How to Handle Ethics-Related Disputes.

• Author: Robbins, David
• Position: Ethics Corner

* Proper business ethics is not only good business, but also required by the Federal Acquisition Regulation. However, there are times when contractors and the government do not have the same view of what proper business ethics are.

Industry executives must know how to handle delicate situations where the government--acting either as customer or as regulator--represents that a contractor's ethics program or level of ethical business operations are not as robust as they should be.

This discussion must begin with a foundational understanding of the Federal Acquisition Regulation requirements for business ethics and conduct.

According to FAR 52.203-13, contractors must: maintain a written code of business ethics and conduct that is available to all employees performing on government contracts; exercise due diligence to prevent and detect criminal conduct; promote a culture that encourages ethical conduct and a commitment to compliance with the law; comply with the Mandatory Disclosure Rule; and train employees and consider training agents and subcontractors on the code of ethics.

They must also: maintain internal controls and employ timely corrective measures following discovery of issues and problems; have a reasonably high-ranking individual in charge of the compliance program; conduct periodic reviews and evaluations of the ethics and compliance program and address shortfalls; maintain a hotline for reporting concerns; and discipline individuals who fail to "take reasonable steps to prevent or detect improper conduct."

This rule has been in existence long enough that there is little question about what is required. But take a moment to ponder what is not required. Contractors do not have to spend a certain amount of money on ethics and compliance. They have the ability to scale their programs according to business size and risk. For example, smaller companies do not need to adopt the business ethics programs of multibillion-dollar prime contractors.

Perhaps most importantly, contractors are permitted to make mistakes. They do not have to be mistake-free to continue doing business with the government. After all, we are not infallible as a species.

A common source of friction between the government and contractors concerns the robustness of a company's business ethics program. It is tempting for the government to represent that because there was a problem, the contractor's business ethics program is not up to par. But that does not necessarily...