New GAO Report: Additional Oversight of Defense Contractor Ethics Programs Recommended

The GAO released a report yesterday recommending improvements to the oversight of contractor ethics programs, entitled “Defense Contracting Integrity: Opportunities Exist to Improve DOD’s Oversight of Contractor Ethics Programs.” In 2007 and 2008, the FAR was amended to require contractors receiving awards worth more than $5 million and involving work in excess of 120 days to have a written code of business ethics and conduct. The new rules also put in place mandatory disclosure requirements. The GAO report, mandated by Congress in the National Defense Authorization Act for Fiscal Year 2008, examines the ethics programs of the 57 major defense contractors of fiscal year 2006 (those that received more than $500 million in DOD contract awards) that were in place prior to the finalization of the new FAR rules, and assesses the impact these rules will have on DOD oversight of contractor ethics programs. (The major defense contractors and dollar amounts of their 2006 fiscal year contracts are listed in Appendix I of the report.)

The GAO found that prior to the finalization of the ethics and compliance rules, 55 out of the 57 largest contractors had programs in place that were largely consistent with the current standards. The GAO nevertheless found some shortcomings in DOD oversight of ethics programs under the current rules and made four recommendations for improvement. The four recommendations made by the GAO are that the DOD:

  1. Strengthen oversight by determining what new DFARS or other guidance is needed, if any, to clarify the functional responsibilities of the DCMA (Defense Contract Management Agency) and other contracting officials for verifying the implementation of required contractor ethics programs;
  1. Determine the need for defense contractors to display the DOD Inspector General’s fraud hotline poster in common work areas for performance of DOD contracts, rather than exempting contractors from displaying the poster if they have their own reporting program in place, as is currently the rule under the FAR;
  1. Revise the DOD IG fraud hotline posters to include information about whistleblower laws that protect employees; and
  1. If it determines a need for hotline poster display, propose revisions to the DFARS to include a contract clause requiring poster display.

The full report is available at Contractors must be increasingly vigilant that the FAR-mandated ethics programs are in place and implemented, and must be aware that these programs are subject to government audit.

If you have questions about the GAO report or ethics programs, contact the Government Contract attorneys at Eckland & Blando.