Improve Procurement Ethics Laws

Improve Procurement Ethics Laws

Background

Integrity and accountability are two fundamental principles of the
federal acquisition process that cannot be compromised. The laws and
regulations governing government and contractor behavior must be clear
and understood by all affected parties and the consequences must be
severe for breaches of improper behavior.

Under current laws, procurement officials and contractors are required
to sign integrity certifications that identify a number of ethics
provisions, including prohibitions against the disclosure of information
and postemployment restrictions. Those who violate these statutory
prohibitions are subject to a maximum period of imprisonment of five
years, as well as criminal and civil fines.

Need for Change

The need for procurement ethics standards is best illustrated by the
Pentagon "Ill Wind" investigations, which revealed many instances where
individuals or companies were trafficking in procurementsensitive
information. Such conduct undermines the integrity of the federal
procurement process and can result in increased contract costs. When
those competing for government contracts are not treated fairly, or
perceive their treatment as unfair, the government pays more than it
would otherwise pay for products or services. Contract costs are
increased because the government may be deceived into selecting a
company or individual who does not provide the best value or
performance. Also, perceptions of unfair treatment can cause contractors
to decide not to compete for certain procurements, thus depriving the
government of lower contract costs that otherwise would result from
increased competition.

The procurement integrity laws include provisions to protect certain
procurementsensitive information (i.e., proprietary and source selection
information) from improper disclosure. But they do not provide clear
guidance because of their complexity and the difficulty of applying
their restrictions to particular procurements. For example, the
statutory definitions are so confusing as to when a procurement has
begun or who is a procurement official or a competing contractor that
those individuals who must follow these rules do not always know when
they apply or whether they are violating a specific provision.

Impediments to Open Communications Between Buyers and Sellers.  The
procurement integrity laws have also had a chilling effect on legitimate
and necessary discussions and exchange of information between
contractors and federal agencies. In the commercial world, customers
expect suppliers to provide them with valuable information regarding new
product or service offerings, as well as to suggest solutions the
supplier can provide to customer problems. Government customers should
be able to gain the benefits of such information. However, the
Acquisition Law Advisory Panel to the United States Congress on
Streamlining Defense Acquisition Law, known as the Section 800 Panel,
found that despite their laudable objectives and purpose, the provisions
of the procurement integrity laws seem to have generated more
uncertainty and anxiety in the procurement community. By virtue of their
complexity and the severity of the penalties for noncompliance, the
information disclosure restrictions have imposed what some have
characterized as a "code of silence" on both government and industry
personnel during the course of a procurement. The former have often
feared to offer and the latter feared to seek even the most routine
information without specific authorization or, frequently, legal
guidance.

The Section 800 Panel quoted a senior NASA official who stated that "if
there is any doubt about whether a document or information should be
discussed during a source selection, it does not get communicated. To
guard against the enormous penalties for error, some corporations and
government activities are said to have furnished their representatives
with 'Miranda cards' that coach them through a litany of preliminary
questions each ought to ask the other before safely addressing the
business at hand."1

Increased costs for certifications. The procurement integrity laws also
contain certification requirements that increase government costs and
provide questionable value in return. A lesson learned from the Ill Wind
investigations was that the conduct prosecuted was conscious,
deliberate, and in some cases highly sophisticated criminal behavior.
Such deliberate criminal conduct is unlikely to be deterred by the risk
of additional penalties for false certification statement violations or
detected as part of the certification process. But these measures are
certain to mean higher costs for the government.

Contract prices and agency administrative costs are increased by the
need to obtain procurement integrity certifications from the thousands
of contractors and agency employees who participate in procurements. For
example, in at least four sealed bid procurements at the General
Services Administration (GSA), the low bidder forgot to sign the
certificate and GSA was forced to accept the next lowest bidder who had
signed the form.2 GSA incurred the increased costs of going to a higher
priced bidder, not because there was any wrongdoing, but because the
rules regarding sealed bids did not allow GSA to let that low bidder
come back and sign the form. In one of these four cases, the first,
second, and third lowest bidders all forgot to sign the form and GSA was
forced to go to the fourth lowest bidder. The original low bid was
$109,777, and the fourth lowest bid was $133,000.3 The government paid
$23,233 more than it should have because of this provision. The costs to
the government and taxpayers are significant because GSA's experiences
are not unique; they typify the governmentwide experience.

PostEmployment restrictions. Finally, a problem exists with the
procurement ethics laws regarding postemployment restrictions.  The
accumulation over time of several duplicative postemployment (revolving
door) provisions applicable to agency employees who participate in
procurements has resulted in considerable confusion. In this regard, the
Director of the Office of Government Ethics (OGE) stated, "Little by
little, rule by rule, we have addressed a problem here and a problem
there with a quick statutory fix, stacking one on top of another until
we have reached a point today that an employee who sincerely wants to do
the right thing simply cannot understand what it is he has to do to
comply."4

A solution. The Office of Federal Procurement Policy (OFPP) and OGE have
proposed revisions to the ethics laws through their legislative proposal
jointly submitted to Congress in 1990 and 1991.5 This proposal addresses
the issues and problems described above and strikes a proper balance
between safeguarding the public against conflicts of interest and
deterring qualified people from entering public service, while at the
same time removing administrative impediments and barriers to effective
communication between government and its business partners.


Endnotes

1. Acquisition Law Advisory Panel to the United States Congress,
Streamlining Defense Acquisition Law, Executive Summary (January 1993),
pp. 6127129.

2. Section 27 of the Official Federal Procurement Policy Act,
Procurement Integrity, 41 U.S.C. 423.

3. GAO Protest Decisions:

     a. HeinWerner Corporation, B247459, 921 CPD 484, June 2, 1992.

     b. Atlas Roofing Company, Inc., B237692, 901 CPD 216, February 23,
1990.

     c. Emjay Engineering and Construction Co., Inc., B24360, 911 CPD
590, June 21, 1991.

     d. Sunbelt Industries, Inc., B245244.2, 912 CPD 279, September 24,
1991.

4. U.S. Congress, House, Committee on Armed Services, Subcommittee on
Investigation, "Revolving Door Issues and PostEmployment Restrictions,"
testimony by Stephen D. Potts, May 9, 1991.

5. The Procurement Ethics Reform Act, 2775, submitted to the 101st
Congress on June 20, 1990, and resubmitted to the 102nd Congress on
February 14, 1991, introduced as 458 on February 21, 1991.