Summary
Many defense contractor employees work side-by-side with federal employees in Department of Defense (DOD) facilities performing substantially the same tasks affecting billions in DOD spending. Given concerns with protecting the integrity of DOD operations, GAO was asked to assess (1) how many contractor employees work in DOD offices and what type of mission-critical contracted services they perform, (2) what safeguards there are to prevent personal conflicts of interest for contractor employees when performing DOD's tasks, and (3) whether government and defense contractor officials believe additional safeguards are necessary. GAO reviewed conflicts of interest laws and policies and interviewed ethics officials and senior leaders regarding applicability to DOD federal and contractor employees. GAO judgmentally selected and interviewed officials at 21 DOD offices with large contractor workforces, and 23 of their contractors.
Indications are that significant numbers of defense contractor employees work alongside DOD employees in the 21 DOD offices GAO reviewed. At 15 offices, contractor employees outnumbered DOD employees and comprised up to 88 percent of the workforce. Contractor employees perform key tasks, including developing contract requirements and advising on award fees for other contractors. In contrast to federal employees, few government ethics laws and DOD-wide policies are in place to prevent personal conflicts of interest for defense contractor employees. Several laws and regulations address personal conflicts of interest, but just one applies to both federal and contractor employees. Some DOD offices and defense contractor companies are voluntarily adopting safeguards. For example, realizing the risk from personal conflicts of interest for particularly sensitive areas, the 19 DOD offices GAO reviewed that used contractor employees in the source selection process all use safeguards such as contract clauses that prohibit contractor employees' participation in a DOD procurement affecting a personal financial interest. In certain other tasks, only 3 of the 23 defense contractors GAO reviewed had safeguards requiring employees to identify potential conflicts of interest so they can be mitigated. In general, government officials believed that current requirements are inadequate to prevent conflicts from arising for certain contractor employees influencing DOD decisions, especially financial conflicts of interest and impaired impartiality. Some program managers and defense contractor officials expressed concern that adding new safeguards will increase costs. But ethics officials and senior leaders countered that, given the risk associated with personal conflicts of interest and the expanding roles that contractor employees play, such safeguards are necessary.
Recommendations
Our 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.
Director:
Team:
Phone:
Cristina T. Chaplain
Government Accountability Office: Acquisition and Sourcing Management
(202) 512-4859
Recommendations for Executive Action
Recommendation: The Secretary of Defense should direct the Under Secretary of Defense (Acquisitions, Technology, and Logistics), to develop and implement policy that requires personal conflict of interest contract clause safeguards for defense contractor employees that are similar to those required of DOD's federal employees.
Agency Affected: Department of Defense
Status: Open
Comments: In December 2007 and in response to GAO's concerns and this recommendation that were voiced in the exit conference for this report, DOD established a new subcommittee and directed its Panel on Contracting Integrity to specifically examine the need for departmentwide policies to prevent contractor employees conflicts of interest. By May 2008, the panel approved a proposed action to draft a contract clause for inclusion in the Defense Federal Acquisition Regulation Supplement (DFARS) prohibiting contractor employee conflicts of interest. However, as of June 2009, further DOD action is contingent pending resolution of a new Federal Acquisition Regulation (FAR) Case to develop governmentwide policy and contract clauses for "Preventing Personal Conflicts of Interest by Contractor Employees Performing Acquisition Functions" (FAR Case 2008-025). Such changes to the FAR are to implement ethics safeguards related to contractor conflicts of interest required by Section 841 of the 2009 national defense authorization act, Pub. L. No. 110-417 (enacted in October 2008). According to congressional reports accompanying House and Senate versions of this legislation, Sec. 841 is in part in response to this GAO recommendation directed at DOD. In passing this legislation, congressional conferees noted an expectation that DOD's Panel on Contracting Integrity should continue its review of these issues, but directed development of a government-wide policy as well. Specifically, Sec. 841 requires no later than August 2009 the development of a policy and a standard clause or set of clauses regarding personal conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental functions. By October 2009, Sec. 841 also requires consideration of additional revisions to the FAR that may be necessary to address personal conflicts of interest by employees of contractors with respect to functions other than acquisition. According to its December 2008 report to Congress providing an updated status for the panel's work on these issues, DOD's office for Defense Procurement and Acquisition Policy (DPAP) will implement appropriate action on this recommendation by September 2009. According to DOD, appropriate action may include revisions to DOD policy for a comprehensive strategy to ensure procurement integrity when using contractor employees for advice in areas involving critical decision-making. Until DOD has had more time to complete its actions, this recommendation remains open.
Recommendation: In developing its policy, DOD should include requirements for contractor companies to identify and prevent personal conflicts of interest for certain of their contractor employees who are performing contracted services that provide inputs to DOD's decision-making in such mission-critical areas as the development, award, and administration of government contracts and other advisory and assistance functions.
Agency Affected: Department of Defense
Status: Open
Comments: As of June 2009, further DOD action concerning possible DFARS changes to implement this recommendation is contingent pending resolution of FAR Case 2008-025, required to implement new ethics safeguards related to contractor conflicts of interest established in October 2008 under Section 841 of the 2009 national defense authorization act, Pub. L. No. 110-417. Specifically, Sec. 841 requires no later than August 2009 the development of FAR policy and a standard clause or set of clauses for inclusion in solicitations or contracts (and task or delivery orders) that sets forth the personal conflicts of interest restrictions for contractor employees performing acquisition functions closely associated with inherently governmental functions. Consistent with this recommendation, once implemented in the FAR, the new policy must require each contractor whose employees perform acquisition functions closely associated with inherently governmental functions to identify and prevent personal conflicts of interest for employees who are performing such functions. By October 2009, Sec. 841 also requires consideration of additional revisions to the FAR that may be necessary to address personal conflicts of interest by employees of contractors with respect to functions other than acquisition. In passing this legislation, congressional conferees noted an expectation that DOD's Panel on Contracting Integrity should continue its review of these issues. As such, according to its December 2008 report to Congress providing an updated status for the panel's work on these issues, DOD's office for Defense Procurement and Acquisition Policy (DPAP) will implement appropriate action on this recommendation by September 2009. DOD action may include revisions to policy for a comprehensive strategy to ensure procurement integrity when using contractor employees for advice in areas involving critical decision-making. Until DOD has had more time to complete its actions, this recommendation remains open.
Recommendation: In developing its policy, DOD should include the following requirements for defense contractor companies: require a written code of business ethics and conduct applicable to contractor personnel working on certain DOD mission-critical advisory and assistance type services to (1) prohibit contractor personnel from participating in a government contract in which they have a personal conflict of interest; (2) require contractor personnel to avoid the appearance of loss of impartiality in performing contracted duties for DOD; (3) require contractor personnel to disclose personal conflicts of interest to their employer prior to beginning work on these contracts; (4) require the contractor to review and address any personal conflicts of interest its employees might have before assigning them to deliver contracted services; (5) prohibit contractor personnel from using non-public government information obtained while performing work under the contract for personal gain; (6) prohibit contractor employees providing procurement support services from having future employment contact involving a bidder in an ongoing procurement; (7) impose limits on the ability of contractors and their employees on accepting gifts (defined as almost anything of monetary value, such as cash, meals, trips, or services) in connection with contracted duties; and (8) prohibit misuse of DOD contract duties to provide preferential treatment to a private interest.
Agency Affected: Department of Defense
Status: Open
Comments: As of June 2009, further DOD action concerning possible DFARS changes to implement this recommendation is contingent pending resolution of FAR Case 2008-025, required to implement new ethics safeguards related to contractor conflicts of interest established in October 2008 under Section 841 of the 2009 national defense authorization act, Pub. L. No. 110-417. Specifically, Sec. 841 requires no later than August 2009 the development of FAR policy and a standard clause or set of clauses for inclusion in solicitations or contracts (and task or delivery orders). Section 841 requires that the FAR policy set forth the personal conflicts of interest restrictions for contractor employees performing acquisition functions closely associated with inherently governmental functions. Consistent with this recommendation, once implemented in the FAR, the new policy must require each contractor whose employees perform acquisition functions closely associated with inherently governmental functions prohibit those who have access to non-public government information obtained while performing such functions from using such information for personal gain. In passing this legislation, congressional conferees noted an expectation that DOD's Panel on Contracting Integrity should continue its review of these issues. As such, according to its December 2008 report to Congress providing an updated status for the panel's work on these issues, DOD's office for Defense Procurement and Acquisition Policy (DPAP) will implement appropriate action on this recommendation by September 2009. DOD action may include revisions to policy for a comprehensive strategy to ensure procurement integrity when using contractor employees for advice in areas involving critical decision-making. Until DOD has had more time to complete its actions, this recommendation remains open.
Recommendation: In developing its policy, DOD should include requirements for contractor companies to report any contractor personnel conflict of interest violations to the applicable contracting officer or contracting officer's representative as soon they are identified.
Agency Affected: Department of Defense
Status: Open
Comments: As of June 2009, further DOD action concerning possible DFARS changes to implement this recommendation is contingent pending resolution of FAR Case 2008-025, required to implement new ethics safeguards related to contractor conflicts of interest established in October 2008 under Section 841 of the 2009 national defense authorization act, Pub. L. No. 110-417. Specifically, Sec. 841 requires no later than August 2009 the development of FAR policy and a standard clause or set of clauses for inclusion in solicitations or contracts (and task or delivery orders). Section 841 requires that the FAR policy set forth the personal conflicts of interest restrictions for contractor employees performing acquisition functions closely associated with inherently governmental functions. Consistent with this recommendation, once implemented in the FAR, the new policy must require each contractor whose employees perform acquisition functions closely associated with inherently governmental functions report any personal conflicts-of-interest violation by such an employee to the applicable contracting officer or contracting officer's representative as soon as it is identified. In passing this legislation, congressional conferees noted an expectation that DOD's Panel on Contracting Integrity should continue its review of these issues. As such, according to its December 2008 report to Congress providing an updated status for the panel's work on these issues, DOD's office for Defense Procurement and Acquisition Policy (DPAP) will implement appropriate action on this recommendation by September 2009. DOD action may include revisions to policy for a comprehensive strategy to ensure procurement integrity when using contractor employees for advice in areas involving critical decision-making. Until DOD has had more time to complete its actions, this recommendation remains open.
Recommendation: In developing its policy, DOD should include requirements for contractor companies to maintain effective oversight to verify compliance with personal conflict of interest safeguards, and have procedures in place to screen for potential conflicts of interest for all employees in a position to make or materially influence findings, recommendations, and decisions regarding DOD contracts and other advisory and assistance functions. This screening can be done on a task-by-task basis or on an annual basis, such as a financial disclosure statement.
Agency Affected: Department of Defense
Status: Open
Comments: As of June 2009, further DOD action concerning possible DFARS changes to implement this recommendation is contingent pending resolution of FAR Case 2008-025, required to implement new ethics safeguards related to contractor conflicts of interest established in October 2008 under Section 841 of the 2009 national defense authorization act, Pub. L. No. 110-417. Specifically, Sec. 841 requires no later than August 2009 the development of FAR policy and a standard clause or set of clauses for inclusion in solicitations or contracts (and task or delivery orders). Section 841 requires that the FAR policy set forth the personal conflicts of interest restrictions for contractor employees performing acquisition functions closely associated with inherently governmental functions. Consistent with this recommendation, once implemented in the FAR, the new policy must require each contractor whose employees perform acquisition functions closely associated with inherently governmental functions to (1) maintain effective oversight to verify compliance with personal conflict-of-interest safeguards and (2) have procedures in place to screen for potential conflicts of interest for all employees performing such functions. In passing this legislation, congressional conferees noted an expectation that DOD's Panel on Contracting Integrity should continue its review of these issues. As such, according to its December 2008 report to Congress providing an updated status for the panel's work on these issues, DOD's office for Defense Procurement and Acquisition Policy (DPAP) will implement appropriate action on this recommendation by September 2009. DOD action may include revisions to policy for a comprehensive strategy to ensure procurement integrity when using contractor employees for advice in areas involving critical decision-making. Until DOD has had more time to complete its actions, this recommendation remains open.
