For many small and medium-sized businesses, the hundreds of millions of dollars in U.S. federal contracts awarded each year represent a major source of income. Some put that income at risk with behavior that violates ethics and compliance expectations and regulations, which can result in debarment. As we posted last year, ethics programs reduce the risk of debarment.
We concluded then: “Businesses pay a high price when faced with debarment. The amount of time and money they will spend to address these problems after the fact is likely much higher than if they had put the right programs into place from the beginning.” What are the right programs?
The recent experience of FedBid, a privately-held contractor to federal, state, and local governments, may provide some guidance. Last September, FedBid was criticized for alleged ethical misconduct in a report by the Veteran’s Administration Office of Inspector General. Ultimately the Air Force suspended the firm, pending a debarment review. The suspension was lifted after the FedBid’s former CEO resigned and the firm implemented required actions. As reported by current CEO in a February 23, 2015 press release, the firm took a number of (after the fact) actions:
· FedBid’s Board of Directors retained outside counsel to conduct a thorough and independent review of all matters related to the report. That review found no apparent violations of law or regulation by FedBid or its representatives, however, it did raise concerns about the culture within FedBid during the time-period covered by the report, particularly how certain representatives and employees of FedBid handled third-party relationships. A set of concrete recommendations was provided.
· FedBid implemented those recommendations, including a stronger ethics and compliance program and appointment of a Chief Compliance Officer.
· All FedBid employees and board members have been counseled on and signed a revised Code of Business Ethics and Conduct.
· Going forward any new employees, advisors and consultants FedBid may hire will also go through this training and sign this Code of Business Ethics and Conduct.
· In addition, FedBid has created an Ethics and Compliance Steering Committee, which includes the Chief Compliance Officer and the CEO, with responsibility to oversee and implement changes in FedBid’s ethics and compliance program, policies and training.
Although not mentioned in the press release, the Air Force is also requiring the firm to establish a 24-hour ethics hotline and notify employees of its existence. (Allen, 2015).
So, awareness of company culture, independent reviews, an executive-level steering committee, a high-level compliance officer, a code of ethics (developed and maintained), ongoing training and communication, and a well-communicated ethics hotline—these are required components of an ethics and compliance program that might help suspended or debarred firms get back on track. But why wait?
There is an overarching “lesson to be learned” from the experience of businesses that have been suspended or debarred from working with the government. That lesson is: be proactive; implement strong ethics and compliance programs from the start and engage in your own independent reviews in order to avoid or reduce potential problems.
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Allen, Larry. “Contractors take note: Air Force demands on FedBid provide valuable compliance roadmap.” FedBiz, February 25, 2015. http://www.bizjournals.com/washington/blog/fedbiz_daily/2015/02/contractors-take-note-air-force-demands-on-fedbid.html?page=all
FedBid. “Statement from FedBid CEO Joe Jordan on USAF decision to lift suspension, not pursue debarment.” Press release, February 23, 2015. http://www.fedbid.com/articles/statement-from-fedbid-ceo-joe-jordan-on-usaf-decision-to-lift-suspension-not-pursue-debarment