WASHINGTON—A Republican senator urged the White House on Friday to strip a multibillion-dollar loophole exempting overseas work from government plans to crack down on contract fraud.
The loophole, quietly slipped last year into a proposed Bush administration rule, would allow companies performing government work overseas to avoid having to report contract abuse. Contract fraud has cost taxpayers $14 million in bribes alone out at least $102 billion spent in Iraq and Afghanistan since 2003.
Such exceptions "threaten to exclude a significant class of government contracts that are ripe for abuse," Sen. Chuck Grassley, of Iowa, top republican on the Senate Finance Committee, wrote in a letter Friday to White House Office of Management and Budget Director Jim Nussle.
"Simply put, there is no reason these contracts should be excluded," Grassley wrote. "I urge you to use your authority that it is not included in the final rule."
OMB spokeswoman Jane Lee said the White House had not yet received Grassley's letter as of Friday evening.
"We will definitely review and consider the senator's letter upon its transmittal," Lee said.
The loophole, first reported by The Associated Press, is part of a larger Justice Department proposal to penalize businesses that fail to root out internal waste and abuse of government contracts.
The department has so far charged 44 people as a result of investigations into kickbacks, bribes and other abuses of taxpayer money overseas as part of the administration's war on terror.
For decades, contractors have been asked to report internal fraud or overpayment on government-funded projects. Compliance has been voluntary, and over the past 15 years the number of company-reported fraud cases has declined steadily.
Now, the Justice Department wants to force companies to notify the government if they find evidence of contract abuse of more than $5 million. Failure to comply could make a company ineligible for future government work.
But the planned rule, as written by policy-writers who are reviewed by the OMB, specifically exempts "contracts to be performed outside the United States."
The rule was published in the Federal Register in November.
The Special Inspector General for Iraq Reconstruction and Justice Department both have criticized the loophole. The White House has refused comment on it before the rule becomes final later this year.
