Federal Manager's Daily Report

In a report whose message could apply to other agencies as well, GAO has urged the DoD to look more closely at the ownership of contractors, which it says often is “opaque” and which “may conceal who owns, controls, or benefits from the company.”

In a review of 32 adjudicated cases, GAO found problems including price inflation through multiple companies owned by the same entity to falsely create the appearance of competition; contractors receiving contracts they were not eligible to receive; and foreign firms receiving sensitive information through U.S.-based companies.

One case involved an ineligible foreign manufacturer that illegally exported sensitive military data and provided defective and nonconforming parts that led to the grounding of at least 47 fighter aircraft, it said.

It noted that DoD, in coordination with other agencies, revised the Federal Acquisition Regulation in 2014 to require contractors to self-report some ownership information and said that the department has taken steps to identify and use ownership information.

“DoD has also begun a department-wide fraud risk management program, but it has neither assessed risks of contractor ownership across the department nor identified risks posed by contractor ownership as a specific area for assessment. Assessing risks arising from contractor ownership would allow DoD to take a strategic approach to identifying and managing these risks, make informed decisions on how to best use its resources, and evaluate its existing control activities to ensure they effectively respond to these risks,” the report said.