Opportunities Exist to Improve DOD’s Oversight of Contractor Ethics Programs

hotline_poster

The Government Accounting Office released a report on the compliance and ethics programs of 57 government contractors each with yearly contracts over $500 million: Defense Contracting Integrity: Opportunities Exist to Improve DOD’s Oversight of Contractor Ethics Programs

The report’s survey was conducted in September 2008, before the new Federal Acquisition Regulations were put in place to require compliance and ethics programs. As of December 2008, the government contractors are required to have a code of business ethics and conduct, an internal control system, and to disclose to the Government certain violations of criminal law, violations of the civil False Claims Act, or significant overpayments. In fiscal year 2008 alone, DOD’s hotline received nearly 14,000 contacts resulting in 2,000 cases referred for investigation.

The Report found two key areas where additional opportunities exist to improve DOD’s oversight. The first is in the area of verifying the existence of contractor ethics programs after contract award as part of contracting officers’ contract administration responsibility. Additional oversight of contractor ethics programs during contract administration could help ensure that contractor ethics programs are in place as intended. The second is in the area of DOD’s hotline program. The new FAR contractor ethics rules have the potential to make the DOD’s hotline program less effective by ultimately reducing contractor exposure to DOD hotline posters and diminishing the means by which fraud is reported under the protection of federal whistleblower laws. Nearly all of the major contractors surveyed in the report had in-house ethics and compliance programs that exempt them from displaying the DOD posters.

The GAO report ended with four recommendations to improve oversight of defense contractors’ ethics programs:

Determine if other guidance is needed to clarify responsibility during contract administration responsibility for verifying the implementation of contractor ethics programs.
Determine the need for displaying the DOD fraud hotline posters.
Determine whether the hotline poster should inform contractor employees of their federal whistleblower protections.
If there is a need for the DOD’s hotline posters, amend DFARS to require display posters regardless of whether contractor has its own posters.

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