Introduction
Ethics occupies the place of paramount importance in government contracts. The standards of accountability and responsibility in the area, where the business coalesces with the public administration are much higher than in the purely commercial segment (Duska, 2007). Private suppliers of the United States public administration services are found everywhere from healthcare industry to the Department of Defense research and development endeavors.
Thus preserving integrity and probity of the government contracting relations, as well as assuring just and equitable treatment of the bidder is highly essential for harmonious functioning of the state (Machan, 2007). Improper conduct often overlaps with serious legal violations, and lead to civil, administrative, and, in the most serious cases to criminal liability (Duska, 2007). Investigating and analyzing ethical challenges in this environment is an indispensable task for a future practitioner in this field, who should always remember that ethics are dynamic, and should track its most recent ramifications (Neill, 1998).
The purpose of this paper is multifold. Firstly, this case sees to identify three most conspicuous and flagrant forms of ethical violations, and analyze the nature of misconduct, which surrounds ethical incidences in the government contracts. Secondly, this paper investigates whether current policies and procedures administered by the state are adequate enough to protect integrity of the state contracts. Thirdly, this research specifically focuses on the analysis of Boeing Company ethics scandal, which happened in 2003, and evaluate the impacts for the company and the implicated managers.
Conflict of Interest in the Government Contracts
Any government employee, who is engaged in government contract dealings, is prohibited from having any financial or other conflict of interest. The law prescribes criminal liability for working on a government contract, if financial interests of an employee may be affected. The concept of ‘employee’ in this case encompasses spouses, minor children, partners, former and future employers(Berrios, 2006).
The most notable examples of having financial conflict of interests are the following. Firstly, having stock in a bidding company qualifies as a conflict of financial interests. Secondly, an employee, who have some form of deferred compensation or pension from the contractor, who participates in the tender, which is managed by this employee’s agency, the employee should declare conflict of interests and forbear from participating in the procedures. Thirdly, working as an advisor for such company, or moonlighting is another criteria. Then, if a spouse or other close relative works for the company, to which the contract may be assigned, and her/his compensation will be somehow affected, the employee of the awarding agency is not eligible for working on the project.
It is noteworthy to mention that the forms of conflicts explained here are non-exhaustive. Because the area of procurement ethics is dynamically developing, anticipating all possible scenarios is not accomplishable (Machan, 2007). Thus, in the event an employee identifies a case, which raises his doubts about potential conflict of financial interests, an employee should conduct additional research, or contact his ethical committee.
Impartiality in the Government Contracts
Although an employee may not necessarily have financial interest in a particular procurement contract, under specific circumstances the ethics committee of such agency may question his impartial stance. Many commentators underscored the importance of impartiality in government procurement contracts, because it serves as a guarantee that all bidders and offerors are treated fairly (Neill, 1998; Berrios, 2006).
Some examples involving impartiality in government contracts are the following. Firstly, working on a procurement proposal, which involves a former employer, its clients, employer of the spouse or close relatives, or others, with whom an employee had some kind of business dealings in the past is a legitimate ground for challenging his impartiality. Secondly, the bids submitted by the friends, a dating partner or other person, with whom the employee has some kind of intimate relationship, his impartiality becomes automatically dubious.
At the same time, it does not automatically preclude this employee from participating in the analysis and assignment procedure. If an employee declares that a conflict of interest is present, but he still desires to take part in the process, he should ask the ethics committee to have his request investigated. If this body rules that despite the grounds of conflict, still this employee may act neutrally, then this employee should sign a declaration of compliance, and he will be admitted to the proceedings.
Accepting Gifts and Independence of the Government Employees
A common rule for the state employees is to never solicit of accept gifts from the companies, which participate in the bidding process (Neill, 1998). If a gift is accepted, it always creates a feeling of reciprocity, and, traditionally a receiver of gift is expected to give something in return. In this case, he may be expected to influence the decision making process of the agency (Duska, 2007). Thus, in legal terms, gift may be interpreted as a bribe, and therefore a criminal action may be taken against both the giver and the receiver.
At the same time, it is important to remember that gifts may take many forms. Practically, it is anything that have monetary value, including travel, meals in the restaurants, discounts for the services, provided by the bidder, entertainment, cash etc.
Ethical Violation by Boeing in 2003
In November 2003, Boeing Company laid off its chief financial executive for one of the gross ethical violations ever perpetrated in the history of corporate America. Among other allegations, the internal investigation of Boeing revealed, that the officer was negotiating to hire a missile expert of the Department of Defense, while that expect was still employed by the government. Furthermore, his position was closely linked to the state procurement assignment (Cavico, 2002).
The Pentagon and the Department of Defense have launched their own investigations, which revealed that the employee was directly approached with the job offer. Yet, together with the internal investigation of Boeing, the specialists found out that both the Chief Financial Officer and the government employee Darleen Druyun intentionally concealed this information from the firm. As a result, in the light of the impeccable reputation of Boeing as a reliable aircraft manufacturer, and ignorance of other top officials, the government of the United States decided not to take any punitive actions against the firm. However, both the CFO and the newly made vice president of the Missile Defense Systems unit both lost their positions (Cavico, 2002).
Although Boeing was not precluded from participation in further biddings and was not deprived of his pending contracts with the Department of Defense, this situation resulted in a number of internal in-depth investigations in the firm. The company Human Resources Department was specifically targeted by the Board of Directors, and the latter decided to fire one third of the specialists there. The company has also renovated its Code of Ethical Conduct. To complete this task, the firm contracted international law firm Baker & McKenzie, which drafted the code and organized a series of workshops for the company employees, explaining how to use the code. Furthermore, the company started to encourage the practice of whistleblowing. Nowadays, practically any employee can report unethical conduct of his colleague, superior or subordinate directly to the specifically appointed officer on ethics, who sits in the board of directors.
Adequacy of the Federal Acquisition Regulation
Nowadays, the Federal Acquisition Regulation regulates ethical and legal issues arising during the process of state procurements. Many commentators highlight that this instrument is one of the successful internationally accepted standard of assigning government contracts. At the same time, although it is a rather effective instrument, and comprehensively covers the associated legal issues, it has several vulnerabilities in terms of ethics.
Firstly, it specifies that the entire process of government procurement contract assignment consists of three parts. During the first part of the process, the government recognizes that a particular need for service or a product arises. Thus, acquisition planning starts. At the second stage, the contract and its requirements are formed. At the last stage, the contract is assigned to the winning agency and administered respectively.
It is not expressly recognized in the law of the United States that the principles of ethics are equally applicable at all stages. Many commentators highlighted that a variety of violations may take place not only when the contract is assigned, but when it is planned and executed as well. To illustrate, a winning company may solicit an employee to change the requirements of approval, extend deadlines for execution, or even approve sub-contracting to a third party.
Secondly, under the law several executive agencies are exempted from this act. For instance, the Federal Aviation Administration and the United States Mint have their own instruments, which govern ethical principles there. This phenomenon is negative for uniformity of laws.
Conclusions
References
Berrios, R. (2006). Government Contracts and Contractor Behavior. J Bus Ethics, 63(2), 119-130. http://dx.doi.org/10.1007/s10551-005-3969-8
Neill, J. (1998). The market : ethics, knowledge, and politics. London New York, NY: Routledge.
Machan, T. (2007). The morality of business a profession for human wealthcare. New York London: Springer.
Duska, R. (2007). Contemporary reflections on business ethics. Dordrecht, the Netherlands: Springer.
Cavico, F. (2002). Case Study: Boeing – Air Force Ethics Scandal, available at: https://secure.business.nova.edu/course-materials/6240/cases/Boeing_AirForceEthicsScandal.htm
