Published: August 7, 2008
The Policy Report
Codes for Contractors
By Paula J. Desio, ERC Chair on Ethics Policy
Last December, Ethics Today reported on proposed federal regulations intended to strengthen the compliance and ethics programs of government contractors and subcontractors.
At the time, ERC had submitted comments to the FAR (Federal Acquisition Regulation) Council addressing several aspects of the proposal. ERC’s comments on the need for high level oversight, adequate resources, effective reporting mechanisms that go beyond hotlines, and an alternative approach to the small business exemption from business integrity provisions were based on its own research: the 2007 National Business Ethics Survey and its 2007 policy report: Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer
To date, the FAR Council has taken no further action on the proposed rules. It is likely that the additional provision proposed by the Department of Justice -- requiring mandatory disclosure of not only potential criminal violations discovered by the contractor but also likely civil and administrative breaches, and broadly opposed by the business and legal communities -- necessitates broader study and consideration.
One very practical concern is the capability of contracting officers to handle the potential volume of voluntary disclosures that could flood their desks. Contractors, especially those who are just beginning to implement integrity and compliance programs in response to the new FAR rules, are not likely to possess the resources and sophistication to winnow out and categorize such problems. Nor will they be willing to be wrong about fact-finding calls about the requisite intent for varying violations.
In an abundance of self-preservation and caution, many contractors are likely to “disclose” and refer every possible shortcoming and oversight to the contracting officer, who, having actual contracts to administer and little or no experience in law enforcement judgments, is likely to forward every report to the Inspector General.
The FAR Council and Congress should certainly consider the magnitude of resources needed to manage and process this flood of referrals before imposing such a requirement through the contracting process. To do otherwise will overwhelm the system and breed cynicism about the feasibility of compliance and business integrity programs that are otherwise well-intentioned.