Winding Down War Zone Contracts

The war in Afghanistan appears to be ending. Combat troops are scheduled to leave by the end of 2014, and how many U.S. military personnel will remain to perform other missions remains

Federal government contracts for services in-country have been declining steadily and this will continue in the coming months. Most of the money left to be earned by federal contractors in Afghanistan will be gained through contracts already awarded. As with any arduous task for which a completion date is announced, the government assumed the risk of contractor lethargy — or worse — when it announced when the war will end.

Aside from the strategic military, diplomatic and political leverage lost by such announcements, one may imagine a scenario where contractors conduct cost-benefit analysis and determine that corporate “best efforts” may be inefficient and hence no longer in the company’s interest in winding up Afghan-based contracts.

There are likely few, if any, more contract opportunities there. Contractors may send second- and third-rate employees to Afghanistan and reallocate prime resources elsewhere. The rationale might further assume that even if future contract opportunities in Afghanistan are forthcoming, past performance would be sufficient to maintain the quality ratings to win contracts and not run the risk of suspension or debarment. But such resource strategies are short sighted.

There are pragmatic reasons for meeting an ethical obligation and to give the best effort in performing the balance of existing contracts in Afghanistan. The government has broad discretion to suspend and debar contractors, as well as terminate existing contracts for convenience or default, but the unique circumstances of the Afghanistan theater create conditions that are more serious than in other places with extensive U.S. government contracting.

Security concerns alone make it difficult to consistently provide the best quality employees. Complicating matters are graft, corruption and “protection” concerns. The physically and intellectually demanding environment, the heightened scrutiny of contractor performance by both the legislative and executive branches and the special inspector general for Afghanistan, should translate to even greater attention to internal corporate compliance programs.

Corporate officers are well aware that robust compliance programs coordinate and monitor risks related to regulatory compliance. The best programs have evolved from detecting and correcting problems associated with risk to anticipating and preventing even the risk of violation of law or regulation. Improper conduct by government contract employees may be imputed to the contractor. Actions of individuals can put the contractor as a whole at risk of suspension or debarment.

Contractors that have been suspended or debarred may continue to perform work, but the government has the power to terminate those contracts for its convenience. Contractors should not take the approach that if a half-hearted effort closing out contracts in Afghanistan leads to suspension or debarment, they could probably complete the contract, earn the revenue and not worry about losing future contracts in Afghanistan because the United States is leaving soon.

The contract could be terminated and the contractor would be denied the opportunity to earn further revenue, and perhaps most importantly, lose future opportunities to win government contracts, as bids from suspended or debarred contractors cannot be considered by the U.S. government.

There is another reason to insist on rigorous compliance programs and best efforts in the demanding environment of Afghanistan. A suspension or debarment hearing for failing to perform a contract adequately because of unqualified personnel is more likely to be defended successfully if the contractor can demonstrate: an existing, robust compliance program that reflects a full understanding and appreciation for the Federal Acquisition Regulation requirements; superb efforts in other theaters of operation and other countries — especially the contractor’s ability and willingness to employ properly qualified personnel in Afghanistan.  

It is critical to resist any temptation to cut corners and perform contracts below existing standards because of the unique circumstances of winding down operations in a difficult environment.

Compliance programs may be voluntary in other sectors of the economy, but government contractors know that FAR provisions mandate compliance programs not just in name, but those that go beyond perfunctory websites and “check-the-box” training. The best corporate officers understand that mandates have actually improved the effectiveness of those corporations that previously implemented only perfunctory compliance programs and have implemented meaningful business ethics codes and internal control systems. Innovative, effective compliance programs don’t have to be expensive or difficult to manage. Technology especially has enhanced a contractor’s ability to create and maintain effective programs that can provide, in the long term, great return on investment to the corporation, and in the short term, an effective means of monitoring corporate processes while ensuring government regulatory requirements are met. The demanding Afghanistan contracting environment will produce examples in the next two years that will exemplify the importance of corporate compliance programs.

A contractor employing substandard personnel in Afghanistan may persuade a federal agency suspension and debarment official to not penalize the company. The official may agree based on the totality of circumstances that will include documentary and testimonial evidence of a superb, well-functioning compliance program, established long before the incidents that led to the proposed suspension, successful performance of all other contracts in other locations, and bona fide attempts to find, hire and employ qualified personnel in Afghanistan.  

With facts like these established, a suspension and debarment official is more likely to consider the mitigating factors of Afghanistan’s uniquely challenging contract environment. The circumstances cannot be altered there, but corporations can take actions in the spirit of compliance.

Retired Maj. Gen. John D. Altenburg is a counsel in Greenberg Traurig LLP’s government contracts and government law and policy practice groups. He is the former deputy judge advocate general for the Department of the Army. The views expressed are solely those of the author.

Topics: Business Trends, Service Contracts, Defense Contracting, Defense Contracting

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