Inspectors General on Integrity and Efficiency. These offices
provide specialized training to the Inspector General (IG)
community and work to identify areas of weakness in federal
programs with respect to fraud and abuse. More recently, the
Department of Justice IG, Michael E. Horowitz, appointed
a federal prosecutor to address whistleblower complaints.
As Horowitz stated, “Whistleblowers play a critical role in
uncovering waste, fraud, abuse and mismanagement.”
Congress has pushed for increased use of suspension and
debarment to eliminate irresponsible contractors. Between
2009 and 2010, suspensions, proposed debarments, and
debarments by the Interagency Suspension and Debarment
Committee increased by more than 50%, and more agencies
are developing formal suspension and debarment programs.
State and Local Compliance
State and local IG activity has also increased. States are
increasingly issuing specific compliance requirements
similar to those found in the FAR, which are sometimes
unexpectedly placed on the contractor. Further, as fiscal
resources dwindle in an underperforming economy, more
federal funding is being used to finance state infrastructure
projects, which carries with it the need for contractors to
meet FAR ethics compliance regulations.
Furthermore, contractors need to be aware of the Federal
Highway Administration standards, which apply to ethics
rules for federally funded state highway projects. Required
Contract Provisions for Federal-Aid Construction Contracts
(FHWA-1273) were revised to include strong language with
regard to fines and imprisonment for false representa-
tions and statements in connection with the construction
of any highway or related project approved by the
Secretary of Transportation. Penalties can include fines and
imprisonment of five or more years.
Clearly, more projects will be subject to FAR provisions and
more agencies are looking to enforce compliance.
Examples of Ethical Breaches to
Help Your Company Avoid Similar Mistakes
Evidence of the heightened regulatory environment is
presented in the following examples.
Common Practice Is Not a Defense
Background –
A global project management and
construction enterprise has pled guilty for employing a
“common industry practice.”
Issue –
Foremen at this company were being paid for 1-2
hours of overtime (per day) for which they did not work.
This scenario had existed for years and was considered
“common practice” as a means to induce more skilled
foremen to stay on a project. The involved city, state, and
federal government agencies and private developers
claimed they were defrauded more than $19 million.
Result –
The head of the company’s U.S. operations
pled guilty and currently faces up to 20 years in jail.
The company now has its labor, billing, and minority
contracting monitored and is required to pay $56 million
in fines and restitution.
A U.S. attorney for the Eastern District of New York, Loretta
E. Lynch, warned contractors that similar contract and
billing fraud is being hunted down and prosecuted and
stated, in conjunction with the guilty plea, that, “The
defense that ‘everyone does it’ will not be a shield against
law enforcement.”
22 Building Washington
