crossposted from unbossed
Yes, it is definitely a government of the contractors, by the contractors, and maybe even for the contractors. At least that is a concern GAO shares, according to a new report issued yesterday.
Here are the key findings from the report and recommendations.
Indications are that significant numbers of defense contractor employees work alongside DOD employees in the 21 DOD offices GAO reviewed. At 15 offices, contractor employees outnumbered DOD employees and comprised up to 88 percent of the workforce. Contractor employees perform key tasks, including developing contract requirements and advising on award fees for other contractors.
In contrast to federal employees, few government ethics laws and DOD-wide policies are in place to prevent personal conflicts of interest for defense contractor employees. Several laws and regulations address personal conflicts of interest, but just one applies to both federal and contractor employees.
Some DOD offices and defense contractor companies are voluntarily adopting safeguards. For example, realizing the risk from personal conflicts of interest for particularly sensitive areas, the 19 DOD offices GAO reviewed that used contractor employees in the source selection process all use safeguards such as contract clauses that prohibit contractor employees’ participation in a DOD procurement affecting a personal financial interest. In certain other tasks, only 3 of the 23 defense contractors GAO reviewed had safeguards requiring employees to identify potential conflicts of interest so they can be mitigated.
In general, government officials believed that current requirements are inadequate to prevent conflicts from arising for certain contractor employees influencing DOD decisions, especially financial conflicts of interest and impaired impartiality. Some program managers and defense contractor officials expressed concern that adding new safeguards will increase costs. But ethics officials and senior leaders countered that, given the risk associated with personal conflicts of interest and the expanding roles that contractor employees play, such safeguards are necessary.
Conclusions
The environment in which DOD makes its most significant spending decisions is changing. As programs grow more complex and costly, DOD has increasingly become reliant on technical, business, and procurement expertise supplied by contractors — sometimes to a point where the foundation on which decisions are based may be largely crafted by individuals who are not employed by the government, who are not bound by the same rules governing their conduct, and who are not required to disclose whether they have financial or other personal interests that conflict with the responsibilities they have performing contract tasks for DOD. To its credit, DOD has recognized that this condition and its risks needs to be studied and addressed by adding personal conflicts of interest among contractor employees as a tasking for its Panel on Contracting Integrity and adopting stricter safeguards for FFRDC employees early in 2007. Such attention is important.
While few cases of improper conduct have been publicly identified, there are also few safeguards in place to identify whether personal conflicts of interest even exist. The new FAR requirements making it mandatory for certain contractors to set and follow written codes of business ethics and conduct will not assure that the advice and assistance received from contractor employees is not tainted by personal conflicts of interest.
The officials in most offices we reviewed that operate within this environment believe that the risk to the government is considerable enough to warrant safeguards when contractors are involved in source selection; at least some believe that risk extends to contractors that are involved in other activities that feed into spending decisions. Arguments that no change is needed focus on costs, which may be calculable. Yet, costs of contractor employees constructing options for their personal gain — an outcome increasingly likely based on sheer numbers — would likely never be known, let alone calculable as long as there is no transparency. Changes to current policy and practices that are targeted, tailored and implemented at the lowest practicable level are a way to minimize the cost of addressing personal conflicts of interest among contractor employees and to maximize the value of any additional safeguards. Several program offices have already demonstrated this is possible through the use of contract clauses and processes to identify potential conflicts and at least one small company has adopted similar safeguards on its own.
Recommendations
We recommend that the Secretary of Defense direct the Under Secretary of Defense (Acquisitions, Technology, and Logistics), to develop and implement policy that requires personal conflict of interest contract clause safeguards for defense contractor employees that are similar to those required of DOD’s federal employees. In developing its policy, DOD should include requirements for contractor companies to identify and prevent personal conflicts of interest for certain of their contractor employees who are performing contracted services that provide inputs to DOD’s decision-making in such mission-critical areas as the development, award, and administration of government contracts and other advisory and assistance functions.
In developing its policy, DOD should include the following requirements for defense contractor companies:
• require a written code of business ethics and conduct applicable to contractor personnel working on certain DOD mission-critical advisory and assistance type services to:
• prohibit contractor personnel from participating in a government contract in which they have a personal conflict of interest;
• require contractor personnel to avoid the appearance of loss of impartiality in performing contracted duties for DOD;
• require contractor personnel to disclose personal conflicts of interest to their employer prior to beginning work on these contracts;
• require the contractor to review and address any personal conflicts of interest its employees might have before assigning them to deliver contracted services;
• prohibit contractor personnel from using non-public government information obtained while performing work under the contract for personal gain;
• prohibit contractor employees providing procurement support services from having future employment contact involving a bidder in an ongoing procurement;
• impose limits on the ability of contractors and their employees on accepting gifts (defined as almost anything of monetary value, such as cash, meals, trips, or services) in connection with contracted duties; and
• prohibit misuse of DOD contract duties to provide preferential treatment to a private interest.
In developing its policy, DOD should include requirements for contractor companies to:
• Report any contractor personnel conflict of interest violations to the applicable contracting officer or contracting officer’s representative as soon they are identified.
• Maintain effective oversight to verify compliance with personal conflict of interest safeguards, and have procedures in place to screen for potential conflicts of interest for all employees in a position to make or materially influence findings, recommendations, and decisions regarding DOD contracts and other advisory and assistance functions. This screening can be done on a task-by-task basis or on an annual basis, such as a financial disclosure statement.
The report is Defense Contracting: Additional Personal Conflict of Interest Safeguards Needed for Certain DOD Contractor Employees GAO-08-169, March 7, 2008
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