Predicting Federal Contractor Misconduct

Abstract

ABSTRACT Between 1995 and 2021, the United States’ Federal Government imposed $162.5 billion in penalties upon government contractors who had engaged in improper behavior as part of the procurement process. Despite the enormity of contractor misbehavior, the characteristics associated with contractor misconduct are relatively underexplored in academic literature. In this study, we examine whether and to what extent firm characteristics predict federal government contractor misbehaviors, which range from minor statutory violations to fraud. We document a consistent association between contractor characteristics (size and total amount of government contracts received), contract-specific characteristics (service-type contracts and awarding agencies GSA and DOE), and the act of committing misconduct. Misconduct severity increases in size and total amount of government contracts, is not affected by service contracts, and has an inverse U-shape for government agencies. Taken together, our results suggest that characteristics of the contractor, contract, and government agency are predictably associated with committing procurement misconduct. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: H11; H57; M41.