Unpaid taxes? No Defense contract for you!

Here’s a no-brainer policy that should have been enacted a long time ago. According to Federal Times, companies with unpaid tax bills would be banned from receiving most Defense contracts under a bill approved on April 28 by the House Armed Services Committee.

The move would save the government about $1 billion per year through additional taxes collected, according to Rep. Brad Ellsworth, D-Ind.

Ellsworth added the provision regarding tax-delinquent contractors to the committee’s IMPROVE Acquisition Act. The bill aims to improve the department’s track record in services acquisition by giving managers more flexibility to shift acquisition work from one organization to another, installing pay and promotion incentives for high-performing acquisition personnel, and making the department’s financial management system more accountable and accurate.

Ellsworth’s provision would require contractors to certify they don’t have delinquent tax debts exceeding $3,000 when they bid on projects, and authorize the Treasury Department to disclose bidders’ tax information to contracting agencies. The legislation includes an exception for contracts that are “necessary to … national security.”

Ellsworth’s provision dovetails with a Jan. 20 executive order from President Obama that aims to ensure that deadbeat firms aren’t given new contracts. Tens of thousands of contractors owe the government more than $5 billion, Obama said.

In April 2007, the Government Accountability Office reported that more than 60,000 federal contractors owed a total of $7.7 billion in unpaid taxes — including 27,000 Defense Department contractors who owed $3 billion.

Obama asked Treasury and the Office of Management and Budget to report back in 90 days with recommendations, a deadline that expired this week. He asked specifically for a plan to make companies’ tax certifications available in a government-wide database so contracting officials have the information they need.

OMB spokesman Tom Gavin said that plan is drafted and under review.

Ellsworth said he is aware of Obama’s order but his interest in the issue dates back to 2006, before he was elected to Congress, when he read a newspaper article about companies that continued to receive federal contracts despite their tax debts.

“As a normal citizen it made me mad that I paid my taxes … and why do these people get federal contracts when they weren’t paying theirs?” Ellsworth said.

Ellsworth said he expects the IMPROVE Acquisition Act to go before the full House soon. According to the Armed Services Committee, the bill applies to about 80 percent of defense contracts — all those not covered by the Weapons Systems Acquisition Reform Act, signed into law last year without a provision on tax delinquents.