Thursday, April 15, 2010

Ethics in Government Contracting: Time for a Change?

Recent media reports of corruption in government contracting has resulted in a damaged reputation for the profession, government agencies, and government contractors. The problem seems to be the failure to establish clear ethical guidelines. The results of such failure results in ruined reputations, fines, imprisonment, delayed or terminated government programs, and additional costs to taxpayers.

In the April 2010 issue of Contract Management, William Sims Curry, makes several suggestions for the improvement of and development of guidelines for “acceptable limits on gratuities” within the government contracting field.

As a professional in the financial industry for the past three years, I was shocked to learn that current standards for ethical conduct and guidelines for gift giving/ receiving do not exist for contractors and government agencies. Perhaps there are several lessons to be learned from existing FINRA, NASD, and State Department of Insurance regulations which guide and establish annual maximum gift amounts as well as guidelines and reporting standards for “conflicts of interest”.

Sims (2010), concluded that a “zero tolerance gratuity policy” was “impractical,” nonetheless, should be a goal for government contractors, officials, and agencies during the contracting/ subcontracting process. Sims (2010) stated,

“[p]rogress towards zero tolerance with respect to gratuities could be achieved if government agencies would reward contractors that implement effective zero tolerance gratuity practices by providing added consideration with respect to source selection decisions and profit negotiations. Such incentives are presently provided by the federal government by rewarding contractors that establish effective management systems and implement effective social contracting practices [see (FAR) 15.404-4 and (FAR) 15.304” (p. 56-57)

What are your thoughts and feelings on existing ethical guidelines for government contracting as they pertain to “gratuities”? Is it ethical at all or should a “zero-tolerance” policy be implemented? What is your personal experience (good or bad) with the giving and accepting of “gratuities”?

1 comment:

  1. You will see that 3.101-2 of the FAR speaks to a "no tolerance" policy on "gratuities". However, 3.101-3 allows these standards to be "modified" by the agencies. Furthermore, the government added Subpart 3.10 to the Federal Acquisition Regulation (FAR) on December 24, 2007. This subpart applies to allfederal government contracts except those to acquire commercial
    items or to be performed entirely outside the United States.

    In the acquisition of commercial items the "contractor" is required to produce a written "Code of Conduct" within 30 days "after the award of the contract". You can quickly see how this also leaves a door open for commercial contractors, doing business with the government, to give "gratuities" prior to the award of the contract, and depending on their written "Code of Conduct", after the award of the contract.

    William Sims Curry's article in Contract Management, spoke to the issue of standardizing a code of ethics accross the board.

    Referenced FAR

    3.101 Standards of conduct.
    3.101-1 General.
    Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions.

    3.101-2 Solicitation and acceptance of gratuities by Government personnel.
    As a rule, no Government employee may solicit or accept, directly or indirectly, any gratuity, gift, favor, entertainment, loan, or anything of monetary value from anyone who (a) has or is seeking to obtain Government business with the employee’s agency, (b) conducts activities that are regulated by the employee’s agency, or (c) has interests that may be substantially affected by the performance or nonperformance of the employee’s official duties. Certain limited exceptions are authorized in agency regulations.

    3.101-3 Agency regulations.
    (a) Agencies are required by Executive Order 11222 of May 8, 1965, and 5 CFR 735 to prescribe “Standards of Conduct.” These agency standards contain—

    (1) Agency-authorized exceptions to 3.101-2; and

    (2) Disciplinary measures for persons violating the standards of conduct.

    (b) Requirements for employee financial disclosure and restrictions on private employment for former Government employees are in Office of Personnel Management and agency regulations implementing Public Law 95-521, which amended 18 U.S.C. 207.