The word "transgression" derives from the prefix "trans" and the root "gress." The prefix "trans" means "to cross" or "across," as in "transfer" or "transportation" (literally, to carry across). The root "gress" means "to move or step," as in "progress" or "aggression" (literally, to move against).
I've often thought that the word "transgression" well describes the crux of contractor integrity in government contracts. Contractor integrity is a series of legal lines, some bright and well-defined, others fuzzy and vague. If a contractor were to "transgress," or step across, one or more of the lines comprising contractor integrity, the contractor is at risk of losing the contract, and more importantly, losing its ability to contract with the government.
Contractor integrity can be divided into three broad categories. First are those rules governing a contractor's conduct with federal agencies. Second are those rules covering a contractor's behavior with its suppliers and fellow contractors. Last are the regulations governing a contractor's internal practices.
Conduct with Agencies
Bribes
It is clearly, unequivocally illegal to offer a bribe to a federal employee. A bribe is defined as a payment made to influence someone to do something that shouldn't be done or to omit to do something that should be done under the rules governing the procurement.
While it's also equally illegal for the federal employee to accept the bribe, a contractor's illegal conduct will not be diminished by the federal employee's complicity in crime. Both the contractor, as a corporate entity, and the corporate employee offering the bribe, are subject to prosecution and fines. The employee may also face imprisonment.
Gratuities
It is likewise illegal to offer a gift to a federal employee. The term gift includes any gratuity, favor, discount, entertainment, hospitality, loan, or other item having monetary value. This doesn't apply to minor items commonly exchanged in business relationships, such as inexpensive pens, mugs, mouse pads, or to the modest provision of food and refreshments, such as soft drinks, coffee, and snacks offered other than as part of a meal.
The provision of meals to government personnel is permitted under certain circumstances, particularly when government personnel are visiting a contractor's facility and recourse to a restaurant or cafeteria for meals is otherwise unavailable. Discretion and common sense must be used to avoid the appearance of impropriety.
Offering Employment
A contractor cannot offer employment, now or in the future, to federal employees involved in a procurement on which the contractor is bidding.
Conduct with Suppliers and Other Contractors
Kickbacks
A kickback is any money, fee, commission, gift or the like which is given by a subcontractor or supplier to a contractor for the purpose of improperly obtaining favorable treatment or obtaining an award in connection with the contract. Crossing this line can mean jail time.
Kickbacks in any form are strictly prohibited and are not to be given or accepted under any circumstance. To raise the consciousness of employees and suppliers about kickbacks, many contractors provide their suppliers with an anti-kickback letter advising them of the contractor's policy not to accept gifts or compensation for favorable treatment. A sample anti-kickback letter is on page 37.
Independent Pricing
A contractor must arrive at its bid price independently and not through consultation or collusion with other contractors.
Contingent Fees
Except under certain circumstances, a contractor may not pay a consultant or representative a commission contingent on obtaining a government contract. The theory here is that the lure of a fat commission will induce the agent to act improperly if necessary to get the contract.
Restricting Subs
A contractor cannot unreasonably restrict its subcontractors from bidding directly on contracts with the government.
Internal Policies and Practices
Records Maintenance
Contractors must maintain records relating to government contracts for at least three years after final payment.
Falsification of Records
Related to records maintenance, contractors must not falsify or destroy records in an effort to hide non-compliance or demonstrate compliance with the requirements of a contract. This could include, for example, records relating to source of origin of goods or employment matters.
Product Integrity
The government must get what it pays for. Accordingly, a contractor cannot deliver inferior goods to the government by substituting shoddy parts or reducing performance.
In large part, most of the rules governing contractor integrity codify well-established common law and state statutory requirements governing fair dealing among businesses and consumers. Nevertheless, contractors entering the federal market should acquaint themselves with the federal regulations governing contractor integrity before falling into a trap for the unwary. Established contractors should re-acquaint themselves with these rules both to remind old hands and teach new hires about the lines of conduct that may not be crossed.
Back to Part One
