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Procurement integrity is back on the agenda – or perhaps it never left. All of us know the stories by now: A senior Air Force acquisition executive with more than 30 years of procurement experience (Darleen Druyun) negotiates secretly with the nation’s second-largest defense contractor (Boeing) for employment while favoring that contractor in a series of procurement decisions. Ultimately, she pleads guilty to a conspiracy charge and is sentenced to nine months in prison. A General Services Administration contractor (CACI) faces serious questions about its contractor responsibility for accepting an “out-of-scope” task order under its information technology schedule contract to provide interrogation services at the Abu Ghraib prison in Baghdad. The task order, which was issued by the Department of the Interior’s National Business Center, ultimately results in at least five government investigations. In the wake of these events, corporate counsel are asking whether such instances of procurement misconduct were merely unavoidable “accidents” or whether a more robust compliance program could have prevented them. I argue for the latter conclusion. Although no corporate compliance program is foolproof, the Druyun and CACI affairs suggest the following lessons. BRING IN THE LAWYERSThe need for corporate counsel involvement, early and often. When the news broke that Air Force official Druyun had been secretly negotiating for employment with Boeing before recusing herself from taking procurement actions with respect to the company, I suspect that the most shocked and angry folks were those on Boeing’s in-house legal staff. The procurement integrity rules governing employment-related contacts with government employees – particularly senior acquisition executives such as Druyun – are extremely complex and nuanced. In this context (as in such areas as data rights and the Buy American Act), every case calls for legal advice. Simply put, there is no way that a contractor executive should even think about engaging in employment-related discussions with a top government procurement official without first consulting with corporate counsel. Similarly, while contract managers at sophisticated government contractors such as CACI may be expected to know the rules for determining when a task order or contract modification is out of scope, there are times when they should consult with corporate counsel about this issue as well. So the Golden Rule of corporate compliance remains, as it always has been: Consult with corporate counsel, early and often. • The need for multiple levels of review. In the Druyun situation, Boeing’s in-house legal staff may not have had the chance to consult on her possible hiring in a timely fashion before one individual – Boeing’s chief financial officer, Michael Sears – conducted negotiations with her in secret and made a job offer. If so, the Boeing blowup argues eloquently that no one individual should have this kind of power. When a corporation contemplates taking an action that can obviously and directly affect its contractor responsibility, the corporation should ensure that the proposed action undergoes multiple levels of review – including, of course, legal review. Put bluntly, it should be unthinkable for one person – even a chief financial officer – to be able to negotiate with and hire a senior government acquisition executive without anyone else knowing about it. Similarly, corporations need to build in controls to ensure that a “second set of eyes” looks at contract arrangements that are arguably out of scope. RED FLAGS RISINGThe need for training on identifying red flags. Both the Druyun affair and the CACI matter presented obvious procurement integrity red flags to anyone trained to look for them. First, Druyun was the second-highest-ranking Air Force acquisition official. That fact alone should have counseled restraint and caution in dealing with her. Second, the task order that CACI received for interrogation services at Abu Ghraib was issued by a fee-for-service procurement shop (i.e., an office that handles other agencies’ procurement for a fee). While these shops can be a savior to overburdened agency procurement personnel, it is commonly understood that agencies that offload their procurement requirements to these shops usually do so for one reason: a need for speed. Given this motivation – and the motivation of fee-for-service procurement shops to maximize revenue – it is no surprise that one of these shops might have been tempted to issue a task order that, charitably put, was on the fringe. In the Abu Ghraib episode, the situation was exacerbated by the shop’s use of a GSA schedule contract rather than its own contract vehicle. Again, it is commonly understood that the GSA – after having awarded schedule contracts with generally broad but not unlimited scopes – rarely intervenes at the task- or delivery-order level, leaving it to the purchasing agency to determine scope issues. Additionally, when an agency offloads its procurement requirements to a fee-for-service procurement shop, the agency has to count on the shop to follow the agency’s procurement rules – an assumption that does not always hold true (as some offloading agencies know all too well and occasionally use to their advantage). The solution to recognizing these red flags is training and more training. DOING THE RIGHT THINGThe need to do the right thing and to eschew legalisms. Being a good government contractor involves more than just strict adherence to the law. When the CACI matter broke, many government contracts lawyers argued forcefully that CACI had no legal duty to reject the National Business Center’s task order. In the current supercharged environment over procurement integrity, that argument is beside the point. Regardless of whether CACI had a legal duty to reject the task order, many agency acquisition executives – including suspension and debarment officials – have made it manifestly clear that, at least prospectively, contractors that indiscriminately accept out-of-scope task orders and contract modifications will do so at no small risk. Although it may sound Pollyanna-ish, contractors do have a duty – albeit perhaps not a legal duty – to moderate their behavior when it comes to accepting task orders and contract modifications that are clearly out of scope. In this area, as in so many others, corporate counsel can play a key role as an honest broker. • The need for comprehensive entrance conferences and debriefings when employees are hired or leave. As if Boeing didn’t have enough trouble with the Druyun matter, it is also facing a lawsuit over hiring from competitor Lockheed Martin one or more individuals who brought some 37,000 pages of proprietary information to Boeing. (In July 2003, the Air Force suspended three Boeing business units as a result of this incident.) This situation cries out for government contractors to develop and implement protocols for vetting both incoming and outgoing employees, particularly with regard to their access to competitive information. While the techniques will vary, companies should require new employees to certify that they have not lifted any of their former employers’ competitively sensitive information. Similarly, companies should require outgoing employees to certify that they are not taking any competitively sensitive information to their new employers. In addition, in-house counsel should work with information security and human resources professionals to develop protocols to prevent departing employees from downloading information that could be of use to a competitor. • The need for a fresh look at company ethics policies and procedures. An old adage goes: “Fool me once, shame on you. Fool me twice, shame on me.” After the Druyun affair and the CACI matter, in-house counsel should carefully review and update as necessary their corporate compliance materials to ensure that they cover the procurement integrity issues involved in these cases. In particular, corporate counsel should look for best practices reflected in publicly available ethics training resources. (One great place to start is the clearinghouse of ethics materials maintained by the Defense Industry Initiative on Business Ethics and Conduct, available at www.dii.org/training/clearinghouse_list00.html.) Companies should also review their reporting relationships and adjust them as necessary to ensure that procurement integrity issues are addressed at the highest levels of the corporation. LEADERSHIP MATTERSThe need for top-of-mind management attention to procurement integrity. Corporations, like governments and other institutions, frequently embody the priorities of their leaders. The best government contractors are usually those companies that truly believe in procurement integrity from the top down – even at the occasional expense of profit. While no corporation with even the most sophisticated compliance systems can ever be sure that it will not be the unwitting subject of the next procurement scandal, companies that devote a significant amount of management attention to this issue reduce the risk of being the next poster child for procurement integrity. More important, at least they will have a story to tell the suspension and debarment officials if, despite their best efforts, things go wrong. In the current parlance, if senior management “talks the talk,” the corporation writ large is much more likely to “walk the walk.” Leadership does matter. Procurement integrity scandals are, of course, nothing new. (Witness the Ill Wind procurement fraud investigations of the late 1980s.) When the fallout from the Druyun affair eventually recedes from the front pages of our newspapers – and it may be a while, given the startling admission in her supplemental statement of facts that she gave a “parting gift” to Boeing during the tanker-lease negotiations – corporate management and in-house legal staff will have to exercise vigilance to ensure that the lessons of the Summer of Procurement Integrity are not lost. John A. Howell is a partner in the D.C. office of Dorsey & Whitney. He can be reached at [email protected].

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