IEC Journal

Indictment on 23 counts of bribery and honest service fraud

A recently unsealed 23-count indictment alleges that a civilian contractor paid more than $2.8 million in bribes to a U.S. Army contracting official stationed at Camp Arifjan, an Army base in Kuwait, and the official’s wife, and that the three individuals committed honest services fraud and money laundering offenses in connection with the same conduct.

See article at http://www.al.com/printer/printer.ssf?/base/news/1241770570203800.xml&coll=2

See DOJ press release http://www.usdoj.gov/opa/pr/2009/May/09-crm-449.html

New Pentagon Rule Slows Revolving Door

Government Executive reports:

Pentagon officials who participate in costly acquisitions now will need written approval from an agency ethics officer before taking a job with a Defense Department contractor.

The interim rule in the Jan. 15 issue of the Federal Register, attempts to slow the revolving door between government and private industry. It was among a blitz of new regulations published on Thursday by DoD and other government agencies, responding primarily to legislation passed by Congress in the fiscal 2008 and 2009 Defense authorization measures.

Among the most significant rules is a regulation barring Pentagon officials who have "participated personally and substantially in a DoD acquisition exceeding $10 million or who [have] held a key acquisition position" from accepting a job with a defense contractor without first obtaining a written opinion from a Defense ethics counselor. The counselor will determine which, if any, activities the official can perform on behalf of the contractor for the first two years after the official leaves government.

Contractor Business Ethics Compliance Program

There is new guidance concerning the Contractor Business Ethics Compliance Program:

• Federal Acquisition Regulation: FAR Case 2007-006, Contractor Business Ethics Compliance Program and Disclosure Requirements
• Federal Acquisition Regulations: Federal Acquisition Circular 2005-28; Introduction, 67064 [E8-26810] 
• Small Entity Compliance Guide, 67093 [E8-26809]

Ethics In Federal Contracting Course

We have no experience with the vendor, but the Ethics in Federal Contracting course looks like it could have some value. The announcement gives the "Course Objectives" as:

After successful completion of this training course, the student will be able to:

• Explain the meaning and purpose of ethics, particularly as related to federal government employees engaged in acquisition
• Identify and avoid problem areas through awareness of and adherence to ethics laws and regulations

2 Plead Guilty in Army Bribery Scheme

Army contracting officer pled guilty to involvement in $9M procurement scandal.  http://www.washingtonpost.com/wp-dyn/content/article/2008/06/24/AR2008062401341_pf.html

Open Compliance and Ethics Group

Government Executive reports on the Open Compliance and Ethics Group, a Phoenix-based nonprofit organization that is trying to assist government contractors and subcontractors in complying with government rules, including the new requirement for contractor codes of conduct:

OCEG's goal was to provide a structured point of reference -- particularly for small and mid-size firms that cannot afford high-priced attorneys or compliance teams -- as well as to reduce the waste of resources that nearly all contractors experience in keeping up with the government's complex amalgam of regulations, according to Switzer. ...

"Federal procurement rules and regulations are complex and the risks can be substantial if contracts are not entered into without sufficient due diligence on the part of the contractor," said Brian Simmons, national director of Ernst & Young's government contract practice.

Improper Pressure on Thunderbirds Contract Selection

Defense News reports on five Air Force officials, including the vice director of the Joint Staff, being disciplined after a Jan. 30 IG report implicated them in a 2005 attempt to steer a five-year, $49.9 million contract to produce multimedia presentations for Thunderbirds air shows. In accordance with Privacy Act rules on disclosure of senior employees, the 250-page report redacts the names of four junior members, but released the name of the senior official involved, Air Force Maj. Gen. Stephen Goldfein.

In one point that could be used in instruction, while Chief of Staff Gen. T. Michael Moseley was not disciplined, he was placed in the awkward situation of having to defend himself against an appearance of impropriety, due to social engagements between him and partners in the company before, during and after the contract competition:

In an interview with Air Force Times, Moseley said he did not discuss the project with Shipley or Hornburg in e-mails and discussions during the selection process.

"I know where those boundaries are and never crossed any of those ethical or contracting boundary lines," Moseley said. "There was a definite boundary of not talking about that stuff. ... It was never brought up."

Proposed FAR Change Requiring Contractor Self-Reporting

The April Government Executive magazine has a feature story on the November 2007 proposal by the  Civilian Agency Acquisition Council and the Defense Acquisition Regulation Council to amend the  Federal Acquisition Regulation and require that contractors report possible criminal violations of federal law to agency contracting officers and inspectors general.

Boeing Loses Tanker Contract

Boeing suffered a large financial hit after losing a $40 billion contract to build a new generation of Air Force tankers. A Government Executive story weighs some of the fallout.

While some analysts claimed the company's 2002 ethics scandal, which resulted in Air Force and Boeing officials serving prison time, was not a factor in the decision, others were not so sure. The Seattle Times quoted one worker:

Michael Cummins, 52, of Everett, blamed the ethics scandal that emerged during the earlier tanker competition for costing Boeing the bid this time as well.

"It boils down to past history," said Cummins, who works on interior mechanics for planes including the 767. "You can never take things back after they're done."

Analyst Loren Thompson told Reuters:

Boeing is still coping with the aftermath of the procurement scandal earlier in the decade. It had great difficulty communicating with its Air Force customer and understanding how its customer was thinking.

The decision provoked memories of the previous tanker competition. Darleen A. Druyun, the top Air Force procurement chief in 2002, admitted that she favored Boeing while negotiating for a job with the company. Both she and Boeing's former CFO went to prison, and Boeing paid $615 million to settle charges of misconduct. Air Force officials denied these events were a factor in the current decision. Sue C. Payton, assistant secretary of the Air Force for acquisition, said of the previous controversy, "That was a half-decade ago."

Whatever the reason for the newest Air Force decision, a perception that ethics violations can hurt the bottom line in a big way may be a good thing for the procurement community and the government in the long run.

Ethics Rankings of Government Contractors?

Government Executive magazine reports on a private sector thinktank's plan to issue rankings of government contractor ethics programs:

"It is kind of vogue to bash government contractors ... because of a few bad apples," Brigham said. "It makes sense to give a lot of credit to the companies that are doing it right, and a tweak on the nose to the companies that aren't aligning with what the new government regulations are."

The group is using a voluntary online questionnaire as the primary means of gathering information. The questionnaire covers four major areas: codes of ethics and business conduct; leadership and tone from the top; internal control systems; and training and communication programs. Various measures and accomplishments in these areas have been assigned weight values, and the institute also will be doing its own research into companies' practices and programs.