THE FIRST 100 DAYS: Ethics Matter!

Mon, 09 Feb 2009 02:52:30 +0000 – By Alex BrighamEthisphere Institute Executive Director

The U.S. federal government is the world's largest single industry and it's getting bigger every day. It plays by its own rules --something that would never fly in any other business -- and the lines between lobbying, political donations and bribery are often blurred which is why for many it pays to have friends on Capitol Hill.

Take government contractors for example. Federal Acquisition Regulations require that companies who take on at least $5 million in federal contracts must have an ethics and compliance program in place. This includes having a code of conduct, publicizing a reporting hotline, having an internal control system that prevents violations of law, conducting periodic reviews, and self-disclosing violations to the government. These rules are clearly coded into Title 48 of the Code of Federal Regulations.

Recently the Ethisphere Institute looked at the ethics programs of more than 1,200 companies that contract with the U.S. Government to examine the extent that they were upholding the rules. Ethisphere's methodology, reviewed by leading attorneys, professors, and contracting experts, is proven to be objective and non-partisan, and received strong political support.

The results of our research should appall every American taxpayer.

Well over 50% of the 1,200 top government contractors couldn't prove even the most basic adherence to government contracting ethics and compliance laws. We found that contractors that failed to meet minimum ethics and compliance rules represented over $180 billion in federal contracts. Some of the contractors studied could not even identify the name or intent of the laws that applied to their business, including the Truth in Negotiations Act, also known as TINA, a law which stipulates the government is receiving accurate and fair pricing from the contractor.

According to Ethisphere's estimates, more than 10% of the $180 billion overseen by contractors with unproven ethics is wasteful, rife with conflicts of interest and would immediately melt away under the spot of accountability and scrutiny. How much should the U.S. government be willing to pay to properly staff and oversee a new ethics function? Surely not $18 billion.

It's time for the federal government to take a more proactive role in examining, classifying and rewarding those contractors that take ethics seriously, and punishing those that do not. This includes giving federal personnel the resources and incentives to pursue and enforce Title 48. Think of the positive achievements that could be made by creating the position of an "Ethics Czar," and giving that person a budget and mandate to enforce the law, rather than simply emulating a historically feckless SEC.

The fact that the independent Ethisphere Institute is the only entity that is proactively examining the ethics of government contractors and their adherence with the laws is not acceptable. The tools for the new administration are already in place in the form of specific ethics and compliance regulations, such as Title 48, that contractors are supposed to adhere but to which no one is holding them accountable. By establishing an enforcement method that identifies potential issues before they become problems, the government could not only avoid corruption, it could also see its bottom line improve.

Top legal professionals, senior corporate executives, non-profit directors and government officials gathered in New York at the beginning of this month for the first annual Global Ethics Summit. We call on government to listen to the message that sayingethics are important and doing something about it are two different things. Talk is cheap, especially when it comes to enforcing ethical behavior, just ask Wall Street. More than ever, it's time for actions to speak louder than words.

Alex Brigham is the Executive Director of the Ethisphere Institute, a research, rating and media organization designed to develop, drive and reinforce profitable ethical business practices, www.ethisphere.com.