Industry Reaffirms Business Ethics Principles.

• Author: Farrell, Lawrence P. Jr.
• Position: President's Perspective - Avoidance of irregularities in letting of defense contracts - Brief Article

As events evolve in the U.S. war against terrorism, it seems clear that the federal government's spending priorities are changing. For the Defense Department, the days of declining budgets may be over, at least for a while.

The conflict overseas--which could expand beyond Afghanistan--and new homeland defense missions undoubtedly will require significant additional funding for the Defense Department, the military services and other agencies that have various national security responsibilities. It thus seems inevitable that more resources will be allocated to national defense priorities. This has been acknowledged by both the Administration and Congress, even though the numbers are still being worked out.

According to a congressional report issued last month by the House Appropriations Committee, the Pentagon and the Central Intelligence Agency estimated the short-term costs for the war in Afghanistan at $66 billion. That includes $14.7 billion to cover operating costs, such as fuel, spare parts and repairs. About $10.6 billion is for intelligence-related upgrades. Hundreds of millions of dollars would be allocated for hiring more agents and more analysts. Approximately $509 million would go to C4I and intelligence-gathering technologies. The report also lists $3.9 billion for force protection equipment, $3.2 billion for aircraft upgrades, $3.1 billion for munitions and communications equipment and $1 billion for ammunition and counter-terrorism training for special operations forces.

For the industry, obviously this is good news. The increased funding could result in short-term and long-term opportunities for new business and a chance for the industry to contribute to the war effort, by making sure that the equipment our troops receive is the best in the world. These high-tech systems--combined with quality training--give the United States military its battlefield edge.

A rapid buildup of new business, however, also comes with the potential for procurement irregularities. As many of you may recall, the surge in defense spending experienced in the 1980s unfortunately spawned a number of procurement scandals and investigations, most notably Operation Ill Wind. Between 1986 and 1990, more than 90 companies and individuals were convicted of misconduct in dozens of defense programs.

We in industry need to remember those lessons and make a special effort to avoid the errors of the '80s.

The NDIA Board of Directors raised this issue during our...