Akin to the financial industry’s “too big to fail” is the corporate world’s too-big-to-ban when it comes to contracts with the federal government.

 

Federal officials can talk all they want about barring companies from doing business with Washington if they’ve behaved badly, but the reality is, some corporate operations are so large that agencies can’t function without them. Case in point: BP.

 

After the Deepwater Horizon unleashed the worst oil spill in U.S. history, some government officials talked about leveraging BP into moving faster to clean up the mess by cutting off its contract work. But the Department of Defense squashed that idea, saying it needed BP to fuel the military effort in Afghanistan.

 

Another example is Xe Services, the defense contractor formerly known as Blackwater Worldwide, whose violations of the Foreign Corrupt Practices Act weren’t enough for the company to lose its deals with the State Department because no other security firm could provide the services that the government needed.

 

According to records compiled by the Project on Government Oversight (POGO), over the past 15 years, the 100 largest government contractors have paid more than $19 billion in fines and penalties as a result of violations such as fraud and bribery. Yet, there have been only four suspensions and not a single company has been completely barred from further contracts. 

 

When two units of Boeing were suspended six years ago, the Air Force granted them a waiver to receive more than $50 million in contracts because of “compelling needs in the national interest.” Since 1995, Boeing has paid $1.6 billion in misconduct penalties.

 

The three worst offenders have all been drug companies, with Merck leading at $5.9 billion, followed by GlaxoSmithKline at $5.5 billion and Pfizer at $2.9 billion.

-Noel Brinkerhoff, David Wallechinsky

 

Size Protects Government Contractors That Stray (by Ron Nixon, New York Times)

Federal Contractor Misconduct Database (Project of Government Oversight)