Integrating Ethics Integrating Ethics and Procurement – and Procurement –

International International LessonsLessons

Professor Christopher YukinsProfessor Christopher Yukins

The George Washington University The George Washington University Law SchoolLaw School

Presentation to Interagency Ethics Presentation to Interagency Ethics CouncilCouncil

August 3, 2006August 3, 2006

2

Topics for TodayTopics for Today Goals in a Procurement SystemGoals in a Procurement System Procurement Integrity Has New Procurement Integrity Has New

ImportanceImportance Druyun CaseDruyun Case Safavian CaseSafavian Case Rise in task-order contractingRise in task-order contracting Decline in Acquisition WorkforceDecline in Acquisition Workforce

International ModelsInternational Models UN Convention Against CorruptionUN Convention Against Corruption UNCITRAL Model Procurement LawUNCITRAL Model Procurement Law

Basic Training – “Common Bloopers”Basic Training – “Common Bloopers”

3Reasons for Reform:Reasons for Reform:Desiderata, Goals, Constraints?Desiderata, Goals, Constraints?

TransparencyTransparency IntegrityIntegrity CompetitionCompetition UniformityUniformity Risk AvoidanceRisk Avoidance Wealth DistributionWealth Distribution(*)(*) Best valueBest value Efficiency Efficiency (administrative)(administrative) Customer SatisfactionCustomer Satisfaction

Traditional?

Transitional?

Current?

Problems in Problems in Procurement Procurement

IntegrityIntegritySome Obvious Some Obvious

ProblemsProblems

5

October 2004 ShockerOctober 2004 Shocker

Ex-Air Force Official Gets Ex-Air Force Official Gets Prison TimePrison Time

Boeing Received Special Boeing Received Special Treatment in ProcurementTreatment in Procurement

By Renae Merle and Jerry MarkonBy Renae Merle and Jerry Markon

Washington Post Staff WritersWashington Post Staff WritersSaturday, October 2, 2004; Page A01Saturday, October 2, 2004; Page A01

6From Darleen Druyun’sFrom Darleen Druyun’sSupplemental Plea Supplemental Plea

AgreementAgreement1. The defendant agrees and stipulates that

she breached the plea agreement by not providing full, complete and truthful cooperation as required by paragraph 11 of the plea agreement. The Supplemental Statement of Facts filed with this Supplemental Plea Agreement outlines the nature of that breach and constitutes a stipulation of facts for purposes of Section 1B1.2(a) of the Sentencing Guidelines.

7Supplemental Facts fromSupplemental Facts fromDarleen DruyunDarleen Druyun

On July 28, 2004 the defendant was reinterviewed by government agents and acknowledged, as a result of the government’s investigation, that she had not been truthful in her prior cooperation. The defendant had previously maintained that she had always acted in the best interest of the United States during her negotiations with the Boeing Company while she was employed by the Air Force. She acknowledged a conflict of interest in negotiating employment with Boeing while at the same time negotiating with Boeing on behalf of the Air Force. However, the defendant had maintained that her relationship with Boeing did not influence her official actions or harm the government.

8Supplemental FactsSupplemental Facts

The defendant, since July 28, 2004, now acknowledges that she did favor the Boeing Company in certain negotiations as a result of her employment negotiations and other favors provided by Boeing to the defendant. Defendant acknowledges that Boeing’s employment of her future son-in-law and her daughter in 2000, at the defendant’s request, along with the defendant’s desire to be employed by Boeing, influenced her government decisions in matters affecting Boeing. That as a result of the loss of her objectivity, she took actions which harmed the United States to include the following:

9More

Obvious

Problems

Duke Cunningham

David Safavian

Ex-Aide To Bush Found GuiltySafavian Lied in Abramoff ScandalBy Jeffrey H. BirnbaumWashington Post Staff WriterWednesday, June 21, 2006; Page A01

Congressman resigns after bribery pleaCalifornia Republican admits selling influence

for $2.4 millionMonday, November 28, 2005

(CNN) -- Rep. Randy "Duke" Cunningham said Monday he is resigning from Congress after

pleading guilty to taking more than $2 million in bribes in a criminal conspiracy involving at

least three defense contractors.

Less Obvious Less Obvious ProblemsProblems

11Historical Historical

ProgressionProgression

Sealed Sealed BidsBids

                                                

                 

                                    

                               

Negotiated Negotiated ProcurementsProcurements

Task Order Task Order ContractingContracting

             

Benefits Benefits of Task of Task Order Order

ContractContractinging

FasterFaster

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

FY1999 FY2000 FY2001

IT ScheduleOrders($millions)Total ScheduleOrders

Fee Revenues

GSA Earnings(Surplus Fees)

SuccessfulSuccessful

13Impact of Shift to Task Impact of Shift to Task

Order ContractingOrder Contracting

CompetitionCompetition

Procurement Procurement IntegrityIntegrity

TransparencyTransparency

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Other Causes of Concern:Other Causes of Concern:Declining Acquisition Declining Acquisition

WorkforceWorkforce

15Acquisition Workforce & Procurement Spending

Defense(reflective of government-wide experience)

050

100150200250300350400450500

1990 1999 2004

Fiscal Year (FY)

Acquisition Workforce(In hundreds ofthousands, PackardCommissionMethodology)

DoD ProcurementSpending (in billions ofdollars)

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Other Causes for Concern:Other Causes for Concern:Outsourcing of Procurement Outsourcing of Procurement

PositionsPositions

Which code of ethics – government or contractor’s?

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18

California Already AppliesCalifornia Already AppliesPersonal Ethics Rules to Personal Ethics Rules to “Consultants”“Consultants”

19California: The Basic California: The Basic

RuleRule

20

. . . Applied to . . . Applied to “Consultants”“Consultants”

Has the Has the Government Government

Shifted to Meet Shifted to Meet Problems?Problems?

22

Guidelines: Elements of an Guidelines: Elements of an Effective Compliance Effective Compliance

ProgramProgram1.1. Standards and procedures Standards and procedures 2.2. Knowledgeable governing authority; high-Knowledgeable governing authority; high-

level personnel responsible, with adequate level personnel responsible, with adequate resources, authority and accessresources, authority and access

3.3. Exclude inappropriate personnelExclude inappropriate personnel4.4. TrainingTraining5.5. Ensuring compliance: monitoring and Ensuring compliance: monitoring and

evaluating program; reporting and guidanceevaluating program; reporting and guidance6.6. Incentives and disciplinary measures Incentives and disciplinary measures 7.7. Reasonable steps in response to criminal Reasonable steps in response to criminal

conductconduct, including modifications to , including modifications to compliance programcompliance program

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Contractor Compliance: Contractor Compliance: Background on Sentencing Background on Sentencing

GuidelinesGuidelines U.S. Sentencing Commission publishes U.S. Sentencing Commission publishes

Guidelines (Guidelines (http://www.ussc.gov/http://www.ussc.gov/)) Federal courts must strictly follow Sentencing Federal courts must strictly follow Sentencing

Guidelines when applying criminal sentencesGuidelines when applying criminal sentences Specific guidelines (Chapter 8) govern Specific guidelines (Chapter 8) govern

sentencing of organizationssentencing of organizations Describe effective compliance programsDescribe effective compliance programs

Effective November 1, 2004, guidelines Effective November 1, 2004, guidelines for compliance programs substantially for compliance programs substantially strengthenedstrengthened

24Benefits of Compliance Benefits of Compliance

ProgramProgram Sentencing Guidelines state:Sentencing Guidelines state:

An effective program can An effective program can reduce corporation’s reduce corporation’s sentencesentence in the event of conviction (8C2.5) in the event of conviction (8C2.5)

Lack of compliance program Lack of compliance program may force may force probationprobation

Effective program may Effective program may ease conditions of ease conditions of probationprobation for corporation (8D1.4) for corporation (8D1.4)

Practical benefits for corporation:Practical benefits for corporation: Demonstrates commitmentDemonstrates commitment to good citizenship to good citizenship Shows Shows commitment to compliancecommitment to compliance Addresses Addresses employee and stakeholderemployee and stakeholder concerns concerns

25Compliance Program Called Compliance Program Called

for by DFARS 203.7001for by DFARS 203.7001 A contractor's system of management controls A contractor's system of management controls

should provide for-- should provide for-- (1) A (1) A code of ethicscode of ethics and and trainingtraining;;(2) (2) Periodic reviewsPeriodic reviews to ensure compliance; to ensure compliance; (3) A (3) A mechanismmechanism for reporting improper conductfor reporting improper conduct; ; instructions that encourage instructions that encourage employees to report; employees to report; (4) Internal and/or external (4) Internal and/or external auditauditss, as appropriate;, as appropriate;

(5) (5) Disciplinary actionDisciplinary action for improper conduct; for improper conduct; (6) (6) Timely reportingTimely reporting to the Government to the Government; and ; and (7) (7) Full cooperationFull cooperation with any Government agencies with any Government agencies responsible for either investigation or corrective actions. responsible for either investigation or corrective actions.

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How Guidelines and DFARS How Guidelines and DFARS CompareCompare

Sentencing GuidelinesSentencing Guidelines DFARS 203.7001DFARS 203.7001

1. Standards and 1. Standards and procedures procedures

Code of EthicsCode of Ethics

2. Knowledgeable 2. Knowledgeable leadershipleadership

3. Exclude risky 3. Exclude risky personnelpersonnel

4. Training4. Training TrainingTraining

5. Monitor, evaluate, 5. Monitor, evaluate, reporting hotlinereporting hotline

Periodic review; Periodic review; audits; hotlineaudits; hotline

6. Incentives and 6. Incentives and disciplinediscipline

DisciplineDiscipline

Adjust program to riskAdjust program to riskSelf-reporting = Self-reporting = sentencing factorsentencing factor

Timely reporting to Timely reporting to governmentgovernment

Cooperation = sentencing Cooperation = sentencing factorfactor

Full cooperation with Full cooperation with governmentgovernment

International International PerspectivePerspectiveUnited Nations United Nations

InitiativesInitiatives

28United

NationsCommission onInternational

Trade Law(UNCITRAL)

ModelProcurement

Law

UnitedNations

ConventionAgainst

Corruption

UN Convention Against UN Convention Against CorruptionCorruption

Goal:Fight Corruption

Extradition

Bribery

ForeignBribery

CentralBody

Civil Society

Judiciary

Procurement

Code ofConduct

CivilService

AssetForfeiture

MoneyLaundering

MutualAssistance

= Self-Executing

30

Procurement

UN Convention Against UN Convention Against Corruption (Art. 9)Corruption (Art. 9)

UNCITRAL Model ProcurementUNCITRAL Model Procurement LawLaw

Public InformationPublic Information YesYes

Advance award criteria and Advance award criteria and publicationpublication

YesYes

Objective and predetermined Objective and predetermined criteria for awardcriteria for award

YesYes

Bid protest and appealBid protest and appeal MaybeMaybe

Measures to control procurement Measures to control procurement personnel – e.g., rules and codespersonnel – e.g., rules and codes

NoNo

Transparency, including in Transparency, including in budgeting and accountingbudgeting and accounting

YesYes

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Challenges Under “Integrity First” Challenges Under “Integrity First” ApproachApproach Leadership Shifts to Integrity CommunityLeadership Shifts to Integrity Community

Politicians, PressPoliticians, Press OfficialsOfficials

EthicsEthics ProsecutorsProsecutors

But: . . .procurement officials, programs, industry But: . . .procurement officials, programs, industry . . .. . .

Over-inclusive: E.g., Commercial Bribery; Over-inclusive: E.g., Commercial Bribery; DamagesDamages

Under-inclusive: E.g., Procurement Integrity Under-inclusive: E.g., Procurement Integrity ActAct

Top 10 Top 10 Compliance Compliance

BloopersBloopers

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Compliance Is About Compliance Is About Making Sure Perceptions Making Sure Perceptions

Match RealityMatch Reality The ethics and The ethics and

procurement integrity procurement integrity rules are extremely rules are extremely complexcomplex

Too often, the problem is Too often, the problem is that employees have that employees have misperceptions regarding misperceptions regarding the rulesthe rules Compliance training’s Compliance training’s

goal is to align your goal is to align your understanding with the understanding with the rulesrules

Misperception:Misperception:It’s Okay To Feed a It’s Okay To Feed a

Government OfficialGovernment Official

35

RealityReality It’s against the law – both the It’s against the law – both the

criminal law and the criminal law and the government’s ethics rules – for government’s ethics rules – for a contractor to give a contractor to give government employees government employees “anything of value,” or for “anything of value,” or for government officials to acceptgovernment officials to accept

That includes meals. That includes meals. Contractors should not pay for Contractors should not pay for meals to government meals to government employeesemployees Exception: snacks can be Exception: snacks can be

providedprovided Question: What’s a Question: What’s a

snack? What’s meal?snack? What’s meal?

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Perception:Perception:It’s Okay for a Contractor To It’s Okay for a Contractor To Loan Money To Government Loan Money To Government Officials, So Long As They Officials, So Long As They

Promise To Pay It BackPromise To Pay It Back

37

Reality: Reality: A Loan Can = A Criminal A Loan Can = A Criminal

GratuityGratuity Federal law makes it a criminal Federal law makes it a criminal offense to give “anything of offense to give “anything of value” to a government official value” to a government official “for or because of” an official act“for or because of” an official act

A loan is a “thing of value,” and A loan is a “thing of value,” and may constitute an illegal gratuitymay constitute an illegal gratuity Federal law calls for a sentence of Federal law calls for a sentence of

up to two years for a up to two years for a gratuitygratuity The possible sentence for a The possible sentence for a bribe bribe (a (a

quid-pro-quo) is up to fifteen years in quid-pro-quo) is up to fifteen years in prisonprison

38

Perception:Perception:It’s Improper for a It’s Improper for a Contractor To Talk To A Contractor To Talk To A Contracting Official About Contracting Official About an Upcoming Procurementan Upcoming Procurement

39

RealityReality Federal Federal

procurement procurement regulations regulations encourage encourage interactions with interactions with industry before a industry before a solicitation is solicitation is issuedissued After the After the

solicitation is solicitation is issued, the issued, the contracting officer contracting officer should control any should control any further exchangesfurther exchanges

40

Perception:Perception:Once a company Once a company

has helped design a has helped design a government government

system, it is forever system, it is forever barred from selling barred from selling

components for components for that system to the that system to the

governmentgovernment

41

RealityReality Principles of Principles of organizational organizational

conflicts of interestconflicts of interest (“OCI”) (“OCI”) prohibit contractors from gaining prohibit contractors from gaining an unfair advantage, such as by an unfair advantage, such as by designing systems that they will designing systems that they will deliverdeliver But if a contractor and a contracting But if a contractor and a contracting

officer officer set up safeguardsset up safeguards, to ensure , to ensure that the contractor doesn’t gain an that the contractor doesn’t gain an unfair advantage or provide biased unfair advantage or provide biased advice, advice, the OCI can be “mitigated”the OCI can be “mitigated” – and, with the contracting officer’s – and, with the contracting officer’s consent, the contractor may proceed consent, the contractor may proceed with follow-on workwith follow-on work

42

Perception:Perception:Government Employees Government Employees Can Accept Can Accept Anything Anything at a at a Trade ShowTrade Show

43

Reality:Reality:“Small Item” Exception Is “Small Item” Exception Is

LimitedLimited Under the gift rules, Under the gift rules,

government officials may government officials may accept up to $20 per accept up to $20 per donor, up to a total of donor, up to a total of $50 per year per donor$50 per year per donor This includes low-value This includes low-value

items given out at trade items given out at trade showsshows

But the exception But the exception extends to extends to all all items from items from a single corporation -- a single corporation -- they may not exceed they may not exceed $50/year per official$50/year per official

44

Misperception:Misperception:In Handling In Handling

Ethics, A Ethics, A Government Government

Employee Is On Employee Is On His OwnHis Own

45

Reality:Reality:Government Ethics Officials Are Government Ethics Officials Are

AvailableAvailable A government official A government official

may always ask an may always ask an ethics official for adviceethics official for advice

If the ethics officer If the ethics officer gives a “comfort letter” gives a “comfort letter” – an ethics opinion – an ethics opinion approving of the approving of the employee’s proposed employee’s proposed conduct – that comfort conduct – that comfort letter may help protect letter may help protect the employee and the the employee and the contractor from contractor from criminal prosecution.criminal prosecution.

46

MisperceptionMisperception

““All’s fair in love and All’s fair in love and government government contracting” – it’s okay contracting” – it’s okay to use a competition to to use a competition to “sneak a peek” at “sneak a peek” at competitors’ competitors’ informationinformation

47

Reality:Reality:It’s Illegal To Steal Inside It’s Illegal To Steal Inside

InformationInformation Procurement Integrity Act Procurement Integrity Act

bans improper access to:bans improper access to: Bid-and-proposal Bid-and-proposal

informationinformation from other from other biddersbidders

Source selection Source selection informationinformation (information (information used by the government used by the government evaluators and evaluators and procurement planners)procurement planners)

48

Perception:Perception:It’s Okay for It’s Okay for a Contractor a Contractor To Recruit a To Recruit a Government Government EmployeeEmployee

49

Reality:Reality:Recruiting Triggers Ethical Recruiting Triggers Ethical

RequirementsRequirements The “revolving door” ethical The “revolving door” ethical

requirements are very complex:requirements are very complex: A procurement official may have to A procurement official may have to

recuserecuse herself from all herself from all procurementsprocurements

Other government employees have Other government employees have similar requirementssimilar requirements, under , under other lawsother laws

Bottom line: Bottom line: contact your HR contact your HR department and/or ethics department and/or ethics officerofficer before even beginning before even beginning the processthe process

Darleen Druyun

50

Perception:Perception:

It’s illegal for a It’s illegal for a contractor to be contractor to be friends with a friends with a government government employeeemployee

51

Reality:Reality:Friendship’s Okay – But Be Friendship’s Okay – But Be

CarefulCareful Items given to a government Items given to a government

employee, if there is a true employee, if there is a true friendship, are not “gratuities” friendship, are not “gratuities” because they are given out of because they are given out of friendship – not “for or friendship – not “for or because of an official act”because of an official act” But be prepared to explain that But be prepared to explain that

friendship to third parties . . . friendship to third parties . . . including an investigatorincluding an investigator

Do your friend a favor: don’t Do your friend a favor: don’t give or accept gifts that will give or accept gifts that will raise concernsraise concerns

52

Misperception:Misperception:Only the Folks in the Only the Folks in the

Contracting Department Contracting Department Need To Worry About Need To Worry About Federal ComplianceFederal Compliance

53Reality:Reality:

Compliance Is Everyone’s Compliance Is Everyone’s ResponsibilityResponsibility

ConclusionConclusion

Professor Christopher YukinsProfessor Christopher Yukins

cyukins@law.gwu.educyukins@law.gwu.edu

Tel. 202-994-9992Tel. 202-994-9992