WASHINGTON (AP) – The government shouldn’t being doing business with companies that aren’t paying their taxes, senators said Thursday after a report found that thousands of non-defense federal contractors owed $3.3 billion.

“When individuals or companies demonstrate flagrant disregard for the tax system through a pattern of repeated and continued abuse, it is appropriate to publish their names and bar their receipt of federal contracts,” said Sen. Norm Coleman, R-Minn.

A report by the Government Accountability Office, Congress’ investigative arm, found that 33,000 civilian contractors owed the government roughly $3.3 billion in taxes.

The report, which was requested by Coleman as chairman of the Homeland Security Committee’s investigations subcommittee, follows one a year ago for defense contractors, which found that 27,000 of them owed $3 billion in unpaid taxes.

The report said the Treasury Department’s Financial Management Service bureau, which is responsible for government payments and debt collection, has poorly managed a program that authorizes agencies to withhold payments from delinquent contractors.

At Thursday’s hearing, lawmakers said the government needs to identify and weed out delinquent companies before they sign new contracts.

Sen. Susan Collins, R-Maine, said agencies could improve “efforts on the front end by ensuring that such firms and individuals never receive contracts in the first place.”

Sen. Carl Levin, D-Mich., said the problem could be reduced if federal agencies required contractors to state whether they owe back taxes.

Dick Gregg, the Treasury bureau’s commissioner, rejected the GAO’s characterization, saying his agency has an “excellent track record” in collecting debts for the government.

He also rejected a GAO recommendation that the FMS require taxpayer identification numbers to process payments.

Gregg also said the GAO’s recommendation to require contractors to submit their taxpayer identification numbers before paying them could jeopardize payments to contractors who do not owe taxes.

“Putting FMS in a position of picking and choosing which payments to disburse would blur the critical distinction between the agency certification authority and FMS disbursement authority,” he said.

That provoked a lively exchange with Coleman, who questioned why requiring taxpayer numbers amounted to “picking and choosing.”

“When you contract with the federal government, there are certain things you’re required to do,” said Coleman. “It is not a right to do business with the government. It’s a contractual obligation. You have certain requirements.”

Later, Coleman told reporters that Gregg was “living in the past … I don’t think he’s being aggressive enough.”

He also said he would look into legislation that would prohibit tax delinquents from getting government contractors.

Stan Z. Soloway, president of the Professional Services Council, a trade group for government contractors, said a tax code violation can already be used as a basis to bar a company from government contracts.

“It’s very hard to define this in statute,” Soloway said in a telephone interview. “What is a violation of tax law? Is it inadvertent, is it a pattern of abuse, is it one executive one time who didn’t fill out one form?”

Because of privacy laws, the GAO did not identify any of the delinquent taxpayers, a restriction that also hampers federal agencies from knowing if they are dealing with delinquent contractors.

But the GAO reported that some owners of the delinquent companies had “substantial personal assets,” including $30 million in real estate, a sports team and multiple luxury vehicles.

AP-ES-06-16-05 1747EDT