Defense Ethics Program
Opportunities Exist to Strengthen Safeguards for Procurement Integrity Gao ID: GAO-05-341 April 29, 2005In fiscal year 2004, the Department of Defense (DOD) spent more than $200 billion to purchase goods and services. To help ensure defense contracts are awarded fairly and current and former employees do not use their knowledge of DOD acquisition activities to gain financial or other benefits, DOD personnel are required to conduct themselves in a manner that meets federal ethics rules and standards. Regulations require DOD to implement an ethics program and provide that contractors meet certain ethics standards. For this report, GAO assessed (1) DOD's efforts to train and counsel its workforce to raise awareness of ethics rules and standards as well as DOD measures of the effectiveness of these efforts and (2) DOD's knowledge of defense contractors' programs to promote ethical standards of conduct.
To implement its ethics program, DOD has delegated responsibility for training and counseling employees on conflict-of-interest and procurement integrity rules to more than 2,000 ethics counselors in DOD's military services and agencies. These efforts vary in who is required to attend training and counseling, the content of ethics information provided, and how often the training and counseling is provided. While some variation may be warranted, DOD lacks the knowledge needed to determine whether local efforts are meeting the objectives of its ethics program--in large part because DOD does not systematically capture information on the quality and content of the training and counseling or employee activity as they relate to ethics rules and restrictions. Specifically, ethics counselors were unable to tell us if people subject to procurement integrity rules were trained. Instead, DOD evaluates its ethics program in terms of process indicators--such as the number of people filing financial disclosure forms, the number of ethics officials providing training and counseling services, and the amount of time ethics officials spend on such activities--which do not provide metrics to assess the effectiveness of local training and counseling efforts. DOD also lacks adequate information on the number and status of allegations of potential misconduct related to conflict-of-interest and procurement integrity rules. Ethics officials did not know of 53 reported allegations of potential misconduct referred to inspectors general offices. DOD has taken several actions since October 2004 aimed at enhancing its ethics program. However, without knowledge of training, counseling, and reported allegations of misconduct, DOD is not positioned to assess the effectiveness of its efforts. DOD's knowledge of defense contractor efforts to promote ethical standards is also limited. Defense regulations provide that contractors should have ethics programs, provide ethics training for all employees and implement systems to detect improper conduct in connection with government contracts. Despite these regulations, DOD had not evaluated the hiring practices of the contractors GAO contacted. Neither the Defense Contract Management Agency nor the Defense Contract Audit Agency--the agencies responsible for oversight of defense contractors' operations--had assessed the adequacy of contractors' practices for hiring current and former government employees. An independent review of one of DOD's largest contractors found that the company lacked the management controls needed to ensure an effective ethics program. Instead, the review found that the company relied excessively on employees to self-monitor their compliance with post-government employment restrictions. The review concluded that by relying on self-monitoring, the company increased the risk of noncompliance, due to either employees' willful misconduct or failure to understand complex ethics rules.
RecommendationsOur 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:GAO-05-341, Defense Ethics Program: Opportunities Exist to Strengthen Safeguards for Procurement Integrity
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
April 2005:
Defense Ethics Program:
Opportunities Exist to Strengthen Safeguards for Procurement Integrity:
GAO-05-341:
GAO Highlights:
Highlights of GAO-05-341, a report to congressional requesters.
Why GAO Did This Study:
To help ensure defense contracts are awarded fairly and current and
former employees do not use their knowledge of DOD acquisition
activities to gain financial or other benefits, DOD personnel are
required to conduct themselves in a manner that meets federal ethics
rules and standards.
Regulations require DOD to implement an ethics program and provide that
contractors must conduct themselves with the highest degree of
integrity and honesty. For this report, GAO assessed (1) DOD‘s efforts
to train and counsel its workforce to raise awareness of ethics rules
and standards as well as DOD measures of the effectiveness of these
efforts and (2) DOD‘s knowledge of defense contractors‘ programs to
promote ethical standards of conduct.
What GAO Found:
To implement its ethics program, DOD has delegated responsibility for
training and counseling employees on conflict-of-interest and
procurement integrity rules to more than 2,000 ethics counselors in
DOD‘s military services and agencies. These efforts vary in who is
required to attend training and counseling, the content of ethics
information provided, and how often the training and counseling is
provided. While some variation may be warranted, DOD lacks the
knowledge needed to determine whether local efforts are meeting the
objectives of its ethics program”in large part because DOD does not
systematically capture information on the quality and content of the
training and counseling or employee activity as they relate to ethics
rules and restrictions. Specifically, ethics counselors were unable to
tell us if people subject to procurement integrity rules were trained.
Instead, DOD evaluates its ethics program in terms of process
indicators”such as the number of people filing financial disclosure
forms, the number of ethics officials providing training and counseling
services, and the amount of time ethics officials spend on such
activities”which do not provide metrics to assess the effectiveness of
local training and counseling efforts. DOD also lacks adequate
information on the number and status of allegations of potential
misconduct related to conflict-of-interest and procurement integrity
rules. Ethics officials did not know of 53 reported allegations of
potential misconduct referred to inspectors general offices. DOD has
taken several actions since October 2004 aimed at enhancing its ethics
program. However, without knowledge of training, counseling, and
reported allegations of misconduct, DOD is not positioned to assess the
effectiveness of its efforts.
DOD‘s knowledge of defense contractor efforts to promote ethical
standards is also limited. Defense regulations provide that contractors
should have certain management controls, such as ethics training for
all employees and systems to detect improper conduct in connection with
government contracts. However, DOD had not evaluated the hiring
practices of the contractors GAO contacted. Neither the Defense
Contract Management Agency nor the Defense Contract Audit Agency”the
agencies responsible for oversight of defense contractors‘ operations”
had assessed the adequacy of contractors‘ practices for hiring current
and former government employees. An independent review of one of DOD‘s
largest contractors found that the company lacked the management
controls needed to ensure an effective ethics program. Instead, the
review found that the company relied excessively on employees to self-
monitor their compliance with post-government employment restrictions.
The review concluded that by relying on self-monitoring, the company
increased the risk of noncompliance, due to either employees‘ willful
misconduct or failure to understand complex ethics rules.
What GAO Recommends:
GAO is recommending that DOD regularly assess training and counseling
efforts to ensure that individuals covered by conflict-of-interest and
procurement integrity rules receive appropriate training and
counseling, ensure ethics officials track and report on the status of
alleged misconduct, and assess contractors‘ ethics programs to gain
knowledge and mitigate risk in DOD contracting relationships. In
commenting on a draft of this report, DOD agreed with two
recommendations and partially concurred with the third.
www.gao.gov/cgi-bin/getrpt?GAO-05-341.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact David C. Cooper at (202)
512-4125 or cooperd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Lacks Information to Evaluate Its Training and Counseling Efforts:
DOD Needs More Knowledge of Government Contractors' Standards of
Conduct Efforts:
Conclusion:
Recommendations:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Comments from Department of Defense:
Table:
Table 1: Summary of Annual Ethics Training by Office:
United States Government Accountability Office:
Washington, DC 20548:
April 29, 2005:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Honorable Solomon P. Ortiz:
Ranking Minority Member:
Subcommittee on Readiness:
Committee on Armed Services:
House of Representatives:
The Honorable Vic Snyder:
Ranking Minority Member:
Subcommittee on Military Personnel:
Committee on Armed Services:
House of Representatives:
In fiscal year 2004, officials from the Department of Defense (DOD)
awarded contracts worth more than $200 billion for goods and services.
Federal ethics rules and standards have been put in place to help
safeguard the integrity of the procurement process by mitigating the
risk that DOD employees will use their position to influence the
outcomes of contract awards for future gain and that companies will
exploit this possibility.
Given the sizeable dollars at stake and the risks inherent in federal
contracting, you asked us to determine whether post-government
employment rules are ensuring the public trust. In response, we
assessed (1) DOD's efforts to train and counsel its workforce to raise
awareness of the rules as well as DOD measures of the effectiveness of
these efforts and (2) DOD's knowledge of defense contractors' programs
to promote ethical standards of conduct. To satisfy our objectives, we
met with the designated agency ethics officials, their designee, or
ethics counselors in the Office of the Secretary of Defense, Air Force,
Army, Navy, and the Defense Contract Management Agency and visited
seven major defense contractors. Further details on the scope and
methodology of our review can be found in appendix I. We conducted our
review from April 2004 to March 2005 in accordance with generally
accepted government auditing standards.
We did not address the effectiveness of the statutory provisions
covering post-government employment restrictions or the extent to which
violations have occurred.
Results in Brief:
Through its ethics program, DOD implemented ethics training and
counseling efforts aimed at educating its workforce to raise awareness
of conflict-of-interest and procurement integrity rules in order to
prevent misconduct. However, DOD lacks departmentwide knowledge of the
content of training and counseling, how often these services are
provided, which employees receive information on conflict-of-interest
and procurement integrity, and reported allegations of potential
misconduct. Specifically, ethics counselors were unable to tell us if
people subject to procurement integrity rules were trained. Ethics
officials also did not know of 53 reported allegations of potential
misconduct referred to inspectors general offices. Without knowledge of
training, counseling, and reported allegations of misconduct, DOD is
not positioned to assess the effectiveness of its efforts. Aware of the
increased public concern about misconduct, DOD took several actions
since October 2004 aimed at enhancing its ethics program.
DOD regulations provide that its contractors should have written codes
of conduct, ethics training, and monitoring programs in place; however
the seven contractors we visited indicated that DOD, through its
oversight activities, did not monitor these contractors' recruiting,
hiring, and placement practices of current and former government
employees. In fact, a recent independent review of one of DOD's largest
contractors found both gaps in the company's procedures and a failure
to follow written policy, in certain cases. For example, the company
relied excessively on employees to self-monitor compliance with
standards of conduct rules and in doing so increased the risk of
noncompliance, due to either employees' willful misconduct or failure
to understand complex ethics rules.
We are making three recommendations to the Secretary of Defense to take
actions in order to raise the level of confidence that DOD conducts
business with impartiality and integrity. Specifically, to improve
DOD's knowledge and oversight, DOD should regularly assess training and
counseling efforts for quality and content to ensure that individuals
covered by conflict-of-interest and procurement integrity rules receive
appropriate training, and DOD should ensure ethics officials track and
report on the status of alleged misconduct. We further recommend that
DOD assess, as appropriate, contractor ethics programs to facilitate
awareness and mitigation of risks in DOD contracting relationships. In
commenting on a draft of this report, DOD concurred with two of our
recommendations and partially concurred with the third. DOD concurred
with our recommendations to regularly assess its training and
counseling efforts for quality and content and to assess, as
appropriate, contractor ethics programs. DOD partially concurred with
our recommendation that ethics officials, as required by the joint
ethics regulation, track and report on the status of alleged misconduct
to the military services and defense agencies head ethics officials.
DOD also provided technical comments, which we incorporated as
appropriate. DOD's comments are included in their entirety in appendix
II.
Background:
Federal statutes and regulations collectively require agencies to
establish an ethics program intended to preserve and promote public
confidence in the integrity of federal officials through their self-
reporting of potential conflicts-of-interest (financial disclosure),
through knowledge of post-government employment restrictions
(training), and through independent investigations of alleged
wrongdoing.[Footnote 1] A key objective of an ethics program is to
provide a formal and systematic means for agencies to prevent and
detect ethics violations. The elements of a comprehensive ethics
program include (1) a written policy of standards of ethical conduct
and ethics guidance; (2) effective training and dissemination of
information on ethical standards, procedures, and compliance; (3)
monitoring to ensure the ethics program is followed; (4) periodically
evaluating the effectiveness of the ethics program; and (5) levying
disciplinary measures for misconduct and for failing to take reasonable
steps to prevent or detect misconduct.
The joint ethics regulation[Footnote 2] is DOD's written policy
establishing its ethics program. The ethics program emphasizes training
and counseling to raise awareness of standards of ethical behavior and
to prevent misconduct. DOD's ethics training requirement includes
educating employees about the procedures to follow when considering
employment outside of DOD and the post-government employment
restrictions that may apply and to inform employees of the resources
that are available to them to address ethics questions and concerns.
The training includes an initial briefing to introduce employees to
ethics regulations, such as conflict-of-interest and procurement
integrity rules, and exit briefings to discuss restrictions that may
apply once employees leave government service. Additional ethics
briefings are held for certain senior employees on an annual basis.
DOD's ethics counseling aims to address employee concerns and questions
as they arise. The training and counseling is also to raise awareness
so that DOD employees can recognize misconduct and report the matter to
ethics officials, inspectors general officials, the head of the command
or agency, criminal investigative offices, or any number of DOD
hotlines. Responsibility for recognizing and reporting potential
misconduct rests with all DOD employees.[Footnote 3] Additionally, the
joint ethics regulation requires ethics officials to track and follow
up on reports of potential misconduct. Finally, the DOD regulation
requires periodic evaluations of local activities, which implement
DOD's ethics program, to ensure they meet standards.
Defense regulations provide that government contractors should have
standards of conduct and internal control systems to promote ethical
standards, facilitate timely discovery and disclosure of improper
conduct in connection with government contracts, and ensure corrective
measures are promptly implemented.[Footnote 4] The regulations provide
that contractors should have a written code of business ethics and
conduct, an ethics training program for all employees, and to
periodically review practices, procedures, policies, and internal
controls for compliance with standards of conduct.
The federal government has a host of laws and regulations governing the
conduct of its employees and contractors. The Compilation of Federal
Ethics laws prepared by the United States Office of Government Ethics
includes nearly 100 pages of statutes alone. For the purposes of this
report, however, we note a few laws relevant to DOD officials whose
responsibilities involved participation in DOD's acquisition process.
The statutes are complex, and the brief summaries here are intended
only to provide context for the issues discussed in this report.
The principal restrictions concerning employment for federal employees
after leaving government service are found in 18 U.S.C. 207 and 41
U.S.C. 423 (procurement integrity). The title 18 provision generally
prohibits former federal employees and their supervisors from
representing non-government entities concerning matters they handled
while working for the federal government. Violation of the statute
entails criminal penalties. In contrast, the title 41 provision more
narrowly applies to contracting officials and also entails civil and
administrative penalties. The provision generally restricts employment
with a contractor if the official performed certain functions involving
the contractor and a contract valued in excess of $10,000,000.[Footnote
5] The law, however, permits employees to accept compensation "from any
division or affiliate of a contractor that does not produce the same or
similar products or services" that were produced under the
contract.[Footnote 6]
There are also provisions related to post-government employment that
are applicable to federal employees' actions while still in federal
service. 18 U.S.C. 208 prohibits government employees from
participating in matters in which they have a financial interest. The
statute imposes criminal penalties on federal employees who begin
negotiating future employment without first disqualifying themselves
from any duties related to the potential employer. In addition 41
U.S.C. 423(c) requires officials who participate personally and
substantially in a procurement exceeding $100,000 to report promptly
contacts by bidders or offerors regarding future employment.[Footnote
7] The official must either reject the possibility of employment or
disqualify himself or herself from further participation in the
procurement.
DOD Lacks Information to Evaluate Its Training and Counseling Efforts:
DOD's joint ethics regulation, administered by DOD's General Counsel,
requires DOD to provide training and counseling to educate employees
regarding applicable ethics laws and regulations. To implement its
ethics program, DOD relies on local ethics counselors within DOD's
military services and agencies to train and counsel employees on
conflict-of-interest and procurement integrity rules. Training is to
raise individual awareness and to enable DOD employees to recognize
misconduct and report any matter to appropriate officials. The joint
ethics regulation also requires ethics officials to track and follow up
on reports of misconduct. However, DOD lacks knowledge to evaluate the
ability of its training and counseling efforts to prevent misconduct
and ensure the public trust.
Training and Counseling Results Are Not Measured:
DOD has delegated responsibility for training and counseling to more
than 2,000 ethics counselors assigned to commands and organizations
worldwide. These ethics counselors administer ethics training and
briefings, provide advice and counseling, and review employees'
financial disclosure documents[Footnote 8] as outlined in the joint
ethics regulation. At the 12 DOD locations we visited we found training
and counseling efforts varied in the content of ethics information
provided, who is required to attend training and counseling, and how
often the training and counseling is provided. For example, some ethics
counselors conduct extensive discussions about employees' plans upon
separation at the exit briefing, some provide written advice, and
others distribute pamphlets summarizing employment restrictions. Some
ethics counselors have supplemented their annual training because they
do not believe that the minimum requirements in the joint ethics
regulation--an annual ethics briefing--are sufficient to ensure
employees understand employment restrictions both during and after they
leave government service. For example, a Navy ethics office offers
live, interactive ethics training to all personnel at its location
approximately three to four times a year.
DOD currently evaluates its ethics program's performance in terms of
process indicators--such as the number of financial disclosure forms
completed, the number of ethics counselors, and the amount of time
spent by ethics counselors on training and counseling services.
According to DOD officials, the information on the number of ethics
counselors at each location and the amount of time they spend with
employees can provide insight into the level of resources used.
However, these process indicators do not provide DOD knowledge of which
employees are subject to restrictions, which employees receive training
and counseling, the quality and content of training, and who is leaving
DOD for employment with contractors. For example, DOD does not know if
the population critical to the acquisition process, those employees
covered by procurement integrity restrictions, are trained. Further,
many ethics counselors could not provide evidence that employees
received the annual ethics training. Additionally, DOD does not know
whether the training and counseling includes all relevant conflict-of-
interest and procurement integrity rules. As shown in Table 1, we found
that the ethics counselors we interviewed did not consistently include
information on the restrictions provided for in 18 U.S.C. 207, 18
U.S.C. 208, and 41 U.S.C. 423 in their annual ethics briefings for the
past 3 years.
Table 1: Summary of Annual Ethics Training by Office:
Year: Standards of Conduct Office, OSD, DOD Headquarters;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were not
available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were not
available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not
included in the training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not
included in the training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: Department of Air Force, Pentagon;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: AFMC, Headquarters, Wright-Patterson Air Force Base[A];
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information included in annual
ethics briefing;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 3: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: AFMC, 88th Wing, Wright-Patterson Air Force Base[B];
Procurement integrity (41 USC 423): 1: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: AFMC, Electronic Systems Command, Hanscom Air Force Base;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: Department of Army Headquarters[A];
Procurement integrity (41 USC 423): 1: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were not
available;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: Department of Army Headquarters[B];
Procurement integrity (41 USC 423): 1: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: Department of Army Headquarters[C];
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 3: Information included in annual
ethics briefing;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 3: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: AMC, Headquarters, Fort Belvoir, Va.[A];
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: AMC, Headquarters, Fort Belvoir, Va.[B];
Procurement integrity (41 USC 423): 1: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training
materials were not available;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training
materials were not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 1: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training
materials were not available;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: AMC, Communications-Electronic Command, Fort Monmouth, N.J.[A];
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 3: Information included in annual
ethics briefing;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 3: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: AMC, Communications-Electronic Command, Fort Monmouth, N.J.[B];
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available.
Year: Department of Navy, Headquarters;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training
materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: NAVAIR Systems Command, Headquarters, Patuxent River, Md;
Procurement integrity (41 USC 423): 1: Information not included in the
training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Procurement integrity (41 USC 423): 2: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 3: Information included in annual
ethics briefing;
Restrictions on former employees (18 USC 207): 1: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: NAVAIR Systems Command, Naval Air Warfare Center-Weapons
Division, China Lake, Calif;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: Defense Contract Management Agency, Headquarters;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
not included in the training materials, unable to determine based on
the training material provided, or unable to determine because the
training materials were not available;
Acts affecting personal financial interest (18 USC 208): 3: Information
included in annual ethics briefing.
Year: Defense Contract Management Agency, East;
Procurement integrity (41 USC 423): 1: Information included in annual
ethics briefing;
Procurement integrity (41 USC 423): 2: Information not included in the
training materials, unable to determine based on the training material
provided, or unable to determine because the training materials were
not available;
Procurement integrity (41 USC 423): 3: Information included in annual
ethics briefing;
Restrictions on former employees (18 USC 207): 1: Information
included in annual ethics briefing;
Restrictions on former employees (18 USC 207): 2: Information
not included in the training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available;
Restrictions on former employees (18 USC 207): 3: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 1: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 2: Information
included in annual ethics briefing;
Acts affecting personal financial interest (18 USC 208): 3: Information
not included in the training materials, unable to determine based on the
training material provided, or unable to determine because the training
materials were not available.
Source: DOD (data); GAO (analysis).
Notes:
[A] SF 278 filers are employees who complete the public financial
disclosure statements. SF 278 filers include senior officials, such as
presidential appointees, general and flag officers (rank O-7 and
above), and senior executive service members.
[B] OGE form 450 filers are employees who complete the confidential
financial disclosure statements. OGE form 450 filers are certain
federal employees, identified by each executive agency based on
employees' roles and responsibilities.
[C] A subset of SF 278 filers at Army headquarters who report directly
to the secretariat.
[End of table]
Training and Counseling is to Facilitate Identification and Reporting
of Misconduct, but Alleged Misconduct Is Not Being Tracked:
Training is to raise awareness of procurement integrity and conflict-
of-interest rules so DOD employees are able to recognize misconduct and
report matters to appropriate officials. Ethics counselors are required
to (1) review the facts of an allegation of misconduct and report the
allegation to appropriate investigative organizations or the head of
the DOD command of the suspected violator and the appropriate
contracting officer, if applicable; (2) follow-up with the
investigative office until a final determination is made on the
allegation; and (3) periodically report on the status of the allegation
of misconduct to the military service and defense agencies head ethics
official. However, when we asked the ethics officials for information
on allegations of misconduct and the status of investigations, they
were not tracking or following-up on the status of alleged misconduct
cases. For information on reported allegations of potential misconduct
the ethics officials referred us to the inspectors general offices.
According to inspectors general officials, DOD has not made an attempt
to determine the extent that potential misconduct in terms of conflict-
of-interest and procurement integrity is reported. The information on
reports of potential misconduct is maintained in various files and
databases by multiple offices. As a result, DOD has not determined if
reports of potential misconduct are increasing or decreasing and why
such a change may be occurring. DOD Inspector General's hotline
official told us that anecdotal evidence indicates post-government
employment misconduct is a problem, but DOD has no basis for assessing
the severity.
At the locations we visited, we obtained information from the inspector
general officials demonstrating at least 53 cases of potential
misconduct reported in the last 5 years. However, ethics officials at
the Office of Secretary of Defense and the military headquarters we
spoke with were not tracking the status of the reports of potential
misconduct. Lacking this knowledge DOD has no assurance that ethics-
related laws and regulations are properly followed and that appropriate
administrative or disciplinary action is taken. Also, the information
on potential misconduct can help DOD understand the extent of the
problem and the risk such behavior poses.
Ongoing Actions to Prevent Misconduct:
Concerned about the effectiveness of its efforts to minimize misconduct
and prevent violations of conflict-of-interest and procurement
integrity rules, DOD has taken actions aimed at enhancing its ethics
program. In October 2004, the Deputy Secretary of Defense required (1)
personnel who file public financial disclosure reports to certify that
they are aware of and have not violated employment restrictions, (2)
DOD components to include training on employment restrictions in annual
ethics briefings to financial disclosure filers, and (3) DOD components
to provide guidance on employment restrictions to all personnel leaving
government service. While this directive clarifies the content required
in DOD's training and counseling, no provisions were made to provide
knowledge about whether the policy is implemented. Therefore, it is
unclear at this time the extent that the actions called for in the
directive will improve DOD's effort to prevent violations of post-
government employment restrictions.
In November 2004, the acting Undersecretary of Defense asked the
Defense Science Board to establish a task force to assess whether DOD
has adequate management and oversight processes to ensure the integrity
of acquisition decisions. The task force report was due January 31,
2005, and is expected to recommend options for improving checks and
balances to protect the integrity of procurement decisions. Currently,
the Defense Science Board is briefing preliminary findings to senior
DOD officials and Congress.
Acknowledging the risk to the acquisition process the United States
Attorney for the Eastern District of Virginia announced, in February
2005, the creation of a procurement fraud working group to increase
prevention and prosecution of fraud in the federal procurement process.
This working group will facilitate the exchange of information among
participating agencies, including DOD, and assist them in developing
new strategies to prevent and to promote early detection of procurement
fraud. Among the ideas and initiatives to be undertaken by the working
group are efforts to detect ethics violations and conflicts of interest
by current and former agency officials.
DOD Needs More Knowledge of Government Contractors' Standards of
Conduct Efforts:
Defense acquisition regulations provide that government contractors
should have standards of conduct and internal control systems that
promote ethical standards, facilitate timely discovery and disclosure
of improper conduct, and ensure corrective measures are promptly
implemented. However, DOD cannot identify nor take action to mitigate
risks because it lacks knowledge of its contractors' efforts to promote
ethical standards. Recently a major defense contractor chartered an
independent review of its hiring processes of current and former
government employees. This review found both gaps in the company's
procedures and a failure to follow written policy, in some cases.
Weaknesses in the contractor's policies, procedures, and structure were
identified, and recommendations were made for actions to be taken to
mitigate risks.
DOD Does Not Have Adequate Knowledge of Its Contractors' Policies and
Practices for Hiring Former and Current DOD Employees:
Defense regulations provide that government contractors must conduct
themselves with the highest degree of integrity and honesty.
Specifically, defense regulations provide that contractors should have
(1) a written code of ethical conduct; (2) ethics training for all
employees; (3) periodic reviews of its compliance with its code of
ethical conduct; (4) systems to detect improper conduct in connection
with government contracts; and (5) processes to ensure corrective
actions are taken.[Footnote 9] The seven contractors we visited
indicated that DOD had not discussed or reviewed their practices for
hiring current and former government employees.
While DOD evaluates components of contractors' financial and management
controls, neither the Defense Contract Management Agency nor the
Defense Contract Audit Agency--the agencies responsible for oversight
of defense contractors' operations--had assessed the adequacy of
contractors' practices for hiring current and former government
employees.[Footnote 10] DOD's lack of knowledge of the contractors'
hiring practices and policies prevents DOD from being assured that
effective controls are in place to address the risks posed by
contractors.
Independent Review of Defense Contractor Finds Weaknesses in Controls
for Managing Former Government Employees:
In February 2004, a major defense contractor hired an outside entity to
conduct an independent evaluation of its hiring policies and practices.
This review found that the company relied excessively on employees to
self-monitor their compliance with post-government employment
restrictions. The review concluded that by relying on employees to
monitor their own behavior, the company increased the risk of
noncompliance, due to either employees' willful misconduct or failure
to understand complex ethics rules. The independent evaluation of the
company's hiring policies and practices illustrates an opportunity for
DOD to leverage knowledge of contractors' practices to identify and
mitigate risks.
In general, the review identified lack of management controls as a
weakness in the company's ethics program. Specifically, the review
found the company lacked (1) a single focal point for managing its
hiring process; (2) centralized management of its hiring process, which
made it difficult to implement consistent procedures and effectively
monitor efforts; (3) consistent maintenance of pre-hire records; (4)
internal audits of its process for hiring former government employees;
and (5) sufficient emphasis from senior company management to the
ethics program in general and the training program in particular, among
other things. As a result of these weaknesses, the company did not know
whether employees were following its written policies and procedures
addressing post-government employment restrictions.
Some contractors we spoke with stated that they used the lessons
learned from the company's independent review to assess their own
policies for recruiting, hiring, and assigning of current and former
government employees to ensure they are complying with ethical
standards. For example, some of the contractors are reviewing company
personnel files to identify employees trained as well as former
government employees hired. Some contractors were in the process of
identifying methods to ensure that information on the hiring and
training of former government employees is readily available, such as
corporate personnel systems that will provide electronic files to allow
the contractor to identify employees with prior DOD experience
including contracts on which they worked as well as monitor employees'
post-government career path. Similarly, knowledge of conditions at the
company and at other contractors could provide DOD with information to
better identify and understand risks to its acquisition process.
Conclusion:
In an environment where the risk of ethical misconduct can be costly,
DOD is missing opportunities to raise the level of confidence that its
safeguards protect the public trust. Better knowledge of training and
counseling efforts is essential to ensuring that the large numbers of
employees who leave DOD for contractors each year are aware of and
abide by conflict-of-interest and procurement integrity rules. Finally,
enhanced awareness of contractor programs would enable DOD to assess
whether the public trust is protected.
Recommendations:
We are making three recommendations to the Secretary of Defense to take
actions to improve DOD's knowledge and oversight of its ethics program
and contractors' ethics programs to raise the level of confidence that
DOD's business is conducted with impartiality and integrity:
* Regularly assess training and counseling efforts for quality and
content, to ensure that individuals covered by conflict-of-interest and
procurement integrity rules receive training and counseling that meet
standards promulgated by DOD Standards of Conduct Office.
* Ensure ethics officials, as required by the joint ethics regulation,
track and report on the status of alleged misconduct to the military
services and defense agencies head ethics officials.
* Assess, as appropriate, contractor ethics programs in order to
facilitate awareness and mitigation of risks in DOD contracting
relationships.
Agency Comments:
DOD provided written comments on a draft of this report. DOD concurred
with two of our recommendations and partially concurred with the third.
DOD concurred with our recommendation to regularly assess training and
counseling efforts for quality and content, and stated that it
currently assesses and will continue to assess agencies' training and
counseling efforts to ensure that personnel required to receive such
training do so in accordance with applicable standards. As discussed in
this report, DOD currently assesses its ethics program's performance in
terms of process indicators--for example, number of financial
disclosure forms completed, the number of ethics counselors, and the
amount of time spent by ethics counselors on training and counseling.
However, as DOD moves forward, its assessments should also provide DOD
knowledge of which employees are subject to restrictions, which
employees receive training and counseling, the quality and content of
training, and who is leaving DOD for employment with contractors to
ensure its ethics program achieves the goal of raising awareness of
conflict-of-interest and procurement integrity rules in order to
prevent ethical misconduct.
DOD concurred with our recommendation that DOD assess, as appropriate,
contractor ethics programs, and stated that it intends to call upon
companies throughout the defense industry to reexamine their ethics
programs and share best practices. DOD also stated that the
recommendation is currently implemented when contracting officers make,
prior to awarding a contract, an affirmative determination of
responsibility, which includes consideration of the potential
contractor's business practices and the potential contractor's
integrity. We believe assessments of contractor ethics programs would
enhance contracting officers' ability to make such determinations.
Knowledge about contractors' policies and practices for hiring former
and current DOD employees would provide DOD more assurance that
effective controls are in place to address the risks posed by potential
violations of post government employment restrictions. As recent GAO
bid protest decisions illustrate, lapses in ethical behavior can have
significant consequences.
DOD partially concurred with our recommendation that the Secretary of
Defense ensure that ethics officials, as required by the joint ethics
regulation, track and report on the status of alleged misconduct to the
military services and defense agencies head ethics officials. DOD
stated that responsibility for tracking and reporting on the status of
alleged misconduct resides with Departmental and federal law
enforcement agencies, rather than ethics officials. While we agree that
responsibility for enforcement should not reside with ethics officials,
we believe senior DOD ethics officials should be knowledgeable
concerning the scope and extent of ethics violations within the
Department. Tracking alleged misconduct cases would provide senior DOD
ethics officials knowledge about whether ethics-related laws and
regulations are properly followed and that appropriate administrative
or disciplinary action is taken. Also, information on alleged
misconduct can position DOD to assess the effectiveness of its training
and counseling efforts and understand the extent of the problem and the
risk such behavior poses. As DOD revises its Joint Ethics Regulation,
it should ensure its reporting structure provides for relaying
misconduct information to senior DOD ethics officials.
Finally, DOD expressed concern that our report may be misinterpreted
because it does not accurately capture the full extent of DOD programs.
We recognize that the Department's programs are broader than reflected
in our report. Our report identifies opportunities to improve (1) DOD's
efforts to train and counsel its workforce to raise awareness of ethics
rules and standards as well as DOD measures of the effectiveness of
these efforts and (2) DOD's knowledge of defense contractors' programs
to promote ethical standards of conduct. Notwithstanding its concerns,
however, we note that DOD agreed that our report identifies
opportunities to strengthen safeguards for procurement integrity.
DOD's comments are included in appendix II.
We are sending copies of this report to the Secretary of Defense and
interested congressional committees. We will provide copies to others
on request. This report will also be available at no charge on GAO's
Web site at http://www.gao.gov.
If you have any questions about this report or need additional
information please contact me at (202) 512-4125 or Blake Ainsworth,
Assistant Director, at (202)512-4609. Other major contributors to this
report were Penny Berrier, Kate Bittinger, Anne McDonough-Hughes, Holly
Reil, and Karen Sloan.
Signed by:
David E. Cooper, Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To address DOD's oversight of its agencies' implementation of ethics
regulations we compared DOD's practices to established management
guidelines. We did not determine the effectiveness of post-government
employment legal restrictions or the extent to which violations of
these restrictions may be occurring.
In assessing DOD oversight of its programs, we used the Standards for
Internal Control in the Federal Government,[Footnote 11] Internal
Control Management and Evaluation Tool,[Footnote 12] Office of
Management and Budget Circular A-123 regarding management
accountability and control, and the United States Sentencing Commission
Guidelines Manual. We applied the management control framework to DOD
and DOD component ethics programs.
To assess DOD's efforts to train and counsel its workforce to raise
awareness and DOD measures of the effectiveness of these efforts, we
met with the designated agency ethics official, their designee or
ethics counselors in the Office of the Secretary of Defense, Air Force,
Army, Navy, Defense Contract Management Agency. In addition to
headquarters offices, we selected locations that according to the
Federal Procurement Database System and DOD officials spent a large
amount of money on acquisitions. Specifically, we met with officials
from: (1) Standards of Conduct Office, General Counsel, Office of the
Secretary of Defense; (2) General Counsel--Ethics and Personnel Office,
Defense Contract Management Agency; (3) Associate Counsel--Ethics and
Personnel, Eastern Region, Defense Contract Management Agency, (4)
Ethics Office and Associate General Counsel (Fiscal & Administrative
Law), Air Force; (5) Air Force Materiel Command, Wright Patterson Air
Force Base, Air Force; (6) Electronic Systems Center, Hanscom Air Force
Base, Air Force, (7) Deputy General Counsel (Ethics & Fiscal) and
Standards of Conduct Office, Army; (8) Army Materiel Command, Fort
Belvoir, Army; (9) Communications-Electronics Command Fort Monmouth,
Army; (10) Office of General Counsel, Navy; and (11) Naval Air Systems
Command, Patuxent River, Navy, (12) Naval Air Warfare Center Weapons
Division, China Lake, Navy. We met with five contracting/acquisition
offices and nine investigative offices at these locations.
To assess DOD's knowledge of defense contractors' programs to promote
ethical standards of conduct, we interviewed seven defense contractors
about their ethics programs and hiring practices of former government
employees. Six of the contractors are ranked in the top 10 of defense
contractors based on DOD spending in fiscal year 2003. The seventh is a
contractor that was in the top 100 of defense contractors based on DOD
spending. We attended the annual Defense Industry Initiative Annual
Best Practices Forum, 2004. In addition, we reviewed a report to the
chairman and board of directors of one major defense contractor
responding to concerns about the company's policies and practices for
the hiring of government and former government employees.
As part of these efforts, we reviewed relevant Federal ethics laws, the
Federal Acquisition Regulation, Defense Federal Acquisition
Regulation, DOD policies, directives and guidance governing conflict of
interest and procurement integrity rules. We supplemented the DOD and
DOD component ethics program information we collected by interviewing
officials from the Office of Government Ethics, Department of Justice,
Army Contracting Agency, Defense Acquisition Regulations Council,
Office of Secretary of Defense Acquisition, Technology, and Logistics
Office, World Policy Institute, and the American Federation of
Government Employees. We also attended the 26TH Annual Council of
Governmental Ethics Laws Conference, 2004.
We conducted our review from April 2004 to March 2005 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from Department of Defense:
DEPARTMENT OF DEFENSE:
OFFICE OF GENERAL COUNSEL:
1600 DEFENSE PENTAGON:
WASHINGTON, DC 20301-1600:
18 APR 2005:
Mr. David E. Cooper:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Cooper:
This is the Department of Defense (DoD) response to the Government
Accountability Office (GAO) draft report, "DEFENSE ETHICS PROGRAM:
Opportunities Exist to Strengthen Safeguards For Procurement
Integrity," dated March 22, 2005, (GAO Code 120336/GAO-05-341). The
Department of Defense partially concurs with the three recommendations
in the draft report (see enclosure).
The first GAO recommendation is that the Secretary of Defense regularly
assess training and counseling efforts for quality and content, to
ensure that individuals covered by conflict-of-interest and procurement
integrity rules receive training and counseling:
that meet standards promulgated by DoD Standards of Conduct Office. The
Department concurs. The appropriate Designated Agency Ethics Officials
(DAEOs), and their designees, as well as other pertinent Department
officials, have regularly assessed, and will continue to assess, their
DoD agencies' training and counseling efforts, to ensure that personnel
required to receive such training and counseling do so in accordance
with the standards promulgated by the Office of Government Ethics
(OGE), as supplemented by the Department.
The second GAO recommendation is that the Secretary of Defense ensure
that ethics officials, as required by the joint ethics regulation,
track and report on the status of alleged misconduct to the military
services and defense agencies head ethics officials.
The Department concurs, with the exception of the role of ethics
officials in the process. The tracking and reporting of the status of
alleged misconduct resides almost exclusively with Departmental and
Federal law enforcement agencies. These various Department
investigating organizations generally report to the appropriate agency
head, who may forward such information to the pertinent DAEO or Deputy
DAEO, who are the head ethics officials. Subsequent to the publication
in 1993 of DoD 5500.7-R, the Joint Ethics Regulation (JER), the
Department deemed that it is not appropriate for ethics counselors (the
term the Department uses to indicate ethics officials) to play a role
in the enforcement of alleged misconduct. An amendment of the entire
JER, which will reflect the current operating status of the tracking
and reporting mechanism, has been under development.
The third GAO recommendation is that the Secretary of Defense assess,
as appropriate, contractor ethics programs in order to facilitate
awareness and mitigation of risks in DoD contracting relationships. The
Department concurs. This recommendation is currently implemented in the
Department's procurements. Under FAR 9.103, Procurement Contracting
Officers make, prior to award, an affirmative determination of
responsibility, which includes consideration of the potential
contractor's business practices and the potential contractor's
integrity. Under FAR 9.406-1(a), during any administrative suspension
or debarment proceeding or in reaching an administrative settlement,
the contractor's ethics program may be examined. The Department does
not believe, however, that it should approve or otherwise accept
responsibility for the contractor's ethics program. Such responsibility
properly lies with the contractor's management. Nevertheless, because
we expect our contractors to have the highest ethical standards, the
Department intends to call upon companies throughout the defense
industry to reexamine their ethics programs and share best practices.
While the Department agrees that there are opportunities "to Strengthen
Safeguards for Procurement Integrity," as stated in the subtitle of the
Report, it is concerned that certain implications in the body of the
Report may be misinterpreted and lead to conclusions not supported by
the Report's actual Recommendations. Through eleven months of its
review, GAO's tasking changed from an assessment of the extent to which
the restrictions on post-employment were being followed by senior
civilian employees, military officers, and contracting officials to an
assessment of DoD's training of its personnel to raise awareness of the
post-Government service employment rules, the effectiveness of that
training, and DoD's knowledge of defense contractors' programs to
promote ethical standards of conduct. Because GAO did not advise DoD of
the changed tasking, however, DoD organizations provided data to GAO
for the purpose of answering the original tasking. The body of the
draft report, therefore, does not accurately capture the full extent of
DoD programs.
The Department appreciates the opportunity to review the draft GAO
report and offers the enclosed comments.
Sincerely,
Signed by:
Daniel J. Dell'Orto:
Principal Deputy:
Enclosure: As stated:
GAO DRAFT REPORT-DATED MARCH 22, 2005 GAO CODE 120336/GAO-05-341:
"DEFENSE ETHICS PROGRAM: Opportunities Exist to Strengthen Safeguards
For Procurement Integrity"
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
regularly assess training and counseling efforts for quality and
content, to ensure that individuals covered by conflict-of-interest and
procurement integrity rules receive training and counseling that meet
standards promulgated by DoD Standards of Conduct Office. (p. 13/GAO
Draft Report):
DOD RESPONSE: Concur. The appropriate Designated Agency Ethics
Officials (DAEOs), and their designees, as well as other pertinent
Department officials, have regularly assessed, and will continue to
assess, their DoD agencies' training and counseling efforts, to ensure
that personnel required to receive such training and counseling do so
in accordance with the standards promulgated by the Office of
Government Ethics, as supplemented by the Department.
To ensure that there is no misunderstanding about who is covered by
conflicts of interest and procurement integrity restrictions, who is
required to receive training and counseling, and what are. the current
required training standards, we provide the following clarification.
Who is Covered: All civilian employees and military officers are
covered by 18 U.S.C. 207 (post-Government Service employment
restrictions) and 18 U.S.C. 208 (restrictions on official duty while
seeking employment outside the Government).
Enlisted members are covered by a JER provision similar to 18 U.S.C.
208, and are subject to prosecution under the Uniform Code of Military
Justice (UCMJ). The procurement integrity post-Government service
employment restrictions apply to those civilian and military personnel
included within the parameters of the statute.
Who is Required to Receive Training and Counseling and Current Training
Standards: The Office of Government Ethics requires all personnel who
are new to a Federal service to receive an ethics orientation. It also
requires all personnel who file a Public Financial Disclosure Report to
receive annual, verbal ethics briefings, which includes a reminder of
the employees' responsibilities under the conflict of interest
statutes. It further requires all personnel who file a Confidential
Financial Disclosure Report to receive annual ethics briefings, which
also includes a reminder of the employees' responsibilities under the
conflict of interest statutes. The training must be verbal once every
three years, and may be written in the remaining two years. The
Department has established that the verbal training occurs throughout
the Department during the same year, the next one occurring in 2006. In
accordance with the JER, personnel covered by the procurement integrity
restrictions file either a public or confidential financial disclosure
report and, consequently, would be covered by these training
requirements. The Department notes that OGE conducts program reviews of
several DoD organizations each year. The reviews include an audit of
the training program. To date, OGE auditors have generally found DoD
organizations to be in compliance with the training requirements. In
addition to (and separate from) the OGE requirements, during 2004, all
members of the DoD acquisition corps were required to take specialized
ethics training, which included post-Government service employment
restrictions.
On October 25, 2004, the Deputy Secretary of Defense amended the JER
and established three additional training and counseling requirements.
On November 5, 2004, the Standards of Conduct Office (SOCO) established
and published guidance to implement the new requirements.
1) DoD personnel who file a public financial disclosure report (SF 278)
must annually certify that they are aware of the disqualification and
employment restrictions of 18 U.S.C. 207 and 208, and 41 U.S.C. 423,
and that they have not violated those restrictions. SOCO attached a
model Annual Certification, which included a summary of the
disqualification and employment restrictions, as well as definition of
terms. Certifications for 2004 were to be filed by 12/31/04. For all
subsequent years, SOCO recommended that the Certifications be collected
with the financial disclosure reports. All senior Department officials,
therefore, who may be those considered at the most risk for inadvertent
violations, must now annually review the restrictions and certify that
they are in compliance with them.
2) Training on post-Government service disqualification and employment
restrictions (which would include those in the procurement integrity
area) must be included in Annual Ethics Briefings. The SOCO guidance
advised that although the OGE regulations already require that the
conflict of interest statutes be covered in these briefings, the
discussion of the restrictions must be enhanced. The SOCO 2004 Annual
Ethics Briefing meets this requirement and is published on its website.
This requirement covers all personnel who file either public or
confidential financial disclosure reports, and, therefore, applies to
all DoD employees involved in procurement.
3) DoD Components are required to provide guidance on post-Government
service employment restrictions as part of out-processing procedures
for personnel who are leaving Federal service. This regularizes what is
already a common practice in many DoD organizations. Some organizations
provide counseling by the legal office as personnel check out. Others
provide written advice tailored to the requirements that apply to the
departing individual. As the SOCO guidance advised, for example, an
enlisted member with no procurement duties has very few restrictions,
while senior personnel or personnel who are heavily involved in
procurement receive more extensive guidance. This requirement ensures
that those personnel who are not required to receive annual training,
but who are nevertheless subject to post-Government service employment
restrictions, will receive guidance as they leave Federal service.
To the extent that GAO is recommending that training and counseling
required by these standards be regularly assessed by the appropriate
authorities to ensure its quality and content, the Department concurs.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
ensure ethics officials, as required by the joint ethics regulation,
track and report on the status of alleged misconduct to the military
services and defense agencies head ethics officials. (p. 13/GAO Draft
Report):
DOD RESPONSE: Concur, with the exception of the role of ethics
counselors in the process. The tracking and reporting of the status of
alleged misconduct resides almost exclusively with Departmental and
Federal law enforcement agencies. These various Department
investigating organizations generally report to the appropriate agency
head, who may forward such information to the pertinent DAEO or Deputy
DAEO, who are the head ethics officials. Subsequent to the publication
in 1993 of DoD 5500.7-R, the Joint Ethics Regulation (JER), the
Department deemed that it is not appropriate for ethics counselors (the
term the Department uses to indicate ethics officials) to play a role
in the enforcement of alleged misconduct. An amendment of the entire
JER, which will reflect the current operating status of the tracking
and reporting mechanism, has been under development.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
assess, as appropriate, contractor ethics programs in order to
facilitate awareness and mitigation of risks in DoD contracting
relationships. (p. 13/GAO Draft Report):
DOD RESPONSE: Concur. This recommendation is currently implemented in
the Department's procurements. Under FAR 9.103, Procurement Contracting
Officers make, prior to award, an affirmative determination of
responsibility, which includes consideration of the potential
contractor's business practices and the potential contractor's
integrity. Under FAR 9.406-1(a), during any administrative suspension
or debarment proceeding or in reaching an administrative settlement,
the contractor's ethics program may be examined. However, the
Department does not believe that it should approve or otherwise accept
responsibility for the contractor's ethics program. Such responsibility
properly lies with the contractor's management. Nevertheless, because
we expect our contractors to have the highest ethical standards, the
Department intends to call upon companies throughout the defense
industry to reexamine their ethics programs and share best practices.
[End of section]
FOOTNOTES
[1] Agency ethics regulations reflecting government standards of
conduct and statutory restrictions are required by Executive Order
12674, Principles of Ethical Conduct For Government Officers and
Employees, April 12, 1989, as modified by E.O. 12731, Principles of
Ethical Conduct For Government Officers and Employees, October 17,
1990. In addition to agency ethics regulations, the Federal Acquisition
Regulation includes specific guidance concerning procurement integrity
(FAR 3.104).
[2] DOD's joint ethics regulation (DOD Regulation 5500.7-R) merges the
federal principles of ethical conduct and restrictions into a written,
uniform source of standards of ethical conduct and guidance for its
workforce. Its scope encompasses not only post government employment
restrictions but also other ethics matters such as gifts, financial
disclosure requirements, and political activities.
[3] Post-government employment restriction violations may also be
reported by parties outside DOD such as contractors through DOD
hotlines.
[4] Defense Federal Acquisition Regulation Supplement, subpart 203.70,
Contractor Standards of Conduct.
[5] 41 U.S.C. § 423(d). The prohibition against accepting compensation
from a contractor applies to former officials who
(A) served, at the time of selection of the contractor or the award of
a contract to the contractor, as the procuring contracting officer, the
source selection authority, a member of the source selection evaluation
board, or the chief of a financial or technical evaluation team in a
procurement in which that contractor was selected for award of a
contract in excess of $10,000,000;
(B) served as the program manager, deputy program manager, or
administrative contracting officer for a contract in excess of
$10,000,000 awarded to that contractor, or
(C) personally made for the federal agency
(i) a decision to award a contract, subcontract, modification of a
contract or subcontract, or a task order or delivery order in excess of
$10,000,000 to that contractor;
(ii) a decision to establish overhead or other rates applicable to a
contract or contracts for that contractor that are valued in excess of
$10,000,000;
(iii) a decision to approve issuance of a contract payment or payments
in excess of $10,000,000 to that contractor; or
(iv) a decision to pay or settle a claim in excess of $10,000,000 with
that contractor.
[6] 41 U.S.C. § 423(d)(2).
[7] 41 U.S.C. § 423(c)(1)(A).
[8] Certain federal employees are required to file a financial
disclosure statement to satisfy federal conflict of interest laws.
There are two separate groups of federal officials required to file.
Public financial disclosure reports (SF-278) are filed by senior
officials, such as presidential appointees, general and flag officers
(rank O-7 and above), and senior executive service members.
Confidential financial disclosure reports (OGE form 450) are filed by
certain other federal employees, identified by the executive agency
based on employees' roles and responsibilities.
[9] Defense Federal Acquisition Regulation Supplement, subpart 203.70,
Contractor Standards of Conduct. While this regulation provides that
contractors should have such elements, they are not required to.
[10] Defense Contract Management Agency's review includes assessments
of contractor performance measurements; Defense Contract Audit Agency
audits include financial and internal control systems of contractors.
[11] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[12] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G
(Washington, D.C.: August 2001).
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