fraud without changes to its certification process. Unfortunately, the SBA failed to make those changes.

The IG found that contracting officers—the federal employees responsible for awarding contracts to firms—did not comply with federal regulations for fifty of the fifty-six set-aside contracts awarded on a sole-source basis. The contracts studied under the audit were all valued individually at equal to or greater than $250,000. Further, the fifty firms that received those contracts did not comply with the Program’s self-certification requirements, leaving no assurance that federal funds were given to eligible WOSB or EDWOSB firms.

The IG audit lists examples of other missing documentation, including WOSB and EDWOSB self-certifications, birth certificates, and mandatory financial information. Indeed, eighteen of the fifty-six contracts, valued at $11.7 million in total, were awarded on a sole-source basis to firms that uploaded no documentation to Certify.SBA.gov, the SBA’s online platform for federal contracting program applications.

The 2015 GAO report explicitly recommended better training for contracting officers because of a lack of understanding regarding SBA certifying procedures. The SBA agreed with that recommendation. However, according to the recent IG audit, one contracting officer, who awarded contracts to firms that had not uploaded any documentation in Certify.SBA.gov, told the IG that “he was not aware of the requirement to verify documents in Certify.SBA.gov.” Other contracting officers incorrectly coded contracts as sole-source contracts. These officers handle awards worth hundreds of thousands of taxpayer dollars, and the numerous mistakes show a vulnerability that the SBA knew it should have addressed.

Just as it did in 2015, the SBA agreed with the IG’s latest assessment and findings. The agency’s intended actions, however, will not rectify the deficiencies identified by the IG. For example, the SBA acknowledged it needed to initiate debarment proceedings for ineligible firms and implement a certification requirement, but it does not anticipate finishing those tasks until summer 2020. The SBA also refused to implement the IG’s recommendation that would strengthen controls to prevent contracting officers from inappropriately coding contracts, instead arguing that the “recommendation is vague and would not likely help the [P]rogram.”

In perhaps the most interesting point of dissent, the SBA argued that “the audit findings unnecessarily rely on unverified and/or refuted data.” In response, the IG pointed out the problem with the SBA’s criticism:

The [data] that we used to conduct this audit was the same data the SBA relies on to formulate the Small Business Goaling Report, which is submitted to Congress and other stakeholders. If the SBA is admitting that the data it uses is inaccurate, the SBA should immediately communicate this inaccuracy to Congress to ensure that all stakeholders understand the SBA’s use of inaccurate data when assessing the Federal Government’s achievement of small business procurement goals.

Either the SBA is knowingly using inaccurate data in its federal reports, or its criticism of the IG report is fundamentally dishonest.

The Program was designed to expand federal contracting opportunities for WOSBs and EDWOSBs. Inflating the competition pool with ineligible businesses reduces the Program’s effectiveness and diminishes the opportunity for WOSBs and EDWSOBs to succeed as the Program intended. Americans deserve an efficient and effective government. Washington bureaucrats spend our money, and they owe it to us to make sure that contracts and funds are properly awarded to eligible businesses. The SBA must fix its mistakes—its negligence is inexcusable.

Chris Klein is a Research Fellow at Cause of Action Institute

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07/3/2018

Cause of Action Institute Representing TABOR Foundation in Suit Challenging Colorado Hospital Provider Tax

Washington, DC – July 3, 2018 – Cause of Action Institute today announced that it is taking on the representation of the TABOR Foundation in its ongoing lawsuit TABOR Foundation, et al. v. Colorado Department of Health Care Policy & Financing, et al. The case argues that the state has violated Colorado’s Taxpayer’s Bill of Rights (“TABOR”) by using a hospital provider tax to artificially increase costs and then collect higher reimbursements from the federal government under Medicaid.

“TABOR requires that the state get consent from the people before raising taxes. But for the past eight years the state of Colorado has been taxing hospitals by hundreds of millions of dollars to fleece the federal government without the required TABOR vote. The TABOR Foundation is rightly pushing back on the sweetheart deal that leaves taxpayers stuck with the bill,” said James Valvo, Counsel and Senior Policy Advisor at Cause of Action Institute.

“The people of Colorado are confronted with actions taken by the legislature and the governor to damage their constitution. The Hospital Provider program was built on a lie, then made much worse. The people should get a final vote on tax increases and new government debt, but that was taken from them in a dishonest power grab by elected officials,” said Penn R. Pfiffner, Chairman of the TABOR Foundation. “The TABOR Foundation is grateful that Cause of Action Institute has stepped in to allow this lawsuit to go forward. Its participation supports all the citizens of Colorado to reverse the corrupt government actions and to allow the people once again to control their state government.”

TABOR Foundation v. Colorado Department of Health Care Policy & Financing is an ongoing Colorado state court lawsuit that began in 2015 challenging a hospital provider tax levied by the state and used to increase Medicaid reimbursements. Under TABOR, new taxes cannot be collected without a vote of the people. The TABOR Foundation’s challenge argues that the hospital provider charge, that is currently reimbursed under Medicaid from the federal government, is in fact a tax and violates the TABOR amendment in Colorado’s state constitution because the state did not hold the required vote.

The case also argues Senate Bill 17-267, which converted the hospital provider tax from the Department to a newly created enterprise, violated the Colorado constitution’s single-subject requirement and failed to comply with the state excess revenue cap, which limits the amount of revenue the state can keep and spend.

Cause of Action Institute will be requesting summary judgment from the Colorado state district court on behalf of the Plaintiffs.

For more information, please contact Mary Beth Gombita, mbgcomms@gmail.com.

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07/3/2018