Deliquent Contractors Under Scrutiny

President Obama took some basic steps last week to hammer government contractors that are delinquent in paying their taxes.

In a memo the president signed on the 20th, Obama directed the Office of Management and Budget, the Treasury Department and other federal agencies to find ways to keep companies that have not paid taxes from receiving new government contracts. He expects recommendations on how the government can do that in three months.

One way to do that is better data-sharing. The president wants a plan to make contractors' certifications on their taxes available in a government-wide database, similar to the data exchanges already being done with other information on companies. Other information like balance sheets, credit reports, and investor reviews.

“All across this country, there are people who meet their obligations each and every day,” Obama said in a speech today before signing the memo. “And yet, somehow, it’s become standard practice in Washington to give contracts to companies that don’t even pay their taxes.”

The president is also directing the IRS to conduct a review of the overall accuracy of companies’ claims about tax delinquency.

“We need to be sure that when a company says it’s paying taxes, that company is in fact paying taxes,” he said.

A regulatory change to the Federal Acquisition Regulation in 2008 requires contractors to certify whether they had delinquent taxes, had failed to pay taxes or had received notice of a tax lien against them. In addition, an agency could suspend or debar the company from government work if a contractor told the government it had had problems with taxes during the previous three years.

In his speech, Obama asked Congress to approve legislation to allow data sharing between the IRS and contracting officials at agencies.

“So the steps I’m directing today and the steps I’m calling on Congress to take are just basic common-sense steps,” Obama said. “They’re not going to eliminate all the waste or all the abuse in government contracting in one fell swoop.”

This post contains excerpts from Matthew Mweigelt's article, President orders clampdown on tax delinquent contractors, for the Federal Computer Week, January 20th, 2010.

For more insight on how the administration intends to incorporate deeper financial reviews of its contractor pool, visit The Federal Computer Week.