NMDMB 04-85

NOTES OF INTEREST AND GUIDANCE (CONT.)

COUNSEL'S CORNER - FRAUDULENT
BUSINESS PRACTICES

The Navy, as one cf the world’s largest purchasers
ef goods and services, is a tempting target for
those contractors that engage in illegal or
unethical business practices. Today, contractors
are somehow involved in almost everything the Navy
does, whether it is the outfitting of ships, the

maintenance of Navil Facilities or the delivery of
health care services to officers, sailors and their
dependents. While most companies oing business
with the Government are honest, many are not. It
is incumbent upon all Naval personnel to be vigilant
and report all suspected instances of wrongdoing by
those who are compensated with taxpayer dollars.

Fraud can take many forms. It can be the payment
of a bribe or gratuity to a Government official,
submission of a false claim or invoice under a
Government contract. use of false weights and
measures, evasion of inspectors, substitution of
materials, misappropriation of government-owned
property, or falsification of records and books of
account. Fraud also includes conflicts of interest
and unauthorized disclosure of sensitive official
information regarding the procurement system, as
was the case in the recent Ill Wind investigation.
No single definition encompasses all possible types
of fraud. However, Naval personnel in positions
where they can observe the performance of government
contractors should use their common sense. If it
does not look right, there is a good chance that it
is not right.

Persons charged as part of their official duties
with monitoring the work of a contractor are often
in the best position to detect unscrupulous
behavior. This group will include goverment
inspectors, COTRs, and auditors. Yet all Naval
personnel whose paths cross those of a dishonest
government contractor have at least the potential
to uncover improper conduct. If fraud is suspected,
it should be reported.

In this
options.

regard, Naval personnel have several
DoD has established a “Hot Line” for
government employees to report suspected incidents
of fraud, waste or misnanagemant in Government
programs. This toll free telephone number -s (800)
424-9098. Reports can be submitted in writing to
Defense Hotline, The Pentagon, Washington, D.c.
20301-1900. The General Accounting Office (GAO) has
also established a “Hot Line” at (800) 424-5454.
Calls on this “Hot Line” are received by the GAO
Fraud Task Force and tips on matters involving the
Navy are referred to the Defense Investigative

Service (DIS), which in turn will refer the case to
the Naval Investigative Service (KIS). The
identities of all persons making calls and written
reports to both “hot lines” are held in etrict
confidence. Additionally, reports can be made
directly to the regional fraud units within NIS or
to the Office cf the Naval Inspector General. Of
course, Naval personnel can also use their normal
chain of command to report suspected problems,

The Government has the right to expect its
contractors to comply with a oertain level of
responsibility and business integrity. When these
standards are breached, the Government has open to
it a mumber of criminal, civil, contractual and
administrative remedies. However, these remedies
are worthless unless fraudulent activities are
{first detected und then reported.

TS

VENDOR FURNISHED EQUIPMENT

Often, as part of a marketing strategy, a commercial
vendor will offer to provide high.y technical and
expensive medical equipment to military hospitals
at no cost to the Government. In exchange, the
Government usually must promise to procure related
me‘iical supplies eyclusively from the supplier of
the equipment. Seeringly this is ar arrangement of
mutual benefit in that the supplier is guaranteed
a market for its goods and the Government obtains
the usage of new madical equipment without the
expenditure of precious appropriated dollars. But
in striking this bargain with the supplier, is the
Navy medical materic] management officer acting in
the best interests of the Navy?

Frequently, he is not. Where such equipment
represents a valid need of the Government, it should
be purchased or leased with appropriated funds. Al)
statutory requirements and procurement regulations
must be followed. In addition, the Navy has no
authority to commit to the purchase of related
supplies from a vendor on an exclusive basis. To
do so results in a sole-source acquisition, which
in most cases will violate the Competition in
Contracting Act and Part 6 of the Federal Acquisi-
tion Regulation (FAR). Also, the prices paid for
these related supplies will often be higher than
that which would have been obtained if competitive
offers had been solicited.


NOTES OF INTEREST AND GUIDANCE (CCNT.)

NHDMB 01-89

VENDOR FURNISHED EQUIPMENT (CONT.)

tis is not to say that the nedical materiel
management officer must ir every case provide
compensation wher a vendor offers to allow the Navy
to use its equipment. As part of ius efforts to stay
abreast of recent developmants in medical technol-
ogy and to define its requirements for these
products, the Government may take possession of and
use vendor-owned equipment on a “free trial” basic
for brief periods of time. However, the term of
such arrangements should be relatively short; sixty
to ninety days is the norm. Like vendor demonstre-
tions, these arrangements cen be a useful way of
testing new technical innovations. However, once a
determination is made that such equipment repre-
sents a valid need of the Government, it must be
acquired using standard procurement procedures.

NAVMEDCOMINST 6700.1 provides policy and procedures
for conducting user tests of medical and dental
equipment. If you are considering the use of
equipment onboard your command for evaluation
purposes this is the most appropriate means of doing
so. For more infcrmetion on the Test and Evaluation
rogram you may contact Mrs. Cheryl Bittner at (301)
663-7117 or by AUTOVON at 343-7117.

PHONE NUMBER CHANGE

Tne telephone number tor the U. 3. Army Medical
Materiel Agency (USAMMA), Defense Depot Tracy. CA
has been changed to (209) 832-9558 or AV 462-9556.
The Tobyhanna and Tracy Army Depot under an Inter-
Service Support Agreement repair or replace medical
stem such as X-ray tubeheads, EKG’s, X-ray high
tension cables, densitometers, microscopes, spec~
trophctometers and printed circuit boards.

DEFENSE SMALL PURCHASE COURSE

The Defense Small Purchase Course is designed to
prepare personnel for their responsibilities in the
small purchase arena. Thin course meets the
requirements of SUPARS 13.103-1, which states all
personnel involved in the purchasing function
(contracting officers, storekeepers, buyers, BPA
callers, etc.) shall attend a NAVSUP~authorized
Small Purchase Course. The Defense Small Purchase
Course will offer you a better understanding of the
regulations, clarify some of those “gray areas” so
often encountered and serve as a refresher course
in the midst of our ever changing procurement
environment .

NEW ITEM AVA:LABILITY

The folluwang items are available for imuediate
issue through Defense Logistics Agency Depot

| System:

1. 6505-C1-201-2824, Cefotaxime Sodium, Sterile,
USP, Equivalent to 1 Gram of Cefotaxime, 5Cs. The
unit price is $368.46 per package.

2. 6505-C1-261-5888, Docusate Calcium and Phenol-
phthalein Capsules, 1000s. The unit price is $54.40
per bottle.

3. 6505-01-261-5889, Docusate Calcium and Phenol-
phthalein Capsules, 100s. The unit price is $6.67
per bottle.

4.  6505~-J1-267-2497, Lovastatin Tablets,
60s. The unit price is $75.00 per bottle.

20 mg,

5. 6505-21-246-1920, Chlorpheniramine Maleate and
Phenylproganolamine Hycrochloride Capsules, Sus-
tained Release, 100s. The unit price is $16.18 per
bottle.