Contracting and the FAR example

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Contracting and the FAR

In 2013, the media reports were flooded with the news about the procurement scandal in the IRS. Strong Castle, an IT company founded in 2011, won a range of IRS procurement contracts (Wilkie, 2013). The estimated total value of the contracts amounted to more than $500 million (Wilkie, 2013). The Strong Castle’s CEO, Braulio Castillo, was a close friend of one of the IRS’s top officials, Greg Roseman, who was in charge of IRS purchasing (Wilkie, 2013). The House Oversight and Government Reform Committee, which investigated the Strong Castle case, reached the conclusion that Roseman may have influenced the selection process in Strong Castle’s favor (Wilkie, 2013).

One would wonder how such an abuse could have occurred given that there are very detailed rules on public procurement known as the Federal Acquisition Regulations (FAR). The point is there are many loopholes in the FAR that allow room for an abuse. One of such loopholes is the small business program in federal acquisition matters. Congress consistently emphasized the importance of small business for the United States and the necessity to place a fair proportion of government purchase contracts with small businesses (US Department of Treasury, 2002). The FAR reflect this policy by of the small business program. The program suggests that treasury contracting officers should ensure that small businesses have an equal opportunity to compete for procurement opportunities (US Department of Treasury, 2002). Under the program procurement contract can be assigned to a small business firms that qualify as protégé firms, provided that they receive developmental assistance of a mentor firm. Under the Department of Treasury Acquisition Rules (DTARs) the following firms can be qualified as protégé firms: women-owned small business, small disadvantaged business, small business owned and controlled by veteran or service disabled veteran (Cooper, 2014).

The small business program was dexterously exploited by Strong Castle. Castillo injured his ankle while he was playing sports during his attendance of the West Point Military Academy Preparatory School (Committee of Oversight and Government Reform, 2013). This injury then became a ground for designating Strong Castle as small business owned and controlled by a service-disabled veteran (Committee of Oversight and Government Reform, 2013). Interestingly, for 27 years the injury did not bother Castillo to the point that he considered that he must be designated as a disabled service veteran. However, shortly before he founded Strong Castle, he filed a disability claim with the US Department of Veteran Affairs (Committee of Oversight and Government Reform, 2013). His claim was approved and thus he received the status of a disabled service veteran (Committee of Oversight and Government Reform, 2013).

It is telling that it is the House Committee of Oversight and Government Reform that unveiled the IRS abuse in the Strong Castle case. In other words, the legislative branch rather than the executive one that stirred up awareness of the abuse. This case illustrates that an executive branch may not be very interest in a prudent public procurement. Indeed, executive officials are not …

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