Safe harbors of Ethical conduct needed in defense procurement.

• Author: McAleese, James
• Position: Legal viewpoint

In light of a recent series of isolated, highly controversial public scandals with respect to several major defense acquisition programs, it is important to create "safe harbors" of conduct so that both government and contractor personnel can work as a cohesive team to speed the fielding of critical technologies for both the war on terrorism and the Defense Department's transformation initiatives.

Responding to a government investigation over possible procurement improprieties is costly and diverts a defense contractor's attention away from the primary objective of supporting the customer. The Defense Department, for its part, has a critical interest in preserving the integrity of the federal procurement system to ensure public confidence in government expenditure of the $2 trillion annual federal budget. It is therefore beneficial to both the government and contractors to create "safe harbors" of future conduct. A "safe harbor" list of do's and don'ts is offered in this article.

A fair procurement process that encourages healthy competition and rewards innovation ensures that U.S. military forces have the decisive advantage on the battlefield. Procurement integrity problems, whether intentional or inadvertent, detract from efforts to improve lethality, combat capability and survivability for American troops in combat. It also fosters public distrust of the government.

Procurement Impropriety Claims

Claims of alleged procurement improprieties arise under different scenarios. A wide array of prohibited conduct is covered by statutory and regulatory restrictions. To avoid inadvertent procurement improprieties, both government employees and contractors must know these fundamental rules. There are several issues that trigger the "appearance of impropriety" in procurements and become bases for contract cancellation, civil claims by the government and criminal enforcement by government:

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 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 range potentially from $I00 million to $170 million in projected Air Force program costs to shift launches to Lockheed Martin, which could arguably rise to between $300 million and $500 million, if applied in a controversial offensive manner. 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 maintain competitive balance after a procurement impropriety.

Improper Employment Discussions. Boeing terminated the employment of two company officials for allegedly violating corporate policy governing employment discussions with government officials during the $17 billion Air Force tanker lease negotiations.

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, Perle advised the Pentagon on policy matters. Members of Congress charged that 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 Global Crossing might benefit from undue influence. Public evidence strongly suggests that the representation was...