Defense Contracting Integrity: Opportunities Exist to Improve DOD's Oversight of Contractor Ethics Programs
GAO-09-591 September 22, 2009Highlights Page (PDF) Full Report (PDF, 49 pages) Accessible Text e-Supplement (HTML) Recommendations (HTML)
SummaryUntil recently, ethics programs and practices of defense contractors were self-policed. Given the significant sums spent to acquire goods and services, the Federal Acquisition Regulation (FAR) was amended twice starting in December 2007 to first mandate and later amplify contractor ethics program rules. Before FAR changes were finalized in December 2008, Congress required GAO to report in 2009 on the ethics programs of major defense contractors. This report (1) describes the extent that contractors had ethics programs before the finalization of the FAR rules that included practices consistent with standards now required by the FAR and (2) assesses the impact the new FAR rules have on Department of Defense (DOD) oversight of contractor ethics programs. To do this work, in September 2008 GAO surveyed all 57 contractors--those receiving more than $500 million in 2006 DOD contract awards--and interviewed DOD contractor oversight agency officials on the impact of the new FAR rules on oversight. All 57 contractors responded to GAO's survey, and 55 reported having ethics programs that include many of the practices consistent with standards now required for compliance with the FAR. The ethics practices information GAO obtained was from before the FAR rules were finalized and thus was not designed to test contractor compliance with the rules that came later. In response to the new FAR rules, DOD has made two key oversight improvements by revising its contract audit guidance to cover the new ethics requirements and establishing the Contractor Disclosure Program to implement the mandatory disclosure requirement. However, opportunities exist to improve DOD's oversight in two other key areas. For example, in verifying implementation of contractor ethics programs during contract administration, the impact of the FAR rules on oversight at this point is negligible. GAO found that DOD had no plans to change contract administration offices' oversight because authority for oversight is not explicit nor is organizational responsibility clear. Also, with regard to contractors' hotline poster displays, the new FAR rules could reduce DOD's awareness of potential violations. The rules exempt contractors with ethics programs that include their own hotlines from the requirement to display DOD hotline posters. If contractor employees report violations to company hotlines instead of DOD hotlines, the employees do not receive the same protections from whistleblower laws. Whistleblower protections for employees unaware of the DOD hotline could be jeopardized. RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Recommendations for Executive ActionRecommendation: To improve DOD's oversight of defense contractor's ethics programs, and to strengthen oversight during contract administration, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, & Logistics (AT&L) to determine what if any new Defense Federal Acquisition Regulation Supplement (DFARS) or other guidance is needed to clarify functional responsibilities of Defense Contract Management Agency (DCMA) and other contracting officials during contract administration for verifying the implementation of contractor ethics programs as required under the FAR ethics rules. Agency Affected: Department of Defense Status: In process Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. Recommendation: To improve DOD's oversight of defense contractor's ethics programs, and to avoid delaying or lessening DOD IG awareness of contract-related problems and diminishing of whistleblower protections for contractor employees, the Inspector General for the Department of Defense, in accordance with the FAR, should determine the need for defense contractors' display of Department of Defense Inspector General's (DOD IG) fraud hotline poster, including directing a contractor to display the DOD IG hotline poster in common work areas for performance of DOD contracts. Agency Affected: Department of Defense: Office of the Inspector General Status: In process Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. Recommendation: To improve DOD's oversight of defense contractor's ethics programs, and to avoid delaying or lessening DOD IG awareness of contract-related problems and diminishing of whistleblower protections for contractor employees, the Inspector General for the Department of Defense, in accordance with the FAR, should determine the contents of DOD IG's fraud hotline poster for display by defense contractors, including revising the poster to inform contractor employees of their federal whistleblower protections. Agency Affected: Department of Defense: Office of the Inspector General Status: In process Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. Recommendation: To improve DOD's oversight of defense contractor's ethics programs, if the need for hotline poster display is determined by the Inspector General, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, & Logistics (AT&L) to propose revisions to DFARS to include policy requiring a contract clause directing a contractor to display the DOD IG hotline poster in common work areas for performance of DOD contracts. DFARS policy should require a defense contractor's display of the DOD IG fraud hotline poster irrespective of whether that contractor has its own internal mechanism, such as a hotline for employees to report contract-related improprieties. Agency Affected: Department of Defense Status: In process Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. eSupplementsThis document has supplemental materials. e-Supplement (HTML) |
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