Infotech and the Law: Savvy contractors brush up on procurement integrity laws

Richard Rector

Procurement integrity laws have been around since 1989, but rarely in the news as prominently as they were in 2003.

Contractors large and small ran afoul of the laws, demonstrating the importance of training and compliance in this area.

The laws are designed to protect the integrity of the public contracting process in three areas: disclosure and receipt of procurement-sensitive information, employment discussions between contractors and federal officials, and post-employment restrictions on former federal officials.

Breaking the laws can bring harsh results, including exclusion from a competition, and civil penalties and liabilities. In rare cases, violations may result in criminal penalties.

The first convictions for criminal violations of the Procurement Integrity Act of 1988 reportedly occurred in January 2003, when a contractor employee and an Army contracting official were found guilty of violating the act.

The convictions stemmed from an investigation into activities of the commander of the Army Contracting Command in Korea.

In July 2002, the commander was indicted on 11 counts of bribery in connection with the award of four contracts, after it was found that the commander had influenced the awards in exchange for bribes totaling at least $700,000.

The indictment also alleged that the commander engaged in a conspiracy to violate the Procurement Integrity Act with a subordinate Army contracting official and with a contract employee working for American Management Systems Inc.

The goal of the conspiracy was to improperly disclose AMS' proposal information to the contract employee so he could submit a better offer through a company he created to compete with AMS on the contract.

The commander allegedly directed the subordinate official to provide information about AMS' proposal to the contract employee to assist him in winning the contract. The subordinate official then assisted the contract employee in submitting a proposal that was virtually identical to that of AMS.

Once proposals were received, the commander designated the subordinate official to review them. At the subordinate's recommendation, the Army awarded the contract to the company created by the AMS contract employee.

In January 2003, the commander pled guilty to two counts of conspiracy and one count of bribery, and the government dropped the remaining eight counts. The subordinate official and the contract employee went to trial and were convicted of engaging in a conspiracy to violate the Procurement Integrity Act.

The subordinate official also was convicted separately of violating the act by disclosing procurement-sensitive information to the contract employee.

The contract employee was separately convicted of aiding and abetting a violation of the act.

Last June, the commander was sentenced to 54 months in prison and three years of probation, and fined $10,000. In August, the subordinate Army official was sentenced to 18 months in prison and three years of probation, and fined $4,000. The contract employee was sentenced to 24 months in prison and three years of probation, and fined $5,000.

The facts of this case were particularly offensive, but violations can and do arise in less egregious circumstances. It is important for all participants in the federal procurement process to understand the procurement integrity laws.

For contractors, this means continually training employees on the risks and obligations of the laws, and developing strong compliance programs to deter and address violations. An ounce of prevention in this area is well worth the cost.

Richard Rector is a partner in the Government Contracts Group of Piper Marbury Rudnick & Wolfe LLP in Washington. His e-mail address is richard.rector@piperrudnick.com.

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