Federal Offical Gets Away With Fraud

You are a government official who goes out drinking and golfing with your neighbor.

Your neighbor also happens to sell surveillance equipment. You let him write the statement of work and he wins a $250,000+ USD deal.

Anyone see any problems with that?

The Surveillance Equipment

The equipment in question is a "Rapid Deployment Kit [link no longer available]." It consists of a portable DVR with a vandal-proof case, connectivity for wireless or wired cameras, IP and megapixel cameras and a 17-inch touch screen display. There are no additional specs online or details on the equipment in the reports. There were no documents to tell the number of cameras in the kit. Since its purchase it has remained in the basement of the Federal Protective Service (FPS) offices.

What Happened

A Department of Homeland Security (DHS) regional director in Kansas City named David Olson [link no longer available], essentially got away with what DHS called a procurement fraud scheme that led to his friend and next-door neighbor being awarded a $250,000 surveillance contract. He circumvented the procurement process for a statement of work written by the friend and worked with him to make sure he got the contract. In this update, we review the case.

Slap on the Wrist

The DHS Office of the Inspector General investigated the scheme, determined fraud occurred and presented its case to the U.S. Attonery’s office which declined to prosecute. Seperately, the U.S. Office of Special Council said in May that it reviewed the case and doesn’t believe Olson knew what he was doing was wrong when he  helped push through a contract for video surveillance equipment for his neighbor of eight years and who he would occasionally drink and golf with. They also don't believe lied to investigators about it. A 14-day suspension was recommended, according to OSC documents, but it was eventually reduced to a three-day suspension deferred for two years.

Metadata Revealed Contractor Wrote the SOW

After Olson told one of his special agents to make sure everyone in the office had training on the new equipment which would be arriving at the office, the agent asked to see the procurement documents. It did not take much research for the agent to find out that the president of the company awarded the contract was Olson’s neighbor, Brad Quigley. Quigley runs the company 4G Solutions out of his house [link no longer available].

He also found Quigley's name was listed in the "properties" section of the document that contained the statement of work. When asked by the agent if he knew that the neighbor had written the statement of work, Olson brushed it off saying it was customary for someone with technical expertise to help draft or write procurement documents.

Whistleblower

By February 2012, the DHS inspector general and the U.S. Office of Special Counsel had received separate tips from a whistleblower that a high-ranking official in FPS was involved in a procurement fraud scheme involving the purchase of surveillance equipment. The tipster said the official had his neighbor write up the statement of work and FPS awarded him a $250,000 for what was actually only $10,000 worth of equipment. The OIG opened an investigation into the allegations. The full report was recently made available online, but leaves out the identities of those involved.

Findings

The DHS OIG determined that Olson “did improperly influence and facilitate the award of the contract.” A string of emails shows that he was working with Quigley to push the deal through. [link no longer available]

Contractor Wrote the Statement of Work

The OIG says it found evidence that FPS violated federal acquisition rules when it awarded 4G Solutions the contract. The report also shows that there had always been questions about who wrote the statement of work after the agent found Quigley’s name in the document metadata and a series of emails showing the document originated from Quigley. In an interview with the OIG, Quigley admitted that he provided the documents to Olson.

This is a problem because contractors are prohibited from writing the statement of work for government bids, according to Federal Acquisition Regulations. "If a contractor prepares and furnishes complete specifications covering non-developmental items, to be used in a competitive
acquisition, that contractor shall not be allowed to furnish these items," the rule says. The rule further says agencies should prepare their own work statements.

"When contractor assistance is necessary, the contractor might often be in a position to favor its own products or capabilities. To overcome the possibility of bias, contractors are prohibited from supplying a system or services acquired on the basis of work statements growing out of their services," it says.

Both Olson and his deputy director said they thought it was customary to have vendors write up a statement of work. Another supervisor said that in his 10 years of procurement experience he has never heard of a vendor being the one to write the statement of work for a project being put up for bid.

Circumventing the Procurement Process

Olson told investigators he wasn’t sure if he involved anyone from Procurement in the process. Through interviews, however, it looks like may have skipped parts of the procurement process to award the contract. There was no independent government estimate or review of the project and the inspector who approves purchases said the order for the surveillance equipment never went through him. He told investigators he didn't know the contract was awarded until after the fact. The inspector says he had an email from Olson asking for comments on the statement of work for the system, but didn't hear anything else about it until almost six months later when he was told to go ahead and initiate the purchase. This was still months before the actual solicitation was released. 

The OIG found that Olson and Quigley had been discussing the best expedite the process long before the contract was awarded. The excerpt below is part of an email from Quigley to Olson:

Conflict of Interest

Olson failed to disclose the conflict of interest when pursuing the contract, according to the OIG report. The investigation uncovered that they occasionally played golf and had drinks together, and Olson admitted to the OIG that he didn’t tell anyone about this issue. However, Olson said he never discussed the solicitation with Quigley even though emails show that they were discussing the contract as early as 2009. The solicitation wasn’t put out until July 1, 2010.

That solicitation was closed because there weren't enough bidders so it was put out again in August. Once the project went to bid in August 2010, Olson's company was the lowest bidder.

Money Not Wasted

The OIG says even though the whole deal was shady, the money was not wasted on the equipment because FPS had a need for it. The cameras could be used as back up cameras in the event that a building's surveillance cameras failed. Additionally they did not find any evidence that the equipment was worth less than was paid for it.

Questions Remain

The OIG report doesn't answer questions about how Olson was able to push the contract through with minimal involvement with procurement officers. That is indicative of a bigger problem in DHS and FPS.

What still isn’t clear is what Olson got out of this deal. Nor does the OIG mention any kind of favors or kickbacks. There is no indication that the OIG looked at Olson's bank accounts or past history with Quigley, which is interesting because in a recent corruption case from Australia, the bank accounts held some of the most damning information.