Defense Ethics Program:

Opportunities Exist to Strengthen Safeguards for Procurement Integrity

GAO-05-341: Published: Apr 29, 2005. Publicly Released: Apr 29, 2005.

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In 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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Consistent with our recommendation and in part in response to our report, DOD has completed several actions since September 2005 intended to strengthen ethics training and counseling and enhance employee awareness of post-government employment restrictions. First, in September 2005, the Under Secretary of Defense for Acquisitions, Technology and Logistics (AT&L) issued a memorandum for all DOD acquisition executives that among other actions, established an expectation for managers throughout the acquisition workforce to regularly include ethics training and awareness in their staff meetings, organization training plans, and individual development plans. Second, in October 2005, the AT&L undersecretary notified DOD acquisition executives that he had requested the Defense Acquisition University to identify and incorporate into acquisition training courses best practices, case studies, and lessons learned on prevention of procurement fraud, waste, and abuse as part of DOD's efforts to maintain focus "not only on doing things right, but also on doing the right thing." Finally, in December 2006, DOD's Inspector General (IG)--in collaboration with the General Counsel's Standards of Conduct Office (SOCO), which is the DOD focal point for ethics training--reported results from a survey conducted in late 2005 of over 3,000 senior officials and acquisition employees regarding post-government employment restrictions. Consistent with our recommendation, according to the IG, the purpose in surveying senior military and civilian employees and the acquisition workforce was to determine their awareness and attitudes concerning restrictions of post-government employment and the goals were to improve the DOD ethics and compliance programs and to promote professional conduct throughout DOD. For example, one objective of the survey was to sample employee perceptions on ethics issues and provide a baseline of awareness and attitudes concerning restrictions on post-government employment. A second objective was to identify areas for potential program evaluation; identify management risks and program gaps; educate agency employees about aspects of the ethics program; and to communicate to DOD employees the importance of ethics in the government. According to the IG's December 2006 report, the survey results will help DOD leadership better understand how senior officials and acquisition workforce become aware of post-government restrictions; how they view their accountability for complying with the restrictions; and where they go for advice and counseling. In response to the IG's recommendations to further enhance ethics training in the future, SOCO agreed in November 2006 to ask the IG to periodically conduct similar surveys of senior officials to continue assessing their awareness of key restrictions. SOCO also agreed to design the 2007 ethics training curriculum to focus on the risk of post-government employment restrictions.

    Recommendation: 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, the Secretary of Defense 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 training and counseling that meet standards promulgated by DOD Standards of Conduct Office.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: As of 2008, DOD sources informed GAO that no action will be taken to directly implement this recommendation. According to DOD's ethics and Inspector General (IG) offices, due in part to personnel privacy concerns, DOD has no budget or plans to develop a management information system to track and report on the status of alleged misconduct that could be used by ethics officials to enhance training and advice to prevent such violations. However, consistent with the intent of our recommendation, DOD ethics officials and procurement fraud investigators have worked with the Deputy Inspector General (IG) for Policy and Oversight to the maximum extent possible to update ethics training materials for employees to increase their awareness that their reports of alleged ethics violations will be acted upon and also to better educate DOD employees on the results of law enforcement actions taken on substantiated allegations of ethics violations. For example, since June 2006, DOD's ethics office has widely disseminated and periodically updated its "Encyclopedia of Ethical Failure" as a training tool that assembles a selection of cases of ethical failure. According to DOD's ethics office, the goal is to sensitize DOD employees to the reach and impact of federal ethics statutes and regulations by providing them with real cases of federal employees who intentionally or unwittingly violated the standards of conduct, organized according to offense, including post-employment violations. According to DOD ethics officials, such training improvements are expected to increase the number of DOD employees who choose to report ethics violations by sharing information that corrective law enforcement action is taken, which reinforces to DOD employees the value of reporting apparent violations. Because DOD officials indicated in 2008 that development of a tracking and reporting system for alleged ethics violations is unlikely to occur due to budget constraints, we are closing this recommendation as implemented in recognition of the alternative corrective actions.

    Recommendation: 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, the Secretary of Defense should 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.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD partially concurred with this recommendation, agreeing to take alternative actions other than directly assessing contractor ethics programs. Specifically, in response to our report, in January 2006, the Under Secretary of Defense for Acquisition, Technology and Logistics sent a letter to the Top 100 defense companies asking their leadership to articulate the department's expectations of high ethical conduct. In addition, the under secretary spoke to a June 2006 defense industry-sponsored ethics conference to enlist contractors' support in maintaining ethics at the heart of their corporate vision and values and to assist DOD in intervention and prevention by sharing best practices in prevention of unethical behavior. With these actions, the defense department has taken the opportunity to strengthen safeguards for procurement integrity as intended by our recommendation, and we are closing out the recommendation as implemented.

    Recommendation: 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, the Secretary of Defense should assess, as appropriate, contractor ethics programs in order to facilitate awareness of mitigation of risks in DOD contracting relationships.

    Agency Affected: Department of Defense


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