Highway Contracting

Assessing Fraud and Abuse in FHwA's Disadvantaged Business Enterprise Program Gao ID: RCED-89-26 November 30, 1988

Pursuant to a congressional request, GAO reviewed the Federal Highway Administration's (FHwA) Disadvantaged Business Enterprise (DBE) Program, focusing on the: (1) nature and extent of program fraud and abuse; (2) results of FHwA investigations of DBE fraud and abuse cases; and (3) approaches FHwA and states used to minimize fraud and abuse.

GAO found that: (1) FHwA established the DBE program to expand highway-related contracting opportunities for disadvantaged small businesses; (2) FHwA did not collect nationwide data relating to key program activities, disadvantaged business investigation results, contractor eligibility assessment and reassessment results, and program monitoring reviews; (3) contractor irregularities primarily involved ineligible businesses using inaccurate or misleading information to obtain contracts or eligible businesses engaging in questionable activities; (4) the Department of Transportation investigated 89 disadvantaged businesses in the program nationwide and resolved 53 cases administratively and 17 cases with legal action; (5) contractors in the resolved cases paid a total of over $1 million to federal and state governments; (6) New York and Pennsylvania investigated 90 additional disadvantaged businesses, resulting in 60 administratively resolved cases; (7) FHwA encouraged states to administratively resolve cases, citing the difficulty in getting cases prosecuted; (8) to minimize program fraud and abuse, most states initially assessed and annually reassessed contractors' eligibility, and FHwA monitored states' and contractors' compliance with program requirements; and (9) New York did not have a program for annually reassessing contractors' eligibility.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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