Contract fraud at the Defense Department

  • 29 May 2019
  • NormanL

We've recently written about price gouging at the Defense Department -- a big problem that is also, alarmingly, legal. But there have been other recent reports on Defense Department operations which make clear that old fashioned criminality is still alive and well in some DoD contractors:

During the five year period from 2013-2017, there were 1,059 criminal cases of defense contracting fraud resulting in the conviction of 1,087 defendants, including 409 businesses, according to a newly released Department of Defense report to Congress. There were another 443 fraud-related civil cases resulting in judgments against 546 defendants.

During that same period, the Department of Defense entered into more than 15 million contracts with contractors who had been indicted, fined, and/or convicted of fraud, or who reached settlement agreements. The value of those contracts exceeded $334 billion, according to the DoD report.

The immediate question is why on earth the Pentagon would give new business to contractors who had areayd been tagged as shady operators:

The latest report names nine firms that were debarred or suspended but otherwise does not identify the criminal or civil defendants from the 2013-2017 period covered by the report. But much of this information can be gleaned from the Federal Contractor Misconduct Database (FCMD) maintained by the Project on Government Oversight.

Several recent instances of defense contractor fraud are described in the latest Semi-Annual Report from the Department of Defense Inspector General.

“Procurement fraud includes, but is not limited to, cost and labor mischarging, defective pricing, price fixing, bid rigging, and defective and counterfeit parts,” the DoD IG report said. “The potential damage from procurement fraud extends well beyond financial losses. This crime poses a serious threat to the DoD’s ability to achieve its objectives and can undermine the safety and operational readiness of the warfighter.”

Con artists and criminals feeding on government contracts is not new. But it is still deeply troubling how much money is diverted from our nation's defense into the pockets of criminals.