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Ethics in Government Contracting: Time for Change?
April 15, 2010 at 11:48 am #97801
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”?
April 15, 2010 at 11:55 am #97811
There are ethical guidelines for gift giving and receiving.
-Gifts valued at $20 or less per “source” per occasion, although the total value of such gifts must not exceed $50 in a calendar year from a single source (Note: a contractor and its employees are considered the same “source.” For example, you could not accept five $15 lunches from five employees who work for the same contractor.)
From Usoge.gov, specially : http://www.usoge.gov/common_ethics_issues/gifts_outside_sources.aspx
April 15, 2010 at 12:43 pm #97809
Tova Churgin SteinParticipant
It is untrue that current standards for ethical conduct and guidelines for gift giving/receiving do not exist. There are clear and reasonable limits on ethical behavior for all contracting personnel. The article you refer to does not give any examples of ethics issues other than that of a member of Congress. Polititicians have a different set of pressures that lead them to violate ethics than civil servants have. The fact that the occassional ethics violation by high-level personnel (usually not civil servants) warrants so much newspaper attention attests to the overall integrity of the system. If ethics violations were common they would not make good news copy.
April 15, 2010 at 12:47 pm #97807
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.
3.101 Standards of conduct.
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.
April 15, 2010 at 12:59 pm #97805
I was not insinuating that they “do not exist” (reference my reply above). I also do not believe the article by Curry was insinuating that they do not exist. Curry’s opening paragraph in fact acknowledged the existence of “established ethical principles”. The article instead speaks to the “present approach to performing government contracting in conformance with established ethical principals”. Curry arguing that the “present approach…has failed” (Contract Management, April 2010, p. 50).
April 15, 2010 at 2:10 pm #97803
Peter G. TuttleParticipant
Hi Candace. I think the existing ethics guidelines about gratuities are sufficient. All the federal contracting professionals that I have dealt with personally since 1986 have followed them with no problems (that I know of). Unfortunately, there are those folks that do not follow the guidelines – sometimes they are caught – sometimes they are not. The one story that I’ll share with our group is about a Army General Officer who attended a “ribbon-cutting” ceremony for the roll-out of a new vehicle at a contractor’s plant. The contractor provided a catered lunch for every employee and guest. The General accepted this “free” lunch (as did everybody else – hundreds of people) and was “turned in” by a disgruntled employee. The amount of time spent by me (cognizant Contracting Officer at the time), legal, the General, his staff and the company’s management dealing with this issue far exceeded the value of the $10 meal. Although the acceptance of the meal was no problem IAW the ethics rules at the time, the PERCEPTION that he was accepting something free and thus improper was the bigger issue. Based on the time and effort spent to deal with this, I never accepted anything from a contractor (even a friend) from that day forward…too much potential hassle. Cheers. Pete
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