Government Contractor Fraud

Federal investigations of government contractors will increase according to a White House press release issued January 20. Federal contracting businesses can expect more Presidential initiatives aimed at �protecting American taxpayer money and the integrity of the Federal acquisition process in prevention of fraud. The penalties for fraud range from loss of a contract, indefinite prohibition on bidding on government contracts and / or civil fines and imprisonment.

Federal Acquisition Regulation Part 3:
IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST
Code of Federal Regulations (CFR)

Anyone, whether a service member, civilian employee, defense contractor, or private citizen, who witnesses what he or she believes to be a violation of ethical standards and/or the law, including but not limited to fraud, waste, or abuse of authority, potential leaks of classified information, or potential acts of terrorism, should report such conduct directly to the Inspector General of the Department of Defense.
Hotline at 800-424-9098 (e-mail: hotline@dodig.mil

Increased Scrutiny of Improper Certifications to Obtain Government Business.

Firms must certify their status in order to obtain the benefits of these preferences and set-asides.

Of the total value of government contracts, 23 percent is reserved for small businesses.

There are several Set Asides in Government Contracting for Small Business

Competitive 8(a)
Emerging Small Business
Partial Small Business
Small Disadvantaged Businesses
Woman-Owned Businesses
Total HBCU / MI and Partial Historically Black College or University  / Minority Institution (MI)
HubZone firms
Service-disabled veteran-owned businesses (SDVOSBs)
"NEW" Women Owned Small Business Preference Program

Contractors need to maintain the highest standards of conduct and compliance to do business with the government.

The monitoring of government contractors takes many forms:

US Government Accountability Office (GAO) reports and legal decisions.

GAO provides a forum for bidders and offerors seeking federal government contracts who believe that contracts have been, or are about to be, awarded in violation of the laws and regulations that govern contracting with the federal government.

A bidder or offeror can file a bid protest with GAO, and GAO issues a decision on whether the federal agency has complied with statutes and regulations controlling government procurement.

See how to file a Bid Protests.
Bid Protest Filings by E-Mail

Presidential War on Waste, Fraud and Abuse Will Increase Pressure on Contractors

The President required that all federal agencies by �every means available� identify every prime recipient required to post a report on the  www. FederalReporting.gov  Web site because it received Recovery Act funds, and ensure that every funding recipient has filed a report. The memorandum directs agencies to improve prime recipient reporting compliance by, wherever authorized and appropriate, terminating awards, pursuing suspension and debarment, reclaiming funds and considering other �punitive� actions.

Government Efforts to Maintain the Integrity of the Federal Acquisition Process

Under the Federal Acquisition Regulation, an Organizational Conflict of Interest (OCI) occurs where, because of other activities or relationships with other entities, an entity is unable or potentially unable to render impartial assistance or advice to the government, the entity�s objectivity in performing the contract work is or might be otherwise impaired, or the entity has an unfair competitive advantage.

There are three types of organizational conflict of interest.

Unequal access to information

Situations can occur when a contractor has access to nonpublic information as part of its performance of a government contract and that information may provide the firm a competitive advantage in a later competition for a government contract. Biased ground rules cases occur in situations in which a firm, as part of its performance of a government contract, has in some sense set the ground rules for another government contract.

Impaired objectivity

Situations in which a contractor �s work under one government contract could entail the company evaluating itself through either assessment of its own performance under another contract, or evaluation of its own and/or competitors� proposals in a procurement process.

Organizational conflict of interest

Result of industry consolidation in which the same company produces products and provides advisory services, the government�s lack of in-house expertise and the government�s concomitant need for expert advice, and the use of broad contract vehicles that encourage marketing by the contractor of a wide range of goods and services.

A company�s failure to address the potential organizational conflict of interest created by the company, or its subcontractor or team member�s participation in the competition can subject the company to civil penalties and/or loss of the contract.

There also has been significant litigation concerning organizational conflict of interest at the GAO in the last year the US Government Accountability Office decisions, in response to bid protests filed by unsuccessful offerors, reflect failures by the agency and awardee to address Organizational conflict of interest. In these cases, the GAO has recommended that the awardee or its subcontractor be eliminated from the competition.

Suspension and Debarment

A government contractor�s conduct considered to be improper can result in suspension and / or debarment. When a firm is suspended or debarred the contractor cannot bid on government work.

In addition to maintaining high standards concerning company conduct, a firm must have, at a minimum, a satisfactory record of integrity and business ethics. If the contracting officer concludes that a firm has an unsatisfactory record of integrity or ethics, the contracting officer can find the firm �nonresponsible� under individual procurements. Interestingly, in this regard, the contracting officer can go beyond conduct relating to contracts and consider activities not related to government contracting, such as environmental, criminal or civil violations.

Mandatory Disclosure

Almost all government prime contractors and subcontractors are now subject to mandatory disclosure requirements and specific requirements under the Codes of Business Ethics and Conduct. Contractors covered by these requirements must disclose to the appropriate OIG and contracting officer when the contractor, during the award, performance or closeout of a contract, has credible evidence that a principal, employee, agent or subcontractor of the contractor has committed a violation of federal law involving fraud, conflict of interest, bribery or gratuity violations, or false claims to the government.

The contractor�s requirements to disclose are very consistent with the government�s focus on fraud, waste and abuse and curbing government contractor misbehavior. Companies that fail to adhere to the appropriate Code of Business Ethics and Conduct are taking a substantial risk in light of the heightened government scrutiny.

 

 

 


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