White House Kicks Off New Wave of Reforms
By Dave Hickey and Emily Parker
President Obama pledged to make procurement reform a priority through increased transparency and oversight, calling for more frequent audits, increased federal procurement staff, stricter “revolving-door” rules, and fewer sole-source contracts, with restrictions on the role of lobbyists.
These pledges, as well as other actions in the president’s first few weeks in office, signal that increased ethics restrictions on government appointees, lobbyists and contractors have arrived.
The new focus on government reform is evidenced by his appointment of Norman Eisen, special counsel to the president for ethics and government reform. Eisen was an ethics advisor to the transition team and co-founder of Citizens for Responsibility and Ethics, a non-profit organization focused on government reform.
Upon taking office, the president also signed an executive order aimed at limiting outside influences on political appointees and reducing the role of lobbyists. The executive order requires all administration appointees to pledge that they will not accept gifts from lobbyists. The contractual language also promises that appointees will accept a two-year “reverse” revolving door ban that precludes them, while serving in their government position, from participation in particular matters involving specific parties related to their former employers or former clients. In this context, “particular matters” would include regulations and contracts. Finally, the pledge extends the current statutory ban on certain senior appointee communications with employees from the former Executive Branch agency, from one year to two years.
The president also intends to require registered lobbyists entering the government to pledge that they will neither seek nor accept employment in any Executive Branch agency they lobbied within the previous two years. They must also promise not to participate in any matter in which they were involved before that agency during the previous two years. Finally, all appointees must agree that, upon leaving government service, they will not engage in lobbying before any Executive Branch official or non-career senior executive service appointee for the remainder of the Obama administration.
This executive order contemplates enforcement of the aforementioned pledges, made by appointees, through judicial civil proceedings, a lobbying ban, and payment of fines for a breach or attempted breach of the pledge. As a result of these new restrictions, companies should review their policies governing gifts, post-employment restrictions and lobbying activities. They should amend them where necessary, communicate any changes to affected personnel and revise company training materials accordingly.
This new initiative is in addition to the ongoing activities by Congress in the ethics and compliance area and career federal government acquisition and law enforcement personnel.
Particular areas to monitor include those detailed in the recently released recommendations of the National Procurement Fraud Task Force, chaired by the assistant attorney general for the Justice Department’s criminal division. It is comprised of members from prosecutorial and investigative agencies, including agency inspectors general. The task force will continue to be influential in the procurement reform arena.
Earlier this year, the task force’s legislation committee released a document titled, “White Paper on Procurement Fraud: Legislative and Regulatory Reform Proposals.” It proposed legislative changes in three broad categories: improvements in ethics and internal controls among contractors; improvements that aid the prosecution of procurement fraud; and improvements in the government’s ability to prevent and detect procurement fraud.
Some task force proposals contained in the white paper are now law. In the ethics and internal controls area, the requirements that contractors implement a written ethics code, notify the government of any overpayment and report when there is “credible evidence” to believe a federal criminal law has been violated in connection with a government contract have been codified in the Federal Acquisition Regulation. (February 2009 Ethics Corner)
Under the new FAR rules, a compliance program must provide a mechanism for employees to report suspicious conduct and require cooperation with any government investigation or corrective action related to government contracts.
Proposed enhanced prosecution tools include changes to the definitions under the federal sentencing guidelines for economic loss to allow for increased penalties for procurement fraud convictions; expanding the office of inspector general subpoena authority to include witness interviews; assigning inspector general lawyers to procurement fraud prosecutions; and expanding and reforming the Program Fraud Civil Remedies Act, which permits civil penalties for the false or fraudulent submission of claims.
With respect to the prevention and detection of fraud, task force recommendations included: extending criminal conflict of interest requirements to contractors performing acquisition guidance or services on behalf of the government; reinstating audit rights for the GSA inspector general regarding price negotiation information under the multiple award schedule program; establishing a national procurement fraud database that compiles adverse action data on contractors from federal and state sources; expanding background checks for contractor personnel; and permitting the use of Social Security numbers for the identification of individuals in the excluded parties lists system.
Clearly, both the president’s actions early in his administration and the task force’s recommendations have and will continue to shape company ethics and compliance programs in a number of areas.
David Hickey (firstname.lastname@example.org) and Emily Parker (email@example.com) are attorneys with Greenberg Traurig LLP, as members of the government contracts practice group. The views expressed are solely those of the authors.