Apparently, politicians and the media have been almost hysterical over the fact that a contractor self-reporting provision was exempted for DOD contractors operating overseas. I agree that such a provision, like any contract provision affecting government contractors, should be applied across the board. That said, please politicians and media, get a grip. The real problem, even if the provision were eventually applied to contractors overseas, is the self-reporting process itself. It does not, and never has, worked as advertised. Originally instituted as strictly a voluntary process in the 1980s, it is now federally mandated. As a former DOD investigator who worked on "voluntary disclosure" cases in the 1980s and early 1990s, I can attest to my statement from personal experience. How does it work you ask? A major DOD contractor with a $1 billion contract gets wind of an impending federal investigation of fraud and decides to head it off by self-reporting the problem. The contractor CEO rushes, like a speeding bullet, to the nearest DOD confessional to report its sins. Once in the DOD sin bin, the CEO confesses its sins against the government to the Father DOD official that it took $1,000 from the DOD feed trough. The official tells the CEO that, yes, his company has sinned, but blesses the contractor, tells the CEO the company is forgiven, and awards the contractor another $1 billion contract with the provision the $1,000 is verified. But not to worry the official says. The verification process will only be limited to the $1,000. The CEO then gives the official its $1,000 in pennies and the official gets a gold star from his (or her) superiors.

Am I exaggerating? Not really. The whole notion of DOD contractor self policing and disclosure is absurd at best. Although some small and medium size contractors have legitimately disclosed fraud, waste, and abuse under the program, it is my experience that most large contractors would not risk such disclosures unless forced to as a damage control move to head off a full scale federal investigation. These are the contractors that have the most to lose in terms of cost impact that could result in large recoveries on the part of the DOD. The self-reporting process is a useful mechanism for major contractors to limit their liability by settling with the government for pennies on the dollar.

Once a contractor self-reports fraud, waste, or abuse on a DOD contract, the investigation, or "verification," as it was called when I was a DOD investigator, was more of a rubber stamping process than an actual investigation with the effort limited in scope to what was reported. Systemic problems are never looked at. Contractor executives were immune from liability under this process, but individual lower level employees were not, often resulting in some poor employee being canned as a sacrifice. Despite its intended purpose, the self-reporting process, in practice, has been a tool easily manipulated by savvy contractors to thwart large scale fraud and limit potential recoveries by DOD. Thus, a call by Congress for hearings on the problem of the missing provision for contractors operating overseas is somewhat missing the mark. Hearings would be better served on exploring how the self-reporting process actually works.

Robert Bauman