Below is my column in USA Today on the use of set aside categories based on race, gender, or other criteria for government contracts. While the set aside issue arose in the recent controversy over Braulio Castillo, there are legitimate questions that should be discussed over the efficiencies and equities of the system. There is also the question of self-identification on these issues. Veteran’s status is easier to confirm, though in the Castillo case we saw the definition can be wildly out of whack. However, we have seen controversies involving people who self-identify as having minority status based on questionable basis such as the controversy over Senator Elizabeth Warren who listed herself as a minority due to Native American blood. There is presumably some criteria for such claims when made in government contracts but I am not sure who where that line is drawn. The real question is whether it would not be better for Congress to directly fund programs to help minority groups rather than require special treatment in government contracting. Hopefully, we can have such a debate without rancor and personal recriminations. There are good-faith reasons to debate whether government contracting should be based solely on the best price and product determination in my view. It is not questioning the purpose of this policy but the means used to achieve it.
Braulio Castillo seemed exactly what the government was looking for. He was CEO of a Virginia company who was listed as a service-disabled veteran. That status allowed Castillo to secure $500 million in government contracts under special rules. Castillo described his terrible disability as just one of the “crosses that I bear due to my service to our great country.” Others now describe it as a shameless scam.
Castillo, 43, was a U.S. Military Academy Preparatory School student when he hurt himself playing football. Decades later, he filed for service-disabled veteran status with the Department of Veterans Affairs. Bizarrely, the VA granted it, even though Castillo went on to play football for the University of San Diego and never served in a military unit. With this status, he was awarded a half-a-billion dollars in contracts despite little experience.
Castillo is certainly not the sole measure of the programs that give preferential treatment in government contracting based on race, sex, geography, business size and disabled status. However, his case shines a light on the system’s darker side.
For years, contractors have complained that companies game the system by adding front owners with the right status. Such was the case of the Virginia company GTSI, which won contracts for IT and integration services in part because one of its partners was considered a “small business.” One e-mail, cited as from a GTSI vice president, revealed that the subcontractor was “very open to the concept of GTSI doing ALL the work” and just taking the money as a front.
The main reason for concern is not fraud, however. It is efficiency. The set-asides downgrade competence, performance and price in government contracts to focus competition for public money on the special status of corporate owners. In writing the laws governing government contracts, Congress simply threw in elements unconnected to the merit of government contracts while demanding reports on the percentage of contracts benefiting these groups.
For example, in 1994, Congress mandated that at least 5% of contracts go to businesses majority-owned by women. Today, roughly 3% of contracts are set aside based on the gender of the owner. Similar set-asides and preferences are accorded by race and service-related injuries. At times, the world of government contracting preferences has become so bizarre that set-aside groups have fought about preferences within preferences. In one case, 25% of the set-aside for small businesses were further set aside for minority-owned or women-owned businesses, but minority businesses objected that woman end up getting too much of the contracting pie.
Good intentions
There is no question about the laudable goals of these programs in expanding minority and women-owned business. Rather, it is the means used to achieve those goals that is the problem. Like special deals in the tax code, it is easy to create such preferences for particular groups without the need to appropriate any money directly to benefit a group. Laws and regulations stretching across dozens of federal departments and agencies have the special set-asides or preferences for “veteran-owned small business, HUBZone small business, or women-owned small business.” Agencies further mandate special treatment for “African Americans, Hispanic Americans, Native Americans, (American Indians, Eskimos, Aleuts, or Native Hawaiians); Asian Pacific Americans (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific Islands, Northern Mariana Islands, Laos, Cambodia, or Taiwan, Asian Indian Americans; and members of other groups designated from time to time.”
Few are prepared to question the wisdom of such an approach out of fear of being called misogynistic, anti-veteran or anti-Samoan. Agencies are left dealing with a tangle of detailed rules while the public expects them to be quickly and efficiently carrying out government business. It is a recipe for inefficient government, a frustrated public and little accountability.
As for Castillo, his contracting days are over. Not because of any reform, mind you. Last month, police charged him in the death of his wife in his Northern Virginia mansion. Despite his classification as 30% disabled, police say he was able to use the other 70% to beat his wife to death and then hoist her to the ceiling to fake a suicide.
Jonathan Turley, a law professor at George Washington University, is a member of USA TODAY’s Board of Contributors.
May 7, 2014
Dredd – there are times for no-bid contracts and there are times for bid contracts. The venerable Jeep won the contract for the vehicle, but the government gave the construction to other companies. FDR’s war spending was incredible. During a war costs increase. This is one of the reasons I want to see Japan rearm itself. We can downsize a little in Asia and they can pick up the slack.
Preznit Blush (Bush II) doubled war spending in 8 years, praze the Lawdy.
He did it with no bid contracts which eradicated fraud, Praze Cheezus.
We eat the camels but spit out the gnats Lordy Lordy.
The Gawd of pieces be prayzed.
http://powertoxins.blogspot.com/2014/02/hypothesis-cultural-amygdala-4.html
Elaine,
Thanks for rescuing my comments.
I posted different varieties to see what WordMess was trying to say.
Like many conversations that take place here anymore, WordMess was not saying anything coherent.
Sorry for any repetition.
Dredd, I found some of your comments in moderation and posted them. I also have deleted a comment under the civility rule for name calling directed at another poster.
Dredd,
I went through ten pages of the spam filter and released three of your comments.
These set asides have gotten beyond ridiculous. They are gameD by large corps hiring a front and other questionable practices. While they may have helped once I wonder with all the gaming if the continue to make any sense. Add to that that identiy politics keeps the little people fighting over scraps while the billionaires and corporations now own the entire government including SCOTUS.
I guess WordMess has a hangover today.
Like yesterday. 😉
[President Obama announced today procurement reforms designed to improve competition for federal contracts, while curbing fraud and waste. He said these reforms would save American taxpayers up to $40 billion a year and help usher in a new era of fiscal responsibility.
Flanked by senators Carl Levin and John McCain — both longtime foes of wasteful spending — Obama said he had directed OMB chief Peter Orszag to draft “dramatic” new procurement rules that would improve how the government spends more than a half-trillion dollars each year. He formally issued a “Presidential Memo” spelling out his aims.
His announcement at the Eisenhower Executive Office Building, adjacent to the White House, follows years of chronic procurement problems, including a massive increase in the use of less than fully competed contract and a persistent shortfall in the number of federal contracting workers.
“Now, none of this will be easy,” Obama said. “We’ll have to end old ways of doing business. We’ll have to take on entrenched special interests. We’ll have to break bad habits that have built up over many years, but we can’t keep spending good money after bad. All across America, families are making hard choices, and now we’re going to have to do the same. ”
The White House issued a “fact sheet” shortly before the president made his remarks. Among other things, it says:
“Government spending on contracting has more than doubled in the last eight years. Government spending on goods and services increased from $200 billion in 2000 to over $500 billion in 2008.”
“A study last year by the Government Accountability Office
of 95 major defense acquisitions projects found cost overruns of 26 percent, totaling $295 billion over the life of the projects.” ]
http://voices.washingtonpost.com/government-inc/2009/03/president_aims_at_fraud_waste.html
Dredd – Obama does that is 2009 and his pastor’s daughter gets nailed for contract fraud in 2014. Didn’t seem to work did it?
Years ago when I practiced communications law, the FCC granted preferences in the broadcast field to “minorities and women.” Construction permits were awarded via comparative hearings when, as usual, there were multiple applicants.
Some trying to get preferences for being controlled by a local minority group member or a female formed limited partnerships and gave the preferred person a carried interest to act as the general partner. The backers held only limited partnership interests. The Commission considered this fiction entirely acceptable and the “veil” was not to be pierced.
Often in such cases, the limited partners were experienced broadcast managers and the general partner was a female or a Black who had no broadcast experience of any type and had never been inside a radio or television station. Although there was no reasonable likelihood that the general partner would have any meaningful managerial role, the scam usually worked. Often the station would then be constructed, licensed and, after a waiting period (three years, as I recall), sold to the limited partners. As I recall, occasionally a corporation was formed instead of a limited partnership and the preferred person was given a carried interest in the common stock; the backers held only non-voting preferred stock.
Are strategies such as these used to gain preferences in the contracting process?
Jonathan,
All my comments are being censored after about 8:30 blog time.
Formating or no formatting, links or no links.
dammiller – where there is a will, there is a way.
“About 17 percent of the U.S. population is Hispanic, and 13 percent is black. In federal small-business contracting, award ratios for those groups are in the single digits.
Small businesses, called the ‘drivers and engines of growth’ by President Barack Obama, attracted about $98.2 billion in government awards last year, according to data compiled by Bloomberg. Hispanic-owned companies won about 8.4 percent of that total, or $8.21 billion, while black-operated small businesses won about 7.2 percent, or $7.1 billion.
‘The needle hasn’t moved,’ said Ruth Sandoval, president of the National Hispanic Business Group, a New York-based organization representing business owners.
The gap may reflect stiffer competition over a shrinking pool of contract revenue as agencies cut spending. Black- and Hispanic-owned businesses also may have difficulty breaking into the $512 billion market because acquisition officers don’t have a mechanism to specifically target those companies.” (Bloomberg).
In my comment up-thread (can’t put too many quotes in one comment) it was pointed out that in one fiscal year situation, $2,300,000,000,000 was “lost” somewhere somehow.
Yet, the problem complained about in this post involves an area where the total contracting amount is $98,200,000,000 (most of it legit, not fraudulent).
The amount of taxpayer dollars lost, just by the Pentagon alone, ($2,300,000,000,000 ÷ $98,200,000,000 = 23.42) is over 23 times that amount.
“About 17 percent of the U.S. population is Hispanic, and 13 percent is black. In federal small-business contracting, award ratios for those groups are in the single digits.
Small businesses, called the ‘drivers and engines of growth’ by President Barack Obama, attracted about $98.2 billion in government awards last year, according to data compiled by Bloomberg. Hispanic-owned companies won about 8.4 percent of that total, or $8.21 billion, while black-operated small businesses won about 7.2 percent, or $7.1 billion.
‘The needle hasn’t moved,’ said Ruth Sandoval, president of the National Hispanic Business Group, a New York-based organization representing business owners.
The gap may reflect stiffer competition over a shrinking pool of contract revenue as agencies cut spending. Black- and Hispanic-owned businesses also may have difficulty breaking into the $512 billion market because acquisition officers don’t have a mechanism to specifically target those companies.” (Bloomberg).
In my comment up-thread (can’t put too many quotes in one comment) it was pointed out that in one fiscal year situation, $2,300,000,000,000 was “lost” somewhere somehow.
Yet, the problem complained about in this post involves an area where the total contracting amount is $98,200,000,000 (most of it legit, not fraudulent).
The amount of taxpayer dollars lost, just by the Pentagon alone, ($2,300,000,000,000 ÷ $98,200,000,000 = 23.42) is over 23 times that amount.
Great piece, Jonathan. Of course, it means you are a racist, bigot, sexist..in some eyes here.
Someone please retrieve my comment from WordMess please.
Much ado about nothing people:
(Bloomberg, emphasis added). In my comment up-thread (can’t put too many quotes in one comment) it was pointed out that in one fiscal year situation, $2,300,000,000,000 was “lost” somewhere somehow.
Yet, the problem complained about in this post involves an area where the total contracting amount is $98,200,000,000 (most of it legit, not fraudulent).
The amount of taxpayer dollars lost, just by the Pentagon alone, ($2,300,000,000,000 ÷ $98,200,000,000 = 23.42) is over 23 times that amount.
Paul – post it a third time, maybe then it will be germane to the conversation.
Frankly – I posted it from two different sites. One she was charged, and then I searched again and found she had just been convicted. If you read both, you would have noticed that.
The intent of the law was good. After decades of being denied contracts based on race or gender there was a chance for minority owned businesses to get a foot in the door and build a reputation.
Of course ‘smart’ people immediately tried to game the system. I worked for a small company that was purchased by an 8A & we qualified for a govt contract that we won. The woman owner was the wife of a big shot for one of the major beltway bandits & had started her business to do subcontracting that the big bandit could claim was going to an 8A.
The law needs to be changed to somehow eliminate these sorts of games but there still needs to be some way to provide opportunities to businesses that are still being shut out because they were never given a chance to begin with.
Is it justice to put in jail those stealing candy at a store but not those who are robbing the U.S. Treasury blind?
Daughter of Jeremiah Wright Convicted in Fraud Scheme
CHICAGO — The daughter of President Barack Obama’s former pastor was convicted on Friday of laundering thousands of dollars from a state grant for a Chicago-area job-training program, federal prosecutors said.
A federal jury took less than two hours to find Jeri Wright, 48, the daughter of Jeremiah Wright, guilty on all counts for her part in a fraud scheme led by a former suburban police chief and the chief’s husband, according to the U.S. Attorney’s office for the Central District of Illinois in Springfield.
The $1.25 million state grant was for a not-for-profit work and education program called We Are Our Brother’s Keeper, owned by Regina Evans, former police chief of Country Club Hills, and her husband, Ronald Evans Jr.
Wright, a close friend of the couple, took as much as $11,000 from checks worth more than $30,000 that were supposed to be for work related to the grant, prosecutors said. About $20,000 was deposited back into accounts controlled by Regina and Ronald Evans.
Image: Al Sharpton, Jeri Wright M. SPENCER GREEN / ASSOCIATED PRESS
Jeri Wright, seen here on Aug. 1, 2007, was found guilty on March 7, 2014, on all counts for her part in a fraud scheme led by a former suburban police chief and the chief’s husband.
The couple has pleaded guilty to the fraud scheme.
The grant agreement was supposed to provide bricklaying and electrical pre-apprenticeship training and GED preparation at the Regal Theater, another entity owned by the couple. Little, if any, of the training provided in the grant agreement was ever completed, according to prosecutors.
Jeremiah Wright was the Chicago pastor whose inflammatory church sermons, which often condemned U.S. attitudes on race, poverty and other issues, became a focus during the 2008 presidential campaign.
Jeri Wright also was convicted of making false statements to law enforcement officers and giving false testimony to a grand jury. The maximum penalty for money laundering is up to 20 years in prison, and five years in prison on the other counts. Sentencing is scheduled for July 7.
According to Donald “Known Unknowns” Rumsfeld:
(Fraud – A Staple of MOMCOM’s Budget).
Is it justice to put those stealing candy at a store but not those who are robbing the U.S. Treasury blind?
Let’s not strain out a gnat while swallowing camels.
The big contracts, the big money, is not affected by this.
The Donald Rumsfeld pointed out on 9/10 that the Pentagon could not track a couple of trillion dollars in its accounting labyrinth.
A look a the world’s aircraft carries tells the story graphically (Where Your 2013 Dollars Went).
Jeremiah Wright’s Daughter Charged With Fraud
Reuters | Posted: 04/10/2013 9:37 pm EDT
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By Mary Wisniewski
CHICAGO, April 10 (Reuters) – The daughter of President Barack Obama’s controversial former pastor was indicted on Wednesday on charges of money laundering and lying to federal authorities, a U.S. Justice Department spokeswoman said.
Jeri L. Wright, 47, the daughter of Jeremiah Wright, was accused of participating in a fraud scheme led by a former suburban police chief and the chief’s husband that involved a $1.25 million state grant, according to the U.S. Attorney’s office for the Central District of Illinois in Springfield.
Wright, of the Chicago suburb of Hazel Crest, was charged with two counts of money laundering, two counts of making false statements to federal officers, and seven counts of giving false testimony to a grand jury.
The state grant was for a not-for-profit work and education program called We Are Our Brother’s Keeper, owned by Regina Evans, former police chief of Country Club Hills, and her husband, Ronald W. Evans, Jr.
According to the indictment, Wright, a close friend of the couple, received three checks in 2009 worth about $28,000 that were supposed to be for work related to the grant. About $20,000 of that was allegedly deposited back into accounts controlled by the Evanses.
Jeremiah Wright was the Chicago pastor whose inflammatory church sermons, which often condemned U.S. attitudes on race, poverty, the Iraq War and other issues, became a focus during the 2008 presidential campaign.
Obama quieted the controversy with a speech putting the quotes in the context of race relations.
The money laundering count Jeri Wright faces carries a maximum penalty of up to 20 years in prison, while the other charges carry penalties of up to five years in prison.
Jeri Wright could not be reached for comment. Prosecutor’s office spokeswoman Sharon Paul did not know if she had yet retained a lawyer. (Reporting by Mary Wisniewski; Editing by Cynthia Johnston and Bill Trott)