Revenue & Spending
GAO: New Contractor ID System Needed
When the federal government is handing out thousands of contracts to more than half a million contractors, it's important to have a robust system for tracking the companies that receive each contract. Earlier this month, the Government Accountability Office (GAO) issued a report on the federal government's use of a private, proprietary corporate identification system to track federal contractors and award recipients. Because corporations are continually acquiring new firms and/or merging with others, it is often difficult to keep track of which companies are actually responsible for the work the government has contracted out. The report recommended the government adopt a new approach to tracking this information.
The GAO report noted that the current system – Dun & Bradstreet's (D&B) Data Universal Numbering System (DUNS) – is so problematic that the government is currently trying to disentangle itself from it and figure out other ways to track the corporations receiving federal funds. GAO's recommendations make it clear that the federal government needs a better, cheaper solution that is open to the public and doesn’t require expensive licensing fees each year.
The federal government uses DUNS data to help it identify the 625,000 private entities that are registered as recipients or potential recipients of federal contract, grant, or loan dollars. On USAspending.gov, the government's spending transparency website, every entity must have a DUNS number in order for government and researchers to track all of the contract or grant funds each company receives. D&B also tracks main corporate entities and their subsidiaries (“parent-child” relationships), allowing users to have a more complete picture of the total amount of federal funding going to individual corporate entities.
Unfortunately, the DUNS system does not track historical corporate ownership of companies, so a researcher or auditor has no way of knowing that Halliburton Co., for instance, won billions of dollars in Iraq war contracts and over $30 billion in total government contracts in the previous decade. KBR, Inc., was owned by Halliburton when it was awarded the Iraq contracts but was sold off in 2007. Because DUNS does not reflect historic ownership records, users of federal spending data would have no way of knowing that a company formerly run by Vice President Dick Cheney was awarded tens of billions of dollars in federal contracts. Instead, these interested citizens would only see the $5 million in contracts that is currently shown in federal spending data for Halliburton, and they would have to search specifically for "KBR" to find the Iraq war contracts.
According to GAO, the DUNS system is made available to the government through a contract with D&B that costs over $19 million per year; the current contract could be worth up to $154 million over the next eight years. This cost is relatively small compared to the $500 billion the government awards to contractors each year, but it is a significant amount of money to spend to lease a corporate ID system, especially one that is as limited as DUNS. This amount is more than the federal government will spend on the entire E-Gov Fund, which pays for a wide array of government websites, including USAspending.gov.
The federal contract with D&B puts tight restrictions on how the government can use DUNS data. Specifically, GAO notes that the contract "specifies that Dun & Bradstreet data … can be used only for acquisition purposes" and cannot be used by other agencies for other purposes. The report gives an example of how this contractual restriction has prevented the Department of Defense from identifying which of its contractors have committed fraud in relation to any federal contracts on which they were working.
The restrictions would prevent other federal agencies from linking contracting data with other databases. For instance, it prevents the U.S. Environmental Protection Agency (EPA) from using DUNS numbers to track corporate polluters, making it almost impossible to see if recipients of federal funds are also responsible for hurting the environment. To do this, EPA would have to sign a new, separate contract with D&B.
Previously, OMB Watch has recommended that any spending transparency regime should include the ability to link contracts, grants, and loans to other datasets. Without this, key relationships between government spending and the performance of contractors and recipients can’t be examined.
GAO also noted a problem that OMB Watch has repeatedly raised: the DUNS system is proprietary. As a result, the database is closed to the public. The government cannot publish the contents of the database, leaving interested citizens in the dark about corporate ownership structures and other data that would allow them to ask tough questions about contractors’ conflicts of interest and accountability. Furthermore, the database is not subject to Freedom of Information Act (FOIA) requests, again due to the proprietary nature of the system.
Unfortunately, moving away from DUNS would come with costs. The regulations that govern federal purchasing have locked in DUNS as the sole identification system for the government's major acquisition systems. And according to the General Services Administration (GSA), these rules have created a monopoly for DUNS, disallowing D&B competitors to submit competing bids and resulting in higher prices for the DUNS data.
Federal officials are concerned that if they do move away from DUNS, certain contractor information would have to be deleted from federal databases due to the way the contracts have been written. The GAO indicates that if the current contract expires, the government would be required to remove data elements – including business names and addresses – from all systems that were using DUNS-provided data. This process would take time and resources that the government is currently hard-pressed to find.
Despite these problems, the federal government is exploring alternatives to the current system. GSA, the procurement agency that oversees the DUNS contract, is conducting a cost-benefit analysis for changing ID systems and creating a strategy for making the switch to minimize disruptions to agency work. However, given the potential costs and hurdles involved, this move may require congressional action.
The federal government needs a non-proprietary system, one that can be used across agencies and is open to the public. If the past predicts the future, it will be difficult for GSA and other agencies to adopt a single, open standard without direct intervention from Congress. Developing a new identification system will require upfront expenses, as every agency will have to retool its internal tracking system. But in the long run, it should save money and help bring more transparency to federal government spending and give us a more complete picture of who receives federal funds.