Creation of Safe Harbors of Ethical Conduct in Major DoD Procurements to Speed the Fielding of Transformational Technologies for U.S. Warfighters

1. Misuse of Another Company’s Trade Secrets. On July 24, 2003 the Air Force announced the reassignment of $1 billion worth of launches from Boeing’s Delta IV rocket program to Lockheed Martin. The Air Force also suspended three Boeing Divisions from future government contract competitions, pending corrective Boeing action. The Air Force concluded that Boeing was in possession of proprietary Lockheed documents during the 1998 Evolved Expendable Launch Vehicle (EELV) source selection.
   
   Most recently, the Department of Justice is publicly rumored to be contemplating asserting civil damages against Boeing as a result of the alleged improper conduct during the EELV source selection. These damages potentially range from $100M - $170M in projected USAF program costs to shift launches to Lockheed Martin, which could arguably be trebled (tripled) to $300M - $500M, if applied in a controversial offensive manner. Generally, civil damages have traditionally been limited to actual overpayments to the offending contractor, and have not included reimbursement of additional program costs incurred by the government to competing contractors to maintain competitive balance after a procurement impropriety.
   
   
2. Improper Employment Discussions. Boeing announced its termination of its Chief Financial Officer and another senior Boeing management official, (who had previously served with the USAF), for allegedly violating company policy governing employment discussions with government officials during the $17B USAF tanker lease negotiations.
   
   
3. Appearance of Conflicts of Interest. On March 27, 2003, Richard Perle, Chairman of the Defense Policy Board, resigned his chairmanship in the face of “appearance of impropriety” and potential conflict-of-interest allegations. As chairman, Mr. Perle advised the Pentagon on policy and National Security matters. Public allegations were made by some Congressional members, that Richard Perle’s representation of bankrupt Global Crossing, Ltd., in the proposed sale of the company to Singapore Technologies Telemedia Pte., created an appearance of impropriety because of the potential that Global Crossing might benefit from undue influence and beneficial DoD treatment as a result of Mr. Perle’s strong public support for the Administration to initiate Operation Iraqi Freedom. Public evidence strongly suggests that the representation was legal, but still created the appearance of a conflict-of-interest.
   
   
4. Submitting False Statements to the Government. In 1999, Samtech Research, a defense contractor, concealed the identity of a company owner, by using alias names, who had previously been debarred from future contracts by the government. This allegedly resulted in other Samtech employees certifying falsely that no principal of the company was currently suspended or debarred from government contracting, violating the criminal False Statements Act. (18 USC §1001).
   
   
5. Failing to Disclose Government Overpayment. The owner of Tech Data Management, received an eight month prison sentence for improperly concealing a $584,000 inadvertent overpayment by the U.S. Army. The owner allegedly failed to inform the Army of the inadvertent overpayment, and then used a portion of the overpayment money for personal matters, creating a clear intent to conceal the overpayment and divert U.S. Taxpayer monies. The owner was charged with converting government property for personal use in violation of Embezzlement of Government Property statute. (18 USC §641).
   
   
6. Gratuities/Bribery. A U.S. Navy electrical foreman was fined $10,000 and sentenced to 36 months probation for illegally accepting $9,300 in gratuities from a government contractor. The foreman had assisted a government contractor, McCaffrey Electric Inc., in obtaining a Naval Air Warfare Center (NAWC) contract. The government employee had decision making authority over certain NAWC base maintenance contracts. He was charged with violating the Federal Anti-Bribery Act (18 USC 201).
   
   
7. Kickbacks to Prime Contractors from Subcontractors. In October 2003, the Department of Justice filed a civil complaint against Dynamics Research Corporation (DRC), which has a strong history of supporting USAF and DoD programs, for penalties and damages incurred by the government due to an alleged $10 million kickback scheme of two former DRC Officers. The government’s complaint alleged that DRC violated the Anti-Kickback Act of 1986 by allegedly engaging in a scheme of kickbacks and overcharges for computer systems.

1. Preventing Even the Appearance of Impropriety. Contractors and government employees should always strive to avoid even the appearance of impropriety, including the appearance of any personal Conflict of Interest. The general test is whether a “reasonable person in possession of the relevant facts” would see anything wrong or improper in the conduct. (Office of Government Ethics, 5 CFR 2635.502; Joint Ethics Regulation DOD 5500.7-R).
   
   
2. Avoiding Civil, and Criminal, Conflicts of Interest. A personal conflict of interest arises when a government employee’s relationships compromises the integrity of the procurement system. A personal conflict of interest is separate and distinct from an organizational conflict of interest, where potential bias can often be mitigated by firewalls or non-disclosure agreements. There is also a criminal statute which prohibits government employees from participating personally and substantially in any government matter that may affect the employee’s financial interests or those financial interests imputed to him or her. (18 USC §208).
   
   
3. Bans on Gifts From Contractors. Generally, government employees are prohibited from soliciting or accepting significant gifts from government contractors. Regulations also prohibit gifts given by contractors to influence performance of official duties, or frequent gifts that create the appearance of use of public office for private gain. The primary rule is to avoid even the appearance of bias, favoritism, or impropriety in any federal procurement. If there appears to be favoritism toward one particular contractor, the integrity of the procurement process will have been compromised due to potential loss of public confidence in the integrity of the procurement process. (Office of Government Ethics 5 CFR 2635.202(c)).
   
   
4. Prohibition Against Employment Discussions Without Recusal by Government Decision Makers. A government employee is prohibited from working on any matter that has a direct impact on the financial interests of his/her prospective employer without first receiving a written waiver. Criminal sanctions include up to 1-year imprisonment or, if willful, 5 years, and a possible fine of $50,000 for each violation. (Financial Conflict of Interest, 18 USC §208, Office of Government Ethics 5 CFR 2635.402. This is also reflected in the Procurement Integrity Act, 41 USC §423).
   
   
5. “Revolving Door” Restrictions. Former government employees are also prohibited by criminal statute from representing a contractor on specific programs with which they were involved while still employed by the government. This includes a lifetime ban on communications that are intended to influence the government on a particular matter, where the former government employee participated personally in matter in his or her official capacity. There is also a 2-year ban on communications by former government employees, who knew or should have known that the matter was pending under his or her official responsibility during the year prior to leaving government employment. There is also a 1-year general ban, imposing a “cooling off” period for “senior employees,” that restricts substantive communications with the government employee’s former agency on behalf of a contractor. (Post-Employment Restrictions, 18 USC §207)
   
   
6. Misuse of Official Position. government employees are precluded from using their positions or government title “in a manner that is intended to coerce or induce another person, including a subordinate, to provide any benefit” to third parties. (Office of Government Ethics, 5 CFR 2635.702)
   
   
7. Covenant Against Contingency Fees. As a matter of public policy, contractors may not pay contingency fees for obtaining government contracts because of the potential for disguised bribes or kickbacks to government officials indirectly through contractor consultants. There is a narrow exception, allowing contingency fees to be reimbursed to the contractor from the government for bona fide employees/firms who specialize in marketing and consulting, so long as they do not seek to assert improper influence upon the government. (Contingency Fees, FAR Subpart 3.4)
   
   
8. Procurement Integrity Act Prohibitions Against Employment Offers, or Seeking of Proprietary or Source Selection Information Prior to Contract Award. The Procurement Integrity Act generally prohibits contractors from knowingly (1) having employment discussions with procurement officials during competitions, unless the official recuses himself or herself; and (2) making any effort to improperly obtain access to either proprietary competing contractor information or to government source selection information during a competition. Violations of the Procurement Integrity Act are subject to a variety of penalties, including criminal prosecution, civil claims, and administrative actions. (Procurement Integrity Act, 41 USC §423).
   
   
9. The civil False Claims Act. This Act imposes civil monetary damages of treble damages (triple the amount of actual government overpayment, plus a $5,000 - $10,000 civil penalty per false claim submitted) on any person who knowingly submits a false or fraudulent claim for payment to the United States government. (31 USC §3729). As a general rule, civil damages are brought against contractors for billing the government for the contracted product, and then actually delivering a lesser/substandard item; or damages can be asserted for actual payments to contractors where the contractor never should have been awarded the contract due to improper conduct in the award. The government generally elects pursuit of treble (triple) civil FCA damages against the contractor, rather than criminal prosecution of individual contractor employees, because of the lower burden of proof for the government, greater recovery of damages to benefit of government, and greater financial deterrent to contractors to police employees. Subcontractors may also be held liable for submitting false claims, where the subcontractor submits false information to prime contractors with the expectation that the prime contractor will then bill the government based upon the subcontractor’s false information. (Ebling v. United States, 355 U.S. 907 (1957).)
   
   
10. The criminal False Claims Act. This Act makes it a crime to knowingly submit a false claim for payment to the government with actual personal knowledge of the falsity of the claim. Criminal false claims occur when a contractor knowingly attempts to be paid by the government for a false or fabricated claim. (18 USC. §287) As noted above, subcontractors may also be subject, under both the civil, and criminal, False Claims Act standards, for submission of false claims to prime contractors, with the expectation that the claim will be submitted by the prime contractor to the government.
    
    
11. The criminal False Statements Act. This criminal statute prohibits a party from knowingly making any false statement (or material omission) to the government. (18 USC §1001). Violation of the False Statement Act does not require the government to have relied upon the false statement or even have knowledge of the false statement.
    
    
12. Prohibitions of Government Employee Disclosure of Source Selection Information Under The Trade Secrets Act. This criminal statute prohibits government employees from disclosing "to any extent not authorized by law" specific categories of information, including confidential and trade secret data of any third party. (18 USC §1905)
    
    
13. Prohibitions Against Subcontractor Kickbacks Under the Anti-Kickback Act. This Act prohibits subcontractors from offering any form of a kickback to prime contractors in the inducement of a subcontract from the prime contractors. It also prohibits the prime contractor from soliciting any form of a kickback from the subcontractor in exchange for the subcontract. This has both potential contractual remedies, civil damages remedies, and also criminal penalties, as a result of a violation of the Anti-Kickback Act. (41 USC §51)

• Request government personnel to serve in an unpaid capacity on contractor Management Councils, Business Process Reengineering Teams, Integrated Process Teams or similar entities.
  
  
• Serve on Government Integrated Process Action Teams or similar entities.
  
  
• Participate in market surveys for products and services as described in FAR Part 10. This can include providing product demonstrations or permitting the government to “test drive” a product for a reasonable period of time.
  
  
• Upon government request, provide existing contractor product specifications; or in situations where contractor acts in capacity as a defense industry representative, assist government in the preparation, refinement, or coordination of specifications or statements of work (as permitted by FAR 9.505-2(a)(1)(i) and (ii)).
  
  
• Engage in public exchanges with the government to enhance the understanding of program requirements and industry capabilities before government’s issuance of Solicitations. (responding to draft SOWs and draft RFPs). (FAR 15.201).
  
  
• Submit unsolicited proposals as contemplated by FAR Subpart 15.6, where the contractor has identified innovative solutions to current government processes, or new innovative solutions to unidentified government requirements.
  
  
• Communicate freely with Members of Congress. (Subject to registration requirement of Lobbying Disclosure Act, 2 U.S.C. §1601.)
  
  
• Ask former government personnel who are employment candidates to obtain and provide an ethics opinion from their former agency regarding the propriety of their potential employment as a pre-condition to their employment.
  
  
• Have systems in place that require company officers and employees to comply with the highest ethical standards, and that make individuals accountable for failures to do so.
  
  
• Become thoroughly familiar with the Government-Wide Ethics Regulations (Title 5 of the Code of Federal Regulations) and the DoD Joint Ethics Regulation (DoD Directive 5500.7-R).
  
  
• Provide employees with periodic training in procurement ethics.
  
  
• Comment upon proposed changes to the FAR and Agency Supplements in accordance with FAR 1.501-2.
  
  
• Sponsor or participate in public meetings to discuss possible changes to the FAR or agency supplements.
  
  
• Be part of industrial associations that present the government with industry views on acquisition policy matters.
  
  
• Participate in trade shows where the latest advances in products and technology are demonstrated.
  
  
• Market products and services listed on GSA schedule contracts as contemplated by those contracts.
  
  
• Write articles for scientific, technical, academic and professional publications describing new products or services or comment critically on government procurement policies.

• Offer gratuities to government personnel (except as permitted by the Government-wide Ethics Regulation and the DoD JER).
  
  
• Seek or obtain source selection information or competing proposal information (except as permitted under the Procurement Integrity Act, 41 USC §423, and FAR 3.104).
  
  
• Seek special favors or consideration directly or indirectly from government officials.
  
  
• Make any representation to anyone that the contractor can achieve certain results because of its relationship with government personnel.
  
  
• Take any action that would compromise a government official’s ability to faithfully and properly perform the functions of his/her position.

• Recognize that contractors are a part of the Acquisition Team (as formally acknowledged by FAR 1.102(c)) and treat them accordingly.
  
  
• Serve in an unpaid capacity on contractor Management Councils, Business Process Reengineering Teams, Integrated Process Teams or similar entities.
  
  
• Conduct market surveys for products and services as described in FAR Part 10, with an emphasis upon obtaining data from contractors on the availability of commercial items to satisfy agency needs. Market surveys can properly involve product demonstrations and the government “test driving” of a specific product for a reasonable time. (Market surveys require the disclosure of basic agency requirements to survey participants).
  
  
• Transparently request contractors or contractor associations to provide or assist in preparing specifications or statements of work (as permitted by FAR 9.505-2(a)(1)(i) and (ii)).
  
  
• Speak before contractor symposia, workshops, conventions etc. on acquisition policy issues or general agency requirements.
  
  
• Request contractors to speak and participate in government sponsored acquisition conferences, workshops, symposia, etc.
  
  
• Attend industry trade shows, ship launches, and aircraft roll-out ceremonies.
  
  
• Request contractors to serve on government business process re-engineering, Integrated Product Teams or similar entities intended to improve or ensure the quality of government procedures and processes that impact contractors.
  
  
• Ensure that contractors receive impartial, fair and equitable treatment (consistent with the requirements of FAR 1.606-2).
  
  
• Become thoroughly familiar with and comply with the Government-wide Ethics Regulation, found in Title 5 of the Code of Federal Regulations or the DoD Joint Ethics Regulation (JER), 5500.7-R.
  
  
• As appropriate, discuss proposed changes to the FAR and agency supplements publicly and transparently (in accordance with FAR 1.502 and 1.503).
  
  
• Discuss acquisition policy issues with industry associations and solicit the views of such associations when formulating acquisition policy.
  
  
• Subject to specific agency clearance requirements, write articles on acquisition issues for contractor publications, as well as for general circulation, professional or academic publications.
  
  
• Be familiar with the FAR provisions concerning organizational conflicts of interest (FAR Subpart 9.5) and take prompt and fair action to avoid, overcome, or mitigate the effects of a potential OCI on any competing contractors. (This is in addition to avoidance of personal conflicts of interest in FAR Part 3).

• Provide source selection information or proprietary proposal information to any contractor (except as narrowly permitted by the Procurement Integrity Act, 41 USC §423, and FAR 3.104).
  
  
• Provide special favors or consideration to any contractor either directly or indirectly.
  
  
• Place personal gain or privilege above the faithful performance of their duties as government officials.
  
  
• Retaliate or discriminate against a contractor who files a protest or claim against the government.
  
  
• Engage in any conduct that is prohibited by the Government-wide Ethics Regulation and the DoD JER.