Sunday, January 1, 2012

US agencies want 1,000-plus contractors barred - Boston.com

US agencies want 1,000-plus contractors barred - Boston.com

The linked article from the Boston Globe reports that the Administration, under pressure from Congress to "weed out" government contractors for ethical violations, has proposed to ban almost as many contractors in 2011 as President George W. Bush did in his entire second term. During 2011, federal agencies have proposed suspending or debarring over 1,000 companies and individuals from contracting with the federal government. According to Stan Soloway, president of the Professional Services Council (a trade association representing hundreds of government contractors), "the use of suspensions and debarments is getting increasingly hostile."

Contractors can be proposed for debarment for a variety of reasons, including poor performance, ethical issues such as over billing or false claims, or even a violation of one of hundreds of regulations contained in the Federal Acquisition Regulations (FAR), the complex manual guiding the bidding, selection, and execution of federal contracts. Increasingly, the government has been using the debarment process as a way to address what they believe are deficiencies in the ethical culture of a company, even if only evidenced by a single minor FAR violation.

With this substantially increased risk environment for federal contractors, what can companies do to protect themselves? The answer is surpisingly simple. Companies need to do everything they can to shore up their ethical culture and demonstrate their ethical due diligence in advance of the inevitable contracting violation. I use the term "inevitable" because with the hundreds of complex regulations and requirements, mistakes WILL be made. When an erroneous claim is submitted; an employee does not accurately fill out his timecard on a time and materials contract; a competitor's bid information is mistakenly emailed to a competitor; or a supplier provides an item from a foreign country (in violation of the Buy America Act, the first thing the government will attempt to determine is whether the violation is an "aberration" or an isolated event by a "bad actor", or whether it is part of a pattern emerging from a weak ethical culture. To determine this, the government will look at the company's ethics program, including the authority, responsibility, and organizational placement of its Ethics and Compliance Officer; the adequacy of its code of conduct; the sufficiency of its ethics training; and the corporate leadership commitment and "tone at the top" when it comes to ethics.

Companies need to proactively ensure that their ethical house is in order BEFORE the crisis occurs. An independent external assessment by a business ethics professional knowledgeable of the government requirements is essential. If the government is already involved in a matter, companies can proactively suggest the use of an independent monitor as an alternative to more punitive actions (such as suspension or debarment) to assess the company's ethical culture, help them strengthen their ethics and compliance program, and monitor their progress for a period of time. All of these actions are designed to demonstrate that the company is a "responsible party" that can safeguard the taxpayer's interests WITHOUT the potentially business-ending suspension and debarment action that now seems to be the government's preferred method of dealing with corporate ethics issues.

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