NCMA AEROSPACE AND DEFENSE CONTRACTING CONFERENCE

ANTHONY H. GAMBOAGENERAL COUNSEL

U.S. GOVERNMENT ACCOUNTABILITY OFFICE

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PROCUREMENT ETHICS

What is GAO’s Role in Procurement Ethics?

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GAO’s ROLE

• GAO fosters the integrity of the contract formation phase through its bid protest process and influences the efficiency and accountability of Government procurement through its audit function

• Organizational conflicts of interest, a component of procurement ethics, are addressed in the bid protest process

• Avoidance of bias by contracting personnel, another component of procurement ethics, is also addressed in the bid protest process

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BID PROTEST TOPICS

• Protest Statistics• Organizational Conflicts of Interest• Druyun Protests• Responsibility

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GAO BID PROTEST STATISTICSFISCAL YEARS 2001 - 2004

FY 2004 FY 2003 FY 2002 FY 2001

Cases Filed1,485

(up 10%)1,352(up 12%)

1,204(up 5%)

1,146(down 6%)

Merit (Sustain + Deny)

Decisions

365(80 days)

290(79 days)

256(79 days)

311(79 days)

Number of Sustains

75 50 41 66

Sustain Rate 21% 17% 16% 21% ADR (cases

used)123 120 145 150

ADRSuccess Rate

91% 92% 84% 84%

Hearings9%

(56 cases)13%

(74 cases)5%

(23 cases)12%

(63 cases)

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FACTORS IMPACTING ORGANIZATIONAL CONFLICTS OF INTEREST

• Consolidation within the industries serving the U.S. Government, particularly in the information technology and defense industries.

• Increase in government procurement of services from contractors, particularly those likely to entail the exercise of judgment.

• Use of contract vehicles that invite “marketing” by the contractor, particularly “umbrella” contracts (i.e. ID/IQ contracts) to multiple companies and covering multiple federal agencies.

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ORGANIZATIONAL CONFLICTS OF INTEREST

Three Types of OCI

• Impaired Objectivity –where a company is asked to perform tasks that require objectivity, but another role the company plays casts doubt on the company’s ability to be truly objective.

• Biased Ground Rules –where a company sets the ground rules for a future competition, e.g. writing the specifications that competitors for a contract must meet.

• Unequal Access to Information – where a company has access to nonpublic information that gives it an unfair advantage in the competition for a later contract.

See discussion of three categories at Aetna Government Health Plans, Inc.; Foundation Health Federal Services, Inc., B-254397 et al., July 27, 1995, 95-2 CPD ¶ 129

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IMPAIRED OBJECTIVITY

PURVIS Sys., Inc., B-293807.3, B-293807.4, Aug. 16, 2004, 2004 CPD

¶ 177. Protest sustained where agency failed to reasonably

consider or evaluate potential conflicts of interest that would be

created by awardee’s involvement in evaluating the performance

of undersea warfare systems that had been manufactured by the

awardee or by the awardee’s competitors, even if such

evaluations were not “part of the procurement process.”

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IMPAIRED OBJECTIVITY

• Science Applications Int’l Corp., B-293601 et al., May 3, 2004, 2004 CPD ¶ 96. Protest sustained where agency acknowledges that awardee’s substantial involvement in activities subject to environmental regulations could create a conflict of interest in performing certain tasks contemplated by the solicitation’s scope of work, and agency gave no consideration to the impact of such potential conflicts in making award.

• Science Applications Int’l Corp., B-293601.5, Sept. 21, 2004, 2004 CPD ¶ 201. Protest denied where agency reevaluation of OCIs reasonably considers additional information and has procedures to assess and mitigate conflicts.

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BIASED GROUND RULES

Lucent Technologies World Servs., Inc., B-295462, Mar. 2, 2005, 2005 CPD ¶ __. Protest denied where, despite CO’s reference to a FAR provision (9.505-2) that arguably did not apply to the facts of the procurement, the CO reasonably excluded the protester from the competition based on its role in drafting technical specifications. The CO’s basic duties and authority under more general provisions of FAR 9.505 were sufficient to justify protester’s exclusion from the competition.

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UNEQUAL ACCESS TO INFORMATION

Johnson Controls World Servs., Inc., B-286714.2, Feb 13, 2001, 2001 CPD ¶ 20. Protest was sustained where the awardee’s (IT Corp) subcontractor (Innovative Logistics Techniques, Inc.) had access to the Army’s requirements data, competitively useful information not available in the RFP, through its contract to provide and maintain a database of the agency’s work orders.

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OCI AND GOVERNMENT PERSONNEL

Battelle Mem’l Inst.¸B-278673, Feb. 27, 1998, 98-1 CPD ¶ 107. GAO determined that although language of FAR 9.5 does not specifically refer to government personnel, agencies are required to determine whether roles of government personnel pose OCIs in the evaluation process.

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ALLEGATIONS OF BIASED PROCUREMENT PERSONNEL

• Government personnel are presumed to conduct their activities in good faith and it is insufficient for protester to merely allege bias without evidence to support such an allegation.

• Where bias on the part of procurement personnel is established, the burden shifts to the Government to show that the protester was not prejudiced by the bias.

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DRUYUN PROTESTS

• Darleen Druyun, a former highranking Air Force procurement official convicted of violating a conflict of interest statute, admitted to active bias in favor of The Boeing Company on various procurements.

• GAO subsequently received protests from other firms challenging the alleged improper influence of Ms. Druyun regarding contracts awarded by the Air Force under the small diameter bomb program and the C-130 avionics modernization upgrade program.

• In light of the admission by Ms. Druyun that she was biased in favor of Boeing, GAO sustained the protests because the Air Force failed to show that her bias did not affect the contract award decisions, or otherwise prejudice the protesters.

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Protest Of Small-Diameter Bomb Procurement

Lockheed Martin Corp., B-295402, Feb. 18, 2005, 2005 CPD ¶ 24.

• Air Force position: Druyun “did not play a significant role”

• GAO found Druyun was significantly involved in the decision making process

• GAO sustains protest and recommends competition of next phase

• GAO identifies possible post-employment restriction violation by Lockheed Martin employee

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Protest Of C-130 Avionics Procurement

Lockheed Martin Aeronautics Co., et al., B-295401 et al., Feb. 24, 2005, 2005 CPD ¶ __.

• Druyun is source selection authority• Air Force position: She did not influence the

source selection evaluation team• GAO found Druyun influenced the entire

source selection process• GAO sustains protest and recommends

competition of installation phase

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RESPONSIBILITY• The determination that a firm is capable of performing a contract is largely committed to the contracting officer’s discretion, and our Office will generally not consider a protest challenging an affirmative determination of a firm’s “responsibility” except under limited, specified exceptions. 4 C.F.R. § 21.5(c) (2005).• A new exception was provided in the revised Bid Protest Regulations in 2002: GAO will now consider a protest that identifies serious concerns that a contracting officer in making an affirmative determination of responsibility failed to consider available relevant information or otherwise violated statute or regulation. 4 C.F.R. § 21.5(c).

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RESPONSIBILITY

In Southwestern Bell Telephone Co., B-292476, Oct. 1, 2003, 2003 CPD ¶ 177, we held that a CO’s affirmative determination of an awardee’s responsibility was not reasonably based where, despite having general awareness of misconduct by some of the awardee’s principals and parent company, the CO did not obtain sufficient information about or consider the awardee’s record of integrity and business ethics in making his responsibility determination.

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OTHER INTEGRITY ISSUES

• Video News Releases and Prepackaged News Stories

• Purchase Cards

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Publicity or Propaganda Prohibition on the Use of VNR Materials

• “No part of any appropriation contained in this or any other Act shall be used for publicity or propaganda purposes.” Omnibus Appropriation, 2004, Pub.L.No. 108-447, div. H, title VI, § 624 (Dec. 8, 2004) (bold added).

• Self-Aggrandizement

• Purely partisan materials

• Covert Propaganda

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WHAT IS A VNR?

• Video and audio feeds obtained from news services or directly from the producer of the video feed. VNR’s include the following components: Slates containing highlighted points on a certain

topic in an attempt to shape the message . B-roll film clips: Interview clips; activity clips;

video footage of events Prepackaged News Story, including suggested

anchor lead-in script• Video feeds can be easily edited into original product

or broadcasted as received.

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PREPACKAGED NEWS STORYCOMPONENT OF VNRs

• A complete news story designed to appear as if the segment had been produced by an independent news agency

• Lead-in anchor script claiming a “reporter” has the story.

• A voiceover specialist, identifying herself as a reporter, narrates the story

• Video contains B-roll segments • Concludes with “reporting from Washington”• No disclosure of source in the prepackaged news

story

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SUMMARY OF GAO FINDINGS ON VNRS AND PREPACKAGED NEWS STORIES

• Only the prepackaged news stories component of VNR’s violated the “publicity or propaganda” prohibition

• Prepackaged news stories targeted the broadcasting audience

• Prepackaged new stories concealed the source from the target audience

• Concealment of source is key to determination of Covert Propaganda

• Anti-deficiency Act violation

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OTHER DEVELOPMENTS IN THEUSE OF PREPACKAGED NEWS STORIES

• Circular Letter to Heads of Agencies, B-304272, Feb. 17, 2004, reminding agencies to consider the prohibition when devising information dissemination strategies.

• Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13, title VI, § 6076, 119 Stat. 301 (2005), prohibiting prepackaged news stories without source disclosure in the text or audio.

• Commission Reminds Broadcast Licensees, Cable Operators and Others of Requirements Applicable to Video News Releases, FCC Notice 05-171, Apr.13, 2005.

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Purchase Cards

• Purchase cards are agency-issued credit cards, meant to streamline procurement of smaller items and give agencies spending flexibility.

• Inadequate internal controls and a lack of training in purchase card use can lead to cardholders making improper purchases that can cause agencies to violate appropriations and anti-deficiency restrictions.

• GAO recommends in its reports that agencies implement greater internal controls to protect themselves.

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Purchase CardsGAO Assistance

• GAO Reports

• Appropriations law forum

• Third edition of Volume 1 of the Redbook, Yearly update

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Other GAO CONTRIBUTIONS

• High Risk Series

• 21st Century Challenges

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HIGH RISK SERIES

• The GAO high risk series focuses on major programs and operations that need urgent attention and transformation to ensure that our government functions in the most economical, efficient and effective manner possible.

• The series also covers programs and operations that are high risk because of their greater vulnerabilities to fraud, waste, abuse and mismanagement.

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GAO High Risk List

• Interagency contracting added this year. Benefits of efficiency and leverage being

eroded by:Abuses identified in GAO & IG reportsLack of accountability & oversightLack of expertise in using various

contracting vehicles• Positive steps being taken, such as GSA/DOD

“get it right” campaign, but effective implementation is key to preserving acquisition reform flexibilities.

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21ST CENTURY CHALLENGES

• The federal government’s current deficit condition and long-term fiscal imbalance stemming primarily from an aging of the population and rising health care costs present enormous challenges.

• This reality calls for significant changes on the spending and/or revenue side of the budget. Tough choices are required.

• A fundamental reexamination of major federal programs and policy areas is necessary to ascertain their continued need.

• GAO, based on its existing work, has identified issues and options that could help address these fiscal pressures, presented as illustrative questions.

• This report is intended as input to help the Congress in reviewing and reconsidering the base of federal spending and tax programs.