Understanding the US Government Ethics Requirements

In the aftermath of scandals such as GCO’s conflict of interest and federal officials’ preferential treatment and gratuities, there has been increased focus on ethics in Federal Government contracting. Some of these ethics violations led to criminal sentences, debarment, and enhanced accounting and legal requirements such as Sarbanes Oxley. Examples of ethics violations include bribery, unresolved conflicts of interest, and false claims.

Every company needs to be cognizant of requirements and have policies and processes in place to avoid ethical violations, or the appearance of them, and to effectively mitigate the impact of violations. Sound ethical operations should be a fundamental organization commitment and high standards are essential to pursuing and retaining business.

There are significant consequences of non-compliance with government ethics requirements. Failure of your company to meet these standards can result in debarment or suspension for up to three years. (FAR Subpart 9.4—Debarment, Suspension, and Ineligibility)

The FAR

The Federal Acquisition Regulations (FAR) were amended in 2008 and 2009 to include significant new compliance requirements for Federal contractors that include: 1) a Contractor Code of Business Ethics and Conduct; 2) an ongoing Ethics Training and Awareness Program; and 3) an effective Compliance and Ethics Program (Internal Controls). These new regulations are additional requirements to already existing rules requiring contracting officers to assure that companies doing business with the Federal Government met a “present responsibility” test. Present responsibility, simply put, means a contractor is “fit” or ethical and therefore eligible to do business with the government. If a contractor is found to lack “present responsibility,” it will not receive a new award and it could lose existing contracts if suspended or debarred from contracting.

The new FAR regulations take these requirements a step or two further to insure contractors remain ethical by requiring a written code of conduct, rigorous training of employees about the code of conduct and ongoing internal controls. The training should cover the standards for “present responsibility,” discuss various effective internal control mechanisms, methods for mitigating and reducing penalties and appropriate remedial measures. Specific types of violations would be incorporated in the training and awareness programs. These requirements apply to all contractors and subcontractors.

Key Features of New Requirements

Written Code of Business Ethics and Conduct Policy. The government expects all contractors to have a formal ethics and business conduct policy that covers the legal requirements in the FAR as well as expectations within the spirit of the laws. Where applicable, sections of the FAR would be cited. The policy would indicate that it is the intent of the contractor to promote compliance with its policy and to provide awareness communications. The Code of Business Ethics and Conduct will delineate specific behaviors to be avoided. Some examples include: bribery, illegal use of proprietary or confidential information, gratuity violations, false claims, fraud, unresolved conflicts of interest, and inappropriate behavior toward colleagues.

The Ethics Training Plan. The plan would provide background on federal requirements, with examples of breaches of requirements by well know companies. The training would walk participants through the various provisions of the FAR and other ethics statutes and how they applied to the company and particular procurements. Some of the types of violations that are occurring would be identified and addressed such as: conflicts of interest, gifts to federal employees, post-employment restrictions for federal employees, seeking employment with the government, the Procurement Integrity Act, “revolving door” rules, rules for contractors working side by side with federal employees, effective internal control mechanisms, methods to mitigate and reduce penalties and appropriate remedial measures and appropriate use of electronic communications and social media. The plan would also address company specific ethics rules.

Awareness training would be offered on a regular basis and would provide a refresher course on the Training Plan illuminated by new circumstances and new events.

Compliance Plan. To implement the Code of Business Ethics and Conduct Policy, a Compliance Plan should be adopted. The Compliance Plan should indicate how the company plans to monitor its activities to identify actual or appearance of conflict with their ethics policy and should include roles and responsibilities for administering the Compliance Plan. As a part of the Compliance Plan, employees would be specifically required to report actual or suspected irregularities on a timely basis. A “no-retaliation” provision would be incorporated in the Compliance Plan. A good practice would be to ask employees to sign a document that they have understood the policy and would perform their responsibilities consistent with the plan. The policy would also address how the company would respond to actual or potential violations including discussion with the Government agency with which the company is doing business. The disclosure to the government must be timely and in sufficient detail for law enforcement to identify the nature and extent of the offense and the individuals responsible for the conduct. Corrective measures would be incorporated into the policy.

Next Steps

The government’s policies and procedures regarding ethics are contained in several statutes and include detailed requirements. There are variations in the requirements depending on the size of the government procurement. To be in full compliance with both the written requirements as well as the spirit of the laws, a thorough understanding of all the policies and procedures will require detailed analysis. Careful adoption of policies in compliance with the requirements will require care in drafting and implementation.

XPRT can assist companies to develop or refine their business ethics and code of conduct policies and to implement policies consistent with government regulations and commonly accepted practices.

Cora Beebe-Fosdick has 30 years experience in the federal government and for more than 15 years, she has assisted firms in navigating the federal government world, successfully assisting them in identifying new business opportunities and winning competitive bids. She can be reached at cora.beebe-fosdick@xprts.co

For a free XPRT consultation to assess what your business needs to bid and win US government contracts, for help with your US government bid, or for more information, contact XPRT at (844) 332-9778.