This old adage is spot on when it comes to investing in ethics and compliance early on in the life of an organization and, at least, before a major non-compliance event occurs. These days, I continue to receive calls, at least monthly, from distressed owners and/or executives of small and medium-sized government contractors facing the intimidating sanction of debarment or worse, parallel debarment and civil/criminal proceedings involving the U.S. Department of Justice. For each of these organizations, their very means of survival are in jeopardy, and they are willing to do whatever it takes to avoid that outcome, including expending large sums of money and resources over a short period of time. In most cases, we encounter a thriving contracting business with no pre-existing investment in ethics or compliance, let alone any formal, documented efforts to create and inculcate a values-based ethical culture.

After having represented successfully scores of government contractors and executives during the most stressful crises in their histories, we genuinely have seen it all and almost immediately have a strategy for architecting a successful outcome. Where our clients embrace and follow our guidance, success, fortunately, has been realized. While I genuinely enjoy this crisis practice, find the challenges rewarding, and have developed many long-standing client relationships from these events, including friendships, nearly all could have been prevented with a relatively small investment upfront in ethics and compliance.

Most of us see the benefits of procuring health insurance, life insurance, car insurance, homeowner’s insurance, and saving for retirement, but faced with the challenging fiscal environment all contractors find themselves in, many small and medium-sized companies choose to forego investment in ethics and compliance when things are going well despite it being a requirement for most under FAR 52.203-13, Contractor Code of Business Ethics and Conduct. We understand the realities of trying to run a business leanly and not layering on legal and consulting fees. But, I would liken such a mentality to deferred maintenance on an exotic sports car – you are going to pay and it is only a matter of time and the longer you wait, the more damage you are potentially doing. If you accept this reality, the question then becomes do you want to invest a small amount now and reap the benefits of the program or wait until a major event occurs that will cost you far more to resolve?

For every client we have successfully guided through a crisis – and the list is long – all would reverse time in a heartbeat and invest upfront to avoid the latter crisis. I am here to tell you that it is the best investment you can make if you intend to be successful in this complex, highly regulated industry. Not only will it decrease the likely occurrence of a significant crisis, but should one still occur, it will position you well before the agency debarring official by showing that the organization and its leadership valued ethics and compliance before trouble arose, a key mitigating factor. I can pretty much guarantee you that the costs will be a fraction of what they would be if implemented during a crises and can be implemented efficiently and without adversely impacting business operations.

So, where do we go from here? In the interests of giving you practical guidance on the key components of an effective values-based ethics and compliance program, we have prepared the following questions for you to ask yourself and your leadership. Answer these questions objectively and honestly and see how your program stacks up against a best practices program.

  1. Does your organization have core values?
  2. Are your organization’s core values defined in a meaningful and practical way for employees?
  3. Do those values reside solely on paper or do they guide your employees’ daily actions and decision-making?
  4. Can employees restate the core values without referring to the written policy?
  5. When was the last time your leadership used the core values during a discussion with employees?
  6. Does your management team regularly engage with their subordinates to discuss the company’s core values and ethical decision-making?
  7. Do you have a full time Ethics & Compliance Officer (ECO)? If part-time, are their ECO responsibilities prioritized or do they take a backseat to their main position?
  8. When was the last time your ECO organized a seminar or training session with employees where he/she led a live discussion focused on the core values and business integrity?
  9. Does your company genuinely consider and factor an employee’s compliance with and promotion of core values in their annual evaluation, particularly for management personnel?
  10. Are you familiar with the FAR (and DFARS or other agency clauses) incorporated into your contracts by reference and are you in compliance?
  11. Are you aware of your organization’s high-risk compliance areas and have you implemented measures, including policies and training, to address them?
  12. Do you regularly monitor and audit your high-risk areas?
  13. Do you use questionnaires or surveys to periodically evaluate employee morale and culture?
  14. Do you maintain an independent Ethics Helpline or Hotline? Have you received hotline reports in the past 12 months?
  15. Do you have an investigations policy or formal process for responding to reports of non-compliance events?
  16. Are those who receive the reports trained on what to do following a report?
  17. Does your process ensure that an independent party uninvolved in the investigation is responsible for evaluating the investigative findings for thoroughness, whether corrective actions are needed, disciplinary actions, and whether the matter gives rise to mandatory disclosure obligations under FAR 52.2013-13, among other obligations?
  18. Have you made a disclosure to the government in the last three years? If not, is it because you did not have any events giving rise to a disclosure or is it because of a lack of awareness of your obligations?
  19. Are you aware that agency inspector general offices often share disclosures with the agency debarring official and have you taken the debarring official’s perspective into account in drafting the disclosure?
  20. Are you aware of the importance of addressing “present responsibility” under FAR Subpart 9.4 when making a disclosure, including the “present responsibility” of any individuals identified in the disclosure that you do not wish to be debarred?
  21. Do you know who your lead agency SDO is and how they approach mandatory disclosures and evaluate “present responsibility”?
  22. Does your company maintain insurance to cover legal costs for employees, as well as directors and officers, in the event of a non-compliance event?
  23. How do you think your program and culture would be rated if an independent and objective party conducted an evaluation?

 

While these are just some initial questions to consider, they should give you a good idea of whether you have gaps in your program and how your program is working. These days contractors of all sizes, including their executives, have a lot to lose as a result of a non-compliance events and the Government’s enforcement regime is far more coordinated than it was in the past. Today, a major non-compliance event can lead to debarment, civil prosecution under the False Claims Act, including penalties and treble damages, criminal prosecution, and contract remedies. Moreover, more than 50-percent of all debarment cases involve individuals, including owners, executives, and employees. Minimize the likelihood of finding yourself in one of these situations by investing in ethics and compliance upfront. You will not regret that decision.