Report to Congressional Requesters

United States Government Accountability Office

GAO

April 2005 DEFENSE ETHICS 

PROGRAM 

Opportunities Exist to 

Strengthen Safeguards 

for Procurement 

Integrity 

GAO-05-341 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-341.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David C. 

Cooper at (202) 512-4125 or 

cooperd@gao.gov. 

Highlights of GAO-05-341, a report to 

congressional requesters 

April 2005

DEFENSE ETHICS PROGRAM 

Opportunities Exist to Strengthen 

Safeguards for Procurement Integrity 

To implement its ethics program, DOD has delegated responsibility for 

training and counseling employees on conflict-of-interest and procurement 

integrity rules to more than 2,000 ethics counselors in DOD’s military 

services and agencies. These efforts vary in who is required to attend 

training and counseling, the content of ethics information provided, and how 

often the training and counseling is provided. While some variation may be 

warranted, DOD lacks the knowledge needed to determine whether local 

efforts are meeting the objectives of its ethics program—in large part 

because DOD does not systematically capture information on the quality and 

content of the training and counseling or employee activity as they relate to 

ethics rules and restrictions. Specifically, ethics counselors were unable to 

tell us if people subject to procurement integrity rules were trained. Instead, 

DOD evaluates its ethics program in terms of process indicators—such as 

the number of people filing financial disclosure forms, the number of ethics 

officials providing training and counseling services, and the amount of time 

ethics officials spend on such activities—which do not provide metrics to 

assess the effectiveness of local training and counseling efforts. DOD also 

lacks adequate information on the number and status of allegations of 

potential misconduct related to conflict-of-interest and procurement 

integrity rules. Ethics officials did not know of 53 reported allegations of 

potential misconduct referred to inspectors general offices. DOD has taken 

several actions since October 2004 aimed at enhancing its ethics program. 

However, without knowledge of training, counseling, and reported 

allegations of misconduct, DOD is not positioned to assess the effectiveness 

of its efforts. 

DOD’s knowledge of defense contractor efforts to promote ethical standards 

is also limited. Defense regulations provide that contractors should have 

certain management controls, such as ethics training for all employees and 

systems to detect improper conduct in connection with government 

contracts. However, DOD had not evaluated the hiring practices of the 

contractors GAO contacted. Neither the Defense Contract Management 

Agency nor the Defense Contract Audit Agency—the agencies responsible 

for oversight of defense contractors’ operations—had assessed the adequacy 

of contractors’ practices for hiring current and former government 

employees. An independent review of one of DOD’s largest contractors 

found that the company lacked the management controls needed to ensure 

an effective ethics program. Instead, the review found that the company 

relied excessively on employees to self-monitor their compliance with postgovernment employment restrictions. The review concluded that by relying 

on self-monitoring, the company increased the risk of noncompliance, due to 

either employees’ willful misconduct or failure to understand complex ethics 

rules. 

To help ensure defense contracts 

are awarded fairly and current and 

former employees do not use their 

knowledge of DOD acquisition 

activities to gain financial or other 

benefits, DOD personnel are 

required to conduct themselves in a 

manner that meets federal ethics 

rules and standards. 

Regulations require DOD to 

implement an ethics program and 

provide that contractors must 

conduct themselves with the 

highest degree of integrity and 

honesty. For this report, GAO 

assessed (1) DOD’s efforts to train 

and counsel its workforce to raise 

awareness of ethics rules and 

standards as well as DOD measures 

of the effectiveness of these efforts 

and (2) DOD’s knowledge of 

defense contractors’ programs to 

promote ethical standards of 

conduct. 

What GAO Recommends

GAO is recommending that DOD 

regularly assess training and 

counseling efforts to ensure that 

individuals covered by conflict-ofinterest and procurement integrity 

rules receive appropriate training 

and counseling, ensure ethics 

officials track and report on the 

status of alleged misconduct, and 

assess contractors’ ethics programs 

to gain knowledge and mitigate risk 

in DOD contracting relationships. 

In commenting on a draft of this 

report, DOD agreed with two 

recommendations and partially 

concurred with the third. 
Page i GAO-05-341 Defense Ethics Program 

Letter 1

Results in Brief 2 

Background 3 

DOD Lacks Information to Evaluate Its Training and Counseling 

Efforts 6 

DOD Needs More Knowledge of Government Contractors’ 

Standards of Conduct Efforts 11 

Conclusion 13 

Recommendations 13 

Agency Comments 14 

Appendix I Scope and Methodology 17 

Appendix II Comments from Department of Defense 19 

Table 

Table 1: Summary of Annual Ethics Training by Office 8 

Contents 

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Page 1 GAO-05-341 Defense Ethics Program 

April 29, 2005 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Solomon P. Ortiz 

Ranking Minority Member 

Subcommittee on Readiness 

Committee on Armed Services 

House of Representatives 

The Honorable Vic Snyder 

Ranking Minority Member 

Subcommittee on Military Personnel 

Committee on Armed Services 

House of Representatives 

In fiscal year 2004, officials from the Department of Defense (DOD) 

awarded contracts worth more than $200 billion for goods and services. 

Federal ethics rules and standards have been put in place to help 

safeguard the integrity of the procurement process by mitigating the risk 

that DOD employees will use their position to influence the outcomes of 

contract awards for future gain and that companies will exploit this 

possibility. 

Given the sizeable dollars at stake and the risks inherent in federal 

contracting, you asked us to determine whether post-government 

employment rules are ensuring the public trust. In response, we assessed 

(1) DOD’s efforts to train and counsel its workforce to raise awareness of 

the rules as well as DOD measures of the effectiveness of these efforts and 

(2) DOD’s knowledge of defense contractors’ programs to promote ethical 

standards of conduct. To satisfy our objectives, we met with the 

designated agency ethics officials, their designee, or ethics counselors in 

the Office of the Secretary of Defense, Air Force, Army, Navy, and the 

Defense Contract Management Agency and visited seven major defense 

contractors. Further details on the scope and methodology of our review 

can be found in appendix I. We conducted our review from April 2004 to 

March 2005 in accordance with generally accepted government auditing 

standards. 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-341 Defense Ethics Program 

We did not address the effectiveness of the statutory provisions covering 

post-government employment restrictions or the extent to which 

violations have occurred. 

Through its ethics program, DOD implemented ethics training and 

counseling efforts aimed at educating its workforce to raise awareness of 

conflict-of-interest and procurement integrity rules in order to prevent 

misconduct. However, DOD lacks departmentwide knowledge of the 

content of training and counseling, how often these services are provided, 

which employees receive information on conflict-of-interest and 

procurement integrity, and reported allegations of potential misconduct. 

Specifically, ethics counselors were unable to tell us if people subject to 

procurement integrity rules were trained. Ethics officials also did not 

know of 53 reported allegations of potential misconduct referred to 

inspectors general offices. Without knowledge of training, counseling, and 

reported allegations of misconduct, DOD is not positioned to assess the 

effectiveness of its efforts. Aware of the increased public concern about 

misconduct, DOD took several actions since October 2004 aimed at 

enhancing its ethics program. 

DOD regulations provide that its contractors should have written codes of 

conduct, ethics training, and monitoring programs in place; however the 

seven contractors we visited indicated that DOD, through its oversight 

activities, did not monitor these contractors’ recruiting, hiring, and 

placement practices of current and former government employees. In fact, 

a recent independent review of one of DOD’s largest contractors found 

both gaps in the company’s procedures and a failure to follow written 

policy, in certain cases. For example, the company relied excessively on 

employees to self-monitor compliance with standards of conduct rules and 

in doing so increased the risk of noncompliance, due to either employees’ 

willful misconduct or failure to understand complex ethics rules. 

We are making three recommendations to the Secretary of Defense to take 

actions in order to raise the level of confidence that DOD conducts 

business with impartiality and integrity. Specifically, to improve DOD’s 

knowledge and oversight, DOD should regularly assess training and 

counseling efforts for quality and content to ensure that individuals 

covered by conflict-of-interest and procurement integrity rules receive 

appropriate training, and DOD should ensure ethics officials track and 

report on the status of alleged misconduct. We further recommend that 

DOD assess, as appropriate, contractor ethics programs to facilitate 

awareness and mitigation of risks in DOD contracting relationships. In 

Results in Brief 
Page 3 GAO-05-341 Defense Ethics Program 

commenting on a draft of this report, DOD concurred with two of our 

recommendations and partially concurred with the third. DOD concurred 

with our recommendations to regularly assess its training and counseling 

efforts for quality and content and to assess, as appropriate, contractor 

ethics programs. DOD partially concurred with our recommendation that 

ethics officials, as required by the joint ethics regulation, track and report 

on the status of alleged misconduct to the military services and defense 

agencies head ethics officials. DOD also provided technical comments, 

which we incorporated as appropriate. DOD’s comments are included in 

their entirety in appendix II. 

Federal statutes and regulations collectively require agencies to establish 

an ethics program intended to preserve and promote public confidence in 

the integrity of federal officials through their self-reporting of potential 

conflicts-of-interest (financial disclosure), through knowledge of postgovernment employment restrictions (training), and through independent 

investigations of alleged wrongdoing.1

 A key objective of an ethics 

program is to provide a formal and systematic means for agencies to 

prevent and detect ethics violations. The elements of a comprehensive 

ethics program include (1) a written policy of standards of ethical conduct 

and ethics guidance; (2) effective training and dissemination of 

information on ethical standards, procedures, and compliance; 

(3) monitoring to ensure the ethics program is followed; (4) periodically 

evaluating the effectiveness of the ethics program; and (5) levying 

disciplinary measures for misconduct and for failing to take reasonable 

steps to prevent or detect misconduct. 

The joint ethics regulation2

 is DOD’s written policy establishing its ethics 

program. The ethics program emphasizes training and counseling to raise 

awareness of standards of ethical behavior and to prevent misconduct. 

 1

Agency ethics regulations reflecting government standards of conduct and statutory 

restrictions are required by Executive Order 12674, Principles of Ethical Conduct For 

Government Officers and Employees, April 12, 1989, as modified by E.O. 12731, Principles 

of Ethical Conduct For Government Officers and Employees, October 17, 1990. In addition 

to agency ethics regulations, the Federal Acquisition Regulation includes specific guidance 

concerning procurement integrity (FAR 3.104). 

2

DOD’s joint ethics regulation (DOD Regulation 5500.7-R) merges the federal principles of 

ethical conduct and restrictions into a written, uniform source of standards of ethical 

conduct and guidance for its workforce. Its scope encompasses not only post government 

employment restrictions but also other ethics matters such as gifts, financial disclosure 

requirements, and political activities. 

Background 
Page 4 GAO-05-341 Defense Ethics Program 

DOD’s ethics training requirement includes educating employees about the 

procedures to follow when considering employment outside of DOD and 

the post-government employment restrictions that may apply and to 

inform employees of the resources that are available to them to address 

ethics questions and concerns. The training includes an initial briefing to 

introduce employees to ethics regulations, such as conflict-of-interest and 

procurement integrity rules, and exit briefings to discuss restrictions that 

may apply once employees leave government service. Additional ethics 

briefings are held for certain senior employees on an annual basis. DOD’s 

ethics counseling aims to address employee concerns and questions as 

they arise. The training and counseling is also to raise awareness so that 

DOD employees can recognize misconduct and report the matter to ethics 

officials, inspectors general officials, the head of the command or agency, 

criminal investigative offices, or any number of DOD hotlines. 

Responsibility for recognizing and reporting potential misconduct rests 

with all DOD employees.3

 Additionally, the joint ethics regulation requires 

ethics officials to track and follow up on reports of potential misconduct. 

Finally, the DOD regulation requires periodic evaluations of local 

activities, which implement DOD’s ethics program, to ensure they meet 

standards. 

Defense regulations provide that government contractors should have 

standards of conduct and internal control systems to promote ethical 

standards, facilitate timely discovery and disclosure of improper conduct 

in connection with government contracts, and ensure corrective measures 

are promptly implemented.4

 The regulations provide that contractors 

should have a written code of business ethics and conduct, an ethics 

training program for all employees, and to periodically review practices, 

procedures, policies, and internal controls for compliance with standards 

of conduct. 

The federal government has a host of laws and regulations governing the 

conduct of its employees and contractors. The Compilation of Federal 

Ethics laws prepared by the United States Office of Government Ethics 

includes nearly 100 pages of statutes alone. For the purposes of this 

report, however, we note a few laws relevant to DOD officials whose 

 3

Post-government employment restriction violations may also be reported by parties 

outside DOD such as contractors through DOD hotlines. 

4

Defense Federal Acquisition Regulation Supplement, subpart 203.70, Contractor Standards 

of Conduct. 
Page 5 GAO-05-341 Defense Ethics Program 

responsibilities involved participation in DOD’s acquisition process. The 

statutes are complex, and the brief summaries here are intended only to 

provide context for the issues discussed in this report. 

The principal restrictions concerning employment for federal employees 

after leaving government service are found in 18 U.S.C. 207 and 41 U.S.C. 

423 (procurement integrity). The title 18 provision generally prohibits 

former federal employees and their supervisors from representing nongovernment entities concerning matters they handled while working for 

the federal government. Violation of the statute entails criminal penalties. 

In contrast, the title 41 provision more narrowly applies to contracting 

officials and also entails civil and administrative penalties. The provision 

generally restricts employment with a contractor if the official performed 

certain functions involving the contractor and a contract valued in excess 

of $10,000,000.5

 The law, however, permits employees to accept 

compensation “from any division or affiliate of a contractor that does not 

produce the same or similar products or services” that were produced 

under the contract.6

 

There are also provisions related to post-government employment that are 

applicable to federal employees’ actions while still in federal service. 

 5

41 U.S.C. § 423(d). The prohibition against accepting compensation from a contractor 

applies to former officials who 

(A) served, at the time of selection of the contractor or the award of a contract to the 

contractor, as the procuring contracting officer, the source selection authority, a member 

of the source selection evaluation board, or the chief of a financial or technical evaluation 

team in a procurement in which that contractor was selected for award of a contract in 

excess of $10,000,000; 

(B) served as the program manager, deputy program manager, or administrative 

contracting officer for a contract in excess of $10,000,000 awarded to that contractor, or 

(C) personally made for the federal agency 

(i) a decision to award a contract, subcontract, modification of a contract or subcontract, 

or a task order or delivery order in excess of $10,000,000 to that contractor; 

(ii) a decision to establish overhead or other rates applicable to a contract or contracts for 

that contractor that are valued in excess of $10,000,000; 

(iii) a decision to approve issuance of a contract payment or payments in excess of 

$10,000,000 to that contractor; or 

(iv) a decision to pay or settle a claim in excess of $10,000,000 with that contractor. 

6

41 U.S.C. § 423(d)(2). 
Page 6 GAO-05-341 Defense Ethics Program 

18 U.S.C. 208 prohibits government employees from participating in 

matters in which they have a financial interest. The statute imposes 

criminal penalties on federal employees who begin negotiating future 

employment without first disqualifying themselves from any duties related 

to the potential employer. In addition 41 U.S.C. 423(c) requires officials 

who participate personally and substantially in a procurement exceeding 

$100,000 to report promptly contacts by bidders or offerors regarding 

future employment.7

 The official must either reject the possibility of 

employment or disqualify himself or herself from further participation in 

the procurement. 

DOD’s joint ethics regulation, administered by DOD’s General Counsel, 

requires DOD to provide training and counseling to educate employees 

regarding applicable ethics laws and regulations. To implement its ethics 

program, DOD relies on local ethics counselors within DOD’s military 

services and agencies to train and counsel employees on conflict-ofinterest and procurement integrity rules. Training is to raise individual 

awareness and to enable DOD employees to recognize misconduct and 

report any matter to appropriate officials. The joint ethics regulation also 

requires ethics officials to track and follow up on reports of misconduct. 

However, DOD lacks knowledge to evaluate the ability of its training and 

counseling efforts to prevent misconduct and ensure the public trust. 

DOD has delegated responsibility for training and counseling to more than 

2,000 ethics counselors assigned to commands and organizations 

worldwide. These ethics counselors administer ethics training and 

briefings, provide advice and counseling, and review employees’ financial 

disclosure documents8

 as outlined in the joint ethics regulation. At the 

12 DOD locations we visited we found training and counseling efforts 

varied in the content of ethics information provided, who is required to 

attend training and counseling, and how often the training and counseling 

is provided. For example, some ethics counselors conduct extensive 

 7

41 U.S.C. § 423(c)(1)(A). 

8

Certain federal employees are required to file a financial disclosure statement to satisfy 

federal conflict of interest laws. There are two separate groups of federal officials required 

to file. Public financial disclosure reports (SF-278) are filed by senior officials, such as 

presidential appointees, general and flag officers (rank O-7 and above), and senior 

executive service members. Confidential financial disclosure reports (OGE form 450) are 

filed by certain other federal employees, identified by the executive agency based on 

employees’ roles and responsibilities. 

DOD Lacks 

Information to 

Evaluate Its Training 

and Counseling 

Efforts 

Training and Counseling 

Results Are Not Measured 
Page 7 GAO-05-341 Defense Ethics Program 

discussions about employees’ plans upon separation at the exit briefing, 

some provide written advice, and others distribute pamphlets summarizing 

employment restrictions. Some ethics counselors have supplemented their 

annual training because they do not believe that the minimum 

requirements in the joint ethics regulation—an annual ethics briefing—are 

sufficient to ensure employees understand employment restrictions both 

during and after they leave government service. For example, a Navy 

ethics office offers live, interactive ethics training to all personnel at its 

location approximately three to four times a year. 

DOD currently evaluates its ethics program’s performance in terms of 

process indicators—such as the number of financial disclosure forms 

completed, the number of ethics counselors, and the amount of time spent 

by ethics counselors on training and counseling services. According to 

DOD officials, the information on the number of ethics counselors at each 

location and the amount of time they spend with employees can provide 

insight into the level of resources used. However, these process indicators 

do not provide DOD knowledge of which employees are subject to 

restrictions, which employees receive training and counseling, the quality 

and content of training, and who is leaving DOD for employment with 

contractors. For example, DOD does not know if the population critical to 

the acquisition process, those employees covered by procurement 

integrity restrictions, are trained. Further, many ethics counselors could 

not provide evidence that employees received the annual ethics training. 

Additionally, DOD does not know whether the training and counseling 

includes all relevant conflict-of-interest and procurement integrity rules. 

As shown in Table 1, we found that the ethics counselors we interviewed 

did not consistently include information on the restrictions provided for in 

18 U.S.C. 207, 18 U.S.C. 208, and 41 U.S.C. 423 in their annual ethics 

briefings for the past 3 years. 
Page 8 GAO-05-341 Defense Ethics Program 

Table 1: Summary of Annual Ethics Training by Office 

Procurement integrity 

(41USC423) 

Restrictions on former 

employees (18USC207) 

Acts affecting personal 

financial interest (18USC208) 

Year 1 2 3 1 2 3 1 2 3 

Standards of Conduct 

Office, OSD, DOD 

Headquarters 

3 • • 3 • • 3 • 3

Department of Air Force, 

Pentagon 

3 • • 3 • • 3 3 3

AFMC, Headquarters, 

Wright-Patterson Air Force 

Basea

3 • 3 3 3 3 3 • 3

AFMC, 88th Wing, WrightPatterson Air Force Baseb

• • • 3 • • 3 3 • 

AFMC, Electronic Systems 

Command, Hanscom Air 

Force Base 

3 3 • 3 3 • 3 3 • 

Department of Army 

Headquartersa

• • • • • • 3 • • 

Department of Army 

Headquartersb

• • • • • • 3 • • 

Department of Army 

Headquartersc

3 3 3 3 3 3 3 3 3

AMC, Headquarters, Fort 

Belvoir, Va.a

3 • • 3 • • 3 • • 

AMC, Headquarters, Fort 

Belvoir, Va.b

• • • • • • 3 • • 

AMC, CommunicationsElectronic Command, Fort 

Monmouth, N.J.a

3 3 3 3 3 3 3 3 3

AMC, CommunicationsElectronic Command, Fort 

Monmouth, N.J.b

3 • • 3 • • 3 3 • 

Department of Navy, 

Headquarters 

3 • • 3 • • 3 • 3

NAVAIR Systems 

Command, Headquarters, 

Patuxent River, Md. 

• 3 3 • • 3 3 3 3
Page 9 GAO-05-341 Defense Ethics Program 

Procurement integrity 

(41USC423) 

Restrictions on former 

employees (18USC207) 

Acts affecting personal 

financial interest (18USC208) 

Year 1 2 3 1 2 3 1 2 3 

NAVAIR Systems 

Command, Naval Air 

Warfare Center-Weapons 

Division, China Lake, Calif. 

3 • • 3 • • 3 • 3

Defense Contract 

Management Agency, 

Headquarters 

3 • • 3 • • 3 • 3

Defense Contract 

Management Agency, East 

3 • 3 3 • 3 3 3 • 

Source: DOD (data); GAO (analysis). 

Notes: 

3 Information included in annual ethics briefing. 

• Information not included in the training materials, unable to determine based on the training material 

provided, or unable to determine because the training materials were not available. 

a

SF 278 filers are employees who complete the public financial disclosure statements. SF 278 filers 

include senior officials, such as presidential appointees, general and flag officers (rank O-7 and 

above), and senior executive service members. 

b

OGE form 450 filers are employees who complete the confidential financial disclosure statements. 

OGE form 450 filers are certain federal employees, identified by each executive agency based on 

employees’ roles and responsibilities. 

c

A subset of SF 278 filers at Army headquarters who report directly to the secretariat. 

Training is to raise awareness of procurement integrity and conflict-ofinterest rules so DOD employees are able to recognize misconduct and 

report matters to appropriate officials. Ethics counselors are required to 

(1) review the facts of an allegation of misconduct and report the 

allegation to appropriate investigative organizations or the head of the 

DOD command of the suspected violator and the appropriate contracting 

officer, if applicable; (2) follow-up with the investigative office until a final 

determination is made on the allegation; and (3) periodically report on the 

status of the allegation of misconduct to the military service and defense 

agencies head ethics official. However, when we asked the ethics officials 

for information on allegations of misconduct and the status of 

investigations, they were not tracking or following-up on the status of 

alleged misconduct cases. For information on reported allegations of 

potential misconduct the ethics officials referred us to the inspectors 

general offices. According to inspectors general officials, DOD has not 

made an attempt to determine the extent that potential misconduct in 

terms of conflict-of-interest and procurement integrity is reported. The 

information on reports of potential misconduct is maintained in various 

files and databases by multiple offices. As a result, DOD has not 

Training and Counseling is 

to Facilitate Identification 

and Reporting of 

Misconduct, but Alleged 

Misconduct Is Not Being 

Tracked 
Page 10 GAO-05-341 Defense Ethics Program 

determined if reports of potential misconduct are increasing or decreasing 

and why such a change may be occurring. DOD Inspector General’s 

hotline official told us that anecdotal evidence indicates post-government 

employment misconduct is a problem, but DOD has no basis for assessing 

the severity. 

At the locations we visited, we obtained information from the inspector 

general officials demonstrating at least 53 cases of potential misconduct 

reported in the last 5 years. However, ethics officials at the Office of 

Secretary of Defense and the military headquarters we spoke with were 

not tracking the status of the reports of potential misconduct. Lacking this 

knowledge DOD has no assurance that ethics-related laws and regulations 

are properly followed and that appropriate administrative or disciplinary 

action is taken. Also, the information on potential misconduct can help 

DOD understand the extent of the problem and the risk such behavior 

poses. 

Concerned about the effectiveness of its efforts to minimize misconduct 

and prevent violations of conflict-of-interest and procurement integrity 

rules, DOD has taken actions aimed at enhancing its ethics program. In 

October 2004, the Deputy Secretary of Defense required (1) personnel who 

file public financial disclosure reports to certify that they are aware of and 

have not violated employment restrictions, (2) DOD components to 

include training on employment restrictions in annual ethics briefings to 

financial disclosure filers, and (3) DOD components to provide guidance 

on employment restrictions to all personnel leaving government service. 

While this directive clarifies the content required in DOD’s training and 

counseling, no provisions were made to provide knowledge about whether 

the policy is implemented. Therefore, it is unclear at this time the extent 

that the actions called for in the directive will improve DOD’s effort to 

prevent violations of post-government employment restrictions. 

In November 2004, the acting Undersecretary of Defense asked the 

Defense Science Board to establish a task force to assess whether DOD 

has adequate management and oversight processes to ensure the integrity 

of acquisition decisions. The task force report was due January 31, 2005, 

and is expected to recommend options for improving checks and balances 

to protect the integrity of procurement decisions. Currently, the Defense 

Science Board is briefing preliminary findings to senior DOD officials and 

Congress. 

Ongoing Actions to 

Prevent Misconduct 
Page 11 GAO-05-341 Defense Ethics Program 

Acknowledging the risk to the acquisition process the United States 

Attorney for the Eastern District of Virginia announced, in February 2005, 

the creation of a procurement fraud working group to increase prevention 

and prosecution of fraud in the federal procurement process. This working 

group will facilitate the exchange of information among participating 

agencies, including DOD, and assist them in developing new strategies to 

prevent and to promote early detection of procurement fraud. Among the 

ideas and initiatives to be undertaken by the working group are efforts to 

detect ethics violations and conflicts of interest by current and former 

agency officials. 

Defense acquisition regulations provide that government contractors 

should have standards of conduct and internal control systems that 

promote ethical standards, facilitate timely discovery and disclosure of 

improper conduct, and ensure corrective measures are promptly 

implemented. However, DOD cannot identify nor take action to mitigate 

risks because it lacks knowledge of its contractors’ efforts to promote 

ethical standards. Recently a major defense contractor chartered an 

independent review of its hiring processes of current and former 

government employees. This review found both gaps in the company’s 

procedures and a failure to follow written policy, in some cases. 

Weaknesses in the contractor’s policies, procedures, and structure were 

identified, and recommendations were made for actions to be taken to 

mitigate risks. 

Defense regulations provide that government contractors must conduct 

themselves with the highest degree of integrity and honesty. Specifically, 

defense regulations provide that contractors should have (1) a written 

code of ethical conduct; (2) ethics training for all employees; (3) periodic 

reviews of its compliance with its code of ethical conduct; (4) systems to 

detect improper conduct in connection with government contracts; and 

(5) processes to ensure corrective actions are taken.9

 The seven 

contractors we visited indicated that DOD had not discussed or reviewed 

their practices for hiring current and former government employees. 

 9

Defense Federal Acquisition Regulation Supplement, subpart 203.70, Contractor Standards 

of Conduct. While this regulation provides that contractors should have such elements, 

they are not required to. 

DOD Needs More 

Knowledge of 

Government 

Contractors’ 

Standards of Conduct 

Efforts 

DOD Does Not Have 

Adequate Knowledge of Its 

Contractors’ Policies and 

Practices for Hiring 

Former and Current DOD 

Employees 
Page 12 GAO-05-341 Defense Ethics Program 

While DOD evaluates components of contractors’ financial and 

management controls, neither the Defense Contract Management Agency 

nor the Defense Contract Audit Agency—the agencies responsible for 

oversight of defense contractors’ operations—had assessed the adequacy 

of contractors’ practices for hiring current and former government 

employees.10 DOD’s lack of knowledge of the contractors’ hiring practices 

and policies prevents DOD from being assured that effective controls are 

in place to address the risks posed by contractors. 

In February 2004, a major defense contractor hired an outside entity to 

conduct an independent evaluation of its hiring policies and practices. 

This review found that the company relied excessively on employees to 

self-monitor their compliance with post-government employment 

restrictions. The review concluded that by relying on employees to 

monitor their own behavior, the company increased the risk of 

noncompliance, due to either employees’ willful misconduct or failure to 

understand complex ethics rules. The independent evaluation of the 

company’s hiring policies and practices illustrates an opportunity for DOD 

to leverage knowledge of contractors’ practices to identify and mitigate 

risks. 

In general, the review identified lack of management controls as a 

weakness in the company’s ethics program. Specifically, the review found 

the company lacked (1) a single focal point for managing its hiring 

process; (2) centralized management of its hiring process, which made it 

difficult to implement consistent procedures and effectively monitor 

efforts; (3) consistent maintenance of pre-hire records; (4) internal audits 

of its process for hiring former government employees; and (5) sufficient 

emphasis from senior company management to the ethics program in 

general and the training program in particular, among other things. As a 

result of these weaknesses, the company did not know whether employees 

were following its written policies and procedures addressing postgovernment employment restrictions. 

Some contractors we spoke with stated that they used the lessons learned 

from the company’s independent review to assess their own policies for 

 10Defense Contract Management Agency’s review includes assessments of contractor 

performance measurements; Defense Contract Audit Agency audits include financial and 

internal control systems of contractors. 

Independent Review of 

Defense Contractor Finds 

Weaknesses in Controls for 

Managing Former 

Government Employees 
Page 13 GAO-05-341 Defense Ethics Program 

recruiting, hiring, and assigning of current and former government 

employees to ensure they are complying with ethical standards. For 

example, some of the contractors are reviewing company personnel files 

to identify employees trained as well as former government employees 

hired. Some contractors were in the process of identifying methods to 

ensure that information on the hiring and training of former government 

employees is readily available, such as corporate personnel systems that 

will provide electronic files to allow the contractor to identify employees 

with prior DOD experience including contracts on which they worked as 

well as monitor employees’ post-government career path. Similarly, 

knowledge of conditions at the company and at other contractors could 

provide DOD with information to better identify and understand risks to 

its acquisition process. 

In an environment where the risk of ethical misconduct can be costly, 

DOD is missing opportunities to raise the level of confidence that its 

safeguards protect the public trust. Better knowledge of training and 

counseling efforts is essential to ensuring that the large numbers of 

employees who leave DOD for contractors each year are aware of and 

abide by conflict-of-interest and procurement integrity rules. Finally, 

enhanced awareness of contractor programs would enable DOD to assess 

whether the public trust is protected. 

We are making three recommendations to the Secretary of Defense to take 

actions to improve DOD’s knowledge and oversight of its ethics program 

and contractors’ ethics programs to raise the level of confidence that 

DOD’s business is conducted with impartiality and integrity: 

• Regularly assess training and counseling efforts for quality and content, to 

ensure that individuals covered by conflict-of-interest and procurement 

integrity rules receive training and counseling that meet standards 

promulgated by DOD Standards of Conduct Office. 

• Ensure ethics officials, as required by the joint ethics regulation, track and 

report on the status of alleged misconduct to the military services and 

defense agencies head ethics officials. 

• Assess, as appropriate, contractor ethics programs in order to facilitate 

awareness and mitigation of risks in DOD contracting relationships. 

Conclusion 

Recommendations 
Page 14 GAO-05-341 Defense Ethics Program 

DOD provided written comments on a draft of this report. DOD concurred 

with two of our recommendations and partially concurred with the third. 

DOD concurred with our recommendation to regularly assess training and 

counseling efforts for quality and content, and stated that it currently 

assesses and will continue to assess agencies’ training and counseling 

efforts to ensure that personnel required to receive such training do so in 

accordance with applicable standards. As discussed in this report, DOD 

currently assesses its ethics program’s performance in terms of process 

indicators—for example, number of financial disclosure forms completed, 

the number of ethics counselors, and the amount of time spent by ethics 

counselors on training and counseling. However, as DOD moves forward, 

its assessments should also provide DOD knowledge of which employees 

are subject to restrictions, which employees receive training and 

counseling, and the quality and content of training to ensure its ethics 

program achieves the goal of raising awareness of conflict-of-interest and 

procurement integrity rules in order to prevent ethical misconduct. 

DOD concurred with our recommendation that DOD assess, as 

appropriate, contractor ethics programs, and stated that it intends to call 

upon companies throughout the defense industry to reexamine their ethics 

programs and share best practices. DOD also stated that the 

recommendation is currently implemented when contracting officers 

make, prior to awarding a contract, an affirmative determination of 

responsibility, which includes consideration of the potential contractor’s 

business practices and the potential contractor’s integrity. We believe 

assessments of contractor ethics programs would enhance contracting 

officers’ ability to make such determinations. Knowledge about 

contractors’ policies and practices for hiring former and current DOD 

employees would provide DOD more assurance that effective controls are 

in place to address the risks posed by potential violations of post 

government employment restrictions. As recent GAO bid protest decisions 

illustrate, lapses in ethical behavior can have significant consequences. 

DOD partially concurred with our recommendation that the Secretary of 

Defense ensure that ethics officials, as required by the joint ethics 

regulation, track and report on the status of alleged misconduct to the 

military services and defense agencies head ethics officials. DOD stated 

that responsibility for tracking and reporting on the status of alleged 

misconduct resides with Departmental and federal law enforcement 

agencies, rather than ethics officials. While we agree that responsibility for 

enforcement should not reside with ethics officials, we believe senior DOD 

ethics officials should be knowledgeable concerning the scope and extent 

of ethics violations within the Department. Tracking alleged misconduct 

Agency Comments 
Page 15 GAO-05-341 Defense Ethics Program 

cases would provide senior DOD ethics officials knowledge about whether 

ethics-related laws and regulations are properly followed and that 

appropriate administrative or disciplinary action is taken. Also, 

information on alleged misconduct can position DOD to assess the 

effectiveness of its training and counseling efforts and understand the 

extent of the problem and the risk such behavior poses. As DOD revises its 

Joint Ethics Regulation, it should ensure its reporting structure provides 

for relaying misconduct information to senior DOD ethics officials. 

Finally, DOD expressed concern that our report may be misinterpreted 

because it does not accurately capture the full extent of DOD programs. 

We recognize that the Department’s programs are broader than reflected 

in our report. Our report identifies opportunities to improve (1) DOD’s 

efforts to train and counsel its workforce to raise awareness of ethics rules 

and standards as well as DOD measures of the effectiveness of these 

efforts and (2) DOD’s knowledge of defense contractors’ programs to 

promote ethical standards of conduct. Notwithstanding its concerns, 

however, we note that DOD agreed that our report identifies opportunities 

to strengthen safeguards for procurement integrity. 

DOD’s comments are included in appendix II. 
Page 16 GAO-05-341 Defense Ethics Program 

We are sending copies of this report to the Secretary of Defense and 

interested congressional committees. We will provide copies to others on 

request. This report will also be available at no charge on GAO’s Web site 

at http://www.gao.gov. 

If you have any questions about this report or need additional information 

please contact me at (202) 512-4125 or Blake Ainsworth, Assistant 

Director, at (202)512-4609. Other major contributors to this report were 

Penny Berrier, Kate Bittinger, Anne McDonough-Hughes, Holly Reil, and 

Karen Sloan. 

David E. Cooper, Director 

Acquisition and Sourcing Management 
Appendix I: Scope and Methodology 

Page 17 GAO-05-341 Defense Ethics Program 

To address DOD’s oversight of its agencies’ implementation of ethics 

regulations we compared DOD’s practices to established management 

guidelines. We did not determine the effectiveness of post-government 

employment legal restrictions or the extent to which violations of these 

restrictions may be occurring. 

In assessing DOD oversight of its programs, we used the Standards for 

Internal Control in the Federal Government,1

 Internal Control Management 

and Evaluation Tool,2

 Office of Management and Budget Circular A-123 

regarding management accountability and control, and the United States 

Sentencing Commission Guidelines Manual. We applied the management 

control framework to DOD and DOD component ethics programs. 

To assess DOD’s efforts to train and counsel its workforce to raise 

awareness and DOD measures of the effectiveness of these efforts, we met 

with the designated agency ethics official, their designee or ethics 

counselors in the Office of the Secretary of Defense, Air Force, Army, 

Navy, Defense Contract Management Agency. In addition to headquarters 

offices, we selected locations that according to the Federal Procurement 

Database System and DOD officials spent a large amount of money on 

acquisitions. Specifically, we met with officials from: (1) Standards of 

Conduct Office, General Counsel, Office of the Secretary of Defense; 

(2) General Counsel—Ethics and Personnel Office, Defense Contract 

Management Agency; (3) Associate Counsel—Ethics and Personnel, 

Eastern Region, Defense Contract Management Agency, (4) Ethics Office 

and Associate General Counsel (Fiscal & Administrative Law), Air Force; 

(5) Air Force Materiel Command, Wright Patterson Air Force Base, Air 

Force; (6) Electronic Systems Center, Hanscom Air Force Base, Air Force, 

(7) Deputy General Counsel (Ethics & Fiscal) and Standards of Conduct 

Office, Army; (8) Army Materiel Command, Fort Belvoir, Army; 

(9) Communications-Electronics Command Fort Monmouth, Army; 

(10) Office of General Counsel, Navy; and (11) Naval Air Systems 

Command, Patuxent River, Navy, (12) Naval Air Warfare Center Weapons 

Division, China Lake, Navy. We met with five contracting/acquisition 

offices and nine investigative offices at these locations. 

 1

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

2

GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001). 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 18 GAO-05-341 Defense Ethics Program 

To assess DOD’s knowledge of defense contractors’ programs to promote 

ethical standards of conduct, we interviewed seven defense contractors 

about their ethics programs and hiring practices of former government 

employees. Six of the contractors are ranked in the top 10 of defense 

contractors based on DOD spending in fiscal year 2003. The seventh is a 

contractor that was in the top 100 of defense contractors based on DOD 

spending. We attended the annual Defense Industry Initiative Annual Best 

Practices Forum, 2004. In addition, we reviewed a report to the chairman 

and board of directors of one major defense contractor responding to 

concerns about the company’s policies and practices for the hiring of 

government and former government employees. 

As part of these efforts, we reviewed relevant Federal ethics laws, the 

Federal Acquisition Regulation, Defense Federal Acquisition Regulation, 

DOD policies, directives and guidance governing conflict of interest and 

procurement integrity rules. We supplemented the DOD and DOD 

component ethics program information we collected by interviewing 

officials from the Office of Government Ethics, Department of Justice, 

Army Contracting Agency, Defense Acquisition Regulations Council, 

Office of Secretary of Defense Acquisition, Technology, and Logistics 

Office, World Policy Institute, and the American Federation of 

Government Employees. We also attended the 26th Annual Council of 

Governmental Ethics Laws Conference, 2004. 

We conducted our review from April 2004 to March 2005 in accordance 

with generally accepted government auditing standards. 
Appendix II: Comments from Department of 

Defense 

Page 19 GAO-05-341 Defense Ethics Program 

Appendix II: Comments from Department of 

Defense 
Appendix II: Comments from Department of 

Defense 

Page 20 GAO-05-341 Defense Ethics Program 
Appendix II: Comments from Department of 

Defense 

Page 21 GAO-05-341 Defense Ethics Program 
Appendix II: Comments from Department of 

Defense 

Page 22 GAO-05-341 Defense Ethics Program 
Appendix II: Comments from Department of 

Defense 

Page 23 GAO-05-341 Defense Ethics Program (120336) 
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