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NCHRP 20-6, STUDY TOPIC 13-1 A SURVEY OF STATE PRACTICES FOR PROTECTING TRANSPORTATION AGENCIES AGAINST CONSTRUCTION AND DISADVANTAGED BUSINESS ENTERPRISE FRAUD INCLUDING USE OF CONTRACTOR SUSPENSION AND DEBARMENT PROCEDURES TABLE 9: CONSTRUCTION CONTRACTS WHERE SUSPENSION/DEBARMENT OCCURREND IN STATES SURVEYED Year of Occurrence Dollar Value of Contracts with Suspension Total Value of Construction Contracts % of Total Dollars # of Contracts where a Suspension or Debarment occurred Total # of Contracts % of Contracts 2002 $ 900,000 $ 2,445,357,000 0.04% 1 628 0.04% 2003 $ 7,000,000 $ 2,260,188,000 0.31% 2 477 0.31% Virginia 2004 $20,000,000 $ 2,183,847,000 0.92% 1 537 0.92% 2000 Unknown Unknown Unknown 3 Unknown Unknown 2001 Unknown Unknown Unknown 4 Unknown Unknown 2002 Unknown Unknown Unknown 7 Unknown Unknown Maryland 2004 Unknown Unknown Unknown 2 Unknown Unknown 2000 Unknown $ 486,655,055 Unknown 1 300 Unknown Minnesota 2004 Unknown $ 474,577,914 Unknown 1 233 Unknown Minnesota, who had a suspension/debarment in both 2000 and 2004, did not have the exact value of the contracts where a contractor was suspended and debarred. The leader in DBE sub contract value, Virginia, did not report any DBE fraud on their survey but did indicate two contractor suspension/debarments in 2002 through 2004. Likewise, while Maryland reported no suspensions, it did report several debarments (three in 2000, four in 2001, seven in 2002 and two in 2004). However, they did not keep track of the dollar value of these contracts, and they did not respond to the survey questions asking the total dollar value of their construction contracts or the total number of contracts. Undoubtedly, the proper reporting, collection and analyzing of suspension and debarment data by all states would be helpful in better understanding the impact of fraud in this area in the transportation industry. Comprehensive tracking information needed to evaluate suspension and debarment of contractors in construction contractors appears to be lacking on the part of many states. V. Conclusion At the federal level, the following statutory schemes are used to detect and prosecute fraudulent construction contract fraud: the Federal False Claims Act, the Criminal False Claims Act, the False Statement Provision, and the Civil and Criminal Racketeer Influence and Corrupt Organization Act (RICO). The states use a variety of false claims acts. At least 23 states have general false claims acts and 26 states have false statement acts. The data provided through the survey responses did not indicate the widespread existence of specific initiatives to detect construction contract fraud. Such fraud is detected through vigilant program management and processed as any other state false claim or false statement violation. - 36 -
NCHRP 20-6, STUDY TOPIC 13-1 A SURVEY OF STATE PRACTICES FOR PROTECTING TRANSPORTATION AGENCIES AGAINST CONSTRUCTION AND DISADVANTAGED BUSINESS ENTERPRISE FRAUD INCLUDING USE OF CONTRACTOR SUSPENSION AND DEBARMENT PROCEDURES As is evident from the responses to the DBE Survey, available data indicates the existence of some fraud, but responses were limited as to the number of actual occurrences and specific dollar amount lost as a result of DBE fraud. Despite the anecdotal evidence of DBE fraud, as with the GAO report, sufficient data was not provided to fully asses the magnitude of the problem. Thus, we cannot conclude either that the problem is minimal or that it is widespread. It is clear, however, that states have implemented a variety of procedures for investigating and monitoring DBE fraud. Debarment and suspension procedures are the major tools for protecting the integrity of the transportation contracting process. Federally funded state transportation projects must include suspension and debarment procedures as a further protection against contract fraud. Investigation periods vary as does whether or not a state requires a contractor to show certification of its suspension and debarment status. Few states that responded to the survey kept track of the dollar value of contracts affected by suspension and debarment actions. However, survey responses and general research reveal that many states lack effective suspension and debarment tracking procedures. Consequently, the differences in the procedures indicated in the responses to the surveys, and arguably the lack of responses may be indicative of the need for the states to implement suspension and debarment assessment and evaluation tools. The overview of fraud statutes adopted by federal and state governments along with the survey responses indicate that federal and state governments, as well as the courts, have consistently been dealing with the issue of fraud for many years. While federal and state transportation agencies have designed processes to detect and deter fraud in construction contracts and DBEs, fraudulent practices will exist and possibly increase, costing the USDOT and state transportation agencies billions of dollars, unless there is an increased effort and coordination between the federal and state governments to provide a statutory framework to actively monitor, report and enforce fraud penalties. - 37 -
