ETHICS:
THE GOOD,
THE BAD AND
THE UGLY
NCMA Columbia Basin Chapter
Alan Rither, Esq.
CPCM, NCMA Fellow
DON’T WE ALREADY KNOW THIS STUFF?
COMMON OPINIONS ABOUT ETHICS
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We’ve all got ethics – some folks just have more than others
Ethics are only for the weak not real leaders (like us)
Ethics is nothing more than expected behavior – descriptive
What’s right for you is wrong for me – situational ethics
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“Corporation – noun.
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An ingenious device for obtaining profit
without individual responsibility.”
Ambrose Bierce, 1842-1914
American Columnist and writer; The Devil’s Dictionary
BUT AREN’T ETHICAL ISSUES COMPLEX?
I’ve heard people say:
“That’s how you see it, but I see it
differently”
But we’re not talking about 50 shades of gray
(or is that “Grey”?)
…but rather, is it
legal or illegal?
WHY DO WE NEED TO STUDY ETHICS?
DOES IT MATTER, ANYWAY?
BUSINESS ETHICS
It’s not about beliefs, it’s about behavior
 Everyone is entitled to their
own morality, but society
decides what is acceptable
behavior
 Not everything that is legal
is ethical nor is everything
that is
ethical, legal
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FAR PART 3.10 – ETHICS PROGRAM
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Policy at FAR 3.1002 applies to all contractors and
subcontractors at every level
Clause at FAR 52.203-13 is mandatory if the value of
the contract is expected to exceed $5,000,000 and the
performance period is 120 days or more. Subcontractor
violations that result in a false claim, and, if paid by you
because of reckless disregard, etc., become your false
claim too.
It looks simple, but there are a number of unresolved
issues like what is “credible evidence,” how long can
you investigate, and who is a “principal” of the company.
Confusion does not necessarily work to your advantage.
HOPING TO BLEND IN WITH THE CROWD?
REQUIREMENTS OF THE CODE
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Contract Clause flowdown
◦ FAR 52.203-13 Contractor Code of Business Ethics and Conduct in
relevant subcontracts
Within 30 days of contract award contractors must have:
◦ Written code of business ethics & conduct
◦ Make a copy available to each employee engaged in performance
of the contract
◦ Exercise due diligence to prevent and detect criminal conduct
Timely disclosure to the Inspector General with copy to the C.O.
whenever you have “credible evidence” that a “principal,” employee,
agent or subcontractor has violated:
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Federal criminal laws – fraud, COI, bribery or gratuity
False Claims Act
REASONS FOR BUSINESS ETHICS
It’s the right thing to do
 Lack of public support / adverse publicity
 Impact on customers / clients
 “A penny saved is a penny earned” B. Franklin
 Government investigations lead to indictments
 Potential penalties far outweigh any benefit
from a second-rate system
 Good policies require good practices

VIOLATORS WANT OTHERS TO JOIN THEM
MANAGEMENT OR LEADERSHIP?
“Management is doing
things right; leadership is
doing the right things.”
Peter Drucker
YOU MUST GET INVOLVED!
“The only thing
necessary for the
triumph of evil is
that good men do
nothing.”
Edmund Burke
LEADERSHIP IS THE KEY TO SUCCESS
“I am more afraid of an
army of 100 sheep led by a
lion than an army of 100
lions led by a sheep.”
— Talleyrand, French diplomat (1754-1838)
PROVERBS 25:26
“Like a muddied spring or a
polluted well are the
righteous who
give way to the
wicked.”
LIVING AN ETHICAL LIFE IN BUSINESS
“Personal leadership is the
process of keeping your vision
and values before you and
aligning your life to be congruent
with them.”
Stephen Covey, author
A FEW BUSINESS ETHICS LAWS
TINA – the Truth in Negotiation Act
 FCA – the False Claims Act
 FERA – the Fraud Enforcement and Recovery Act
 FCPA – the Foreign Corrupt Practices Act
 AKA – the Anti-Kickback Act
 LDA – the Lobbying Disclosure Act
 CDA – the Contract Disputes Act and
 SOX – the Sarbanes-Oxley Act

WHAT MOTIVATES SUCH BEHAVIOR?
“Can I get
away with it?”
LEADERSHIP DOWN THE WRONG PATH
…AND IT GOES DOWNHILL FROM THERE
TRUTH IN NEGOTIATIONS ACT
Requires government contractors to submit cost or
pricing data and to certify that such data is
accurate, current and complete as of the date of
final agreement on price, commonly referred to as
the “handshake.”
 Cost or pricing information or data includes all
facts that prudent buyers and sellers would
reasonably expect to affect price negotiations
significantly. Cost or pricing data are factual, not
judgmental, and are verifiable.
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TINA – THRESHOLD AND EXEMPTIONS
Applies to contracts over $700,000 except if:
 Adequate price competition exists
 The price is set by law or regulation
 The acquisition is for a commercial item
 The head of the contracting activity for the
government agency grants a waiver.
WHY SO MANY LAWYERS TEACH ETHICS
WORLDWIDE CORRUPTION
THE FOREIGN CORRUPT PRACTICES ACT
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A federal law that prohibits U.S. organizations,
directly or through others (such as foreign
representatives, consultants or business
partners) from…
 Giving
or offering any payment, gift, bribe, or
“anything else of value” to a foreign official
 For the purpose of influencing an official act or
failure to act, or inducing the foreign government
official or party to use influence to affect the
decision of a foreign government or agency.
FCPA ISSUES
As business, including government contracting,
becomes more global, the interactions with foreign
officials increase
 FCPA jurisdiction is very broad – applies to acts
taken wholly outside the US if a US concern
commits the act
 The term “foreign official” has been interpreted
very broadly, to include low-level employees of
state-owned foreign entities
 Therefore, all interactions with foreign
governments must be closely scrutinized
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LOBBYING DISCLOSURE ACT
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Legislation aimed at bringing a level of accountability to
federal lobbying practices. It was amended substantially
by the Honest Leadership and Open Government Act of
2007.
The Byrd Amendment prohibits the use of appropriated
funds by recipients of a Federal contract for purposes of
influencing or attempting to influence federal officials in
connection with a Federal action, such as the awarding
of a Federal contract. The Act prohibits contractors from
using appropriated funds for lobbying in connection with
a contract, grant, loan or cooperative agreement with a
Federal agency.
CONTRACT DISPUTES ACT
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Claims by the contractor against the Government must be submitted
in writing to the CO for a decision. All claims by the Government
against the contractor must be the subject of a decision by the CO.
Except for alleged fraud in connection with a claim by the contractor,
all claims by either party must be submitted within six years after the
claim accrues. (like a statute of limitations)
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Claims by the contractor that exceed $100,000 must be
accompanied by a certification that
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(i) the claim is made in good faith,
(ii) the supporting data are accurate and complete to the best of the
contractor's knowledge and belief,
(iii) the amount requested represents the contract adjustment for which
the contractor believes the Government is liable, and
(iv) the certifier is authorized to submit the certification on behalf of the
contractor
TRYING TO DO IT ALL
CONFLICTS OF INTEREST
Recent trend shows increasing importance
 COI: A situation in which an individual who has
authority to make or influence a procurement
decision may have past, present, or currently
planned personal, business or other interests
with a vendor or competitor in the subject
procurement other than those of the employer
 Both individual and corporate responsibility
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AVOID EVEN THE APPEARANCE OF COI
Do not solicit, directly or indirectly, any offer or
promise of future employment or business
opportunity, or engage in any discussion of
future employment or business opportunity
with any contractor or prospective seller while
participating in the evaluation of proposals.
 Do not accept outside employment which will
interfere with contract work, or create or
appear to create a conflict of interest.
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ANTI-KICKBACK ACT OF 1986
Prohibits those involved in government contracting
from offering, accepting, or attempting to accept
inducements for favorable treatment in awarding
contracts for materials, equipment, or services of
any kind.
 What is a kickback? Any money, gift, gratuity,
thing of value, or any other form of compensation
which is provided for the intended purpose of
obtaining a contract or favorable treatment under
a contract.
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TIME TO STOP DIGGING
SARBANES-OXLEY ACT
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Introduced major changes to the regulation of corporate governance
and financial practice
Requires certification by corporate officers that the report:
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Does not contain any material untrue statements/omission or be
misleading
Financial statements and related information fairly present condition
and results in all material respects
Signing officers are responsible for internal controls and have evaluated
these internal controls within the previous 90 days and reported on
findings
All deficiencies reported in internal controls and information on any
fraud that involves employees involved with internal activities
Any significant changes to internal controls or related factors that could
have a negative impact on the internal controls
Penalties up to $1 million and 10 years imprisonment
OMB CIRCULAR A-123 (REV. 12/2004)
“Management’s Responsibility for Internal Controls”
Federal equivalent of SOX
Management has a fundamental responsibility to develop and
maintain effective internal control. The proper stewardship of
Federal resources is an essential responsibility of agency
managers and staff. Federal employees must ensure that Federal
programs operate and Federal resources are used efficiently and
effectively to achieve desired objectives. Programs must operate
and resources must be used consistent with agency missions, in
compliance with laws and regulations, and with minimal potential
for waste, fraud, and mismanagement.
BALANCE IS REQUIRED
Federal managers must carefully consider the appropriate
balance between controls and risk in their programs and
operations. Too many controls can result in inefficient and
ineffective government; agency managers must ensure an
appropriate balance between the strength of controls and the
relative risk associated with particular programs and
operations. The benefits of controls should outweigh the cost.
Agencies should consider both qualitative and quantitative
factors when analyzing costs against benefits.
ANY QUESTIONS?
Alan Rither, 375-2218