Infotech and the Law: Druyun fallout will be felt long and hard

Richard Rector

The federal government has long imposed unique ethical responsibilities on its contractors. Following the defense procurement scandals of the 1980s such as Operation Ill Wind, Congress considerably increased the number and types of ethical considerations governing federal contracts.

The result is a maze of ethics-related statutes and regulations with which companies and their employees must comply or face civil, administrative or criminal sanctions. Despite this labyrinth of mandated ethics, the regrettable conduct of Darlene Druyun once again has cast a shadow on the government contracting community, and the effects may be felt for years to come.

In 2002, Druyun retired as the Air Force's Principal Deputy Acquisition Secretary, a position in which she held extraordinary power. Like many retiring government officials, she passed through the revolving door to employment in the private sector as the Boeing Co.'s deputy general manager of missile defense systems.

It came to light, however, that Druyun had negotiated her new job with Boeing's Chief Financial Officer Michael Sears while she held her government position and exercised authority over Boeing's contract activities.

Last month, Druyun admitted that she had acted against the government's interest by favoring Boeing in certain contract matters:

  • In negotiations to lease 100 Boeing KC 767A tanker aircraft, Druyun agreed to a higher price for the aircraft than she believed was appropriate, as a "parting gift" to her future employer.

  • She negotiated a $100 million payment to Boeing as part of a restructuring of the NATO AWACS program, despite believing that amount to be too high.

  • As the selection authority for the $4 billion procurement to upgrade the avionics of the C-130 aircraft, she chose Boeing over four competitors, despite her belief that an objective selection authority may not have selected Boeing.

Druyun pleaded guilty and has been sentenced to nine months in prison for her improprieties in the tanker lease deal. Sears lost his job at Boeing and last week pled guilty in federal court to related improprieties. However, they will not be the only ones to suffer from their disgraceful behavior.

Certain Boeing business units are indefinitely barred from bidding on Air Force launch business. Additionally, Lockheed Martin Corp., BAE Systems Plc and L-3 Communications Inc. have each protested the C-130 upgrade contract, and Lockheed Martin filed an "omnibus" protest requesting a review of all acquisitions in which Druyun was involved. The Government Accountability Office, the watchdog arm of Congress, will consider these matters.

The Druyun scandal also has led to the most sweeping analysis of the federal procurement system since the 1990s, and the entire government contracting community is certain to feel the effects.

Last week, the Pentagon asked the Defense Contract Management Agency to survey all contract actions in which Druyun was significantly involved from 1993 to 2002. This includes at least nine major programs totaling more than $32 billion for which she served as the source selection authority, as well as hundreds of other contract actions.

The Pentagon also has commissioned the Defense Science Board to conduct a departmentwide study of the acquisition process to integrate more checks and balances into the system. Among the task force members will be ethics professors from the University of Virginia and George Washington University. According to Michael Wynne, the Pentagon's acting acquisition chief, these efforts are necessary to restore integrity to the acquisition process.

Although the fallout from the Druyun case is just beginning, the immediate lesson for contractors is clear: Implement a compliance program that ensures every employee understands and follows the rules.

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

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